Globalisation and the EU

The combination of technological progress, lower transport costs and trade liberalisation in the European Union and elsewhere has led to increasing trade and foreign investment flows between countries. This has important consequences for the functioning of the EU economy. While globalisation brings huge benefits and opportunities, it also means that Europe has to face fierce competition both from low-cost economies like China and India and from innovation-driven economies like the US.

International economic integration, or globalisation as it is commonly known, offers many opportunities. EU firms are given easier access to new and expanding markets and sources of finance and technology. EU consumers are given access to a larger variety of goods at lower prices. This opens the prospect of potential significant gains for the Union in terms of higher levels of productivity and wages. The European Commission estimates that about one-fifth of the increase in EU living standards over the past 50 years is attributable to globalisation. That is why the Union has been firmly in favour of greater economic integration. Its trade policy has been an important instrument towards world trade liberalisation. However, the public often associates globalisation with job losses and downward pressures on wages and working conditions. These anxieties are based on fears that increased competition from low-wage countries puts too much pressure on local producers and workers and may result in the closure, or partial closure, of factories at home and their relocation abroad. While these concerns are not new, they seem to have been heightened by the emergence of China and India on the world trading scene. In particular, the widespread use of information technologies increasingly erodes the boundaries between what can and cannot be traded. Finding an adequate response to globalisation and coping successfully with structural economic change may be seen as a challenge for dynamic economies. The challenge is to turn the potential benefits of globalisation into real gains while minimising the social costs. Measures to improve the functioning of EU markets and to boost innovation performance will help shorten the adjustment process. Moreover, there are also significant external challenges facing the EU which require policy responses, including:
- encouraging global trade and maintaining Europe's position as the leading global trading bloc;
- managing migration as a source of workers, a response to ageing, and a benefit to development.
Historically, the implementation of a common trade policy was at the heart of the original plan that led to the founding of the European Community and today the EU is the world's largest trading bloc, accounting for about one-fifth of all world trade. Trade policy aims to encourage world trade through the progressive abolition of restrictions on international trade and the lowering of customs barriers, as well as the promotion of multilateral trade rules. Trade can also serve as a strong catalyst for growth and poverty reduction in developing countries. However, the successful integration of developing countries into world trade requires more than improved market access and strengthened international trade rules. By improving productive capacities, removing supply-side constraints and upgrading infrastructure in developing countries, aid for trade can lead them to higher growth, employment and incomes. The EU is playing an active role in this regard. It is collectively the most important donor in the world in the field of trade-related assistance.
As regards migration, major changes have taken place in the sources and destinations of migrants: traditional receiving countries have lost prominence, while Southern European countries that were exporting migrants until fairly recently have now become receiving countries, and some Eastern European Member States are now both sending and receiving migrants. The EU recognises that immigration has an important role to play in increasing Europe’s growth potential. Migration can also have important effects on the economic and social development of migrants' countries of origin. When migrants leave they take all their knowledge and skills with them, thus contributing to the 'brain drain'. And when working in their host country, migrants acquire new skills that can be of great value for the development of their country of origin when they return (a 'brain gain'). In addition, the money that migrants regularly send home to their families and friends – so-called remittances – is becoming an increasingly important source of income in the migrants' countries of origin.

Matteo Orzi
matteo.orzi@gmail.com

(artigo de opinião)