Europe is struggling to regain competitiveness against the United States and China
“Europe has been worried about slowing growth since the beginning of this century. Various strategies to increase the growth rate have come and gone, but the trend has remained unchanged. Mario Draghi. Foreword to the report: “The future of European competitiveness”.
Mario Draghi is possible European economist a contemporary who is most notable for his public activity, he shares with several others of the profession to be a major politician of his continent (perhaps comparable to the “giants” of European reconstruction such as Erhard of Germany and Einaudi of his country, Italy).
He was the Prime Minister of Italyformerly a senior official in his country and president of the European Central Bank, where he presided over the euro crisis last decade, he is known above all for his relentless public activism and his always-heard voice.
On September 17 of this year, he submitted his report on restarting European competitiveness to the European Union: ¨The future of European competitiveness¨.
No one in the old continent could ignore his recommendation and especially his diagnosis which is a lapidary on Europe’s loss of competitiveness in the hands of the United States and China.
Draghi takes as a fact the lead of the United States and China in economic competitiveness, examples are the sectors of artificial intelligence, the digital world, investments in research and development, energy, etc.
Among other things, the report shows that Europe has come close to US productivity in a few moments since 1890, the last close to the 1990s, it has not stopped moving away since then, it also emphasizes that the era of cheap energy is over. (with the crisis with Russia), low investment in R&D and that The Old Continent has an excess of regulation, bureaucracy and lack of coordination among 27 nations all factors that affect the competitiveness of the European economy affecting the development of the Union.
It proposes a strategy based on intelligence, digital development, a high investment scheme, an innovation strategy linked to decarbonisation and greater regulatory coordination and fewer barriers within the eurozone.
In this long and already highly regarded report, there are many references to regulatory aspects and competition in the markets.
He explains it in a very technical way The European Union is hostile to digital developmentThe reason is not only low investment incentives, but also EU regulation and antitrust rules.
We have recently seen strict measures and fines by the EU against digital companies (specifically Apple and Google among other open investigations) and a similar climate around the structural impact assessment of technology mergers/acquisitions.
¨The main reason for lower investment rates is the fragmentation of the European market. For example, there are 34 groups of mobile network operators in the EU and only a handful in the United States or China, partly because the EU and member states tend to view mergers in the sector negatively. This fragmentation makes the fixed costs of investing in networks relatively more difficult for EU operators than for companies operating in the continental United States or China.
In the same sense it refers to regulatory barriersin the chapter dedicated to obstacles to innovation in Europe.
¨Regulatory barriers to “scale” are particularly challenging in the technology sector, especially for young companies. Regulatory barriers limit growth in several ways. First, complex and costly procedures in fragmented national systems discourage inventors. Second, the EU’s regulatory stance towards tech companies is hindering innovation: the EU now has around 100 technology-focused laws and more than 270 regulators active in digital networks across all member states. Third, digital companies are discouraged from doing business across the EU through subsidiaries because they face heterogeneous requirements, a large number of regulatory agencies and the “doralization” (over-regulation) of EU law by national authorities. This problem is compounded by the fact that EU competition law enforcement is likely to inhibit cooperation within the industry. Finally, many different national procurement rules result in high ongoing costs for cloud providers. The net effect of this regulatory burden is that only the largest companies – often based outside the EU – have the financial capacity and incentive to bear the costs of compliance. “Young, innovative technology companies may decide not to operate in the EU at all.”
The report is particularly interesting in this respect, it supports the debate whether there is consensus on its diagnosis and on its conclusions and recommendations, it is clear that it has set an agenda for discussion, on topics that are generally very consolidated in the European Union, such as anti-monopoly control and regulatory systems.
In this sense, and strictly from the point of view of antitrust and regulatory aspects, it might be useful to look at the Spanish experience of recent years, which in my opinion is proving to be innovative and useful.
Spain created (by merging several organizations) in 2013 a single agency called “National Commission for Markets and Economic Competition¨, evaluate economic competition (antitrust laws) and regulation of services (energy, telecommunications, transport, etc.) with a focus on keeping everything in a balance that allows competition in markets with regulation that does not prevent the virtuous development of this process. There has also been some progress in this regard in the United Kingdom (which is not part of the European Union).
The Spanish experience was useful to avoid disagreements and they also have a multifaceted perspective (from technical-regulatory and free competition angles) and in particular have a way of analyzing and monitoring markets that allows measuring the positive and negative aspects of some regulations or some anti-monopoly measures to support their correction or their ratification.
Throughout Draghi’s report, there are many elements that he thinks go beyond the European problemwhich has always emphasized certain aspects of unity given that the origins of the Union (since the old Coal and Steel Treaty) have always privileged it to maintain peace.
Draghi’s report is inconvenient in certain respects because it can create asymmetries that maybe create noise in unity (e.g. innovation requires a high level of education and compatible study centers – he refers to this in the report) and this requires a high commitment of nation states (government-society) , to achieve sustained and harmonious progress and leave no Member State behind.
An extraordinary debate that has just begun and which we hope our country can use to learn from and implement in the future in search of the “lost” development that is always our beacon.