VZCZCXRO3827
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHBS #1698/01 3101658
ZNR UUUUU ZZH
R 051658Z NOV 08
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 BRUSSELS 001698 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND ECIN EINV ETRD EUN
SUBJECT: EUROPEAN COMMISSION RELEASES "GLOBAL EUROPE: 
COMPETEING IN THE WORLD" 
 
¶1. (U) Summary.  On October 27, 2008, the European Commission 
published a report assessing the competitiveness of the 
European Union (EU) in the global economy.  The report, 
entitled "Global Europe: competing in the world" concludes 
that since the mid-1990s, the EU has been able to broadly 
maintain its world market share, while the U.S. and Japan 
have lost ground.  The report states that the EU remains the 
world's biggest exporter of manufactured goods, and dominates 
markets for high-quality products.  The report warns, 
however, that the EU must invest in its high-technology 
manufacturing and continue to improve its market share in the 
fast-growing Asian economies. The report reinforces the 
economic arguments behind the 2006 European Commission's 
Global Europe trade policy framework.  End summary. 
 
¶2. (U) The report highlights the following strengths and 
weaknesses: 
- Thanks to some key assets, including chemicals, pharmacy 
products, motor vehicles and non-electrical machinery, the 
EU's trade balance for manufactured products has improved 
sharply, reaching a surplus of 162 billion Euros in 2007. The 
increase of 105 billion Euros in the trade surplus since 2000 
has helped to partially offset the rise in the EU's energy 
bill, for which the deficit increased by 137 billion Euros 
over the same period. 
 
- The EU accounts for 19.5% of global markets for merchandise 
trade (excluding energy), down only 1.3 percentage points 
since 1995. Market share losses are much greater in the case 
of the U.S. and Japan, falling by 4.4 and 4.1 percentage 
points respectively. The U.S. and Japan now respectively 
account for 13.0% and 9.5% of the world market 
. 
- Two thirds of EU non-energy imports are 'inputs' in 
manufacturing processes. This underscores that the EU as a 
whole relies on open markets for manufacturing inputs and 
that open supply chains are crucial to its manufacturing 
strength. 
 
- The EU's strong manufacturing performance is due to 
improvements in quality, combined with the ability to sell 
these products at premium prices because of quality, branding 
and related services. The EU accounts for a third of 
high-quality goods; these products represent half of all EU 
exports of manufactured goods. Building on this ability to 
sell products at premium price is the only way to uphold EU 
levels of employment, wages and social protection. 
 
- The EU's performance in high-tech products is disappointing 
and slightly lower than its overall market share. Given its 
level of development, the EU should perform better in this 
sector. This raises concerns about the EU's future capacity 
to keep its products at the cutting edge of quality and 
innovation. 
 
- The EU has lost significant market share in some of the 
fast-growing emerging markets, particularly in Asia. In the 
long run, this underperformance in some of the most promising 
markets could undermine the EU's position in international 
trade. The new generation of free trade agreements with 
India, Korea and ASEAN are a direct attempt to correct this 
trend. 
- The EU is the leading exporter of services, with 26.9% of 
the world market compared to 19.7% for the U.S. and 6.1% for 
Japan. The European Union is also the world's biggest 
investor and the principal recipient of foreign investment. 
When intra-EU stocks are excluded, the EU owns 33% and hosts 
29% of world investment stocks. 
 
¶3. (U) The European Commission's Global Europe trade policy 
framework was launched in 2006. Global Europe argues that 
Europe's economic strength is rooted in its access to imports 
the competitiveness of its exports. Based on this, Global 
Europe refocused the priorities of EU trade policy to include 
ensuring an open market for imports into the EU, increasing 
market access for EU exporters (especially in the growing 
markets of Asia), and improving the protection of 
intellectual property rights. According to the Commission, 
the new report reinforces the economic rationale behind the 
Global Europe framework. 
 
¶4.  (SBU) Comment:  With respect to the latter two priorities 
of the 2006 global Europe trade policy framework - improving 
market access and improving protection of intellectual 
property rights --  the United States and the EU share 
objectives and have been working closely together.  For 
instance, both the United States and the EU now have 
high-level dialogues with China aimed at improving market 
access, regularly share information on market access issues 
and solutions, and have increasingly coordinated approaches 
to China's obligations under the WTO agreement.  Close 
coordination on intellectual property rights and enforcement 
 
BRUSSELS 00001698  002 OF 002 
 
 
was incorporated into the 2007 U.S.-EU transatlantic 
framework adopted at the 2007 ministerial meeting, and the 
United States and the EU are leading participants in the 
negotiation of an anti-counterfeiting trade agreement.   In 
addition, it is useful to note that the EU's declared goals 
of market access would be significantly advanced by an 
ambitious agreement under the WTO Doha Development Agenda 
negotiations.  End comment. 
 
SILVERBERG 
.