A new report by the European Commission has assessed the competitiveness of the European Union in the global economy at the end of a decade of rapid economic change.

A new report by the European Commission has assessed the competitiveness of the European Union in the global economy at the end of a decade of rapid economic change. Since the mid-1990s, there has been a major redistribution of market share between emerging and developed countries and among developed countries themselves. In this highly competitive environment, the EU has broadly maintained its world market share, while the US and Japan have lost ground. 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 focus on investment in its high-technology manufacturing and continue to improve its market share in the fast growing economies of Asia. The report reinforces the economic arguments behind the launch of the European Commission's Global Europe trade policy framework in 2006.

Key elements of the report:

• Thanks to some of its key assets such as chemicals, pharmacy products, motor vehicles and non-electrical machinery, the European Union's trade balance for manufactured products has improved sharply, reaching a surplus of €162bn in 2007. The steady increase of €105billion 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 €137bn over the same period.
• The EU accounts for 19.5% of global markets for merchandise trade (excluding energy) having lost only 1.3 percentage points since 1995. Market share losses are much greater in the case of the US and Japan, falling by 4.4 and 4.1 percentage points respectively. The US and Japan now respectively account for 13.0% and 9.5% of the world market.
• Two thirds of EU imports (excluding energy) are 'inputs' in manufacturing processes. This demonstrates very clearly that the EU as a whole relies heavily on open markets for inputs for its manufacturing and that open supply chains are integral to its manufacturing strength.
• The EU’s strong performance is due to an upgrading of the quality of its products, combined with the ability of EU companies to sell products at premium price because of quality, branding and related services. The EU accounts for a third of high quality goods and 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 for 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 capacity in the future 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 on some of the most promising markets could undermine overall 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 against 19.7% for the US and 6.1% for Japan. The European Union is also the world's biggest investor and the principal host of foreign investment. When intra-EU stocks are excluded, the EU owns 33% and hosts 29% of world investment stocks.

The European Commission's Global Europe trade policy framework was launched in 2006. Global Europe is based on the argument that Europe's economic strength is rooted in access to imports for manufacturing and the competitiveness of its exports in the global economy. Global Europe refocused the priorities of EU trade policy to reflect this. These included: ensuring an open markets for imports into the EU; improving market access for EU exporters, especially in the growing markets of Asia, both through targeted work to tackle individual trade barriers and through a global trade deal and a new generation of Free Trade Agreements with Asian economies; action to improve the protection of intellectual property rights globally, which is vital to European companies that have invested heavily in design and innovation. This report strongly reinforces the economic rationale behind the Global Europe framework.