The European economy seeks its Michelin star | Business


Anyone who has tried it knows that tackling a recipe for the first time is challenging. The list of ingredients, the quality of the raw material and the indications of times and steps to follow do not ensure the desired result. In the kitchen, success or failure also depends on the skill of the cook, acquired through experience and learning. Something similar happens in the economy. In the production of goods and services the secret ingredient is not raw materials or machinery, but knowledge. In fact, the importance of the immaterial in globalization is already a palpable reality. Services represent between 20% and 25% of global trade, data transfers on the internet grew by 500% between 2010 and 2017 and the dissemination of knowledge multiplied by 1.4 since the 2008 crisis. At the same time As multinationals build innovation and development (R&D) centers in different countries, trade in services in economic sectors such as telecommunications, information technology or biotechnology, increases following a dynamic independent of the trade in goods.

The production of vaccines against covid-19 is a good example. Scientific knowledge has determined the creation of vaccines such as Moderna or Pfizer-BioNTech, the most widely used in the EU with more than 480 million inoculated doses. However, to carry out the world’s largest immunization campaign, and vaccinate 7,000 million people, it is necessary to produce at least 14,000 million doses. This requires adding another type of knowledge. Vaccine production and distribution companies have needed to create their own value chains. From pharmaceutical ingredients and medical machinery to syringes and freezers. To develop these chains, made up of hundreds of companies, material but also intangible goods have been used, especially through human capital that is transferred through services, ideas and intellectual property. This new recipe for international trade denies that globalization is in decline, but it does indicate that it is changing and that it is increasingly characterized by being immaterial, digital, and knowledge-intensive. The challenge is that not all countries are prepared to take full advantage of this globalization 2.0.

The problems of blocking supply chains and fears of shortages of certain products have focused attention in recent months. Avoiding dependence on products generated in other countries has become the mantra of European industrial policy. However, it is a mistake to focus on the concept of dependency. In a world of interrelated economies, the EU, due to its size and population, will have progressively less weight and it is neither feasible nor desirable that the goods and services it consumes are produced only within its borders.

European dependence on the rest of the world is, therefore, inevitable, and it needs to be approached from a positive perspective. The loss of relative weight in the world economy will mean that a growing part of the innovations and products that Europeans acquire will be generated abroad. In return, the different industrial sectors of Europe can specialize in the production of certain goods and services that are more favorable to them and, at the same time, companies and citizens can access and benefit from a growing number of innovations and technologies developed outside of Europe. the European Union.

Europe must choose in which sectors it wants to excel and European industrial policy must be developed taking into account that ideas and knowledge are key in the new globalization. The bad news is that the percentage of European GDP devoted to R&D has stagnated since 2010 and that the European Union has only two universities in the top 50 in the world. The good news is that Europe has human capital, infrastructures and institutional stability to continue being a leading region in the sectors of greater dynamism and business competitiveness. Achieving the recipe for success requires investing in centers of excellence that are located on the frontier of knowledge. Only in this way can the European economy get its Michelin star.

Óscar Guinea es economista del European Centre for International Political Economy e Isabel Pérez del Puerto He is a journalist.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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