Introduction
The European commission is the world’s largest donor in the (ODI) official Development aid. They are very important in the development of the poor countries. In fact, they hold the top discussion on financing countries for development (European commission, 2009, para. 2).The European commission comes out as a giant in developing policies that must maintain their status as among the top stimulus for economic growth in the world. To maintain this position with the ever changing world market trends and with competitors in sight, the commission has to develop equally robust policies. This policy paper will attempt to discus the effect of further emergence of the global competitors like China and India among others, on the economic competitiveness of the European commission.
Background Information
The European Union was formed in 1993 between mainly the countries located in Europe. It is a political and economic union with 27 member countries making over 500 million nationals (Lanzieri, 2009, pp1-4). Its foundation was based on the interest of the European community, emerging as a giant in economic policies for development. It has been estimated that the European Union generates about 21.3% and 28% share of the purchase power parity gross world product and nominal world gross product respectively. That is a strong economic base and defines their strength in the world of market and economic powers (International Monetary Fund, 2010).
The European economy is based on a single market under laws that are applied in all the member states. The European Union has representatives in such world organizations as the G8 major economies, the United Nations, World Trade Organization, and the G-20, amongst others (Albi 2005, p. 204).The European Union has a parliament whose members are elected from the respective member countries, and this ensures continued participation of the member states in the Union. It has its executive arm called the European commission whose functions are to run the daily operations of the union and initiate legislations.
Its main purpose is to push the interest of the union. An individual member state provides a commissioner but they first, council members have to nominate them. The president of the commission is confirmed after nomination by the parliament (Europa 2010).
The European economy is based on a single market throughout all the member states. As has been seen, they have a large economy, with figures showing about US$16.45 trillion, more than 21% of the world’s total economic output. This is seen based on the purchasing power parity (International monetary fund, 2010). The Union’s economy in nominal gross domestic product (GDP) is rated the largest in the world by the international monetary fund (International monetary fund, 2009).as shown in the table below.
A table showing the world’s six largest economies in the nominal gross domestic product.
European Union is also the largest importer and exporter of goods and services. They are the biggest trading partner to other major economies and boasts of being the second largest economy in bloc trade. Estimates show that over a third of the world’s largest corporations have their headquarters at the European Union (CNN) Cable News Network, 2010).The annual capita of the member countries vary, the least having US$7000 and the highest estimated at US$69000.
It has a fairly stable unemployment rate of 7%, and controlled inflation of about 2.2%. The Union has an investment amounting to 21.4% of the GDP (gross domestic product) these are statistics that were taken as at May 2007. The Union’s Public deposit is also very minimal, at -0.9%of the GDP. The European Union has five non European member states that use the common market but have their own custom unions. The Union’s introduction of a single currency was aimed at reducing the rate of exchange and to forge a uniform market. Over the years, the European states have had strong budgets; an example is in 2007 when they agreed on a budget of 120.7 billion Euros.
Then the proceeding years were agreed to be 864.3 billion till 2013.They have a policy on competition which ensures consistency within their common market. The commission is given the mandate to run the market and has developed policies that prevent, state aid, cartels, and on the other hand, allowing for economic liberalization. They also control mergers which must undergo their approval to be followed, they also check on antitrust issues which they minimize. This has ensured a strong bond within the European family, a big bargaining power, increased market activity, expansion and hence development.
The commission has power over the interests of transnational corporations; they can stop the companies from merging if it is not in their best interest. An example is 2001 when they successfully stopped the merging of two companies whose respective countries had allowed merging; these were two United States based firms (GE and Honeley).The European union has a common policy on agriculture that control prices.
They have energy policy which is geared towards enhancing access to renewable, affordable, reliable and efficient energy. They also want to reduce their over dependence on Russia for energy and are focused on diversification of their energy supply. They have infrastructure policies aimed at improving networking between the countries. Among the new projects are the Galileo positioning system and the projects under the (TEN) Trans-European Networks.
Other policies include the regional policies aimed at reducing the disparities among the European nations, environmental policies, policies on education and research. This background information shows how strong, healthy and sound economically compared to other world powers.
Right now issues are emerging, that seems to threaten the otherwise stable economy of Europe, among them are and the fast-track emergence of the global competitors which is not making matters any simpler to the European economy the others are climatic changes and globalization which tries to undermine their formation. India and China are considerably poor nations but their developments over the past decade pose great threat to the growth and dominance of the not only the United States but also the European Union in the global market. By 2025 researchers are predicting a big change in global economic trends, nation–states who pose as international communities are predicted to cease to hold the power with other countries rising.
The expected increase of the power of non-state players like religious organizations, tribes, criminal connections and businesses also furls their demise. It is feared that countries may leave the western economic models for the currently less attractive alternative model of China, causing leaks in the strength of the western alliances and further failures. The European Union being one such threatened organization should work towards minimizing the damage (National Intelligence Council 2008).
Objectives
- To investigate the impact of emergence of the global competitors on economic competitiveness of the European Union.
- To identify the other global competitors
- To determine the threat poised to the economic competitiveness of the European Union by the further growth of the global competitors.
Scope
The scope of this paper is to study the prevalence of China, India and other emerging global competitors in influencing the change of policing by the European commission. The paper entails a discussion on the two major global competitors, their expansion, reasons for their rapid growth and their impact on the traditionally dominant economies. It also includes their strengths and differences. At the end the paper gives suggestions of the ways through which the European Union can counter the impacts that are created through globalization.
Discussion
The European Union has had a great influence in the global world for the last decade, actively involved in financing and supporting the development of poor countries. Among the countries it has traded with are the upcoming giants, India and china. Their dominance in the world has never faced challenging issues as is now feared. The global trends are constantly changing and the global competitors rapidly rising to the occasion. The impact is slow but real and is continuing to pile in the European council agenda.
Drivers of Economic Change
The 21st century has unleashed a shift in market dominance with countries like China and India adding flavor to the shift with their strong and fast surge in economic growth. Free trade networks have continually grown over the years to level in which almost all the nations are represented. The world trade organisation has since registered 149 countries and this is set to grow. Several multinational and regional trade agreements have come up; these free trade treaties have continually and increasingly separated the world economic powers like the United States and The European union.
The former Soviet countries including China and India are increasingly participating in contributing to this shift. The fact that they command almost half the world’s population gives a hint of what to expect. India for example currently has a purchasing power of about $420 billion. Sachs, a researcher predicts that the economies of China, India, and Brazil will overcome the economies of the present G6 nations with possibilities of only United States and Japan standing out among the G6 nations. This is disheartening to the European Union considering that they currently hold on as the largest single exporter and importer.
To further complicate matters, China has become the Second largest consumer of oil, after the United States and is restlessly pursuing technology, innovations, science and strategic resources. Another driving factor is the decreasing obstacle to the flow of goods and services in the global market which undermine the idea behind the nation-states, one of the reasons why the European Union was, formed (Randolph 2006, pp.1).
The cost of data transfer has gone tremendously down leading to many multinational companies resorting to outsourcing on the global market, in this regard; India and China has had a hub of outsourcing companies who offer their services at a relatively cheaper cost. This has had a significant effect on the global competitiveness of the world economic powers. The shift from manufacturing to services in the developed world has been another cause of this change, offshore manufacturing is taking shape, especially the fact that it is concentrated in China and India; this helps boom the economy of the host countries leading to more shift of companies to those areas.
This is particularly common among the technological companies like the Hewlett Packard Company whose printers are designed in India and the United states, manufactured in China, Hungary, and India, and then assembled in Taiwan before they go to the global market. It leads to the spread of manufacturing companies and services globally, diluting the dominance of the European Union economic power as more global competitors are unveiled in the market.
China
China in itself gained from the conflict between the established but stagnant imperial economies of the west against the dynamic and developing economic powers. When it changed into a capitalist country, this economic war started between the United States, the European Union and increasingly powerful China and India. China did not follow the United States style of empire building, the European or Japan.
Its method was much friendly and so far is crucial in helping them displace European dominance in China and overseas. They edge over the others through economic competitiveness and are fast growing to be the supreme market in other regions and nations like, Africa, Asia, the Middle East and the Latin America. This is posing a great threat to the economic competitiveness of the European market who from the statistics is the largest importer and exporter (Petras 2010, Para. 5). China’s new way of economic dominance is boosted by their model of, market relations. They are willing to learn new technique and innovations, and continually move to new regions.
China has built its force from the gains of social revolution, which has enhanced their efficiency; they have been able to control infiltration from other major economies like the United States and Europe. Their labor force is skilled, healthy and hard working. They have acquired technological and managerial skills from the capitalist states having changed into one themselves; this has opened the oversea markets to their exploitation. They have developed strategic policies that have been their driving force. Their infrastructure and industrial base is sophisticated and large, rapidly expanding in other parts of the world.
China continues to manage its own financial system and industries which protects them from the competition of the European Union, the United States and other emerging markets. Exorbitant levels of investment rates were achieved by the removal of the social safety net which led to higher savings for medical and education. It also initiated the exploitation of the large pool of work force through the semi-private agricultural sector.
They have intensively pursued the utilization of resources for their industry. China also offers competitive prices for their goods and services as opposed to the more expensive European products. This is due to the fact that their cost of production is much lower compared to the other market players. Their three main movers of economy, the state, national capital and the foreign capital are flexible to the changes in economic and political conditions. This allows them to fit in every condition as opposed to the European Union policies which are less flexible (Petras 2010, Para. 15).
The hybrid system of the European system has brought about the disparities in class and continues to widen the gap between the wealthy and poor nations, with the accumulation of wealth and elite investments. This has lowered the mass consumption rate, effectively lowering their economic competitiveness (Petras 2010, Para. 17).The entry of China in World Trade organisation has also accelerated their emergence as a dominant force in global trade, this to the demise of the traditional economic powers such as the European Union. China has put effective policies in place to surge them forward in their quest for economic dominance.
Among the measures in place are: Infrastructure development in billions of dollars. They have built high speed railways, water ways, new airports which promote expansion and growth of the respective industrial sectors. China has invested on the training of new skilled labor to replace the unskilled with major focus on building engineers, investment bankers among others. Their undying push to access resources has also played a big part in their development.
India
Another emerging global competitor in the market, India threatens the economic dominance of the European Union. India like China, have cheap labor that is appealing to most global companies. Its rise has also been largely attributed to the investment on industrial development and infrastructure. India’s domestic market grows continually and this is very instrumental in its emergence as a global competitor. India is generally similar to China in their approach to market dominance and therefore most of the discussions on China’s rise apply to India.
From the discussion, the three main propagators of global change are: increased globalization due to decreased barriers to the movement of the global products, data and culture, The Asian emerging global competitors like China and India among others which seeks a drastic change of power from the traditionally dominant nations to the emerging ones. The other factor that comes out is the climate change which becomes more expensive on the global economy.
The global flow of goods that has increased undermines the functions of Nation-states and effectively is an issue that impacts on the European Union. The other factor of emergence of the global competitor poses another challenge to the European commission as they try to consolidate their position as a giant economy in the world. This is because in one way or the other, it leads to the shift of economy from the west to the east; further emergence would in turn increase globalization and limit the European Union’s strength (Schmitz & Messner 2008, pp.3).
The two big economies India and China, have huge numbers in their population, with very many millions poor. Their differences are in their powers, China seems to be more powerful than India. While Chinese government depends on their economic growth, that can not be said of India, Again China clearly emerge as a global power while India is still seen as a developing country (Schmitz& Messner, 2008, pp.57).
Continual growth and expansion is expected with industrial growth and emphasis on their strength like, upgrading their production platform with increased expansion of the domestic market. This has already posed a real threat to the expansion of the European market and only caused their demise; further growth is set to lower their dominance which is their power.
Challenges to the European Union
The European Union must improve on their global competitiveness by advancing in technology, innovation and Science so as to reduce the increasing dominance of the emerging countries if it is to stay in its position. Another area is in climate change where the emerging worlds are taking advantage; The European union should focus their research on addressing the climatic issues. The European Union should do more collaboration with the competitors to help in technology exchange.
Conclusion
The European market is facing a real threat from the emergence of the global competitors. The other global competitors include Brazil, Russia, and the former soviet bloc. Further emergence of the global competitors is poised to lead to economic shift from the west to the east and this will mean the demise of European Union.
Recommendations
- The European Union should collaborate more with the upcoming global competitors with an aim of facilitating technological exchange and joint research for a common goal.
- The European Union should put more effort in advancing their technology, innovations and Science to keep with the fast advancing global competitors and should price their goods and services competitively to attract more market.
- The European Union should make changes to their policies on climate change with a view to promoting climate friendly innovations like the green technology.
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