Competitiveness in the age of geopolitics: What agenda does the EU really need?

Abstract

Competitiveness has returned to the forefront of European economic policymaking. This paper scrutinizes the recent debate on European competitiveness, as prominently diagnosed by the Draghi Report. By disaggregating the debate into three conceptual strands – market share-focused, productivity-focused, and beyond-GDP competitiveness – we conduct a descriptive statistical analysis of competitiveness indicators for the EU and the United States. Though our analysis concurs with the Draghi Report in identifying an innovation gap in high-tech services and energy, the state of EU competitiveness does not appear as bleak as suggested by recent public discourse. Based on a highly selective reading of the Draghi Report, the current focus on across-the-board deregulation will contribute little to addressing the identified problem areas and risks becoming self-defeating, as it tends to exacerbate reliance on an increasingly outdated export-oriented growth model, given pervasive protectionist tendencies in the global economy. We conclude that a more targeted approach is needed, based on an expansionary public investment agenda and mission-oriented industrial policies.