The continent has found itself in the middle of a full-blown competitiveness crisis, according to commentary from Baker McKenzie.
The crisis, said the law firm in Europe’s response to a shifting world order and the implications for EU competition policy, comes as the EU needs to find methods to improve its flagging productivity in order to protect its social market model and economic security.
The situation, said author Fiona Carlin, partner at the firm, is pretty dire.
She wrote that “Europe faces many challenges, not least an open war on its doorstep, random acts of sabotage by hostile states, what is being coined as the second China shock, the unpredictability of the US Trump administration and its hostility to the EU project, and the erosion of international law and institutions.”
She continued: “Even if the EU manages to avoid harsh US tariffs with mercantilist purchases of more liquefied natural gas (LNG), military and agricultural products, the change of guard in Washington risks (among other challenges) opening a floodgate of imports from China and other markets on the receiving end of more aggressive US tariffs on a scale that may hasten Europe’s deindustrialisation.”
Baker McKenzie referred to the Draghi report from last year, which took a scathing view of the continent’s competitiveness.
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This report, titled The Future of European Competitiveness, stated the foundations on which European prosperity have been built are ‘now being shaken’. This, wrote Draghi, is illustrated by the wide gap in GDP that has opened between the EU and the US.
Draghi told the Parliament that a fit-for-purpose competitiveness agenda would require annual funding of between €750bn to €800bn for projects whose objectives were already agreed upon by the EU. Some of this money could come from private sources, but some would also need to be secured through public investment, including by new common debt issued specifically to fund key joint projects.
In light of that report, Baker McKenzie now questions whether there is a need for new competition tools.
It wrote: “There is nonetheless a worrying trend at Member State level to call for ever more regulatory intervention at a national and/or at an EU level to combat unilateral anti-competitive strategies by non- dominant firms. The German and Dutch governments support empowering the Commission to impose structural remedies on top of initiatives to allow their own national authority to do so domestically.”
