Eric Davies discusses the ups and downs of globalisation in relation to the European Commission’s recently published Reflection Paper on Harnessing Globalisation.

Factory closures, job losses and a diminution of workers’ pay and conditions are often highlighted as the downsides of globalisation.

At the same time, global trade is credited with boosting economic growth in the EU — with every €1 billion of additional exports calculated to support 14,000 jobs — while cheaper imports are said to particularly benefit poorer households.

In an effort to bring some clarity to such a mixed picture, the European Commission has launched a debate on how the EU and its Member States can shape globalisation in a way that anticipates the future and improves the lives of Europeans.

Reflection paper

Harnessing globalisation starts at home: the EU must act to share the benefits of globalisation more fairly, in line with its principles of solidarity and sustainability.

That is one of the messages in a Reflection Paper on Harnessing Globalisation which, says the Commission, clearly finds that globalisation can be beneficial — providing it is properly managed.

Part of that management process requires the EU to be an innovative and competitive economy, with world-leading companies and with citizens who can adapt to change and are able to generate the wealth needed to uphold Europe’s social model, says the paper.

The EU27 remains the world’s largest trader, investor and development assistance provider, says the Commission, and it is deeply integrated into global value chains.

Note:

“EU27” refers to all Member States other than the UK — Brexit is already being taken into account by the Commission.

Global rulebook

According to Frans Timmermans, First Vice-President of the Commission, Europe must help rewrite the global rulebook so that free trade becomes fair trade and globalisation becomes sustainable and works for all Europeans. At the same time, he argued, the EU must focus its policies on giving people the education and skills they need to keep pace with the evolution of Europe’s economies.

Echoing Mr Timmerman’s comments, Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness, said that Europe must promote a stronger rules-based global order, act resolutely against unfair practices, and make societies more resilient and economies more competitive in the face of a fast-changing environment.

Concerns

The paper does not shy away from the less positive aspects of globalisation. The fact that non-EU countries do not all share the same standards in areas such as employment, the environment and safety are recognised.

With European firms unable to compete with competitors from such places on price alone, global competition can result in workers’ pay and conditions being undermined and/or jobs being lost.

The solution to such negative effects lies not in protectionism, argues the Commission, but in shaping a truly sustainable global order, based on shared rules and a common agenda. The EU could, for example, lobby for new rules to tackle issues such as tax evasion, government subsidies and social dumping.

Globalisation Adjustment Fund

In order to ensure a better distribution of the benefits of globalisation, the Commission calls on the EU to work with its Member States and regions as well as with international partners and other interested parties.

The Commission argues that a number of tools can be used to help redistribute wealth more fairly. They include implementing progressive tax policies and investing in innovation. Regions that are particularly vulnerable to globalisation should be given financial assistance through the EU structural funds and particularly through the Globalisation Adjustment Fund, which was established in 2007 to help workers retrain, find new work or start their own business.

Further information

The text of the Commission’s Reflection Paper on Harnessing Globalisation, together with additional information, can be accessed on the European Commission website.

Last reviewed 25 May 2017