LETTERS TO THE EDITOR

Spring 2007

by C. Boyden Gray

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Sir,

Hubert Védrine says that for some time now the US has “not encouraged any new unification projects that might further strengthen Europe”. He explains that the US may publicly “deplore the national divisions between Europeans” and the EU institutional complexity, but in fact the US wants to take advantage of this situation and make sure that Europe would remain “understanding and docile”.

Having supported every major step toward closer European integration over the past 50 years, the United States should not need to defend its record. But I would nevertheless like to file a brief dissent on economic grounds. It is quite clear that the US would love to see the EU perfect its internal market, and the US does what it can, without meddling, to support the efforts of the EU’s current leadership to achieve this goal. The benefits to the US of a more competitive internal market that remains open to the global economy are many and deserve a little explanation.

First, a more integrated European economy would permit greater deregulation – or “better regulation” as the Europeans prefer to call it. This in turn would mean considerable added growth for the EU (and to some extent the US as well), according to the OECD and other experts. The result would be greater economic growth for the world – and, of course, for the nearly 60% share of world GDP generated by the EU and the US. There would also be greater demand in the EU for US exports, with obvious benefits to the US current account deficit.

Second, greater economic growth and better regulation would slow the tendency of the EU to export over-regulation to foreign competitors so as to lessen its own regulatory competitive disadvantage. This tendency puts a drag on world growth as well as on the abilities of both the US and the EU to create new jobs in the face of globalisation. Conversely, a better internal market with better regulation would facilitate the realisation of a true transatlantic market ultimately free of regulatory divergence between the US and the EU – the holy grail of economic opportunity on both sides of the Atlantic.

Third, better job creation in the EU would, we Americans believe, enhance the integration of minorities into European society, as there is no better integration tool than gainful employment. Poor job growth presents dangers because of the target the very high Muslim youth unemployment provides for terrorist recruiters and other troublemakers.

Finally, faster economic growth and more opportunity for young people might perhaps reverse the de-population trend and the migration of some of the EU’s best and brightest outside of the continent (even if some of the migration is to EU members to reach Britain and Ireland). Such growth would certainly also mean more funds for defence, R&D and education – goals shared by all Europeans.

The most concrete current example of failed economic integration is the EU’s fragmented energy policy, which makes the EU (and thus indirectly the US) more vulnerable than necessary to unfriendly governments wherever oil reserves are largely controlled by state entities. The failed energy policy – caused by member states’ protection from competition of their national champions – is a metaphor for the reluctance of member state politicians and special economic interests generally to submit to the common good, as originally envisioned by Jean Monnet (and as executed more successfully in the US by Founding Father Alexander Hamilton and John Marshall, the first US Chief Justice).

There is today a general recognition that Europe needs to reform, and that the EU and US need to stand together to compete in the global economy. The US has been tireless in its efforts to share the benefits of its deregulation experience where the US and the UK had a decided head start under President Reagan and Prime Minister Thatcher. Both continents are working together to remove other impediments to a truly integrated market for the entire Atlantic community, including obstacles to better joint action on energy and the environment.

In short, the US wouldn’t mind losing a little bit of competitive ground to the EU if the benefits of a more integrated and growing EU economy mean a much higher combined GDP – and higher productivity and job growth – for both.