Shailendra Ghorpade of MetLife, Daniel Hamilton of Johns Hopkins University and Penelope Naas of Citi are all committed Atlanticists: but they all see some issues ahead, especially for Europe, and according to Daniel the window of opportunity for putting things right is a small one.
In the AmCham EU panel discussion at The Premier Business Leadership Series, hosted by Mikael Hagstrom of SAS, they identified demographic, labor and migration issues as the biggest challenges for Europe. A stunning statistic: 85 percent of migration into Europe is unskilled labor, and only 5 percent skilled. By contrast in the United States, just 5 percent of legal immigration is unskilled, while 55 percent is skilled. “Europe is a magnet for the unskilled” said Daniel. Yet its future must lie in a sophisticated mix of manufacturing and services, which demands a highly skilled workforce.
This situation magnifies other demographic problems that Europe and America have in common, such as an ageing population.
Nonetheless, the alliance is a strong one, underpinned by incredible levels of transatlantic investment. Sixty percent of American foreign direct investment goes to Europe. That compares with a meager 3.7 percent that Americans invest in the high-growth BRIC economies (Brazil, Russia, India and China). “Money has no race, color or religion,” said Shailendra. In other words, it goes wherever the risk-reward ratio is most favorable. Americans are attracted to Europe because it offers a safe haven investment and the returns are high.
And yet, and yet … it is a troubled relationship. Americans are bewildered by the complexities of government in Europe and there are growing concerns about the currency, which could make investment decisions more difficult in the future. Penelope highlighted the tendency for the relationship to get bogged down in trivial disputes about standards such as GM in food. This gets in the way of the much bigger things we have in common.
“For most of the twentieth century America saw Europe as a problem. It was certainly the biggest foreign policy challenge. That is no longer the issue; the trouble now is that many Americans do not see Europe as the solution,” said Daniel. But the ball is in Europe’s court. It needs to solve the currency crisis quickly and take the opportunity to redefine itself and its role in the world. The panelists agreed that there is a failure of political will in Europe: we lack politicians who can articulate the benefits of union.
This is especially true in core countries like Germany, where the public increasingly sees itself bailing out the weaker economies on the periphery, and is not being told the incredible benefits of a single market. “Europeans see the union not as two plus two equals five, which is the whole point of integration, but rather as two plus two equals less than four,” said Shailendra.
If it can get its act together, a united Europe has a bright future as a service-led, skills-based economy, sharing common goals with America. If not, we could see a rise in protectionism and unilateralism on both sides of the Atlantic, which would spell disaster.
For the time being though it seems Americans have a better concept of Europe than Europeans themselves.