Europe Still Matters: U.S. Firms Should Stay the Course

Despite current economic challenges, new study finds Europe remains the most profitable and easiest region to do business for U.S. companies

Schiphol, June 2012 – A new study by Joseph Quinlan, Transatlantic Fellow at the Center for Transatlantic Relations, Johns Hopkins and the German Marshall Fund showed that despite the Eurozone crisis, the region offers tremendous opportunities for U.S. businesses and remains the most profitable region in the world for corporate America. The crisis has triggered EU-wide structural reforms that will make Europe stronger, not weaker in the longer term. Meanwhile, the European Union remains the largest and wealthiest economy in the world.

“The prophesying by the pundits that the future of the world economy lies with emerging markets like China, suggests that Europe is becoming less and less relevant. Nothing could be further from the truth”, said Joseph Quinlan. He went on to say, “The report reveals that despite Europe’s economic difficulties in 2011, the region still accounted for over half – 53% – of total US foreign affiliate income last year. This was 156% larger than reported income from Asia—a figure that speaks volumes about Europe’s underlying importance to corporate America.” The European combined economy is larger than that of the U.S., while Europe’s accounts for about 30% of global personal consumption; greater than the share of the U.S. (27.7%) and more than double the BRICs combined (13.6%).

“It’s crucial that American businesses continue to reap the benefits that investing in Europe has to offer. To ignore a combined market economy larger than the U.S. would be a costly mistake.”

The report found many advantages to doing business in Europe. Europe accounts for 25% of global R&D expenditures and produces the largest share globally of natural science graduates – 18%; with a 17% share of engineering degrees (compared to 4% in the U.S.). Europe also comes out on top when it comes to ease of doing business. According to the World Bank, 12 European economies ranked in the top 25 most business-friendly; this is in contrast to some of the emerging markets that did not rank very highly – China 91st, Russia 120th, Brazil 126th, and India 132nd.

Additionally the countries on Europe’s periphery, notably the Middle East, Russia, Turkey and North Africa remain key sources of growth and consumption. Europe’s trading links to those countries have deepened and thickened over the past decade to the benefit of U.S. companies operating in Europe.

Foreign investment and shifting production overseas are often thought of as destroying trade or reducing U.S. profits and job losses, but in reality the opposite is true. “U.S. affiliates in Europe help create trade, not destroy it. The more profitable U.S. affiliates are in Europe, the more earnings available to the parent firm to hire and invest at home, dole out higher wages to U.S. workers and pay out dividends to U.S. shareholders. That’s win-win for both sides”, stated Quinlan.

Source: AmCham The Netherlands press release, June 2012

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