Europe Still Matters: U.S. Firms Should Stay the Course
The Case for Investing in Europe was commissioned by the European Council of American Chambers of Commerce (AmChams in Europe), which is the umbrella organization representing 45 AmChams in Europe and Eurasia. The Report’s author, Joseph P. Quinlan will be in Copenhagen on September 13, to present the report at AmCham Denmark’s annual Foreign Investor Summit.
Despite current economic challenges, new study finds Europe remains the most profitable and easiest region to do business for U.S. companies.
A new study by Joseph Quinlan, Fellow at the Center for Transatlantic Relations, Johns Hopkins and the German Marshall Fund shows 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.
“Predictions by the experts 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., and 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,” says Stephen Brugger, Executive Director, AmCham Denmark.
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. Specifically, Denmark is highlighted as one of the leaders in creating innovation and according to the World Bank, the easiest place to do business.
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 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 a win-win for both sides”, stated Quinlan.
“I am pleased that AmChams in Europe’s new report supports the fact that Europe and Denmark are still attractive markets for foreign investments,“ says Pia Olsen Dyhr, Danish Minister for Trade and Investment. “At the same time, it underscores the importance of creating optimal framework conditions for foreign investors. This is why the government has set up a working group that is looking into how we can work even more effectively to promote and make it attractive for foreign companies to establish a presence in Denmark.”
“Last week there was a lot of focus on China and emerging markets, however, North America is certainly a region that we prioritize. Invest in Denmark works diligently - through offices in New York, Silicon Valley and Toronto - to attract more U.S. investment in areas such as IT, green energy and life science," added the Minister.
To download a copy of the report, click here.