THE US ELECTION OUTCOMES SHOULD MATTER LESS TO EUROPE

11/05/2024 Remigijus Šimašius.

The first world map with America in it: 1507 Martin Waldseemüller map.

Let's face it Today as it happens - US presidential elections are highly important and often concerning for the EU. And it’s not just for the high-level reasons Europeans usually discuss. Europe is becoming less central to the US, largely due to changing demographics and a fading European cultural sentiment among Americans. Meanwhile, the US has increasingly captured Europe’s attention. Why? Several reasons drive this interest, and all of them are about Europe, not America.

First, the US is surpassing Europe in economic power. The EU's share of the world's GDP, adjusted for purchasing power, is 15.5%, compared to the US's 15.02% last year. However, since 2010, the EU’s cumulative GDP growth rate has been just 21%, while the US saw 34% growth. The situation looks even starker in nominal GDP terms: in 2008, the Eurozone and the US had roughly equivalent GDPs of €13.1 trillion and €13.6 trillion, respectively (in today’s prices). Last year, the Eurozone’s GDP was just over $15 trillion, while the US GDP stood at $26.9 trillion.

Second, Europe is increasingly exposed to and dependent on non-democratic countries. German manufacturers, for instance, are lobbying against restrictions on China, fearing retaliatory actions.

Third, Europe’s regulatory influence in setting global standards is waning. The EU's last notable success was forcing Apple to adopt USB-C chargers globally. Such influence may be harder to wield as Europe’s purchasing power declines, with tech firms choosing to switch off certain product features in Europe rather than adapt to EU regulations at substantial costs. Europe’s innovation struggles, highlighted in the Draghi report, underscore this. However, the report fails to link excessive regulation and company departures to Europe’s innovation gap, instead calling for more government spending that is already higher in the EU than in the US.

Fourth, Europe’s divisions weaken its role on the world stage. For instance, Hungary’s close ties with the Kremlin highlight internal divisions that undermine Europe’s international strength.

Fifth, Europe’s military dependence on the US stems from a long history of pacifism - or rather, neglect. The US has always spent more on defence, and despite some recent EU increases, the US still accounts for two-thirds of NATO’s budget. This dependence brings economic effects: two-thirds of EU military orders in recent turbulent times go to US companies, while only one-sixth go to European firms.

Imagine a world in which the EU tackles these issues - a Europe with a stronger economy, less dependence on China and other autocracies, lean regulation, more dynamism in innovation, real unity, and military self-sufficiency. Such a Europe would view US elections with the interest of a neighbor, not the concern of a tenant. Regardless of who wins the US election, this is the direction Europe must consider in all of its political and regulatory decisions.