Single market, competitiveness take centre stage

Malta must look beyond the common transactional approach to EU affairs.

EU leaders are meeting in Brussels today and tomorrow for another European Council meeting that will primarily focus on the European Single Market and competitiveness.

The Single Market is the backbone of the EU and its most significant achievement, with people, goods, and capital flowing freely between member states. For small countries like Malta, the single market is our lifeline as it provides our businesses with a market of over 500 million people that would have otherwise been impossible to reach. On top of this, the EU also provides us with the benefits of free trade agreements that it negotiates with third countries.

The global economy is in flux, with protectionism on the rise and geopolitical tug of wars intensifying. While the EU has thrived on free trade, the challenge posed by China’s competition is becoming increasingly difficult to manage. The EU industry is losing ground and struggling to keep up with China’s technological advancements. EU companies are already feeling the impact, and the Union is now in a race against time to prevent further capital outflow to third countries.

This European Council will delve into these issues as the EU strives to revitalise the Single Market and enhance competitiveness. Former Italian Prime Minister Enrico Letta will present his report on the Single Market, marking the first of two reports. Following the June elections, another former Italian Prime Minister, Mario Draghi, will present a report on competitiveness. In a recent event in Belgium, Draghi argued that competitiveness is not a flawed concept, but Europe has been misdirected in its focus. His comment was in reference to previous policies that aimed to decrease wage costs within the EU to boost productivity but inadvertently undermined European demand.

It is becoming increasingly common for third countries to not play by the rules. Yet, the EU was late in acknowledging this worrying trend, and EU businesses have remained burdened with costs and red tape, particularly in energy-intensive industries, that would not have been an issue in a benign world.

The EU must address fragmentation to compete with China, the US, and other global players. It must address the lack of harmonisation in specific sectors so that EU companies can achieve greater economies of scale and become more competitive.

As to Malta, we must look beyond the common transactional approach to EU affairs. The world has changed, and the EU will have to adjust to remain relevant in a competitive geopolitical world. And so do we. We need to look at the developments beyond the EU to embrace emerging trends and turn the challenges into opportunities. We need to consider our industries as part and parcel of the EU industries, as they also form part of the EU’s supply chain. Therefore, at face value, it might appear that we will not be impacted as a country, but some of our businesses, which might employ hundreds, might be indirectly affected.

This European Council is important as it will delve into the future of us all in terms of standard of living, jobs, and livelihoods. It is also important as work is proceeding in earnest to prepare the EU Strategic Agenda for the next five years, which will set the general direction for the new EU Commission. The strategic importance of revitalising the single market and boosting EU competitiveness will become more pronounced as stiff competition from China and other third countries intensifies.

Photo: Shutterstock

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