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HELLENIC REPUBLIC COMPETITIVENESS AND WORLD TRADE 1 HELLENIC REPUBLIC A New Global Environment • Globalisation means that the flows of goods, services, capital, technologies and people are spreading worldwide, as countries everywhere open up to wider contact with each other • So globalisation can boost economic growth. But it can also be disruptive. If left unharnessed, it may widen the gap between rich and poor countries and further sideline the poorest economies. • Individual nation States cannot deal with the problem. When business goes global, the rules of fair play must also be set globally, through international agreements 2 HELLENIC REPUBLIC A New Global Environment Global markets are changing the way in which the world economy operates: • New limits to governments' influence over what were previously regarded as national issues mean that international cooperation will become more common. • Global companies are most likely to locate in countries where barriers to entry and exit are low, and where the labour force is well educated and flexible. • People and ideas will achieve greater prominence as a source of national competitive advantage, as labour remains less mobile than capital or technology. 3 HELLENIC REPUBLIC Competitiveness in Global Markets • Competition from Western industrialised nations and from the Asian tigers, Latin America and Eastern Europe is becoming even more fierce and the diffusion of technological advances more rapidly. • Improvements in transport and telecommunications have cut costs, while governments and international institutions have played a significant role by promoting open markets, business-friendly foreign investment regimes, and common rules and standards. • These changes are imposing the need to improve competitiveness. • Improving competitiveness is central to raising the underlying rate of growth of the economy and enhancing living standards • Competitiveness is about removing impediments to investment and creating a high skills, high productivity and therefore high wage economy where enterprise can flourish 4 HELLENIC REPUBLIC Governments have an important role to play Governments have an important role to play in encouraging a friendly climate of enterprise by: • providing a stable macroeconomic framework based on low inflation and sound public finances • deregulation and lower corporate tax rates • enhancing market liberalisation, extending privatisation and reducing trade barriers • helping business through the provision of high quality business support services • modernize education and upgrade skills through lifelong learning. 5 HELLENIC REPUBLIC The EU and World trade • The EU accounts for a large share of global imports and exports, making the Union one of the world’s biggest traders. • Trade was one of the first areas in which EU countries agreed to pool their sovereignty, transferring to the European Commission the responsibility for handling trade matters, including negotiating international trade agreements on their behalf. • This means that the EU’s 25 Member States negotiate as one, both with their trading partners and at the WTO, thus maximising their influence on the international scene. • Nevertheless the EU lacks competitiveness vis-à-vis the U.S. Therefore the Member States are implementing a 10 years reform programme known as the Lisbon strategy to make the EU “The most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”. 6 HELLENIC REPUBLIC Foreign Trade in 2003 (USD billions) 3.000 2.500 2.000 1.500 1.000 500 0 2.848,0 4.000 3.025,0 3.000 1.047,0 US 2.000 477,0 EU25 1.250,0 597,0 1.000 Japan 0 Total imports Total exports World Trade in 2003 (Percentage, %) 25 20 15 10 22,9 25 20 14,0 15 6,8 10 5 5 0 0 World import share 13,8 US 13,1 8,5 EU25 Japan World export share 7 HELLENIC REPUBLIC Foreign Direct Investment FDI in the US in 2003 70 US FDI Abroad in 2003 50 62,1 45 60 37,9 40 Share of Total (%) Share of Total (%) 47,2 50 40 30 18,7 20 11,6 10 7,6 35 30 25 20 15 10,8 10 4,1 5 0 0 EU15 Other Japan Canada EU15 Other Japan Canada 8 HELLENIC REPUBLIC The Lisbon Strategy To improve competitiveness, the member states agreed to implement necessary reforms in five broad policy areas: 1. Economic reform -Objectives: Complete the internal market, further opening of regulated markets (energy, ports), reduce red tape, promote quality pubic services, lower the cost of doing business. 2. Employment - Objectives: Improve the quality of work and increase employment rate to 70% by 2010. 9 HELLENIC REPUBLIC The Lisbon Strategy 3. Education, innovation and research - Objectives: Speed up the transition towards a knowledge driven economy, increase R&D spending to 3% of GDP by 2010 4. Social cohesion - Objectives: Promote equal opportunities and reduce regional disparities (according to the social policy agenda) 5. Environment/sustainable development - Objectives: Apply Kyoto protocol, promote eco-innovation and eco-business 10