American and European differences in SMEs that should alter our approach to TTIP

Domestic markets have a substantial impact on how nations approach international trade. Some countries, like Germany or Japan, cannot rely on internal demand to fire growth. China on the other hand has taken advantage of external interest in its supply capacity to build interior demand. Consumption has often an underestimated impact on any given country’s ability to thrive on the global scene. 

The United States has always been privileged with regards to this dualism. Its very nature preconditions it to be competitive in the current international system and the correlation between the rise of America as the world’s only superpower during the 1990s and the development of globalisation is an undeniable one. Uncle Sam is extraordinarily well prepared to operate abroad and is keen to use its worldwide influence to unlock markets. Much of its wealth is thus generated outside North America.

America

American Advertisement 
Photo credit: Poster Boy NYC / Foter / CC BY

Because of the US political organisation, liberal ideology and considerable size, American  businesses are mobile. The larger companies operate throughout the immense territory and smaller ones tend to expand by hopping from state to state with great dynamism. It is as if the necessary organisational skills needed for commercial development in space were part of the American capitalist DNA. Small and medium enterprises are not scared to go a little bit farther and cross state borders to achieve growth. Confining yourself to a single area is difficult to justify unless you use it as an asset to reinforce your identity. (http://www.in-n-out.com/history.aspx)

The fact is that despite being vast, the American market may still be saturated. John D. Rockefeller started selling oil in China during the 1890s as his titanic production exceeded domestic demand. Today more than ever, 320 million people is not enough to fuel the development of Fortune 500 companies (the largest in the country ranked by gross revenue). Most of them try their luck abroad.

This is particularly useful as the US subsequently benefits from a complete structure abroad  (law, consulting and accounting firms, international understanding of English, knowledge of the American way of doing business, for instance).

Of course one may argue that so do European companies. German goods are universally recognised, the Italian food industry is a privileged ambassador and Spanish multinationals dominate Latin America. Such large corporations do not, nevertheless, constitute the necessary basis for an enduring economy. Growth is widely regarded as being the consequence of a strong small and medium enterprises network. This is where the United States distinguishes itself from the European and achieves economic expansion. 

Europe Needs More Competitive SMEs Before Signing the TTIP Agreement

America

Local British Shop
Photo credit: mostaque / Foter / CC BY

European SMEs do not take off because they do not dare to. The domestic markets are restricted and the average business owner will not even consider opening a branch in some other part of the Union. European SMEs mobility could hence represent a major source of growth in years to come just like the American corporations did: in order to rise and become the world leaders that they are today, they first controlled their whole natural milieu. Mistakenly, designating European SME operations as “international” or foreign direct investment is a psychological error that should not be committed at this point in the Single Market.

This is where the European Commission should be focussing its efforts at the present time. Reinforcing the digital Single Market for instance, a quintessential industry for 21st century SMEs, has been in the European agenda for the past ten years without significant progress being made. Europe’s digital humiliation is probably the most significant example of how important it is to control a large domestic market to develop at the present time (only Spotify, Skype and Asos are considered top tier tech companies -thanks to American support-, Microsoft or Samsung-style giants are not on the table). Europe needs to turn the Single Market into an actual economic zone instead of just a space to export goods without having to pay tariffs. Things should be so evidently easy for entrepreneurs that opening a branch in Stuttgart if an opportunity is present there for a Strasbourg businessperson should not even come into question. It is time for the all related legal and fiscal parameters to come together throughout the Union.

TTIP Agreement

TTIP Agreement

Before jumping in a Transatlantic Trade Agreement that will effectively integrate our Single Market with the United States’, the EU should understand and remedy stagnation in European economic integration. It is likely that very little growth will be achieved thanks to the TTIP as things stand today. All major European companies that are big enough to cross the Atlantic already operate there, and the smaller ones are simply not prepared.

Most importantly, the European market for SMEs, unlike the American, is deeply deficient.  Since our SME mobility is excessively low very few European businesspeople will take advantage of TTIP. Americans, instead, being used to moving around, will not take much until they come compete against European businesses without the latter doing the same thing in the US, eventually turning TTIP into a self-harming agreement. The European Union should wait until such SME parameters are mastered and all available growth has been exploited to make the TTIP move. Being too abrupt in this decision could lead to an irrecoverable loss in competitiveness in comparison with the American counterparts that shall erode the already fragile European start-up culture. Our businesses need to be European before being global and the United States certainly represent a worthy example.

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Guillermo Giralda Fustes

Guillermo Giralda Fustes

Politics, Philosophy & Law student at King's College London writing predominantly on European Union-related affairs.