Anniversary of the EU founding provides opportunity to affirm manufacturing’s vested interested in political and economic policies

March 27, 2017
March 25 marked the 60th anniversary of the founding of the European Economic Community, the forerunner of today’s European Union (EU). For manufacturers in Europe, this milestone provides an opportunity to reflect on the correlation between politics, economics, and profitable go-to-market strategies.

Manufacturing has certainly been impacted by the formation of the EU, and manufacturing leadership should feel obligated to understand the historical significance and acknowledge that the future of the EU requires consideration. Manufacturers, whether they like it or not, have a vested interest in political awareness. Their sphere of influence is powerful. Manufacturing, though, also depends on stable trade relationships, such as endorsed by the European Economic Community sixty years ago.

On March 25, 1957, the heads of government of Belgium, France, Germany, Italy, Luxembourg, and the Netherlands met in Rome to sign the treaty. In its preamble the document clearly states the objectives: To “lay the foundations of an ever closer union among the peoples of Europe” and improve living and working conditions through “common action to eliminate the barriers which divide Europe.”

It’s hard to imagine if the original authors and signers had any inkling of the major impact the EU would have on the global economy. McKinsey Global Institute reports that the treaty was evolved from six initial members to 28 countries with a combined population of more than 500 million and GDP of €15 trillion. That makes the European Union the second-largest economic entity in the world after the United States, representing about one-fifth of global GDP.

Over the years the scope of the agreement also expanded, from a focus entirely on the free circulation of goods to a wider view which now includes free movement of people, capital, and services.

Although the accord has had some naysayers over its lifespan, there is little argument that the treaty can be credited with bringing significant improvements to living and working conditions across Europe. The impact is not only economic. The EU has also played an essential geopolitical role during its six decades, bringing stability among European neighbors that had spent previous centuries at war.

The EU has also played a part in shoring up young democracies in countries including Greece, Portugal, and Spain, as well as in the ten Eastern European nations that have joined since 2004.

The role of the EU has not been without controversy. McKinsey says, “The past decade has been an especially difficult and turbulent one—a time of weak economic growth, as the global financial crisis gave way to a sovereign-debt crisis, and of political fragility, as the EU’s reputation, achievements, and ability to act have been called into question.”

This culminated with the British vote to leave the EU.

The referendum, which took place June 23, gave UK residents a chance to decide whether the UK should leave or remain in the European Union. The BBC reports that 52% of the population that voted want to leave the EU, and 48% voted to stay. The referendum turnout was an unprecedented 71.8%, with more than 30 million people voting. The massive turnout was as startling as the results.

The resulting impact is yet to be determined.

This week as the anniversary of the founding of the EU is being observed, the UK government is preparing Article 50 which will signal the official departure from the EU. The EEF, the UK’s manufacturing trade group, continues to represent the best interests of manufacturing. “We will continue to engage at the highest level with a wide range of influencers on issues ranging from immigration to the UK’s trading relationship with the EU,” says Hywel Jarman, Director of External Affairs, EEF in a most recent EEF newsletter.

Manufacturers, too, will benefit from staying informed and engaged in economic and political issues. The challenges to the EU—and manufacturing--will continue to mount.

The McKinsey article identifies three global forces that will likely cause high impact for countries in Europe.

“First, aging will create an economic growth gap as the working-age population declines, putting the onus for future GDP growth on productivity, which is currently waning.

Second, rapid advances in digitization and automation will disrupt the European economy, expose it to new competition, and raise difficult questions about the future of work, even as they provide the potential to boost productivity and close the growth gap created by the demographic changes.

Third, the EU faces increasing competition from emerging-economy companies and digital multinationals, rising migration pressures, and a broader backlash against globalization and global institutions as many citizens feel left behind.”

For manufacturers, these pressures will be highly concentrated, creating high-risk situations. For manufacturers who stay on top of technology advances, though, there will be opportunities to expand. It’s up to each organization’s leadership to decide if their company will take an active part in defining the future, or will sit on the sidelines, risking obsolescence.
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