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January 9, 2007
New policy for the EU?

Speaking of the Streamlined Sales Tax Project, the European Union is embarking on the same type of tax harmonization project. It's designed to protect member states who levy the heaviest taxes, and is being criticized by countries who fear they'll be forced to raise their taxes to the detriment of their economies -- Great Britain, Ireland, Estonia and Slovakia.

A 2002 study conducted by the EU found,

... neither Europe's knowledge society in general nor its [information and communication technologies] sector in particular are as strong as they need to be ... Whether in patent applications, numbers of scientific researchers, universities' standing in international rankings, numbers of Nobel Prize winners or references in scientific papers, Europe trails the US ....

Europe needs to dramatically improve its attractiveness to researchers, as too many young scientists continue to leave Europe on graduating, notably for the US. Too few of the brightest and best from elsewhere in the world choose to live and work in Europe.

The study concluded,

Europe has to develop its own area of specialisms, excellence and comparative advantage which inevitably must lie in a commitment to the knowledge economy in its widest sense -- but here it is confronted by the dominance of the US. The US threatens to consolidate its leadership. The US accounts for 74% of top 300 IT companies and 46% of top 300 firms ranked by R & D spending.

Microsoft was viewed through the same lens. The EU fretted that Microsoft "would gain enough momentum so that the attendant network effects themselves would propel the technology to dominance." Once that happened, there'd be no room for a better product. The QWERTY theory might be more compelling if someone could come up with a better example than the layout of a typewriter keyboad (granted, marginally differentiated products don't always succeed). The EU's antitrust case against Microsoft was blatantly protectionist and demonstrated that European leders subscribe to zero-sum analysis, a worldview which discounts the possibility of net gains and assume that for every winner there has to be a loser.


Angela Merkel

Now, German Chancellor Angela Merkel is making the creation of a single trans-Atlantic market a priority of Germany's European Union presidency in early 2007. The chairman of the German Bundestag's committee on the European Union commented in a Wall Street Journal op-ed, that there are all kinds of opportunities for stronger cooperation. Many are in the traditional smokestack industries, but protection of intellectual property and "provisions of antitrust legislation" are also mentioned.

Some in Germany see a trans-Atlantic free trade zone as a new chapter in Europe's continuing struggle with globalization. As such, it doesn't necessarily reflect a rejection of zero-sum thinking.

Dotted Divider Line





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