Greater Opportunity Through Innovative Change


(Berlin, Germany) The 15-nation European Union (EU), measured as a trade bloc, is Arkansas' third largest trading partner, importing $367 million in goods in 2002 (1). Themes at an international trade and monetary policy conference underway here are the need for further economic integration and high standards in educating the global economy's next generation of workers.

British entrepreneur David Ricardo (1772-1823) developed the great economic idea of comparative advantage (2) that is the foundation of international trade. In many respects, the EU symbolizes the benefits of trade. Under the influence of conservatives the Europe that suffered under statist philosophies and two world wars in the first half of the 20th Century emerged late in the second half as the world's largest trade bloc. The significance of trade between Arkansas and the EU is reflected in government trade statistics from both sides of the Atlantic:

* Arkansas' $367 million in exports to the EU last year represented 13 percent of total exports.

* EU investment supported an estimated 25,500 jobs in Arkansas (2000).

* Exports to the EU support an estimated 3,100 jobs in Arkansas (2001).

* The EU is the top foreign investor in Arkansas. EU investment amounted to an estimated $2.5 billion or 54 percent of total foreign investment in Arkansas (2000).(3)

Given the significant investment ties between Arkansas and the EU, and the jobs and exports created by this relationship, it is important the proper fiscal and monetary policies are followed so trade can expand.

Conservatives And The EU

European Conservative leaders and market-based think tanks have played an important role in shaping the EU for more than half a century.

British Conservative leader Winston Churchill, the former prime minister, called for a "kind of United States of Europe" in a September 1946 speech at Zurich University. In 1951, six European nations signed the Treaty of Paris establishing a common market for the production and trade of coal, steel, iron ore and scrap metal. The treaty abolished all trade barriers among the six nations, which included West Germany. Conservative Konrad Adenauer, the West German chancellor and leader of the Christian Democratic Union, presided over the postwar Economic Miracle, which occurred as a result of sweeping, market-based policies. The treaty's success in expanding trade led to creation of the European Economic Community (1957) and the European Community (1967). Great Britain entered in 1973 under a Conservative government and today imports more Arkansas goods ($100 million) than any other EU member.

The 15 EU member nations (ranked in terms of Arkansas exports) are Great Britain, Netherlands, France, Belgium, Germany, Italy, Finland, Sweden, Spain, Greece, Ireland, Denmark, Austria, Portugal and Luxembourg. The Treaty on European Union at Maastricht, The Netherlands, finalized the process of trade integration among EU member nations in 1992. But monetary integration resulting in a common currency-the euro-was not completed until last year. EU members have strict spending limits imposed on them to maintain fiscal discipline and the European Central Bank is also restricted in its monetary policy.

The Need For High Standards In Education

A recurring theme at private receptions with corporate board members was the importance of trade and the creation of conditions that contribute to its expansion. These include political stability, monetary policy that contributes to low inflation and a stable euro, and education policies that set high standards. European business leaders privately stressed the need for school systems to train young people in mathematics and science, and to develop critical thinking and problem-solving skills.

---Greg Kaza

(1) Arkansas Policy Foundation calculations based on Arkansas Department of Economic Development trade data, "U.S. Exports Via Arkansas.".

(2) "Trade Benefits Arkansas," Arkansas Policy Foundation (June 2003).

(3) European Union; Office of the U.S. Trade Representative and U.S. Census Bureau, Foreign Trade Division; U.S. Department of Commerce, Bureau of Economic Analysis.