We often fail to recognize the benefits brought about by free trade and an open economy. This is particularly so in Europe, where the largely harmonized internal market is very much taken for granted.
When I became chief executive officer of Nokia (NOK) in 1992, the regulatory burden in Europe was much heavier than it is today. Europe was consumed with heavy taxes and duties, but we have come a long way since then. That progress has recently been threatened, however, by a rise in economic nationalism. This concerns me, as today more than ever, European nations need to work together to secure the levels of innovation and productivity companies need in global competition.
Recent examples of European economic nationalism abound, most often in the area of cross-border mergers and acquisitions. But it doesn't stop there. European countries face increased thresholds of difficulty in implementing commonly agreed legislation, and too easily drift apart on essential issues such as international trade. Sadly, many public figures think more of short-term political success than the longer-term necessity of unpopular decisions.
FINDING A BALANCE. Although a European Union directive on cross-border takeovers exists, its limited scope serves as an example of just how restricted the EU is in remedying economic nationalism. First, the directive has been so watered down that it may have little effect on easing cross-border takeovers. Second, the ultimate implementation of the directive lies in the hands of the EU's member states.
As a CEO, I understood the need to protect a company's interests at all costs, finding a balance between its owners and other stakeholders. All the same, I also believe that in a position of leadership, it is important to make decisions that will bring long-term benefits, even if these decisions are difficult or unpopular.
Likewise, if governments blur their long-term responsibilities to the electorate by making short-term, populist policy decisions -- instead of focusing on economic policies that allow companies to formulate globally competitive business strategies --the results can be disastrous in the long term. One company with potential for global leadership is far more valuable for its European stakeholders than a handful of suffering national champions. In today's world, a purely nationalistic view on business is simply outdated.
TOO MUCH TO LOSE? Governments and the EU have to make tough decisions regarding mergers, takeovers, and labor laws in order to create and secure the best regulatory environment for spurring industrial innovation and research and development. Policy measures that deal with the critical issues facing Europe must be effectively implemented.
European countries also need to secure support from their citizens for EU initiatives that are aimed at meeting Europe's challenges. It's a pity that so many Europeans feel they have too much to lose, as it makes reform difficult. This is why more emphasis should be put on the benefits that a fully functioning single market brings to the majority of people, rather than on the adjustment costs it imposes on a minority.
Imposing populist sentiment against EU initiatives does not help Europe. Instead, political leaders should positively influence integrationist trends and work towards rallying support from their citizens for measures to strengthen the single market. National governments have to adhere to and maintain the original principles of the truly single market. Of course, broad agreement on unpopular measures in an expanded Europe of 450 million people of different backgrounds presents difficulties.
However, these difficulties are not insurmountable and must be overcome, as there is no better way to secure the future prosperity and competitiveness of Europe than to build a strongly integrated economic area. It is after all, the basis of existence for today's Europe as we know it.