Monday , December 17, 2018

The Transatlantic Economy 2015: Why It Matters to the Carolinas

The United States is currently negotiating a number of “mega-regional” trade agreements with scores of countries around the world. Those agreements could open up significant markets for American companies.

Most of Washington’s attention these days is focused on the Trans-Pacific Partnership with 11 other Asia-Pacific countries. But another mega-regional deal, the Transatlantic Trade and Investment Partnership (TTIP) with the 28 countries of the European Union (EU), is likely to mean more for the Carolinas. Here’s why.

One of the best kept secrets in Washington is how companies actually work. Across the Pacific, they deliver goods and services mainly through trade. But across the Atlantic, they deliver goods and services mainly through investment. The Charlotte region has been a major beneficiary of this investment.

Understanding this simple distinction helps us understand why the global economy still rests squarely on the shoulders of the transatlantic economy, despite all the chatter about the ‘‘rise of the rest.’’ Here are eight critical ties that bind Europe to the United States—and especially to the Carolinas.

  1. Production. American companies in Europe and European companies in America are among the largest and most advanced economic forces in the world and an important glue binding together the two sides of the Atlantic. The combined output of transatlantic affiliates—nearly $1.3 trillion—is larger than the output of most countries.

Europe accounts for almost half of the global output of American companies operating abroad, and double U.S. corporate output in all of Asia. U.S. affiliate output in the UK is four times greater, and in Germany double, U.S. affiliate output in China. Meanwhile, European affiliates account for nearly two-thirds of all foreign affiliate output in the United States. German affiliate output in the United States roughly equals Japanese output and is greater than Canadian output.

  1. Jobs. America is the largest source of onshored jobs in Europe, and Europe is the largest source of onshored jobs in America. Fifteen million workers owe their livelihoods to robust transatlantic commerce. Most workers working for American companies outside the United States are European, and most workers employed by European companies outside of Europe are American. What’s more, on average those jobs pay better, and offer better benefits, than domestically-sourced jobs.
  1. Assets. Europe is the largest investor in the American economy, just as America is the largest investor in Europe’s economy. Europe accounted for 70 percent of the $2.8 trillion invested in the United States in 2013—most of it by firms from the UK, the Netherlands, France, Switzerland and Germany. Similarly, Europe accounts for roughly 60 percent of all U.S. assets globally.
  1. Knowledge and innovation. U.S.-EU flows in research and development (R&D) are the most intense between any two international partners. European companies account for over three-quarters of total foreign private sector R&D spending in the United States. American companies spend 60 percent of their global R&D in Europe. Europe and America are knowledge economies, and companies seeking competitive advantage are seeking that extra slice of knowledge that they can turn into an extra slice of profit. More often than not, they look across the Atlantic.
  1. Trade within the company. In the Pacific economy, trade is king; investment flows are secondary. In the transatlantic economy, however, investment drives trade—a sign of a deep and dense economic partnership. Most trade across the Atlantic, in fact, is conducted among two or more parts of the same company.

It’s when BMW sends engines from its plant in Bavaria to its plant in South Carolina. It’s what makes BMW America’s No. 1 auto exporter by value. Over half of U.S. exports to Belgium or the Netherlands takes place because American companies are sending products to their affiliates in those countries. Without that substantial investment presence, trade would shrivel and American communities would suffer.

  1. Foreign affiliate sales. Everybody thinks of Germany as an export powerhouse. But German companies based in America sell far more than German companies export to America. European companies deliver goods and services to Americans primarily through the sales of their affiliates based in America, not through exports.

In 2013, European affiliate sales in the U.S. of $2.3 trillion were more than triple European exports to the United States. The same is true for American companies. U.S. foreign affiliate sales in Europe are roughly half the global total, double sales in the entire Asian region, and more than total U.S. worldwide exports. Sales in the UK alone are double those in all of South America.

  1. Profits. The United States is the most profitable place in the world for European companies, just as Europe remains the most profitable region of the world for U.S. companies. In 2014, European companies earned $110 billion in the United States. And despite Europe’s recent economic struggles, American companies made more money in Europe in 2014 than ever before—$238 billion, a 6.2 percent jump. Europe—not Asia or Latin America—accounts for over half the global profits of U.S. companies.
  1. Services—the sleeping giant of the transatlantic economy. Most American and European jobs are in the services economy, which accounts for over 70 percent of U.S. and EU GDP. The U.S. and the EU are the biggest services economies in the world and each other’s most important commercial partners when it comes to services trade and investment. U.S. services exports to Europe reached a record $250 billion in 2013, and European services exports to the U.S. reached a record $186 billion, up 21.6 percent from the depressed levels of 2009.

Moreover, American companies in Europe and European companies in America sell more than 2.6 times what they export in services to each other. Yet services sectors on both sides of the Atlantic are more protected than agriculture and manufacturing combined. Removing barriers to services through TTIP would be equivalent to 50 years’ worth of GATT and WTO liberalization of trade in goods and would be the most important international initiative to create jobs.

What it means for the Carolinas…TTIP Matters

These deep linkages across the Atlantic continue to be very significant for the Carolinas. All told, about 700,000 jobs are directly or indirectly related to the Carolinas’ commerce with Europe.

Investment is the key. There is more European investment in North Carolina or South Carolina alone than total U.S. investment in China, Japan and India combined. Companies from the European Union account for 69 percent of global investment in North Carolina and 65 percent in South Carolina. They account for 76 percent of global investment in Durham; 70 percent in Charlotte; and 61 percent in Raleigh. In South Carolina they account for 88 percent of global investment in Spartanburg; 71 percent in Charleston; and 56 percent in Greenville.

Trade is also substantial. The Carolinas exported goods valued at $13.8 billion to Europe in 2013. Europeans bought $7.4 billion worth of goods from South Carolina and $6.4 billion from North Carolina. Each state exported more than twice as many goods to Europe as to China in 2014.

This translates into jobs. It also tells us what European regions are important to the Carolinas and to the Charlotte-Spartanburg region. For North Carolina, the top job-generators are companies from Brussels, Belgium; the southeastern German state of Baden-Württemberg, Germany; Paris, London and Dublin. South Carolina jobs are primarily onshored by companies from—surprise—Bavaria, but also from Baden-Württemberg, Paris, Brussels and London. For Charlotte the knowledge region around Oxford is also important, and for South Carolina the industrial companies of Germany’s Ruhr valley are also key.

In short, transatlantic economic ties are strong and deep. But they still suffer from various barriers to investment, trade, and services. The TTIP negotiations are focused on clearing away needless or costly impediments to investment, trade and services.

And since so many European labor, environmental and consumer standards are equivalent to American norms, TTIP is not about lowering standards, but repositioning Europe and America to maintain high quality standards together in a world of diffuse economic power and intensified global competition. The Carolinas stand to gain from such a 21st century partnership.



This expert analysis is made possible by Shumaker, Loop & Kendrick, LLP, a full-service law firm with offices in Charlotte, North Carolina; Tampa and Sarasota, Florida; Columbus and Toledo, Ohio. At Shumaker, “We think global. Our practice is relationship-driven; our goal is global reach with local depth.” For more information, contact David H. Conaway at 704-945-2149 or or visit

Content written by Daniel S. Hamilton , Ph.D., Executive Director of the Johns Hopkins University Center for Transatlantic Relations; co-author with Joseph P. Quinlan of The Transatlantic Economy 2015. For more information, contact him at 202-663-5878 or

Hamilton’s former positions include U.S. deputy assistant secretary of State for European Affairs, U.S. special coordinator for Southeast European stabilization and associate director of the Policy Planning Staff for two secretaries of State, senior associate with the Carnegie Endowment for International Peace and deputy director of the Aspen Institute Berlin; currently adviser to Microsoft, Business Roundtable and Transatlantic Business Dialogue; Ph.D., American foreign policy, SAIS.



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