As part of our series of guest blogs on CEO insights, Martin van Roekel invites Noel Clehane, BDO’s Global Head of Regulatory & Public Policy Affairs, to share his views on the continued importance of the transatlantic economy and trade
Why we shouldn’t underestimate transatlantic trade
Both Martin van Roekel, our CEO, and I travel all over the world as part of our global roles for BDO and we have spent considerable amounts of time in the BRIC countries, among others. Readers of Martin’s blog will be well aware of the launch of the BDO’s Ambition Survey 2012 in October and the increasing preference of over 1,000 CFOs from mid-sized companies to direct their expansion and investments towards the BRIC countries.
The Survey highlighted that a significant proportion of CFOs are setting their sights on a ‘big seven’ of attractive investment destinations. Interestingly, while this group of seven includes all four BRIC countries (Brazil, Russia, India and China) and not surprisingly, the US, the remaining destinations are two specific EU Member States (the UK and Germany), rather than viewing the European Union as a distinct trading or investment destination.
As the BDO network approaches its 50th birthday (although many BDO firms are much older than that), the origins of our international organisation come to mind. BDO as a network was ‘convened’ by firms from Germany, the Netherlands, the UK, the US and Canada in 1963, and it is interesting to reflect on the apparent change in the economic fortunes of these countries since then - particularly in recent years. The previously unrivalled economic supremacy of these five countries - along with a number of others, such as Japan, Australia, and France - is now assumed to be in terminal decline and the emerging - if not emerged – markets, led by the BRICs, are in the ascendancy.
In my view it is not at all as clear cut as that especially when one reads some of the recent figures on transatlantic trade and investment. Here are some eye-watering statistics and facts:
1. The European Union and the US are each other’s largest trade and investment partners
2. At least 15 million workers are employed by the ‘transatlantic economy’
3. Almost US$ 2 billion in goods and services are traded across the Atlantic every day
4. Total investment flows between the US and Europe are estimated at €2.7 trillion
5. US investment in the four BRICs since 2000 is less than investment in Ireland in the same period, and just over 7% of investment in Europe as a whole
6. US investment in Brazil since 2000 is approximately 75% of investment in Belgium in the same period
7. US companies earned more profit in Europe than any other region
8. European investments in the US in 2010 were 72% of all inward foreign direct investment to the US
9. The US and European Union are the two leading service economies in the world: the US is the largest country and the EU, taken as a bloc, is the largest region in traded services
10. Total US-EU trade in goods in 2011 was over US$630 billion dwarfing any trade numbers with the BRICs
11. European investment in China constitutes around 6% of total European investment in the US
There are many more such statistics which suggest that there is life in the ‘Old Continent’ yet and that the EU-US economic axis is still key to all internationally-minded companies. The sheer size of the transatlantic economy ensures that Europe and the US will be indispensable economic partners for the foreseeable future and will continue to afford mid-sized companies considerable opportunities.
The BDO Ambition Survey 2012 has faithfully captured the current thinking of CFOs of mid-sized companies as regards global investment opportunities and risks, and the Survey provides further evidence of the continued rise of BRICs to the status of major world economies. However, the transatlantic economy remains enormous and if the joint US-EU High Level Working Group on Jobs and Growth established in 2011 succeeds in eliminating or reducing remaining trade barriers, this will grow even larger. I hope that this will ensure that the inexorable rise of the BRICs and their undoubted and permanent importance to the global economy does not blind mid-sized companies to the trade and expansion opportunities available in Europe and North America. These are the two continents where BDO originated and where today we have over 21,000 BDO partners and staff in BDO firms across all of the countries involved. Our 50 years of growth and the recent announcement of BDO’s 2012 year-end figures offer continued testament to the robust and resilient economies on either side of the Atlantic.
Don’t underestimate them or the opportunities they present!