Struggle for Leadership: The Competitiveness of the EU and US Food Industry

Introduction and goal Globalization is an important issue in the food industry, although most food is still locally produced and consumed. Many small and medium enterprises characterize the industry. Results of WTO negotiations intensify the international competition, in which the EU and USA are the largest players. Countries like Brazil, India and China are gaining market share. This raises the following research questions: 1. How competitive are the EU and US food industry and their sub-sectors? 2. Which role plays innovation and legislation in the competitiveness of the industry? 3. How will the competitiveness develop under future globalization and trade liberalization? The goal of this study is to fill these knowledge gaps. Methodological framework and data The external analysis, addressing research question 2 describes the developments in the external environment of the food industry, such as international trade policies or the concentration of supermarkets. The internal analysis, addressing question 1, is the core of this study and deals with the assessment of the competitiveness of the food industry. The competitiveness is measured with five indicators based on an international economics approach: 1. Growth in real value added of a specific industry in the total food industry reflects the competition for labor and capital between different industries within a country. 2. Growth of the Balassa index reflects the export specialization level in one category of goods from one country. 3. Growth of the export share on the world market and reflects the competition performance. The growth is the absolute deviation -not an annual growthand considers the market size. 4. Growth of the labor productivity affects the unit labor costs and by this, relative prices. 5. Growth of real value added, as major economic indicator reflects industrial dynamism. The European food industries are benchmarked against other important competing countries: US, Canada, Australia and Brazil. A benchmark recognizes that the lowest negative growth figure will be classified as strong if all other countries have higher negative growth figures. The future developments of the food industry competitiveness, addressing question 3, are assessed by the general equilibrium model of the Global Trade Analysis Project (GTAP).