ABSTRACT
This chapter discusses some of the relationships between the FDI undertaken both by European firms inside and outside Europe and by non-European firms into Europe and certain features of European trade patterns and recent performance. The analysis reflects the following concern. Over the past fifteen years European trade with the rest of the world has been marked by a loss of competitiveness, notably in science-based industries, leading to an overall deterioration in the most advantageous pattern of trade specialization (Guerrieri, 1997b). European trade is characterised by particularly high levels of intraregional exports and imports, giving European trade a stronger inward-looking bias than is the case for the intra-regional concentrations of trade at the other two poles of the Triad. This raises the question of a link between loss of competitiveness and this pattern of trade. Could the Single Market, by virtue of its very success, have dampened the competitiveness of European-based firms by making it possible for them to enjoy acceptable rates of profitability by exploiting the benefits of scale economies without having to venture too far beyond the limits of the EU?
