The European Union Has Unveiled a Competitiveness Strategy: Will It Be Sufficient to Surpass the United States and China?

The European Commission established a long-term strategy to restore competitiveness in global industries, as European enterprises confront intense rivalry from China and emerging challenges under U.S. President Donald Trump. To address this issue, the new legislation, known as the Clean Industrial Deal, was introduced as the EU’s strategy for enhancing competitiveness and achieving decarbonisation, building upon the European Green Deal (Abnett and Blenkinsop, 2025). It delineates specific measures to transform decarbonization into a catalyst for growth within European industries. This encompasses reducing energy costs, generating high-quality employment, and establishing optimal conditions for corporate success (Abnett and Blenkinsop, 2025). The strategy will direct the EU’s activities for the forthcoming five years. A critical question persists: Is this sufficient to guarantee the EU’s competitiveness in a volatile and fundamentally evolving global landscape?

EU Competitiveness Plan

The European Commission (2025) has identified five critical areas of action to address the multifaceted challenges that EU industry is currently facing. However, the proposed strategies require examination. First initiative, the Competitiveness Compass provides a roadmap to improve productivity and innovation; however, its efficacy will be contingent upon the extent to which member states align their national initiatives with these broad goals. Subsequently, the Clean Industrial Deal endeavors to transform decarbonization into a catalyst for industrial expansion by promoting sustainable practices and green technologies. Nevertheless, it may encounter opposition from sectors that are heavily dependent on conventional, carbon-intensive methods. Additionally, the Union of Skills’ emphasis on bridging skills gaps through education and training is essential; yet, these investments must be capable of keeping pace with the rapidly changing technological landscape. In parallel, the Savings and Investments Union seeks to improve access to capital, creating better financial opportunities for citizens and businesses alike; however, the success will be contingent on its ability to foster a truly integrated and competitive financial market across the EU. Lastly, the actual impact of Simplification, which is to eliminate administrative burdens, will be contingent upon the specifics of the regulatory changes and the degree to which they genuinely alleviate complexities for businesses of all sizes, rather than introducing new ambiguities. (European Commission, 2025).

From Strategy to Standing: The EU in Comparison with the U.S. and China

In an increasingly globalized world, international competitiveness has become one of the key determinants of economic growth, innovation, and societal well-being. The European Union, the United States, and China remain the three dominant actors in the global economy, which justifies the need to compare them in terms of indicators such as Gross Domestic Product (GDP), investments in research and development (R&D), and their positions within global value chains. These indicators have been selected as the primary criteria for this analysis due to their significance in assessing competitiveness. However, it should be noted that other relevant factors—though not addressed in this study—also play an important role and merit attention in a broader analytical context.

GDP Growth

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Between 2015 and 2024, the pace of economic growth clearly differentiated the world’s three largest economic powers: China, the United States, and the European Union. During this period, China’s average annual GDP growth reached approximately 5.8%, compared to 2.5% for the United States and only 1.9% for the European Union. This distribution of growth rates puts the EU at a disadvantage relative to its main global competitors, especially in light of its ambition to build a strong and competitive international economy.

While China experienced a period of rapid expansion, consistently exceeding 6% annual GDP growth between 2015 and 2019, fueled by strategic infrastructure investments and technological advancements, its continued high growth rate, even with a recent moderation (5.2% in 2023, projected 4.9% in 2024), signifies a persistent upward economic momentum that the EU struggles to match (World Bank Group, 2024a). This sustained high growth allows China to accumulate capital, invest in future technologies, and expand its global influence at a pace significantly faster than the EU.

The United States displayed a more consistent, albeit less dynamic, growth pattern, with annual growth rates typically ranging from 2% to 3%. The economy’s resilience is emphasized by its capacity for rapid recovery, as evidenced by the strong rebound to 6.1% in 2021 following the pandemic-induced contraction. The United States’ capacity to adapt and innovate, which is supported by a significant investment in research and development, enables it to sustain a robust growth trajectory (approximately 2.5% between 2022 and 2024) and remain a formidable global competitor (World Bank Group, 2024c).

In stark contrast, the European Union’s economic performance reveals a concerning trend of stagnation. While experiencing moderate growth in the pre-pandemic years (2015-2019), the significant contraction in 2020 was followed by a weak and short-lived recovery. The plummeting growth rate to just 0.4% in 2023, with a meager 0.9% projected for 2024 (World Bank Group, 2024b), signals a significant loss of economic dynamism. This anemic growth not only hinders the EU’s ability to compete globally but also raises concerns about its capacity to fund crucial investments in areas like the green transition and digital transformation, potentially widening the gap with its major competitors. The implications of this prolonged period of low growth are significant for the EU’s future prosperity and its role in the global economy.

Research and Development (R&D)

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Research and development spending is a key driver of innovation and long-term competitiveness. Analysis of trends in R&D spending in the EU, the US and China, 2015-2023 show clear differences in investment dynamics between these countries.

The United States has consistently maintained its status as the global leader in absolute R&D spending. Specifically, the United States’ expenditure increased by nearly 50%, from approximately $549 billion to over $823 billion between 2015 and 2023 (OECD, 2025). Notably, even during the difficult pandemic years, this expansion maintained its consistency. As a result, the United States’ dominant position in cutting-edge sectors such as biotechnology, digital technology, and defense innovation is further bolstered by this level of investment.

Conversely, China demonstrated the most rapid expansion in R&D investment. Between 2015 and 2022, spending increased from $393 billion to over $717 billion. This sharp rise indicates China’s strategic objective to establish technological leadership, particularly in clean energy technologies, semiconductors, and artificial intelligence. Moreover, such investment trends reflect a deliberate shift in China’s economic priorities toward high-tech self-reliance and global influence.

In comparison, scale and growth are both areas in which the European Union is behind. R&D expenditures increased from approximately $410 billion in 2015 to $504 billion in 2023—a modest 23% increase over eight years. Furthermore, the EU experienced a clear decline in 2020, which was only gradually reversed. Given these figures, this level of investment may not be sufficient to bolster the EU’s aspirations for strategic autonomy or global technological leadership. Without a significant acceleration in investment and innovation, the EU may be relegated to the status of a technological follower, rather than a global innovation leader.

Position in Global Value Chains

As the “world’s factory” (Xiao, 2024), China has become a linchpin in global value chains (GVCs), exerting a significant influence on manufacturing and assembly, ranging from basic consumer goods to sophisticated electronics and electric vehicles. Its dominance across multiple stages, including raw materials, highlights a level of vertical integration that provides it with significant control and resilience within these chains (Xiao, 2024). While this central role facilitates global production and trade, it also creates dependencies for other economies, including the EU, which rely on China for both intermediate and final goods (Baldwin, 2024). Such reliance raises critical concerns regarding the EU’s susceptibility to geopolitical shifts, trade disputes, and potential supply chain disruptions that originate in China.

In contrast, the United States strategically focuses on the higher-value-added segments of GVCs (Fefer, Wong and Schwarzenberg, 2020). By outsourcing much of the physical manufacturing and assembly, US companies concentrate on innovation-driven activities such as R&D, design, branding, and marketing, deriving significant value from the intellectual property embedded in their products, regardless of their origin of manufacture (Fefer, Wong and Schwarzenberg, 2020). This strategy allows the US to capture significant profits and maintain a competitive edge through innovation. In contrast, the EU continues to lag in R&D, where innovation is frequently hampered by inconsistent and restrictive regulations—driving many startups to relocate to the US in search of a more supportive environment.

The European Union’s robust innovation ecosystems and highly skilled labor force have enabled it to establish a strong presence in global value chains (GVCs) (Kolev and Obst, 2022). However, this strength is juxtaposed with a significant vulnerability: EU companies are also significantly reliant on the importation of intermediate goods, which account for a substantial portion of their total merchandise imports (Kolev and Obst, 2022). This high level of import dependence underscores the need for the EU to strategically diversify its supply chains and potentially strengthen its domestic production capabilities in critical sectors to enhance its resilience and long-term competitiveness.

Conclusion

Considering all the data presented above, it is clear that revitalizing European competitiveness is not just important — it is essential. The European Union does not lack talent or innovative ideas; what often holds it back are regulatory burdens and an uncompromising focus on green technologies. While the ambition to lead in sustainability is admirable and necessary for the planet’s future, the challenge arises when such efforts are not matched globally. If other major economies continue to prioritize growth without equivalent environmental constraints, the EU risks falling behind — sacrificing economic dynamism in the pursuit of goals others may not share at the same pace.

Therefore, the recent awakening within the European Union is a positive and much-needed development — one that could pave the way for Europe to reassert itself as a strong and influential global player. In the current geopolitical and economic landscape, the EU lags behind both the United States and China in key areas such as innovation, technological leadership, and strategic investment. However, with the right mix of bold policy decisions, targeted investments, and a renewed focus on competitiveness, Europe has the potential to reclaim its role as a leading force on the world stage. This moment of reflection and renewed ambition could be the turning point — not just for economic recovery, but for shaping a future where the EU leads with both strength and vision. Ultimately, the sufficiency of the new competitiveness strategy in ensuring the EU’s standing in a dynamic global environment will hinge on its adaptability and the EU’s resolve to continuously adjust its approach in response to evolving challenges and opportunities.

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