Where competitiveness is concerned, the fact that a European worker earns far more than his Chinese counterpart is of little consequence so long as that higher hourly wage level is reflected in greater efficiency and greater productivity. Thus when we look at salaries, we have to set them against worker productivity.
Having said that, it is glaringly obvious that Europe’s hourly productivity is currently being eroded, particularly compared with the US. The euro’s high rate of exchange against the dollar in recent years has also had a far from negligible impact on European products’ loss of competitiveness in the world’s marketplaces.
In parallel with price competitiveness, Europe’s (and especially Germany’s) comparative advantage stems largely from its “non-price competitiveness.” This type of competitiveness comprises all of those characteristics that cause a product to stand out positively among its competitors, regardless of price. In particular, it comprises know-how, quality, and innovation, which allow a company to sell the same products as its competitors but at twice the price.
This explains the performance of the German manufacturing system – and that performance, incidentally, is on a par with the average figure for the European community, according to the most recent figures.
The countries of central and eastern Europe have made enormous progress in terms of price competitiveness; yet while they have now overtaken even the Germans, they perform less well than those in the field of “non-price competitiveness.” Other countries, on the other hand, have fallen below the average, performing less well in the sphere of price competitiveness, like Italy, or less well in the sphere of “non-price competitiveness,” like France.