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Stronger European economy good for Utah

Published October 20, 2012 1:01 am

This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

This summer Germany's state-owned railway giant Deutsche Bahn started to experience what globalization is all about in the very heart of its business. The privately owned company HKX began servicing the Cologne-Hamburg railroad.

HKX, for the first time, brought competition on a long-distance connection in Germany's still largely monopolized railroad market. HKX — the acronym means Hamburg-Köln-Express — offers travelers transport between two important metropolitan areas at a very competitive price.

It even came up with a touch of railroad nostalgia on its maiden run in late July. The first train that left Cologne central station at 6:35 a.m. was composed of luxurious first class "Rheingold" cars from the 1970s.

Why am I telling all this to readers of The Salt Lake City Tribune, more than 5,100 miles and eight time zones away from Germany? Well, first of all, the competitor to Deutsche Bahn is Railroad Development Corp., an American company from Pittsburgh, Pa., which owns HKX.

And while the fact that an American railroad company goes to Germany to invest in a railroad connection rather than doing that at home says a lot about the situation of railway as a means of mass transport in the U.S., it also says: Businesses go to where they find promising markets and opportunities.

Utah's companies in that respect seem to have made ample use of their chances in Europe in the past decade. Utah's exports have more than quadrupled from $1.3 billion in the year 2000 to more than $6 billion in 2010, making Europe — the 27 EU-member states plus Switzerland — the most important export market for Utah, as Gov. Gary Herbert's office points out.

Of a total of $6.5 billion invested in Utah, $1.1 billion or 17 percent came from Europe, thus supporting 19,300 jobs in Utah in 2008. Together with West Virginia and South Carolina, Utah is one of three U.S. states that are most intensely connected with the European market.

The single European market is one of the two historic achievements of the European Union. The other one is peace on most of the continent for more than 65 years. For this reason, the Oslo committee has awarded this year's Nobel Peace Prize to the European Union, thus drawing attention to what this unique project is all about — apart from economic figures.

Sadly, these figures in the single market don't look too good right now, for the EU and for Utah. Utah's exports to the EU have already decreased by 9 percent between 2010 and 2011. And if the euro crisis continues to put economic growth rates in Utah's most important European partner countries under pressure, this might become worse.

The most important market for Utah's commodities is Great Britain, where about two-thirds of Utah exports go. Switzerland, Belgium and Germany account for another 25 percent of Utah exports to Europe as a whole.

Disturbing signs of a weakening economy in Germany, Europe's leading market, are becoming more and more frequent. This week's new figures show that Europe's auto market is in trouble as car builders have sold 7 percent fewer cars between January and August 2012 compared to the same period last year.

In particular, Germany's car builders suffer from the weak economic growth, or even outright recession in some important European countries, because they export two-thirds of their cars to the rest of Europe.

But there are positive signs in the overall economic outlook of Europe as well. With Germany finally adhering to the European Stability Mechanism bailout fund in September, the scenario most dreaded in the EU and the rest of the world — a collapse of the Eurozone — has become much less likely. And that's excellent news for Utah.

A breakdown of the Eurozone would automatically result in a sharp decline of purchasing power in many EU countries. Restored national currencies like the lira in Italy or the franc in France would mostly be weak. And ultimately, a Eurozone default would put a big question mark behind the very existence of the EU and its single market.

Even setting aside immediate economic consequences, a prospering Europe with its single market and a single strong currency is a much more reliable partner for Utah and its industries than, say, China. Democratic decision-making processes offer a far more secure economic setting than authoritarian economic policies decided upon by a small ruling class in Beijing.

Talking about the U.S. and European auto builders, EU Energy Commissioner Guenther Oettinger stressed that both transatlantic partners could work together much closer in setting standards.

"We should work together to design plugs for electric vehicles," he said. "If we don't do it, the Chinese will." A unique standard in future technical developments on both sides of the Atlantic would facilitate reciprocal investments and trade. But as the European basis of this, we need the euro and the European market.

By the way: Pittsburgh's Railroad Development Corp. is doing pretty well with its Cologne-Hamburg railroad connection. It's selling an average of 80 percent of its tickets and impressing German passengers with punctuality and a high-quality service.

Peter Seidel is a political reporter for Kölner Stadt-Anzeiger in Cologne, Germany, one of the leading newspapers in the state of North Rhine Westfalia.