This year's report highlights that despite transatlantic political turbulence and the COVID-19-induced recession, the U.S. and Europe remain each other’s most important markets. The transatlantic economy generates $6.2 trillion in total commercial sales a year and employs up to 16 million workers in mutually “onshored” jobs on both sides of the Atlantic. It is the largest and wealthiest market in the world, accounting for half of total global personal consumption and close to one-third of world GDP in terms of purchasing power.
The report consists of six chapters. Chapter One underscores how the transatlantic economy today is structurally sound yet buffeted by considerable political uncertainties. Chapter Two updates our basic framework for understanding the deeply integrated transatlantic economy via “eight ties that bind.” Chapter Three compares transatlantic commercial relations with those the Atlantic partners have with China, including how supply chains are being transformed. Chapter Four explores the transatlantic digital economy, which in many ways has become the backbone of commercial connections across the Atlantic. Chapter Five offers an overview of European commercial ties with the United States, and Chapter Six an overview of U.S. commercial relations with Europe.
The two appendixes provide the most up-to-date information on European-sourced jobs, trade and investment with the 50 U.S. states, and U.S.-sourced jobs, trade and investment with the 27 member states of the European Union, as well as Norway, Switzerland, Turkey, and the United Kingdom.
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Transatlantic Investment: Still Driving the Transatlantic Economy
• The U.S. and Europe are each other’s primary source and destination for foreign direct investment.
• Together the U.S. and Europe accounted for 27% of global exports and 32% of global imports in 2019. But together they accounted for 64% of the outward stock and 61% of the inward stock of global FDI. Moreover, each partner has built up the great majority of that stock in the other economy.
• U.S. foreign affiliate sales in Europe of $3.4 trillion in 2019 were greater than total U.S. exports to the world of $2.5 trillion and roughly half of total U.S. foreign affiliate sales globally.
The U.S. in Europe
• Over many decades no place in the world has attracted more U.S. FDI than Europe. During the past decade Europe attracted 57.3% of total U.S. global investment – more than in any previous decade.
• Measured on a historic cost basis, the total stock of U.S. FDI in Europe was $3.6 trillion in 2019 – 60% of the total U.S. global investment position and almost four times U.S. investment in the Asia-Pacific region.
• America’s capital stock in the UK ($851 billion in 2019) is more than triple combined U.S. investment in South America, the Middle East and Africa ($261 billion). Total U.S. investment stock in China was just $116 billion in 2019, only about 14% of U.S. investment stock in the UK. The U.S. investment presence in China and India combined – totaling $162 billion in 2019 – is just 19% of total U.S. investment in the UK.
• The UK still plays an important role for U.S. companies as an export platform to the rest of Europe. U.S. firms based in the UK export more to the rest of Europe than U.S. firms based in China export to the world.
• In 2019 Europe accounted for roughly 60% – $17.3 trillion – of corporate America’s total foreign assets globally. Largest shares: the UK (20%, $5.4 trillion) and the Netherlands (10%, $3.0 trillion).
• America’s assets in Ireland ($2.0 trillion in 2018) and Switzerland ($1.0 trillion) were each much larger than those in China ($466 billion).
• Ireland has also become the number one export platform for U.S. affiliates in the entire world. Exports from U.S. affiliates based in Ireland reached $351 billion in 2018, about 4.5 times more than U.S. affiliate exports from China and about 3.5 times more than affiliate exports from Mexico.
• Europe accounted for over 60% of global FDI that flowed into the U.S. in the first three quarters of 2020. Annualizing data, U.S. FDI inflows from Europe are estimated to come in at $81 billion in 2020 versus $120 billion in 2019.
Transatlantic Trade
• The U.S. and the EU are each other’s largest export markets. U.S. goods exports to the EU (including the UK) in 2020 ($291 billion, down 13%) were more than double U.S. goods exports to China ($125 billion). Meanwhile, EU (incl. UK) exports to the U.S. represented roughly 22% of the region’s extra-EU exports in 2019; EU exports to China represented just 11% of the total.
• U.S. merchandise exports to Europe have almost doubled in value from 2000 to 2020. U.S. exports of goods to Europe were up 3% in 2019 but fell 13% in 2020. Fifteen U.S. states registered doubledigit growth in goods exports to Europe from 2018 to 2019. However, all but two U.S. states (New Hampshire and New Jersey) registered negative export growth to Europe in 2020.
• 48 of the 50 U.S. states export more to Europe than to China, in many cases by a wide margin. America’s five Pacific coast states exported about 40% more goods to Europe than to China.
• In 2019 New York and Maryland exports to Europe were more than nine times those to China; Florida almost eight times more; Connecticut and New Jersey six times more; Georgia, Indiana Kentucky, Nevada and Texas roughly five times more. Arizona, Kansas, Massachusetts Virginia, Illinois and Missouri each exported roughly four times more to Europe than to China.
Transatlantic Services
• The U.S. and Europe are the two leading services economies in the world. The U.S. is the largest single country trader in services, while the EU is the largest trader in services among all world regions. The U.S. and EU are each other’s most important commercial partners and major growth markets when it comes to services trade and investment. Moreover, deep transatlantic connections in services industries, provided by mutual investment flows, are the foundation for the global competitiveness of U.S. and European services companies.
• Four of the top ten export markets for U.S. services are in Europe. Europe accounted for 39% of total U.S. services exports and for 42% of total U.S. services imports in 2019.
• U.S. services exports to Europe reached a record $345 billion in 2019. The U.S. had a $100 billion trade surplus in services with Europe in 2018, compared with its $223 billion trade deficit in goods with Europe.
• U.S. imports of services from Europe also hit an all-time high in 2019 of $245 billion. The UK, Germany, Switzerland, Ireland, France and Italy are top services exporters to the U.S.
• Moreover, foreign affiliate sales of services, or the delivery of transatlantic services by foreign affiliates, have exploded on both sides of the Atlantic over the past few decades and become far more important than exports.
The Transatlantic Digital Economy
• The transatlantic theatre is the fulcrum of global digital connectivity. North America and Europe generate about 75% of global digital content.
• The U.S. and Europe are each other’s most important commercial partners when it comes to digitally-enabled services. The U.S. and the EU are also the two largest net exporters of digitally-enabled services to the world.
• In 2019, digitally-enabled services accounted for 59% of all U.S. services exports, 50% of all services imports, and 76% of the U.S. global surplus in trade in services.
• In 2019 the U.S. registered a $219.9 billion trade surplus in digitallyenabled services with the world. Its main commercial partner was Europe, to which it exported over $245 billion in digitally-enabled services and from which it imported an estimated $133 billion, generating a trade surplus with Europe in this area of over $112 billion.
• U.S. exports of digitally-enabled services to Europe were about 2.7 times greater than U.S. digitally-enabled services exports to Latin America, and double U.S. digitally-enabled services exports to the entire Asia-Pacific region.
• U.S. overseas direct investment in the “information” industry in the UK alone was more than double such investment in the entire Western Hemisphere outside the United States, and 33 times such investment in China. Equivalent U.S. investment in Germany was four times more than in China.
Transatlantic Jobs
• Despite stories about U.S. and European companies decamping for cheap labor markets in Mexico or Asia, most foreigners working for U.S. companies outside the U.S. are European, and most foreigners working for European companies outside the EU are American.
• European companies in the U.S. employ millions of American workers and are the largest source of onshored jobs in America. Similarly, U.S. companies in Europe employ millions of European workers and are the largest source of onshored jobs in Europe.
• U.S. and European foreign affiliates directly employed 9.9 million workers in 2019. These figures understate the overall job numbers, since they do not include jobs supported by transatlantic trade flows; indirect employment effects of nonequity arrangements such as strategic alliances, joint ventures, and other deals; and indirect employment generated for distributors and suppliers.
• U.S. affiliates directly employed an estimated 4.9 million workers in Europe in 2019 – close to one-third more than in 2000.
• European majority-owned foreign affiliates directly employed 5 million U.S. workers in 2019.
• In 2018 the top five European employers in the U.S. were firms from the United Kingdom (1.3 million), Germany (860,700), France (780,000), the Netherlands (550,000), and Switzerland (478,500).
• The top five U.S. states in terms of jobs provided directly by European affiliates in 2018 were California (490,700), Texas (401,500), New York (357,400), Illinois (240,300) and Pennsylvania (232,900).
The Transatlantic Energy Economy
• Foreign companies have invested roughly $400 billion into U.S. energy-related industries. In 2018, FDI in the U.S. energy economy directly supported 173,500 U.S. jobs, contributed $1.2 billion in R&D and generated $5.7 billion in U.S. exports.
• German companies are by far are the leading source of foreign direct investment in the U.S. energy economy in recent years, accounting for 16% of the 830 greenfield investment projects in the U.S. energy sector over the past decade. Other notable European investors include France (9%), the UK (8%), and Spain (7%).
• Europe and the U.S. made up over 80% of all green bonds and 78% of all sustainable debt issued in 2020.
• Monthly liquefied natural gas (LNG) exports from the United States to Europe dipped in 2020, but still averaged 65 billion cubic feet for the year, up from 57 billion cubic feet in 2019. The U.S. is a net energy exporter of crude and petroleum products to Europe.
• U.S. companies in Europe have become a driving force for Europe’s green revolution. Since 2007 U.S. companies have been responsible for more than half of the long-term renewable energy agreements in Europe. U.S. companies account for four of the top five purchasers of solar and wind capacity in Europe.
The Transatlantic Innovation Economy
• Bilateral U.S.-EU flows in R&D are the most intense between any two international partners. In 2018 U.S. affiliates spent $33 billion on R&D in Europe, 56% of total U.S. R&D conducted globally by affiliates.
• In the U.S. R&D expenditures by majority-owned foreign affiliates totaled $66.9 billion in 2018. R&D spending by European affiliates totaled $45.1 billion, representing 67% of all R&D performed by majority-owned foreign affiliates in the U.S.
• The largest European sources of R&D in the U.S. in 2018 were firms from Germany ($10 billion) and Switzerland ($9.6 billion).
