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Europe’s clearest strength is making complex things well. Industry makes up more than 20 per cent of the EU’s value added and supports around 35m jobs, the European Commission says. Manufacturing, machinery and industrial equipment remain particular strongholds.
“A lot of European countries are ranking very highly in these sorts of indices,” says Dr. Andreas Eisl, Senior Research Fellow in European economic policy at the Jacques Delors Institute, pointing to an underlying strength in Europe’s ability to produce complex, specialised goods that are difficult for competitors to replicate.
Asked whether those strengths are sustainable, Dr. Eisl is cautious: “there’s nothing that can always be sustainable. There is always a need then also to defend these advantages,” he says.
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At the same time, those advantages are not simply about individual products or companies. Behind them are specialised suppliers, skilled workers, research institutions and industrial clusters. These have developed over decades and are not easily replicated elsewhere.
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The pharmaceutical industry is one example. In 2025, the EU exported €366bn worth of medicinal and pharmaceutical products outside the bloc. Imports came to €146bn, according to Eurostat. Ireland alone accounted for almost €94bn of extra-EU pharmaceutical exports. Germany followed with €68bn and Belgium with €39bn. But the sector also rests on research and specialised suppliers.
Belgium has developed a major pharmaceutical and life-sciences cluster around companies including UCB, Janssen and GSK. Denmark is home to companies such as Novo Nordisk and a large biotechnology sector. Germany combines pharmaceutical and chemical production with a broad research base. The Netherlands has strengths in pharmaceutical research and specialised production.
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Airbus offers a similar tangible example. The company’s aircraft production is spread across France, Germany, Spain and the UK. Toulouse is home to final assembly and engineering. Hamburg produces A320-family aircraft. Spanish sites in Getafe, Illescas and Cádiz make major structural and composite components. Broughton in Wales produces wings. In these industries, Anke Hassel, Professor of Public Policy at the Hertie School, says, innovation depends on “skilled labour and dense supplier networks rather than digital scale alone.”
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In some cases, Europe’s strength lies not in dominating an entire sector but in controlling a particularly valuable part of it. Take, for example, ASML, the Dutch semiconductor equipment maker. The company does not manufacture an entire semiconductor, but its lithography machines are essential to producing some of the world’s most advanced chips. A similarly specialised position can be found in areas of aerospace, industrial equipment and medical technology.
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“One doesn’t have necessarily comparative advantages in everything,” Dr. Eisl says. “It also doesn’t make sense to produce everything yourself.” The caveat, however, is when specialisation almost means dependency on another country for something that is critical to the functioning of an industry.
The recent Nexperia dispute offers an example. The Dutch-owned semiconductor company is strategically important because it produces chips used in cars and consumer electronics. But much of its assembly and packaging takes place in China. In 2025, the Dutch government intervened in the company. China responded by restricting exports from Nexperia’s Chinese operations. That disrupted the supply of chips back to Europe. The company struggled to fulfil orders, despite having production facilities in Europe.
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Europe’s research base is another continued source of strength. The bloc has major research institutions and expertise in areas including advanced manufacturing, robotics, quantum technologies, photonics and advanced materials. The challenge is turning those capabilities into companies that can grow.
Europe has “universities, scientists and engineers”, Ms Hassel says. “What it lacks is often the capital, market integration and entrepreneurial ecosystem needed to turn those assets into globally dominant businesses.”
Quantum technologies illustrate the opportunity. Europe is not at the forefront of AI development, but Dr. Eisl sees potential in areas where its research base is stronger.
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“We’re not really good [at AI], we know that, but I think we’re quite good in quantum technologies if we make use of what is there in Europe in terms of research.”
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The US and China remain the reference points for much of Europe’s competitiveness debate, with general analyses often treating either economy as if it has found an uncomplicated model for sustained growth.
Dr. Eisl points to Germany as a historic example. The country spent years benefiting from a powerful combination of industrial exports, relatively cheap energy and access to large foreign markets. But those conditions changed. Parts of the German economy have had to adjust to a different competitive environment.
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Dr. Eisl therefore cautions against looking at the US and Chinese economic models as some kind of holy grail: “It is not like sometimes it’s shown as the US and China, everything would go great and everything’s going bad in Europe,” he says. “But these countries also have their own problems.”
China faces an ageing population and an economic model that is heavily exposed to changes in the global environment, he argues. The US has benefited from deep capital markets, a huge domestic market and a concentration of technology companies that Europe has struggled to match. But it also faces high public debt. And there are questions over how much of the enormous investment currently flowing into artificial intelligence will ultimately translate into productive growth.
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