Over the past two years, the EU has accumulated a trade record that would trigger fulsome celebration in any self-confident political culture. EU-Mercosur provisionally applied after two decades in the making. A landmark agreement with India now concluded. Upgraded frameworks with Japan, Vietnam, and Australia. Piece by careful piece, Brussels has assembled the architecture of genuine global commercial presence, and the scaffolding is impressive. The question, urgent and overdue, is whether Europe has companies capable of walking through the doors it has opened.
The Financial Times has reported the EU preparing to relax merger rules in order to create what Brussels now calls, without embarrassment, European champions. This is a welcome development. European antitrust doctrine was built in the pre-Global Financial Crisis era for a world where the relevant market was the single market and where Europe could imagine parity with the US, and that world is gone.
In today’s arena, European companies in energy, defence, advanced manufacturing, and financial services are routinely outgunned by American platforms carrying trillion-dollar capitalisations and by Chinese state enterprises backed by sovereign patience, political support and weaponised one-way free trade. Blocking mergers between European companies to protect a market whose boundaries predate the smartphone is not competition policy. It is competitive self-harm wearing the clothes of regulation.
The polycrisis clarifies what peacetime comfort obscured. We are not navigating a sequence of manageable disruptions but living inside permanent, compounding instability, a world shaped by geopolitical fracture, supply chain weaponization, and technological decoupling, where fielding globally resilient and strategically agile enterprises is not a matter of industrial preference, but a matter of survival. Washington understood this long ago. Beijing built an entire economic model around it. Europe, meanwhile, perfected regulatory excellence while its competitors perfected scale.
Influence without leverage
There is a truth that European leadership must now be willing to state plainly: regulatory power without commercial power is influence without leverage. The Brussels Effect is real enough. Other jurisdictions adopt European rules because European market access makes compliance rational, and that is genuine soft power, not to be surrendered lightly. But soft power without competitive capacity is a negotiating position, not a strategy, and negotiating positions erode the moment the other side decides it no longer needs the deal.
What makes this moment different from thirty years of inconclusive European champions debates is that, as we say in Romania, the knife is now reaching the bone, and the trade architecture now exists to give those champions somewhere consequential to go.
The EU-Mercosur agreement, the India free trade deal, and the Indo-Pacific partnerships are not merely commercial arrangements. They are relationships built on what Europe genuinely represents, a way of doing business that integrates governance, sustainability, and partnership in ways that neither Washington nor Beijing can offer with equivalent authenticity. It is worth pausing, however, on what the India deal does and does not yet deliver.
The Investment Protection Agreement, which would give European companies enforceable rights against arbitrary expropriation or discriminatory treatment in the Indian market, remains unresolved, with New Delhi’s longstanding resistance to investor-state dispute settlement mechanisms still intact. Meaningful liberalisation in financial services was left largely outside the deal’s scope, limiting the ability of European banks, insurers, and asset managers to access one of the world’s fastest-growing capital markets on equal terms.
Access conditions for European technology firms and start-ups seeking to establish themselves in India’s regulatory environment remain ambiguous in the text. The agreement’s trade and sustainable development provisions are also weaker than in comparable EU deals, a point that may yet complicate ratification in the European Parliament. These gaps are not fatal, but they are reminders that a politically celebrated agreement and a fully operational commercial relationship are different things, sometimes separated by years of patient follow-on negotiation.
Nor is the Gulf picture a success story yet. Free trade negotiations between the EU and the Gulf Cooperation Council have been stalling, on and off, for more than three decades, suspended since 2008 over the familiar collision between Brussels’ insistence on embedding human rights and environmental conditions in trade agreements and the GCC’s equally firm view that trade should remain about trade. The EU has recently pivoted toward bilateral arrangements with individual Gulf states, launching FTA negotiations with the UAE in April 2025 as a potential building block toward a wider regional framework.
But a comprehensive Gulf agreement remains distant, and China, which brings no comparable political preconditions to the table, is actively pursuing its own preferential access to the same markets. For Europe, this is not a minor footnote. The Gulf represents critical energy supply relationships, sovereign capital at a scale that could transform European investment ecosystems, and a set of markets whose geopolitical orientation over the next decade is still genuinely up for grabs.
The European model
European companies do not merely export products. They export a model. That model travels best when carried by enterprises large enough to be taken seriously, and welcomed into foreign markets rather than merely tolerated in them. Being welcomed is a distinction that matters enormously. It is Europe’s most under-deployed strategic advantage.
The deeper structural problem, however, lies closer to home. Europe does not lack innovation, whatever the conventional wisdom suggests. Its universities generate world-class research, its scientists publish at the frontier, and its startup ecosystems have matured considerably over the past decade.
What Europe consistently fails to do is scale what it invents. The House of Lords Communications and Digital Committee warned in early 2025 that Britain risked becoming an ‘incubator economy’, a place where start-ups develop innovative products and services before selling out to foreign buyers or relocating abroad, so that other countries derive the economic benefit. This thought could be applied with equal or greater force to the EU as a whole.
According to the European Investment Bank, almost thirty per cent of EU unicorns have moved their headquarters out of the bloc over the past fifteen years, overwhelmingly toward the United States, drawn by deeper capital pools, a unified domestic market that lets a company scale from New York to California without changing its legal structure, more favourable tax treatment for founders and early investors, and a regulatory environment that treats growth as the default assumption rather than a risk to be managed. European venture capital investment stands at roughly twenty-two per cent of US volumes, and the disparity is most severe at the later stages where scaling requires hundreds of millions. Europe produces more tech start-ups than America but has far fewer scale-ups and unicorns, and the gap is not narrowing at a pace that matches the rhetoric.
Scale was always the Achilles heel of the European economy, not innovation, whatever the jokes would have it.
Exporters as anchors
The answer to Europe’s scaling deficit will not come exclusively from its established industrial heartlands. Central and Eastern Europe is incubating a business culture that has quietly developed the attributes Europe most needs at precisely the moment it needs them. The pressure cooker of post-communist transition, the discipline imposed by thin capital markets and unreliable institutions, and the unsentimental realism of entrepreneurs who had no large domestic market to retreat into have together produced something distinctive: firms that are lean by necessity, specialised by design, and internationally oriented from their first serious year of trading.
These are not companies that scaled up and then looked abroad. They were born looking abroad, because the arithmetic of a mid-sized national economy left them no other credible option. That outward orientation, when combined with the sector depth these companies have accumulated in software, defence-adjacent manufacturing, agri-processing, cybersecurity, and advanced components, gives them a profile ideally suited to the trade corridors Brussels has spent the past decade constructing. The Mercosur gateway, the Indian market, the Indo-Pacific frameworks are not abstractions in Warsaw or Bucharest; they are addressable opportunities for firms already accustomed to competing outside their comfort zone.
What is equally important is the broader economic logic: a regional champion is never merely a successful exporter. It becomes an anchor for suppliers, a training ground for talent, a magnet for capital, and a proof of concept that raises the ambitions of the firms around it. The flywheel, once it turns, compounds. Europe’s trade architecture has built the wheel. Eastern Europe may well provide the first serious push.
The larger ambition deserves to be named. For a generation, Europe’s global identity rested on regulatory leadership, and that identity was valuable, earned, and worth defending. But the world emerging from the polycrisis does not need a regulator. It needs a builder. The vision worth pursuing is something that might be called EU Inc., not a supranational bureaucracy but a cohort of genuinely global European enterprises, large enough to absorb shocks, ambitious enough to expand aggressively into markets the trade agenda has opened, and credible enough to lead recovery coalitions when the next systemic shock arrives. The trajectory from historic regulatory champion to future recovery leader is the reinvention that Europe’s moment demands.
The trade victories exist. The merger reform is underway. What remains is the vision to connect them, and the political courage to build, at last, a Europe powerful enough not just to set the rules of the game but to win it.
Photo: Dreamstime.
