North America ({[getData("NAFTA","Bush Institute Score",true) | grade]}) and APEC ({[getData("APEC","Bush Institute Score",true) | grade]}) European Union ({[getData("EU","Bush Institute Score",true) | grade]}) Mercosur ({[getData("Mercosur","Bush Institute Score",true) | grade]}) Pacific Alliance ({[getData("PA","Bush Institute Score",true) | grade]}) Japan ({[getData("Japan","Bush Institute Score",true) | grade]}) China ({[getData("China","Bush Institute Score",true) | grade]}) Russia ({[getData("Russia","Bush Institute Score",true) | grade]}) Germany ({[getData("Germany","Bush Institute Score",true) | grade]}) South Korea ({[getData("South Korea","Bush Institute Score",true) | grade]}) SADC (D)

The Asia Pacific Economic Cooperation Forum (APEC) encompasses 21 economies that together account for roughly 60 percent of the global economy and close to half of world trade.

North America contributes 47 percent of the value of APEC’s GDP. When weighted by GDP, North America maintains a significant lead over APEC (minus North America), scoring an A versus APEC's C+. North America compares favorably to APEC in each of the Scorecard’s six categories except macroeconomic environment, where APEC leads by five points. APEC's better score derives largely from China ranking in the 94th percentile on the World Economic Forum’s indicator of macroeconomic competitiveness.

North America’s largest advantage is on investment environment, where it leads APEC by 39 points. This is because without North America, China and Russia account for over half of APEC’s GDP, and both countries score in the D- range on the investment environment indicators for maintaining prohibitions or significant restrictions on foreign investment in key sectors. Commendably, APEC is closing the gap in scoring for legal protections and has improved scores for health and education. However, its collective scores for business, trade, and investment environment continue to weigh it down in comparison with North America.

The APEC model provides North America with food for thought when it comes to its focus on underlying competitive drivers such as health, food security, innovation, and human capital, and its detailed work to deepen integration in key sectors such as energy, transportation, automotive, and chemicals. View APEC integration data.

APEC members are currently negotiating two massive, comprehensive trade deals: the Trans-Pacific Partnership, or TPP (which the U.S. negotiated with Canada, Mexico, and 9 other Asia-Pacific countries but then withdrew from), and the Regional Comprehensive Economic Partnership, or RCEP (which is led by China and includes India and key U.S. partners like Australia, New Zealand, Japan, and South Korea, among others, but excludes North America). RCEP and TPP are competing models for shaping trans-Pacific trade in the 21st century; the absence of the U.S. from these forums tends to give China the upper hand in taking advantage of this historic opportunity.

Without the United States, the proposed TPP would receive an un-weighted score of 71.5 (B) on the 2017 Scorecard, compared to a 62.0 (B-) for RCEP. In part, this can be explained by the fact that RCEP includes more developing countries. In 2016, the GDP per capita at purchasing power parity (current international $) for the RCEP group was $13,098, compared to $26,560 for the TPP group. Un-weighted, TPP outscores RCEP by 6-14 points on five of the six key Scorecard metrics; however, the two groups are neck-and-neck on the macroeconomic environment indicator.

The European Union (EU) is the result of decades of integration among its 28 Member States. Within the EU’s Single Market, goods, services, people, and capital move as in a single country. Although its scores across the six key Scorecard metrics have fluctuated over the last eleven years, the EU’s overall grade has held steady at a B.

When weighted by GDP, the EU’s grade is still a B, but its overall average score rises from 68.9 to 73.9. Nonetheless, North America’s weighted grade and score, an A and 88.6, are significantly higher. The EU’s regulatory regime provides competitive advantage, within the Single Market, to European products over North American products, and inhibits flexibility and innovation by European producers. As such, it accounts in part for the EU’s lower scores relative to North America.

EU ministers have set goals to enhance the functioning of the Single Market by focusing on integration in energy, transport, and services, and by fostering digital commerce. View European Union integration data.

The European fund for strategic investments targets key areas for competitiveness including infrastructure, development of the energy sector, and education and training.

The EU approach to integration transfers sovereignty to supra-national political institutions, which the North American model does not. The UK’s vote to leave the EU seems to suggest that the North American approach may be more politically sustainable.*

The United States alone ships more than $740 million in goods to the EU every day. The Transatlantic Trade and Investment Partnership between the U.S. and EU, currently being negotiated, could be a boon for North American businesses, and would add to the free trade agreements Mexico and Canada already have with the EU.

*Note: Because the UK decision to leave the European Union has not yet taken effect, the UK is still included as part of the EU in the 2017 edition of the Scorecard.

In the early 1990s, Mercosur (Common Market of the South) was an early adopter of economic integration in the Americas, and set a goal of full South American economic integration. But momentum toward this goal stalled several years ago, before the current economic turmoil, in large part due to persistent trade disputes between Argentina and Brazil. Mercosur backslid on integration commitments by raising its common external tariffs, while several members have imposed protectionist measures in recent years, dissuading foreign direct investment.

Scores weighted by GDP across each of the six Scorecard categories show a large gap—of 40-60 points on business, legal, investment and trade environment—between North America and Mercosur. Between 2015 and 2017, the gap on the health and education indicator increased from 25 points to nearly 44 points, in part due to concerns about the spread of the Zika virus in Latin America. After improving eight points year-over-year, North America now scores 34 points better than Mercosur on the macroeconomic environment indicator. However, both regions score below the 50th percentile, indicating the continued need for the United States to reduce its deficits and debt.

While all five Mercosur countries, particularly Venezuela, are low performers across the Scorecard’s six key categories, Brazil’s economic collapse and political controversies over the past two years have become a further drag on the inert group. Falling prices for Brazil’s seminal commodities—oil, sugar, and coffee—caused the economy to contract 3.8 percent in 2015. Furthermore, a corruption scandal at the giant state-run oil company Petrobras culminated with the impeachment of President Rousseff in September 2016. Brazil’s economy once again contracted 3.6 percent in 2016, despite the country hosting the Olympics that summer. Between 2015 and 2017, Brazil’s average score on the Scorecard’s six key metrics dropped from 32.6 to 22.3, reflecting significant drops in health and education, macroeconomic environment, investment environment, and legal system and property rights.

Since Mauricio Macri became the president of Argentina in December 2015, the country has become a beacon of hope for Mercosur. The new president has initiated a wide-ranging series of reforms designed to reduce trade barriers, bring down annual double-digit inflation, produce economic growth, and provide certainty for investors. Argentina’s Scorecard investment environment score improved six points in 2017, and we expect further improvement in coming years as the reforms proceed.

Formally launched in June 2012, the Pacific Alliance is a relatively young trade group, but it has become a significant counterpoint to Mercosur within Latin America. Currently, the Pacific Alliance accounts for nearly 40 percent of Latin America’s total GDP, over half of the region’s exports, and 45 percent of the region’s foreign investment.

Within the Scorecard’s six categories, North America (weighted by GDP) significantly outperforms the Pacific Alliance (weighted by GDP excluding Mexico) on business environment (83.7 to 52.4), legal environment (78.5 to 43.4), trade environment (72.2 to 50.2) and health and education (78.2 to 42.0). While North America’s score for investment environment is higher, the difference is not as great, and the Pacific Alliance countries score higher on macroeconomic environment, reflective of the government debt burden in North America, particularly in the United States.

Notably, Mexico is a member of both NAFTA and the Pacific Alliance. However, Mexico’s economy represents a much larger share of the Pacific Alliance, accounting for nearly 60 percent of its combined GDP.

The Pacific Alliance has goals that extend beyond current plans for North American integration, such as enabling the free flow of capital among its members and combining their financial markets into one stock market. With a combined population of approximately 226 million, the Pacific Alliance is also actively working to increase the circulation of business professionals and students.

The scores across the Scorecard’s six categories are quite similar, but North America scores much better than Japan with respect to its investment environment and macroeconomic policies. Notably, Japan slid from an B+ to a B on the 2017 edition of the Scorecard.

Japan has the lowest ratio of FDI as a proportion of GDP of any OECD member. Its inability to attract more inward investment stems from complex regulation and cultural resistance to mergers and acquisitions transactions with foreign partners. Overregulation and lack of labor mobility contribute to a higher cost of doing business and inhibit investment. This is reflected in Japan's low investment environment score of 50.7, compared to North America's (weighted by GDP) score of 78.9.

Japan’s loss in investment is North America’s gain. For decades, Japanese firms have invested their large cash holdings in North America as a production platform. NAFTA provided a significant boost to Japanese investment in North America, particularly in the automotive sector. Twenty years later, 74 percent of Japanese brand vehicles sold in the U.S. are built in North America. Japanese companies have also invested heavily in regional value chains in other sectors such as electronics, metals, food processing, and high-tech manufacturing.

Government debt in Japan as a percentage of GDP is also higher than in any other OECD country due to sharp increases in social spending and inadequate revenues. Its low and falling macroeconomic score reflects these concerns. This indicator is where North America achieves its lowest score (48), which still compares favorably to Japan's score of 32. A strengthening yen continues to dampen the profits of Japanese firms that are export-dependent, while an aggressive policy of monetary stimulus has yet to ignite the country’s sluggish economy.

When comparing North America and Japan, the ability to attract sustained investment and labor mobility give North America the edge.

Despite steady improvement since 2007, China receives a D+ with an overall score of 39.4 on the Bush Institute Scorecard against North America's B+.

Significant legal and regulatory reforms corresponded with China’s entry into the World Trade Organization in December 2001. However, the investment environment score remains China’s lowest among the six key Scorecard indicators, and China’s trade environment score has shown the least improvement since 2007. This may reflect a plateau after implementation of its WTO commitments.

China has pursued an aggressive bilateral free trade agreement strategy in recent years. But, in contrast to the openness of North America, China still imposes a variety of market restrictions. China supports state-owned enterprises in many sectors, walls off foreign investment, fails to provide adequate intellectual property and other legal protections for foreign businesses, and maintains regulatory barriers to market access.

Major investments by the Chinese government in health and education are paying off, and are reflected in the 28-point increase in China’s score in this category since 2007.

China receives a relatively high score on macroeconomic environment, scoring 53.6 to North America’s 48.1 (when weighted by GDP). In part, this reflects China’s nearly 11 percent annual growth rate over two decades. However, China’s high rate of GDP growth is showing signs of leveling off. If North America capitalizes on its economic recovery to restore healthy GDP growth, and pays down government debt, this indicator may yet tip in favor of North America.

The Scorecard reveals long-standing structural impediments to Russia's economic competitiveness. Rampant corruption causes the country to score particularly low on the measure of legal system and property rights (46.7) and discourages foreign investment (24.2).

Since 2010, Russia’s business environment score has increased from 34.4 to 49.1, thanks to sizeable government investment in infrastructure, an efficient electrical grid, and the relative ease of starting a business. However, recent developments threaten to impede any further improvement. Russia's military involvement in Ukraine and Syria, lack of engagement to address the threat of nuclear capabilities in North Korea, and allegations of interference in the 2016 U.S. presidential election have combined to severely strain its relationship with the West. Presently, economic sanctions block Russia's access to international capital markets and dampen foreign direct investment into Russia.

At the same time, lower oil prices have put substantial pressure on the Russian government, which relies on oil and gas for more than half of its budget revenue. Since oil prices collapsed in 2014, Russia’s score on the macroeconomic environment indicator has fallen from 58.5 in 2014 to 40.4 in 2017. As long as sanctions persist, Russia’s scores for investment and trade environment—at 24.2 and 21.8 respectively in 2017—are expected to remain low. The combination of sanctions (including Russia's self-imposed import restrictions) and the collapse in oil prices caused Russia’s economy to contract 2.8 percent in 2015 and 0.2 percent in 2016.

North America's diversified economy, stable legal system, and sustained ability to trade and attract investment give North America a clear and enduring advantage over Russia.

Germany continues to make gains in key categories such as business environment, investment environment, macroeconomic environment, and health and education. Germany has a reliable legal system and relatively open trade regime. Behind China, it is the world’s largest exporter, benefiting from a weaker Euro while showing strength in product design innovation, investments in workforce training, and manufacturing excellence.

Germany’s steady growth over the last decade, stewardship in public financial policy, and low unemployment rate have contributed to its standing as the strongest economy in the Eurozone.

When comparing Germany’s scores with those of North America (weighted by GDP), the two economies are tied three to three in the Scorecard’s six areas of competitiveness.

Germany receives slightly better scores on legal protections and health and education, and a significantly better score on macroeconomic environment. North America receives significantly better scores for its business environment and investment environment due to its greater ease of obtaining credit and starting a business. In 2017, North America’s trade environment score overtook Germany’s, which fell from 72.5 in 2016 to 68.7 in 2017. Germany’s decline on this indicator may be a reflection of uncertainty concerning the viability of the European Union after Great Britain’s vote to leave the group.

In the World Economic Forum, participating CEOs have developed similar recommendations for both Germany and North America to maintain competitiveness: adopt competitive energy policies, strengthen postsecondary math and science achievement, increase labor mobility and invest more in infrastructure.

South Korea’s economic development over the last few decades is a success story. It is now the world’s 11th largest economy by nominal GDP. To its credit, North America just edges out this important trading partner with an A versus South Korea's A-.

South Korea undertook significant economic reforms after the Asian financial crisis in 1997 and sought to institutionalize greater openness to trade and investment through strategic free trade agreements, including with the United States, Canada, and the European Union. Negotiations with Mexico are ongoing, and South Korea has expressed interest in joining the TPP. U.S. criticism of the trade deficit has generated trade tensions. Given South Korea’s position as a net buyer of U.S. energy and services—and as a strategic military partner in the Pacific—the U.S. must work to preserve close ties between the two countries.

While South Korea scores well across each of the Scorecard’s six categories, it nonetheless trails North America (weighted by GDP) in all categories except macroeconomic environment and health and education. South Korea continues to make improvements to its legal and regulatory environment, and its trade environment score has increased from 49 to 60 since 2007. However, investor confidence in South Korea is still much lower than in North America.

South Korea’s overall economic freedom is limited by a legacy of institutional corruption and a rigid labor market, especially in comparison to North America’s labor mobility. The annual ratio of total exports to GDP is roughly 50 percent, compared to just 13 percent for the U.S. While South Korea’s manufacturing efficiency and excellence give it a competitive advantage in the global marketplace, its continued reliance on growth through exports creates vulnerability to downturns in its key export markets, including China and the U.S.

North America’s advantage over South Korea is its ability to attract sustained investment, thanks to a strong, stable business and legal environment.

• North America (B+) and SADC (D)

  North America holds a large and growing lead over SADC on the Scorecard. SADC must prioritize improvements in health and education to ensure strong and stable regional economic development in the future.

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  Southern Africa is home to some of the most competitive economies in sub-Saharan Africa. Efforts to spur economic development and promote political stability through policy coordination date back to 1980. Formal efforts to integrate economically began in 1992 with the formation of the Southern African Development Community (SADC), which comprises 15 member states.* SADC has set goals around regional integration “themes” that go beyond economic integration to include investments in basic infrastructure and services, institutional capacity building, agricultural productivity and food security, and common approaches to socio-economic challenges.

  SADC achieved a free trade area in 2008, but its patchwork efforts to create a customs union are challenged by members’ overlapping commitments to sub-regional customs unions. SADC is also focused on capital markets development and monetary cooperation, striving toward a single currency by building on the foundation of countries that already use the South African Rand as common currency. South Africa’s economy dominates in the region, accounting for $294.8 billion of a combined 2016 GDP of $574.3 billion.

  Due to a lack of reported economic data, only nine** SADC member countries can be evaluated on the Scorecard. These nine countries have a combined population of nearly 204 million. SADC’s unweighted score is 29.6 (D), down from a high of 34.3 in 2009. Weighting by GDP elevates the SADC score slightly, to a D+, but also more starkly reveals the region’s decline from a score of 48.3 in 2007 to 35.9 in 2017.

  A detailed look at individual members across indicators on each index shows that SADC’s average, in almost every instance, is weighed down by one or two members scoring in single digits. In particular, Zimbabwe scores low in every category because years of poor governance and widespread corruption have resulted in economic instability. Conversely, Mauritius has been a bright spot, scoring above the worldwide average on all six Scorecard categories. Botswana and Namibia score in the 50s on the business environment and legal environment indicators, exceeding the SADC averages. South Africa, by far the largest economy in SADC, excels with a score of 66 on the investment environment indicator but underperforms on most other indicators. Political uncertainty and growing corruption pose a threat to South Africa’s—and the region’s—economic progress.

  Several economies in SADC are still in dire need of comprehensive economic reforms. Scores across each of the six Scorecard categories show a large and growing gap between North America and SADC. In particular, SADC scores the lowest on the health and education indicator, particularly alarming for a region that has the youngest population and workforce in the world. The region must prioritize improvements in health and education if it is to ensure strong and stable regional economic development in the future.

  * Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia, and Zimbabwe.

  ** Botswana, Madagascar, Mauritius, Mozambique, Namibia, South Africa, Tanzania, Zambia, and Zimbabwe

  
  
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