STRATEGY

U.S. Falls From Top Spot in Global Competitive Rankings

Switzerland now ranks No. 1, followed by Finland, Sweden, Denmark, and Singapore.
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Despite a surge of entrepreneurial activity, years of running budget deficits  have knocked the United States from its top spot on a closely-watched ranking of the world's most competitive nations.

Citing "large macroeconomic imbalances," the World Economic Forum, a global  policy group based in Geneva, ranked the United States in sixth place on this year's Global Competitiveness Index, the group announced on Sept. 26.

The annual index is based on economic data, as well as surveys with more than 11,000 business leaders in 215 countries.

Switzerland ranked No. 1, up from No. 4 last year, as a result of its "sound institutional environment, excellent infrastructure, efficient markets and high levels of technological innovation," the report said.

Also ranking above the U.S. were Finland, Sweden, Denmark, and Singapore. The three least competitive countries on this year's list were Angola, Burundi, and Chad.

The top rankings of Switzerland and the Nordic countries "show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness," Augusto Lopez-Claros, the group's chief economist, said in a statement.

Lopez-Claros said that business activity in these countries clearly benefited from "rule of law, an efficient judicial system, and high levels of transparency and accountability within public institutions."

While the U.S. also fosters an excellent business environment and remains a global center for technology development, rising levels of public debt and repeated fiscal deficits is threatening its long-term competitiveness, the report said.

"What worries business communities, and others, is that the current account deficit in the U.S. is the largest it's ever been," Lopez-Claros said. Many are beginning to ask if this is sustainable, he added.

The U.S. current account deficit -- the broadest measure of foreign trade -- rose to $218.4 billion over the second quarter of the year -- the second highest on record, the Commerce Department reported in September. That's putting the country on track for a fifth straight annual deficit this year.

At least part of the trade gap, U.S. manufacturers say, is the result of policies by China  that give its producers an unfair advantage in the global marketplace, including undervaluing its currency, and turning a blind eye to piracy and intellectual property theft.

A day after the WEF rankings were released, the U.S. Chamber of Commerce -- the world's largest business association, with small businesses making up over 95% of its members -- issued a report calling on China to lower its trade barriers, float its currency, and enforce copyright protections.

Last updated: Oct 6, 2006




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