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03/12/2016

Commission looks to trade policy to protect key tech industries

Innovation & Industry

Commission looks to trade policy to protect key tech industries

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SPECIAL REPORT: The new EU executive will continue to focus industrial policy on so-called key enabling technologies, but is seeking to protect European industry from unfair foreign competition.

Key Enabling Technologies (KETs) cover six areas underpinning a range of products in strategic export markets, including the security, health and energy sectors. They include nanotechnology, micro-nanoelectronics, phototonics, advanced materials, industrial biotechnology and advanced manufacturing.

In June 2012, the Commission tabled a strategy to boost the industrial production of KETs-based products, aiming to keep pace with the EU’s main international competitors, restore growth in Europe and create jobs in industry.

The global market volume in KETs-based products was estimated to be worth €646 billion during 2010 and is expected to increase by more than half to €1 trillion by 2015, representing almost 10% of EU GDP.

A High-Level Group on Key Enabling Technologies (HLG) was founded by the EU executive in Brussels on 27 February 2013.

Getting KETs past the ‘valley of death’

“KETs directly and indirectly boost competitiveness and generate jobs along strategic European value chains creating growth and wealth in the economy,” according to a HLG manifesto published over the summer.

But the document also emphasised that the EU’s major weakness lies in translating its KETs knowledge-base into goods and services, creating a so-called valley of death in the innovation chain.

The manifesto claimed that whilst other global regions direct 70% of research spending to activities that are close to markets, in the EU, two-thirds of research funds are spent on basic research, where there is no directly applicable commercial application to the science.

“Europe should urgently rebalance its public funding toward technological research and innovation,” the manifesto urged.

It asked the European Parliament to prioritise KETs politically by incorporating them into policies and to use public procurement to accelerate the uptake of European KETs-enabled innovative products.

Now that the new European Commission has taken office, “We need to ratchet up the pace of implementing measures,” according to Ulrike Rabmer-Koller, the vice president of the crafts and trade division of the Austrian Chamber of Commerce, who sits on the HLG.

A Commission spokeswoman points out that KETs gained in the setting of the Horizon 2020 budget, with a dedicated KETs budget of almost €6 billion, including for projects that combine different KETs, and several calls for KETs pilot lines have already been launched in the first work programme.

The rules have also been changed to make it possible to combine Horizon 2020 funds with Structural Funds.

“’Investments in innovation’ is one of the key pillars in our reinforced industrial policy. We know the importance for industry of continuous investment and development of new technologies to drive industry and compete internationally. Stimulating investment in new technologies is at the core of the mandate and priorities of Commissioners Elzbieta Bie?kowska and Carlos Moedas,” the spokeswoman added.

International concerns and competition

But it is the international markets that are causing the most concern for KETs.

A report published last year pointed up the international distortion in KETs with other countries attracting KETs through anti-competitive behaviour.

One issue that rankles is the ability of other countries to attract KETs business through favourable business conditions and tax perks. 

Specifically, there is evidence that some measures implemented in the US and in Asian countries result in a distortion of the international market for KET-related industries by creating incentives and making their country attractive beyond pure market conditions.

“Indeed, there have been cases in which EU-based KET companies have invested in third countries, simply because the incentives were too attractive to turn down and the investment was less risky,” the Commission spokeswoman said.

“We need a level playing field in the area of investment, trade, IP-protection, public procurement and legal certainty. The forthcoming HLG-report will address some of the issues,” Rabmer-Koller says.

The Commission spokeswoman told EurActiv that the EU executive is working make sure that – when negotiating different trade agreements, at bilateral and multilateral levels – it achieves “a favourable trade environment and a level playing field for KETs in full compliance with World Trade Organisation (WTO) rules.”

“The Commission is also exploring how trade policy can better support the KETs policy, notably with regard to the reciprocity needed to ensure an international level playing field with respect to technology transfer,” she added.

Background

The European Commission sought to break with years of inaction on industrial policy when it unveiled a new strategy in 2012, promising a "new industrial revolution".

The strategy's headline goal is to raise industrial activity to 20% of EU gross domestic product by 2020, compared to just over 15% today, taking it back up to pre-crisis levels.

Europe is a world-leader in many strategic sectors such as engineering, automobiles, aeronautics, space, chemicals and pharmaceuticals, the Commission argues, saying it must build on those strengths to relaunch manufacturing.

Timeline

  • Oct. 2012: Commission unveils new industrial policy strategy, aiming to raise industrial activity to 20% of EU gross domestic product by 2020
  • 25 Oct. 2013: Commission’s industrial competitiveness report shows industry’s share in Europe’s GDP declined from 15.5% of GDP in 2012 to 15.1% in summer 2013
  • Jan. 2014: Commission unveils communication calling for “a European industrial renaissance”
  • Sept. 2014: Council adopt conclusions on mainstreaming industrial competitiveness in other policy areas

Further Reading