After setbacks, EU prepares to make new venture into industrial policy

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SPECIAL REPORT / A European Commission communication to re-launch European industrial policy – to be published next month and seen by EurActiv – will face diffidence from member states left unconvinced by a string of unfulfilled initiatives and divided over what such a policy should deliver.

The Commission’s communication, called 'Industrial Policy – a contribution to growth and economic recovery', identifies four key pillars: investment in innovation, better market conditions, access to capital, and skills.

Unlike previous industrial policy statements – included within the Lisbon Strategy and the Europe 2020 initiative – it also earmarks six “priority action lines”, specific sectors where it proposes immediate action.

These include: clean production manufacturing technologies, sustainable construction, clean vehicles, bio-based product markets, key-enabling technologies and smart energy grids.

It will also propose measures to improve the functioning of the internal market and European performance in global markets.

Jaded feelings – the legacy of bitter experience

Business leaders who on 19 September called on Industry Commissioner Antonio Tajani to give the energy efficiency industry a central role in the revised policy will doubtless welcome these sectoral focuses.

But the communication will battle against jaded feelings elsewhere in the member states.

Sean McGuire, a spokesman for the Confederation of British Industry, welcomed the broad focus, but added: “It is important that this strategy looks at industry in its broadest sense, not just manufacturing.  Creative industries and industry-related services are two important potential drivers for growth in the future and creating an environment to foster this growth is important.”

Another policy advisor on industry based in Brussels, speaking on condition of anonymity, spoke bluntly about the limitations of the paper.

“There is nothing that is going to set the world to light. It is just a re-packaging of everything that has already come, and there are no big surprises in there, which is unfortunate,” he said.

Indeed many of the initiatives within the paper relate to proposals already under way within the EU executive’s departments. For example, defining targets for the deployment of smart grids, and setting timetables for standards for these, are processes which have been announced and are already on track within the energy department.

Communication hints at new actions

The same is true of the so-called Key Enabling Technologies, or ‘KETs’ - including micro- and nano-electronics. The communication pledges that these will be key components of European Innovation Partnerships going forward, an intention long made clear by the Commission's research department.

New actions are described in the communication: an innovation partnership for manufacturing technologies for clean production, and an action plan for sustainable construction are two examples.

“That’s all very well, but what exactly that means remains to be seen,” said the policy advisor.

Low expectations abound following the failure of industrial policy to find a strong resonance in the past.

“For most of the past 60 years, industrial policy has at best been a secondary concern. Even though industrial policy acquires the status of one of the Europe 2020 Strategy’s seven flagship initiatives, no specific objectives or precise indicators are set,” said a report by the Party of European Socialists, issued in advance of the communication.

Industrial policy has been fragmented across a range of different aims such as increasing competition and employment and has tended to be viewed from a free-market perspective, rather than a holistic policy.

Tangible pan-European projects have proved difficult

Moreover tangible efforts to promote industry at a pan-European level have witnessed significant setbacks.

The Galileo satellite project, for example, was touted as one of the largest public-private partnerships in history. The private sector showed lukewarm commitment to the multibillion-euro project, however, leaving member states with a huge headache and a bigger bill.

One of the main stumbling blocks has been the definition of industrial policy. Whilst Italy favours beefing up reciprocal trading guarantees to force a level playing field for European trade, France has tended to stress a strategy of picking winners, large industrial companies that reach the critical mass to succeed.

The nature of which sectors should be chosen has always proved controversial in the context of “picking winners”.

The Commission emphasises the need to boost innovative industries at the heart of the paper, but the age-old tension between mercantilist and free-trade ideologies still haunts the European stage.

Trade reciprocity will ignite ideological debate

In northern Europe, the emphasis has been on competition and freedom of industry from regulation. On the other hand, labour interests - under pressure from the economic crisis - are suspicious of an industrial policy that does not incorporate social rights.

These tensions are likely to resurface in the wake of the communication.

In particular a section calling for tight controls over public procurement contracts for non-European companies, emanating from countries where the EU does not enjoy reciprocal rights, is likely to cause friction between the member states.

One of the things that all member states are likely to agree to is a call for “competitive proofing” of legislation, to rid companies of burdensome rules.

The Commission has called for the cutting of red tape before, and even appointed a tsar to oversee the issue.

As elsewhere in the paper, its repetition serves in some ways to underline the shortcomings of past initiatives.

Positions: 

“The EU roadmaps – for which several directorate-generals are responsible – have not been co-ordinated, despite the considerable conceptual overlaps and correlations,” said one German business leader, on condition of anonymity. “The European companies concerned are threatened with double or even multiple burdens resulting in electricity and emissions trading costs, capital being syphoned off, investments being hindered, and thus in massively adverse impacts on world market competitiveness,” the German industrialist added.

A great deal of progress has been made, both in terms of the doctrinal position of the European Commission and in terms of setting up "real" economic policies,” according to a recent report by Eurocité economists Julien Mendoza and Stephane Rouhier. “Nevertheless, there is still a long road ahead before we can declare the existence of a “European industrial policy. The main problem today refers to the positioning of the states, that favour their national champions at the international and European levels at the expense of thinking in terms of the supranational,” the economists concluded.

“We welcome the focus on industrial policy as a potential driver for growth but the real issue required for the real economy to grow is access to finance, whether for the SME sector or for larger manufacturing," said Sean McGuire, a spokesman for the UK’s Confederation of British Industry. “Access to credit and bank borrowing are becoming increasingly difficult and this is where we need more action. Making changes, for example, to the product safety directive, will not address this.”

The French industry group Cercle de l'Industrie, which represents CEOs of all major listed French industrial groups, called for streamlining the EU's industrial policy into other policy areas. “The Cercle de l’Industrie considers that EU competitiveness goals, as set in the Europe 2020 strategy, should be better integrated in all EU policies and legislation. The implementation of clear objectives related to industry (similar to the '20-20-20 goals' in the field of energy), as mentioned by Commissioner Oettinger on July 16th 2012, could be an option. It is also essential to ensure that EU competition policy is consistent with industry policy objectives and specificities,” a paper from the French industry group said.

French industry also favours rationalisation of the management of industry policy, according to the paper. “The Commission should better recognise the leading role of the Commissioner for Industry and Entrepreneurship, as Chair of the “Group of Commissioners for Industrial Policy” (gathering, among others, the Commissioners for Internal market, Research and Innovation, Competition), under the authority of President Barroso,” the paper added.

“The weak legal provisions on industrial policy in the Lisbon Treaty have so far been interpreted in a limited way by the European Commission,” says a position paper by the Party of European Socialists (PES). “Instead, the Commission should more seriously pursue the option of taking any useful initiative to promote such co-ordination [between Member States in the field of industrial policy], in particular initiatives aiming at the establishment of guidelines and indicators, the organisation of exchange of best practice, and the preparation of the necessary elements for periodic monitoring and evaluation,” the report said.

Commenting on a position paper by the party, PES Group President Karl-Heinz Lambertz, said: "Experience has clearly shown that there cannot be growth without a strong industrial policy, and likewise, a strong industrial policy is not possible without strong structural funds. Therefore, instead of simply reallocating structural funds, a European agenda for growth must be based on a real strategy for industrial renewal in Europe and on a multi-level governance approach", he stressed.

“A new industrial policy strategy for Europe needs to be sustainable,” said German Green MEP Reinhard Bütikofer. “New policy instruments such as a soil directive should be adopted. I think we should focus on industrial policy, and the forthcoming industrial report being revamped by the Commission for later this year, because this is probably one of the most contentious issues in the sphere of economic policymaking presently.”

Timeline: 
  • 10 Oct. 2012: Commissioner Antonio Tajani to unveil new Industrial Policy communication
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