Europe tries to reverse drift towards de-industrialisation

  

SPECIAL REPORT / After a lost decade, Europe is trying to reverse a decline in manufacturing which has brought industrial output to a standstill. The issue will reach the EU's top decision-making body in March when European leaders meet for their quarterly summit in Brussels.

Over the past few years, the European Commission has been the most vocal EU institution campaigning for the continent's industrial revival, positioning itself as a driver of competitiveness and job creation.

Within the EU executive, the commissioner for enterprise, Antonio Tajani, has emerged as the winner of an internal debate opposing supporters of industry to environmentalists, whose policies were blamed for hampering the economy.

The financial and social crisis helped Tajani get his message across. As unemployment rates shot up to beyond the 10% ceiling across the continent, a growing number of EU citizens and leaders became convinced that Europe needed a serious industrial policy to stem the outflow of production towards Asia.

Since 2010, the Commission has produced strategies for the re-industrialisation of Europe every two years, picking technology winners, such as smart grids or 3D printers. The last such document, published in January, carries the resounding headline of an Industrial Renaissance for Europe, making no secret of its Italian inspiration.

The EU has set a target for industry to make up 20% of the continent's Gross Domestic Product (GDP) by 2020, though the goal is non-binding, unlike similar targets such as for carbon dioxide emissions reductions.

Industry represented almost 18% of EU GDP at the beginning of the century, but this figure has dropped to around 15%, while manufacturing output is now at the same level as a decade ago.

The increased weight of services in the EU economy partly explains the downward trend of manufacturing on the continent, which has been hit by the outsourcing and relocation spree fuelled by high taxes and high energy and labour costs. 

Service-based knowledge economy goes down the drain

The relocation wave now seems to be falling, or even reversing, as manufacturers realise the drawbacks of China's state-controlled economy and India's poor infrastructure base, while labour costs in emerging economies have begun to grow.

However, Europe urgently needs to adapt to the new needs of industry if it wants to re-attract the companies that left the continent in search of greener pastures.

EU leaders will address all these issues when they meet in Brussels on 20-21 March for their quarterly summit. An extraordinary European Council initially dedicated only to industry was cancelled in February, but the topic still remains on the table of the EU's top decision makers.

Pro-industry decisions are not going to be neutral for other sectors as it requires aligning the entire EU economy with industry needs. The Commission says it can mobilise regional development funds to help the transition. A bigger share of EU structural funds can now be used for innovation and industry rather than for the service-based knowledge economy dreamed of in Brussels ten years ago.

For those who are sceptical about such an U-turn, the EU executive provides a formula: "Each additional job in manufacturing creates 0.5-2 jobs in other sectors," reads the new Commission mantra repeated in statements and official documents.

For the strategy to work, it requires EU leaders to send a clear, unequivocal message of support. Even if this turns out to be the case, it would only be the beginning of the process, as the European elections in May and the new Commission taking office after the summer break may impose new priorities.

Whichever state receives the delicate portfolio of industry in the new EU executive may prove the best indicator of how the strategy will unfold in the coming years.

Industry supporters also hope that Italy, which is set to hold the rotating EU presidency in the second semester of 2014, will help drive the agenda at the time when EU institutions are renewed. The country is the second top manufacturing country in the EU after Germany and the fifth in the world.

Positions: 

“Europe is still far from the 20% target of industry’s share in Europe’s GDP by 2020. That is why industrial competitiveness has to be at the heart of the March 2014 European Council political agenda," said European Commission Vice-President Antonio Tajani, responsible for industry and entrepreneurship.

"We need a strong commitment at the EU and national level to ensure coherence and prioritisation of all instruments at our disposal. An industrial strategy must encompass many other sectors, as they are increasingly inter-connected and have a major impact on industrial success,” he added.

Tajani's position was backed by the EU Competitiveness Council held in Brussels last week (20-21 February). "A broad consensus emerged on the importance of intensifying the mainstreaming of industrial competitiveness in other policy areas. The importance of coordinating different European policies was also emphasized," read the conclusions of the meeting.

The Council also "calls for the endorsement of the reindustrialisation efforts in line with the Commission's aspiration of raising the contribution of industry to GDP to as much as 20% by 2020."

Europe's main industry lobby, BusinessEurope, calls for "a 360° strategy to improve industrial competitiveness". EU leaders are asked "to give a clear sense of direction, with deliverable priorities, and to ensure that the state of play for the European industry and the progress made in pro-competitiveness reforms are monitored and evaluated every year", reads a note.  

Timeline: 
  • 20-21 March 2014: European Council to discuss industrial policy
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Comments

Victoria's picture

How rwo-faced! Last week the EU complained that Germany was too-export orientated and should address this by looking at service economy. Well without Germany who would have bailed out the defaulting companies?

Why not attract companies within the EU that have been progressing and progressively showing their nouse in entrepreneurial developments in the Green and Environmental Arena such as that we are seeing developed in the Renewable Fuels and Products sector currently amassing huge interests in the Mediterranean region and Holland.

The new wind energy company that is looking for a home in the EU and Mediterranean area is one. This has the potential to drive wind turbine costs down to a third of the current system as well as being twice as efficient in converting wind to energy. This is a World-Beater which the Chinese are looking at buy and then another lost development.

Also the new bio-photovoltaic-cell and spray-applied photo-voltaic cell and electrical storage system which we are developing. This is the future for P_V systems as they are ultr-thin (less than 3.65 mm thick)and can be applied to any surface - old and new - and as well as provide a paint and protective coating can produce electricity at a better conversion rate than current "plate systems" at 20% of the current systems. They can even store electricity as well for up to 30 hours. This again is an EU development and because of lack of interest in the EU and is now being looked at in Taiwan as the development to buy out. Another loss.

The companies in Hardenberg and Malta (respectively Genesyst EU BV and Applied Biofuels Malta) have bothe demonstrated their business acumen to the point that they are now leading the game-changing ideas with the developments of Renewable Fuels and Products - in their Bio-Refinery developments - that have been highlighted will promoted massive manufacturing opportunities and huge job creation opportunities on the back on solving the issues of renewable fules/products etc which can be produced at the most competitive edge and deliver such to meet the EU Directives at a price that can be afforded. For example an incineration project to burn 400,000 tonnes per year of waste can be reduced to barely €120 million in capital expenditure. In doing this for a typical plant that means producing over 120 million litres of the biofuel etanol per year from this and this can be sold to the public at around half the current average costs of gasoline/petrol in the EU (average prices are around €uro 1-40 per litre. Similarly it can also produce the alternative as butenol and have that for sale at €uro 0-95 per litre. Surely this is what we want rather than try and bring back companies that have left.

The alternative is that the companies from Asia will scoop this style of companies up and yet again we will have scenario of the Dyson Vacuume Cleaner company being owned by Asian companies.

Brook Riley's picture

Can’t help being amused by BusinessEurope’s confused call for a “360° strategy”. Are they saying they want to go round and round in circles? Or that they want to stick with business as usual? Oh well... :-)

an european's picture

So we have the opportunity to make "frackin' " So let's do it for the beginin'

We need computer and cpu factories as well !
Not only made in taiwan or china but here in the EU!

Sven AERTS's picture

Manufacturing where the customers are, pls. And can't the CO2e Emission Trading System be seen as an incentive for our manufacturing industry to go buy-up / implement new factories in emerging economies? That way they would generate their own CO2e certificates as they'd be implementing all their energy efficiency techniques in these companies they've taken over and rationalised?

Karel Yurian's picture

I think that there is something here to do and action.

The EU has an immense talent of individuals across its 28 Member Countries and its 500 Million people. There are some within this pool of talent who are there beavouring away in exciting and innovative technologies that seldome see the expressions of gratitude they deserve from the Public At Large. It is all very well the EU (cloistered) Leaders saying that the member countries should reinvigorate the Economy of the European Union and the wider Europe by actioning or proposing and "setting a target for industry to make up 20% of the continent's Gross Domestic Product (GDP) by 2020" but this is not that difficult an achieve. You do not have to around the world and attempt to recoup long lost industries for once they have left the EU they have gone for ever, no the real logic is to go for the innovative industries such as those instanced by others in the alternative (renewable) fuels, the alternative and far better wind turbines, and the exciting developments in the photo_voltaic cells we are reading about. These are just the touch of the ice-berg issues though, there are others in the new generation of products that may still be in the laboratory awaiting just the cash infusions needed to start. we cannot have the James Dysons and the other entrepreneurs leaving the EU to have their IP strangled by the CHinese at birth.
So when it come to the EU supporting programmes let's not hear that it is supporting existing companies that are still profitable and only use such money for their own bank sheets but add to the talent that is around. There are numerous companies around that just need such monetary infusions to encourage traditional funders to support. Approving a fund so that a company in the area of Bio-Refining can then get banks on board is the way forward. And we know of one such company that is right at the heart of the EU which can do this by making biofuels and which has been at the mercy of institutional ignorance in the fact that it could reduce the overall imports of oil to the EU by €100s of Billions in less than 15 years, but it is totally ignored This is one of a series of companies that there are around that could go forward with just a small infusion and a fraction of those that major companies have been given. As the European Investment Bank has already said, "why give money and loan facilities to the major utilities at near zero interest rates, when there are real companies out there that would love that opportunity and they would bolster up the EU's overall economic assay."
"These Utlities are only interested in such cheap funds because it is a Bottom Line Accounting system that does nothing to create jobs."

Let's hear it for the EU helping these Companies so that the Targets are achieved rather than be achievable!