Europe looks for its ‘formula’ to create industrial champions

Steel collies from German steel manufacturer Salzgitter AG are stored in Salzgitter, Germany, 22 March 2018. [EPA-EFE/DAVID HECKER]

As Europe prepares for a comprehensive update of its competition, industrial and trade policies, experts and private sector representatives have warned against state interventionism proposed by France and Germany.

“A strong economic base is of key importance for Europe’s competitiveness, prosperity and role on the global stage and for the creation of jobs,” reads the EU’s strategic agenda for the next five years, endorsed by the EU leaders on 20 June. 

But there is no silver bullet to create European champions able to compete with American and Chinese firms, analysts and organisation representatives agreed at an event organised by EURACTIV on 19 June.

EU industrial policy under the spotlight as elections loom

As the EU gears up for a big refresh after May’s elections, there is growing consent among business leaders that incoming policymakers should refocus attention and resources on industrial policy, particularly in the continent’s most valuable sectors.

Instead, they recommended a comprehensive strategy covering various policy areas and also reflecting the different needs of member states and sectors.

But the global pressure should not lead to a significant review of the EU’s competition rules, something France and Germany proposed last February.

The Franco-German plan implied that leaders would have the powers to amend the European Commission’s antitrust decisions, one of the few exclusive competences the EU executive has.

Champions grow through competition

Instead of letting governments picking ‘champions’, the EU should strengthen the single market, invest more in innovation and “assertively” pursue fair and equal trade policies, argue Dutch ministers Eric Wiebes, Sigrid Kaag and Mona Keijzer.

The proposal failed to gain support among member states, including the Netherlands and Spain, and was also criticised by their industrial players back home.

The idea represented “a total U-turn from what was Germany’s industrial policy before,” said Holger Kunze, director of the European office of VDMA, Germany’s mechanical engineering industry association.

Berlin had been a staunch supporter of free trade and the single market in order to create new opportunities for its robust ecosystem of innovative medium-sized companies.

EU tells China to rebalance relations as it's no longer a developing nation

The leaders of France, Germany and the European Commission called on Tuesday (26 March) for more reciprocity in trade relations with China, in a sign that the EU no longer considers China a developing country and is increasingly concerned about its growing influence.

But as the rise of Chinese firms became more visible, German minister of economy, Peter Altmaier, suggested earlier this year that there should be less competition in Europe in order for European companies to remain competitive abroad. 

Kunze said that there are 1,300 “hidden champions” already based in Germany. They could suffer the consequences if the EU’s antitrust rules are reviewed and state interventionism is allowed to create ‘European champions’ through mergers.

19 EU countries call for new antitrust rules to create 'European champions'

A total of 19 EU governments have proposed updating the EU’s antitrust rules in order to facilitate the emergence of European industrial giants able to face “fierce competition” from the US and China.

Johan Bjerkem, an analyst at the European Policy Centre, recalled that the idea of reviewing the competition rules is not a new debate in France and Germany. But even if their proposal to limit the Commission’s powers does not take off, many member states are in favour of updating the rules in the face of competition from the Silicon Valley and China’s state-backed companies.

The strategic agenda endorsed by the EU leaders said that “we will continue to update our European competition framework to new technological and global market developments.”

Comprehensive

Competition is an important element of the package, but not the only one. “It has to be a comprehensive package,” Bjerkem said, also including areas like trade to fight against foreign unfair practices or facilitate market access.

Paul Csiszár, director at Commission’s DG Competition, agreed that competition would be one of the elements. But he said Europe should be wary of the consequences of some of the trade defence instruments implemented to address unfair practices. 

EU toughens anti-dumping trade powers

The European Union has agreed new powers to apply higher tariffs and more rapidly as part of a wave of measures to face the long-term challenge of cheap imports from China.

“Around 30 million jobs depend on competitive steel prices,” he warned, referring to the tariffs imposed to address steel dumping.

The picture gets more complex as member states also have different needs. “It is not only about Germany and France, we are talking about 28 member states and we have different situations,” said Luis Colunga, deputy secretary general of IndustriAll (European Trade Union).

He argued that the EU needs a “clear and comprehensive” strategy for all member states and valid for all sectors.

Six takeaways from Siemens-Alstom rejection

The European Commission decided on Wednesday (6 February) to block the merger of Siemens and Alstom, meant to create a European champion in the railway sector, due to the negative impact it would have on the European market and consumers.

However, even if there is no silver bullet to ensure that European companies prosper abroad, the formula is not a secret. 

The success is based on the opportunities offered by the internal market to scale up and grow, and on research and development, argued Kunze.

On both fronts, Europe has a lot of room for progress. The single market remains incomplete in many sectors. Meanwhile, the EU’s investment in R&D (around 2% of its GDP) is far behind the global champions, primarily South Korea (4.5% of its GDP).

[Edited by Zoran Radosavljevic]

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