Thumann: EU must cut green tape to boost industrial competitiveness

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This article is part of our special report European Business Summit.

European companies’ competitiveness is hampered by unnecessary burdensome legislative instruments in climate, energy and environment and policymakers must rebalance industrial strategies towards manufacturing, BusinessEurope President Jürgen Thumann said in an interview with EURACTIV, as the European Business Summit (EBS) gets underway today (15 May).

Jürgen R. Thumann is president of BusinessEurope and former president of the German employers' organisation, BDI. Thumann is a born entrepreneur. At the age of 19, he took over the management of his family's business. Later he founded Heitkamp & Thumann Group which today comprises 21 companies with some 2000 employees.

He spoke to EURACTIV's editor-in-chief, Daniela Vincenti.

To read a shorter version of this interview, please click here.

The European Business Summit this year has a provocative title: Industry matters. Do you have the feeling that in the past months industry has been sidelined?

On the contrary: this year’s European Business Summit (EBS) highlights the renewed attention to the importance of a strong and competitive European industry. EU leaders rightly recognised the role industry can play in a quick recovery from the crisis by driving growth and creating jobs. But this change of mindset is fairly recent and, in my view, still incomplete. This year’s EBS edition will put industry matters in the spotlight of the political debate.

The Commission presented a communication in October to promote the re-industrialisation of Europe. How convincing do you think that was?

No doubt that the crisis has worsened the economic and social situation in many Member States and exacerbated the impact of pre-existing competitive weaknesses. Sadly, we have seen Europe’s share of global manufacturing output decline over the last decade.

Manufacturing output is now more than 10% lower than before the crisis. This decline puts the prosperity of Europe at risk and has been left unaddressed by policy-makers for a too long time, even though lessons learnt from the current crisis show that countries, which have managed to keep their industry and related services strong and competitive, are recovering fastest.

The Commission’s communication you mentioned is designed to increase the manufacturing share of GDP from its current level of around 16% to 20% by 2020. It at least shows the Commission’s intention to put industry back to the centre of EU’s economy.                                 

Can we realistically reach this goal? How?

Arguably, industry is the most important contributor to Europe’s return to sustainable growth and job creation. Having a strong industrial base is vital for the European Union.

All in all industry generates 16 % of European GDP, 80 % of Europe's exports and combined with the related service sectors the share is even higher.

Industry accounts for 45 % of Europe’s workforce as each job in industry is linked with at least two high quality jobs in the service sectors. Industry is also a key driver of technological progress: 80 % of private sector R&D investment comes from manufacturing.

Increasing manufacturing’s share of GDP to 20% by 2020 would create at least 400,000 new jobs a year, reversing the losses of recent years. Alongside those new manufacturing jobs, many more jobs would be created in the supporting service sector.

Can we  achieve this target? Yes, if Europe sets a clear strategy to boost industrial competitiveness.

What would be a clear strategy?

BusinessEurope has five key recommendations to support industrial competitiveness. First of all the EU needs to reassess its approach to energy. We need to learn from the high cost lessons of the current EU policy while taking “game changers” – like the shale gas revolution and the very limited progress in global climate talks – into account.

Our energy policy needs to be cost-competitive, reliable and climate-friendly or Europe will not achieve its 20% industrial GDP target nor its 2020 climate targets.

An ambitious and competitiveness-driven internal and external trade policy agenda is also a priority for growth and jobs. Opening foreign markets should be the leitmotiv of an ambitious EU free trade agenda targeting current and emerging trading partners.

Equally important is to secure the supply of raw materials at competitive prices. Europe is import dependent on almost all industrial raw materials so we need to ensure free trade and open markets globally.

It is essential to reduce export restrictions on raw materials applied by some countries and to ensure that EU environmental and other legislation does not undermine or increase the cost of imports of raw materials into Europe.

Improving access to finance is vital for industrial companies and economic growth. Therefore European financial market reforms need to balance safeguarding financial stability and financing needs of companies without generating undue negative impacts on lending.

Last but not least, we must  better translate skills into employment. Europe must invest in the education of its people to boost productivity. The availability of a skilled workforce, in particular people with Science, Technology, Engineering and Mathematics (STEM) skills, is essential to improve industrial competitiveness and innovation.

There are plenty of other structural reforms needed to boost competitiveness. Do you have a sense that the EU has done everything it could to push member states on the road to growth-enhancing reforms?

As we said in BusinessEurope's 2013 Spring Reform Barometer almost five years have passed since the outbreak of the global financial crisis, yet Europe remains unable to return to a path of sustained growth.

Although many members states made progress in structural reforms during 2012, companies continue to be concerned that such reform efforts lack the urgency that is clearly required.

A survey of our member federations suggests that the greatest improvements came in the area of financial stability, but reform progress in areas impacting on productivity and investment, as well as trade and competitiveness, was much too slow.

Building on the progress I mentioned, further effort is required on fiscal consolidation. To help reduce overall tax burdens, fiscal consolidation should focus primarily on reductions in current public expenditure protecting investment, not tax rises. Tax reforms should shift taxation away from labour and capital which are most damaging to growth and employment. The Euro area needs also to make progress in implementing the banking union, notably the single supervisory mechanism.

BusinessEurope's Reform Barometer also recommends that regulation must be designed to minimise administrative burdens for companies. Differences in market openness must also be reduced. We are thinking of minimising the costs of enforcing contracts, properly transposing European directives, and ensuring that most public procurement is advertised openly throughout the EU internal market.

Regarding innovation and skills we urge that R&D intensity must be increased to reach the goal of 3% of GDP in R&D expenditures. Innovation policies must be more business oriented, stimulate private R&D investments and encourage close cooperation between public institutions, academia and businesses.

Last, but not least BusinessEurope's members want to see that unit labour cost rises are consistent with rises in productivity. Cutting employers’ social security contributions will encourage companies to hire more staff. Reduce tax burdens on labour will make work more attractive for low-income earners, compared with welfare benefits. And let’s not forget Europe’s ageing population – we must ensure that retirement ages evolve to reflect longer life expectancy.

Do you think energy policies are well carved to maintain a balance between industry needs and climate goals?

European companies are suffering from the negative effects of „green tape“. The European Commission is still inclined to develop unnecessarily burdensome legislative instruments in climate, energy and environment policies. This is why BusinessEurope is continuously urging the Commission to move towards a technology-driven and competitiveness friendly approach to fight climate change, improve energy efficiency and, at the same time, to protect the environment.

European companies are carrying a lot of burden when Europe’s share of the total global greenhouse gas emissions is just 10 to 11%. The costly EU climate policies and our unilateral approach have not led to the success of the “leadership by example” role that the European Commission had promised.

I can only confirm that European companies remain committed to the fight against climate change, but in the light of the lacklustre results from UN climate negotiations, the EU must rethink its own energy and climate policies. Technology should be the driving force to deliver on energy cost-competitiveness, security of supply and climate action with the ambition of maintaining a strong industrial base in Europe.

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