EU industrial policy finds renewed support with crisis

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This article is part of our special report Industrial Policy.

Business leaders and trade groups put forward various models for an EU industrial policy during an event organised by the Confrontations Europe think-tank in Strasbourg this month. EURACTIV France reports.

Although the EU appears to be heading towards a services economy, the economic crisis has made drawing up an industrial policy more relevant than ever, industry bosses told the Europe Forum on 17 April.

''There is no prosperous economy without industry. Even if this is obvious, it has not always been the case,'' said Franck Huiban, advisor to the CEO of European aeronautic, defence and space company EADS.

According to Huiban, the economic crisis was a brutal wake-up call for Europe, which was turning towards a service-based economy.

Today, the EU represents 15% of global industrial output, compared with 20% in 2000. In France, industry represents only 16% of GDP – like in the UK – compared to 22% in 2000. In Germany, industry is more resistant and still represents 30% of value added. But these figures are nothing like those in emerging countries, which together produce 52% of the world's industrial output.

In the late 1990s, the EU thought it should move its industrial production out of Europe, keeping only research and development (R&D) and marketing. It now seems, at least in theory, that the EU has changed its vision.

The 'Europe 2020' strategy, currently in its preparatory phase, may contain a section on industrial policy (see 'Background'). Yet doubts persist over the suitability of the strategy, which aims to boost growth instead of creating the conditions for growth.

''[The] Lisbon [Strategy] is dead. But we are making the Europe 2020 strategy with the same approach. I promise you, in 10 years we will be there saying that it didn't work again,'' said Rolf Kroker, director of German think-tank Institut der deutschen Wirtschaft, based in Cologne.

EADS representative Franck Huiban said the role of governments is crucial for creating the conditions for an EU industrial policy. He pointed out that 15-20% of R&D spending in the United States is financed by public funds.

Jean-Marc Barki - manager of Sealock and a board member of the Europe committee at MEDEF, the largest employers' union in France - insisted that R&D development is essential. He stressed that small and large companies need to move closer to one another so that SMEs can benefit from the expertise of larger structures. ''We need our elders to know how to grow,'' he said.

Rolf Kroker stressed the need to develop research-friendly taxation. Yet he does not believe that states themselves should be actors in this area.

As for employees, Dominique Olivier, from French trade union CFDT, highlighted the importance of creating ''conditions for cooperation between men and women at work".

According to Olivier, a lack of training is slowing down innovation in Europe. For example, every year Europe has a shortage of engineers, meaning that companies have to recruit qualified staff from elsewhere.

Some regulations implemented by the EU, such as the REACH regulation on chemical products and the climate and energy package, are raising concern among businesses. If Europe wants to set an example to emerging countries or the United States, it still has a long way to go, Barki suggested.

''REACH is hindering small businesses and others continue to move forward without such a thing,'' he said.

According to Huiban, the euro situation presents an obstacle to the establishment of a competitive industrial policy. Consequently, he called on the EU to support a new monetary deal at the G20.

Industrial policy has been one of the pillars of European integration. In 1952, the European Coal and Steel Community (ECSC) was formed on the basis of cooperation in two key industrial sectors. Despite this foundation, industrial policy is not a priority of the EU.

Several initiatives have been launched since the 1980s, when the Single European Act gave the go-ahead for long-term programmes aimed at reinforcing the competitiveness of European industry. The Maastricht Treaty prepared the ground for Community action to support the restructuring of industry and technological development (Article 157).

But the hard work did not pay off: fifty years of European integration have not led to a genuine industrial strategy.

Today, figures in the sector are pleading for industry to be placed at the heart of the 'Europe 2020' economic strategy. Industry ministers – who are demanding a key role in the implementation of the project – have been working to develop an ambitious industrial policy focused on sustainable growth and employment.

Drafted on 1 March by European competitiveness minsters, the draft industrial policy is vague on detail and addresses themes that are already well-known, such as innovation, support for SMEs and sustainable growth.

  • 25-26 March 2010: EU summit to discuss overall approach of Europe 2020 strategy and Commission's proposed headline objectives.
  • 17-18 June 2010: EU summit to adopt further details of strategy, including country-specific targets.
  • Autumn 2010: Member states to submit stability and convergence programmes, as well as national reform programmes.

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