Manufacturing takes centre stage in new industrial policy

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This article is part of our special report Industrial Policy.

Manufacturing industries are returning to the heart of the debate on how to put Europe back on a sustainable growth path, as business leaders warn against an over-reliance on the services sector. 

Forecasts of 1% growth will not be enough to boost employment and maintain Europe's social model, according to BusinessEurope, a lobby group. The difference between growth of 1% and 2% is 6.5 million new jobs and a public debt consolidation effort of €450 billion – or 7% of GDP – by 2014.

In light of such a stark prognosis, Jürgen Thumann, president of BusinessEurope, said an integrated industrial policy designed to develop manufacturing and services industries is urgently needed.

He cautioned against ignoring heavy industry, noting that white-collar professional services are dependent on the manufacturing sector.

"Many of the services would be lost without a strong industrial base," he said yesterday (4 February) ahead of separate meetings with European Council President Herman Van Rompuy, European Commission President José Manuel Barroso and European Parliament President Jerzy Buzek.

Thumann said he would press EU leaders to develop digital industries, complete the single market and support the efforts of European companies to expand overseas.

This was echoed by Andrea Moltrasio, vice-president of Confindustria – an Italian business organisation – who accused academics and policymakers of "snobbery" in their attitude to manufacturing.

Manufacturing has suffered, he suggested, partly because factories have gone out of fashion. "Industry is part of the knowledge economy. We need a new industrial strategy which should be at the core of the EU 2020," said Moltrasio.

He called for closer links between universities and enterprise through industrial clusters and measures to boost the presence of European SMEs abroad.

"We have to increase international trade, especially in emerging markets. The EU should help companies to internationalise rather than having individual governments take a unilateral approach," he said.

New 'Go for Growth' strategy

The need for competitive exports was just one of a series of elements of a new document entitled 'Go for Growth', published by BusinessEurope in Brussels.

The plan calls for a range of structural reforms to cut red tape, increase labour flexibility and safeguard the sustainability of social security systems, in tandem with restoring balance to public finances across Europe.

It also hammers home the importance of the manufacturing sector, which accounts for three quarters of EU exports and the vast majority of private sector R&D spending.

Concluding the WTO Doha round of trade talks and sealing bilateral free-trade agreements with South Korea, India and South East Asian countries is essential to continued growth, according to BusinessEurope.

However, they also stress the need to ensure that bigger trade partners – like Russian, China, India and Brazil – live up to their commitments to the open market.

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Signhild Arnegård Hansen, president of the Confederation of Swedish Enterprise, said safeguarding the internal market in the face of rising protectionist tendencies is essential to recovery.

"The internal market has delivered numerous benefits but it is rarely spoken about," she said.

Arnegård Hansen said the full adoption of the Services Directive would be a boon to the services sector and called on policymakers to resist unnecessary changes to the Posted Workers Directive.

Henryka Bochniarz, president of the Polish Roundtable, said Poland had weathered the economic storm better than most thanks to structural reforms undertaken by the government in consultation with industry and social partners.

"Structural reforms are painful but essential. Shock therapy was the basis for our success in recent years," she said.

Bochniarz said Poland's diverse economy has also helped, along with tax cuts and a strong entrepreneurial spirit. However, she acknowledged that despite its growing GDP, Poland still has a lot of room for improvement.

Philippe De Buck, director-general of BusinessEurope, said protecting employment is more important than directly saving jobs. He said commitment to flexicurity should not be shaken by the economic crisis.

"We are sending a strong message to trade unions urging them to stick with the principles of flexicurity as agreed before the crisis," De Buck said.
 

Europe's economy has increasingly come to rely on the services sector in recent years, as heavy industry relocates to lower-cost economies.

The economic crisis has prompted political and industrial leaders to take stock of such long-term trends amid a growing jobs crisis.

In addition to solving the rising employment crunch, policymakers must grapple with demographic challenges, climate change and global competition for energy and raw materials.

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