2 Industrial policy for an enlarged Europe
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8875/04
COM(04) 274
| Commission Communication — Fostering structural change: an industrial policy for an enlarged Europe
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| Legal base | — |
| Document originated | 20 April 2004
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| Deposited in Parliament | 28 April 2004
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| Department | Trade and Industry
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| Basis of consideration | EM of 12 May 2004
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| Previous Committee Report | None
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| Discussed in Council | 17-18 May 2004 Competitiveness Council
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee C
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Background
2.1 The Commission Communication examines the competitiveness
of European industry and assesses the risk of deindustrialisation.
It follows on from the Commission's Communication on Industrial
Policy of December 2002,[5]
when some of the foundations that should underpin the EU's industrial
policy were set out, and the Communication of November 2003,[6]
which gave initial views on deindustrialisation. The Conclusions
of the Spring European Council also expressed concern about deindustrialisation.
The Communication
2.2 The Communication acknowledges that industry makes an essential
contribution to Europe's prosperity and dynamism. Industry is
increasingly enmeshed with services and contributes to their development.
But it is facing major challenges — increasingly rapid technological
development; skills gaps; expectations regarding consumer, environmental
and health protection; new global competitors. However, the Commission
concludes that there is no proof of a generalised process of deindustrialisation.
The decline in the share of the economy accounted for by industry
should be seen in the context of the long-term reallocation of
resources to services in developed countries. Although likely
to cause difficulties of adjustment, it should be seen not as
a threat but rather a natural consequence of economic progress
which should be facilitated and encouraged as a precondition to
maintaining competitiveness and sustainable growth.
2.3 That said, the Commission highlights the emergence
of worrying signs, including poor performance in productivity
growth, research spending and innovation. This is manifested in
the fact that relocation of industrial activity away from the
EU is no longer limited to the traditional labour-intensive sectors,
but is beginning to be observed in intermediate and even high-technology
sectors, including some research activities and services. India
and China are the main beneficiaries. Competitiveness is seen
as the key factor in resolving industry's problems. Compared with
the US, the Commission notes a greater difficulty of access to
private funding, a "culture which is sometimes too cautious
to take risks", and insufficient collaboration between public
research bodies (including universities) and the industrial sector.
2.4 Enlargement is seen as a major opportunity through
the extension of the internal market and temporary competitive
advantages, such as low labour costs, before the new Member States
have been fully transformed into knowledge-based economies. Stability
and regulatory prudence are essential to exploiting these opportunities.
2.5 The Communication proposes three types of action
to facilitate structural change. The first is a "better lawmaking"
approach that, along with giving industry the benefit of an integrated
market, ensures that the regulatory burden is minimised. Here,
integrated impact assessments involving other Community institutions
and the Member States are seen as central. Secondly, in order
to exploit synergies between different Community policies affecting
competitiveness, five policy areas are identified:
- knowledge — innovation,
research and training all having a key role;
- functioning of the internal market;
- cohesion policy — in particular regional
policy and employment policy contributing to the process of structural
change, specifically by promoting the development and the spread
of knowledge;
- development of a policy of sustainable production;
and
- the international dimension — in particular
improving Community companies' access to third country markets
and exporting the regulatory approaches successfully implemented
by the Union inside the Single Market.
2.6 Thirdly, the effectiveness at a sectoral level
of "horizontal" policy instruments should be analysed:
in 2004-2005, mechanical engineering, eco-industries, the automotive
sector and non-ferrous metals will be thus analysed.
2.7 In conclusion, the Communication emphasizes that
the new Member States will face greater challenges than the existing
ones in successfully managing the process of structural change.
The priorities set out in the Communication are seen as particularly
important to maintain their, still fragile, competitiveness. The
emphasis on cohesion and the dissemination of knowledge is seen
as the key to enabling them to build sustainable comparative advantages
that will outlive the temporary advantages of low labour costs.
The sectoral approach to competitiveness will facilitate a targeted
response to the problems of industrial change, which are particularly
acute for these countries. In this way, the challenges that enlargement
is setting the Union's industrial policy can be met, and the opportunities
that it offers fully exploited. An industrial policy adapted in
this way will, the Commission says, help to put industry in the
enlarged Union, including that in the new Member States, in a
position to make a crucial contribution to achieving the objectives
set four years ago at the Lisbon European Council.
2.8 The Communication notes that the Commission intends
to present a "strategic agenda" on the future of research
in manufacturing industry in autumn 2004. It will propose measures
on future technologies, education and training, international
cooperation and the creation of an environment favourable to industrial
innovation. The Commission intends this to form the basis for
the research and innovation measures to be proposed under the
seventh R&D Framework Programme (2007-2011).
The Government's view
2.9 In her 12 May Explanatory Memorandum, the Minister
of State for Industry and the Regions, and Deputy Minister for
Women and Equality, at the Department of Trade and Industry (Jacqui
Smith) notes that the Communication
"is not setting out any new policy initiatives
at Member State level. Therefore there are no direct policy implications
for the UK. In taking forward work to improve the Industrial Competitiveness
of the EU, Member States will continue to work together through
the open method of co-ordination, to share best practice in fostering
a more competitive and enterprising regulatory framework. The
Commission will focus on improving the synergies between Community
polices to improve their impact, and continue to assess the effectiveness
of its policies in strengthening industrial competitiveness".
2.10 She points out that "the Communication
also includes several references to tax. As the UK Government
has made clear, taxation issues are a matter for Member States,
in accordance with the principle of subsidiarity". Finally,
she notes that "the Government has not launched a formal
consultation on this Communication" but "has launched
a public consultation on the shape of the next R&D Framework
Programme".
Conclusion
2.11 There could scarcely be a more important
policy area for the future prosperity and stability of the enlarged
Union. As the most recent OECD "Economic Outlook" concluded,
"there is an urgent need for large continental European countries
to better understand why they have been under-performing in comparison
with other OECD economies and to take the necessary steps to overcome
this deficiency". The Spring European Council called for
"a clear and integrated response to the competitiveness challenges
facing the Union", adding that "the incoming President
will wish to consider how to ensure the competitiveness agenda
is effectively supported". We accordingly think that it
would be timely for there to be a wider discussion and we recommend
the Communication for debate in European Standing Committee C.
5 Communication from the Commission, 'Industry Policy
in an Enlarged Europe' COM(02) 714, 11 December 2002. Back
6
Communication from the Commission, 'Some key issues in Europe's
Competitiveness - towards an integrated Approach' COM(03) 704,
21 November 2003. Back
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