11 European Competitiveness Report 2006
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15669/06
COM(06) 697
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| Commission Communication: Economic Reforms and Competitiveness: key messages from the European Competitiveness Report
Commission Staff Working document — European Competitiveness Report 2006
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| Legal base | — |
| Document originated | 14 November 2006
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| Deposited in Parliament | 24 November 2006
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| Department | Trade and Industry
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| Basis of consideration | EM of 14 December 2006
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 In recent years, the Commission has produced an annual European
Competitiveness Report, which seeks to provide an analytical contribution
to discussions on ways of achieving the objectives contained in
the Lisbon Strategy. The Report for 2006 is set out in a lengthy
Staff Working document, which is accompanied by a Communication
from the Commission which identifies the key messages to be drawn
from it.
The current document
11.2 After providing definitions[36]
of "competitiveness", both generally and in relation
to specific industries, the Communication begins with a review
of recent developments concerning growth, productivity and employment
in Europe. It notes that, whilst the growth in per capita GDP
in the Community of 25 has in the last decade been relatively
low, more recent developments point to an acceleration in economic
growth from 1.7% in 2005 to 2.8% in 2006. However, it also notes
that, whilst employment rates have risen slightly, this has not
been sufficient in many Member States to meet the Lisbon targets,
and that increases in labour productivity have remained extremely
modest.
11.3 The Communication then goes on to address various
aspects relating to three of the four priority actions of the
reform agenda put forward by the European Council in spring 2006
— knowledge and innovation, unlocking the business potential,
and achieving an efficient and integrated energy policy. The aspects
in question are:
— Liberalisation
of the energy market
The Communication suggests that the introduction
of competition since the early 1990s has generally resulted in
more cost effective provision of energy, but that incumbents continue
to have a strong grip on production, imports and key infrastructure.
It therefore suggests that the allocation of rights and responsibilities
of market players needs to be clarified, with a stronger role
for regulators, and more being done to speed up unbundling, to
develop further liquid wholesale markets, and to put in place
mechanisms to improve transparency. In addition, it highlights
the shift which has occurred in the emphasis of research and development
spending towards efficiency improvement since liberalisation,
and says that it may be necessary to encourage an increase in
fundamental (public interest) energy research. The Commission
also notes that, in general, energy liberalisation is compatible
with environmental objectives, with potential increases in consumption
resulting from lower prices being offset by greater fuel efficiency.
— Better
regulation
The Communication underlines the importance of this
initiative, and the high level of political commitment to it across
the Community, which it says is reflected in the National Reform
Programmes adopted by Member States in 2005. However, it also
comments that actual improvements on the ground remain patchy,
and that some Member States have yet to introduce systems for
measuring the impact of new regulations. The Commission concludes
that much work remains to be done to embed better regulation practices
across the Community, and that, although there has been some progress,
there has yet to be a substantial reduction in the administrative
burdens affecting businesses.
— Financing
of innovation
The Communication highlights the policy measures
needed to deal with this issue, and notes the variety of tools
used by different Member States, including grants, loans and fiscal
incentives. It also mentions the growing importance of a robust
venture capital industry, but notes that a market for cross-border
venture capital remains undeveloped, and it discusses the possibility
of stimulating the provision of venture capital through mutual
learning and the exchange of best practice. It also suggests that
more effort should be directed towards facilitating the provision
of cross-border venture capital and the debt financing of innovative
projects.
— Developing
lead markets
The Communication notes that the intention behind
this concept is to identify sectors which have the potential to
drive forward innovation, but which are currently held back by
excessive regulation or other structural factors, the idea being
to develop a range of supply and demand side policies, which could
help these sectors to achieve their potential, and thus lead to
the emergence of new, innovation-friendly markets. The Commission
notes its recent Communication on innovation, and says that it
now intends to launch pilot lead markets in 2007, as a prelude
to developing a comprehensive strategy in this area.
11.4 In addition, the Communication contains an analysis
of two significant high technology sectors — information
and communication technology (ICT) and the pharmaceutical industry.
In the former case, it concludes that markets tend to evolve very
quickly, with innovation being a primary factor for longer-term
competitiveness, and that better regulation and an effective array
of innovation policies will be key to its continued success. As
regards pharmaceuticals, it notes that, whilst the Community industry
is growing, there continues to be a substantial gap vis-a-vis
the United States, with the latter enjoying in particular a significant
advantage in labour productivity. In addition, the US market for
pharmaceuticals tends to be both more dynamic and more concentrated
than that in the Community, which in turn helps to drive innovation.
The Commission notes that the Community's relatively weak performance
in this area was due to a lack of reform in labour and capital
markets, education systems, public spending and market regulation,
and it has set up the EU Pharmaceutical Forum to address some
of the more pressing issues facing the industry.
The Government's view
11.5 In his Explanatory Memorandum of 14 December
2006, the Minister of State for Trade, Investment and Foreign
Affairs at the Department of Trade and Industry (Mr Ian McCartney)
simply says that this is a factual document with no direct policy
implications, and that no specific action is envisaged as a result
of it. However, he adds that the Commission may draw on the document,
along with other evidence, when formulating and considering policy
proposals.
Conclusion
11.6 These annual Competitiveness Reports have
provided a useful input to discussions on the Lisbon Strategy,
and consequently we (and our predecessors) have tended to draw
them to the attention of the House. We are therefore doing so
again on this occasion, but we see no need for any further consideration
by the House, and we are accordingly clearing the document.
36 Generally speaking, competitiveness is defined as
a sustained rise in the standard of living of a nation or region,
with involuntary unemployment remaining as low as possible: in
the case of an industry, the term is understood as maintaining
and improving its position on the global market. Back
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