8 European competitiveness report 2009
| (31207)
17185/09
+ ADDs 1-2
SEC(09) 1657
| Commission Staff Working Document: European competitiveness Report 2009
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| Legal base | —
|
| Document originated |
1 December 2009 |
| Deposited in Parliament
| 10 December 2009 |
| Department | Business, Innovation and Skills
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| Basis of consideration |
EM of 23 December 2009 |
| Previous Committee Report
| None |
| To be discussed in Council
| No date set |
| Committee's assessment |
Politically important |
| Committee's decision |
Cleared |
Background
8.1 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 2009 is set out in this lengthy
Staff Working Document, which contains an Executive Summary identifying
the key elements. These
include the possible implications of the economic downturn for
productivity, as well as a number of other determinants of future
EU competitiveness on world markets, notably the evolving characteristics
of the so-called BRIC countries (Brazil, Russia, India and China);
the role of high-skilled migration; the extent and conditions
under which training can boost productivity; and the role of product
and labour market regulations in influencing investment in Information
and Communication Technologies (ICT).
The current document
8.2 On the overall competitiveness performance
of the EU, the report states that the bursting of the large real-estate
and stock-market bubble in the US and in some European countries
has put a halt to the robust growth seen since 2006, and that
this has adversely affected consumption and, by extension, almost
all economic activity. The situation has been further exacerbated
by the financial crisis and the contraction in international trade,
the combination of these factors having resulted in a downturn
unprecedented in both magnitude and scope. The report adds that
the real long-term effects on productivity will be negative, as
firms have to freeze investment projects, whilst a contraction
in employment will cause firm-specific skills to be lost. In addition,
many firms adopt aggressive cost-saving strategies under which
innovation, and in particular R&D expenditure, are usually
targeted.
8.3 Nevertheless, the report suggests that there
may be some positive results from the recession. For example,
some firms, particularly those which rely on innovation, will
intensify such activity as a way forward in an increasingly competitive
environment, and it notes that policies which help enterprises
to invest in innovation and reap emerging market opportunities,
and which boost investment in human capital, are key to turning
challenges into opportunities. It also indicates that the strongest
positive impact on productivity comes from the momentum that a
crisis may provide for structural reforms, which explains why
the European Economic Recovery Package (EERP) is embedded within
the Lisbon Strategy for Growth and Jobs.
8.4 Finally, from a longer term perspective, the
report identifies two important features which it says stand out
in relation to sectoral trends. First, the outsourcing of services
from manufacturing has recently intensified, and partly explains
why productivity in manufacturing has grown faster than in services.
Secondly, within manufacturing, the most recent enlargements have
had a significant impact on EU industrial structure, whilst open
international trade has increased access to export markets as
well as the pressure on companies to remain internationally competitive.
8.5 On the external dimension of competitiveness,
the report states that, although the BRIC still account for a
small share of its Foreign Direct Investments (FDI), the EU is
the largest provider of such Investments in each of the BRIC countries,
and that there has been a particular emphasis on the services
sector, confirming the importance of direct investment in the
internationalisation of services. It adds that, as services are
much less tradable than goods, settling in BRICs (through FDIs)
is the main means by which EU companies can secure access to those
fast-growing markets, and it suggests that further advancing trade
relations with those countries could present tremendous opportunities
in terms of access to large and fast-growing markets and of savings
from a better global division of labour. However, it points out
that the challenges and opportunities differ for each of them.
Thus, the biggest challenges will concern manufacturing with regard
to China, services with regard to India, agriculture (including
biofuels) with regard to Brazil, and energy (especially gas) in
relations with Russia. At the same time, it suggests that manufacturing
will play an increasing role in relations with India, Brazil and
probably Russia as well, and that the outsourcing of services
will gain importance with China.
8.6 On migration, skills and productivity,
the report indicates that the capacity to build human capital,
and to attract and retain the most qualified workers, is increasingly
becoming the key factor for economic success, and it identifies
two challenges as being of a pressing character — attracting
qualified migrants, and fostering the upgrading of skill levels
in the EU. It says that, compared with other receiving countries,
the EU economies attract, on average, a relatively lower share
of the highly skilled migrants, and that increasing the selectivity
of migration regimes alone will not be sufficient to address this
situation. In particular, there is a need for increased efforts
to integrate highly skilled foreign-born workers, particularly
women, into the labour market, involving measures to improve language
skills, the mutual acceptance of professional qualifications,
and training and action to fight discriminatory practices in the
workplace. In addition, improved integration requires a more broad-based
approach backed by measures to improve social, cultural, regional
and political integration of foreign-born workers.
8.7 More generally, the report highlights the need
to ensure a higher training uptake and to improve the impact of
training on productivity. It notes that labour market systems
which promote long-term relationships between firms and workers
might have a positive impact on the accumulation of human capital,
and that, if training is to result in a sustained increase in
labour productivity, the combination of training and ICT investment
is essential.
8.8 Finally, on regulation, ICT and productivity,
the report states that, whilst empirical evidence indicates that
the flexibility of the US economy in enabling it to adapt to major
changes — such as the IT revolution — has given it
a temporary productivity advantage, the EU should start realising
enhanced IT-driven productivity growth over the next few years.
It also observes that restrictive regulatory regimes hinder ICT
investment and productivity, and that it is important to reduce
administrative burdens, introduce flexibility in the labour markets
and liberalise key sectors in the economy in order to reap the
full potential of ICT technologies.
8.9 The report concludes by stating that, if the
current crisis is used to trigger structural reforms, it can provide
an opportunity to increase productivity growth and boost competitiveness,
and that enhancing trade and investment relations with the BRICs
and reaping the emerging opportunities will play a key role. It
adds that, as well as reasserting the EU's own competitive advantages,
it will be crucial to push for improvements in regulatory frameworks
and the enforcement of laws in these countries, as well as addressing
the strong state interference, including the build-up of non-tariff
barriers to trade. Concerning the EU labour market, the priority
areas include promoting mobility, upgrading skills and matching
labour market needs.
The Government's view
8.10 In his Explanatory Memorandum of 23 December
2009, the Minister for Business, Innovation and Skills (Pat McFadden)
points out that this Communication is a background document with
no direct policy implications, but that the Commission may draw
upon it (along with other evidence) when formulating and considering
policy proposals.
Conclusion
8.11 Although these annual Competitiveness Reports
are themselves lengthy, technical and detailed, the key messages
identified by them have provided an 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, and we are accordingly clearing the document.
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