23rd Commission meeting, 16 May 2014 WORKING DOCUMENT. Commission for Economic and Social Policy INDUSTRIAL POLICY PACKAGE
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1 ECOS-V rd Commission meeting, 16 May 2014 WORKING DOCUMENT Commission for Economic and Social Policy INDUSTRIAL POLICY PACKAGE Rapporteur: Markku Markkula (FI/EPP) Member of Espoo City Council This document will be discussed at the meeting of the Commission for Economic and Social Policy to be held in Brussels from a.m. to 6 p.m. (tbc) on Friday 16 May DOCUMENT SUBMITTED FOR TRANSLATION: 10 April 2014 COR DT-TRA Rue Belliard/Belliardstraat Bruxelles/Brussel BELGIQUE/BELGIË Tel Fax Internet: EN
2 - 1 - Reference documents Communication from the European Commission For a European Industrial Renaissance, COM(2014) 14 final, and Communication from the European Commission A vision for the internal market for industrial products, COM(2014) 25
3 - 2 - I. GENERAL COMMENTS The EU's industrial base has changed and will continue to change A strong industrial base is of prime importance to Europe's competitiveness and to steady growth. The longest crisis ever experienced by the EU has underlined the importance of the real economy and strong industry. Industrial activity is a component of value chains and networks that are becoming ever wider and ever more complex, where large concerns as well as SMEs operating in different sectors and countries interconnect with each other. Industry has come to encompass much more than the traditional manufacturing sector which it is often assumed to comprise. The traditional product chain concept with its fixed phases and production factors is receding because the real picture is of complex and often globally networked ecosystems. Technologies play a key role as facilitators of new, sustainable approaches. The bio-economy offers huge opportunities. Products based on renewable raw materials are already on the market, from medicines to textiles, the construction sector and cars. The new generation of biodiesel produce at least 85% lower emissions than fossil fuels. Mobile networks are more prevalent in cars, consumer electronics, industrial production and healthcare than in people's everyday activities. A modern machine tool company has more than ten times as many computers and network devices than an office environment. Industry links equipment supply and maintenance, production materials, detailed and general control and maintenance, subcontractor and customer chains and logistics. Digitalisation is critical. Data needed to optimise the system as a whole are transmitted in real time via wireless LAN to the regional network and from there to the global cloud service. Data move and are processed both between machines and between people and processes, covering the entire business network. The nature of traditional industry has in many ways changed and it has become more of a service activity. As a collaborative effort between many mainly independent players, networked activity requires data management: data modelling for systems, as well as open innovation and cooperative activity, with benefits for all concerned. Industry accounts for over 80% of Europe s exports and 80% of private research and innovation. Nearly one in four private sector jobs is in industry, often requiring a high level of professional skills. Every new job in manufacturing results in jobs in other sectors. Industrial products and services complement each other. Services represent about 40% of the value added in European manufacturing exports. About a third of the jobs generated by these exports are located in companies that supply the exporters of goods with auxiliary services. Services such as
4 - 3 - maintenance and training are crucial elements in the delivery of complex manufactured products. Expert services such as financing, communications, insurance and Knowledge-Intensive Business Services (KIBS) are playing an increasing role in the production of manufactured goods. This is one of several explanations for the increasing contribution of services to the overall output of an economy. Globalisation and the economic crisis have had a serious impact on EU industry: since 2008 a total of 3.5 million jobs have been lost in manufacturing, and EU productivity continues to weaken. There are nevertheless major differences between individual Member States. COMMISSION PROPOSAL The Commission communication urges the Member States to recognise the key role played by industry in efforts to strengthen Europe's competitiveness and sustainable growth. An industrial strategy cannot be put into practice as a stand-alone policy, as it has numerous interactions with many other policy areas. The Commission considers that the following priorities should be pursued to support the competitiveness of European industry: continue deepening the mainstreaming of industrial competitiveness in other policy areas to sustain the competitiveness of the EU economy, given the importance of the contribution of industrial competitiveness to the overall competitiveness performance of the EU; for instance, particular attention must be paid to increasing productivity in business services to increase industrial competitiveness and the competitiveness of the EU economy in general; maximising the potential of the internal market by developing the necessary infrastructures, offering a stable, simplified and predictable regulatory framework favourable for entrepreneurship and innovation, integrating capital markets, improving the possibilities for training and mobility for citizens and completing the internal market for services as a major contributing factor to industrial competitiveness; decisively implementing the instruments of regional development with national and EU instruments in support of innovation, skills, and entrepreneurship to deliver industrial change and boost the competitiveness of the EU economy; to encourage investment, businesses require access to critical inputs, and in particular energy and raw materials, at affordable prices that reflect international cost conditions. The design and implementation of policy instruments for different objectives both at EU and national levels must not result in price distortions that imply disproportionately higher relative prices for these inputs. Action should also be taken in the internal market and at international level to ensure the adequate provision of these inputs, as well as to increase energy and resource efficiency and to reduce waste; the utmost must be done to facilitate the integration of EU firms in global value chains to boost their competitiveness and ensure access to global markets on more favourable competitive conditions;
5 - 4 - finally, the objective of revitalisation of the EU economy calls for the endorsement of the reindustrialisation efforts in line with the Commission s aspiration of raising the contribution of industry to GDP to as much as 20% by EUROPEAN COUNCIL DECISION On 20 and 21 March 2014, the European Council discussed industrial competitiveness as a driver for economic growth and jobs, and it emphasised the link between the Europe 2020 strategy, industrial competitiveness and climate and energy policies. A coherent European energy and climate policy must ensure affordable energy prices, industrial competitiveness, security of supply and achievement of our climate and environmental objectives. Special attention should be paid to the role of cleantech as a cross-cutting element for enhancing the competitiveness of industry. The European Council noted that key enabling technologies (KETs) are of crucial importance for industrial competitiveness. From the point of view of industry, such technologies would include for instance batteries for electrical vehicles, smart materials, high-performance production and industrial bio-processes. These should be consolidated by defining projects of European interest as soon as possible. The European Council urged the Commission and the Member States to address shortages in the area of science, technology, engineering and mathematics (STEM skills) as a matter of priority, with the increased involvement of industry. The European Council emphasised that all available instruments, such as EU structural and investment funds, should be used to achieve the objectives. The Council intends to revisit these questions in March 2015 with the mid-term review of the Europe 2020 strategy. II. COR PRELIMINARY ANALYSIS AND RECOMMENDATIONS BUSINESS ENVIRONMENT The global competitive environment has changed fundamentally and it is necessary not just to adapt to the situation but also to become a motor of change in many respects. The long-term global competitiveness of EU business needs to be given greater weight when evaluating existing EU regulation and deciding how to target RDI funding. EU legislation on industrial products lays down the main requirements for companies in respect of safety, health and other matters of public interest. It is particularly important that industry should not be excessively burdened with pointlessly frequent regulatory changes. Controlled dismantling of regulatory barriers is important as technology develops ever more rapidly and global supply chains become even more interconnected.
6 - 5 - The Commission has promised to ensure that regulation is stable over the long term and that rules are substantially simplified. Thorough impact assessments should be carried out of new rules. EU standards serve in practice as a model throughout the world, and the Commission continues to promote a system of international standards. European companies should improve their innovation capacity and become key players within continually expanding networked value chains. Competition conditions are not even across global markets and unfair conditions are imposed on European companies operating in key emerging markets. Updated state aid rules will come into effect in June Facilitating the implementation of EU structural and investment funds by extending the scope of application of the General Block Exemption Regulation in particular represents a significant improvement. RDI ACTIVITY AND SKILLS Europe s competitive advantage in the world economy lies in sustainable, high value-added goods and services, the effective management of value chains and access to markets throughout the world. The steep fall in investment in innovation during the economic crisis has become a serious threat to Europe's future. The public sector must develop more effective ways of promoting investment and innovation at EU, Member State and regional level. The EU patent system must also come into operation. To support and promote competitiveness it must be possible to make full use of EU instruments such as Horizon 2020, the Connecting Europe Facility, European structural and investment funds, and the Competitiveness of Enterprises and SMEs programme (COSME). National instruments must also be deployed, notably market-based and other innovative funding instruments. The new funding priorities agreed on by the Commission and the European Investment Bank provide a significant opportunity for leading-edge companies to invest in KET technologies. Skills mismatches and training issues will be a key challenge for EU industry in the coming years, especially as progress in manufacturing technologies will increase demand for specific skill and training sets. RECOMMENDATIONS BASED ON COR OPINIONS The Committee of the Regions has consistently emphasised the importance of industrial policy in previous opinions, and pressed for structural reform and an improvement in the responsiveness of industry in the competitive environment created by globalisation and digitalisation. These recommendations are also tied to measures to raise the level of skills, and to lifecycle thinking that emphasises overall impact and climate change targets.
7 - 6 - In previous opinions adopted on industrial policy, the Committee of the Regions: a. underlines that industrial policy needs to be one of the pillars of the European venture, treated as a genuine political priority on the same political footing as cohesion, infrastructure and agriculture 1 ; b. calls for structural reform to help adapt to the sweeping changes affecting the business environment that require a new model of competition policy to be adopted at global level. Technological and information and communications technology skills, as well as the transition to a low-carbon economy, are critically important alongside the rise of new emerging countries 2. c. points out that a comprehensive approach above all creates great opportunities to develop new sustainable materials and helps meet the CO 2 targets enshrined in the EU 2020 strategy. The CoR notes that a consistent lifecycle approach already starts in the product [the word "car" is used in the original opinion] design phase. This also covers environmentally relevant effects in the production process, as well as the operational phase and, finally, recycling and/or processing for subsequent re-use as well 3 ; d. notes that internationally successful products be they products in the strict sense, or systems, services or broader operational frameworks are the result of world-class expertise based on value chains and ecosystems. Horizon 2020 needs to be able to create the conditions for functional innovation chains; only then will it be possible to respond to major societal challenges and the need for industrial regeneration 4 ; e. notes that the strategic areas on which the Commission is quite rightly focusing could completely change both patterns of consumption and production management, industryservice-sector divisions and the division between sectors and areas of activity as they are now, and ultimately how European industrial output is networked. The Committee proposes that forward-looking management of skills and change should be viewed as a crucial component of industrial strategy at every level 5 ; f. emphasises the role of key enabling technologies in Horizon Technologies should not only be developed in separate science and technology programmes; rather, they should be linked as early as the R&D stage to industrial value chains and global innovation value CdR 2255/2012 fin. CdR 374/2010 fin. CdR 1997/2013 fin. CdR 402/2011 fin. CdR 2255/2012 fin.
8 - 7 - networks, and to activities that develop regional ecosystems and innovation clusters and strengthen expertise 6. Complementing these recommendations, the Committee of the Regions: a. notes that industrial policy should be recognised as a key priority when developing the sustainable competitiveness of the EU and responding to societal challenges; b. supports the Commission's objectives in relation to re-industrialisation and job creation, in particular that of raising the contribution of manufacturing to EU GDP to 20% by 2020; c. points out that a stable and predictable regulatory environment is a prerequisite for investment in industry to take place in the EU. This stability and predictability must be achieved both at local and regional level, and at national and EU level; d. emphasises the importance of the Horizon 2020 programme in strengthening the industrial competitiveness of the EU; industrial policy objectives should be substantially incorporated into the Horizon 2020 work programmes, especially in pillars 2 and 3; e. urges regions to evaluate the need for technologies to promote the intended development in their own smart specialisation strategies (RIS3) and to make the necessary measures to promote industrial policy a key funding priority. Based on these recommendations and the feedback on this working document, the idea is for the actual opinion to propose measures fleshing out the communications. III. SUMMARY AND QUESTIONS As well as businesses, the Member States and regions will play a central role in implementing the Commission's proposals. What measures have been implemented or are planned for example to incorporate advanced materials, nanotechnology, micro- and nanoelectronics, biotechnology or photonics into existing industrial processes? The regional smart specialisation strategies (RIS3) are critically important. What new cooperation and investment mechanisms have been established at EU and regional level to accelerate the revitalisation of industrial policy? The regions should focus on creating efficient innovation ecosystems and joint European projects for them. How can these be used as an instrument to promote growth and create jobs? 6 CdR 402/2010 fin.
9 - 8 - It is important for local rules governing participation and funding to allow the involvement of key players involved in innovation and effective networking at EU level. Measures, rules and guidelines of the Member States and local authorities are crucial. Have obstacles or good ideas been flagged up in relation to the development objectives? What approach has been adopted here? The capacity of the public sector in particular to manage innovation must be increased in the regions. How is cohesion funding planned with a view to achieving this? How is this evident in the RIS3 strategies? Measures of the Member States and local authorities should not be limited to local or isolated industrial sectors, but should promote cross-sectoral and interregional cooperation and innovation. Industrial value-added chains reaching for instance from raw material procurement all the way to business services and logistics, as well as links with research institutes, universities and other education centres, must be properly integrated into industrial policy activity in the regions and at EU level. How does Horizon 2020 promote this and what new funding practices have the various Commission directorates-general adopted or are they planning in order to increase cooperation between the regions and top-level research? COR DT-TRA
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