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MEMO/02/265

Brussels, 25th November 2002

Competitiveness Council, Brussels, November 26, 2002

The Competitiveness Council will meet in Brussels on 26 November 2002. The Commission will be represented by Commissioners Erkki Liikanen (Enterprise and Information Society), Philippe Busquin (Research) and Mario Monti (Competition).

Competitiveness Commission communication on a Better environment for enterprises (PH)

The Council will discuss the key results of the Communication Better environment for enterprises which was adopted on 7 November (see IP/02/1674).

The Communication describes the main results of the Commission staff working papers "Benchmarking Enterprise Policy: Results from the 2002 Scoreboard", "Quantitative targets in Enterprise Policy". The Communication also refers to the results of various benchmarking projects (Best projects) presented in the Commission staff working paper "Highlights of the results of the Best Procedure projects 2001-2002".

The presentation will be followed by an exchange of view focusing on the quantitative targets initiative.

The Council is expected to adopt Council conclusions focusing on Quantitative Targets and based on the Commission's communication.

Sustainable Development (including a sub-point on Chemicals) (PH)

This point is based on the conclusions of the Industry Council of June which state that the Council should undertake "to evaluate on a regular basis whether the balance between the three pillars of sustainable development is maintained, in particular in terms of ensuring the competitiveness of European enterprises, and to draw appropriate conclusions in relation to any corrective action required".

    Sustainable development and the contribution of Enterprise policy (PH)

    The Commission will first make some comments on the current situation and will focus on three main points: sustainable development remains high on the political agenda for business; Johannesburg world summit showed the positive effects of a proactive approach by industry; the deteriorating economic and industrial situation in the European Union makes it urgent to pay attention to EU competitiveness and jobs. The Commission will then inform ministers about a series of important decisions that have been taken and in particular the Better Regulation Package and the Communication on environmental voluntary agreements.

    The Commission will draw the attention of ministers to the two proposals currently under discussion in the Council which are the Emissions trading and the Environmental Liability Directives. The Commission will also mention the follow up to the Green paper on Integrated Product Policy, the preparation of the two thematic strategies on resource use and recycling and the preparation of an Action Plan for environmental technologies.

    All the current and expected initiatives show the Commission's intention to further strengthen the contribution of enterprise policy to sustainable development.

    The forthcoming Communication on industrial policy will clearly emphasise the need for a sustainable production policy.

    State of play of the Chemicals legislation (PH)

    The Commission will inform ministers about the next steps in the development of the new chemicals policy, in particular concerning the timetable for implementation, consultation with stakeholders, and the second phase of the business impact assessment. The Commission will stress that what must be avoided is ending up with a highly bureaucratic, resource intensive, slow-moving system, which will discourage innovation and investment in Europe. It is anticipated that the Competitiveness Council will pass on a clear message as to the importance of its involvement in the decisions on the new chemicals policy at Community level to ensure that, in real terms, the sustainable development objective can be translated into reality.

Biotechnology Strategy and action plan (PH, FF)

The Council is expected to adopt conclusions, a road-map of actions ahead, providing for specific measures, priorities, an indication of responsibilities and a timetable for implementation based on the European Commission's action plan. The Council is expected to take a strategic view on the plan, which will mark a starting point for a process and framework of co-operation in all the main areas needed for responsible development of biotechnology in Europe.

Within the €17.5 billion 6th EU Research Framework Programme (FP6 2003-2006), the Commission will devote €2.225 billion to life sciences and biotechnology. Biotech applications include health care, agriculture and foodstuffs, industrial products such as new materials and bio-plastics, and clean technologies, for instance based on enzymes.

Biotech policies have to be based on sound scientific evidence, via an open and democratic debate. This is a key sector for science and economic growth: if Europe stands on the sidelines and does not take the necessary steps, it risks losing an important opportunity. The biotechnology action plan aims at strengthening the biotech science base, networking Europe's biotechnology players, screening biotech impact on health and the environment, fostering responsible governance and public dialogue, as well as allowing EU citizens and consumers to make informed choices.

Other key issues to be addressed include human resources: Europe is lacking skilled researchers and entrepreneurs in the biotech field. Access to finance is also a problem for biotech start-ups and innovative SMEs: they need risk and venture capital that is not always available in Europe. Intellectual property rights are also instrumental for the growth of the sector in Europe.

Background:

In line with the conclusions of the European Council in Stockholm which recognised the contribution of biotechnology to the achievement of European competitiveness objectives, the Commission adopted a Communication on "Life Sciences and Biotechnology: a strategy for Europe" in January 2002, including a comprehensive 30-point action plan. The Communication is based on an analysis of the strengths and weaknesses of the biotechnology sector in Europe and a comprehensive consultation with a broad variety of stakeholders' views. The European Council in Barcelona invited the Commission and the Council to develop measures and a timetable to make it possible for European enterprises to make the most of the potential of biotechnology.

The Danish Presidency foresees the adoption of comprehensive conclusions that group together the main actions for the responsible development of biotechnology.

The conclusions are expected to state that the potential offered by life sciences and biotechnology in areas such as healthcare, agriculture and food, industrial products and processes and environmental protection should be continuously assessed as regards benefits and risks. The EU should also keep a close eye on economic, social and environmental consequences and ethical aspects. The development of a competitive biotechnology industry in the EU requires a comprehensive and co-ordinated policy approach covering all major areas of biotechnology application.

There should also be a strengthening of the value creation chain (human and financial resources, transposition of ideas from research to the market, networks and clusters, pro-active role of administrations).

Responsible governance (participation of society, regulatory framework, and international and development co-operation) should also be ensured.

The adoption of these comprehensive conclusions will establish an important framework for co-operation between the Commission and the Member States in the implementation of the strategy.

The European Research Area (FF)

The Council will hold an exchange of views, on the basis of the Commission's communication, "The European Research Area: Providing new momentum - Strengthening, reorienting, opening up new perspectives", and will be called on to adopt conclusions on the subject.

The draft conclusions reaffirm the importance for the Member States and the EU of co-ordinating their research and development (R&D) activities so as to ensure that national and EU R&D policies are consistent.

According to the Commission's Communication, Europe's below-par performance in R&D is due to insufficient investment in research, both public and private, a reduced innovation and technology transfer capacity and weak co-ordination of research efforts at EU and national level. This is why Europe needs a European Research Area, a true internal market for science and knowledge. Endorsed by European Heads of State and Government at the March 2000 Lisbon European Council, the project is now well underway, but many aspects need further evaluation.

The European Research Area initiative has already achieved set results such as the benchmarking of national research policies on the basis of twenty indicators, and the inauguration of a European network of mobility and assistance centres for researchers, to be created at the beginning of 2003.

The 6th EU Research Framework Programme (FP6 2003-2006) is also specifically designed to help bring about a European Research Area, particularly through its new funding instruments such as large Networks of Excellence and Integrated Projects. FP6 will also step up action in infrastructures and mobility, and will support initiatives aimed at the networking of national research activities.

To push the European Research Area project further forward, the Commission recommends enhancing co-ordination between national research policies. To this end, it proposes that common objectives should be determined and translated into specific objectives for each country by high-level representatives of EU Member States. Annual national progress reports should also be presented.

The Commission also proposes to step up ongoing activities, for instance, by putting forward measures designed to help researchers from third countries arrive and stay in Europe, as well as issuing guidelines concerning their career development.

More research for Europe towards 3% of EU GDP (FF)

The Commission will present its Communication: "More research for Europe: Towards 3% of GDP", and the Council will hold an exchange of views on the basis of a Presidency note.

The Communication is part of the process established by the European Council at Lisbon in March 2000 to turn Europe into the most competitive knowledge-based economy in the world by 2010. It takes stock of progress so far after the March 2002 Barcelona European Council called on the EU to raise its research spending to 3% of EU gross domestic product (GDP), up from 1.9% today.

Japan has already achieved the 3% level, with R&D expenditure accounting for 2.98% of its GDP in 2000, and the USA is coming closer (with a figure of 2.69% in 2000 which has been constantly rising since 1995). In the USA, €288 billion was spent on R&D in 2000, but only €164 billion in the EU. It is a gap that is also widening.

The Communication identifies framework conditions that need to be addressed in a consistent way. These include:

  • supply of high quality human resources

  • a strong public research base with upgraded links to industry

  • a dynamic entrepreneurship culture

  • appropriate systems for intellectual property rights

  • a competitive environment with research and innovation-friendly regulations and competition rules

  • supportive financial markets, macro-economic stability and favourable fiscal conditions.

Financial incentives for private R&D and technology-based innovation could also be used in more consistent and effective ways. In this regard, public authorities can use a range of financing instruments, in particular direct support measures, fiscal incentives, guarantee schemes and public support for risk capital. A better mix of these instruments is required.

Antitrust Reform (TL)

The Council is ecpected to adopt the proposal on antitrust reform. This reform will fundamentally simplify the way in which the Treaty's antitrust rules are enforced in the European Union. The new Regulation will govern the procedures of how the rules on restrictive agreements (Article 81 of the Treaty) and abuses of a dominant position (Article 82 of the Treaty) are enforced. The new Regulation abolishes the need for prior notification of a number of agreements in order to obtain an individual antitrust exemption. Instead, the provisions governing antitrust exemptions are rendered directly applicable in national law. Direct applicability allows the Commission, the national competition authorities and the national courts to apply the rules governing antitrust exemption. In order to ensure uniform application of competition rules, the Commission and the competent national authorities will co-operate closely in the newly established European Competition Network (ECN).

Background

In 1999, the European Commission adopted a White Paper on the reform of its 40-year old antitrust rules. The proposed reform concerns the modernisation of the procedural rules which govern how the EU Treaty's provisions on agreements between undertakings which may restrict competition, such as cartels (Article 81 of the EC Treaty) and abuses of a dominant position (Article 82 of the Treaty) are enforced. The reform has become necessary in order to allow for a direct application of EU competition rules in an enlarged European Union. The proposal is the most comprehensive overhaul of the EU's antitrust procedures as set out in the so-called Regulation 17 of 1962. The reform concerns the procedural rules and does not alter the substantive content of Articles 81 and 82 of the EC Treaty.

Following a extensive consultation of the business and legal communities, as well as national governments and competition authorities, the Commission, in September 2000, proposed a far-reaching reform of how the antitrust rules are to be enforced in an enlarged European Union. The reforms, which received strong support from the European Parliament, have been discussed for two years in the Council.

The core features of the reform are:

    abolishing the system of notification of all agreements between undertakings within the scope of Article 81(1) of the EC Treaty in order to obtain individual antitrust exemption according to Article 81(3) of the EC Treaty;

    making the exemption provisions of Article 81(3) directly applicable in national law, thus allowing the Commission, the national competition authorities and national courts to apply the antitrust exemption as set forth in Article 81(3). All enforcement bodies involved will closely co-operate in applying the antitrust exemption.

The reform of Regulation 17 must be distinguished from the upcoming reform of the rules governing merger control. Mergers of Community dimension as defined in the applicable Merger Regulation must still be notified to the Commission prior to their implementation.

    Rationale for the Reform (TL)

    The requirement of notification and individual exemption under Article 81(3) of the EC Treaty was appropriate in 1962 when there were only six Member States and experience in the application of antitrust law governing agreements between undertakings was sparse. During the last forty years, many individual decisions have been taken applying the exemption criteria of Article 81(3) of the Treaty. National competition authorities and national courts are therefore well aware of the conditions under which antitrust exemptions can be granted. Individual exemptions taken by the European Commission are thus no longer indispensable to ensure a uniform application of Article 81(3) of the Treaty. In addition, a system of individual notification of all agreements between undertakings which may affect competition is no longer workable as the EU prepares to take in 10 new members.

    The kind of agreements typically notified under art 81 concern either horizontal agreements, such as those cleared this week by the Commission between manufacturers of mobile phone equipment companies for the licensing of patents (see IP/02/1651 on 3G patents), or vertical arrangements, such as distribution or franchise agreements.

    Less bureaucracy, direct enforcement (TL)

    The main goal of the proposed reform is to eliminate the notification requirement and the complex procedure necessary to obtain individual antitrust exemption. The old notification system will be replaced by a system of direct application of the exemption by the Commission, but also by the national competition authorities and courts. This will strengthen the enforcement of competition rules as they will be applied by several enforcement bodies.

    All enforcement bodies will co-operate closely in applying the exemption criteria within the framework of the European Competition Network. The uniform application of competition rules throughout the European Union will thus be ensured.

    How will decentralised enforcement work in practice (TL)

    In 2003, the Commission will create a network of competition authorities, called the European Competition Network (ECN), which will be a central plank of the new enforcement system. It will allow for greater co-operation between the Commission and the national competition authorities and it will provide for an allocation of such cases according to the principle of the best-placed authority. As a guardian of the Treaty the Commission will have a special responsibility in that network.

    The Commission will also adopt during the course of the next year a number of Notices and Guidelines explaining or clarifying how certain concepts must be understood with a view to provide general guidance and legal certainty for businesses. These will include guidelines to help companies decide to which authority they should go, for example to file a complaint. Both the notices plus Guidelines will be very valuable to both companies, in terms of saving time and resources, and to the Network for the allocation of cases.

Community Patent

The Council is due to try to adopt procedural conclusions concerning the proposed Community Patent, after its failure to do so at the 14th November Competitiveness Council. However, the Commission considers that the focus of the Council's attention should rather be on resolving the major outstanding difficulty concerning the proposal, namely the establishment of a system of Community courts to rule on patent disputes, rather than further procedural conclusions. Under the Spanish Presidency, the Council had already reached a working arrangement on the basis for compromise on other aspects such as languages, cost and the central role of Munich-based European Patent Office (EPO established under the 1972 European Patent Convention) (see MEMO/02/99).

The proposed Community Patent would give inventors the option of obtaining a single patent legally valid throughout the European Union (see MEMO/01/451, IP/00/714 and MEMO/00/41). The proposal was recognised by the March 2000 Lisbon European Council as a vital element in making Europe the most competitive economy in the world by 2010 by encouraging EU firms to invest in innovatory technologies. Currently, a typical patent valid in eight Member States costs three to five as much as Japanese or US patents.

Internal Market Commissioner Frits Bolkestein underlined at the 14th November Council that the Commission cannot accept that the proposed central and specialised EU jurisdiction should be watered down. This is because the Commission is determined that companies using the Community Patent should not have to run the risk of potential legal action before courts in each and every Member State which could adopt divergent interpretations of disputed patents. Speaking after the 14th November Council, Mr Bolkestein warned that "Europe's companies are crying out for access to pan-European patent protection at reasonable cost with minimum red-tape and maximum legal certainty. The failure to agree on the Community Patent undermines the credibility of the whole enterprise to make Europe the most competitive economy in the world by 2010."

Research to combat AIDS, malaria and tuberculosis (FF)

The Council will hold an exchange of views on the proposal for a Decision on EU participation in a research programme aimed at developing new clinical trials to combat poverty-related diseases such as HIV/AIDS, malaria and tuberculosis. This European and Developing Countries Clinical Trials Partnership (EDCTP) brings together EU Member States plus Norway, developing countries and industry in a joint effort. The exchange of views will focus in particular on the structural organisation and management required for carrying out the programme.

The proposal is based on article 169 of the Treaty (qualified majority voting in the Council; co-decision with the Parliament). Article 169 has never been used before and it allows for joint research programmes between the EU and Member States. This aims to foster co-ordination, avoid overlapping and waste of resources and achieve critical mass at European level, in line with the spirit of the European Research Area.

The vicious circle of disease and poverty is causing a fundamental public health and economic crisis in developing countries, particularly in Sub-Saharan Africa. The Commission will support the initiative with €200 million. A further €200 million worth of activities stem from participating countries' national clinical research programmes that are brought together under a common objective. The remaining €200 million will be acquired from other donors and industry.

The EDCTP programme foresees:

  • support for clinical trials in public-private partnerships of new drugs and vaccine candidates that urgently await clinical testing.

  • joint European and African management facilities

  • measures for improved networking of European clinical research programmes

  • support for clinical research capacities in developing countries

  • a training scheme for local researchers and clinicians that will strengthen the locally available human resources to guarantee the long-term sustainability of the EDCTP programme

Given the different degrees of progress and taking into account the long development times for drugs and vaccines, first results for malaria drugs should be available in 3-5 years and for vaccines for some diseases in 5-10 years.

Proposal for a Directive of the European Parliament and of the Council on measuring instruments (PH)

The Commission submitted its proposal on 15 September 2000. The European Parliament has delivered its Opinion at first reading on 3 July 2001. The Commission has submitted an amended proposal on 6 February 2002. The Presidency will outline a progress report on this issue. A common position is envisaged under the Greek presidency.

Shipbuilding (PH)

The Commission will present the key results of the 6th report on the situation in world shipbuidling which was adopted on 13 November (see IP/02/1661). The report puts forward the serious difficulties in world shipbuilding as evidenced by a slump in orders for new vessels in the major shipbuilding regions in the first six months of 2002. The report notes that, due to past over-supply, slowing economies around the world and the effects of 11 September, orders have fallen significantly. As a result, shipyards are running out of work and a number of bankruptcies and layoffs have already occurred, mainly in Europe. In this shrinking market, European shipyards are also threatened by unfair pricing by certain competitors.

The Commission will recapitulate the approach which has been chosen regarding the distortion of competition in the shipbuilding market (alleged unfair Korean business practices led to a request for dispute settlement with the WTO since an amicable agreement with South Korea was not possible. A temporary defensive mechanism has been brought into force and aid could be authorised for certain market segments and for a limited period).

Information points under "any other business"

    STAR 21 report (PH)

    Following its publication in July this year (see IP/02/1059), the final report of the high-level European advisory group on Aerospace - the STAR 21 report (Strategic aerospace review for the 21st Century), was sent to the ministers concerned in the Member States. The Commission will inform ministers about the results of the group's work and will invite Member states to take a position on STAR 21 recommendations. The Commission will also inform ministers of its intention to further develop some of the key STAR21 themes in a forthcoming Communication on aerospace and defence.

    G10 Medicines report (PH)

    The Commission will give an oral presentation on the follow up of the G10 Medicines report published on 7 May 2002 in which the G10 Medicines group presented a framework of 14 Recommendations covering benchmarking, competitiveness, enlargement, stimulating innovation and patents ; see

    http://pharmacos.eudra.org/

    The Commission will respond to the Report in the form of a Communication to be adopted in the first half of 2003. The primary objective of the Communication will be to set out a way of implementing the recommendations in such a way that the Report's delicate balance between competitiveness and health objectives is maintained. It will also seek a way forward that can allow for concrete measures to be taken at an EU level while fully respecting national competence.


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