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European Commission

MEMO

Brussels, 22 January 2014

Member States need to act to boost European industry

A strong European industry is necessary for fostering growth and competitiveness to sustain the current incipient economic recovery. Therefore the Commission submits to the consideration of the European Council a series of priorities to support the competitiveness of European industry. Today's communication “For a European Renaissance” is the European Commission’s contribution to the 2014 European Council debate on industrial policy.

EU industry in figures

Overall, EU industry has proved its resilience in the face of the economic crisis: it is a world-leader in sustainability and returns a €365 billion surplus in the trade of manufactured products (€1 billion per day) generated mainly by a few high-end medium technology sectors, such as automotive, machinery and equipment, pharmaceuticals, chemicals, aeronautics, space, creative industries and high-quality goods in many other sectors, including food. Nonetheless, the legacy of the crisis is severe: 3.5 million jobs have been lost since 2008, the share of manufacturing in GDP fell from 15.4% to 15.1% last year, and the EU’s productivity performance is deteriorating in comparison to our competitors (IP/12/1085).

Main challenges of EU industry

Two recent Commission reports have identified a number of weaknesses hampering growth:

  • Internal demand remains weak, undermining European companies’ home base and keeping intra-EU trade subdued after the crisis.

  • The business environment has improved in the EU overall and particularly in some Member States, yet progress remains uneven: inflexible administrative and regulatory environments, rigidities in some labour markets and weak integration in the internal market continue to hold back the growth potential of firms, especially SMEs.

  • Innovation and investment levels remain low holding back the modernisation of our industrial base, but without technological progress EU competitiveness will be hampered.

  • EU firms face higher energy prices than most of our leading competitors and difficulties accessing affordable materials, qualified labour and capital (IP/13/862).

To deal with this situation, the Commission has been pursuing an integrated industrial policy approach as outlined in the Industrial Policy Communications of 2010 and 2012.

Key priorities

As a contribution to the European Council debate of March on industrial policy, this Communication sets out the Commission’s key priorities to boost EU competitiveness. It draws on the Annual Growth Survey, provides an overview of actions already undertaken and puts forward selected new actions to speed up the attainment of these priorities. In this process of implementation of reforms to improve competitiveness, Member States will play a central role.

Key priorities are as follows:

1. Mainstreaming to ensure EU reindustrialisation

Industry’s interactions with the rest of Europe’s economic fabric extend far beyond manufacturing, spanning upstream to raw materials and energy and downstream to business services and consumer services. Industrial activities are integrated in increasingly rich and complex value chains, linking flagship corporations and small or medium enterprises across sectors and countries.

To be able to reindustrialize Europe by increasing manufacturing’s share of GDP to 20% by 2020, Europe needs to mainstream its competitiveness. Thus, all policy areas having an impact on competitiveness should take its aspects into account. This ensures industrial competitiveness is put at the centre of policy making and Member States are also called upon to adopt the same approach.

Achieving an effective implementation of well-coordinated and consistent industrial policies at regional, national and EU-level is critical to delivering industrial change in the EU, to ensure our future competitiveness and to increase our growth potential.

From 2014, the ‘Report on Member States’ Competitiveness Performance and Policy’ under Article 173 TFEU will be strengthened to evaluate and clearly link the impact of improvements in the business environment on the progress in Member States’ actual competitiveness performance, and the scope of its annual reports will be extend to monitor efforts at national level to mainstream competitiveness aspects into other policy fields.

2. Resources at our disposal to make the industrial renaissance happen

Access to financial resources is crucial to boost a strong European industry. For the first time the Commission has put an increasing share of its policy, at regulatory and financial levels, at the disposal of Member States, regions and industry.

With the adoption of the new multiannual financial framework 2014-2020 at least €100 billion of European Strucutral and Investment Funds (ESIF) are at the disposal of regions to finance support for industry and SMEs in line with their smart specialisation strategies. This includes investments in industrial competitiveness in the six strategic areas identified by the European Commission in 2012. These cross-cutting areas are: advanced manufacturing, key enabling technologies, clean vehicles and transport, bio-based products, construction and raw materials and smart grids.

The integration of industrial and research policy will facilitate more breakthroughs, discoveries and world-firsts by taking great ideas from the lab to the market through a relevant part of the €80 billion of the Horizon 2020 Programme. This will help make existing industries cleaner and smarter and help Europe lead in the technologies of the future.

3. A more business friendly framework

European SMEs must overcome the barriers that limit their growth. The average SME is smaller in Europe than in the U.S. The smaller the company the greater the difficulty it has in investing in innovation, exporting and integrating global value chains, thus compromising its competitiveness.

The potential of clusters, which represents favourable innovation ecosystems for mutually reinforcing groups of SMEs, need to be better exploited as an avenue for firm growth.

An updated Small Business Act could create more synergies with the reform process under the European Semester, helping SMEs to grow and create jobs. Under this new SBA, the Commission will take action and if adequate, propose new legislative measures, to ensure that start-ups in all Member States are able to set themselves up at a maximum cost of €100 and within three days as well as proposing a target of one month to obtain the necessary licences. The Commission will also develop conditions to reduce the duration of court litigation of credit recovery for companies and to give a second chance to honest entrepreneurs and facilitate the transfer of business. The Commission strongly requests Member States introduce the SME Test or an equivalent system in their decision making process and reduce the administrative burden.

The Commission will present an Initiative on Growth-Friendly Public Administration, providing a comprehensive overview of the best practices in public administration available across the EU, in particular with regard to e-government tools and public procurement.

EU industrial policy has traditionally paid much attention to SMEs who have been mainstreamed into our policy approach. As regulatory and administrative costs can impact SMEs up to ten times more than larger companies, the Commission has systematically promoted simplification for SMEs through exemptions for micro-enterprises and the application of the Think Small First principle. Framework conditions for SMEs have been improved considerably since the Small Business Act (SBA) was adopted five years ago. The time and cost of starting up a business have been cut (from 9 to 5 days and from €463 to €372). However, the time and cost to obtain all the licenses required to start commercial operations remain very high in some Member States.

At the EU level, the Commission continues to improve the quality of legislation and the regulatory environment in order to make it more stable and predictable. The implementation of the Regulatory Fitness and Performance Programme (REFIT) and follow-up to the Top-10 regulatory burdens will simplify EU legislation and reduce regulatory burden on businesses while Competiveness Proofing has been fully integrated into the Commission’s impact assessments for all major proposals with significant effects on competitiveness.

Cumulative Cost Assessments have been conducted in a number of sectors (steel, aluminium) and will be performed in others (e.g. chemicals and forest-based industries) in an effort to facilitate the mainstreaming of competitiveness across Community policies.

A fitness check of legislation in the refining sector will be finalised in 2014. In the future, the Commission will undertake comprehensive reviews of the competitiveness and regulatory frameworks in each of the main industrial value chains using fitness checks and cumulative cost assessments.

Member States are called to implement similar actions to develop a business friendly environment to facilitate SMEs and competitiveness.

4. Easier access to critical production inputs

EU firms need to have access to essential inputs in a sustainable way and on the best possible terms, but there are still significant problems in capital, energy and raw material markets.

Access to finance

Access to finance is still a priority for the European Commission. Policy actions are contributing to alleviate capital needs for specific purposes. The amendment of the Common Provisions Regulation will allow the development of risk sharing instruments with EU guarantees. European Structural and Investment Funds (ESIF)/the European Social Fund and financial instruments supporting lending to SMEs and small midcaps (cf. COSME, HORIZON 2020) will be available to Member States on a voluntary basis.

The adoption of the COSME and Horizon 2020 programmes will also multiply the financing capacity of public sector funds with equity investments through financial intermediaries, such as venture capital funds and a well-functioning pan European venture capital market. The revised Transparency Directive abolishes the requirement to publish quarterly financial information; and the new rules on European Venture Capital Funds and European Social Entrepreneurship Funds create a special EU passport for fund managers investing in start-up SMEs and social businesses. The full implementation of the Late Payments Directive will also improve financing to companies.

An internal market for capital where SMEs can have access to cross-border finance still remains an unfulfilled goal The analysis of the replies to the Green Paper on the Long-Term financing will now lead to proposals for measures to diversify sources of financing for SMEs.

Access to raw materials

EU industry is mostly dependent on the supply of raw materials from international markets, especially unprocessed minerals and metals. It faces a number of challenges regarding access to both primary and secondary raw materials throughout the whole value chain (exploration, extraction, processing/refining, recycling and substitution).

The Commission’s Raw Materials initiative has a strong external dimension so as to ensure fair and sustainable access to raw materials worldwide, by improving supply conditions for EU companies and ensuring a level playing field in the raw materials trade. The Commission will continue using all instruments, including a mapping exercise of raw materials diplomacy which is currently underway, to safeguard access to raw materials. Special attention will be paid to ongoing and future trade negotiations.

Moreover, in 2014 the Commission will present a set of actions to promote technologies able to replace these critical raw materials, to strengthen the European Innovation Partnership and improve recycling.

Access to energy

Industrial competitiveness and energy efficiency remain major objectives of the Union as acknowledged in the Europe 2020 strategy. This policy framework was successful in reducing EU energy intensity by about 15% between 2005 and 2012. Although these efficiencies have reduced energy consumption, energy prices have considerably increased and EU industrial electricity prices are estimated to be twice as high as in the USA and Russia and 20% higher than in China.

The price gap is greater in gas: EU gas is three to four times more expensive for EU industry than for US, Russian and Indian competitors, 12% more than in China but cheaper than in Japan. Energy taxes and levies are identified as the main drivers of these prices increases.

Alongside this communication, the Commission has adopted a package on climate and energy covering themes ranging from its approach in the 2030 perspective to updating measures to avoid carbon leakage and to proposing changes to the functioning of the Emissions Trading Scheme (ETS). With this package, the Commission maintains its full commitment to the Europe 2020 strategy while using intelligent policy design to ensure that industrial competitiveness is safeguarded across all industry sectors.

Industrial competitiveness and energy efficiency remain major objectives of the Union as acknowledged in the Europe 2020 strategy. Different EU policies work to achieve our objectives in the most cost efficient way.

  • On the supply side, Horizon 2020 provides funding to energy and climate-related research and innovation, which aim to develop and promote the uptake of breakthrough technologies needed to reach climate and energy goals.

  • Completing a fully integrated internal market for energy and increasing competition in energy markets will allow industrial and residential users to benefit from lower wholesale prices for energy.

  • The further development of an efficient pan-European infrastructure for gas and electricity as well as for transporting major feedstock would help reduce transport costs and risks for energy-intensive sectors. Existing pipelines should be linked in particular with Southern and Eastern Europe to improve synergies between industries from different Member States and achieve higher energy efficiency across Europe.

  • It is important to avoid disproportionate increases in the cost of energy due to taxes, levies or other instruments introduced by Member States to implement different policies. This is essential to ensure cost effectiveness and contribute to improving EU competitiveness.

More information on energy prices and energy costs: MEMO/14/38

5. Maximise the potential of the Internal Market

The internal market remains the centrepiece of the EU’s economic success. It provides EU companies with a large home market, facilitates improvements in productivity by reducing costs, fosters the uptake of more efficient business processes and increases returns on innovation. But there is still potential to further deepen the single market to bring about faster technological change.

It is important to speed up the adoption of Commission proposals to complete infrastructures and simplify and improve the business environment in the Internal Market. The Commission calls on the Council, the European Parliament and the Member States to adopt and/or enforce those initiatives related to the integration and completion of the internal market which are currently suffering delays. These initiatives are mainly in the fields of the integration of networks such as transport, energy and ICT.

The Commission invites Member States to:

  1. Unleash the potential of the transport sector

In early 2013, the Commission adopted the Fourth Railway Package that makes it easier for rail operators to enter and operate in the EU market. In the maritime sector, the Commission set out plans in July 2013 to ease custom formalities for ships, reducing red tape, cutting delays in ports and making the sector more competitive. The Commission is also taking active steps to enforce the Single European Sky obligations in Member States.

  • Speed up development of clean vehicles

To speed up the development of clean vehicles and vessels in Europe, the adoption of the proposal on the deployment of alternative fuels infrastructure will stimulate economic growth in Europe by mandating Member States for a minimum coverage of alternative fuel infrastructure, including electric recharging stations with common interface standards.

  • Create an internal market for ICT to reduce roaming costs

The proposal for a single market in telecommunications aims at promoting investment and taking steps to further decrease regulatory fragmentation in the EU. Beyond infrastructure, the convergence of information and communication technologies with energy and logistics networks will create a new landscape of opportunities and challenges for industry and related services. The impact of these changes will provide market opportunities for key enabling technologies, which will redefine global value chains and reshape patterns of specialisation. The EU, Member States, regions and industry all have a co-ordinated role to play in fostering the digitalisation of business processes, contributing to the development and implementation of an industrial dimension of the digital agenda and promoting competition in broadband provision.

  1. Liberalise and integrate the internal market for energy to reduce costs

The development of an internal market for energy requires integrated energy networks which would reduce energy costs for European companies.

  1. Complement space infrastructures to offer new business opportunities

The Commission is completing the space infrastructures with its flagship projects, Galileo and Copernicus during the next financial perspectives and will propose rules creating the technological and regulatory conditions for their commercial exploitation.

  1. Strengthen the market surveillance and product safety package for SME development

The Commission calls on the co-legislators to adopt the proposals on the market surveillance and product safety package. The Commission will ensure that harmonisation is enforced and facilitate the participation of SMEs in the Single Market. More information: IP/13/111 MEMO/13/93

  1. Improve the functioning of the internal market for services

Given the increased inter-linkage of industry and services, the full implementation of the Services Directive remains important for Europe’s industrial competitiveness and needs to be improved. A more integrated internal market for services would boost the competitiveness of business services and industry. These should be taken into account adequately in the design and implementation of industrial policy strategies. In this sense, the Commission will define further action after the High Level Group on business services issues its recommendations in March 2014.

In addition, the Commission is planning to take new actions in the following fields:

  1. Well-designed European standards will accelerate the diffusion of innovations: The European Standardisation System is being reviewed in order to assess whether it is able to adapt to the rapidly evolving environment and to contribute to Europe’s strategic internal and external objectives, in particular in the field of industrial policy, innovation and technological development.

  1. Businesses need effective standard-setting and the protection of intellectual property. Effective standard-setting and the protection of intellectual property (which represents 50% of total intangible assets in the EU) are crucial for promoting innovation and the development of new technology areas. The Commission will clarify the rules on the use of IPR in standards and will pursue an initiative on IPR-based standardisation.

  1. Pushing for a more integrated internal market based on rationalising the existing regulatory framework. The Communication “A vision for the internal market for industrial products” published today. The Commission will also prepare a Regulation on Enforcement to help reinforce a level-playing field for compliant products in the EU. The Enterprise Europe Network will be reinforced to strengthen support for SMEs in the internal market and further enhance the assistance given for access to finance and for the innovation management capacity of SMEs.

6. Internationalisation of EU firms

The internationalisation and the integration of EU firms in global value chains is a means to increase their competitiveness and ensure access to global markets in more favourable competitive conditions.

Exports and the EU’s trade surplus have played an important role in mitigating the impact of the crisis. With an estimated 90% of global growth coming from overseas by 2015, access to third country markets will remain a key feature for Europe’s competitiveness. To promote access to markets around the world, the Commission will continue to pursue FTA negotiations with key bilateral trade partners and continue to act within the WTO TBT agreement in order to prevent third countries putting up technical barriers to trade. Missions for Growth will be reinforced and the services of the Enterprise Europe Network be put to better service to support the internationalisation of SMEs. More information

The Commission will continue to promote international standards and regulations building on the EU’s role as a de facto standard setter and take a leading role in reinforcing the international system. Regulatory cooperation with other countries will continue to be a priority. EU companies must be able to uphold their Intellectual Property Rights (IPRs) in all relevant markets. To extend the support provided to businesses, the Commission has already expanded its IPR helpdesks network to ASEAN and MERCOSUR and will consider further geographical expansions of such support services. Enterprise Magazine

Public procurement access is an increasingly important part of modern trade negotiations. For example, bilateral negotiations with Canada have yielded significant advances in the opening of procurement markets at sub-federal levels. Similar advances will be pursued in other bilateral negotiations, notably with the United States and Japan.

  • Improving education and training - facilitating mobility

The Commission has put in place an overall strategy for improving education and training systems, new comprehensive tools to monitor skills needs and specific initiatives to bring together the relevant actors dealing with apprenticeships, in particular those with crucial ICT skills.

Skills mismatches are likely to remain a key challenge for EU industry in the coming years, especially as progress in manufacturing technologies will increase demand for specific skill sets. The Commission is developing the new generation of Erasmus for young Entrepreneurs programme as well as the new Erasmus+ programme, the European Alliance for Apprenticeships and other instruments to make available cross-country traineeships in firms through the active involvement of industry and SMEs and it invites Member States to support these efforts.

Currently, only 0.3% of the EU’s population moves to another country for professional purposes each year, compared to 2.4% in the USA. The EU has a unique role to play, to facilitate mobility between higher education institutions through the Erasmus+ programme. Industry and SMEs’ participation in such initiatives will be further encouraged. In emerging sectors and areas of economic activity, Knowledge and Innovation Communities (KICs) will help to make available the skills needed in these new markets.

Conclusions

The objective of revitalization of the EU economy calls for the endorsement of the reindustrialisation efforts in line with the Commission´s aspiration of increasing the contribution of industry to GDP to 20% by 2020.

The communication presented today on the EU Industrial Renaissance, seeks political support at the highest level to facilitate the implementation of the industrial policy and structural reforms at EU, national and regional levels.

The communication on the European Industrial Renaissance will be the European Commission’s contribution to the European Council in March, which is dedicated to industrial, energy and climate change issues.

More information:

Communication For a European industrial renaissance

Communication: A vision for the internal market for industrial products


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