European Commissioner for Competition Policy
"Global Europe – competing and cooperating"
"Women in European Business" (WEB) conference
Frankfurt, 11th October 2007
Dear Dr. Ackermann, Ladies and Gentlemen,
Let me start by thanking you for inviting me to speak to 'Women in European Business'. As you certainly know, I've been a woman in business, and I know there are challenges as well as huge opportunities, which is why networks like yours are so important.
Women have enormous potential and skills to bring to the business world. A recent study among the 500 largest firms in the US has shown that companies with more women on their management boards have achieved on average 66% higher returns on investment than boards predominantly filled with men. This correlation can be found in all sectors! Clever companies value the fact that having more women on the board will lead to more independence, innovation and good entrepreneurship and thus yield higher returns.
I very much believe in actions to help make sure more qualified women get to the top, to make women more visible and help them create networks. I am therefore particularly pleased to address such a distinguished and mostly female audience today!
You have chosen "competition and cooperation" as the theme of this conference – and asked me to speak about its global aspects. This is a challenging topic. What are the benefits of free competition in a globalised economy? Can a responsible approach to globalisation and maintaining a firm competition policy be reconciled? Should Member States be given greater leeway to try to protect national business against the 'threats' of globalisation? Or should we rather cooperate with our international partners to open up more and better opportunities for competition everywhere?
Let me share some ideas on these issues with you.
As you all know, competition brings tremendous benefits for citizens and businesses, consumers and tax payers alike. Free and fair competition leads to wider choice, more innovation, higher quality and often lower prices. Competition benefits the real income of workers both directly – the buying power of the cash in their pockets - and indirectly, via higher investment – an estimated 8% over the next half century. To put it in absolute terms, this translates into over €2000 annually for every EU citizen, or over €5000 per EU household. Just think of air travel, telephony or new media: services in these sectors are getting cheaper over time, and more available and more innovative every day.
Competition between companies is of course not an end in itself. But well-functioning markets are great instruments to achieve public interest objectives, notably consumer welfare. And a strong competition policy to keep these markets open and fair is a necessary pre-requisite if we are to secure these objectives in all industries and for all consumers.
Take the example of cartels. Cartels are extremely harmful. The cost of illegal profit is paid right through the European economy, right down to the end consumer. According to OECD estimates, cartels can raise prices by up to 50%. This is why I have made the fight against cartels one of my top priorities: most recently, we have bust cartels in areas as diverse as bitumen for road surfaces, zips and fasteners and lifts. All things we use on a daily basis, so we should be sure we are paying a fair price for them!
Another important aspect of competition policy, and a core task for the Commission, is to ensure fair competition between Member States and their companies through the control of state aids.
Historically, the main objective of state aid control has been twofold:
Firstly, it has ensured that the removal of tariff and other regulatory barriers in the EU is not simply replaced by national subsidies with similar trade-diverting and market-distorting effects; and
Secondly, it has safeguarded equality and solidarity. The positive effect of the Community's cohesion and Structural funds policy would have been undermined if richer Member States could have used their larger national budgets to attract economic activity to their own richer territories.
Are these objectives still valid? Well, Heads of State and Government seem to think so since they have rightly committed us to "less and better targeted state aid". "Less" aid because direct support to firms can lead to damaging subsidy races or keep inefficient firms afloat. And "better targeted" aid since national policies and EU state aid control need to be joined up to support the key objectives of competitiveness and cohesion, growth and jobs.
I am often asked whether EU state aid control – and for that matter, EU competition policy as a whole - can still 'deliver the goods' in a globalised world. How, people ask, can our Member States compete to attract investment, not with other Member States but with non-EU countries? Is our unique state aids discipline a hindrance in a world where non-EU countries lure foreign investments with public money? Should Member States be able to protect their companies against foreign take-overs and artificially build up national champions in order to maintain qualified jobs at home?
These are real questions, reflecting real concerns, and I do not take them lightly. They deserve real answers. I do not pretend to have all of them. But I do know that protectionism is not the best answer. Let me explain why.
State aids first. When companies decide on location, public support is only a marginal factor they take into account. Of course, they'll take it if they can get it - but it is mostly not decisive. Firms locate where political and security risks and underlying cost structures are low, and where skilled workers are easily available. The higher the skills and research capabilities in a given location, the more likely it is that a potential investor will want to locate there.
This is confirmed by a Business Survey the German Presidency presented at last April's Informal Competitiveness Council in Würzburg – reflecting your, business', answers about your location choices. This also confirms that the EU remains world leader in attracting foreign direct investment, with 45% of world flows and a record increase in 2006. Our rigorous state aid control is doing well, it would seem – it minimises harmful subsidy races within the Union, while allowing foreign direct investment.
We can always do better, of course. This is why I launched the state aid Action Plan, the first ever comprehensive reform of state aid policy in the fifty years of European integration. Through it, we have significantly broadened the possibilities to support firms genuinely engaged in R&D and innovation, or investing in competitiveness and excellence. More aid to production-related non-EU investments would simply not be justified. I've enough business experience to know we must not simply take it for granted that a company will go to a non-EU location if it is not paid to stay. Investing in infrastructure, R&D or training is a much better use of scarce public resources in my view – and it directly benefits investment too.
Second, merger control. Some believe that in the face of globalisation, we need "national champions", giants bred and trained to leap to our defence against whatever 'rampaging hordes' globalisation might spawn. A dose of realism and experience is needed here, I think.
The "national champion" logic, artificially sheltering European undertakings from competition, is as flawed today as it always was. I have never seen any company leap to the defence of anyone else than its shareholders. And quite rightly so: companies have to care about return on investment. We can only expect national champions to champion themselves. This is why protecting "national champions" is doomed to fail.
Also, let us remember that our Member States trade first and foremost among themselves. If we allow protectionist impulse to go unchecked, the EU consumer will pay the price. Most people of course understand that. This is why we should not over-state the problem. 99.9% of European cross-border transactions are completed without any political interference. But in those cases where Member States have raised unjustified obstacles to takeovers, the European Commission has intervened forcefully. We will do so again if need be.
Competition policy in a globalised environment
Of course, you will say, it is not good enough to 'do good at home', if others are not playing by the same rules. I understand why some say we are made to open up our doors while our international competitors keep theirs firmly closed. And I agree there is an issue here. This is why we need to cooperate, to get our partners to apply the same degree of discipline as we do. The answer to globalisation is therefore not less competition, but more - and a more integrated competition policy, both globally and in Europe.
We must achieve a global level playing field for our companies. This is why the Commission's Global Europe Communication has a clear motto: no protectionism at home, activism abroad. European competition and trade policy must act in tandem to pursue the following objectives:
1) Protecting European consumers and businesses from the harmful effects of global cartels, monopolies and restrictive agreements. European competition law must continue to be applied irrespective of the nationality of the undertakings concerned. If harm is caused to European companies and consumers, then it is our business, we will not hesitate to tackle abusive behaviour.
2) Increasing the effectiveness of EU trade defence and market opening instruments. We have very efficient trade policy tools, such as anti-dumping and anti-subsidy duties. But they only concern 0.45% of our trade. So we could refine them further, and use them more actively. And we should bring more cases to the WTO Dispute Settlement Body, if we want to foster international discipline.
3) Promoting worldwide convergence of substantive state aid and competition rules. For example, it would be great if South Korea could agree to abandon direct operating aid to shipyards – but this will have to be negotiated and agreed in the context of our future bilateral Free Trade Agreement.
In all these areas, bilateral and multilateral cooperation is indispensable. We already cooperate with many competition authorities on a bilateral basis, in particular with our major trading partners, where the EU has dedicated competition agreements with the United States, Canada and Japan. I am delighted that in 2004 we launched a policy dialogue and cooperation with China, and have helped them shape the Anti-Monopoly Law China recently adopted. Many of the Association or Partnership Agreements Europe has signed with its close neighbours contain competition rules. We will need to enforce them – and move ahead on state aid issues as well.
Bilateral agreements are good, but they clearly are not enough. Cartelists and abusers of dominant positions know no boundaries in our global world. So competition authorities need to be able to operate effectively in cases involving several jurisdictions. This is why, in 2001, we launched the International Competition Network (ICN) with 13 other founding partners. The ICN is unique in many ways. It is the only international body devoted exclusively to competition issues. Members are not States or governments, but competition authorities. And in a number of cases, ICN recommendations have led to policy change and thus to increased convergence.
More integration is also needed inside the EU. Cooperation inside the European Competition Network (ECN), between our national competition authorities and the Commission, is steadily deepening.
But we also need substantive policy integration, linking competition policy with other policy areas. The success of the single market has only been achieved thanks to a strong regulatory framework and effective competition policy. Regulatory measures remove many, but not all, barriers to market entry. Competition policy ensures that a level playing field emerges instead. This is why both must act together.
Ladies and Gentlemen,
Competition is a powerful tool to help us all shape up for globalisation. Competition policy is the means to keep our markets open and competitive, so that our markets deliver the best for our citizens.
But competition policy will only succeed if it is part of an integrated strategy in which external and internal policy instruments complement and reinforce each other – and if we manage to convince our partners to subscribe to the same rules, and enforce them as vigorously as we do.
We Europeans compete – as we should. We also cooperate, wherever we can. This, in my view, is the road to success.
Thank you very much for your attention.
 Study by US research firm Catalyst covering 2001-2005