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European Commission's Vice-President responsible for industry and entrepreneurship
R&D and innovation to re-launch Europe's competitiveness
"INNOVAZIONE PASSAGGIO PER L'EUROPA"
ISPRA - Varese, Monday 18 July 2011
During the economic crisis the EU lost 6 million jobs and one thousand billions of its GDP.
The current market pressure is the result of a lack of foresight - dramatically manifesting itself in the crisis - from national and European policy-makers that failed to make courageous decisions.
This is not just an excess debt problem. The root of the problem is an inexorably lacking ability to maintain economic growth and the increasingly wider gap with the emerging economies.
Beyond speculation, markets structurally tend to drive investments towards favourable economic perspectives also in medium-term. If we do not provide a credible answer to the widespread disbelief in our ability to grow quickly, we will run the risk of having to accept lower living standards and jeopardize the achievements of the European Social Model because of greater austerity.
In other words, “loss of competitiveness” is the knot that we still have to cut, if we want to avoid slipping into a spiral of economic and social decline, deindustrialization and inevitable political unrest.
The European engine runs too slow, and not to its fullest abilities, because we have been unable to keep pace with the changes and meet the challenges put forward by the new global world.
It is utopist to think that we will successfully compete with China, India or Brazil on quantity or products with little added value. This is not where we expect to see progress in stopping delocalization and re-launch industry.
In order to return to a steady and concrete growth, Europe must aim at high value-added products that are unsurpassed in quality and innovation, and linked to research and technological development; able to address problems of sustainability and resource efficiency following global demographic and industrial growth.
R&D, innovation and training are the real trump card that, together with less naïve commercial policies, more transparency and checks on finance, greater internal market integration, and an industrial policy that keeps up with the challenges of the new millennium, can prevent the European decline.
It is more than a decade that Europe is repeating this “mantra”, like an annoying talking cricket. The revitalization of EU competitiveness through a knowledge-based economy was the motto of the Lisbon Strategy, promoted back to 2000 by heads of State and Government.
Now it is no time for pulling words out of the air, or pursuing unrealistic actions. Europe must act resolutely and accomplish its goals in actual facts. Possible resistance or lack of determination from some states must be addressed within the mechanisms of a new European governance in order to avoid that inhomogeneous competitively levels coexist in the Eurozone - which is something that will occur, if some States’s efforts for R&D are inadequate.
The Commission is the first one to set a good example. Beginning with the new multiannual financial framework that has to be in line with the “mantra” of more competitiveness by means of innovation.
R&D “emergency” to secure European technologic leadership
R&D and training policies are at the very heart of the global race for technological leadership in emerging sectors. There is a great deal at stake and the competition is rising; without adequate political solutions Europe is likely to fail.
The USA and Japan get a net advantage, with respectively 300 billions euro per year (2.6% of GDP) and 120 billions (3.4% of GDP), compared to 200 billions euro for Europe, only 1.9% of GDP.
Emerging economies are growing rapidly. In 2014, Chine will be able to overtake Europe with more than 250 billions euros of investments; and India has a R&D trend rate of growth comparable to Europe’s one.
US venture capitals for R&D invest 5 times more than in the EU; and for what concerns contracts, there is a ration of 7 to 1!
USA and Japan overtake Europe also in the performance evaluation on Research and Innovation based on a scoreboard of the Commission- respectively 50% and 40% more than the EU. And China has reduced the gap with the EU from 6% in only one year.
Similarly, for what concerns the demand for patents in emerging sectors such as health-related technologies or green economy, Europe is only third, followed by South Korea.
Research and Innovation originate, first of all, from investments on human resources. And also in this field, Europe has a university’s instruction expenditure limited at 1.2% of the GDP with a minimal percentage of private investments; compared with 1.5% of Japan and 3% of the USA where the public-private ration is around 50%.
It follows that only 5% of European universities is in the world top 20 and, less than half of US ones in the top 100.
Since the Lisbon Strategy, the emerging countries have gone from 1/5 to 1/3 of global wealth production; and continue to grow also in sectors with high intensity in knowledge and technology. The number of Chinese researchers had already outstripped the European one in 2008, with a yearly growth rate of 10% compared to 3% in the EU.
These countries prove to be fully conscious of the fact that competitiveness will be increasingly based on innovation ability rather than costs. Paradoxically, it seems that they pursued the Lisbon Strategy before us Europeans.
If Europe will not rise up to this crucial challenge, politics will have to take all the responsibilities. Both emerging and industrialized competitors deem innovation as a political imperative, which has to be put under the control and direct impulse of heads of Government themselves; and to which other policies, such as education, regional development, taxation and standardization, are functional too.
Ever since the beginning of its new mandate, the Barroso's Commission has ambitiously responded to the challenge of defending EU technological leadership. “Europe 2020” set the key objectives for an intelligent and sustainable growth, such as the rise to 3% of GPA for R&D, improvement the quality of education, promotion of the green economy.
Under the pressure of the crisis, the EU is designing a system of effective governance through the so-called “European semester” and relative recommendations that also concern the correction of competitiveness disequilibria between countries, starting from – indeed - research and innovation ability.
It is indeed for strengthening this governance, that the European Council has taken the political responsibility on the direction and control on the results.
Among the flagship initiatives to put into effects the targets of Europe 2020, the Commission has adopted two key policies that are deeply intertwined in terms of objectives and financial instruments: a new European industrial policy for meeting the challenges of globalization and Innovation Union, both centered on a return to real economy and the re-launch of competitiveness through innovation.
Their implementation will be the best test possible for the seriousness and political coherence of the EU. Starting from the fuel that will be chosen to make the engine run, both at a national and EU level.
Especially in times of budget austerity, investments in R&D are the typical good example of the added value of EU common action. To have a common platform for research is the means to create important synergies between different national programs, concentrate an adequate amount of resources attracting also private investments, have priorities at a EU level, avoiding waste and duplication.
In order to ask Member States for investments in a more credible manner, the Commission had to set the good example. Accordingly, in the recent proposal of the multiannual financing framework 2014-2020, we asked for an increase from 54 to 80 billions euro for R&D e Innovation.
The auspice is that great part of the new regional funds – approximately 1/3 of the new budget equal to 347 billions – will be spent in a more efficient manner, with efficiency and outcome indicators tarred on the ability to promote R&D, innovation and competitiveness. From this point of view, it is extremely important that more competitive regions, such as Lombardy, continue to receive consistent resources to strengthen their competitiveness and be growth engines both in Italy and Europe, as “champions” in the global competition. We also have to bear in mind that an excess of resources concentrated in weaker regions can create serious problems in terms of permeability capacity, with waste and delays; and a consequent weaker impact of EU expenditure on total competitiveness.
Aiming at the industry of the future and applied research
EU funds will have to be more accessible for SMEs and push key sectors - such as KETs (Key Enabling Technologies) or the green economy - also with the development of applications that are nearer to the market.
In other terms, the efficiency in the use of new funds - but also of the remnant resources of current VII Framework Program and regional funds – will have to be evaluated in terms of the ability to further establish emerging European industries and create new jobs. That is the capacity to promote our competitiveness in a meaningful way.
Another key test will be public investments’ ability of being selective, focused on real priorities with economic potential and the capacity to attract more private investments. Within this context, the Commission and BEI can further strengthen instruments for venture capital, also in R&S activities with greater risks and still far away from concrete commercial openings.
Among the priorities which we have to aim at: KETs and those technologies linked to green economy which are playing a crucial role in addressing social challenges, such as ageing population, resource scarcity and climate change.
Such technologies have spectacular both actual and potential growth rates: only concerning products based on nanotechnologies, it is expected that profits will go from the 254 billions of 2009 to 2500 in 2015, with a substantial percentage of EU GDP and remarkable effects on employment.
It is indeed in this field that Europe’s future as a global economic and industrial power is at stake. From what emerges from the report adopted last month by the KETs Focus Group, Cina, the USA and South Korea invest way more than us in applied Research and Development - respectively 90% for China and 76% for the USA and Korea – compared to limited resources destined to Basic Research of the EU (approximately 2/3 of total investments).
Thus, whereas the EU invests 27% of the total for nanotechnologies at the global level, and 33% of all publications in the sector are European, our percentage of licenses is only the 17% compared to 40% in the USA; and the amount of production of 15% compared to 53% of the USA.
The report concludes that, if Europe remains a leader in basic research, there will be others who will gain greater advantages in terms of products’ development, marketing, and employment.
These figures outline very precise strategies, where the technological transfer from lab to factory has primacy on basic research, which often remains confined to the academic domain.
Politics has to acknowledge these trends and ground the new European Strategy for Research and Innovation on a forceful change of route with more applied research and development and selective investments. Stimulating private research with a new European juridical regime for venture capital, subsidized loans and fiscal incentives.
It is necessary to further promote SME’s access, their potential for research creativity and innovation, favouring clusters with universities and research centres, and simplifying their participation to European and national research programs.
Also public contracts – equal to 2200 billions euro per year and to 19% of the EU GDP – must become an engine for innovation, stimulating the production of innovative goods and services.
Role of the research centre ISPRA
Ispra is an excellent example of Europeans’ capacity to pool their forces in the research sector. With more than 2000 employees, it is one of the most important research centres in Europe and the major one in Italy. It is part of the Joint Research Centre (JRC), a network of research centres of excellence localized in five EU countries.
Ever since its origins, JRC has been guided by a principle of collaboration and cooperation in scientific research between Member States sharing research plants and labs. Throughout the years, evolution and diversification took place with an extension of competences from nuclear energy to differentiated areas, supporting the set of EU policies. As I could verify during my visits at the laboratories, the JRC at Ispra deals with issues of central interest for European citizens.
Many actions of DG ENTR are based on the knowledge of CCR for the elaboration and implementation of regulation and European standards in industrial sectors, such as Galileo or GMES, Euro 6 norms on harmful emissions or Eurocodes for the earthquake-proof safety of buildings.
In order to provide a service of excellence, JRC has developed a vast network of collaborations with research centres, universities and European industries. I congratulate myself with Confindustria Lombardia for having chosen Ispra as the venue for this meeting today, and I vividly encourage industry representatives here present to deepen their contacts with JRC.
Italy and the R&D and Innovation challenge
In the context of the new governance, Europe 2020 is translated into national objectives, adapted to the characteristics of the various States, for instance with the PNR Research and innovation presented by Minister Gelmini.
In the following recommendations of the Commission approved by the Council, despite the appreciation of the efforts made, a delay for R&D e innovation has been pointed out once again as one of the main handicaps for the competitiveness of the Italian system.
Among the Member States, Italy is certainly one of those who spend less for R&D (approximately 1.2 of GDP). It is not only a problem of quantity, but also of quality of expenditure, duplications and wastes. In the European "scorebord" on the performance levels for Research and Innovation, Italy is way below the EU average. Only Spain, Portugal and some new Member States are worse than us.
I do not think that an economy like ours, based on industry and competitiveness ability, can afford this.
Often, after having invested in young people from primary school to university, brains are dispersed afterwards. More than one million Italians under 40 live abroad, and we are assisting to a constant bleeding of enterprises, young researchers (6000 per year), part of the best innovative resources in the country. Still, Italy continues to be potentially creative and rich in brains: between 2000 and 2009 there have been almost 400.000 international scientific publications with levels similar to France; and our researchers near to Germany and Israel in high-level international rankings.
Some Regions set good examples of effective practices; for instance, Lombardy – first in Italy for expenditure in R&D with 4 billions a year equal to 21% of the national total. But, within the European context, Lombardy is only at the 47° place on 244 European regions for employment rate in the high-tech sector. The establishment of important technological clusters which I recently visited, such as the aero spatial and the energetic ones, is an encouraging sign. Similarly, the initiative of Minister Gelmini and President Formigoni for a Protocol Region Lombardy MIUR.
The reforms promoted by the Government and efforts to attract more investments are the good track to follow; as, for example, the possibility – which the Government is working on - of using apprenticeships to insert young people between 18 and 29 years old into research projects. However, in the current situation where Italy risks of becoming one of the special watched of the Euro, it is necessary to speed up.
Also in symbolic terms, I would be favourable to cut politics and bureaucratic expenditures to redirect resources to R&D.
Similarly, I deem necessary to have fiscal policies that give incentives - especially in the South - where we can make a better use of European funds. We also need a general reorganization of incentives that are currently regulated by too many national and regional norms; that, in times of resource scarcity, must focus on real priorities and be able to stimulate private investments.
In general, we need a more efficient management of the funds for R&D with a culture that gives value to the results of studies.
Politics must take the responsibility to make focused and well-timed choices so that Europe can defend its technological leadership maintaining industrial roots and jobs; and safeguarding the European Social Model.
What we need, thus, is more political Europe aiming at boosting competitiveness through the strengthening of the economic governance for a common strategy on Research and innovation.
Italy, as a big industrial country, must believe in its potential and ability for promoting talent, creativity and entrepreneurship.
In the beginning of 2012, I will organize a conference on Industrial Innovation in Brussels to evaluate the status of the European strategy and the improvements achieved.