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European Commission Vice President responsible for Industry and Entrepreneurship
An industrial Renaissance to boost Europe's growth
Conference on Industrial Policy / Brussels
6 June 2013
The Commission’s latest figures have confirmed that Europe is in a double dip recession.
The crisis has accelerated the loss of competitiveness and the industrial decline, which are the first causes of unemployment which is already above 12%.
Over 3.8 million jobs in industry have been lost since 2008.
Competitiveness cannot be measured in macro-economic terms only.
Industrial competitiveness plays a key role in re-launching growth and employment.
Industry represents 75% of EU exports and 80% of private investment in research. Each job in industry generates between 1 and 2 jobs in the service sector.
If we don't want to lose our know-how, it is also highly strategic to maintain a significant part of production sites in Europe.
Unfortunately, since 2000, our industrial decline has also been accelerated by the crisis.
We went from over 20% of GDP stemming from manufacture to a current 15.2%.
In the past five years, China has increased its share of global manufacturing output by 7.7%. With a share of 21.7%, it has overtaken the United States and Europe.
DECREASE IN INVESTMENTS
This industrial decline is also linked to the decrease in investments. Private investment decreased by three thousand and fifty billion euros between 2007 and 2011. The EU received no more than 23% of foreign direct investment in 2010, compared to 45% in 2001.
Our investment in R&D amounts to only 2% of GDP, far from our objective of 3%, and lower than that of the United States and Japan.
DELOCALIZATION AND RELOCALIZATION
Recently we observed that 40% of EU firms with more than 250 employees had re-localized.
The latest Commission report, on industrial competitiveness, shows relevant differences in the level of competitiveness among Members States and the gaps with our main competitors.
For example, many Member States face serious problems with productivity levels, innovation capacity, business environment, electricity prices, access to funding and late payments.
We have to act now and try to solve these problems.
The industrial activities that re-localized the most are those in a situation of overcapacity or the more energy and labour-intensive.
In particular, energy prices are one of the most influential factors in determining localisation of energy intensive industries.
Today electricity prices in Europe are double than those of the United States, and three times higher than in China.
We can't run away from the discussion, which influences our choices in terms of energy.
Last week, the European Council asked the Commission to monitor energy price and their impact on industrial competitiveness.
We will present a report before the end of this year. Moreover, we should be able to develop a true European policy on raw materials. Otherwise we run the risk of seeing part of our production delocalise.
For example that linked to rare earth, establish itself there where it can restock. Mostly, in China, which controls 95% of such strategic materials.
DIFFICULTIES IN GROWTH FOR EUROPEAN ENTERPRISES
Along with few large champions, Europe has a forest of SMEs, often very small. Almost 90% of European enterprises have less than 10 employees.
Only 13% of European SMEs export outside the EU and only 26% of them take advantage of the internal market.
We have to support internationalization and clusters, improve the internal market, develop the Digital Agenda and unlock access to funding.
INNOVATION CLOSER TO THE MARKET
Innovation is crucial. Some European countries are more advanced and others are clearly lagging behind. According to our latest scoreboards Sweden, Denmark, Germany and Finland are at the top, while Romania, Lithuania, Bulgaria and Latvia find themselves far behind.
The current effort to re-direct support measures towards applied research is not enough.
For example, in Key Enabling Technologies, China is spending 90% of funds on applied research and the United States 76%. In Europe this percentage reaches only 18%.
RESTRUCTURING TO COME
The latest data indicates that there has been an increase in job losses linked to restructuring. The most affected sectors are automotive, steel and construction.
To react to this situation it will be necessary to concentrate on growth and investment, including public investment.
Moreover, we have to develop a real European industrial policy that is able to anticipate the needs of restructuring.
I have held high-level talks between entrepreneurs, social partners, Member States and the European Parliament for the automotive, steel and construction sectors.
HOW OUR POLICIES
The first lesson to be learnt from the crisis is that industry is the cornerstone of the economy. The Member States with a stronger industrial base have fared much better than the rest.
We concentrated too much on finance and services and ended up excessively burdening industry.
Several policies directly influence industry's competitiveness.
The first is our ENERGY AND CLIMATE POLICY
Energy prices are the result of the lack of a common market. Certainly, the environmental policy must remain a priority.
Internationalization is Another
Only 13% of the SMEs manage to export to third countries. In the context of our internationalization strategy we have to promote clusters to improve access to markets.
Additionally, I sponsored missions for growth with delegations of European entrepreneurs in Latin America, United States, and North Africa. In a few days I will be in Russia and at the beginning of July in China; also, by the end of the year I will be in Burma, Thailand and Vietnam.
70% of the growth from now until 2020 will be in the emerging countries. It is, therefore, essential to draft a policy of further opening of the global markets, with an effective and fair access for our companies.
TRADE is the third crucial sector
Is vital for our economy, I'm against protectionism but
Our international agreements must be balanced, avoiding negative effects on sectors or geographical areas. Thus, we are reinforcing our ex-ante and ex-post analysis capabilities, taking into account the cumulative effect of the different agreements on specific sectors. We must also employ our trade defence instrument effectively, as our counterparts do.
I am very satisfied about the opening of negotiations with the United States. The challenge is to eliminate technical barriers to harmonize standards and rules, with significant savings and advantages in terms of competitiveness for our industry.
The fourth is ACCESS TO FINANCE
Restrictions and disparities in the conditions for accessing finance are the biggest obstacles to solve the crisis.
This is especially true for Spain, Portugal, Italy and Greece who have predominant number of SMEs, most affected by the credit crunch.
President Draghi himself recently stressed the need for actions.
The Commission and the European Investment Bank have to commit to an extraordinary effort, in synergy with the EU budget, in order to strengthen venture capital and credit insurance instruments.
Moreover, possible collaboration with the European Central Bank has to be explored.
A "SMART" REGULATION
We need to dismantle the perception of Europe as an enemy to business. To this end, it is not always necessary to do more; sometimes helping enterprises means doing less.
Fewer rules, procedures and costs can help companies. Fitness check, competitiveness proofing and the principles of the Small Business Act should be our priorities.
I propose to go even further. I propose to work together on a genuine plan to simplify rules and to reduce administrative burdens.
Our legislation should be simple and stable in order to attract investments.
Our impact analysis should systematically take into account the cumulative effects of different initiatives.
The next European Council on Industry and Youth Unemployment, will be a chance to advocate for reindustrialization. It is necessary to strengthen the role of the Competitiveness Council.
Today's event will allow us to check on the status of the new industrial policy. The plans drafted, in collaboration with governments, industry and social partners, for the relaunch of key sectors such as automotive and constructions, and the creation of specific task forces, constitute very important steps. In the next few days, we will also adopt a Steel Action Plan that represents a crucial test of Europe's effective willingness to change some policies to reverse the declining process taking place in this sector.
Similarly to agriculture, which must be preserved with a common policy as European patrimony, industry much be considered as a precious good, essential for our prosperity. If we are playing a match at the EU level, then the industrial policy must play a key role in the open discussions on the new European economic governance.