As the general director of the European Engineering Industries Association Adrian Harris writes, there is a request for the European Commission to start developing a holistic EU industrial policy, in order to create a joined-up approach among European industrialists.
The trend in recent years has been to relegate industrial policy as forgettable. It was viewed as a matter of the past, a synonym of misplaced government interventionism aimed at guiding the market through a predetermined scheme to choose predesigned winners. It is true that very often state subsidies were used to support failing industries or to rescue national industries facing greater global competitors.
However, nowadays there is a different point of view, that effective support for industry doesn’t involve preserving structures of the past. On the contrary, industrial policy can be a driver of change helping to create a framework that connects enterprises and makes them stay updated on industrial innovation, thus aiding to survive and succeed in the international market instead of insulating them from the outside.
The EU Competitiveness Council has admitted there is a need for an overarching European industrial system. One of its conclusions involved a call for the Commission to provide a holistic EU industrial policy strategy in time for the European Council meeting that is going to be held in spring 2018. Across the sector there has been great support for this action, as it is evidenced by the #Industry4Europe social media campaign that was therefore launched.
But many would ask, why is the reform taking place now ? For a variety of reasons. In the first place, policymakers took quite a long time before accepting that manufacturing keeps having a central role in the success of European economy. About 11 million people are employed and almost €2,000 billion are generated annually only by the engineering industry. Moreover, after the financial crisis of 2008, the states who first recovered were the ones based on a strong manufacturing industry.
On a second aspect, manufacturing has been victim of a digital revolution in recent years. The production process has been integrated with new digital technologies and data analytics, producing greater efficiency and making new business models possible. The transformation is happening very quickly around the world and also creating new and innovative working places. Different countries such as China and the US are supporting the change and trying to promote the process as part of a wider industrial strategy, whilst Europe will need to accelerate the pace.
Thirdly, there is evidence that if citizens don’t believe that policies are creating employment and economic stability then they lose faith in policymakers. An overarching industrial strategy could help restore the faith by attracting manufacturing investment to the EU and creating jobs across the whole economy. It is in fact proved by research that a job in manufacturing is always followed by other jobs in the service industry and creates further multiplier effects.
Furthermore, this kind of industrial strategy aiming at supporting digitization, new business models and technological innovation will also create the possibility for European enterprises to find solutions for urgent social issues such as the environment, sustainable energy, mobility and migrants, healthcare and others.
These are the main motives why Europe needs to rapidly attract manufacturing investment back and reach a 20% industry share in GDP, which is the target that the Commission outlined for 2020. So now that the aim is fixed, we need to understand how to achieve it and how should the EU industrial strategy look like.
The key according to the European Council is to create an industrial policy mainstreaming across EU initiatives, which means that a unitary approach should be used to connect all policy areas which have influence on the competitiveness of manufacturing enterprises. Some practical examples may include making sure that the EU framework for regulation is well designed to support processes such as digitization by avoiding forms of over-regulation, which can suffocate attempts of innovation as has already happened in Europe in past years.
In addition, energy policy will play an important role. The EU should seek for a holistic industrial strategy , made of policies promoting its energy technology leadership and energy efficiency, in order to reaffirm Europe’s competitiveness and ease the transition to a more sustainable economy. Furthermore, a comprehensive industrial policy approach will reinforce the Internal Market, on which European manufacturers have based their businesses and thrived over the past decades. A focus will also be put on an open trade agenda, thus indicating the significant role that international markets have for EU enterprises. Plus, funding for Research, Development and Innovation (R&D&I) aimed at fostering industrial competitiveness will also push innovation and help Europe keep its leading role.
European Industry is heavily influenced by what occurs in these policy areas, because they can make it easier or more difficult for manufacturing firms owners to expand their business, hire more workers or develop new solutions for society’s issues. However, all these policies must be integrated with each other and seen as the pieces of a coherent bigger puzzle, in order to make the European industrial strategy to succeed. This is the reason why the European Parliament along with the Commission must take action now and define an ambitious and coordinated EU strategy. If European policymakers can help manufacturers continue to create growth and jobs, it will be Europe’s citizens who will get the rewards.