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A renewed start for Europe? 4 takeaways from the EU’s New Industrial Strategy

Industrial policy / COMMENTARY
Johan Bjerkem , Marta Pilati

Date: 12/03/2020

The Union's much-awaited new industrial strategy is a solid attempt to harmonise a variety of EU policies and instruments, but it lacks concrete measures. It fails to explain how the Single Market can be strengthened and overlooks the potentially unequal impacts of the twin transition to a green and digital economy.

Finally, it has arrived: Europe’s much-awaited New Industrial Strategy. After the presentation of the European Green Deal a few months ago and the digital package last month, the Industrial Strategy is the last puzzle piece of the strategic roadmap the von der Leyen Commission has set out for itself. And precisely a hundred days after its investiture, at that.

The Strategy is a solid attempt to provide a much-needed coherent and strategic approach to a variety of policy areas and instruments. It lacks some concrete measures, however, especially concerning how to strengthen the Single Market, and overlooks the potentially unequal impacts of the twin transition to a green and digital economy.

The Commission’s goal is ambitious. Europe is to position itself among the leading technological players while simultaneously stepping up its efforts to becoming climate neutral by 2050. “This is about Europe’s sovereignty”, the Strategy underlines.[1] Of course, this is not the first time the EU presents such a strategy. In the last decade alone, documents on EU industrial policy have called for “An Integrated Industrial Policy” (2010), “A Stronger European Industry” (2012), “a European Industrial Renaissance” (2014) and “A renewed EU Industrial Policy Strategy” (2017).

So what is actually new about this new Industrial Strategy for Europe? Here are some of the major takeaways.

TAKEAWAY 1: The return of strategic thinking

Compared to previous documents, this new Strategy represents a more ambitious and strategic attempt to restore Europe’s industrial competitiveness. Beyond merely mainstreaming industrial competitiveness across policy areas, it suggests a few new initiatives and measures to better leverage its regulatory power strategically. Under the heading “Upholding a global level playing field” (section 3.2.), the Commission suggests a new instrument to better tackle the distortive effect of foreign subsidies, the International Procurement Instrument and an Action Plan on reinforcing customs controls.

The role of the to-be-appointed Chief Trade Enforcement Officer is also expected to improve the enforcement of EU trade agreements and the framework for foreign direct investment screenings (to be in place by October 2020), as outlined under “Reinforcing Europe’s industrial and strategic autonomy” (section 4).

Some of these ideas were included in our recommendations in the EPC publication “An Industry Action Plan for a more competitive, sustainable and strategic European Union” last November.[2] However, many of these initiatives still need to be detailed and put to the test. As such, the new Strategy remains a general roadmap with concrete measures still missing.

TAKEAWAY 2: Europe as an initiator of industrial alliances

The Commission wants to make better use of its convening power and the role it can play in coordinating and launching industrial projects. The work the Commission and European industry have done in the last few years to map strategic value chains and identify possible Important Projects of Common European Interests (IPCEI) has paid off. Following microelectronics and batteries, clean hydrogen is now presented as the next important IPCEI: renamed in a more appealing way, industrial alliances.

Other alliances on low-carbon industries, and industrial cloud computing and platforms are to follow, as well as raw materials. It remains essential that an Industrial Forum, made up of industry, small and medium-sized enterprises, social partners, researchers and member states, represents a reliable and permanent successor to the Strategic Forum on IPCEI. To avoid becoming another talking shop, it should provide assistance and enable the rapid launch of further alliances (on e.g. autonomous vehicles, smart health, high-performance computing).

TAKEAWAY 3: Something old, something new

The new Strategy is a mix of some old and some new elements. There is a willingness to adopt a more comprehensive and holistic approach to industrial strategy, covering policy areas from digital, trade, competition, energy and climate. However, although the new, more strategic elements mentioned above are welcome, the document lacks ambitions on some of the old – but still crucial – enabling factors: the Single Market, innovation, research and skills. Very few concrete or fundamentally new measures are listed under the headings “Embedding a spirit of industrial innovation” (section 3.5.) and “Skilling and reskilling” (section 3.6.).

Others might also be disappointed by the fact that no concrete change of competition rules is suggested in the Strategy. However, this is simply because the Commission’s review has just started.

The Strategy does underline the importance of the Single Market and lists it as a fundamental of Europe’s industrial transformation. The document was also accompanied by a new SME Strategy, a Single Market Barriers Report and an Action Plan on better enforcing Single Market rules. Nonetheless, beyond accompanying measures, ambitious proposals are lacking.

The EPC contributed a few recommendations on what remains essential to make the Single Market work.[3] Enforcement might have to be more fundamentally rethought, barriers to a truly digitised Single Market should be addressed, and services must again become a top priority. With the increasing servicification of manufacturing, the EU market for services cannot remain as underdeveloped as it currently is. Unfortunately, the Services Directive is not mentioned in the Industrial Strategy.

TAKEAWAY 4: What about inequalities and risks?

The Strategy insists on the enormous scale of the transformation brought by the twin transition, which “will affect every part of our economy, society and industry.”[4] Yet, it seems to assume that all EU regions and economic actors can engage with the magnitude of the required change equally and successfully. In practice, innovation, digital activities and knowledge intensity increase the geographic concentration of economic activities in already advanced areas, while the rest struggle to reap the benefits. This potential polarisation is not even acknowledged in the Strategy.

The regional dimension of the Strategy is limited to disparities in reliance on fossil fuels, for which the Commission rightly proposes the Just Transition Mechanism. In reality, significant disparities also exist among EU regions in terms of innovation, digitalisation, the adoption of new technologies, and human capacity. Surprisingly, these are not mentioned as factors that could impede the successful implementation of the Strategy and therefore demand special attention.

The potential exacerbation of territorial inequality brought by the twin industrial transition is ignored, when, in fact, the EU needs a geographically fair industrial strategy.[5] For example, the process of strengthening industrial ecosystems and value chains, which is welcomed, should be carefully implemented to avoid the exclusion of actors and regions far away from the most dynamic agglomerations of activity (cities and industrial areas).

The way forward: Targeted, concrete measures

For a successful implementation of the Strategy, the EU should ensure that it is accompanied by targeted measures that guide all regions and sectors in the twin transition, ensuring their participation in EU value chains. It is thus crucial that an inclusive dimension is built into this approach. Similarly, the results originating from industrial alliances in the major sectors must be diffused to actors operating outside of established industrial networks.

The new Industrial Strategy is a welcomed first step in promoting strategic thinking and a comprehensive approach. However, to address Europe’s industrial needs in the dual transition adequately, the Strategy needs more concrete measures, a revamped approach to the Single Market and a keen eye on inequality.

The support the European Policy Centre receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect the views of the authors only. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.

[1] European Commission (2020), Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: A New Industrial Strategy for Europe, COM(2020) 102 final, Brussels, p.1.
[2] Bjerkem, Johan and Marta Pilati (2019), “An Industry Action Plan for a more competitive, sustainable and strategic European Union”, Brussels: European Policy Centre.
[3] Bjerkem, Johan and Malcolm Harbour (2019), “Making the Single Market work: Launching a 2022 masterplan for Europe”, Brussels: European Policy Centre.
[4] European Commission (2020), op.cit., p.1.
[5] Pilati, Marta (2019), “A geographically fair EU industrial strategy”, Brussels: European Policy Centre.

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