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Sharing the same vision – The cornerstone of a new industrial policy for Europe

Industrial policy / DISCUSSION PAPER
Claire Dhéret

Date: 20/03/2014
The need to make the best use of the 2014 March European Council and to provide a clear vision of what a European Industrial Renaissance entails is more than pressing. Time is precious and the responsibility of EU heads of state and government is tremendous. Claire Dhéret argues in this discussion paper that they should seize the opportunity offered by the European Council to pave the way for an EU industrial policy providing the industry with what it needs most: an unambiguous and well-defined strategic plan for the decades to come.

This paper begins with the current prospects for European manufacturing. Facts and figures leave no room for ambiguity: the sector has been facing serious difficulties for a long time, illustrated by the constant reduction of the manufacturing share in almost all indicators. This steady decline is the result of two simultaneous developments: ever-mounting external pressures (1), as well as a profound fragmentation in the way industrial policies are pursued across Europe (2). The combination of these developments and the EU's incapacity to respond to a changing environment with one clear and common vision has made its industrial base uneven across the territory. In addition, growing divergences of industrial output across the EU and uncoordinated industrial policies are likely to have negative spill-over effects on other aspects, such as the functioning of the internal market and the resilience of the common currency.

Second, the author gives an overview of past and present EU actions to re-industrialise Europe. It is argued that despite recognising the importance of manufacturing for the economy with an additional ambitious rhetoric for re-industrialising Europe, the weakness of the current policy framework, both regarding the lack of clarity of EU strategic orientations and their questionable impact on national policies, seems unsuited to meet ongoing challenges.

Based on this assessment, and in the view to provide EU industries with a clear strategic plan, three possible scenarios with several policy implications are outlined: Towards the Europeanisation of the Value Chain (1); The EU as Facilitator of a Level-Playing Field (2); and The Predominance of the Free Market Approach and National Forces (3). They represent very different ways in which an EU industrial policy could evolve in the coming years. Fostering a frank debate around these three scenarios is urgently needed as it would provide the right framework to answer the key questions lying at the core of a new industrial policy for Europe.

Finally, the author suggests three concrete steps, which would lay the foundations for an EU industrial strategic plan. These steps include:

  1. Coalition-building of EU countries to take the lead in the design of a EU industrial compact;
  2. the establishment of a reflection group with high-level experts and a clear mandate to address the key questions of the future orientation of EU industrial policy, whilst also reflecting upon the policy implications of the three scenarios mentioned above; and
  3. concrete proposals – made by the coalition of EU countries – to address the main obstacles threatening EU industrial competitiveness: i.e. financial fragmentation (1), energy prices and the high price differential with Europe's competitors (2), and the absence of a level-playing field with other regions of the world (3), which should be addressed by the revision of the EU's state aid framework and the opening of foreign markets to EU industries through for instance, a stronger focus of trade negotiations on access to foreign public procurement markets.

Supporting the re-industrialisation rhetoric with a real action plan is crucial as focusing on either ambitious communication or technical and marginal issues will fall short of addressing the magnitude of current challenges and will rather perpetuate a long tradition where EU industrial policy is caught between a rock and a hard place.

Read the full paper here
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