CECIMO welcomes the EC Communication on Industrial Renaissance – The European Council should endorse the 2020 manufacturing target

29 January 2014

CECIMO welcomes the Commission Communication “For a European Industrial Renaissance”, published 22 January 2014, urging Member States to recognize the central role of the manufacturing industry for economic growth and jobs. Now, it is up to Member States to endorse at the European Council in March the target of increasing the share of manufacturing in EU GDP to 20% by 2020 and adopt the policy priorities set by this Communication.

The ball is in the courtyard of Member States

The European Council is called on to set, at the highest level, policy guidance and agenda to mainstream industrial competitiveness objectives across all relevant EU and national policies. This is certainly a step in the right direction. The EU lacks competence to implement an industrial policy and if there is one way to implement the Industrial strategy set out in the Commission’s 2010 and 2012 Communications, it should fully involve Member States.

CECIMO believes that having concrete targets for manufacturing set at the European Commission’s level has given the EU’s industrial policy strategy credibility in the eyes of businesses. But the industrial upturn is not there yet. The Communication points out serious gaps between Member States in business conditions and competitiveness. This negatively affects the performance of manufacturing value chains in Europe and the overall attractiveness of the EU for investments.

Filip Geerts, CECIMO Director General, shares the Commission’s view that Member States should be more engaged: “The next logical step should be to set up an agreement between Member States to guide, monitor and benchmark national measures in a more systematic manner against European targets. Therefore, we fully support the Commission’s call to the European Council to pay more attention to industrial policy and drive it forward.

Bottom line: focus on strategic sectors and the investment environment

The Commission has implemented an integrated industrial policy approach since 2010 which has a positive impact on stabilizing the EU economy. However, the share of manufacturing in GDP has fallen from 15.4% in 2008 to 15.1% last year. Despite the outstanding performance of some EU sectors in global markets, the EU’s industrial productivity lags behind major competitors. Moreover, it is noted that the EU is losing its attractiveness for investments due to, inter alia, low internal demand, high energy prices, and unfavorable regulatory and business environment in comparison to industry-friendly conditions in major competing regions.

The Communication offers a spot-on response to these challenges that builds on two strands: improving conditions for investment in the EU and supporting strategic areas that boost competitiveness across sectors. Among the top priorities pinpointed by the Commission to improve the investment environment are: the reduction of regulatory burden, deeper integration of the Single Market, restoring normal lending to the real economy, the modernization of energy, transport and communication infrastructures and skills development.

The Commission also reveals its intention to capitalize industrial growth on areas of industrial activity in which Europe is likely to have a comparative advantage in the future. It is announced that a study will be commissioned to that end. The Commission proposes therefore continuing to implement sector-specific initiatives with a focus on six key priority areas determined in the 2012 Communication*.  Filip Geerts states: “The Commission recognizes once more the key role of advanced manufacturing technologies in the economy and their multiplier effect on competitiveness.” He adds: “Over the last two years, our industry has shown phenomenal export performance outside Europe contributing to industrialization across the globe, but more should be done to ensure the transfer of new production technologies to industrial users in the EU.

The EU strategy for key sectors does not overlook the regional dimension, which is key to success when speaking about establishing comparative advantages and industrial specialization. The EU Cohesion Policy (for 2014-2020) encourages Member States to combine EU structural funds and their national policy measures to support regional development based on their comparative advantages in key industries.

We believe in a 3-C formula to drive the industrial policy agenda forward

Overall, the diagnosis of the problems hampering the Industrial Renaissance in Europe is done and possible remedies identified by the European Commission are accurate. However, what is missing is a mechanism to monitor national policy measures and to ensure their alignment with broader EU manufacturing objectives. This is why the European Council’s response to this Communication will be crucial. What we need in the EU to implement a European industrial policy is actually a 3-C formulacommitment (of Member States to work towards common goals), coordination (of policies across the board at the EU and national level) and consistency (of policy outputs at national and European level).

The current Communication sends a clear signal to Member States to commit to an ownership of European industrial policy approach and to better coordinate their policies, without specifying the kind of mechanism foreseen to do it.  The European Commission has actually been monitoring improvements in national performances and the business environment through annual Member States’ competitiveness reports and the European Semester process. The current Communication states that, in the future, there will be a more detailed impact analysis of improvements in the business environment on Member States’ actual competitiveness performance. Moreover, the scope of annual reports will be extended to monitor the ability of national efforts to mainstream competitiveness aspects into other policy fields.

These are good steps on the way to a better coordination of industrial policy measures. Now, what we need is the commitment of Member States to act together.  Therefore, we expect them to sign up to an agreement between each other to meet the 2020 manufacturing target and to put forward the mechanism and rules for the implementation and governance of European industrial policy.

From Industrial Revolution to Industrial Renaissance

The Commission has made tremendous efforts over the last years to highlight the importance of manufacturing for growth and jobs in the post-crisis era. One of the seven flagships of the Europe 2020 Strategy has been dedicated to industrial policy.  The Communication in 2010 spoke about a new Industrial Revolution and reindustrialization of Europe whereas the new Communication throws in the expression ‘Industrial Renaissance’.  Competitiveness reports and numerous studies carried out by the Commission have put forward a comprehensive analysis of factors underlying Europe’s competitiveness as well as policy measures needed to adapt to global competition. The rhetoric about the revolution and renaissance has been successful in building consensus among the stakeholders. The EU Institutions and Member States agree on the need to re-industrialize Europe and it is time to agree on how this will be done and how roles and responsibilities will be shared.

Global competition is getting fiercer and the clock is ticking. There are serious indications showing that Europe has no time to lose. After being hit by the 2008-09 economic meltdown, the machine tool consumption in Europe has hardly recovered and today, it still remains 30% below pre-crisis levels. This is a sign that some factories have disappeared from Europe whereas others have suspended equipment investments which are key to achieving productivity growth. Investments in advanced manufacturing systems provide a good indicator when carrying a health-check of manufacturing. “More than ever, it is urgent to invest in manufacturing if Europe wants to get serious about achieving the reindustrialization objective.” concludes Filip Geerts.

Links: European Commission press release - 22/01/2014

* Advanced manufacturing technologies for clean production, sustainable industrial and construction policy and raw materials, clean vehicles, bio-based products, key enabling technologies, and smart grids