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Industrial competitiveness: Europe can do better

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Competitive enterprises are the foundation of economic success. In 2013, Member States improved their business environment, exports and sustainability, but many roadblocks still remain – particularly for industrial competitiveness. For example, the cost of energy is increasing in almost all Member States, while decreased investment and access to finance are further contributing to the deindustrialisation of Europe. Only by overcoming these hurdles can the EU achieve the sort of industrial competitiveness it needs in the 21st century.

European industry has bounced back from the depths of the years-long malaise caused by the global financial crisis. But given the severity of the slowdown – EU industry has lost 3.8 million jobs since 2008 – there is still work to be done to get EU industry back to, and beyond, pre-crisis levels.

 

According to Commission analysis, industrial competitiveness performance is determined by five key areas: innovation and sustainability; business environment, services and infrastructure; public administration; finance and investment; and skills. Using these criteria, three rough groups emerge in the EU:

  • The consistent cluster performs well in all areas of competitiveness. This cluster includes Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Spain, Sweden and the United Kingdom.
  • The moderate cluster performs well in some competitiveness areas but faces difficulties and deterioration in others. The countries in this cluster are Cyprus, Greece, Italy, Malta, Portugal and Slovenia.
  • The catching-up cluster includes Member States that have significant challenges in many areas, but are quickly improving. These countries are Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.

The slowness of structural change is one of the most daunting problems the EU faces today. For example, while most Member States have improved in innovation since 2008, it seems that innovation convergence within the Union has stopped. In other words, a number of less innovative Member States are not keeping up with the most innovative ones.

Low investment is another of Europe's main problems, with EU investment levels having fallen by more than 3 % of the EU GDP, from 21.1 % in 2007 to 18 % in 2012. Moreover, investment has remained unresponsive to policy measures, making it difficult to predict when it will recover.

Due both to tightening credit standards and banks’ ongoing deleveraging, access to finance is also still difficult in many Member States. Moreover, energy prices vary considerably throughout the EU. Not surprisingly, the nations with the most consistent industrial performance have below-average electricity prices.

Although we cannot deny that big challenges lie ahead across the EU, European exports to third countries have grown. Indeed, internationalisation efforts have produced positive results, particularly in the sectors of high-tech goods and knowledge-intensive services. But there is bad news, too: Internal EU trade is growing more slowly than external trade. This slowdown is particularly problematic to the countries most affected by the crisis, which are increasingly losing importance as suppliers to the EU economic core.

The way forward

Despite recent struggles, the European Commission is committed to achieving the ambitious target that industry will account for 20 % of GDP by 2020. Based on its 2013 competitiveness analysis, the Commission suggests several priorities for the Member States and the Union.

Firstly, we should make it as simple as possible for firms to carry out their daily business and reduce the costs of operating in Europe (e.g., energy and raw materials). Secondly, we need to continue working on improving access to finance and capital markets for firms, particularly SMEs. Programmes like COSME and the single portal on EU finance are designed to spur investment and, in turn, promote EU industry. Thirdly, we need to continue opening markets for European firms both within the internal market and in third countries, as we have been doing in our Mission for Growth and information platforms, such as the Europe-China Standards Information Platform (CESIP).

To foster intra-EU trade, the notification procedure under Directive 98/34/EC enables enterprises to raise concerns about new national regulations in other Member States. In addition, the New Approach Notified Designated Organisations (NANDO) database provides conformity assessment services to help ensure that industrial products conform to regulations both inside and outside the EU.

 

"We remain a long way from the 20% target for 2020. The Commission has adopted several initiatives to address high energy prices, difficult access to credit, drop in investments, lacking skills and red tape. And we will come forward with an industrial initiative to boost action in this field. This should be a catalyst in view of the February 2014 European Council in order to significantly strengthen the growth and competitiveness for industry."
European Commission Vice-President Antonio Tajani

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