In 2010 the EU’s share in global trade with mechanical engineering products amounted to 37.2%, which is around 3% above its share in 2000. This development contrasts to the performance of the US and Japan, whose shares fell from 25.6% to 17.4% and from 21.3% to 15.6%, whereas China's share increased to 13.0% from only 3% in 2000.
These are some of the results of the new Study on the Competitiveness of the EU Mechanical Engineering Industry, presented in Brussels today. This comparison of the EU with its most important competing nations underscores the strength of its Mechanical Engineering enterprises (ME) – well-established suppliers in the global market – that successfully expanded their market shares although emerging competitors tapped into the market.
Mechanical engineering is vital for the EU's current account balance
The EU mechanical engineering industry (ME) does not only provide 3 million jobs within the EU, but contributes also significantly to a sound current account balance of the EU-27. In 2010 the EU trade deficit was 156.7 bn € for manufactured goods, but for mechanical engineering the EU reached a surplus of € 119, 2bn.
Europe: A global heavyweight among major competing economies
The most important competing economies for the EU ME are Japan, China and the US. The EU ME is by far the largest industry as compared to the US and Japan that only came up to 65.4% and 42.0% respectively of the EU ME’s value added in 2010. However, the Chinese ME has caught up rapidly over the past decade and – as measured by value added – is on par with the EU.
The EU ME-industry faces a major productivity challenge
Japan is in the lead in terms of labour productivity, closely followed by the US. Third in this ranking is the EU-27, Similar to labour productivity, wages vary among competing economies. The US ME have the highest wages, with wages per employee about 20% above the EU average. Despite a much higher labour productivity, Japan’s wages are only close to those in the EU. China lags far behind in wages per employee, at 11% of the EU average.
New Member States will face growing competition from China
Current Chinese labour productivity levels are comparable to those in Poland, the Czech Republic and Slovakia, whereas labour costs in these new Member States are much higher. This gives Chinese enterprises an edge and challenges the new Member States that are more focused on production than on R&D, design and marketing. They will therefore experience growing competition from China.
Employment more resilient than in other industry sectors
EU ME employment development has been better than for total manufacturing, despite the fact that ME was hit harder by the crisis than most other EU-industries. Over the period 2000 – 2010, overall employment for the ME showed a decline with 2.6%, in the US, 3.3% in Japan, but only 1.5% in the EU.
Outlook - The strengths and opportunities of mechanical engineering
In the area of technical regulations, the EU with its internal market is a model for others with regard to its openness to international co-operation and its close contact with international organisations.
The growth momentum of the BRIC countries, above all China, will cause a shift of economic activity away from Europe to Asia.
Even though all individual countries and the EU-27 are able to grow, China will be clearly dominating the world output of mechanical engineering products by 2025.
Nevertheless, prospects for EU ME are bright, as the economic growth potential is significant.
Recommendations to promote the ME sector
A set of recommendations to promote the mechanical engineering sector comprises measures in the fields of the industry's organisation and structure (e.g. a stronger use of clusters for SME development), market regulation (e.g. improved market surveillance), financial markets (e.g. better incentives for investors to fund ME companies), labour market (e.g. improved mobility), innovation environment (e.g. investment in technologies with lowest CO2 abatement costs) and trade policies (e.g. bilateral trade talks with partners strategic for ME). For the complete list, see MEMO/12/204.
Background - Mechanical Engineering Industry
The Mechanical Engineering Industry is a very wide and diverse sector. It mainly covers machinery and equipment, machinery for the production and use of mechanical power, except aircraft, vehicle and cycle engines, agricultural and forestry machinery, machine tools and other special purpose machinery. With more than 20 subsectors that face quite different market environments it is one of the most heterogeneous industry sectors.