Sectoral industrial policy is largely linked with commercial policy. The commercial policy measures that have the greatest consequences for industrial sectors are manipulations of the customs tariff, anti-dumping measures, trade agreements and various export incentives. By virtue of customs union, most of those measures are already in the hands of the European institutions [see sections 23.3 and 23.5]. Other sectoral policy measures are the incentives used by governments to modernise and guide national industries, such as grants to certain research bodies, to documentation centres and centres for the dissemination of knowledge, to productivity centres and to vocational training centres. Some such measures are already centralised at European level. The others require European coordination, inasmuch as they may disturb conditions of competition on the single market.
Also still in the hands of governments are the most direct and best-known sectoral measures, i.e. aids of every kind: grants, loans, interest rate subsidies, etc. Aids for the improvement of certain sectors and aids to "infant industries" are characteristic examples of sectoral measures. The main grounds for them are employment promotion, regional development or even national prestige where important undertakings, regarded as "flagship companies", are involved [see section 15.5.3]. Since sectoral aids and the conditions under which they are granted vary greatly from one EU State to another, they may affect trade between Member States and distort or threaten to distort competition. Therefore, the objective of industrial policy should be to create the conditions that allow better control of such aids. Moreover, the effectiveness of the Union's policies to promote greater cohesion could be improved by a progressive reduction in aid intensities in the central and more prosperous regions.
It is for that reason that Articles 107 and 108 of the Treaty on the functioning of the EU (ex Articles 87 and 88 TEC) provide for Commission control of the aids which States grant directly or indirectly to certain undertakings or the production of certain goods. Such aids must be notified to the Commission, which has the power to authorise them or prohibit them in accordance with the criteria laid down in the Treaty or under secondary legislation [see section 15.5]. Thus, although the most powerful instrument of sectoral industrial policy is still in the hands of the governments, the Commission may prevent such national aids from distorting conditions of competition or running counter to the objectives of the EU's industrial policy.
The best way to prevent individual sectoral measures by governments that are harmful to the common interest and at the same time to restructure European industry is the common sectoral policy. This has developed in the most vulnerable sectors at international level, either because the markets are saturated (steel, shipbuilding, textiles) or because they are not yet well developed at European level (aeronautics, information industries, telecommunications). We shall examine EU policy in those sectors below.