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17.4.  Appraisal and outlook of EU industrial policy

    Generally speaking, the EU intervenes in the industrial sector only to create an environment conducive either to the expansion of undertakings throughout the internal market (enterprise policy) or to the activity of certain industrial branches which present common problems, to enable them to cope better with increased competition at European and world levels (sectoral policy).

    Although disparities remain between Member States' industrial structures, we are nonetheless in the presence of a parallel development of the various parameters in the secondary sector. The completion of the single market, in 1992, provided a fillip to the restructuring of European industry. The removal of the physical, technical and fiscal barriers to intra-European trade gave rise to strengthened trade and therefore bolstered competition within the European Union. Thanks to the removal of border controls and technical trade barriers, businesses can now supply a single product for the whole of the single market. Manufacturers no longer have to produce for fifteen separate markets. This situation increases competition enormously in the internal market. Greater competition results in the alignment of national suppliers' prices on those of foreign suppliers, who penetrate markets that had previously been protected. In the short term that squeezes the profit margins of undertakings which had been protected and/or enjoyed monopoly situations. Some of them are even forced to leave the market.

    The elimination of the least competitive producers enables, however, those firms which survive to expand on the market. They are thus able to: better exploit and maximise their production capabilities, or even increase them (economies of scale); strengthen their domestic efficiency by restructuring and concentrating their activities and by improving allocation of human, technical and financial resources; improve their organisation and the quality and variety of their products, and innovate both as regards the production process and the products offered. This competitive pressure has already caused the wind of change to sweep the Union's industrial fabric. The real chances of European industry are in the sectors of defence, aeronautical and energy saving technologies – under the condition of cross-border ventures.

    Entrepreneurship and a well-functioning internal market are vital to growth and job creation. The regulatory environment should encourage entrepreneurial activity and make it as simple as possible to set up new businesses. Creation of a favourable business environment implies the elimination of superfluous and niggling regulation. The internal market must be made as unbureaucratic as possible. Both the Union and the Member States must therefore facilitate market entry and exit for businesses of all sizes, improve access to finance and know-how, improve regulation and reduce administrative burdens. The regulatory framework should be clear and predictable, while regulation should be limited to what is strictly necessary for achieving clearly-defined objectives. The common enterprise policy aims at this end, but it is not certain that the national policies follow suit. Member States should transpose faster European legislation on the internal market and related subjects into national legal and administrative practice. On the other hand, company law and corporate governance practices need to be modernised in view of the growing trend for European companies to operate cross-border in the internal market, the continued integration of European capital markets, the rapid development of new information and communication technology and the enlargement of the EU to new Member States, most of which have not a long-established business culture. Industrial policy, which is an important pillar of the Lisbon strategy, is anchored in the EU's drive to ensure a well-functioning internal market, to provide fair conditions of global competition for European enterprises and to respond to environmental challenges.

    The Treaty on the functioning of the European Union declares that the Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union's industry exist (Article 173 TFEU). In fact, there has been a substantial improvement in industrial competitiveness in recent years, due to the combined effect of the completion of the internal market and of the efforts made on restructuring, investment and productivity. But, European companies have yet to overcome the handicaps with which they contend as a result of their previous isolation inside closed markets. In order to overcome these handicaps, the EU must promote services to industry, develop transnational industrial cooperation, reinforce competition and modernise the role of the public authorities. Common legislation and institutions must improve corporate financing by eliminating institutional and regulatory barriers to the development of venture capital so as to facilitate risk-taking.

    Generally speaking, the European policy for the improvement of the business environment is based on the open method of coordination and on voluntary tools, such as the exchange of best practices in order to enable the Member States to learn more efficiently from each other. In fact, Member States have made significant progress in implementing the recommendations of the European Charter for Small Enterprises and are increasingly acting as sources of mutual inspiration and good practice. One may ask, however, if the intergovernmental cooperation may by itself face the new challenges of European industry.

    Globalisation, geared to the opening-up of world markets, the mastery of technology, speed of action, innovation and intangible investment, is an opportunity for Europe to seize, and one to which it must adjust without delay. European industries must adapt their structures, production and marketing methods to the conditions and opportunities existing worldwide. On their side, European institutions could better promote access by European companies to the world market. An open but vigilant policy, based on the rigorous enforcement of international rules agreed in the framework of the World Trade Organisation, is a necessary complement to internal market opening [see sections 6.2 and 23.4]. Identification of precise problems and specific action to remove them can make a significant contribution to improving the outlets for the European industries [see section 23.3].

    Last but not least, the European Union must move faster towards the "information society" by creating a common information area. This consists of several indivisible elements: trans-European infrastructure (terrestrial cable infrastructure, radio communications networks and satellites); the basic telecommunications services, interactive access to databases and training of the users, that is of the general public, to optimal use of information and communication technologies. If the e-economy is not rapidly developed by the Union and the Member States, the European Union risks not to attain the strategic goal for the decade, set by the Lisbon Summit in 2000, to become the world's most dynamic and competitive knowledge-based economy. To promote electronic commerce in Europe, the EU and the Member States should aim at narrowing gaps and addressing mismatches in e-skills, explore the most effective means of assisting the cross-border mobility of ICT and e-business professionals and encourage learning and training for e-skills.

    In the telecommunications sector, the exposing of former monopoly operators to competition and the introduction of new entrants to this market has led to an increase in productivity and to lower charges for users. The European measures for telecommunications mean that the same rules apply to all converging technologies, creating more competition and a level playing field in Europe. Thanks to the opening up of the telecommunications markets, the coordinated measures in the field of mobile and wireless communications systems, Europe is a prime mover in digital multimedia and the management of optical communications networks and services and mobile communications. Technological convergence affords all business and citizens new opportunities for access to the information society. The common information area that is created through telecom liberalisation is not only an indispensable requirement of the productivity and competitiveness of European industry, but is also an important factor for economic and social cohesion [see section 12.1.2].

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