Written by Philippe de Backer, Belgian MEP with ALDE, member of the Committee on Industry, Research and Energy at the European Parliament
European industry is in crisis. Production is 10 percent lower since the economic crisis began in Europe and over three million industrial jobs have been lost. Real actions are still missing, despite declarations, reports and recommendations to re-industrialise Europe. The real question is: how can we in Europe cope with global competition and creative destruction and how will the EU and its member states act on the issue to really boost European industrial competitiveness?
“A stronger European industry and integrated and coherent industrial policy are key for growth and jobs in the EU”, the new Commission president Jean-Claude Juncker put forward in its inauguration speech six months ago. Expectations were high, the estimated results low.
There are three main challenges currently facing Europe’s economy: 1) weak economic growth, 2) globalization and digitalization, 3) megatrends (climate change, population explosion).
But the problems many industrial sectors face today in Europe do not result from the financial or Eurozone crisis. On the contrary, the crisis is the result of too little Europe, a lack of a unilateral energy, climate, digital, capital market and environmental policy which are hurting European industrial competitiveness. The lack of a genuine single market is hurting many industrial sectors in Europe.
On top of that, we see a lack of structural changes in national economies and a delayed response of many Europeans to the information revolution. It is changing Europe from a leader towards a follower. Europe is in the global context no longer an attractive region.
Why does Europe has no Samsung, Apple, Google or Twitter? The lack of a European response to the rise of ICT and Internet is weakening Europe’s position, because the digital rise and changes are affecting various industrial sectors. Europe is losing the battle for ‘the digital native’ to Asian and American high-tech giants.
Furthermore, the switch to renewable energy that is taking place in many European countries is not being managed in a market-driven and cost-effective way. This deepens Europe’s competitive disadvantage. Europe cannot reverse climate change by itself, or choose an energy policy which isolates it from external shocks such as shale gas revolution.
Overall, Europe’s economy is slightly transforming into a post-industrial service economy. Losing productions to regions outside the EU as China, Brasil or the USA is far from a new phenomenon, because there are more comparative advantages for mass production to be found there.
This does not mean that it is over and out for Europe. On the contrary, we need a new dynamic for Europe. This does not mean Europe’s national economies don’t have new opportunities. Even of more importance for the European industry is our ‘immaterial capital’ that is driving our industrial production and growth. Research and development, design, creativity, skills,… Why to worry about industrial production when we can have an industrial renaissance based on activities that bring greater value and that we already bring to the table?
The European Commission has estimated that for every hundred jobs created in industry, at least 60, and perhaps 200 new jobs were created in the rest of the economy. This shows that a vital element for renewal is research and innovation. But innovation requires entrepreneurship. Innovation does not simply fall from the sky, nor can it be imposed. It is driven by people, by their commitment, creativity, dedication and motivation to be the best and succeed. Also policy makers need to make changes.
In order to regain economic growth, we need three things.
In the first place, we have to cut the regulatory burden on industrial production. Industry and policymakers need to agree on pro-growth and pro-industry regulations that allow the market-led development of new technologies.
Next to that, we have to develop new products and services. Public investments in R&D need to be supportive towards areas with the highest economic risks and the greatest potential for new products and services. That means ensuring the Horizon 2020-programme stimulating cutting-edge research.
Last but not least we have to attract more investments to Europe. Europe must create a more open regeluation and develop more risk-appetite. In doing so, we can not only stimulate the human capital we have, we can also make sure the human capital stays in Europe and not flees away to the United States.
The industrial renaissance of Europe will not be achieved through old-style industrial policies which tried to create state-led industries through the use of subsidies. Nor will it be assisted by protectionism of any kind. Fundamental change must be embraced and not hindered. On top of that, we must open our eyes to the interconnected world. This is a prerequisite to keeping European industry competitive and its economies prosperous.