chapter 6 european industrial policy. competitiveness eu share of global economy ability to generate...
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Chapter 6
European Industrial Policy
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Competitiveness
• EU share of global economy• Ability to generate growth and sustainable
employment• Based on efficient, innovative businesses• Competitiveness is not static – change is
key• Role of industrial policy is to aid this
process
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What is industrial policy?
• All those policies which impinge on the structural adjustment of industry with a view to promoting competitiveness
• Provision of a horizontal framework in which industry can develop and prosper by remedying structural deficiencies and addressing areas where the market mechanism alone fails
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Approaches to industrial policy
• National versus supranational policies
• Interventionist versus liberal
• Clash of cultures– France - national champions– Germany - state as a catalyst– UK - ultra-free marker
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Types of industrial policy
• Horizontal or generic - affects all sectors
• Negative - slows process of structural change
• Sectoral specific - steel, textiles, IT, etc
• Positive - accelerates process of change
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Evolution of EC policy - 1980s
• Policy shift - emerging liberal consensus
• Impact of SEM - integration as a cure– create environment for firms to compete and
restructure– increase rule enforcement– re-commitment to free and fair trade– limits to national champions - rise of
European champions
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Evolution of EC policy - 1980s
• Supremacy of markets
• collaboration and co-operation (consistency with market?)
• greater horizontal emphasis
• emergence of network economy
• dilution of national policies - convergence of liberalism at state levels
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Industrial policy in the New Millenium
• Policy more passive and based on:– promotion of permanent adaptation to
industrial change within open, competitive markets
– coherence with other measures– horizontal measures
• Key theme: improved functioning of markets to stimulate private sector investment
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New themes
• Industrial policy has become explicit industrial competitiveness strategy
• investment in human capital
• non-mobile factors of production
• co-operation at pre-competitive stages of production
• impact of globalisation
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Porter (1990)
• Competitiveness is determined by intensity of competition
• This is aided by clusters
• EU policy has directly sought this
• Put firm at centre of strategy
• Policy addresses market failure
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Maastricht and industrial policy
• Explicit EU competence for the first time• Industrial policy aims to:
– accelerate the adjustment to structural change (i.e. positive industrial policy)
– promote business development initiatives - SMEs
– promote co-operation between enterprises– dissemination of outcomes of research and
development policies
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Examples of industrial policy instruments
• Research and development policy
• Competition policy• Trade policy• Export promotion• Education and
training• Inward investment
schemes
• Fiscal policy• Infrastructure
development• Environment• Labour market policy
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Rationale for EU intervention
• Will the market deliver?
• High costs and risks of R&D
• Avoids duplication
• Europe falling behind
• R&D per head in Europe - half that of Japan and 60% of US
• Reduce problems arising from different standards
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Problems of EU and collaborative strategy
• Competition problems?
• Different working methods and cultures
• Higher costs at early stages
• Bureaucratic procedures
• Role for SMEs
• Marginalized by globalisation
• Value of outcomes?
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Globalisation
• Limits role of state to:– supporting scientific and technological
infrastructure - e.g. dissemination– support competition and fair play– alleviate institutional failure - education and
training– support for strategic technologies where state
lags behind– negotiation of common trade rules
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Globalisation (cont.)
• Requires policy which aims to develop locations in which industry can flourish rather than policy to develop national industry - i.e. ownership not important
• national champions irrelevant
• horizontal-generic policies dominant
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Evidence
• In areas EU is emerging as success:
- mobile phones (Nokia and Ericsson)
- Pharmaceuticals (losing fragmentation)
- Aerospace (Airbus is challenging Boeing)
But more work needed in hi-technology and information industries
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