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 s resources move out of manufacturing industry to the various service sectors, the ongoing restructuring of European businesses is often misinterpreted as a process of de-industrialisation. This is not the case, but rather the outcome of businesses adapting to changing demands, by innovating and incorporating more technology. At the same time, competition from developing economies does present a real threat of de-industrialisation in certain labour-intensive markets – for instance, in mining, shipbuilding, footwear, leather goods and textiles. Some sectors in individual Member States are so badly affected that they face extinction. The situation is often not clear, however, and this has led to concerns expressed at the highest levels of government – just how much of a problem in the EU is de-industrialisation?
This recent policy Communication(1) answers this question, and serves as a wake-up call to policy-makers by emphasising the importance of industry as a motor for jobs, innovation and growth in the economy. It also comes as a timely reminder of the opportunities offered by enlargement, coming within a few days of the accession of ten additional Member States to the Union. It sets out to assess the extent and threat of de-industrialisation in Europe, and whether industry is sufficiently competitive to meet the challenge. As a result, the Commission has scrutinised how EU policies such as trade, tax, competition, and regional development solutions can be mobilised to create an attractive environment for the activities of EU industry and its future development.
Policy in action
The Communication underscores various measures and initiatives that are already under way to benefit industry. Peter Sandler, European Commission spokesman on Enterprise and Information Society, explains its three principal messages. “The first is to make sure that we are not strangling industry with red tape. We have concrete proposals to evaluate the overall impact of legislation on different industrial sectors. For instance, safety regulations in the car industry often require vehicles to be redesigned, thereby adding weight and driving up fuel consumption, making it more difficult for them to reach EU environmental standards. Therefore we need to look at the cumulative effect of legislation.
“The second is to make sure all our different policies – from the internal market, to our approach to taxation, to the research funding available at European and national level – are aligned and work in a way which helps industry become competitive. Finally, we need to work with individual sectors to establish their competitiveness agendas. Which policies are actually working, which ones are not? What are the barriers we need to overcome? We have already done a lot, particularly in high-tech industries and pharmaceuticals – where there has been major legislative reform.”
Opportunities
The enlargement of the Union should mean that many lower-paid manufacturing jobs that might otherwise have been lost to the EU could go to new Member States with low labour costs. Industries in more highly developed areas of the EU can compete by adding value to production, with more highly skilled, speciality types of activity – for instance, in clothing for professionals like doctors and nurses, or in speciality fabrics such as fire-resistant materials. Another example is shipbuilding where much of the construction of bulk carriers and oil tankers has been lost to Asia, yet the EU still holds its own in cruise ships.
Certain areas of southern Germany that have been heavily dependent on the automotive industry have suffered badly from downsizing, with much production exported to other countries. The region is now in the process of reinventing itself, through relying on its high skills base in engineering and technology to find ways of attracting a range of high-tech industries. The mobile phone company, Nokia, in Finland, reassigned the manufacturing and assembly of its handsets to Hungary – where labour costs are low – but retained its highly knowledge-intensive activities, such as systems and software design, at its original site.
“There are benefits for the EU as a whole if companies can take advantage of the cost differences among Member States,” says Sandler. “Regional funding needs to be redirected, as does industry itself, in those areas that lose out. At the same time, this is only a temporary advantage for the new Member States – the longterm goal for the whole of the Union must be to increase our knowledge base and add value to keep production within Europe. The regions most affected in the short term should not try to stem the tide or fear that their businesses will take advantage of an enlarged EU. On the contrary, it will pay them in the long term to co-operate in this process.”
(1) ‘Fostering structural change: an industrial policy for an enlarged Europe’, COM(2004) 274, downloadable from http://europa.eu.int/comm/enterprise/
enterprise_policy/industry/2004communication.htm
Contact
- P. Sandler, European Commission,
Enterprise and Information Society
Tl. +32 2 296 8645
Fx. +32 2 296 3038
peter.sandler@ec.europa.eu |
COMPETITIVENESS