A fallen taboo. The words "industrial policy" have been taboo for a long time in the European Union. It was only in the early 1990s that they were readmitted into the Community language, following a lengthy quarrel born from the fact that, according to Germany and a few other Member States, these terms evoked the "five year" plans of the Soviet Union and other forms of centralised economies. Given that no EU country wanted such a slide, it was not difficult to agree on different terminology; for example, in the Commission, the Directorate General for Industrial Policy became the "Business" Directorate General, and everyone was satisfied. Today, "industrial planning" imposed by public authorities, with production objectives, simply doesn't exist anywhere anymore; no equivocation possible, the notion is out-of-bounds. In fact, Europe has always conducted industrial policy, but under other names. Approval or otherwise of a merger, that's industrial policy, as is controlling State aid, directives on company law, standards relating to worker consultation, rules regarding polluting waste or recycling. Depending on the case, these measures come under competition policy, or internal market policy, or social policy, or even that of the environment; but they constitute measures of industrial policy. The flaw of such a decomposed policy was its lack of coherence and comprehensive vision, emphasis being placed on one aspect or another depending on the pressure of events. Priorities were one day determined by an environmental disaster, another by scandals in company governance, a third day by the social consequences of certain types of behaviour.
From Chancellor Schroeder to President Prodi. The "communication" that the European Commission approved at the end of last year on "Industrial Policy in an Enlarged Europe" attempts to define the elements of a comprehensive strategy, based on a principle that is not explicitly set out but that could be summarised as follows: industrial policy must take full account of the requirements of other European policies (environmental, social, competition, etc.), but the latter must take account of industrial requirements. Nobody has forgotten that last year this problem was the subject of lively polemics. Chancellor Schroeder had, notably, urged the Commission to take further account of the role of industry in the economy and society (especially employment). President Prodi's response constituted an act of faith in this irreplaceable role, placing emphasis on manufacturing industry which produces material goods intended for the populations and rejecting any idea of Europe being transformed into a "service economy". This document recognises that services have increasing importance and weight, but at the same time it reaffirms that industry is the "source of European prosperity" and combats "the widespread, but erroneous, idea that manufacturing industry will no longer have a key-role to play in a knowledge-based economy or on an information and services society". It stresses to what extent manufacturing industry and services are interwoven. Most of the results of research are in fact exploited by industry, that which implements technological innovations by creating economic worth. A solid and efficient manufacturing industry remains essential.
The situation is positive overall. The most important remains, that is to say defining the content of the policy to implement. An analysis of the current situation undertaken by the Commission is positive overall: its conclusion: "European industry is, in many ways, modern and competitive". In most sectors, industrialists have made considerable efforts to bring their production infrastructures "up to standard" and to integrate new forms of organisations. Sure, the arrival of new large actors on the international stage (China, other Asian countries, certain South American countries, etc.) has somewhat reduced the EU's share in international trade, but this reduction is less than that suffered by the United States and Japan. The EU's share has gone from an average of 19.3% in the 1991/1995 period to 18.4% in 2002, whereas in the same period, the share of the United States slid from 15.1 to 12.1% and that of Japan from 12.2 to 8.2%. And in some sectors (automobile, aeronautics, certain telecommunication equipment) European manufacturers have become world leaders. The EU has a large trade balance in goods.
What is remarkable is that these results were obtained by facing the challenge represented by the "sustainable development" dimension, severing the relationship between production and polluting emissions. Investments into environmental protection are qualified as "substantial", and the Commission cites the following latest data: since 1985, industrial production has increased by 30%, but emissions of carbon dioxide have fallen by 11% and that of acidifying gases by some 50%. These gross figures certainly need completing by the comments of the "environment" Directorate General and some non-governmental organisations, but, on the whole they are favourable.
The weak spots. First black spot in this rosy picture: despite the remarkable results of some small Member States, productivity in the EU remains below that of the United States. Europe's trailing behind is especially sensitive in the services sector, but it also concerns the industrial sector. Investments in computer technology are considerable, but gains in productivity are slow in coming. These observations have led to a campaign in several industrial circles demanding tax advantages and other public measures, but the Commission is more inclined to refer to structural problems like: the fragmentation of certain services markets, obstacles that remain regarding geographic mobility, shortage of skills in certain category of jobs.
Second shortcoming: the number of European patents is much less than its main rivals, which automatically affects results in innovation. The Commission has drawn up seventeen "innovation indicators" and noted that the EU is trailing behind in most. On refining the analysis it notes that the EU "tends to specialise in medium or high-tech industries and in fully-matured sectors", but lags behind the United States, mainly, in sectors like electronics, bio-technology and nano-technology.
The root of these shortcomings lies in the lack of investment into research, which in the EU corresponds to 1.9% of GDP, against 2.7% in the United States and 3% in Japan. Romano Prodi has denounced this state of affairs on many occasions, insisting on the goal of "3% of GDP for research". It has, however, to be stressed that where Europe lags behind the United States it is essentially in areas of research financed by the private sector. Recent polemics in some Member States indicate that public research is the victim of sclerosis and bureaucracy, more than a lack of means. Spending better is more urgent that spending more, and the private sector must do its bit too.
Coherence remains to be defined. In the part of the document devoted to the future, the Commission's remarks on what industrialists themselves should do adds nothing to what they doubtless already know. They are urged to combine information technology, new management techniques and training the labour force, so as to substantially improve productivity. But what interests us, is knowing what could and should be specifically done at European level. The Commission first recalls the essential advantages that the EU already provides: a) the internal market widens outlets and facilitates trade; b) the single currency increases transparency and reduces the cost of transactions; c) the liberalisation in part achieved and in part planned of transport, telecommunications and energy improves the competitiveness of the user industries. In certain areas, progress is still required: the Commission has announced a comprehensive paper on company law (encompassing the sensitive area of "company governance") and says that the regulatory environment will be further simplified and improved.
But the most difficult element to get to grips with is coherence between the different policies that have a direct influence on company life and industrial competitiveness. The Commission stresses "the need to find the right balance between the three dimensions: economic, social and environmental". But it acknowledges that there is "no miracle solution" for establishing where this right balance lies. Regarding one of the most delicate and controversial aspects, competition policy, the Commission writes: "the nature and practical application of competition policy and industrial policy pursue their own objectives that need balancing in the decision-making process". It's not with that that we see any more clearly. According to the Commission, certain constraints imposed on industry by the concept of "sustainable production" are in themselves an element of growth, and it cites the recycling industry, renewable energies, consumer protection and social legislation, as consumer confidence is the foundation of stable demand and growth, environmental measures help companies acquire more competitiveness on the world market and to create new markets, and the social responsibility of firms enhances the consensus around the European social model. But the question of coherence and balance is not settled for that. All that the Commission can say, and we understand that, is that "the combination of adequate political instruments may contribute to reconciling apparently opposite political goals". And it's with wise modesty that it sees in its document a "starting point". Interested circles are invited to contribute to the process, and the Commission is considering drawing up a report at the end of the year on results secured and possibly launching further initiatives. Good work! (F.R.)