As the EU gears up for a big refresh after May’s elections, there is growing consent among business leaders that incoming policymakers should refocus attention and resources on industrial policy, particularly in the continent’s most valuable sectors.
Industry is responsible for about a quarter of Europe’s gross domestic product (GDP), according to European Commission figures, and it provided about 50 million jobs in 2017. But following the financial crisis, Europe lost 4 million such jobs and only 1.6 million have been replaced since 2013, according to the IndustriAll European Trade Union.
Notable sectors include aerospace and defence, which employs over a million people directly and indirectly, as well as the steel and automotive industries, which sustain more than 10 million jobs between them.
Challenges loom large though as Europe struggles to maintain its competitive edge on a global level. Shifting economic trends, climate change and digitalisation have already dramatically changed the industrial landscape.
Business leaders have consistently urged Europe’s policy- and lawmakers to ensure an industrial framework in which the continent’s countries and companies can work together in order to survive and thrive.
Innovation funding and research & development, as well as the fledgeling European Defence Fund (EDF), are set to play a significant role in that quest.
In March, EU negotiators agreed to set aside 35% of the bloc’s research budget for clean energy research and innovation.
The European Commission has proposed boosting the flagship Horizon Europe programme from the current €78 billion to €100 billion under the bloc’s next long-term budget period.
But the Horizon programme’s advocates will still have to argue their case for raising the size of the fund during what are expected to be fierce and protracted negotiations on the overall budget later this year.
“Investing in research and innovation is investing in Europe’s future, in knowledge and new solutions. That is why we set a new level of ambition to deepen Europe’s innovation capability, provide lasting prosperity and preserve our global competitiveness,” said EU R&D chief, Carlos Moedas.
In April, members of the European Parliament also gave the green light to the EDF, which is set to benefit from €13 billion under the next long-term budget, if the budget is approved.
The fund aims to strengthen Europe’s defence industry and reduce duplication in defence spending by co-funding defence research with member states.
Visions of the future
Attention is already being paid to where industrial policy will fit into the structure of the next European Commission and whether its oversight will be entrusted to a representative from one of the bigger and more influential member states.
The current Commissioner tasked with the portfolio is Poland’s Elżbieta Bieńkowska, who is also responsible for the internal market and entrepreneurship matters.
EU officials have told EURACTIV they expect the next Commission chief to appoint a vice-president solely for industry and use the current model of the Energy Union portfolio as a yardstick.
Under Slovak Commissioner Maroš Šefčovič, issues like climate action, energy, environment and transport were all grouped into one team, tasked with making the EU as energy independent and green as possible.
During a final annual stocktake on 9 April, the EU executive insisted that its Energy Union efforts had been largely successful and that it could essentially be considered as “completed”.
If industrial policy were to be given the same treatment, areas like energy, competition policy and research & development could all find themselves under the same banner and reporting to the same coordinator.
How industry is treated by the next Commission will largely depend on who heads the EU executive by the end of the year. The industry-friendly European People’s Party is in pole position to nominate a candidate, given the current polls across Europe.
The EPP has chosen Manfred Weber as its candidate under the Spitzenkandidat system but if EU leaders decide to ditch the experiment, first used to elevate Jean-Claude Juncker to the top job in 2014, former internal market Commissioner Michel Barnier could just as easily find himself in the running.
Other candidates, like ALDE’s Margrethe Vestager, have championed their industrial credentials lately, while the Greens’ Bas Eickhout and Ska Keller have reiterated the need to align strategies around green policies, a ‘Green New Deal”.
Giving the capitals what they want
Industrial policy is firmly on the minds of national leaders too. At a March summit, they called on the Commission to “present, by the end of 2019, a long-term vision for the EU’s industrial future, with concrete measures to implement it”.
Its conclusions also urge the Commission to “address the challenges European industry faces, touching upon all relevant policy areas”.
The EU executive has in recent years built up a reputation of giving the European Council what it asks for, with its November 2018 long-term climate strategy for 2050 a case in point.
On Wednesday (30 April), the Commission gave a taste of what industrial players could expect from its forthcoming “vision” in a strategic document released ahead of an informal meeting of EU leaders in the Romanian city of Sibiu.
The text insists that a new “modern” industrial policy would “build on the single market and focus on strategic value chains”. It also adds that the EU “should develop new tools” to combat state-supported companies that distort the internal market’s level playing field.
It remains to be seen if this will involve a reform of the bloc’s competition policy, which came under heavy scrutiny earlier this year when the Commission blocked a merger between France and Germany’s rail giants, Alstom and Siemens.
Paris and Berlin both admonished the EU executive for nixing the tie-up, which they claimed was necessary to combat China’s alleged ambitions to enter the European market, while top industry heads like former Airbus CEO Tom Enders called it a “cause for concern”.
As a response to the failed merger, German economy minister Peter Altmaier and French counterpart Bruno Le Maire launched a joint industrial manifesto, which calls for competition rules to be updated for a new generation.
Altmaier conceded in early April that “this cannot be done just at member state level. It must be conceived at European level and it has to be the European Commission that organises and guides the debate.”
Advocates of these so-called ‘European champions’ will likely draw on successful examples of industrial policy in action, including aerospace and defence giant Airbus, which this year celebrates its 50th birthday.
The aircraft builder also appointed a new CEO this year and during his first day in the job, Guillaume Faury said Airbus was founded on a “new, simple yet bold idea: extensive industrial collaboration between several European countries”.
That business plan, which relies heavily on free movement of goods and workers, has allowed the Toulouse-headquartered company to become a world leader in aeronautics and defence.
Such has been its success that ‘Airbus’ is now used as a byword for other large-scale plans in fields as diverse as artificial intelligence, batteries and railways. But Airbus executives are keen to point out that its success should not be taken for granted.
At a recent event in Brussels, Altmaier hailed the A380-builder as “a good example of what can be created from a carefully crafted industrial strategy”, while EU competition chief Margrethe Vestager praised it “for creating competition where we didn’t have it before”.
But current and prospective ‘European champions’ will hope that any future EU industrial vision firmly takes into account countries in Asia and the Americas, helps build a level playing field, and exports Europe’s standards to the rest of the world.
EU trade policy is one of the key tools that facilitates this, but certification organisations like the European Union Aviation Safety Agency (EASA) also play a significant role.
A test case for industrial policy?
European aspirations to become a player on the global battery market, for example, have doubled down on standards as their unique selling point, given that it is nearly impossible to compete on price with Asia’s already-established industry.
The European Battery Alliance was set up over a year ago to try and boost Europe’s 3% battery market share. In April, the Commission gave the scheme a clean bill of health but concluded that it is time to “accelerate efforts”.
Setting green standards for batteries is the next step and the Commission is working with relevant authorities to finalise standards by the autumn, according to Vice-President Maroš Šefčovič.
At a press conference after the Alliance’s third meeting on 30 April, Belgian economy minister Kris Peeters said “the debate about industrial policy has so far been too abstract. This is different. The Alliance is a tangible measure.”
It remains to be seen whether the EU will use the fledgling Alliance’s template in its vision for future industrial policy.
During a first stock-take of the Battery Alliance in early April, Šefčovič concluded that “it is an example of 21st-century industrial policy”, suggesting that the Commission will favour sector-by-sector policies that interact with one another.