European Industrial Policy

1
Chapter 6

• European Industrial Policy

2
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

3
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

4
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

5
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

6
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

7
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

8
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

9
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

10
(No Transcript)
11
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

12
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

13
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

14
Rationale for EU intervention

• Will the market deliver?
• High costs and risks of RD
• Avoids duplication
• Europe falling behind
• RD per head in Europe - half that of Japan and
  60 of US
• Reduce problems arising from different standards

15
(No Transcript)
16
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?

17
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

18
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

19
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

20
(No Transcript)
21
(No Transcript)
22
(No Transcript)