1. 1 European Industrial Policy 1. Defining industrial policy Summer School Koloceb 30/8 -2/9/ 2010 Guido Nelissen

2. Defining industrial policy Theoretical rationale behind industrial policy Tackling market failures (externalities): r&d, infrastructure, education, public goods, long pay back periods Tackling market barriers: information gaps (for launching new products, about cost structures of new activities, in case of long-pay back periods), coordination problems : setting-up a new activity requires the creation of new supply chain, Standards, ipr’s 2

3. Definition. All micro-economic instruments with a structural impact on companies and on the regulatory framework in which they operate Not static Past decades: very narrow interpretation  Evolution from interventionism to just creating the right framework conditions Today a wider understanding of the objectives of industrial policy has emerged  3

4. Industrial policy as a policy process in support of strategic collaboration between the private and the public sector mainly based on soft tools With the inclusion of environmental, energy (European climate plan), social policies (training, skills gaps, social management of change) 4

5. The building blocks 0.Industrial policy is NOT (although these policies affect industry) Macro-economic policy Income distribution Wage policies Industrial relations Land-use policies Price controls Environmental policies (generic) Sustainable development (generic) Cohesion policy (generic) Liberalisation of services 5 1.Creating the right framework conditions Establishment of companies Efficient public services Regional economic policies Competition policies (state aids – network industries) Internal market Corporate taxation Company finance Environmental policies with direct impact on industry Transport and Logistics Energy

6. 2. Horizontal industrial policies Research and development Innovation IPR’s Entrepreneurship Risk capital Skills & human capital Managing restructuring Public procurement Trade policies Energy (competitiveness aspects) Sustainable production Industrial infrastructure Standardization Impact assessments 3. Sectoral policies Sectoral policies/action plans (sectoral applications of horizontal tools) Cross-cutting policies: defense, ICT Regional policies (sector- specific) Cluster policies Lead markets Innovation Technology platforms/JTI’s Actions for a low-carbon industry and green jobs 6

7. Old and new interventionism Toolkit for industrial policy doesn’t include anymore Central planning National champions ‘Buy national’-campaigns Soft loans and debt rescheduling Trade protectionism (quota/tariffs) Public equity which does not respect the rules of the internal market Abuse of anti-dumping procedures Barriers to FDI-takeovers by foreign companies Golden shares 7

8. New ways of public intervention PPP’s (joint technology initiatives) Public technology(green) procurement Public investment funds and risk capital financing Lead markets Big projects: Airbus, Ariane, Galileo, Eurocopter, ITER, ULCOS Public equity when public partner behaves as a private investor 8

9. 9 European Industrial Policy 2. The history of European industrial policy Summer School Koloceb 30/8 -2/9/ 2010 Guido Nelissen

10. The History of European Industrial Policy European economic integration began in 1952 with a ‘deep’ free trade area in coal and steel with extensive public intervention in investments, trade, restructuring Euratom, ESA Sixties: creation of a DG for industrial policy 10

11. 2.1.The phasing out of industrial policy in Europe 11

12. 1960-70 an entire range of sectors were subject to European industrial policy of the old style (relaxing of state aid supervision, explicit protectionism, special regulations, anti- dumping): cars, aircraft, railway rolling stock, shipbuilding, textiles, telecoms equipment, consumer electronics National rescue plans for sectors/companies in restructuring 12

13. Eighties: waning importance of (national) industrial policy  Heydays of neo-liberal thinking: industrial policy is only hindering the dynamics of free markets  Industrial policy became a dirty word because equal to artificially keeping afloat ‘sunset’ or ‘chimney’’companies and sectors at a very high price for society Lobbying by mighty mno’s for scarce public resources 13

14.  1985: launch of the White Book on the creation of the internal market The creation of the internal market limited the room for national policies dramatically Focus on the creation of an internal market and the EMU(dominating role for competition policy)  But at the same time emergence of first tools for a horizontal industrial policy at the European level(FP1 in 1984, Esprit in 1983) 14

15. 1990: first communication on industrial policy: ‘industrial policy in an open and competitive environment – guidelines for a European approach (Bangemann): Ruling out state interventionism Stressing framework conditions Emphasizing economies of scale, harmonisation of standards and norms, open public procurement, liberalisation of protected sectors, research Sector policies only to support structural change and capacity reductions (communications on ict, shipbuilding, automotive, textiles) 15

16.  Confirmation that main policy focus was to dismantle national barriers and the elimination of subsidies (dominance of competition policy)  Industrial policy turned into company policy and promotion of entrepreneurship  And moved from national intervention to European promotion of framework conditions 16

17. 2.2. The search for a horizontal industrial policy at the European level Nov. 1993 the Maastricht Treaty art 130 provided legal basis for industrial policy: the EU should guarantee the necessary conditions for a competitive industry without disturbing free competition Text of art. 173 of the Lisbon Treaty is much more detailed 17

18. Quasi-constitutional ban on interventionist policies Start of renewed activism of the Commission/council: Innovation, standardization, sme’s, structural adjustment, ICT 1993: White Paper on Growth, Competitiveness and Employment: link between industrial policy with macro- policies (report Delors) 18

19. 1994: new communication on industrial policy about the way industrial policy and macro-economic policy could mutually reinforce each other Promotion of immaterial investments stressing the qualitative aspects of competitiveness: training, quality, work organisation,service component of goods, innovation Develop industrial cooperation (TEN’s) Development of new markets (health, biotechnologies, ict, environment) From free to fair competition The social dimension of free trade (social clauses) Tackling counterfeiting 19

20. A modern role for governments Better use of the structural funds for managing industrial change Sector policies within the framework of horizontal tools (mainly for modernizing traditional sectors although no concrete implementations) 1997-2001: industrial policies=ict-policies (creating the ‘new’ economy) 20

21. Communications of 1994 not followed by action programmes but it was the first attempt to develop some kind of active horizontal industrial policy to replace competition disturbing national industrial policies t gave a new boost to the slow but steady development of horizontal policies at the European level 21

22. 2.3. Re-invention of industrial policy: sustainable, sectoral but horizontal, soft, non-ideological 2000: Strategy of Lisbon 2001. Strategy for sustainable development (Gothenburg): the three pillars of sustainable development 2002: Barcelona-objective of 3% R&D 2002: Creation of the Competitiveness Council (combining the Councils for the internal market, research and industry) Aho- and Sapir-reports 22

23. December 2002: ‘An industrial Policy in an enlarged Europe’: The challenges for industrial policy investigation of the instruments for industrial policy Re-defining the boundaries for an industrial policy in an open market Opening the door for a revisited sectoral approach 23

24. November 2003: ‘some key issues in Europe’s Competitiveness – Towards an Integrated Approach’ Assessing the risk of de-industrialisation Screening of the potential contribution to industrial policy of related policies as: sustainability, regional policiy, education, trade, competition, R&D, Information society, environment, taxation, employment, transport, energy 24

25. April 2004: ‘Fostering structural change: an industrial policy for an enlarged Europe’: stressing the need for structural change in order to respond to the risk of de- industrialisation and relocation Seizing the opportunities of enlargement Integrated approach to competitiveness in 5 areas (knowledge, cohesion, sustainable development, globalisation, internal market) Better regulation and consultation, impact assessments Promoting structural change (disappointing EU productivity growth resulting in slow overall growth) and fighting the risk of de- industrialisation Increase in funding of RDI and cohesion 25

26. October 2005: ‘Implementing the Community Lisbon Programme: A policy framework to strenghten EU manufacturing – towards a more integrated approach for industrial policy ’ ‘A new industrial policy’ Stressing the vital role of manufacturing Screening of 27 industrial sectors and a number of sectoral competitiveness studies Rebirth of sector policies: 6 sectoral initiatives 26

27. Concretely One-stop-shop regulations ERA Cohesion policy as a tool for horizontal industrial policy TEN’s Cluster policies Incentives for green tech, clean energy Further development impact assessments 27

28. EU 2020: 4 out of 7 flagship initiatives concern industrial policy Digital agenda Innovation Union Low-carbon, resource efficiënt Europe An industrial policy for the globalisation era 28

29. Mid-term review of industrial policy: a contribution to EU’s Growth and Jobs Strategy (2007) Simplifying the regulatory environment Lead market Initiative Standards Initiative Clusters Initiative Future of Energy Intensive Industries Access to natural resources and raw materials External aspects of competition Industry/services Initiative New sectoral initiatives: food, Electra, Galileo 29

30. Wave of regulations since 2002 Must be viewed as new attempts to reconcile industrial policy with the requirements of the internal market In order to address structural challenges Sustainable development Integrate rapidity of technological developments the evolution to a knowledge economy The new international division of labour 30

31. 2.4. Main elements of the ‘new’ industrial policy in Europe since 2002’ Re-invention of sectoral policies at the European level mainly based on soft tools: high level panels,technology platforms and technology roadmaps, lead markets, cluster policies, a sectoral application of horizontal tools (sector- tailored) LeaderShip, Star 21, Cars 21, EnginEurope, Elektra, HLG Defence,Textiles and Chemicals, Metals communication,task force on ICT Competitiveness 31

32. Strong emphasis on the knowledge society innovation Innovation action plans Better innovation governance Technology transfer Competitiveness and Innovation programme IPR and counterfeiting Access to finance for innovative sme’s 32

33. Increased efforts for R&D 3% Barcelona objective Strongly increased budget for the7FP Creation of a ERA Technology platforms Development of new technologies: biotechnologies, ict, nanotechnologies, new materials Creation of EIT 33

34. Sustainable development: Disconnecting economic growth from environmental degradation Eco-efficient production in traditional sectors Support to the development of eco-industries Development and diffusion of clean technologies and renewable energy Strong global dimension : global sectoral aspects, emission trading, carbon leakage, … 34

35. Implemented by: Ecotechnologies Action Plan (ETAP), Integrated Product Policy EMAS Eco-design directive Green public procurement Access to raw materials the action plan for sustainable production and consumption and for a sustainable industrial policy 35

36. Energy High level group on competitiveness, energy and environment Important industrial dimension in the implementation of the European Climate Plan Future of energy intensive industries Energy security Strategic Energy Technologies Plan (SET) 36

37. Trade Tackling the external aspects of competitiveness and market access Respect of core labour standards Bilateral agreements Trade defence instruments Promoting productivity and economic growth by promoting ICT’s E-demand (e-government, e-health,..) Broadband policies: as a tool to enhance competitiveness (eEurope) Integration ict’s in established industrial sectors I2010 and the European digital agenda 37

38. Better regulation One-stop services Internal market Impact assessments Standards Infrastructure: TEN (transport, energy, broadband) 38

39. Integration of a social dimension: Managing structural change Restructuring Task Force Globalisation Adjustment Fund Cohesion policy in support of industrial change and innovation Promotion of CSR Intangible assets and human capital Knowledge diffusion Organisational innovation Tackling skills gaps (improving sectoral skills) Lifelonglearning 39

40. Public intervention PPP’s: Joint Technology initiatives: Artemis (embedded systems), Eniac (nanoelectronics), hydrogen Stronger role for the EIB Inclusion of demand-side policies 40

41. Improved governance Improved use of the Open Method of Coordination Impact assessments Establishment of the Competitiveness Council Integrated approach: better exploiting the synergies between different policies Better coordination with macro-economic policies Yearly competitiveness reports as a scientific basis for policy-making Improved social dialogue: Creation of the EMCC and the CCIC, improved sectoral dialogue 41

42. 2.5. Some conclusions During last 3 decades the scope and nature of industrial policy has drastically altered Dominance of neo-liberal thinking Macro-economic discipline imposed on MS Pro-competitive logic of ever deeper market integration As a result the toolkit for industrial policy has shrunk considerably: industrial policy may not hinder free movement of goods, capital, Move from national interventionist industrial policy to horizontal policies at the European level New views on industrial policy have emerged although very slowly 42

43. Return of industrial policy since 2001 is resulting from the failure of liberalisation and privatization in addressing structural challenges. Also the creation of the internal market didn’t contribute to growth and jobs as expected. It became clear that a more balanced strategy was needed. Wave of communications since 2001 show the renewed commitment of the Commission to protect and strenghten the industrial basis of Europe and to take into account the specific needs and characteristics of individual sectors 43

44. Finally, industrial policy became broader, softer and less ideological with close links to energy policies, sustainable development and social policies 44

45. 45 European Industrial Policy 3. The building blocks for a sustainable industrial policy Summer School Koloceb Koloceb 30/8 -2/9/ 2010 Guido Nelissen

46. 1st Industrial Revolution (1780) 2nd Industrial Revolution (1890) 3rd Industrial Revolution (1990) Dominant technology and raw material Steam engine, power loom, iron processing Electricity, chemistry, combustion engine, assembly line ICT, microelectronics, new materials, eco- industries Dominant Energy Source CoalCoal, oilRenewable energies, energy efficiency Raw materialSteelPlasticsRenewable raw material, biotech, recycling Transport/communica tion Railway,telegraphCar, plane,radio, tvHigh-speed railways, internet, mobile telecom Society/stateLiberal state, freedom of trade, constitutional state, property rights Welfare state, mass production, mass society, parliamentary democracy Civil society, globalisation, global governance, environmental state Core countriesUK, Belgium, Germany,France USA, Japan,GermanyEU, USA?, China?Japan? 46 Source: Jänicke and Jacob, 2009

47. Principles Production models based on innovation and knowledge rather than on cheap resources Development of new more sustainable consumption patters Transformation of current industrial sectors into sustainable structures Alls this will have enormous social and financial implications There will be no broad societal acceptance of a green transformation without a broad mobilisation of society 47

48. Characterics green industrial revolution Each industrial revolution leads to a new balance between the economy and the institutional framework:new institutions (the sustainable welfare state?), new production methods, means of transportation, raw materials, energy basis First industrial revolution required free trade, property rights, market development and division of labour: this increased the pressure for the creation of the rule of law and political participation (‘liberal revolution’) 48

49. Second industrial revolution with the transition to mass production led to a minimum of social standards and income distribution, purchasing power (welfare state), key role for social partners Green industrial revolution Impressive potential for innovation but also for redefining societal systems/structures Resource-intensive growth patterns of the second industrial revolution cannot be sustained: new sustainable patterns of consumption Sectors based on the exploitation of natural resources will see their existence threatened: 49

50. New functions for the state Liberal state: core functions were economic Welfare state: social core functions were added to the economic functions Environmental state: sustainable functions are included (supporting sustainable infrastructure, consumption, taxation) 50

51. Consequences for industrial policy A green industrial revolution needs an appropriate industrial policy by Extending the scope of traditional industrial policy to integrate the challenge of sustainable development: eco-efficient production, climate change, protection of natural resources Extending the array of tools: regulations to promote sustainable production and consumption, educational instruments to change behaviour, tools for the internalization of external costs, need of a global approach 51

52. Shifting away from the narrow focus on competitiveness: Adjustment of industry to the upcoming lead markets and technologies Preparation of the industry for scarcity of energy and other resources Development and diffusion of more eco-efficient technologies Sustainable industrialisation in other parts of the world 52

53. Dynamic/intelligent environmental Regulations/standards/benchmarks/minimum mandatory targets (top runner approach) Internalisation of external costs by market- based instruments: taxes,subsidies, emission trading, carbon tax Activating the public sector as an innovation- driving demand factor: Green public procurement Fostering of the emerging markets for sustainable goods and services (lead markets) 53

54. Developing global markets for sustainable products Supporting eco-innovation by developing strategic roadmaps for new technologies/activities and including institutional and societal dimensions Action plans for the eco-industries: waste management, water treatment, eco- construction, renewables, energy- efficiency Identify barriers to their expansion Finance Create a friendly regulatory environment 54

55. Integration in traditional industries Integration of ict’s Global sectoral agreements to reduce greenhouse gases Not only supporting eco-innovation in the green tech sectors but also fostering structural change in the traditional industrial sectors 55

56. Integrated product policy approach: Voluntary agreements Standards EMAS Ecodesign directive, eco-Labelling, …. Boosting resource efficiency Enhancing the environmental potential of industry EMAS/ISO14000 Greening workplaces CSR 56

57. Governance Balancing issues as climate change, energy, resources with economic growth, jobs, welfare: at the same time being mindful of conflicts while capitalizing on synergies and opportunities Integrated policy approach: policy coordination between industrial policy and sustainability strategies (inclusion of departments for environment, research, energy, employment in the development of industrial policy) 57

58. Addressing the social dimension: the restructuring of industrial sectors into sustainable structures needs broad social acceptance and may not negatively impact the distribution of welfare Need for global governance in support of sustainable development Promoting trade in sustainable products International development assistance Diffusion of sustainable technologies CDM and JI 58

59. A green revolution is taking place, be part of it. Thanks! 59