Ari Kokko Industrial policy Why? How? Examples: EU Industrial Policy and Swedish Industrial Policy Sources

Ari Kokko Why now? u GATT and regional integration mean that trade policy instruments cannot be used to promote domestic industry u Changes in the international monetary system limit the scope for active foreign exchange policy u Industry localization more variable than ever before u When market outcomes are not satisfactory, industrial policy is what remains

Ari Kokko What is industrial policy? u Broad definition - targetted taxes and subsidies - competition policy - R&D and innovation policy - education - infrastructure - and much else

Ari Kokko European industrial policy u Challenges –tougher international competition: USA/Japan and Eastern Europe/Asia providing double squeeze –new technologies and faster technical progress –lingering unemployment –need for structural change –fragmented infrastructure in the Single Market –inappropriate institutional infrastructure: innovations, patents, entrepreneurship

Ari Kokko European industrial policy u General objectives –strengthening of the competitiveness of Community industry –generating new jobs u Specifically –retain technological leadership –achive economies of scale, technical efficiency, and competitive business climate

Ari Kokko European industrial policy u Framework –industrial policy decision to be taken at the national and regional level –common competition policy –coordination and horizontal measures in areas such as R&D, vocational training, social policy, networks, and foreign trade

Ari Kokko European industrial policy u Priorities –to promote intangible investment –to develop industrial cooperation –to ensure fair competition –to modernize public authorities

Ari Kokko European industrial policy u To promote intangible investment –tax incentives for training and learning –research collaboration schemes –harmonization and standards for new technologies –protection of intellectual and industrial property –provision of accurate economic data

Ari Kokko European industrial policy u To develop industrial cooperation –remove legal and fiscal obstacles –facilitate international information flows –reinforce favorable investment climate in partner countries (including investment guarantees) –support Eastern European industrial development –regional programs in Asia and Latin America

Ari Kokko European industrial policy u To ensure fair competition Externally –promote strengthening of GATT framework –establish international competition policy –develop preferential relations with trade partners Internally –common competition policy –reduce public subsidies –reduce physical investment bias in state aid –strengthen internal market infrastructure

Ari Kokko European industrial policy u To modernize public authorities –deregulation and administrative simplification –continued harmonization of national legislation –increased support for the establishment of industrial networks and clusters –promote diffusion of information and new technologies –establish trans-European networks for data interchange

Ari Kokko Swedish industrial policy u Activities in several overlapping fields –openness and deregulation –corporate governance, state ownership, and SMEs –education, training, and R&D –foreign direct investment –regional development –tourism, environment, social security

Ari Kokko Swedish industrial policy u Openness –reduce EU protection levels u Deregulation –horizontal programs to replace firm and sector- specific intervention in manufacturing –deregulation of energy market –simplification of regulatory framework for business

Ari Kokko Swedish industrial policy u Corporate governance and state ownership –review of institutional ownership –privatization u Small business sector –provision of venture capital –review of tax rules for small business –access to information and marketing facilities –upgrading of skills and competence

Ari Kokko Swedish industrial policy u Innovation policy –emphasis on measures to facilitate technology diffusion –special IT programs –participation in EU programs u Education and training –higher output of science and technology graduates –appropriate incentives for investment in human capital and continuous upgrading of skills

Ari Kokko Swedish industrial policy u Foreign direct investment –investment promotion (Invest in Sweden Agency) u Regional development –approx. SEK 13 billion in EU funds for remote and sparsely populated areas –infrastructure and IT

Ari Kokko Swedish industrial policy u Tourism promotion u Environmental protection –green policies in legislation and public procurement –market opportunity for private sector? u Social security –strengthen work incentives u Baltic Sea region –Sweden as a bridge to the Baltic region? –promotion of regional cooperation and investment