# IMMC.EESC-2017-05067-AC.ENG.xhtml.EESC-2017-05067-00-02-AC-TRA-EN.docx

EN

European Economic and Social Committee

European Economic and Social Committee

CCMI/157

CCMI/157

Investing in a smart, innovative and sustainable industry

Investing in a smart, innovative and sustainable industry

OPINION


  European Economic and Social Committee


  Investing in a smart, innovative and sustainable industry

  [COM(2017) 479 final]

OPINION

European Economic and Social Committee

Investing in a smart, innovative and sustainable industry

[COM(2017) 479 final]

Rapporteur: Bojidar DANEV

Rapporteur: Bojidar DANEV

Co-rapporteur: Monika SITAROVA HRUSECKA

Co-rapporteur: Monika SITAROVA HRUSECKA

European Commission Consultation

| European Commission Consultation | 09/10/2017 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| | |
| Body responsible | Consultative Commission on Industrial Change (CCMI) |
| Adopted in CCMI | 23/01/2018 |
| Adopted at plenary | 15/02/2018 |
| Plenary session No | 532 |
| Outcome of vote
  (for/against/abstentions) | 166/1/2 |

European Commission Consultation

09/10/2017

09/10/2017

Legal basis

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Article 304 of the Treaty on the Functioning of the European Union

Body responsible

Body responsible

Consultative Commission on Industrial Change (CCMI)

Consultative Commission on Industrial Change (CCMI)

Adopted in CCMI

Adopted in CCMI

23/01/2018

23/01/2018

Adopted at plenary

Adopted at plenary

15/02/2018

15/02/2018

Plenary session No

Plenary session No

532

532

Outcome of vote
  (for/against/abstentions)

Outcome of vote
  (for/against/abstentions)

166/1/2

166/1/2

1.
     Conclusions and recommendations

1.

Conclusions and recommendations

The EESC welcomes the Communication on smart, innovative and sustainable development and its approach of empowering people and businesses. However,

The EESC welcomes the Communication on smart, innovative and sustainable development and its approach of empowering people and businesses. However,

-the longer-term continuity and predictability of the policy must be assured. The Commission should develop the present policy, or rather set of policies, into a coherent, longer-term strategy;

-the EESC also addresses the Council, because Member States are competent for most industrial policy issues and must therefore be committed to coherent actions. No Member State has alone the capacity to meet the global challenges facing industry;

-shared objectives and a common framework for industrial policy could be the core of the future of Europe. EU governance to this end must be improved to provide results;

-action is urgent, because the challenges of digital technology, de-carbonisation and global political changes are unprecedented and unpredictable.

Regarding the Communication, the EESC concludes that

1.1the Commission has taken the approach of mainstreaming actions in several policy areas in order to create conditions conducive to industrial competitiveness and development, in line with what the EESC has proposed for years;

1.2the paradigm shift of the digital era is having disruptive, transversal effects upon all businesses and society;

1.3enterprises are challenged in an unprecedented way to swiftly transform new technologies into innovations and successes in ever more competitive markets. A central position in a global value chain is of great importance for many;

1.4people are at the core of change. Labour market policies need to adapt to changing circumstances. A fair transition means support to people and regions confronted with structural change;

1.5education and training are necessary facilitators and drivers of the industrial transition. All workers need upgraded skills, especially digital abilities, and many need new professions;

1.6meeting environmental, climate change and other sustainability goals entails significant change for the whole economy. New business opportunities are occurring. At the same time, industrial non-carbon transition requires huge investment in fundamentally new, non-carbon technologies and much more clean electricity at competitive prices;

1.7the level of investment in European industry is low, but there are some signs of a positive development. In any case, investors are attracted only by the right framework conditions for industry;

1.8access to global markets is crucial to industry, and therefore the network of trade agreements must be further built out, based on the principle of fair trade.

The EESC recommends that

1.9the overall objective of EU action should be to further develop a well-functioning toolbox of horizontal polices and a predictable legal framework in order to incentivise innovation, support investments and help industry provide solutions to societal challenges. This should add value with measurable impacts on growth and employment, be delivered with a minimum of administrative burden and spread benefits to society as a whole;

1.10all actions should be taken to complete the Single Market, with emphasis on implementation by Member States. A vigilant implementation of competition policy, which is necessary as a driver of innovation and fairness, should however not hinder EU companies from growing;

1.11the Digital Market strategy must be implemented urgently, accompanied by a focused employment policy;

1.12an open and realistic attitude should be adopted towards new, disruptive technologies and business models, with emphasis on giving society, including enterprises, the opportunity to benefit from new possibilities;

1.13social dialogue and dialogue with civil society should be renewed and strengthened at all levels to facilitate change, manage social problems and avoid conflicts;

1.14flexible pathways are needed between work and education, such as apprenticeships and work-based learning. In many Member States, vocational training should be given better appreciation;

1.15leadership in low-carbon and circular economies should benefit our economies. Policies should support the development of innovative new businesses as well as the costly transformation of energy-intensive manufacturing in order to avoid investment and carbon leakage;

1.16obstacles to turning present, big private savings surpluses into productive investments in industry and infrastructure should be explored;

1.17EU support should mainly be directed at boosting innovation, scaling up SMEs, helping regions in trouble and empowering people. The leverage effect on private finance should be an important criterion;

1.18R&D and innovation policies must be guaranteed additional resources in the next financial framework. These policies should be aimed more at the uptake of new technologies, scaling up and market successes and should not exclude companies of any size;

1.19official statistics should better reflect the changed features of the economy, such as the blurring of sectoral borders and new forms of economic activity. A common method of calculating value added from industry and services is needed;

1.20most relevant targets and indicators for industrial policy, both at macro-economic and less aggregate levels, need further open reflection, in addition to the 20% target;

1.21governance must be improved in order to mainstream policies and ensure coherence through the decision-making process, whether with a stronger Competitiveness Council or otherwise;

1.22the annual Industry Day and the High Level Industrial Roundtable should be welcomed as they increase ownership of the strategy among stakeholders. Dialogue with industry should, however, not be limited to these arrangements.

2.
     Introduction

2.1The backbone of the European economy is industry. It provides 24% of EU jobs – 32 million directly and 21 million indirectly, mainly in services. These jobs come with relatively high wages for both high-skilled and less skilled workers. Manufactured goods account for 75% of exports. Industrial growth spreads to all parts of the economy. Industry is also the cradle of innovations in all sectors, including solutions to many societal challenges. However, increased interlinkages of manufacturing and services as well as integration within value chains form the essence of value added in our economies.

2.2After many years of decline, industrial output, exports and employment in Europe now seem to be on a path to recovery. Still, this recovery is incomplete and the competitiveness of European industry is unsatisfactory. Relatively high taxes and energy prices, insufficient investment, both real and intangible, slow productivity growth, innovation gaps with competitors, skill shortages as well as subdued internal demand are frequently reported.

2.3Megatrends with a bearing on industry are, in particular:

-revolutionary technological development; digitalisation with all its applications, but also nanotechnology, new materials, life science-based technologies etc.;

-growing environmental requirements, including mitigating climate change;

-spread of higher living standards, ageing populations and urbanisation;

-globalisation, with open markets and value chain production, but also aggressive state entrepreneurship and protectionism.

These well-known trends offer vast opportunities for European industry. They could also constitute severe risks for society and industry if not reacted to properly and successfully.

3.General comments

3.1The EESC welcomes the Commission’s Communication and largely agrees with its analysis of the situation and challenges facing European industry. The Communication is mainly an update to existing proposals, with a number of new actions to be tabled by the current Commission. However, the longer-term continuity and predictability of the policy must be assured. The Commission should urgently develop a longer-term strategy, to which all Member States should also be fully committed.

3.2The EESC notes with satisfaction that the Commission is consistent in presenting an approach to industrial policy that the Committee has proposed for years. Instead of developing legislation in numerous policy areas affecting industry with little concern for their impacts on and inputs from industry, the approach is now to mainstream these policy areas with industrial development as a priority.

3.3The EESC has during the last few years presented opinions on the Commission’s proposals for different industrial sectors and policy areas
  1
  . These opinions are still mainly relevant in the context of this Communication. In this opinion the EESC wishes to underline some currently relevant aspects of industrial policy and add some new comments.

3.4Enterprises are facing an unprecedented need to adapt, often radically. They have to swiftly grasp new technologies and transform them into better productivity and innovations, succeeding in ever more competitive markets. Positioning oneself well, preferably at the core of an international value chain, is imperative for many companies. SMEs can and should strive to play an important, innovatory role in these chains, which are mostly built around big companies with required resources and networks.

3.5New industries will emerge. Digitalisation gives rise to innumerable new networks and interactions, fostering new spectrums of products and services, which are ever more fine-tuned to customers’ needs. The scale-up of production, product and services technologies as well as the growth of start-up companies must be enabled by relevant policies at EU level, because value chains are not limited to single states. On the other hand, differences between Member States and regions require tailor-made measures.

3.6All enterprises have to upgrade their operations continually. Outdated and unprofitable companies cannot be preserved by subsidies. However, Europe needs a wide range of industries to meet societal needs, and specific strategies for sectors with particular challenges should therefore be developed.

3.7People are at the core of change. Without qualified and devoted workers there is no industry. The opportunities provided by new technologies and innovations must be exploited, but digitalisation and other game-changing technologies will impact the structure of the labour market, with less manufacturing jobs and more IT specialists. Also work organisation and management concepts will change, with implications for the quality of jobs, which will become less hazardous but also more intense and flexible.

3.8The employment impact of technological disruptions needs to be properly assessed and the toolbox for anticipating change needs to be strengthened. The challenge of adjusting labour markets to structural change will be enormous: providing employment security or new job options as far as possible, social protection of those in need and preventing the decline of whole regions. The European Globalisation Adjustment Fund needs more resources and its scope must be widened so it also applies to the impact of technological change. Industrial relations at all levels, and in particular social dialogue at company level, involving workers, are vital facilitators for industrial change while helping acceptance of change and avoidance of conflicts.

3.9Education and training are necessary instruments and drivers of the industrial transition. All workers need to upgrade their skills, especially digital abilities. Many need training in quite new professions. The speed of technological development is a big challenge to keeping educational curricula and numbers in line with industry’s changing needs. Work-based learning solutions, such as Germany’s successful dual system, should be applied much more widely. At least in some Member States, the appreciation of vocational training should be reinstituted. Likewise, the attractiveness of STEM subjects should be enhanced.

3.10Macro-economic and industrial policy are mutually reinforcing. The current economic upswing creates a window of opportunity to modernise transport, energy and digital infrastructure, upgrade R&D and its transformation into successful innovations, and balance regional development. The right combination of macro-economic and industrial policy should prolong the recovery and protect the economy and industry against any future downturn.

3.11Investments in European industry are still at a worryingly low level, while there is a big savings surplus in the EU that has not turned into productive investment. The reasons for this should be thoroughly studied, especially because industrial transformation requires enormous investments. One thing is, however, clear: both domestic and international investors are attracted only by framework conditions that are conducive to sufficient competitiveness.

3.12Nevertheless, there are some signs of possible positive trends in investments. In a world faced with huge political instability, the EU is a safe and stable place to invest. Due to growing demand, production in some industries is reaching full capacity utilisation. This will trigger investments in new capacity, hopefully in Europe.

3.13Environmental and climate constraints, notably the Paris Agreement on climate change, affect all enterprises. Many new business opportunities are occurring in low-carbon and circular economies. The EU’s frontrunner ambitions can help European industries in global markets. Energy- and resource-intensive industries, in particular, have to perform fundamental technological changes, requiring ambitious policy support in order to avoid investment and carbon leakage. The non-fossil transformation of manufacturing and transport will significantly increase the demand for electricity at competitive prices.

3.14Cooperation between all players – the EU, Member States’ governments, authorities, regions, universities and schools, stakeholders and enterprises – could and should be better. For example, collaboration between enterprises and universities must to be improved. Schools should turn to enterprises for help with timely curricula and apprenticeships. Most importantly, Member States should cooperate by promptly implementing and enforcing agreed policies and legislation.

3.15Present statistical methods do not produce a timely, useful picture of the industrial situation in Europe. The sectoral division into manufacturing, services and other productive activities is outdated. A considerable part of economic activity is not included in the calculation of GDP. Statistics on imports and exports do not describe industrial activity well in an era when roughly half of industrial production is part of global value chains. A common method of calculating value added and interlinkage of industry and services is urgently needed.

3.16The EESC is of the opinion that the target of 20% of GDP for industry needs to be complemented by more relevant targets and indicators, which better reflect all aspects of industrial development.

3.17Governance of the mainstreaming of policies affecting industrial competitiveness and development as well as between Member States, needs to be strengthened. Better regulation – i.e. predictable, cost-effective and evidence-based – and ex-ante, transparent impact assessments are important. Coherence throughout the decision-making process should be ensured by strengthening the role of the Competitiveness Council or other institutional arrangements. Silo thinking at EU and national levels must be removed to respond to increased dynamics in the global economy.

4.Specific comments

4.1Making Europe’s industry stronger: The EESC agrees with the need for a holistic and forward-looking vision of Europe’s industry. To make Europe’s industry stronger the overall objective of EU action should be to create a well-functioning and predictable legal framework, that incentivises innovation and helps industry provide solutions to societal challenges. It should add value with measurable impacts on growth and employment, be delivered with a minimum of administrative burden and spread benefits to society as a whole.

4.2The Single Market: The EESC welcomes the approach of empowering people and businesses and agrees with the proposed actions to strengthen the Single Market, including the capital market. Enhancing standardisation and self-regulation are important areas of action. Most importantly, Member States must fulfil their obligation of compliance and enforcement. Vigilant implementation of competition policy is essential for innovation and price formation. The Commission’s vigilance concerning big global players is highly appreciated. European enterprises should, however, not be hindered from growing – the size of the median EU (excl. UK) listed firm is only about half of the size of the median US firm. It is a question of the interpretation of the definition of the relevant market in competition law enforcement.

4.3Digital age: Digitalisation entails a real paradigm shift with effects on society as a whole, and even containing geopolitical features. The EESC has presented its detailed views on digitalisation in other opinions. These have dealt with big data, 5G, advanced manufacturing, robotics etc. EU strategies for a digital Single Market, digitising European industry, cybersecurity and artificial intelligence are paramount. An important question of principle is how to strike the right balance between, on the one hand, utilising and benefitting from new disruptive technologies and, on the other hand, ensuring security and fairness. The emphasis should be on giving society, including enterprises, the opportunity to benefit from new possibilities by having an open and realistic attitude.

4.4Low-carbon and circular society: Maintaining leadership in these areas is a big challenge in an environment of increasing competition. Leadership should, however, not be an aim in itself; rather, it should benefit our economies and societies. The energy transition needs to be supported but energy prices must be competitive for industry.

4.5Investments: The numerous EU instruments to support investments – both real and intangible – should mainly be directed at boosting innovation, helping SMEs scale up, supporting regions in trouble, upgrading infrastructure and empowering people through education and training. SMEs still need more help to find their way to the right source amongst the numerous different possibilities, and much easier processes for application and reporting. One important criterion should be the leverage effect on private investment. All proposals, including those expected from the HLG on Sustainable finance, that re-orient allocation of capital towards long-term investments and contributions to sustainable growth, are welcome
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4.6Innovation: The EESC agrees that policies should be aimed more at the uptake of new technologies, scaling up and market successes as well as at collaboration within and between regional clusters. No companies of any size should be excluded. Horizon 2020’s successor should be allocated radically more resources in the next financial framework. Whenever possible, the first industrial application of publicly funded R&D should take place inside the EU. The potential of public procurement should be fully exploited by integrating innovative, green and social criteria in public tenders, applying the MEAT-principle systematically.

4.7The international dimensions: Trade must be open but fair and sustainable. Access to global markets and raw materials is crucial for industry and therefore the network of trade agreements must be further built out. The EESC urges the Commission to actively use available instruments to tackle unfair trade practices. Special attention should be paid to new forms of protectionism on the part of non-EU countries. The EU should promote its environmental and social standards in the context of trade agreements. As for the screening of foreign direct investment, it is important to identify risks of threats to security or public order. Simultaneously, when more investment is needed in EU businesses, foreign direct investments should be welcomed – they are also signs of Europe’s potential.

4.8Partnerships: The EESC welcomes the introduction of an annual Industry Day and the High Level Industrial Roundtable and announces its strong interest in participating in both. This approach should cover all areas of industrial policy in order to increase ownership of the strategy with stakeholders. Dialogue with industry should however not be limited to these arrangements. More transparency and collaboration are needed, especially when starting impact assessments.

Brussels, 15 February 2018

Georges DASSIS

The president of the European Economic and Social Committee

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