A4-0113/97

Resolution on the Commission Communication on Benchmarking the Competitiveness of European Industry (COM(96)0463 - C4-0622/96)

The European Parliament,

- having regard to the Commission communication (COM(96)0463 - C4-0622/96),

- having regard to the Commission Staff Working Paper concerning a European Quality Promotion Policy for Improving European Competitiveness (SEC(96)2000),

- having regard to its resolution of 9 March 1994 on the White Paper on Growth, Competitiveness and Employment (COM(93)0700 - C3-0509/93) ((OJ C 91, 28.3.1994, p.124.)),

- having regard to its resolution of 29 June 1995 on the Commission communication concerning an industrial competitiveness policy for the European Union (COM(94)0319 - C4-0140/94) ((OJ C 183, 17.7.1995, p. 26.)),

- having regard to its opinion of 19 September 1996 on the proposal for a Council Decision on a third multiannual programme for small and medium-sized enterprises (SMEs) in the European Union (1997-2000) ((OJ C 320, 28.10.1996, p.153.)),

- having regard to the conclusions of the Industry Council of 14 November 1996,

- having regard to the conclusions of the Dublin European Council,

- having regard to the reports of the Competitiveness Advisory Group,

- having regard to the findings of the group of experts which took part in the hearing held on 5 February 1997 by its Committee on Economic and Monetary Affairs and Industrial Policy,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Social Affairs and Employment (A4-0113/97),

A. whereas benchmarking is an appropriate technique for identifying the competitive shortcomings of European industry; whereas this technique is based on the comparison of practices, scenarios and results achieved by similar economic agents; whereas benchmarking seeks to determine how the best business practices have been achieved; whereas it will not be possible to derive immediately, from the findings of such comparisons, practical measures which do not affect the socio-economic situation of the European Union as a whole,

B. whereas benchmarking is a method that has to be developed and implemented by the Member States in consultation with one another and with the Commission so as to ensure the comparability and consistency of the many different indicators,

C. whereas benchmarking is a method for gauging economic performance and should be regarded as a tool and not as a policy in its own right,

D. whereas benchmarking can be used at different levels and, if a study is to be made of the competitive situation of European industry, different types of benchmarking would have to be carried out in relation to framework conditions, industry as a whole, specific industrial sectors and individual enterprises,

E. whereas enterprises are ultimately responsible for maintaining their own competitiveness and the public authorities can perform the crucial task of providing an appropriate framework to ensure that the efforts of the enterprises are compatible with the aim of sustainable economic development,

F. whereas the success of industrial benchmarking and a quality promotion policy in improving European competitiveness is totally dependent upon an inclusive approach to all social partners, including small and medium-sized enterprises,

G. whereas competitiveness is not an end in itself but a means of achieving higher standards of living and social welfare; whereas to achieve a high standard of social welfare a high standard of environmental protection is needed; whereas the structural factors affecting competitiveness are the principal focus of the Commission communication underlying this resolution,

H. whereas the EU's competitive position in manufactured goods has been deteriorating throughout the 1980s, up to the beginning of the 1990s, when it recovered somewhat; whereas this recovery, however, was due to a recession which reduced demand for imports, inducing a quasi-mechanical and temporary trade-balance improvement,

I. whereas the EU's declining trade performance cannot be explained simply by growth differentials, since the EU's growth performance over the period 1980- 1993 has been almost exactly average compared to the whole of the OECD; whereas while the EU's dwindling trade surpluses can partly be explained by macroeconomic imbalances - such as currency appreciation due to capital inflows - other factors must be at work,

J. whereas the EU has lost considerable ground in emerging markets, primarily to non-Japanese Asian producers; whereas the EU has also lost ground steadily in the North American market, to both non-Japanese Asian producers and Latin American producers,

K. whereas the sectors which have had the highest growth rates in world trade are also the sectors where the EU, in terms of its trade balance, is weakest, indicating that the EU seems to be slowly locking itself into the wrong type of specialization,

L. whereas although the EU has kept reasonably strong positions in pharmaceuticals and aerospace and has recovered, to some extent, in software, its overall market position in high-tech industries is poor; whereas varying degrees of deterioration in the EU's market positions are also apparent in industries which traditionally formed the core of its manufacturing exports,

M. whereas industrial competitiveness depends not only on industry's own efficiency but also on its commercial capacity, which in turn is partly dependent on institutional support mechanisms for external trade which should be examined as part of framework conditions,

N. whereas, in certain sectors considered to be of strategic importance, severe market distortions could occur if the European market were to be opened up unconditionally and no agreed reciprocal arrangements were laid down with the main non-European countries,

Infrastructure and services

O. whereas the average input costs of an EU industrial enterprise consist of 40% for purchases of goods, 20% for purchases of services, 30% labour and 10% finance,

P. whereas prices for key service inputs in Europe are higher than those of its major competitors and, with the progress of liberalization elsewhere in the world, the gap has been widening; whereas, despite the progress made as a result of the single market, there are still sectors to which access is restricted and whereas such sectors, which include public contracts, construction, distribution, transport networks, energy and communications, account for nearly half of GDP in the EU; whereas state aid to industry, although sometimes justified on strategic grounds, is a cause of economic inefficiency which is damaging to the economy as a whole,

Q. whereas the American labour market model is not comparable to the Community model, given that there are substantial differences in the two types of social security systems, resulting in a high proportion of casual labour in the United States,

R. whereas, within this framework, should be included the provision of infrastructure and public services, which, in view of the principles of cohesion and solidarity laid down in the TEU, should reach a standard minimum level in all Member States, and whereas public infrastructure investment in the economically less-developed regions helps to close the gap between the latter and the more advanced regions,

Labour market, social legislation and training of the labour force

S. whereas the EU is far behind the United States in terms of both labour productivity and the proportion of the working age population actually employed (the employment rate) and whereas this difference cannot be attributed to Europe's human resources, capital base, infrastructure or the size or level of development of its internal market,

T. whereas, if the European social model is to be preserved, high employment rates are essential, and whereas in order to attain such rates social security systems must place greater emphasis on active employment measures (training, mobility, etc.) than on mitigating the consequences of unemployment; reiterating its firm commitment to preserving a high level of social protection and solidarity between generations,

U. whereas taxation on labour imposes a burden upon and can act as an obstacle to job creation and results in lower employment rates; whereas in the period 1980- 1994 the average effective tax rate on employed labour increased from 34% to 40% in the EU, whereas the effective tax rate on other factors of production decreased from 44% to 35%; whereas the lower end of the salary scale is subject to particularly high taxation when compared with the USA and Japan,

V. whereas tax competition between countries on a global as well as on an EU level to attract investment of internationally mobile capital and tax evasion by major companies have contributed considerably to the ever higher taxation of labour in the EU as the least mobile production factor,

W. whereas it would be beneficial for the European labour force and for European industry to expand the concept of job-based security to incorporate a concept of security based on employability; whereas, for the purposes of adapting the labour market to the world of work which we live, greater mobility by the labour force would be desirable and whereas such mobility depends not only on labour regulations but also on the housing market, which is an enormous obstacle to geographical mobility, the poor training of workers, which is a hindrance to functional mobility, and company pension schemes, which increase the cost of changing jobs,

X. whereas employment stability encourages investment in human capital and hence an improvement in the skill levels of workers, and whereas such stability seems to make more sense than increased costs in connection with the laying off of workers, which tend to act as an obstacle to job creation in times of economic growth,

Y. whereas there is no single market in the education and training of workers and whereas this would help enormously to improve the skill levels and mobility of workers,

Capital markets

Z. whereas, despite the progress made towards the liberalization of capital movements, restrictions remain which hinder access to the capital needed for investment, especially for innovative and fast-growing SMEs,

AA. whereas average long-term nominal interest rates have been between 1 and 2 percentage points higher in the EU than in the United States and nearly 4 points higher than in Japan since 1980,

Research and development

AB. whereas Europe's rates of investment in research and development have been low compared with the USA and Japan and whereas there is a link between such investment and economic productivity; whereas the American system of tax incentives has proved more efficient than the European system of subsidies as a means of boosting investment in R& D; whereas the ability of European industry to exploit technological innovation is weaker than that of the USA and Japan,

AC. whereas the degree of diffusion of innovation in the EU is lower than in the USA and Japan and whereas this makes R& D investment less profitable,

AD. whereas 90% of European industry consists of small and medium-sized enterprises, and whereas in most cases those enterprises do not have the resources needed to carry out benchmarking analysis,

Benchmarking and competitiveness

1. Stresses that, while it has been demonstrated that benchmarking works well in companies, its application to public policy should be handled with care; believes that benchmarking is simply a tool which should be used in pursuit of politically agreed priorities; stresses too that - while international competitiveness in the manufacturing sector is undoubtedly important to the health of the European economies - it cannot form the sole focus of public policy; adequate resources must also be allocated to service sectors - which are not usually subject to international competition - but which play a vital role in employment creation;

2. Notes that the job creation rate constitutes a starting-point for gauging the EU's economic performance and competitiveness and that any interaction of factors which boosts that rate should be encompassed within benchmarking techniques;

3. Shares the Commission's view that competitiveness is a means to achieving higher standards of living and social welfare rather than an end in itself; calls on the Commission to involve Parliament in everything concerning benchmarking;

4. Shares, also, the Commission's view that living standards must be defined broadly to include elements that are difficult to quantify, such as a high degree of environmental protection and a low level of crime, and underlines the Commission's statement that gross domestic product represents an imperfect measure of living standards;

5. Urges sectoral business and trade union organizations to carry out benchmarking studies to enable them to identify shortcomings in the way they themselves operate vis-à-vis world leaders;

6. Regards it as essential to establish support mechanisms for SMEs to enable those enterprises, which are the key component of the European economic system, to apply benchmarking techniques in order to enhance their competitiveness;

7. Calls on the Commission to bring forward conclusions as to why certain European sectors, such as food, drink, tobacco and furniture, all outperformed their US and Japanese counterparts in terms of industrial added value; calls on the Commission to do likewise with those EU Member States which outperformed the US and Japan in terms of job creation;

8. Calls on the Commission immediately to consult with all the social partners, especially the trade unions and SMEs, as industrial benchmarking can only succeed with an inclusive partnership approach;

9. Considers that no active measure to promote employment can yield benefits unless public and private investment is increased in proportions that will have a significant impact on the current unemployment rates;

10. Calls on the Commission to invite Parliament to participate in the annual tripartite visits to Japan and the US to assess benchmarking;

11. Stresses that an overall benchmark of the performance of the EU and its Member States is the rate of net job creation; urges consequently the Council to consider all framework conditions that influence it and in particular the inter-relation between education, research and development, and the availability of risk capital;

Infrastructure and services

12. Notes that the Ciampi advisory group on competitiveness emphasized the importance of public investment in order to maintain a high-quality infrastructure in Europe; notes that the ratio of public investment to GDP has already declined substantially over the 1980s, from 3.5% on average in the EU at the beginning of the 1980s to 2.5% in the early 1990s and expresses concern that the proposed Growth and Stability Pact may speed up this process; urges, therefore, that benchmarking be used as a means to compare levels of public investment in the EU with those in the US and Japan; welcomes, too, attempts to discover new ways of promoting public-private partnership in this field; advocates reducing the discrepancies in development among the various regions of the EU by means of infrastructure investment;

13. Is concerned at the situation of the services sector in the EU by comparison with its competitors and believes that, unless decisive action is taken to reduce the cost of services, European industry will be unable to compete successfully on international markets;

14. Is in favour of the liberalizations pending in the services sector, since it believes that, although liberalization entails a cost in the short term, the long-term benefits produced by a prudent liberalization can be higher; calls, therefore, on the Member States and the Commission to examine ways of opening up markets more quickly in sectors which are still restricted (professional services, financial services, energy, transport, telecommunications), but believes that this process must go hand in hand with a requirement to ensure access for all members of the public to quality services at a reasonable price and under the condition of ensuring a high and harmonized standard of environmental protection in order to avoid any 'environmental dumping' in these sectors;

Labour market, social legislation and training of the labourforce

15. Believes there is an imbalance in today's social protection systems in Europe, which focus their efforts on mitigating the consequences of unemployment (passive measures) rather than on eliminating its causes and believes that, in order to provide guarantees for the future, greater emphasis should be placed on active employment measures (retraining of workers, training, mobility, etc.);

16. Emphasizes that benchmarking should be used to measure the quality of managerial skills and training in the European Union, given that cost differentials between European firms and their US or Japanese counterparts are often due to operational inefficiencies;

17. Calls upon the Commission DG responsible for 'benchmarking¨ to consult DG V (Health and Safety) with a view to exploring the benefits of benchmarking 'reference workplaces¨ where 'best practice health and safety in the workplace¨ can be shown to be not only morally exemplary but economically sensible in terms of efficiency and productivity gains - thus increasing the competitiveness of European industry;

18. Notes that average labour costs in the EU are now lower than in Japan, and France - one of the countries worst hit by unemployment and market share losses - has relatively low labour costs; concludes that - while the EU has been losing market share in several manufacturing sectors - there is no evidence linking these losses to high labour costs; notes too that wage developments should be viewed in terms of their demand-side effects as well as their supply-side effects; urges therefore that any attempt at industrial benchmarking should not be based on a narrow definition of competitiveness focused solely on wage-price competition;

19. Invites the Member States to include the level and structure of taxation of the different factors of production in their benchmarking methods in order to correct the current high tax rate on employed labour, making the Member States regain the capacity to tax enterprise profits, capital income, and property, as well as gearing the tax system to ecological conversion. Insists also on the need to proceed in a coordinated way towards the reduction of the non-wage cost of labour especially for the lower end of the wage scale;

20. Calls upon the Member States, in consultation with the social partners, to adopt a benchmarking method for employment and environmental policies as well as for sectors of industry, with a view to speeding up the identification and diffusion of best policies and practices that reinforce sustainable development and employment;

21. Believes that job stability and flexibility are compatible and highly desirable objectives and calls on the social partners, including SMEs, to be fully involved in the attainment of these objectives;

22. Believes it would be beneficial to regard the recognition of qualifications in the same way as the movement of goods within the single market; believes also that a system of quality certification similar to that already in force for environmental regulations would improve the standard and transparency of training;

23. Urges the Council, the Commission and the Member States to focus in particular on adopting a set of indicators to monitor closely the evolution of skills, especially training in new technology, and to ensure that vocational qualifications keep up with market demand and that life-long learning programmes make an effective contribution to professional mobility through full utilization of the European Social Fund;

Capital markets

24. Believes that, despite the progress made in this area, further steps should be taken towards achieving a genuine single capital market; this would require action in the field of mortgage credit and bond markets; differences in taxation of investment income, which distort capital movements between Member States, should also be eliminated and the single market in insurance completed;

25. Emphasizes once again the positive impact of Economic and Monetary Union on the competitiveness of the EU as a result of the elimination of transaction and exchange rate costs, greater certainty in terms of planning and costing, enhanced transparency, in particular for SMEs, and a more closely-integrated financial market;

Research and development

26. Believes there is a need for imaginative ways to be found to enable greater economic resources to be devoted to research and development;

27. Furthermore asks the European Commission to benchmark policies in the public sector that promote R& D results into innovative products and processes with the aim of drawing up conclusions for the actions needed in this area within the Member States and at EU level;

28. Calls on businesses and on the Member States to increase crossborder cooperation on R& D and calls on the Commission to propose ways of increasing cooperation among European SMEs in this area;

Future action

29. Calls on the Commission to draw up working procedures for the continuous process that benchmarking constitutes as soon as possible, including pilot projects to be carried out in close cooperation between the Commission, the Member States and representatives from industry and trade unions, in order to map out problems posed in the area of benchmarking and to find standardized processes to identify and characterize best practice;

30. Proposes to the Commission that it should arrange for the exchange and collection of information about existing work concerning benchmarking at different levels (worldwide, within the OECD and at European, national and company level) in order to take advantage of existing experience of the process of benchmarking;

31. Calls on the Commission to propose a work programme for the forthcoming work on benchmarking, after consulting the European Parliament, as soon as the results of the pilot projects are available, and then to submit annually a report on progress in the area of benchmarking (which could be included in the annual competitiveness report), to be discussed in the Council in a yearly competitiveness discussion after the European Parliament has been consulted;

32. Instructs its President to forward this resolution to the Commission, the Council and business and trade union organizations.