COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MO4) 380 final 
Brussels, 25.10.1994 
COMMUNICATION Ffl™ THF COMMISSION 
TRENGTHENING THE COMPETITIVENESS OF THE EUROPEAN 
MACHINERY CONSTRUCTION INDUSTRY 
lis 
Mechanical engineering contributes to the European economy with the largest trade surplus of all industrial 
sectors. Nevertheless, the terms of trade of thé EU with the rest of the world have worsened since the mid-
eighties owing to fast growing imports from Far East countries. Outside Europe the EU machinery exporters 
have a relatively weak presence, specially in the fast growing Pacific Rim. There is a particularly notorious 
trade imbalance between the EU and Japan. 
EU mechanical engineering is a strong competitive industry. Europe has traditionally been and still is the 
world leader in this area. A key factor of its success has been its flexibility and adaptability to the needs of 
its customers. This position has been maintained through technological excellence, traditionally based on 
mechanical know-how. In a wider sense the finest asset of European mechanical engineering is its 
personnel. Not only are its engineers among the best of the world, but its workers are highly-skilled and 
relatively well trained. The proportion of skilled labour in the total work-force is very high. The professional 
experience of contemporary European engineering staff rests on a centennial tradition of craftsmanship. 
European machinery construction offers an unequalled diversity of products adapted to particular technical 
requirements. There is no doubt that the unique market segment know-how, customer adaptation, short 
reaction lag to market changes and organization flexibility of engineering SMEs are critical factors in the 
European supremacy in speciality machines and equipment, its broad product range is a strength of the 
European machinery industry. On the other hand, the production model of special machines based on short 
batches precludes economies of scale. This is a handicap of European SMEs in comparison with some 
competitors which are more active in the volume business. Smaller firms are generally better suited to 
manufacturing speciality machines and larger firms standard machines. A competitive machinery 
construction industry needs both kinds of firms. 
The technological base in Europe today is sufficient to launch applications towards, La., the global 
information society. However, European engineering does not fully exploit the possibilities offered by 
innovation to upgrade its competitiveness. Certain foreign competitors, specially Japan, have in the last two 
decades narrowed the technological gap with Europe and even surpassed it in some technologies. Although 
still relatively far below the European level, some of the engineering industries of other Asian countries like 
Taiwan and Korea are climbing the technology ladder at a faster pace than their European counterparts. 
the trends in the 1980s and early 1990s in world trade and assimilation of new technologies indicate that 
our leadership is increasingly threatened. Machinery construction is very sensitive to investment slumps. It 
regularly faces sharper fluctuations in demand than most other sectors due to its dependence on the 
investment level of other industries, most of which are quite cycle sensitive themselves. The sector is 
confronted with a productivity gap in regard to certain competitors as a result of structural shortcomings and 
cyclical malfunctions. In particular, capital is much more expensive for European industrial firms than for 
their main overseas competitors. Non-wage labour costs are higher in Europe than in our major competitor 
countries, like USA or Japan. Another factor affecting international competitiveness is the relative 
inflexibility of working practices in certain European countries. Industry also needs to increase its efforts to 
modernize if it is to become a global player. 
The approach the Commission proposes to answer those questions is to transform this traditional, mâture 
industry hitherto based on mechanical engineering technology into a modern, renewed industry based on a 
better utilization of new technologies in such areas as information and communication (IGT), new materials, 
micromechanics, lasers, man-machine interfaces, organizational improvements and clean production. 
However, we should not lose sight of the past excellencies of this industry - macromechanical know-how, 
creativity, flexibility, close contacts with its customers. 
Based on this analysis, the Communication identifies the support that the EU Industrial Competitiveness 
Policy can contribute towards the improvement of the business environment in which machinery 
manufacturers operate. It then selects among the instruments at the disposal of that policy the most 
appropriate to tackle the problems besieging European machinery construction. 
To this end the Commission proposes coherent measures in the fields of investment promotion, business 
environment, industrial cooperation, technical harmonization, R&TD, vocational training, regional policy, 
trade policy and environmental protection. None of the proposed actions presuppose obligatory expenditure. 
Most of them can be implemented by means of Union or national instruments already in place. Due to the 
small size and resource shortage in a large part of this industry, those instruments are not sufficiently known 
or sought after: An improved access to and participation of the machinery industry fn such instruments is 
therefore desirable. In order to facilitate the implementation of the proposed actions, the Commission pleads 
for reinforcing the dialogue between the European and Member States' authorities and thé representatives 
of this industry. 
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TABLE OF CONTENTS 
Page 
Introduction i 
1. Overview and structure of the EU machinery construction industry 1 
1.1. The notion of machinery construction industry 1 
1.2. Trie importance of machinery construction in the European Union 1 
1.3. The essential role of machinery construction in the economy as supplier 
of capital goods . 4 
1.4. Past expansion, current crisis and conditions for a competitive up-grading 5 
2. Goals and challenges 6 
2.1. Specificities of an EU policy for machinery construction 6 
2.2. Premises and challenges 6 
2.2.1 The macroècônomic environment 6 
2.2.2 Innovation 7 
2.2.3 Assets: personnel, know-how, Europe-wide home market 8 
2.2.4 The issue of product specialization f 8 
2.2.5 Weaknesses: cyclical sensitivity, non-wage labour costs, financing 8 
3. The means: Union measures and actions proposed to industry and the Member States 10 
3.1. Investment promotion: enhancing competitiveness and employment 10 
3.2. Business environment : improving framework conditions 10 
3.3. Industrial cooperation: promoting private initiatives of mutual interest 11 
3.4. Technical harmonization: EU-wide regulations on the way to worid-wide recognition 11 
3.5. Research and technological innovation: the key to sustainable competitiveness 12 
3.6. Vocational training: fighting the shortage of engineers and other qualified staff 13 
3.7. Structural funds: reducing regional disparities 14 
3.8. External trade policy: opening up world markets 14 
3.9. Specific measures for small and medium sized firms 15 
3.10. Clean manufacturing: environmental protection as business opportunity 16 
3.11. Implementation of measures 16 
4. Conclusions 17 
ïA. 
OVERVIEW AND STRUCTURE OF THE EU MACHINERY CONSTRUCTION INDUSTRY 
1.1. The notion of machinery construction industry 
The subject matter of this Communication is the EU machinery construction industry3. Its product scope 
comprises machines and mechanical equipment4. Its country coverage is the EU Member States5, taking 
also into account the experiences in EFTA states. 
Although the Communication is focused on machinery construction, it does not deal with this industry in 
isolation but rather in its relations with its supplier and customer industries and the significance of that 
double up- and down-stream relationship for the whole manufacturing industry. 
1.2. The importance of the mechanical engineering industry in the Union. 
Mechanical engineering is quantitatively an important part of the manufacturing industry. With a 
production of 210 billion ECU it accounts for 8% of total EU industrial output. Among EU manufacturing 
industries it ranks 5th6 with respect to production, after the food and drink, chemical, motor vehicles and 
electrical and electronic engineering industries and before such industries as metal articles, paper, printing 
and publishing, rubber and plastic or textiles. It is a fragmented, labour-intensive sector: almost 120 
thousand engineering firms employ 2.3 million people. Subsequently its gross value-added ratio at factor 
costs is high: 0.40, of which 2/3 is labour cost. For comparison this industry generates a gross added value 
of 87 billion ECU (1992) while the motor vehicles, parts and accessories industry generates 81 billion. 
Graph 1: Value added of mechanical engineering in sectoral comparison (billion ECU, 1992) 
/P 
120-T y 
Chemicals Food, drink 
& tobacco Mechanical 
engineering Motor 
vehicles Metal 
products 
Source: DEBA 
In German speaking countries the concept of machinery construction (Maschinenbau) is well established: its coverage corresponds to that of Chapter 29 of the 
NACE nomenclature plus manufacture of safes and strongrooms, office machinery, computers and other information processing equipment and railway lo-comotives 
and rolling stock. Union industrial literature speaks of mechanical engineering with a coverage identical to that of Chapter 32 of the old NACE. English speaking 
countries traditionally use the concept of mechanical engineering, covering manufacturing of all types of mechanical machines and applian-ces as well as fabricated 
metal products. In the United Kingdom steelwork is included in mechanical engineering. 
The product scope is based on the Revision 1 of the the EU Statistical Classification of Economic Activities (NACE). It comprises all the groups under Division 29 
"Manufacture of Machinery and Equipment n.e.c." from 29.1 through 29.5 devoted to machines and equipment and heading 28.62 devoted to tooling. These include 
manufacture of engines and turbines, except aircraft, vehicle and cycle engines; pumps and compressors; taps and valves; bearings, gears, gearing and driving 
elements; furnaces and furnace burners; lifting and handling equipment; non-domestic cooling and ventilation equipment; other general purpose machinery n.e.c; 
agricultural tractors, other agricultural and forestry machinery; machine-tools; machinery for metallurgy, for mining, quarrying and construction; for food, beverage 
and tobacco processing, for textile, apparel and leather production, for paper and paper-board production, other special purpose ma-chinery and precision tools. 
The manufacture of weapons and ammunition of Group 29.6 and the manufacture of domestic appliances of Group 29.7 are excluded from this Communication. It 
should also be recalled that by propulsion mode there are two main kinds of machines: mechanically driven and electrically driven machines. Manufacture of 
electrical machinery is the competence of the electrical engineering industry and therefore falls outside the scope of the Communication. For the sake of convenience 
manufacture of mechanically driven machinery and equipment is referred to below as machinery construction. 
There is no empiric data available on the machinery construction industry in the sense given to it in this Communication. The sectoral description and analysis below 
is based on existing research on mechanical engineering. Thus, figures found in the Communication are slight overstatements of the size of the sector studied. 
Depending on the subject and source mechanical engineering and machinery construction are used without distinction. However, this is not thought to significantly 
gffect the relevance of the analysis or the conclusions. Machinery and mechanical equipment forms the core of all three concepts. 
Since this is a European Union document the country coverage sensu stricto is the EU Member States. However, the mechanical engineering industry of the EU and 
EFTA countries, which is represented by one industrial federation (ORGALIME), forms an organic unity featuring a West European, highly internationalized industrial 
bloc and shares much the same structural characteristics and problems. The Communication has been drafted thinking also about EFTA industry in the perspective 
of the integration of EFTA nations into the European Union within the Communication's implementation period. 
Aggregated at 2-digit level of NACE 
1À, 
OVERVIEW AND STRUCTURE OF THE EU MACHINERY CONSTRUCTION INDUSTRY 
1.1. The notion of machinery construction industry 
The subject matter of this Communication is the EU machinery construction industry3. Its product scope 
comprises machines and mechanical equipment4. Its country coverage is the EU Member States5, taking 
also into account the experiences in EFTA states. 
Although the Communication is focused on machinery construction, it does not deal with this industry in 
isolation but rather in its relations with its supplier and customer industries and the significance of that 
double up- and down-stream relationship for the whole manufacturing industry. 
1.2. The importance of the mechanical engineering industry in the Union. 
Mechanical engineering is quantitatively an important part of the manufacturing industry. With a 
production of 210 billion ECU it accounts for 8% of total EU industrial output. Among EU manufacturing 
industries it ranks 5th6 with respect to production, after the food and drink, chemical, motor vehicles and 
electrical and electronic engineering industries and before such industries as metal articles, paper, printing 
and publishing, rubber and plastic or textiles. It is a fragmented, labour-intensive sector: almost 120 
thousand engineering firms employ 2.3 million people. Subsequently its gross value-added ratio at factor 
costs is high: 0.40, of which 2/3 is labour cost. For comparison this industry generates a gross added value 
of 87 billion ECU (1992) while the motor vehicles, parts and accessories industry generates 81 billion. 
Graph 1: Value added of mechanical engineering in sectoral comparison (billion ECU, 1992) 
12o«r y 
Chemicals Food, drink 
& tobacco Mechanical 
engineering Motor 
vehicles Metal 
products 
Source: OEBA 
In German speaking countries the concept of machinery construction (Maschinenbau) is well established: its coverage corresponds to that of Chapter 29 of the 
NACE nomenclature plus manufacture of safes and strongrooms, office machinery, computers and other information processing equipment and railway lo-comotives 
and rolling stock. Union industrial literature speaks of mechanical engineering with a coverage identical to that of Chapter 32 of the old NACE. English speaking 
countries traditionally use the concept of mechanical engineering, covering manufacturing of all types of mechanical machines and applian-ces as well as fabricated 
metal products. In the United Kingdom steelwork is included in mechanical engineering. 
The product scope is based on the Revision 1 of the the EU Statistical Classification of Economic Activities (NACE). It comprises all the groups under Division 29 
"Manufacture of Machinery and Equipment n.e.c." from 29.1 through 29.5 devoted to machines and equipment and heading 28.62 devoted to tooling. These include 
manufacture of engines and turbines, except aircraft, vehicle and cycle engines; pumps and compressors; taps and valves; bearings, gears, gearing and driving 
elements; furnaces and furnace burners; lifting and handling equipment; non-domestic cooling and ventilation equipment; other general purpose machinery n.e.c; 
agricultural tractors, other agricultural and forestry machinery; machine-tools; machinery for metallurgy, for mining, quarrying and construction; for food, beverage 
and tobacco processing, for textile, apparel and leather production, for paper and paper-board production, other special purpose ma-chinery and precision tools. 
The manufacture of weapons and ammunition of Group 29.6 and the manufacture of domestic appliances of Group 29.7 are excluded from this Communication. It 
should also be recalled that by propulsion mode there are two main kinds of machines: mechanically driven and electrically driven machines. Manufacture of 
electrical machinery is the competence of the electrical engineering industry and therefore falls outside the scope of the Communication. For the sake of convenience 
manufacture of mechanically driven machinery and equipment is referred to below as machinery construction. 
There is no empiric data available on the machinery construction industry in the sense given to it in this Communication. The sectoral description and analysis below 
is based on existing research on mechanical engineering. Thus, figures found in the Communication are slight overstatements of the size of the sector studied. 
Depending on the subject and source mechanical engineering and machinery construction are used without distinction. However, this is not thought to significantly 
gffect the relevance of the analysis or the conclusions. Machinery and mechanical equipment forms the core of all three concepts. 
Since this is a European Union document the country coverage sensu stricto is the EU Member States. However, the mechanical engineering industry of the EU and 
EFTA countries, which is represented by one industrial federation (ORGALIME), forms an organic unity featuring a West European, highly internationalized industrial 
bloc and shares much the same structural characteristics and problems. The Communication has been drafted thinking also about EFTA industry in the perspective 
of the integration of EFTA nations into the European Union within the Communication's implementation period. 
Aggregated at 2-digit level of NACE 
Half of the EU mechanical engineering equipment is made in Germany. In the UK, Italy and France 
there is also a sizeable production. The evolution in the geographical distribution of EU mechanical 
engineering during the eighties points at a progressive consolidation of its concentration in a limited number 
of regions8. 
Mechanical engineering firms design, construct and distribute production equipment and parts for 
practically all branches of the economy from agriculture to utilities, from public works to aerospace. 
Within mechanical engineering machinery for metallurgy, mining, quarrying, construction, lifting and 
handling is by far the largest9 subsector with over 40 billion ECU output, followed by machinery for wood­
working, paper production and processing, laundry and leather in excess of 15 billion. The heterogeneity of 
these two sectors accounts for their size. The former subsector is dominated by construction and civil 
engineering equipment. Then comes a cluster of subsectors with over 10 billion output, including machine-
tools, tractors and other agricultural and forestry machinery and transmission equipment. Other sizeable 
subsectors are the food, drink and tobacco processing machinery and the textile machinery. This ranking 
also gives a notion of which are the main customer industries of mechanical engineering products. 
Graph 4: Breakdown of EU mechanical engineering by sectors 
1991, million ECU 
100% -r-
90% 
80% 4-
70% 
60% 4-
50% 
40% 
30% 4-
20% 4-
10% 4-
0% 
Source: DEBA Transmission equipment 
Tractors and other 
agricultural machines 
Machine-tools 
Machinery for woodworking, 
paper production and 
processing, laundry and 
leather 
Machinery for mining, 
metallurgy, construction, 
lifting and handling 
Others 
Another essential characteristic of European mechanical engineering is a distinct industrial 
structure dominated by small and medium enterprises10. This applies to all Member States. In 1990 
there were almost 120 thousand mechanical engineering companies in the European Union, with the 
following breakdown: 4% with 100 or more employees account for 64% of the sectoral turnover and 62% of 
employment; 14% between 20 and 100 employees and 82% with less than 20 people.11 
Germany alone stands for 53% of the value added in the EU. The UK is second with15% followed by Italy with 13% and France with 10 %. In the Benelux, Spain and 
Denmark there is a modest production and very little in the rest of the Union. Germany shows also the highest intensity of mechanical engineering with a 12.5% 
share in total manufacturing, followed by Denmark with 10.0% and Italy with 9.6%; in Greece it is less than 1%. Between 1987 and 1992 Germany increased its share 
of EC mechanical engineering from 42% to 53%; all the other significant producer countries lost shares. Production is concentrated in a few industrial regions: North 
Rhine-Westphalia, Baden-Wùrttemberg, Bavaria and Lower Saxony in Germany, Lombardy and Emily-Romagne in Italy, the South-East and the Midlands in Britain 
and Isle of France and Rhone-Alps in France. 
There are no comparable production statistics for all the main types of produced machines and equipment so their relative weight can only be approximately 
estimated and the machine types ranked 
As a rule, the many smaller companies manufacture units or small batches of customer-tailored, special machines in niche, low-volume markets. The few big 
companies make relatively long batches of standard machines or components 
The SME dominance is determined by the product range. Concentration on specialized production methods and products is best suited to smaller, surveyable 
companies in possession of specific know-how and is, indeed, a precondition for such companies to remain in the market. In the company size breakdown (Table 1), 
the companies with 100 or more employees account for 64% of the sectoral turnover and 62% of employment. There is only one corporation in Europe! 
Mannesmann, predominantly devoted to machinery construction with more than 100,000 employees. The largest three firms in the sector (Mannesmann, Thyssen 
and Deutsche Babcock) are German. 82% of all EU companies have less than 20 employees. As a rule, the many smaller companies manufacture units or small 
batches of customer-tailored, special machines in niche, low-volume markets. The few big companies manufacture relatively long batches of standard machines or 
components, gaining economies of scale from their large-scale production facilities and financial solidity. 
Table 1 
Breakdown by enterprise size of EU mechanical engineering 
(1990) 
number of number of %of %of %of 
employees enterprises enterprises employment turnover 
£100 4,437 4 62 64 
£20 £99 16,683 14 23 24 
<20 98,794 82 15 12 
Source: Eurostat 
Employment in mechanical engineering is an important contributor in absolute numbers to the 
Union labour market: 2.3 million employees make it the third largest industrial employer after the electrical 
and electronic engineering and the food and beverage industries and before such industries as metal 
articles, chemistry and motor vehicles. In Germany and Italy it is the largest industrial employer. 
The engineering business is more and more becoming a service business requesting an uniquely 
qualified sales and after-sales staff (most often engineers) . The manufacturer does not any more offer 
stand-alone machines but solution packages to the needs of his customers, including concurrent design and 
engineering, installation, run-in, maintenance, operators' training and complete after-sales service. 
Equipment application know-how has become as important as construction know-how. 
Machinery construction is a growth market for European industry due to its top-of-the-range 
products, its sustainable volume and its key role within manufacturing industry. With its technical 
know-how and adaptability it also functions as an engine for technical progress in its customer industries. 
1.3. The essential role of machinery construction in the economy as supplier of capital goods 
The (mechanical and electrical) engineering industry is the exclusive manufacturer of equipment for 
industry. Engineering products account for the major part of the growth of the industrial production base. 
The machines supplied by the mechanical engineering industry are used for manufacturing cars, lorries, 
aeroplanes, textiles, machines, household appliances and capital and consumer goods in general. Its main 
market is the manufacturing industry12. Machinery is at the base of economic development and industrial 
competitiveness. 
As major supplier of advanced capital equipment goods machinery construction is crucially linked with all 
important downstream industries. Machine performance determines the potential for productivity 
raises in several other key sectors, like the automobile industry. The industrial future of the Union among 
advanced industrial nations therefore depends largely on the consolidation of a competitive machinery 
construction in Europe. 
This sector has close links with other growth markets. European technical prowess in machinery design and 
construction is entirely based on the ability of the industry to innovate and exploit the advances of 
engineering science and outstanding professional skills of its staff. The machinery industry relies more and 
more on new technologies, such as information and communication technologies (ICT), new materials, 
micromechanics, lasers and man-machine interfaces; at the same time it constitutes a major market for 
goods and services emanating from those technologies. Mechanical engineering is, together with the 
chemical industry, the main supplier of environmental control and clean production technologies and 
products. 
The supplier industries of the machinery construction industry directly related to the production process 
include purveyors of fungibles, material inputs and means of production13. It is important to note that in 
terms of cost and technological relevance the means of production is the most important of these three 
categories. Within means of production the most important kind of equipment is mechanical machinery. 
This means that the first supplier of the mechanical engineering industry is itself: machines are made by 
machines. In this context the machine-tool industry occupies a key position. 
12 In the case of West Germany the shares of its major sectoral clients are 72% for manufacturing, followed by 8% for services, 7% for power and water supply and 
mining, 6% for agriculture and forestry and 5% for construction. 
Fungibles are electricity, water, fuels, welding materials, lubricants and others which are used up during production. Suppliers of material paits and components 
are the primary iion and stool processing (cold drawing, lolling and forming products, wiios, stool tubes), foundiy anil forging, secondary moral transformation 
(screws, nuts, bolts, springs, chains), boilers and metal containers, tools, drives and tiansmissions, mechanical, hydraulic, olectrical and electronic components and 
sub-assemblies industries. Suppliers of production equipment are the tooling, electrical and mechanical machinery industries. 
The development of the machinery construction industry and those of its supplier and customer 
industries are intertwined: changes in any of them reflect immediately in the other two. For instance, a cut 
in the price of steel goods alleviates at once the production cost of machines; a fall in the demand for cars 
soon leads to shorter order books for machine manufacturers. All these three categories of industries are 
particularly cycle-sensitive. Owing to its unilateral dependence on sectors, which in their turn are cycle-
sensitive, the mechanical engineering sector is regularly confronted with sharper fluctuations in 
demand than most other industries. 
1.4. Past expansion, current crisis and conditions for a competitive up-grading 
In line with the above, the development of mechanical engineering in the last decade is best understood in 
terms of investment trends. During that period the economic indicator curves of the sector have been a 
mirror image of the general economic curves, only on a larger scale and with 1/2-1 year lag. Between 
1991 and 1993 it has recorded the deepest and longest recession since the 2nd World War.14 
Graph 5: Evolution of mechanical engineering in comparison with manufacturing 
Production Employment 
130 T (1985 = 100) 
130T 
120 
110 
100 
90 
80-• (1985 = 100) 
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 70 
Mechanical engineering • - Manufacturing 19831984 1985 1986 1987 1988 1989 1990 1991 1992 
Source DEB A ; Eurostat estimates for 1993 
In the medium term the prospects are more favourable. The EU Internal Market and the European 
Economic Area together with certain EFTA countries provide incentives for investment in West European 
production and trade. The Commission's Action Plan for Growth, Competitiveness and Employment 
furnishes fresh fuel to the coming upswing. The long awaited Uruguay Round agreement boosts world trade, 
triggering in its wake a surge in demand of industrial commodities. 
14. Grapn 5 shows how following the recession of 1982/83, production rose during 1984/85: from 1982 till 1985 output increased in real terms by a 2.7% annual 
average. In 1986/87 H stagnated again. From 1987 to 1990 it grew once more steadily and sizeabry: from 1985 till 1990 it increased by a 3.9% annual avera-ge. 1991 
recorded the beginning of the deepest and longest recession which has hit the European mechanical engineering industry since the 2nd World War. Between 1990 
and 1993 EU production has fallen in current terms from 227 thousand million ECU to 210. apparent consumption from 190 thousand million ECU to 171 and 
employment from 2.7 million to 2.3, i.e. 15% of the sector's workforce has been lost, half of which in East Germany. 
2. GOALS AND CHALLENGES 
2.1 Specificities of a EU policy for machinery construction 
The Commission's goal is to assist industry and the member States, respecting the principle of subsidiarity, 
in upgrading the competitiveness of the EU machinery construction industry in the framework of the Union 
policy of industrial competitiveness. A competitive industry is indispensable to maintain the Union's position 
in the world economy. While fully respecting their contributions to the economy, the reality is that at the 
continental level neither services, information technologies nor any other economic activity can replace the 
unique role of the manufacturing industry as the supplier of material goods and a prime generator of wealth 
and employment. 
The Members States too have generally attached great importance to machinery construction. The 
objective importance of mechanical engineering varies considerably between EC countries and regions. 
Some national and regional governments, mostly where the machinery industry is concentrated, have or 
have had specific promotion plans for this sector. This Communication takes into account to the greatest 
possible extent their valuable experiences. It must be admitted, however, that their strategies have not been 
co-ordinated among them but have rather striven to attract investments in machinery production into their 
territory. Without prejudice to the question of regional disparities, economic efficiency in the EU machinery 
construction market is better achieved when resource allocation uses the criterion of comparative 
advantage. 
Machinery construction is a key industry; essentially important in its own right and owing to the central role 
of machinery for the whole of manufacturing industry. It should be emphasized that the first responsible for 
its competitive upgrading is the European machinery industry itself. Within their respective competences the 
Union and its Member States should also take all measures conducive to the consolidation of the global 
competitiveness of their machinery industries. 
The European machinery construction industry has never asked for a privileged treatment. Its basic goal is 
not to trigger intervention from either the Union or the Member States, but to create means by which 
individual companies can achieve their own strategic objectives. 
The European machinery industry will have in the coming years to meet challenges on four fronts, and 
accordingly it will need to: 
i. overcome the shortcomings, both exogenous and endogenous, both structural and cyclical which 
render it sensitive to cyclical fluctuations, undermine its reinvestment capacity and threaten its long-
term profitability; 
ii. accelerate its restructuring, both with regard to company structure and size, to product upgrading 
and market orientation; 
iii. learn how to draw the greatest possible competitive advantage from the innovation process, which 
involves R&TD in, inter alia, the fields of production automation, data processing and 
telecommunications, training, organizational and managerial improvements, grasping market 
openings and above all readiness to apply research results; 
iv. step up efforts in order to become a true global player, with a strong presence not only in Europe but 
also in the USA, Far East and other significant future markets. 
Within the domain of machinery construction, manufacturers of different types of machines and equipment 
are subject to partially diverse production technologies, markets and competition conditions. It is believed, 
however, that all subsectors have sufficient similarities to benefit from common measures so that only the 
machinery construction industry in its totality justifies a European policy initiative. When carrying out the 
actions proposed here Public Authorities and other concerned bodies ought to take into account the 
specificities of this sector : mature industry, broad product range, focus on home market, production 
technology based on mechanics, fragmented company structure and low investment capacity. 
2.2 Premises and challenges 
2.2.1 The macroeconomic environment 
From the viewpoint of the machinery construction industry a stable evolution of the economy in the long 
term is even more important than specific measures taken to enhance competitiveness. Continuous growth 
of the economy offers industry, of course, optimal opportunities for profit reaping and expansion. However, 
industry is also able to adapt itself to a stagnating economy and even to a decreasing trend in demand, 
provided that the evolution is smooth, the impending changes can be forecast and the necessary 
accompanying measures to facilitate structural adjustment are put at its disposal. 
Updating the organization and work methods of concerned Union and national public services to best 
business practice is essential in improving this industry's competitiveness. Government must also create an 
attractive business environment for the continued location of machinery plants in the EU. In this respect it 
should in the first place ensure a steady development by means of an adequate fiscal and monetary policy. 
A special effort should be made to avoid unbridled cyclical swings and frequent changes of economic policy, 
which are especially damaging for the machinery construction industry. In shaping their economic policy, 
public authorities should attach value to industry's capacity of creating wealth; for industry to thrive here 
long-term inward investment in the Union must be encouraged, taking account inter alia of the level of 
the fiscal burden and non-wage labour costs borne by our industry relative to its major competitors. 
Further Government has to promote the development of public services having an impact on industrial 
competitiveness, such as education or communications, for which it is responsible. 
2.2.2 Innovation 
Technological excellence lies at the heart of competitive advantage. This holds specially true of economies 
oriented toward advanced, specialized, knowledge-intensive production but relatively poor in land, raw 
materials, energy and population, like the Union and of an industry such as engineering that produces 
mainly leading technology products with a high value-added. 
The dependence of all industrial branches on mechanical engineering to upgrade their production 
equipment arises in this industry a vigorous innovative drive. The machinery manufacturer continously 
receives requests from his customer industries, which he must swiftly transform into new processes and 
products. The limits originally imposed on the mechanical engineering industry by mechanical science are 
long gone : information technology has spread to virtually all its subsectors. This trend began in the 
seventies with computer aided design (CAD) and manufacturing (CAM), which by now have reached almost 
universal use. Production proper is increasingly carried out by flexible cells which integrate several 
machines working together on a work-piece thanks to coordinated, computer steered numerical controls 
(CNC). Fully automated, computer integrated manufacturing (CIM) progresses slower than first expected. 
Future productivity increases are expected to arise more from market pull than from technology 
push. Factory automation provides a good example. In the past machine users tried to solve production 
bottlenecks simply by letting more performing machines do the same tasks. Higher costs, lack of experience 
with the new technology and above all poor task definition led sometimes to disappointment. On the 
drawing-board large-scale automated production lines (CIM) appear to have superior performance. 
However, CIM market introduction of during the last decade has gone slower than predicted. Most 
machinery users lately prefer smaller flexible cells which are more versatile and easier to work with. Also 
the higher initial investment cost of CIM has been a deterrent in a period of squeezed returns. The future 
outlook is that the manufacturer, rather than developing a new machine model and then searching for users, 
will first study with users their impending production tasks and develop solutions for those tasks on the basis 
of his machine construction capacity. 
European industry is the world leader in engineering technology. The European engineering industry 
is recognized to possess an outstanding record both in manufacturing technology and product range and 
performances. However, certain foreign competitors, specially Japan, have in the last two decades 
narrowed the technological gap with Europe and even surpassed it in some technologies. Although on 
average still relatively far below the European level, the engineering industries of other Asian countries like 
Taiwan and Korea are climbing the technology ladder at a faster pace than their European counterparts A 
great effort must therefore be made in the upgrading of medium- and high-tech products so as to 
consolidate or recover the technological edge of this industry. 
Our engineering is barely maintaining its ground in market segments which it has traditionally 
dominated and is losing the battle of many new products. It keeps its ground in the domestic market but is 
not sufficiently present in overseas markets, specially in the fast growing markets of the Pacific Rim. 
European engineering experiences difficulties in transforming the excellent theoretical proficiency, that it 
undoubtedly possesses, into new marketable products within a sufficiently short development lead time. In 
this regard pre-industrial development activities of companies are of key importance. If he is to remain in 
the market, the European machine manufacturer, rather that developing a new machine model and then 
searching for users, will have to first study with users their impending production tasks and then develop 
solutions for those tasks on the basis of his machine construction capacity. 
A resolute Innovation Policy is a capital instrument of Competitiveness Policy. The 4th Framework 
Programme of European community activities in the field of research and technological development and 
demonstration (1994-1998) has therefore as a basic goal strengthening the scientific and technological base 
of the Community and its industry in order to improve its international competitiveness. Vocational training 
programmes are being stepped up too. 
In the globalized economy competitive advantages are no longer limited to wealth in natural resources. 
They are rather based on immaterial resources like professional skill, organization, information, cultural 
environment and scientific and technical prowess. European engineering is a perfect example of the validity 
of that assumption. 
2.2.3 Assets: personnel, know-how. Europe-wide market 
The main asset the European machinery construction industry has to offer is its professional skills. 
Technically speaking European engineering is the world leader. The US and Japanese machinery industries 
can match European engineering standards in some areas and maybe even surpass them in a few, but the 
European wealth in specialized technologies, processes, products and services is unequalled. The 
innovation potential of European mechanical engineering is foreseen to remain at a high level on account of 
expected developments in the fields of intelligent manufacturing, microelectronics, micromechanics, 
mechatronics and new materials. The superior inventiveness of European engineers is demonstrated by the 
number of European mechanical engineering related patents, ahead of USA and Japan. 
In a wider sense the finest asset of European mechanical engineering is its personnel. Not only are its 
engineers among the best of the world, but its workers are highly-skilled and relatively well trained. The 
proportion of skilled labour in the total work-force is very high15. The professional experience of 
contemporary European engineering staff rests on a centennial tradition of craftsmanship. Notwithstanding, 
some European engineering companies still are somewhat less proficient in penetrating overseas markets 
than in meeting the particular technical requirements of their traditional clients. During recessions there is a 
risk that the innovative capacity of European engineering is drained by personnel reduction. 
The completion of the Single European Market starting 1993 eliminates the barriers affecting the free 
circulation of machines in a 385 million consumer strong market (EU/EFTA). Here important benefits are 
beginning to be reaped from economies of scale, product standarization and abolition of internal border 
formalities. Between 1985 and 1992 the share of intra-EU trade in Union consumption of mechanical 
equipment grew from 1/5 to 1/3. Had it not been for industry preparation for the Single Market, investment 
would have plummeted even lower in the period 1991/92. Although undergoing today a major 
restructuration, Central and Eastern Europe offers in the medium term very interesting opportunities for 
West European machine makers. 
2.2.4 The issue of product specialization 
Smaller firms are generally oriented toward manufacturing speciality machines and larger firms toward 
standard machines, though of course this is not always the case. A competitive machinery construction 
industry needs both kinds of firms. A Commission study on the machine-tool sector recommends 
reinforcing the European presence in the standard machines market while maintaining our position 
in the specialities market. That recommendation is extrapolable to other subsectors of the machinery 
industry. 
There is no doubt that the unique market segment know-how, customer adaptation, short reaction lag to 
market changes and organization flexibility of engineering SMEs are critical factors in the European 
supremacy in speciality equipment. Its broad product range is a strength of the European machinery 
industry. However, the production model of special machines based on short batches precludes economies 
of scale. This is a handicap of European SMEs in comparison with some competitors which are more active 
in the volume business. Cooperation between manufacturers of speciality and standard equipment and 
better financial support to the growth of SMEs are two ways of strengthening European presence on both 
markets. 
According to a French survey in 1988 engineers represented 11% of the payroll of machinery firms, technicians 17% and qualified workers 47%; thus only 25% 
were non-qualified. 
2.2.5 Weaknesses: cyclical sensitivity, non-waoe labour costs and financing 
Acute cyclical sensitivity is one of the most serious weaknesses of the machinery construction industry all 
over the world. Every sector of the economy experiences hardships due to cyclical oscillations, but the 
machinery sector is particularly disrupted for two reasons. Firstly, due to its quick innovation pace 
machinery manufacturers must keep up a high level of expenditure in R&D during recessions, but specially 
the smaller ones are impaired by their limited financial strength. Secondly, employees are often laid-off 
during recessions; these are mostly highly-qualified staff on which the machinery companies have heavily 
invested but which are hard to get back once the cycle swings up again. Since European machinery 
construction has been repeatedly shaken by recurring recessions, it may be concluded that the temporary 
symptoms reveal a structural problem. On the other hand, in periods of growth engineers and skilled 
workers are often hard to find for European machinery companies16. 
European machinery construction suffers from récessions more than its competitors. Higher non-wage 
labour costs in some of the main machinery-producing EU countries17 are one of the significant factors in 
competition with USA and Japan. Another factor affecting international competitiveness is the relative 
rigidity in working practices in certain Member States; for example, there is little flexibility to adapt 
working hours to seasonal and cyclical oscillations in demand. 
Capital is more expensive for European industrial firms than for their main overseas competitors18. 
Besides the quantitative rate handicap, banks in certain competitor countries show more confidence in the 
long-term prospects of their industrial clients and support industry more actively. This phenomenon is 
particularly marked in Japan where engineering companies and banks often form part of the same keiretsu 
or conglomerate. 
The financial difficulties of the European machinery manufacturers are not just external. Fierce competition 
and pressure from dominant customers forces them to slash profit margins. Family firms carry on with lower 
level of net profits than joint-stock companies. This results in an internal shortage of reinvestment. Thus, 
not only are the smaller manufacturers financially weak but their possibilities of consolidating their financial 
standing are very limited too. 
Besides, certain organizational factors of European companies account for part of the gap. European 
engineering firms seem to be more hierarchical and compartmented than the Japanese ones. More 
attention is paid in Europe to the development of traditional products and customer relations and less to new 
product areas and geographical markets. There is a tendency of over-engineering, i.e. to building and fitting 
machines at higher levels of quality and accessories than what the market requests. Making customer 
tailored machines is slower and more labour-intensive than making standard ones, which penalizes 
European productivity. Shop-floor experience is valued less than in Japan. Work in our factories is 
organized more by functions than by tasks. European managers ought to pay more attention to these 
matters. 
In the case of Japan there are also factors at national level which add to the competitive advantages of 
domestic companies. There is evidence of Japanese targeting on certain kinds of machines. The Japanese 
authorities have been more active in assisting their machinery industry. The Japanese machinery market is 
foreclosed owing to national buying preference on non objective grounds, vertical integration of distribution 
channels and restrictive regulations and administrative routines. The European engineering industry cannot 
imitate the Japanese model since its structure and environment are different, but it should make.better use 
of its own assets and obtain smoother access to the Japanese market and free and fair trade with the rest of 
the world. 
Because of external handicaps concerning investment, labour-market, working regulations, fiscality and 
financing, and internal deficiencies, there is a productivity lag with respect to some of our overseas 
competitors. According to a German study, the average Japanese machine-tool worker is 2.8 times more 
productive than his German colleague. The gap is probably less striking in other machinery subsectors less 
amenable to long-batch, automated production, but productivity remains a serious problem for the sector as 
a whole. 
16 
The sector has particular difficulty in recruiting engineers. It takes 10-15 years to train a specialized engineer. Industry has repeatedly complained about the 
inadequacy of the educational and vocational training schemes in most Member States to meet their needs. Their staffing problems are compounded by a trickle of 
skilled staff caused in part by recessions, as explained above, and in part by other sectors' better wages and images. Each employee who leaves European 
mechanical engineering impoverishes its technological heritage. 
According to the White Paper in 1991 non-wage labour costs (sum of taxes and obligatory social security contributions) amounted to 39.6% of GDP in the EU but 
only 29.8% in the US and 30.9% in Japan. Within the EU there are. cost differences ranging from 47.1 % of GDP in Denmark to 34.4% in the UK. 
The mid 1992 day-to-day call money rate was 9.69% in Germany, 9.99% in France, 9.78% in the UK but 4.53% in Japan and 3.25% in USA. If this was a 
temporary situation it would not concern a long-term Competitiveness Policy, but the interest gap has not diminished in the past five years. 
10 
3. THE MEANS: UNION MEASURES AND ACTiOr^ PROPOSED TO INDUSTRY ArW THE MEMBER STATES 
3.1. Investment promotion : enhancing competitiveness and employment 
The EU machinery construction industry needs an effective domestic market in which free and fair 
competition are assured in order to upgrade its competitiveness. To raise the level of investment in capital 
goods in Europe is crucial for the health of this industry. Both the offer of machinery by this sector and the 
demand of machinery from end-user industries are to be encouraged. The first thing to do in order to 
encourage investment is to eliminate the structural obstacles that hamper it. The Commission recommends 
Member States to take horizontal economic measures that can benefit the whole manufacturing industry. 
Such measures, together with others aimed at improving the efficiency of the labour market could also be 
instrumental in fighting against the present high unemployment rate in this branch. 
Hitherto investment by the manufacturing industry has concentrated on investment in physical production 
equipment, mainly in machines19. The absolute level of European industry's physical investment has to be 
increased or at least maintained. Reducing it would have a negative impact on the machinery construction 
through shrinking demand for its products and on the manufacturing industry at large through lower 
productivity. The new Communication on Industrial Competitiveness calls for all Government policies to 
take fuller account of intangible investment. Effective exploitation of the new factors determining industrial 
competitiveness calls for the promotion of knowledge, human resources and innovation. These two 
categories of investment are compatible and the machinery industry should be encouraged to step up both. 
Member States should consider granting further tax, depreciation and other incentives for sound 
investments in capital goods in general, including machinery, insofar as their economic situation allows it. 
This measure would encourage badly needed investment after years of insufficient expenditure in the 
renewal of production equipment and generate more wealth through heightened productivity than the 
resulting loss in public revenue. It also has the advantage of not distorting competition between industrial 
branches. In order to encourage the ongoing restructuration of the EU machinery construction industry, it 
invites the Member States to shorten the tax depreciation terms of production equipment arid make 
depreciation regulations more flexible within the limits of Union and national law. 
In comparison with US companies, European companies, very specially SMEs, have more difficulty in 
obtaining loans for start-up, high-risk or high-technology projects. It is desirable to build up the risk capital 
market in the Union. Machinery companies are invited to avail themselves of the favourable loans and other 
financial services of the European Investment Bank and the European Venture Capital Association. 
3.2. Business environment: improving framework conditions 
Streamlining of the laws and regulations limiting business practices, upgrading public and private services to 
industry and supporting cooperation sought by companies are useful means of enhancing the 
competitiveness of the European machinery sector. 
The objective of providing a competitive environment for business is the central element of the Union's 
Strategic Programme for making the most of the Internal Market (COM(93) 632). Through this 
Programme the machinery construction industry will experience the completion of the basic legal framework 
needed for the functioning of the Internal Market in the field of machines and equipment, ensuring 
conformity and transparency in the transposition of Union directives in this field into national law and quality 
in the enforcement of the latter. Improvements are also envisaged in the area of European standardization, 
conformity assessment and quality promotion. Further improvements are planned including i.e. active 
application of competition policy, tackling the problem of delays and double-charging in cross-border 
payments, further proposals on transport, the creation of a more favourable tax regime for business and 
improvement in the area of company law.20 
The competitiveness of an enterprise depends, apart from its own skills and the costs it bears, on the 
stimulation it receives from the industrial tissue around it. An efficient business infrastructure is a 
precondition for the location and flourishing of industry. The European economy has the duty of furnishing 
top-quality services to its industry. The main responsibility herein lies with central and local authorities and 
19 
20 According to a study by the IFO-lnstKute machines account for 44% in value of the total investments of German industry 
In this latter area the Strategic Programme indicates that, besides pursuing its efforts designed to provide firms with instruments which would facilitate their 
development in the Internal Market, the Commisston intends to initiate a fundamental reflection oh the legal framework in a single market. So far progress has been 
made with the adoption of the Statute of European Groupings of Economic Interest, the Insiders Directive, the 11th Directive on Bank Branch Office Accounting and 
the 12th Directive on the Individual Company. However, the central goal of the European Company Statute, which would enhance mobility of firms in the Internal 
Market, has not been achieved. A number of directive proposals remain blocked. The difficulties are particularly linked to the transfer of headquarters and mergers. 
11 
the service sector. For its part, The White Paper gives a fresh thrust to the objective of the Maastricht 
Treaty of developing Trans European Networks by proposing a 400 thousand million ECU investment in 
large-scale infrastructure works in the areas of transportation, telecommunications and energy distribution. 
The machinery construction industry will benefit greatly from the resulting improvement in business 
infrastructure. It can also supply part of the equipment needed for their realization, specially the construction 
machinery industry. 
Free and fair competition in an open market is the most important prerequisite for the future 
competitiveness of the European machinery construction sector. State aids to particular companies or to 
sectors must conform to the very strict criteria applied by the Commission if they are to be declared 
ompatible with the common market. The Commission will step up its efforts to reduce public aid, taking into 
account regional imbalances, and will shortly look at possible changes in the mechanisms for controlling 
state aids. The intention is also to simplify the monitoring of minor cases. Ongoing measures have to be 
better co-ordinated taking into account the competitiveness of EU industry as a whole. Distortions of 
competition between the EU and its trading partners must be removed too. 
3.3. Industrial cooperation: promoting private initiatives of mutual interest 
Industrial cooperation is above all the responsibility of industry . However, it is for Public Authorities to 
establish a framework to capitalize on mutual interests. The Commission's primary objective is to promote 
cooperation between different operators in the machinery and equipment market through removing legal 
and fiscal obstacles to cooperation, supporting industrial initiatives on growth markets, organizing round 
tables or developing a legal framework for a common promotion of European investment in third countries. 
SMEs should be encouraged to participate in industrial cooperation, specially in a fragmented industry like 
machinery construction. The Commission will give priority to cooperative initiatives which are of European 
interest. 
Voluntary cooperation schemes at the initiative of private partners are welcome both among EU companies 
and between them and third country companies, both within the machinery construction industry and the 
upstream and downstream industries. In the case of machinery construction particularly high productivity 
gains can arise from a better technological integration between the materials and components machines are 
made of, the production technology of machines and their applications. An even closer collaboration along 
this line of industrial activities would therefore be very fruitful. Such collaboration must strike a balance of 
interests and prove profitable for all the involved types of enterprises, having in mind that while 
manufacturers of mechanical components and machines generally are SMEs, their suppliers of materials 
and fungibles as well as their customers are often large corporations. 
Indeed, we observe that since 1990 the trend towards industrial cooperation among European machinery 
manufacturers and between them and their suppliers and customers has gained pace, despite the slowdown 
in economic activity, as illustrated by the growing number of strategic alliances and mergers. This trend has 
to be further encouraged. 
The Commission will study the opportunity of summoning a Round Table of Industrialists of the mechanical 
engineering and connected industries, based on the model sketched in the Communication on Industrial 
Competitiveness Policy. 
3.4. Technical harmonization: EC-wide regulations on the way to world-wide recognition 
Industry perceives that the further development of European harmonization, specially an acceleration in 
standards, is crucial for the functioning of the Internal Market. In the application of technical harmonization 
to mechanical equipment the Commission shall continue applying the full potential of the New Approach on 
Technical Harmonization in which only essential requirements are mandatory and the Global Approach to 
Certification and Testing. In the field of Quality Promotion the Member States and Industry should also step 
up their activities. The New Approach applies to all the equipment covered by this Communication with the 
exception of farm and forestry tractors. The development and use of European standards of voluntary 
application shall be promoted. Technical harmonization, certification and quality are powerful means of 
raising competitiveness. They are industrial policy at its best: deregulatory, open and horizontal. 
Of particular interest to the machinery construction industry is speedily completing the transposition into 
Member State laws of New Approach directives, in particular the Machinery Directive, and 
accelerating the preparation of the harmonized standards covering that Directive's essential safety 
requirements in view of its entry into force. In order to facilitate trade and access to foreign markets it is 
important that European standards (EN) remain compatible with international standards (ISO, IEC). 
12 
The Commission shall continue its efforts to disseminate the contents of the said Directive among 
machinery firms, specially SMEs, and orientate manufacturers when applying the Directive's principles to 
machiné design and construction. The Commission is concerned about the low level of awareness and 
assimilation of the Directive among the concerned parties. Member States should step up their efforts in 
assuring the widest possible diffusion, specially among SMEs, of its key provisions. The campaigns 
launched by Denmark and other countries provide useful experience. 
A cost-benefit analysis should be done before passing any new law or regulation which may affect industry. 
Existing regulations should be reviewed in order to ascertain whether they are really necessary and 
beneficial and render them as simple and homogenous as possible. Specially such regulations that may 
raise trade barriers are candidates for deregulation. Whichever the economic prospects may be, what 
industry has the right to expect from Government is long-termedness, predictability, transparency and 
accountability. 
The Union shall accelerate its efforts to grant EU exporters of machinery the benefit of a guaranteed access 
to foreign markets, as far as technical regulations and standards are concerned, through the negotiation of 
Mutual Recognition Agreements with our main trading partners. 
') • • ': - ' : ••• . • •'. '''-••. •.. " ... • ' ' -
3.5. Research and innovation: key contributions to sustainable competitiveness 
The new horizontal Communication on Industrial Competitiveness reasserts that the EU must place its 
science and technology base at the service of industrial competitiveness. 96% of research carried out in the 
EU is financed by either the Member States or Industry. 
The lion's share has to be borne by industry itself. European industry has a lower share in R&D than either 
Japanese or US industry. Recently, however, it is becoming more aware of its importance and redoubling its 
research efforts. Industry must step up its expenditure in R&D to the utmost of its financial capacity. More 
industrial cooperation in research would also be welcome. Aware of the limited capacity of European 
engineering firms, specially SMEs in recession times, to bear additional costs, the Commission has 
proposed to the Member States in the White Paper tax credit schemes for research. Such credits could 
be developed to encourage machinery companies to invest more in science, even in the long term-
Member States have a fundamental rôle to play in fostering R&D in the EU since they account for the lion 
part of the expenditure. However, as the Commission has pointed out in the White Paper, R&D within the 
Union should be better coordinated. The Commission has recently made specific suggestions in this regard 
in its Communication "Research and Technological Development: achieving coordination through 
cooperation". 
Within the limited possibilities left by the remaining 4%, EU funded R&TD aims at strengthening the 
scientific and technological bases of Union industry and encouraging it to become more competitive at 
international level. The 4th Framework Programme of European community activities in the field of 
research and technological development and demonstration (1994-1998) with a budget of 12,300 M ECU is 
more focused towards the development of generic technologies of wide application, taking more account 
also of the needs of users, than its predecessor, the 3rd Framework Programme, in line with the aspiration 
of industry. Research on industrial technologies will receive 1,995 M ECU (IMT) or 17% of the total 
Programme budget, of which 1,707 millions to industrial and materials technology and 288 to measuring 
and testing. Of particular interest for the machinery construction industry within the Industrial Technology 
activity are Theme A - Design, engineering, production systems and human management - and Theme B -
Materials and material-related technologies -. For information and communication technologies (ICT), 
which aisp interest this industry, an amount of 3,405 M ECU is to be made available. The development of 
a competitive European CNC is a strategic issue for thé machinery construction industry. This problem is 
to be tackled by the OSACA project in the framework of the ESPRIT programme. Research in support of 
technical standards wilt also be included in the 4th Framework Programme, thus strengthening the 
competitivepositiori of EU industry. ' . 
Due to the inroad of data processing and automation in state-of-the-art mechanical manufacturing 
technology, the kind of research nowadays needed in mechanical engineering is often dependent on a 
combination of contributions from the mechanical and information sciences. There is therefore a widespread 
desire in the engineering industry for a closer collaboration between IMT and ICT, successors of the 
_ BRITE-EURAM and ESPRIT programmés. In this regard the 4th Framework Programme gives particular 
attention to the coordination of research of interest to industry. Such coordination will take place both within 
specific programmes (focused clusters in ICT and vertical coordination in IMT) and between specific 
programmes in related areas, i.e. between IMT and ICT. The latter can range from close collaboration 
among the responsible Commission Services to simultaneous calls for proposals and common examination 
of received proposals. 
13 
Companies cannot always participate directly in Union and Member States R&D projects. The CRAFT 
facility established under BRITE/EURAM enables groups of SMEs with insufficient research facilities to 
contract outside organizations to carry out R&D on their behalf. This technology stimulation, together with 
support for exploratory phases of research, will be earned forward under the new IMT programme and 
extended to other specific programmes. Another outstanding feature of the 4th Framework Programme, 
specially for SMEs, is the Programme for Dissemination and Optimization of Research Results, which 
incorporates activities from the current VALUE and SPRINT programes. 
Of particular interest for EU and EFTA machine manufacturers and research centres seeking co-operation 
with each other is EUREKA. It is a cooperative R&D scheme which receives public support from 23 
European States and the Commission. It covers practically all sciences and technologies, with emphasis on 
new materials, lasers, robotics and manufacturing automation. 
COST promotes transnational cooperation between companies on joint R&D projects. All the Union and 
EFTA countries plus a number of Central and Eastern European countries participate. Research is 
undertaken in all fields, notably in new materials and advanced production technology. This programme is 
interesting for EU and EFTA firms seeking partnerships in Eastern Europe. 
The technological position of this industry can furthermore be improved by stronger links between its firms 
on the one hand and universities and research bodies on the other. A large amount of basic and practical 
knowledge lies in the technological infrastructure but European industry does not draw from it all the benefit 
it could. The Member States should take measures to bridge that gap. 
3.6. Vocational training: fighting the shortage of engineers and other qualified staff 
More emphasis has to be given to mechanical engineering in the training policy to be developed in 
application of the White Paper, with the involvement of public authorities, business and the social partners. 
industry attaches great importance to the adoption of European minimum standards for training. More co­
ordination among existing European and national training schemes is required. This training strategy shall 
endeavour, taking into full account the advice of the social partners, to better anticipate future technological 
needs. The first priority is increasing shop-floor workers' training jn new technologies. More use of 
interdisciplinary training is recommended. Particular attention shall be paid to the training of SMEs' staff. 
It is advocated to generalise the use of training vouchers that young apprentices in engineering firms can 
spend throughout their working lives in order to update their skills. The Union should set in place a medium-
and long-term framework for linking systems of continuous training and training credits with 
measures for increasing flexibility and reducing work time. The Commission does not see the reduction 
or flexibilization of working time as a universal solution at the level of European machinery construction but 
believes it can be one way to improve competitiveness that can be discussed at company and branch level. 
Work time reduction must safeguard productivity, specially that of highly skilled staff, without jeopardizing 
product development. 
A partnership between universities, Member States and industry to set up a system of initial and 
continuous training would suit multidisciplinary training and training for jobs that require advanced technical 
skills, information technology, etc. 
TherCOMETT programme for education and training in technology, the PETRA initiative for training of 
young people and their preparation for working life and the FORCE programme for development of 
continuing training shall be reinforced. From 1995 the above training instruments shall be replaced by the 
LEONARDO programme and the Euroform initiative for vocational training in the framework of the 
Structural Funds. The new programmes will revolve around the objectives of facilitating adaptation to 
industrial change, facilitating integration and reintegration into the labour market, improving training 
schemes at company and Member State levels, facilitating exchanges of young people in initial training, 
stimulating cooperation between training establishments and firms and supporting exchanges between the 
training systems of the Member States. The budget foreseen by the Commission for LEONARDO in 1995 is 
142 M ECU with a ceiling of 100,000 ECU per project and year. The machinery construction sector is 
exhorted to tap these Union instruments to their full extent. 
The European Social Fund also supports training schemes with the aims of encouraging employment and 
increasing workers' mobility. 
Member States ought to consider the foundation of new training institutes in mechanical engineering 
according to its eventual needs. Their goal would be to raise the knowledge and skills of European 
mechanical engineering manpower and provide the qualified personnel industry requires. 
14 
3.7. Structural funds: reducing regional disparities 
In the interaction between strengthening the industrial competitiveness policy for machinery construction 
and economic and social cohesion which is one of the objectives of the Union, the analysis furnished by the 
Communication (Point 1.2) on the competitive situation and geographical distribution of the EU mechanical 
engineering industry provides pointers towards the prospects of this activity in different regions. This may 
lead certain countries and regions to re-examine their current actions for this sector. 
The objective of Union regional policy is to progressively narrow the existing disparities in economic 
development and infrastructure between different countries and regions. In July 1993 the Council of 
Ministers adopted the regulatory framework of the Structural Funds for the period 1994-1999. With an 
allocation of 141 billion ECU, one third of the EU budget, the new Structural Funds are the privileged 
instrument of Union economic and social cohesion policy. For industry this solidarity translates into more 
equitable competition conditions for firms located in different EU countries and regions. A close partnership 
between the Commission, the responsible authorities in the Member States and industry is foreseen at 
every step of the programme planning. 
Of special interest for machinery construction companies are Objectives 2, new 3 and new 4. 
Objective 2 operational plans are targeted at traditional industrial basins in need of restructuration. A 
significant part of the EU machinery industry is situated in Objective 2 zones, i.a. North Rhine-Westphalia 
and parts of Lower Saxony in Germany, the Centre and North of Italy, industrial basins of England, Wales 
and Scotland, the North, North-East and Rhone Valley in France, Catalonia and the Basque Country in 
Spain. 
The new Objective 3 integrates both the combat long-term unemployment and the incorporation to the 
labour market of youth and workers risking to lose their job. The new Objective 4 has been created to 
facilitate the adaptation of workers to industrial change and the evolution of production systems. The latter 
is addressed to both active workers and unemployed. The interventions under these objectives can allay 
cyclical workforce disruptions in the machinery sector. 
The Community Support Framework for Objective 1 also includes some regions of interest to the machinery 
construction industry like the Eastern German Lander or Hainault in Belgium. When investing in the 
production infrastructure of backward regions the Structural Funds create additional demand for machinery, 
from which the machine producing regions of the Union profit. Conversely they can also serve to help 
develop machinery construction in regions were it is non-existent or fledgeling. 
9% of the the Structural Funds' interventions during 1994-99 is earmarked for Community Initiatives . Two 
of the new initiatives decided for this period are of particular relevance to engineering firms: ADAPT, aimed 
at helping the workforce adjust to industrial change by improving their qualifications and encouraging 
organisational adaptation (1400 MECU); and SMEs, whose purpose is to improve the competitiveness of 
small and medium-sized firms in particular, including those which are subcontractors for large firms, (1000 
MECU). Whereas the SME initiative is confined to less-favoured regions, ADAPT can also apply to non-
assisted regions of the Union. 
3.8. External trade policy: opening up world markets 
For an export-oriented economy like the Union liberalisation of world trade constitutes a first rank 
precondition for global competitiveness. The overall benefits of fair access to foreign markets largely 
outstrip imagined or real risks of strong import flows. This interest of the sector is met by the objective of the 
Treaty of European Union to open markets to free competition. The EU was the first to adopt a policy 
designed to correct the impact of competition distortion on trade. The Union has a fundamental interest in 
ensuring that its trading partners allow fair competition as it does. Tightening-up of competition rules in the 
EU must be paralleled by fair foreign trade conditions. 
In this respect the successful outcome of the Uruguay Round entails a powerful thrust forward for the 
Union machinery industry and, indeed, for all industry. This agreement will cut import duties on machinery 
and mechanical appliances by half over a ten year period and curb technical barriers to trade, giving exports 
of EU mechanical engineering equipment an estimated annual 4.5% boost by the end of that period. 
Moreover, its psychological effect as heralding the end of the recession can hardly be overestimated. The 
establishment of the World Trade Organisation will significantly reinforce the multilateral trade system, 
providing the required framework for pursuing further market opening, i.a. with regard to technical barriers to 
trade. The nascent organization will also play an essential role in the enforcement of the multilateral trade 
rules arising from the Uruguay Round. 
15 
Although the Common Commercial Policy is a Union competence, actions with trade implications of 
certain Member States may result in competition distortion. Harmonization of such actions should therefore 
be further pursued, notably in the field of export credit insurance schemes (for which a directive 
concerning medium- and long-term financing is under preparation) as well as of export controls on dual 
use goods. The fmalization of à common extra-EU Import and export regime is a precondition for fair 
competition on Member State markets and will facilitate the dismantling of customs formalities on intra-EU 
shipments. A better integration of Member States' activities in export markets in the Union's external trade 
policy is also desirable. The European machinery construction industry endorses these strivings. Machine 
manufacturers will draw advantage from the Union's dynamic external policy through the completion of the 
CCP and the improved management of the EU external frontiers. 
Industry expects from the Union a firm reaction to sectoral subsidies, State aids and other illicit 
practices by other industrialised countries. In the view of the sector this problem is particularly acute in 
the case of certain Asian nations. The Commission has recently forwarded to the Council significant 
modifications to the llicit Practices Regulation as well as a new Regulation on Subsidies, which could prove 
useful in this respect. The Union will continue to use the trade instruments at its disposal at the request of 
industry, provided the circumstances merit it, in a manner consistent with the relevant multilateral rules. Of 
special importance for European machinery construction is the access to foreign public procurement. 
Careful attention must also be paid to the effects of any bilateral trade arrangements between USA and 
Japan to ensure there is no discrimination against EU machinery suppliers. 
The European machinery industry must be present in growth markets; particularly in China and in the 
Pacific Rim. To this end the Commission will study the opportunity of extending and developing export 
promotion and industrial co-operation, specially for SMEs. Whenever needed, the Commission will favour 
possibilities for European companies to pool their resources in order to accede to far-away markets. 
Member States could also promote closer relations between their engineering firms and engineering firms in 
third countries by means of a cooperation programme on the model of the Euro/Japanese programme on 
consumer electronic components, as well as of cooperation in the fields of science, technology and training. 
An industrial assessment mechanism based on the White Paper's conclusions and inspired by the Trade 
Assessment Mechanism on Japan, could be a useful tool in exploring the reasons for the below-average 
export performance of the machinery construction industry in certain key markets and proposing corrections. 
3.9. Specific measures for small and medium sized firms 
Since the majority of machinery construction firms are SMEs, most measures recommended elsewhere are 
primarily oriented toward smaller enterprises, although they can be applied to enterprises of all sizes. This 
point takes up measures targeted at SMEs only. 
SMEs often have the benefit of innovative capability, flexibility and the ability to meet short notice 
deadlines, and are generally well equipped to compete effectively in the market place. However, there are 
weaknesses within SMEs which hinder their ability to fully exploit their growth and employment potential. 
For example, SMEs have difficulty in overcoming the increasing complexity of their legal and administrative 
environment. Their structural capacity to deal with this is hampered by the fact that most management 
functions continue to be carried out solely by the head of the enterprise himself. This plus the difficulties of 
obtaining finance, both working and equity capital, as well as weaknesses in management capacity, access 
to R&D, all points to the need for programmes which can help SMEs overcome these problems. In 
particular, technological stimulation measures aimed at promoting participation of SMEs, such as the ones 
which have been carried out in the BRlTE-EURAM programme under CRAFT, will continue in the next 
specific R&TD programmes. 
The Commission's proposals for an Integrated Programme for SMEs and the craft sector, announced on 
May 1994 (COM(94)207 final) puts into concrete form proposals for a closer partnership between all-parties 
concerned with the development of SMEs, to meet the objectives outlined in the White Paper for SMEs to 
support their growth and employment potential. The Integrated Programme also assembles various 
initiatives, both existing21 and new at a Community level, to ensure their coherence and visibility. There are 
also provisions within the 4th Framework Programme R&TD and within the EIB global loans and E|F 
schemes for loan guarantees all designed specifically to help SMEs. The Commission will study ways of 
21 
A panoply of measures for SMEs already existe in different Union policies. The Multiannual Programme in favour of enterprises adopted in June 1993 reinforces 
the priority axes of Enterprise Policy in order to encourage the Europeanization and internationalization of SMEs. The network of 210 Euro-Info Centres is being 
reinforced to meet the need» of SMEs. The EC network is moving towards more specialized assistai BCand BRE networks facilitate partner search for 
business co-operation. The Enterprise and Euro-partenariat programmes as wen as the measures in support of transnational sub-contracting all encourage 
Partnerships between enterprises. In addition. pMot actions are being undertaken such as Euromanagement and Seed Capital. 
16 
strengthening the European risk capital market, specially concerning equities and shares in SMEs. A studv 
will shortly be performed on the financial instruments available to the capital goods sector. The Membei 
States are invited to study the creation or improvement of instruments for aiding the financing of SMEs. 
The Industry Council of 28th September 1994, after an in-depth study of the Integrated Programme 
adopted a Resolution on Policy in favour of SMEs inviting the Commission to propose actions in order tc 
implement that Programme. It is necessary to improve the efficiency of European policy for SMEs by mean; 
of a new partnership between the Member States and the Union. 
3.10. Clean manufacturing: enviromental protection as business opportunity 
The Maastricht Treaty establishes as one of the Union's prime tasks to promote a harmonious and balancée 
development of economic activities and sustainable growth respecting the environment. Unior 
environmental policy is under development. In the meantime throughout the Union a number o 
environmental authorities and agencies are issuing a rapidly increasing volume of often diverging anc 
unrealistic environmental control measures, many of which affect business. This is why it is urgent tc 
consolidate environmental policy as a primary Union competence. 
The 5th Environmental Action Programme puts at the disposal of the Union a range of policy instrument; 
at sectoral level. In regard to industry, a new set of business-oriented environmental instruments is to be 
exploited. A start has been made with eco-auditing, eco-labelling, voluntary agreements, liability schemes 
etc.. Some of these instruments will create new job opportunities. 
In environmental protection industrialists ought not to view requirements only as a deterrent for business 
The EU environment policy offers considerable advantages to first movers. This fast growing marke 
is currently estimated at between 75 and 100 thousand million ECU, of which 45 thousand million an 
generated in the Union. Directive 89/392 is expected to raise the safety standard of machines sold on the 
EU market. These trends offer new possibilities for innovation and increased yields. Mechanical engineerinc 
is one of the main suppliers of environmental technology: machinery and plant manufacturers are capable 
of offering end-of-the-pipe technology and integrated emission reduction systems. European environmen 
control technology is world leading together with USA. 
The Commission will deepen its dialogue with the Union's trading partners in order to preven 
environmental overregulation in post-industrial export markets (Japan, USA, EFTA) anc 
environmental dumping in new industrial competitor countries (East Asia). 
3.11. Implementation of measures 
To ensure full participation and effective coordination in the implementation of the actions suggested in thi: 
document, Member States will be invited to forward appropriate comments and suggestions to be taken intc 
account in the further elaboration of proposals. The Commission will follow up the debates in the Counci 
and Parliament on the present Communication and the developments in its diffusion and implementation ir 
the Member States. 18 months after its publication the Commission will present a report on the above. 
It is equally important to ensure a systematic and continuous dialogue with the European machinen 
construction industry, departments of industry and all other concerned parties. The modalities of such { 
renewed dialogue will be developed, taking into account the experience of the Commission in the past anc 
the particularities of the European machinery construction industry and the main partners. 
Consultation shall take place at least once a year to follow up the work programme arising from the 
summary of proposals. 
17 
CONCLUSIONS 
Engineering is the supplier par excellence of production equipment to industry. Machinery construction is at 
the core of the engineering sector. Machine performance determines the potential for productivity increases 
in the whole manufacturing industry. Hence, maintaining a sizeable European machinery output will 
prove decisive for the future position of the Continent as a world industrial power. Machinery 
construction also makes a substantial contribution to the surplus in EU's trade balance. 
In its turn, the competitiveness of a machinery construction firm depends greatly on the productivity and 
quality of Its suppliers and the welfare of its customers. The problems the sector is currently undergoing 
cannot therefore be tackled in isolation but only in the framework of an economic policy that ensures a 
competitive environment for all manufacturing industry. If this vast area of the economy linked to machinery 
construction is to maintain its competitiveness, it is imperative to turn the relations of EU machinery 
manufacturers with their suppliers and end-users into a source of competitive advantage. 
EU machinery construction gives work to over 2 million people. The welfare of the sector is therefore a 
matter of Union concern. More than 80% of the sector's firms have 20 employees or less. Upon mat 
background actions to promote employment and foster the competitvity of SMEs ought to be at the forefront 
of the European policy for its industry. The White Paper on Growth, Competitiveness and Employment 
provides an a-dequate framework for those actions. 
Confronted by serious structural problems (acute cyclical sensitivity, financial fragility/erosion of its 
competitiveness, etc.), this industry is searching for the strengthening of its global competitiveness. In large, 
mature sectors like this, where the EU industry has still a strong position in its home market, the general 
trend towards an Increase in value added has to be followed. À renewed dynamism can be created by 
an effort of innovation, productivity arid quality. 
Acute cyclical sensitivity is one of the sector's most serious structural weaknesses. The machinery 
construction industry is particularly disrupted by cyclical oscillations owing to the financial fragility of its 
many small companies. Since the investment jolts suffered by this sector reflect cyclical oscilla-tions of the 
whole industry, only a stable evolution of the whole economy at long term can lead to a tempering of the 
sector's investment pattern. Hence it is of the utmost importance that the Member States carry out a 
macroeconomic policy leading to a steady growth and that they sufficiently promote capital 
investment It is likewise clear that the sector would draw advantage from short-term anti-cyclical measures 
aimed at attenuating drops in investment during recessions. 
The foremost goal of Union policy with regard to the machinery construction sector is to contribute 
towards improving at term its compétitive environment To this end the Commisston proposes to the 
Member States and industry the implementation of measures in a number of areas such as investment 
promotion, business environment, industrial cooperation, research and technological innovation, vocational 
training, structural funding, external trade policy and specific measures for SMEs. The measures proposed 
for ihfc machinery construction industry are generaSyhorizontal actions. They could also benefit the 
alt manufacturing industry. 
•18 
ANNEX 
SUMMARY OF PROPOSALS 
Policy area 
Investment 
promotion 
Business 
environment 
Industrial 
< 
cooperation 
Technical 
harmonization 
R&TD Proposed action for machinery construction 
Encorage investment both in tangibles and intangibles 
Consider tax and depreciation incentives for investment in capital 
goods 
Shorten the tax depreciation terms of production equipment 
Co-ordinate national investment promotion measures 
Profit from EIB and EVÇA financial services 
Apply the Strategic Programme on the Internal Market 
Implement macroeconomics for improving industrial competitiveness 
Improve the business infrastructure 
Restrict State aids to an indispensable minimum 
Encourage strong European industrial groups within competition law 
Promote industrial co-operation, specially among SMEs 
More cooperation between machine manufacturers, suppliers & users 
Consider round table of industrialists 
Continue applying New Approach on technical harmonization 
Continue applying Global Approach on certification and testing 
Promote Quality 
Transpose new approach directives, i.e. the Machinery Directives 
Accelerate the preparation of harmonized standards 
Improve diffusion of the Machinery Directives 
Negotiate mutual recognition agreements with third countries 
Increase investment by industry 
Improve Collaboration between national R&D programmes 
Grant tax credit schemes 
Improve co-ordination among Union funded programmes 
Profit from the Extended rapid response approach to SME 
applications 
Profit from closer Collaboration between IMT and ICT programmes 
Develop a European CNC by means of the OSACA project 
Foster diffusion of R&D to SMEs through CRAFT, VALUE and 
SPRINT 
Promote pan-European R&D through EUREKA and COST To be implemented 
or triggered by 
EU 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ MS 
+ 
+ 
+ -
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
'•+•' 
+ 
+ 
+ Indus 
try 
+ 
+ 
+ 
• + 
+ 
+ 
+ 
+ 
+ Others 
" + 
+ 
+ Point 
in 
Section 
3 
3.1 
3.2 
,3.3., 
3.4 
3.5 
'1 
Policy area 
Vocational 
training 
Regional 
policy 
Trade policy 
Specific 
measures for 
SMEs Proposed action for machinery construction 
Pay more attention to mechanical engineering in training policy 
Achieve rninimum standards at EU level 
Coordinate better between European and national schemes 
Anticipate better future technological needs 
Increase shop-floor workers' training in new technologies 
Make more use of interdisciplinary training 
Pay more attention to the training of SME staff 
Generalize the use of vouchers 
Consider liiiking continuous training with increased labour flexibility 
Set up a partnership between universities, MS and industry 
Make full use of Leonardo, Socrates and Social Fund schemes 
Consider establishing new training institutes in engineering 
Make full use of the Structural Funds, in particular: 
some machinery companies can profit from Objective 1 funds; 
many machinery companies can profit from Objective 2 funds; 
make more use of new Objectives 3, 4; 
profit more from Community Initiatives. 
Profit from Uruguay Round Agreement 
Achieve World Trade Organization 
Harmonize export credit insurance schemes 
Harmonize export controls on dual use goods 
Finalize the Common Import and Export Regime 
React vigorously to third countries' aids and barriers to trade 
Use trade policy instruments whenever legitimate 
Develop exports to growth markets, specially in the Pacific Rim 
Create an industrial trade assessment mechanism 
Give priority to SMEs in industrial policy 
Co-ordinate Member States policies through concerted actions 
Implement the 1993 Multiannual Programme 
Carry out the new actions in the Integrated Programme 
Implement SME measures in regional, R&D and training programmes 
Strengthen the European risk capital market, specially for SMEs To be implemented 
or triggered by 
EU 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
•i 
+ 
+ 
+ 
+ • MS 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ Indus 
try 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
+ 
-•• 
+ 
+ 
+ 
+ 
+ Others 
+ 
+ 
+ 
+ 
+ 
+ 
+ Point 
in 
Section 
3 
3.6 
3.7 
3.8 
3.9 
Jo 
Policy area 
Environmental 
protection Proposed action for machinery construction _ ' 
Consolidate environmental policy as primary Union competence 
Cany out 5th Environmental Action Programme 
Prevent environmental overregulation and environmental dumping^ To be imnlcmcntcd 
or triggered by 
EU 
+ 
+ 
+ MS 
. + . Indus 
try Others Point 
in 
Section 
y 
3.9 
XI 
STRENGTHENING THE COMPETITIVENESS OF THE EUROPEAN 
MACHINERY CONSTRUCTION INDUSTRY 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND 
THE EUROPEAN PARLIAMENT 
FINANCIAL STATEMENT 
1. TITLE OF OPERATION 
Strengthening the competitiveness of the European machinery construction industry. 
2. BUDGET HEADING INVOLVED 
See point 7.2. 
3. LEGALBASIS 
Treaty on European Union and, in particular, Articles 3 and 130 thereof, Title XIII on 
industry, Title XV on research and technological development (Articles 130f et seq.), 
Title VIII on social policy and industrial changes (Article 123). 
4. DESCRIPTION OF OPERATION 
4.1 Specific objectives of operation 
The tasks that this Communication sets out to fulfil are : 
a) to investigate into the structure and situation of the EU machinery 
construction industry in relation to its supplier and customer industries; 
by to analyse the premises for its competitive upgrading; 
c) and to propose the means of applying the Union's horizontal approach on 
industrial competitiveness to the industrial activity of machinery construction. 
The final objective of the above activities is facilitating the restructuring of the 
European machinery construction industry and contributing towards the 
strengthening of its global competitiveness. 
To this end the Commission proposes coherent measures in the fields of 
investment promotion, business environment, industrial cooperation, technical 
harmonization, R&TD, vocational training, regional policy and trade policy. 
4.2. Duration 
This Communication forms part of the continuously evolving framework of Union 
Industrial Competitiveness Policy. The specific actions proposed on machinery 
construction will be reviewed annually and are expected to be applied for ten 
years at the most. 
2-2 
4.3. Target population 
Member States, regional and local authorities, EU institutions, machinery 
construction industry, credit institutions, educational and training bodies, 
standardization and certification bodies. 
5. CLASSIFICATION 
5.1 Non-compulsory expenditure 
This being a Commission Communication, none of the measures put forward 
herein are compulsory. By their nature some of the measures would be carried 
out primarily by the Member States' national or local authorities, others by Union 
institutions, still others by Industry itself or by other bodies. 
5.2 Differentiated appropriations 
Not applicable 
5.3. Type of revenue involved 
Not applicable 
6. TYPE OF EXPENDITURE OR REVENUE 
The Commission shall make proposals after discussion at the Council and 
Parliament. 
7. FINANCIAL IMPACT 
With respect to the actions that would be carried out by the Member States or 
other bodies, quantification is left to their discretion . The Communication does 
not set quantitative targets on these non-compulsory proposals. 
With respect to the actions to be carried out by Union authorities, they are in 
every case the application to a specific area of industrial activity of instruments 
already approved and included in the Budget of the European Communities. 
This Communication will have no additional impact on the 1995 year Budget and 
fits in with the financial perspectives for 1993 to 1999. It covers certain direct 
support provided pursuant to policies or activities covered by the various 
provisions of the Treaty. 
8. ELEMENTS OF COST-EFFECTIVENESS ANALYSIS 
8.1 Specific and quantifiable objectives; target population 
The Communication's overall objective is to contribute towards making 
European machinery construction more competitive. The EU industry has 
currently almost 1/3 of the world machinery market . It should sustain or if 
possible increase that share. The main responsibility for that objective lies with 
Industry itself and the degree to which it will be achieved depends in the first 
place on the measures Industry will take. Within this context it is not possible to 
quantify the contribution to that objective arising from measures taken pursuant 
to this Communication. The target population are in the first place the 2.3 million 
employees of the EU mechanical engineering industry. 
X3 
8.2 Grounds for the operation 
The European machinery construction industry is confronted with a productivity 
gap with regard to certain competitors as a result of structural shortcomings and 
cyclical malfunctions. This industry also needs to modernize itself in order to 
become a global player. 
•••••„•-\ Cost .. 
Notappâcabte 
' - Spin-offs: 
Most measures proposed are extrapotable to the whole of mamrfactimng 
industry or can otherwise increase its productivity through an improved 
performance of the equipment it buys from the machinery construction industry. 
«.3 Evaluation 
Each measure mentioned in point 7.2 has its specific evaluation procedure. 
18 months after the publication of this Cammatécatôon the Commission must 
submit to the Council a report on the diffusion and implementation of the 
measures proposed in it 
m addition, consultation shaft take place at least once a year to follow up its 
Work Programme. 
9. Administrative expenditure 
9.1 Opération expenditure on studies, meetings of experts, etc. 
9.1.1 Experts' meetings (AO-2500) 
Under reserve of the outcome of the decisions concerning the budget and 
resource allocation, the Commission will yearly and during the period of a 
maximum of 10 years when the proposed actions will be enforced, summon two 
experts meetings, one with officials from the Member States' Ministries of 
Industry and the other with representatives from Industry and other concerned 
bodies. These meetings wilt ensure a systematic and continuous dialogue with 
all the concerned parties and provide for the annual follow-up consultation on 
the Communication's Work Programme foreseen in Point 3.9 of the 
Communication: 1 meeting x 32 government experts/meeting x 801 ECU/expert 
= 25,632 ECU/year, 1 meeting x 20 private experts/meeting x 918 ECU/expert = 
18,360 ECU/year. total annual expense 43,992 ECU, 1995 through 2004. 
9.1.2 Conference (AO-2550) 
18 months after the publication of the Communication the Commission will 
summon a conference to present its Report on the debates in the Council and 
Parliament on the Communication and its diffusion and implementation in the 
Member States. This action is in fulfiiment of the corresponding proviston of 
Point 3.9 of the Cornmunication: 30,000 ECU in 1996. ft wif include room rental 
(18,000 ECU), invited experts(4,590 ECU), printed and audio-visual material 
(3,000 ECUI andinterpretatioit (4,410 ECU). 
a4 
9.1.3 Study (A0-2600V 
A survey on Member States' measures related to the machinery construction 
industry will be carried out by an independent consultant. It will cover actions 
and programmes in force at the time of publication of the Communication, as 
well as plans to implement the proposals made in it. Its findings will assist the 
Commission services in preparing the above Report: 150,000 ECU in 1995-
1996. This appropriation will depend on the results of the budgetary procedure 
and to the Commission decision on allocation of resources. 
9.2 Personnel 
The actions provided for in this communication come under a number of common 
policies and are covered by the general headings mentioned in paragraph 7.2. It will 
have no additional impact on the Budget. At the present stage it is not foreseen that 
their implementation would generate need for additional statutory staff. 
9.3 Credit bill book 
Indicative planning in ECU 
Action 
Experts 
meetings 
AO-2500 
Co-
financing 
of 
conference 
AO-2550 
Study 
AO-2600 
Total 1995 
Draft 
Budget 
43,992 
75.000 
118.992 1996 
43,992 
30,000 
75,000 
148,992 1997 
43,992 
43,992 1998 
43,992 
43,992 1999 
43,992 
43,992 2000 
43,992 
43,992 2001 
43,992 
/ 
43,992 2002 
43,992 
43,992 2003 
43,992 
43,992 2004 
43,992 
43,992 
KSN 0254-1475 
COM(94) 380 final 
DOCUMENTS 
EN 08 io 
Catalogue number : CB-CO-94-493-EN-C 
ISBN 92-77-81515-9 
Office for Official Publications of the European Communities 
Lr2985 Luxembourg 
ISSN 0254-1475 
DOCUMENTS 
Catalogue number : CB-CO-94-493-EN-C 
ISBN 92-77-81515-9 
Office for Official Publications of the European Communities 
LP2985 Luxembourg