COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 16.04.1997 
COM(97) 152 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
"The competitiveness of the European Information and 
Communication Technologies (ICT) Industries" 

TABLE OF CONTENTS 
1. Introduction 
2. The ICT Industries: global structures, European competitiveness 
2.1. Market structure 
2.2. Competitiveness of the European ICT industries 
3. Main challenges for the European ICT industries 
Improve market take-up 
Transform industrial structures 
Develop fast-growing companies 
Enable European excellence in software 
Optimise technology development and diffusion 
Exploit the potential for employment growth 
4. Priority areas for policy initiatives 
4.1. Policy initiatives under way which require urgent implementation 
4.2. New areas requiring attention 
Improve global competition 
Accelerate ICT take-up and promote awareness 
Create new markets by timely standards 
Exploit the potential of enlargement 
Promote industrial cooperation 
Facilitate the emergence ofSMEs 
Focus on employment: skills, education and training 
Promote benchmarking 
5. Conclusion 
Annex 1 - The Council Resolution of 18.11.1991 and its follow-up 
Annex 2 - Statistical Tables 
/A 
1. Introduction 
The Information and Communications Technologies (ICT) Industries (fig.l) are a critical 
component of the European economy, they are: 
• a major and growing part of industrial activity 
• one of the keys to future competitiveness of all industrial processes, products and 
services 
• the platform for the emerging Information Society in the 21st century 
It is essential that Europe possess a competitive dynamic ICT industry in order to: 
• avoid excessive dependence on key technologies 
• participate in expanding global markets 
• contribute to the creation of new employment 
• be at the forefront of future innovation 
Europe cannot afford to miss the boat. There are worrying signs of: 
• slow market growth 
• declining relative shares for European producers 
• uneven response to market and technological evolution 
Urgent action is required by all actors (Industry, Member States, Commission) to force 
the pace and ensure that European ICT industries are at the forefront of market and 
technological evolution. Many are already under way, and now need effective and urgent 
implementation. Others need to be developed. 
The Netherlands Government and the recent informal Industry Council have launched the 
debate. This Communication is a first contribution from the Commission, updating the 
analysis and identifying the main challenges and areas for attention. A tripartite exercise 
should be pursued over the coming months to carry the work forward towards priority 
setting and implementation. 
For the purpose of this communication, ICT industries are defined as comprising: 
consumer electronics, computer and office equipment, telecommunication equipment, 
components, software (either as component or product, or services associated to the 
provision of software). Other sectors, such as broadcasting or content industries, often 
included in the definition of ICT industries, are not covered here. 
2, The ICT Industries: global structures, European competitiveness 
2.1. Market structure 
Over the past 5-10 years technological, economic and social progress has transformed the 
industries and their markets (often referred to as "convergence"). There are three main 
segments to the market: infrastructure, commercial and consumer. The different features 
of these markets impose different structures and modes of operation on the enterprises 
supplying them (fig. 1), and imply different legislative and policy interests for public 
authorities. 
Infrastructure, comprising large-scale systems with long product life-cycles and 
relatively slow growth, are being affected by downsizing and deregulation. Although 
traditional European-affiliated suppliers enjoy strong competitive positions In some areas 
such as telecommunications, they are under extreme pressure to adapt themselves to the 
progressive liberalisation and deregulation oftheir sectors. 
• b 
Industrial and commercial markets attract numerous new entrants addressing niche 
markets which in many cases have grown to very large segments. Producers tend to be 
technology oriented and depend heavily on venture capital in their early phases. US 
industry generally enjoys very strong positions in these markets. 
Consumer markets demand constant innovation and product reliability, and suffer 
constant price erosion. Consumer products are increasingly the technology drivers of the 
ICT industries. These features have driven industrial concentration to the point where 
global markets are dominated by a small number of recognised brand-names supported 
by complex dynamic global production structures. Japanese, and more recently Korean, 
producers are prominent, though European-affiliated producers maintain significant 
presence. US producers are gaining importance as PC-related products expand into 
consumer markets. 
The growing globalisation of these markets has driven industry to spread out its 
manufacturing operations seeking the most cost-effective structures and resulting in a 
truly global network. The relative absence of trade barriers and the universal nature of 
market demand for ICT products is, of course, the underlying factor in providing the 
volume necessary to obtain the economies of scale which drive this evolution. In Europe, 
as elsewhere, a large proportion of manufacturing activity is carried out by transnationals 
with US, Japanese or Korean capital affiliation. 
The employment situation in the ICT industries is the result of two opposing trends (see 
Fig. 2): on one hand the effect of high productivity gains in manufacturing methods and 
in some cases relocation, have resulted in substantial reductions in sectors such as 
consumer electronics, computers and terminals. On the other hand, the spectacular 
growth in software and services has increased employment. The net result is a balanced 
situation of overall moderate growth in the long term, which however require important 
changes in the skills structure. Over the past ten years, jobs have moved from 
manufacturing to R&D and sales/marketing, as well as from blue collar and clerical 
workers to white collar. 
2.2. Competitiveness of the European ICT industries 
The ICT industries represent an important and growing proportion of manufacturing 
industry in Europe (see Fig. 3.1): 8.3% of turnover (up from 4.3% in 1981), 6.5% of 
employment, 7.8% of production, 9.1% of total gross value added (up from 6.1% in 
1991). On all these measures except employment, the ICT industries provide higher 
contribution than either the chemical or the automotive industries (see Fig. 3.2). Their 
relative share will increase in the future as the Information Society in all its forms takes 
hold. These figures do not take account of services industries (including software) which, 
for ICT, show significant employment growth. Market growth rates are of the order of 
7%, and are expected to continue at this rate over the next few years (see Fig. 4).This is 
an impressive figure, considering that unit prices are in general decreasing - even 
drastically for some products - and each new generation of products provides 
significantly increased performance. 
Despite this positive macro picture, there are causes for serious concern. 
High as they seem, these growth rates are consistently lower than those of the USA and 
the growing Asian economies. Of particular concern is the fact that since 1990 Europe's 
Employment in the ICT sector - Study by B1PE for the European Commission - DG III - July 1996 
share of world-wide IT markets has declined from 35% to 28% (see Fig. 5). During the 
same period, US IT markets have grown from a similar starting point to represent about 
41% of the world-wide market in 1996. IT expenditure in Europe represents 4.5% of 
GDP, compared with 5.7% in the USA. The per capita IT expenditure is 797 ECU in 
Europe, compared to 1,285 ECU in the USA (see Fig. 6). Within the Union, large 
differences exist between Member States, expenditure being generally lower in peripheral 
and southern States. In addition, the trade balance, with the exception of 
telecommunications equipment, is worsening in most ICT industry sectors (see Fig. 7). 
Imports have increased five-fold since 1980 to 143 BEcu in 1995, and now represent 
circa 50% of consumption in some areas (office equipment and computers, and consumer 
electronics) - this is to be compared with circa 11 and 17% in the chemical and 
automotive sectors respectively. 
Success in ICT is mostly the result of a combination of access to excellent research and 
availability of risk capital in early stages, and strong focus on markets once established. 
This is typically the case in software packages, where US suppliers have captured 
leadership. In this area, the European successes are limited to niche applications, in 
particular in sectors where it has been possible to build application excellence on 
experience from leading edge users, e.g.; in engineering or design packages. 
In semiconductors, European manufacturers have been able, through international 
strategic alliances and important R&D efforts, notably by JESSI and the Esprit 
programme, to maintain a competitive position, which ensures a European production 
base, access to key manufacturing technologies and ability to provide critical supply to 
the downstream user industries. 
The electronic assembly sector, both for consumer electronics and for computers, is 
where Europe, as a production area, shows the heaviest handicap, due largely to the high 
cost of labour. This disadvantage has led to complex combinations of délocalisations, in 
Asia and more recently in central and eastern European countries, and installation of 
some manufacturing functions in proximity to the destination markets. 
In the telecommunications equipment sector, the global structure of the main players and 
constant efforts in technology have ensured to Europe a leading position, exemplified by 
the GSM success. The importance itself of the European telecommunications equipment 
industry shows the need to face adequately the ongoing technological revolution. 
3. Main challenges for the European ICT industries 
Improve market take-up: European markets lag behind those of other regions. First, the 
commercial market is less forward-looking; too many companies perceive investment in 
ICT primarily as an element of cost, to be reduced when business confidence declines. 
The contribution of ICT towards improving competitiveness, streamlining business 
processes and enabling innovation is underestimated or ignored. Second, the take-up of 
ICT by individual consumers is slow. With some exceptions, notably in Nordic countries, 
the number of Internet users is comparatively low in Europe (see Fig. 8). Third, public 
administrations are slow to make innovative use of ICT, this is particularly important in 
education, but affects many other areas where potential gains in efficiency and quality of 
service are very significant. Finally, the uneven pace of telecommunications liberalisation 
throughout the Union has probably been the single most important brake. Such structural 
delays represent serious handicaps for the European ICT industry, both in the context of 
the movement towards the Information Society, and the development of industrial 
competitiveness policies. Suppliers must work harder to seek means to convince the 
market of the benefits of ICT and to stimulate accelerated take-up. An open and 
functioning single market is essential for the diffusion of ICT products and the 
development of related services. Divergent standards and regulations persist, imposing 
obstacles to the expansion of the ICT industries. These issues are dealt with elsewhere2, 
but they must be resolved if Europe's full market potential is to be realised. 
Transform industrial structures: European ICT industry has been slow in restructuring 
itself to meet the new challenges. They have not kept pace with the trend of outsourcing, 
developing networks of competitive component suppliers, cross-national production 
networks, which is so much a feature of the US and Japanese producers and their Asian 
supply networks . The opportunities presented by the economies of the central and 
eastern European countries, and their eventual integration into the Union, to enable 
restructuring should be seized by industry - and facilitated by public authorities. 
Industrial cooperation in global markets is essential in order, not only to participate in the 
creation of standards and be present in the markets, but also to ensure access to key 
technologies and components and to avoid excessive dependency. 
Develop fast-growing companies: Europe has also failed to foster the sort of dynamic 
growth of new entrants which is so much a feature of the US industry. The conditions 
surrounding SMEs and start-ups must be improved; their role is critical in introducing 
new technology, in supporting competitive improvements in large enterprises and, most 
importantly, in the creation of employment. Industrial restructuring inevitably means 
changes in employment, which can be facilitated by instruments to create a flexible 
educated work-force. If ICT production in Europe is to remain competitive, industry also 
has to commit itself to the continuous upgrading of its skills. 
Enable European excellence in software: No amount of restructuring can change the 
fact that Europe is a high-cost region for manufacturing. European manufactured 
products must compete in global markets on design and quality, and in some cases do so 
very successfully, for example GSM mobile telephones and digital satellite TV. The role 
of software, particularly embedded software, in conferring competitiveness and providing 
added value, is so important as to merit particular mention. The traded software area is 
relatively well understood, including package software, custom software and services. 
But this represents only a fraction of the total industrial activity: every significant 
manufacturer has some software activity in-house, developing, adapting, servicing and 
maintaining. Indeed for many businesses, core competence is expressed in software. 
Much of the product of financial services is software; software already constitutes a 
significant part of the value of modern aircraft and provides an increased share of the 
functionalities which make several industrial products competitive in the marketplace. 
Securing adequate understanding of the contribution of this element of economic activity 
to competitiveness, added-value and employment is now long overdue. Only with 
adequate understanding of the structures and economics of this industry can policy be 
developed at company or government level to exploit the benefits software offers. It is all 
the more important because the development of the myriad applications of the 
Information Society will require a massive effort of software development and content 
production. The linguistic fragmentation of the European software market represents an 
2COM(96)359 of 24.7.1996- Communication from the Commission on "Standardisation and the global 
information society: The European approach". 
' "Wintelism and the Changing Terms of Global Competition" Professors M. Borrus and .1 Zysman, 
University of California 1997. 
additional challenge but also an opportunity for specific European solutions: a large part 
of development and marketing costs depend on the number of language versions of the 
product, while the size of language market addressed first constitutes an important 
competitive advantage. 
Optimise technology development and diffusion: ICT industries need to remain at the 
forefront of technological developments. Not only are R&D costs rising as a result of 
shorter product life-cycles, but in addition the interactive innovation process requires that 
industry react more in tune with customer requirements. Further, for the ICT industry to 
profit from R&D investment, technologies should be diffused as timely and as widely as 
possible. This is not an automatic process; it requires significant effort for the take-up of 
new technologies by all classes of users: industry, services (private and public) as well as 
private citizens. 
Exploit the potential for employment growth: The diffusion of use of ICTs will have a 
profound impact on quantitative and qualitative aspects of the employment. A recent 
study identifies three types of effect of ICTs on employment: direct effects on the ICT 
and related industries; indirect effects on other branches of the economy such as increases 
in productivity and changes in production structures; and other effects triggered by the 
increased "tradeability" of services and the resulting changes in the international division 
of labour. The same study estimates long term effects for Europe over ten years between 
a loss of three million jobs (negative scenario) and a gain of six million additional jobs 
(in the positive scenario of expeditious ICT diffusion). It is however clear that the direct 
effects on jobs in the ICT industries show a positive trend. The experience of the USA, 
where ICT industries' restructuring started earlier, indicates that more than 150,000 jobs 
were created between 1988 and 1995 in the Personal Computer sector alone (for example 
one US company, starting up in 1985, grew to nearly 6B$ t.o. and 15,000 employees by 
1995). The Union must encourage the growth of such companies financed through 
dynamic pan-European secondary capital markets. European IT companies will create the 
high quality jobs of the future. 
4. Priority areas for policy initiatives 
Broad consultations with industry and the Member States, as well as the 
recommendations from various consultative bodies and studies show remarkable 
consistency. They fall into two categories. The first comprises those recommendations, 
such as telecommunications liberalisation, which are already the subject of action or 
reflection in the Commission and National administrations. These are summarised here in 
order to bring attention to the importance of implementing a range of key policies for the 
competitiveness of the industry. A second set of issues is identified which concern the 
ICT industries more specifically, or which would benefit from future priority 
examination. These are dealt with in the second part. 
IFO Institut fur Wirkschaftsforschung. Miinchen, 1996 
4.1. Policy initiatives under way which require urgent implementation 
The adoption in November 1996 of a comprehensive action plan for the Information 
Society has served to fine-tune the Commission's priorities. It addresses the need for 
rapid progress and provides a sense of urgency to the EU's policy commitment for an 
effective implementation of all aspects of the IS. The priorities are: 
• The effective implementation by all member states before 1.1.98 of the 
telecommunications markets liberalisation is vital. The Commission is determined 
that the commitments made will be implemented and it will be monitoring carefully 
the legislative development in the Member States. 
• Electronic commerce is the first practical implementation of the IS, the first "massive 
application" of the future. In the communication "Putting services to work"6, a 
European initiative on electronic commerce was announced. To launch this initiative, 
a framework communication to the Council has been adopted by the Commission 
listing the key priority areas that have to be resolved. 
• Strengthening and acceptance of internationally agreed principles and rules covering 
competition, intellectual property rights, privacy and individual rights, information 
security, interoperability and standards. 
• Take-up actions and awareness initiatives need to be established or expanded to 
encourage European industry and society to increase ICT usage. 
• Satellite-based broadband communication systems: the action plan submitted by the 
Commission addresses the regulatory adjustments and R&D actions needed in order to 
ensure significant European presence at international level. 
• In the transport sector, new applications in trans-European networks (TENs), new air-
traffic control systems and numerous consumer applications are emerging which will 
offer growing markets for the European ICT industry. Action plans for Intelligent 
Transport Systems (ITS) and Location and Navigation systems (GNSS) are being 
prepared. 
• The Framework Programme for R&D is especially important in making the best use 
across the EU of the substantial investment in R&D which is required in order to 
maintain competitiveness. The 5th Programme due to start in 1998, will focus 
particularly on the participation of users in R&D activities, essential to ensure that 
actions meet real needs in line with the requirements of the market. In parallel, the 
support of the development of key technologies will be integrated into one programme 
and will be structured in four areas: services for the citizens, electronic commerce, 
multimedia content and key technologies. Responsiveness and flexibility will also be 
enhanced. 
» Education and training are critical in providing employees with the necessary skills 
and flexibility to use new technologies. Educational infrastructures must be upgraded 
by equipping schools and cultural institutions with ICTs, providing them with network 
5 COM(*6)6©7 of 27.11.1996 - Communication from the Commission on "Europe at the Forefront of the 
Gtotol Information Society: Rolli«<g Action Plan". 
6 CSE(%)6 of 27 November 19% - "Putting Services to Work", a Communication to the European 
Council. 
access (in particular Internet). This should be accompanied by improved teacher 
training in ICT applications. In cooperation with the Member States, the Commission 
will stimulate actions at national level to offer European citizens training appropriate 
to the Information Society. The action plan "Learning in the Information Society", 
approved by the Commission in December 1996, will bring together the most 
important players in order to provide better access to skills needed in the future. The 
implementation of the action plan runs in parallel with the work undertaken by the 
Task Force "Educational software and multimedia", i.a. a joint call between several 
Commission services, thus facilitating access to Community support in this area. The 
measures will be renewed next year. 
The language issue, particularly important in Europe for software, is addressed in the 
Information Society and Language Engineering programmes . 
4.2. New areas requiring attention 
Action in these areas should be targeted at improving either conditions in the supply side, 
such as benchmarking and training, or opening up the demand side, for example market 
access or take-up measures. 
Improve global competition: The positive conclusion of the Information Technology 
Agreement (ITA) at the WTO Conference in Singapore in December 1996 and the WTO 
telecommunications Agreement in February this year are very important steps in this 
direction. The abolition of tariffs on all IT products by the year 2000 accelerates the 
process started in the last round of GATT negotiations. It will contribute to reducing the 
costs of producing ICT equipment in Europe, while providing European manufacturers 
with better opportunities for exporting to foreign markets. The ITA must be implemented 
immediately, while at the same time launching the review mechanism to extend product 
coverage. Action should be initiated to extend the country coverage to those non-
participating WTO countries (notably in South America), while participation in the ITA 
should be required of candidates for accession to the WTO, notably China and Russia. 
With the removal of tariffs following the ITA, attention will shift towards the elimination 
of non-tariff barriers in our main trading partners, notably by pursuing Mutual 
Recognition Agreements (MRAs), and greater harmonisation of standards and 
conformity assessment procedures. The first priority will be to build on the work of the 
TransAtlantic Business Dialogue to conclude an MRA with the USA, exploring in 
particular the possibilities of extending the principle of manufacturers declaration of 
conformity. In parallel, operational activities will be developed in the context of the 
TransAtlantic Small Business Initiatives (TASBI). These and other trade policy 
instruments should be applied in a coherent manner ensuring that European industry 
operates under optimal conditions both within the Union and in global markets. 
Accelerate ICT take-up and promote awareness: Public administrations can and 
should do more to stimulate the take-up of ICT, both within their own services and with 
the public at large. In the first place, education authorities must improve the provision of 
ICT to schools in order to pave the way to the Information Society. Moreover, they must 
respond to public demand for better, more cost-effective services. And in the broadest 
7 COM(96)456 of 2.10.96 - Multi-annual programme on Multilinguism in the Information Society. 
Adopted by the Council on 8.10.1996 
context, the furtherance of National and Community policies in many domains would 
benefit by accelerated greater innovative use of the means offered by ICT. For example, 
fig. 6 demonstrates the relative lack of investment in IT in southern and peripheral 
Member States, despite the fact that IT is a powerful tool to promote Cohesion by linking 
regions and reducing barriers. A number of Member States are now in the process of 
establishing innovative fiscal and other incentives aimed at accelerating the take-up of 
ICT in homes, schools and businesses. These schemes point the way, and should be 
emulated and expanded upon broadly throughout the Union. 
Create new markets by timely standards: The creation and use of standards has 
become one of the key strategic levers used by industry to establish new markets. 
Consumer markets, particularly, depend on establishing purchaser confidence in 
products, hence the importance of establishing cooperation between suppliers to support 
universal standards. To participate in the benefits of such cooperation, producers must 
bring contributions to the table, in the form of technologies, standards or markets,and be 
active in the international standards creating process if they are not to fall behind 
technologically and commercially. The regulatory side of standardisation also needs 
attention to simplify and accelerate procedures (e.g. manufacturers declaration of 
conformity) in order not to hinder new product marketing. Standards in ICT are generally 
global in nature, but often multiple standards, based on regional specificities, will 
compete for market acceptance. European companies should therefore should not only 
participate in the standardisation of technical specifications via international consortia, 
but should also use. when possible, European platforms. The European Commission 
supports the creation of a flexible and open workshop structure enabling European 
companies to participate in the international ICT standardisation process. They should 
trigger internationally recognised standards using European specificities. This calls for 
agreements at the strategic level between the principal actors on the main user 
Q 
requirements . To translate user requirements into technical specifications, pragmatic and 
flexible delivery mechanisms need to be developed by industry in close collaboration 
with European standardisation organisations. The European Commission supports the 
creation of flexible industry-led standardisation procedures to develop - besides the 
adoption of formal European standards - technical specifications for European market 
operators. To ensure consistency and an optimal use of the European standardisation 
resources, a "guichet unique" under the umbrella of the European standardisation 
organisations should be considered as a matter of urgency. 
Exploit the potential of enlargement: The enlargement of European Union offers the 
European ICT industry an expanded and growing internal market, improved economies 
of scale, as well as new development locations to site cost-sensitive operations. The 
European ICT industry has the opportunity here to re-engineer its manufacturing supply 
structures, similarly to those of US and Asian producers, and so sharpen its global 
competitiveness. Much of the industry is in the process of setting up various forms of co­
operation in these countries, which offer also skills availability and competitive 
manufacturing conditions. European producers are relocating activities back from the Far 
East in order to take advantage of these, often better, conditions, releasing Far East 
plants to concentrate on growing and increasingly open local markets. Particular attention 
will be given to the facilitation of co-operation between the industries of the EU and the 
CEEC. This is already under way in the consumer electronics industry. The Commission 
8 An example of such agreements is the Mol) on "Open Access to Electronic Commerce for European 
S M Es". 
supports this initiative, and its expansion and extension to other sectors of the ICT 
industries. Actions proposed by industry include benchmarking suppliers, supplier 
conferences, in-plant training, and quality workshops. The Commission would support 
the establishment or strengthening of active industry representation in the CEEC. The 
pre-accession strategy provides a solid framework to establish conditions for fair 
competition and to create a level playing field which will benefit the European industry. 
Promote industrial cooperation: Numerous other important industrial co-operation 
initiatives are under way or proposed, notably in the Newly Independent States, in the 
Mediterranean area, South America and Asia. Several export promotion activities are also 
proposed. In so far as the ICT industries are concerned, and particularly the SMEs, more 
effort needs to be made to raise industry's awareness of the opportunities offered and to 
help them to prioritise according to their circumstances. In addition, transborder 
industrial co-operation activities could benefit largely from enhanced co-ordination with 
existing Member States' programmes. 
Facilitate the emergence of SMEs: Small and medium enterprises (SMEs) are critical 
for employment generation and a key element of the ICT industry (particularly in the 
software and multimedia content areas) because they often play the leading role in the 
development of new technologies and the creation of innovative products. European 
industry lags far behind the US in high-tech IT start-ups. This is a serious handicap, as 
can be seen from the fact that many of today's leaders in ICT were SMEs in the USA less 
than 20 years ago. Policy initiatives aimed at creating favourable conditions for fostering 
and financing innovative start-ups is of the greatest importance. Policy initiatives should 
pay particular attention to facilitating the provision of venture capital and co-operation 
should be sought with financial institutions, in order to develop mechanisms such as 
technology "rating". Efforts should also continue to reduce the administrative burden, 
often a prime source of discouragement. The environment surrounding in particular 
starting new businesses, should be considered as the subject of a benchmarking analysis, 
by comparing the situation in Europe and in other regions, particularly the USA (Silicon 
Valley). These problems have long been evident, but the situation remains critical. There 
is urgent need for the Commission and Member States to develop rapid and effective 
action. The Commission also intends to use the G7 project "Global market-place for 
SMEs"1 , as the basis for encouraging the exchange of experiences at global level and 
facilitating other forms of co-operation. 
Focus on employment: skills, education and training: As earlier noted. European ICT 
industry must restructure continually in order to remain competitive, upgrading its 
products and processes to provide increased added value while relocating less profitable 
cost-sensitive operations. Skills upgrading are at the heart of the process. The 
implementation oï a "skills standards" scheme could go a long way to fulfilling this 
objective. Establishing skills profiles related to the main activities on an industry wide 
basis provides a reference for building a competent workforce, improving performances 
and defining training programmes. Such standards will also contribute to a better 
functioning of labour markets by providing a clear basis for matching employers" needs 
and skills offered. Moreover, standards offer a practical basis for improved co-operation 
between industry and schools and colleges, and a set of criteria to help education 
9 Specific features of SMEs are addressed in the "Action Plan for Innovation in Europe", adopted by the 
Commission on 20.1 l.P)%. - COM(%) ?X<> 
10 Project launched at the (i7 Ministerial Conference in Brussels in February ! ()95 
9 
authorities in Member States in their efforts to tailor curricula to the 21st century digital 
economy. 
Promote benchmarking: The European Commission considers benchmarking to be an 
effective and powerful tool for improving competitiveness and intends to promote its use 
by enterprises, in particular SMEs. Because of its economic importance and global 
nature, the ICT industry is among the first to be singled out for the application of 
benchmarking, and the Netherlands Government has had carried out a benchmark study 
of the industry. The Commission intends to promote benchmarking at sector and 
framework condition level. The competitiveness of the European economy as a whole 
benefits from improvements in the ICT industry. Systematic review of industrial 
performance, identification of relative weaknesses and adoption of corrective measures 
contributes to progress. The Commission will review its current information sources to 
determine whether they are adequate for the purpose of providing appropriate 
benchmarking indicators, and will revise them if necessary. It will work closely with the 
Member States and industry to identify critical framework conditions for industry and to 
identify best practises. Areas already identified here for consideration include SME start­
ups and embedded software. 
5. Conclusion 
A number of key areas for action have been identified in this Communication. The 
longer their effective implementation is delayed, the more difficult it will be to hold a 
leading position for the European ICT industry. Telecommunications liberalisation is 
critical, but others are also necessary as described above. 
The Commission proposes to follow up on this Communication by working together with 
the Member States and Industry to draw up specific actions responding to these key 
areas, to establish a work programme for their execution by all concerned parties 
(Commission, Member States, Industry), and a mechanism for regular review of progress. 
10 
Annex 1 
The Council resolution of 18.11.1991 and its follow-up 
Since the resolution of 1991 , the launch of the 4th Framework Programme for R&D has 
successfully addressed industry requirements for R&D in ICT. User and market needs 
have guided the relevant R&D programmes (Esprit, ACTS and Telematics), and the 
technologies developed as a result are having a direct market impact. 
Best use of results and active international co-operation have been two key elements in 
programme action. Attention has been focused on SMEs. Synergies with the Eureka 
programme have been strengthened. 
As explained in the resolution of 1991, multilateralism is the basis on which access to 
markets should be sought. This approach has been pursued in the GATT where 
significant reductions in tariffs were obtained in the Uruguay round negotiations. These 
were followed by the Information Technology Agreement (ITA) which will result in the 
elimination of tariffs for most IT products by the year 2000. Of similar importance is the 
success achieved by the conclusion of the WTO agreement in February 1997, opening 
markets for telecommunication services world-wide. 
The multilateral approach does not preclude bilateral actions where appropriate. Contact 
has regularly been made with the US and Japan to protest against bilateral agreements 
which discriminate against the EU (e.g. the US-Japan Semiconductor Arrangement). 
A "Centralised Point of Information" was established in order to collect information and 
analyses concerning market access to and competitive practices in the main industrialised 
countries. A report was issued covering anti-competitive practices, distortions in 
procurement, state aids, including examples of discriminatory practices and structural 
impediments. 
A number of industrial co-operation initiatives have been undertaken. An important 
example is the parts and components industry supplying consumer electronics producers, 
whose production practices have been compared with those of similar Japanese 
companies. This has been done in a co-operative benchmarking project jointly organised 
by the European and Japanese consumer electronics industries, with the support of the 
Commission and MITI. This exercise has produced many useful suggestions, as well as 
helping suppliers and users to understand each other's requirements better and resulting 
in improved performance and increased business. The programme is now being oriented 
to the countries of Central and Eastern Europe. 
' Council Resolution of 18 November 1991 concerning electronics, information and communication 
technologies. 
2 Report presented on 1 1 March 1994 to the Directors (ieneral of Industry. 
// 
Figure 1: ICT industry structural trends 
YESTERDAY TODAY 
Services 
(information 
society) 
Markets Markets 
transport 
equipment manufacturing 
equipment other 
c 
r-
Figure 2 
EU employment in the ICT industries 
(thousands of employees) 
Computers 
Components 
Consumer electronics 
Telecom equipment 
Software and services 
Total 1980 
242 
258 
230 
493 
270 
1493 1990 
284 
243 
181 
392 
612 
1712 1994 
175 
224 
110 
361 
732 
1602 
Source: BIPE 
II 
Figure 3.1 
EU 12 ICT Industries as a % of the Total Manufacturing 
Industries (81-90-94) 
0.0% 1981 
1990 
1995 
Number of Turnover Total Production GVAfc in 
Persons investment excl. VAT in 1990 prices 
Employed 1990 prices Exports Imports 
Figure 3.2 
EU 12:Comparasion for Main Indicators in 1995 (As a % of 
the Total Manufacturing Industry) 
> 14.0% 
V) 
% 12.0% 
ç 
? 10.0% 
I 8.0% 
o 6.0% 
4.0% 
2.0% 
0.0% 11.2% 
Number of 
Persons 
Employed GVAfc in 
1990 
prices I ICT 
I Chemicals 
[Automotive 
Indicators 
h 
Figure 4.1 
ICT Market Growth, CGAR 1996-98 
Total ICTMarket 
Telecom Services 
Telecom Equipment 
Services 
Software Products 
Data Comm. Hardware 
Office Equipment 
Computer Hardware 
Source EITO 97 9.50 
10% 
Figure 4.2 
Western European Information and Communications Technology 
(ICT) Market, 1996 Billion ECU** 
1996 
Value %of 
ICT 
Total IT 148 47.1 
Computer and Datacom Hardware 58 18.4 
Office Equipment 2.5 
Software 31 9.9 
Services 37 11.6 
Hardware Maintenance and Support 15 4.7 
Total Telecommunications 167 52.9 
Telecommunication Equipment 29 9.1 
Telecommunication Services 138 43.8 
Total ICT 315 100 
Note: 'Western Europe includes the 15 EU and 2 non-EU countries (Switzerland and Norway) 
** It should be noted that all figures have been rounded to the nearest billion ECU at 
1996 constant exchange rates. Total and percentage may not add up due to rounding. 
Source: EITO 97 
Figure 4.3 
Western European Information and Communications Technology 
(ICT) Market by Product. 1996 
Total Value = 
315 Billion 
ECU 
Telecoms 
Equipment 
9% Office 
Equipment 
3% 
HW Maint. 
& Support 
5% 
Source: EITO 97 
>f 
Figure 5.1 
Worldwide IT Market by Region: Percentage 
Breakdown Calculated on Market Values. 
1995-1997. Billion ECU 
1996 
Value 1995 
% 1996 
% 1997 
% 
Europe* 154 29.4 28.3 27.5 
US 225 41 41.4 41.8 
Japan 92 16.9 16.8 16.6 
4 Tigers* 16 2.7 2.9 
RoW** 57 10 10.5 11.1 
Total 544 100 100 100 
Note: Europe includes Western and Eastern Europe 
* 4 Tigers = Hong Kong, South Korea, Singapore, Taiwan 
*" Row = Rest of World 
Source: EITO 97 
Figure 5.2 
Worldwide IT Market by Region. 1996 
Total Value = 
544 Billion 
ECU 
4 Tigers 
3% Rest of 
World 17% 
/6 
Figure 6 
IT/GDP and IT per Capita in Western Europe, the US and Japan. 1995 
IT per Capita ECU 
WEmmEEEmam 672 
Source: EITO 97 3.67 763 
942 
88 630 
I 648 
521 
217 
50 
426 
698 
453 
396 
131 
214 
370 
• 417 
IB 460 
200 400 600 800 1000 
Figure 7 
EU 12: Trade Balance for the ICT, Chemical and Automotive 
Industries 
D O 
UJ 
o 
i 
-30000 -20000 Automotive 
ICT Ind. 
Cons. Elect. 
Telecom. Equip. 
Off.Mach/Comp. 
Chemical 
-10000 0 10000 20000 30000 
Sectors D1995 
• 1990 
• 1985 
• 1980 
/?• 
Penetration of Internet Hosts per 1.000 People, July 1996 Figure 8 
I 2 t I | I 
p o 
SNM: EITO 97/fMworkVMurës, http://www.nw.com and AMriiWy* 
I? 
ISSN 0254-1475 
COM(97) 152 final 
DOCUMENTS 
EN 15 16 08 
Catalogue number : CB-CO-97-157-EN-C 
ISBN 92-78-18704-6 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
/n