Opinion on the Industrial aspects of the Commission`s White Paper entitled 'Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21st Century` (94/C 295/10)

On 20 December 1993, the Economic and Social Committee, acting under the fourth paragraph of Article 20 of its Rules of Procedure, decided to draw up an Opinion on the Industrial aspects of the White Paper entitled 'Growth, Competitiveness, Employment: the Challenges and Ways Forward into the 21st Century`.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee`s work on the subject, adopted its Opinion on 4 May 1994. The Rapporteur was Mr K. Schmitz.

At its 316th Plenary Session (meeting of 1 June 1994), the Committee adopted the following Opinion, with five abstentions.

1. Introduction

1.1. At its meeting in Copenhagen on 21/22 June 1993, the European Council asked the Commission to draw up a White Paper on Growth, Competitiveness and Employment.

1.2. In an Own-initiative Opinion issued on 20 October 1993 the Committee submitted to the Commission a large number of proposals with regard to the White Paper.

1.3. The White Paper on Growth, Competitiveness and Employment was submitted by the Commission on 5 December 1993.

1.4. At its meeting in Brussels on 10/11 December 1993, the European Council considered Part A of the White Paper and drew up a plan of action (1) comprising:

- a general framework for employment policy at Member-State level;

- specific accompanying measures at EU level (in particular trans-European networks);

- a follow-up procedure.

The aim of the plan of action is to bring about an early change in growth and industrial competitiveness trends with a view to creating 15 million new jobs by the end of the century. In this context the Committee welcomes the ECOFIN Council`s decision to instruct the Economic Policy Committee to issue a half-yearly report on the implementation of the White Paper at national and EU level and to keep a watching brief on the work of the two high-level working parties on the action programme.

1.5. Not least because of the global approach adopted, the White Paper is currently the most important economic policy document advocating higher levels of growth, competitiveness and employment in Europe.

2. General observations on the industrial aspects of the White Paper

2.1. The Committee welcomes the strategic remarks set out in the White Paper.

2.1.1. The central measures proposed by the White Paper rightly relate to EU industry and services, including the public sector. The Committee agrees that the competitiveness of manufacturing industry, commerce, banking, insurance and transport is a factor of key importance to the safeguarding and further development of the 'European economic and social model`.

2.1.1.1. The position of European industry (2) is at stake. It must be strengthened, otherwise the whole of the European economy will be the loser and jobs will be at risk in the private sectors providing services to industry and households, in the welfare sector and in the public sector. Indeed, in the long term the social security systems will be at risk.

2.1.1.2. Industry is the vital backbone of an effective modern economy. Every job in industry safeguards two or three jobs in other sectors of the economy. A strong European industry helps to strengthen the competitiveness of the European economy overall. The development of 'European enterprises` can serve as a catalyst in this respect.

2.1.2. The following facts have a major bearing on the future form of the European economy:

- It has long ceased to be possible to develop products and increase production simply by imitation (as, for example, Japan did during its process of catching up with the West). The advanced States of the 'Triad` (the EU, USA and Japan) are now all equally looking to compete on the basis of innovation. European industry and European-orientated enterprises have a key role to play in this respect.

- The aim now is not to eliminate rivals but to strengthen the development capacity of the world`s regional markets. The political and economic organization of open trade and the development of cooperation machinery have become even more important.

- Central planning by governments and companies has proved to be inefficient. In the light of the complex nature of economic and technical processes, there should be greater emphasis on decentralized decision-making and on setting strategic objectives at state and company levels. Economic success depends in large measure on the involvement of people, on their skills and motivation, and on providing them with guarantees in respect of social security. An efficient, properly functioning public sector is also very important.

2.2. The Committee deplores the fact that the White Paper is vague over the matter of implementation. In many areas it is unclear who is to be responsible for implementing the proposed measures. This criticism does not apply only as regards the responsibilities of the European Commission and national governments. The role of regional authorities, the social partners and other economic and social groups is also not clear. The Committee expects the Corfu European Council to decide upon a detailed plan of action, incorporating a clear timetable, and to define the levels at which action is to be taken in the Member States. This much-needed political initiative to create new jobs and cut unemployment may go a long way towards strengthening public confidence in the European Union`s ability to act.

3. Specific comments on the industrial aspects of the White Paper

3.1. Observations on the competitiveness of European industry

3.1.1. The Committee largely shares the White Paper`s appraisal of the weak points (1), i.e.:

- reduced share of markets for research-intensive and high-technology products;

- inadequate presence on markets which have good prospects for the future;

- productivity still below that of main competitors.

With regard to the final point, however, the Committee has doubts about the strength of the empirical evidence for the claim that industrial productivity is noticeably higher in the USA than in the EU (2).

3.1.1.1. There are many factors behind this loss of industrial competitiveness: high manufacturing costs (including labour, capital and energy costs), inadequate expenditure on R& D; long delays in incorporating research findings into marketable products; and structural shortcomings in infrastructure, public services and the training provided by public authorities and companies.

3.1.1.2. The Committee would, however, point out that the type of economic-development system we want to set up has a bearing on the appraisal of 'industrial competitiveness`. The Committee supports the strategic approach pursued by the White Paper, namely that the economic foundation for the European economic development model has to be constituted by highly productive industry with a high technology input. The White Paper rightly points out that 'the key elements in competitiveness that are now of greatest importance are no longer confined to the relative level of the direct costs of the various factors of production`. (3)

3.1.1.3. Recent studies and practical experience have shown that at both national macroeconomic (4) and corporate (5) level the decisive factors in productivity and growth are of a qualitative nature. A number of aspects are particularly important here, namely: the quality of education and training, the efficiency of industrial organization, the ability to bring about constant improvement in the production process, the dynamism of research and development and its industrial application, the availability of competitive infrastructures and services, product quality and the readiness to take account in business strategy of the consequences of social changes (e.g. the field of environmental protection). Ability to organize work and production is becoming a decisive factor in competition between companies.

3.1.1.4. In the light of this approach to industrial development strategy one can readily understand why the White Paper points out that between 75 % and 95 % of firms` total wage bill is now accounted for by functions linked to organization rather than to direct production, e.g. information technology, engineering, training, accounting, marketing and research (6).

3.1.1.5. The Committee does, however, acknowledge that industrial development based on increased productivity and innovation will entail technology-generated unemployment and the transfer to outside the EU of low-productivity, labour-intensive industrial production since in this sector the EU cannot maintain its competitiveness with production bases in developing countries or eastern Europe. Labour costs in these countries cannot be matched in the EU. In view of this unemployment problem, supplementary measures will therefore have to be taken to promote labour-market mobility, the personal-service sector and the redistribution of working hours. (1)

3.1.2. The European Union possesses major comparative advantages. These include: the potential of its work force and fundamental social consensus - which provides the necessary basis for the exploitation of this potential; a high level of scientific and technical knowledge and skills; market-integration; a tightly knit, good-quality infrastructure; and cultural and geographical diversity.

3.1.3. The Committee would point out that, because of these comparative advantages, the European Union is in a position to maintain and improve its competitive position - in particular by consolidating its productivity capacity. The White Paper therefore rightly focuses on the need for greater private investment, as well as the need to overcome the weak points which it mentions. To achieve this aim, a number of macroeconomic conditions have to be met (financial policy, monetary policy, savings patterns, aggregate economic demand) (2). The Committee believes that in the current economic situation, long-term privately-funded and State-funded infrastructure projects must be used to provide the urgently required economic stimuli, and boost employment.

3.2. Cooperation in respect of overall competitiveness

3.2.1. The strengthening of overall competitiveness must go hand in hand with measures in the field of cooperation with non-EU states. Trade problems between regional economic blocs and nations must be resolved in accordance with clearly indicated criteria under the authority of an internationally recognized institution which has sanctions at its disposal, such as GATT and its successor the World Trade Organization (WTO) (3).

3.2.2. The tendency towards reaching agreements and engaging sanctions on a purely bilateral basis must be counteracted. World trade must be coordinated on the basis of criteria which are readily understandable and clearly indicated conditions of competition (social and economic clauses). It should, however, be accepted that these criteria will have to be differentiated in accordance with the level of development of the trading blocs concerned. In line with this principle, trading relations between the highly industrialized 'Triad` states (the EU, USA and Japan) should be based on reciprocity.

3.2.3. The economically weak non-EU states must be able to compete fairly within the overall pattern of free trade being constructed by the GATT and its successor the WTO. On this basis, trade principles must be applied which not only enable these states to take part in the international division of labour but also, and above all, promote their internal, autonomous development. The emphasis must be placed not only on abstract free trade axioms but on concrete measures to promote opportunities for development. It is above all the industrialized states, including the EU, which have an obligation here to guarantee the existence of the conditions needed to enable the developing countries - and more recently also the countries of eastern and central Europe - to participate in the worldwide division of labour.

3.2.3.1. The principle of reciprocity will therefore have to be dispensed with in trade with those countries or at most applied very selectively. Instead, the principle of 'asymmetric` trade must be applied; on the one hand, it has to be recognized that the economies of these weaker non-EU states need to be protected if their potential is to be tapped; on the other hand, the markets of the developed industrialized countries must be opened to their products.

3.2.3.2. Such a trade policy, which is already embodied in the 'Europe Treaties` with the countries of central and eastern Europe, must however be backed up by both economic and social development assistance on a very large scale. Increases in EU import quotas should be conditional upon the achievement of economic and social progress in these countries.

3.2.3.3. It is, however, also clear that the opening-up - irrespective of the form it takes - of the EU market to products from the 'third world` and eastern Europe will heighten the need for a dynamic industrial and regional policy at both national and European level.

3.3. Promotion of internal forces for growth by fully developing the European Internal Market

3.3.1. The Internal Market came into effect officially on 1 January 1993. But a large number of trade barriers remain. This is partly due to inadequate implementation of the Internal Market programme. There are, however, also many trade barriers which the European Union has yet to summon up the strength to resolve. Such barriers occur in particular in the fields of taxation and company law (the 'European Company`) and also as a consequence of the lack of a coherent legal system and of Europe-wide standards for major technical installations and equipment. In addition, competition policy is not fully effective, there is inadequate mobility on the labour-market (external flexibility), (1) and progress needs to be made on cross-frontier public procurement. Fluctuating exchange rates are also a serious impediment.

3.3.2. Over and above the need to remove these barriers, measures have to be taken to promote growth and employment by developing the economic potential of the Internal Market. It is clear that resources are not being used in an optimal way within the Internal Market. If we can make significant progress here, the resultant expansion of internal trade will generate substantial increases in growth rates and employment. In many sectors markets are fragmented and walled off from each other. The way to overcome the demand-side aspect of market fragmentation is to create conditions which give consumers greater confidence in the Internal Market. The following are required, in particular:

- a dynamic European industrial policy;

- specific measures to promote small and medium-sized firms;

- interlinking of infrastructures at European level;

- a European research and technology policy;

- further development of European regional policy.

3.3.3. A dynamic European industrial policy

3.3.3.1. As there is a close link between restructuring and competitiveness, a dynamic European industrial policy must be geared towards efficient and consistent implementation of all economic activities which facilitate, safeguard and advance the restructuring of the economy and the workforce, having regard to the objectives of economic and social cohesion and sustainable growth. The Committee put forward a series of proposals on this matter in its earlier Opinion (2) on the Commission Communication on industrial policy in an open and competitive environment.

3.3.3.2. In the White Paper the Commission rightly advocates a differentiated industrial policy, involving the relevant social and economic interest groups, which is geared to the creation and consolidation of employ-ment in growth industries and services, rather than simply maintaining established sectors by applying a traditional state-subsidy policy.

3.3.3.3. The increasing globalization of markets and production make it necessary, in particular, to modernize and extend European infrastructure networks and communications networks.

3.3.3.4. In the light of the fact that the speed and cost of innovation has increased in almost all markets, European policy must concentrate to a greater extent on R& D, whilst taking care to avoid distortions in competition.

3.3.3.5. The on-going replacement of rigid administrative structures and production structures and the traditional Taylor system of work organization is enhancing the importance of competition factors, such as company and production organization, process inter-linking, and investment in human capital. Work techniques based on cooperation should be developed in enterprises in collaboration with employees` representatives and promoted by means of European pilot projects (e.g. Community initiatives in connection with objective 4 of the Social Fund).

3.3.3.6. There is a need to develop new products and services to satisfy 'new social needs` and ensure 'sustainable development` (the White Paper refers in this respect to the fields of communications, the environment, health and culture). Promotion of product innovation must form part of a modern European industrial policy. With this aim in view, it is also necessary to lay down generally applicable European 'quality standards` (norms, legal provisions) for products and services. Measures must be taken at State level to ensure that these new products and services are made available in a socially-just and regionally-balanced manner.

3.3.3.7. Such an industrial policy must provide a platform for an open dialogue between state bodies and socio-economic interest groups. It must also develop new political, legal and financial instruments to promote the innovation capacity of society. Cooperation between industrial enterprises also has a role to play in stimulating action provided that competition is not jeopardized.

3.3.4. Specific measures to promote SMEs

3.3.4.1. In order to have prospects for growth and to be efficient, economies need to have a differentiated mesh of companies with inter-linked economic activities. SMEs have a particularly important role to play in this system of vertically and horizontally-linked production stages, especially as they are major providers of jobs. There are shortcomings in the European economy in this respect. The current recession has revealed specific weaknesses of SMEs, and in particular of suppliers of industrial components and semi-finished goods (e.g. suppliers to the motor vehicle and electronics industries).

3.3.4.2. In order to remedy these weaknesses and shortcomings, efforts must be made to remove restrictions to market access in the EU internal market and to establish a favourable framework in this respect. The following measures are needed in particular:

- reciprocal recognition of technical diplomas;

- the improvement of financing conditions by ensuring that the banks are willing and able to facilitate access to their loans and to provide investment finance on favourable terms for schemes which hold out prospects for the future but involve risks. These measures are particularly important to innovative small and medium-sized enterprises;

- measures to help enterprises extend their business links in international markets (export guarantees);

- better organization of the dissemination of research findings to SMEs;

- support for cooperation and alliances, whilst safeguarding competition;

- the provision of basic and further training opportunities for management and the rest of the workforce;

- the provision of decentralized publicly guaranteed communication services which are appropriate to the needs of SMEs (information networks).

3.3.5. The interlinking of infrastructures at European level

3.3.5.1. The Committee welcomes the fact that projects covered by investment policy are geared primarily to meeting general production requirements, particularly in the fields of information technology, energy supply and transport. The EU`s efforts are mainly concentrated on projects of 'Community interest`. The Committee draws attention to the fact that the interlinking of infrastructures, in particular, will boost the European economy. Productivity will be increased if transaction and circulation costs are reduced. In the Committee`s view, an investment drive of this nature needs to be based on a sound mix of private-sector and public-sector activities. The Committee is disturbed to note that public-sector investment, in particular, has declined in recent years. In some Member States it has dropped to the level prevailing in the 1970s.

3.3.5.2. The Committee would also point out that the necessary interlinking of infrastructures is hampered not only by differing political conditions, national regulations and standards, but also by the differing interests of infrastructure companies (railway, energy and telecommunication utilities and ancillary industries). The Committee calls upon the Commission, the Member States and infrastructure enterprises to work together to:

- establish the necessary measures on the financing of infrastructure projects; (1) (only a small part of the finance can be provided in the form of EU grants) and to

- establish as soon as possible the legal and technical conditions required to ensure system interoperability.

The European Centre of Public Enterprises (CEEP) should play an active role in this respect. The proposals of the working party set up under the responsibility of Henning Christophersen, Member of the EC Commission, should be implemented as soon as possible.

3.3.5.3. The proposals on transport infrastructure put forward by the Commission in the White Paper are welcomed. Large parts of the current transport infrastructure do not meet the needs of an effective European internal market.

3.3.5.3.1. The Committee will issue separate Opinions setting out its views on the Commission`s proposals in the following fields:

- trans-European networks for combined transport,

- trans-European road network,

- trans-European inland waterway network,

- trans-European high-speed train network,

- trans-European network of conventional rail lines, airports and seaports.

3.3.5.3.2. In the light of the enormous investment requirements in the transport field the Committee calls for a strict order of priorities to be established. The main criteria to be adopted should be: firstly, the contribution which the respective projects make towards achieving the goal of interlinking infrastructures (particularly where there are gaps) within the Internal Market and of interlinking Community infrastructure with the infrastructure of neighbouring countries; secondly, the possibility of achieving a speedy implementation of the project.

3.3.5.3.3. A coordinated approach to land-use planning in the Internal Market is an essential prerequisite for an efficient European transport network. The aims must be: (a) to identify the most important transport axes and (b) to provide links with the peripheral areas. Care must be taken, particularly with regard to the main trunk routes, to ensure that environmental compatibility is not sacrificed in the interests of efficiency. In the case of passenger and goods transport, priority should therefore be given to extending the rail system. In the case of bulk goods, priority should also be given to extending and improving inland waterway routes and the necessary maritime transport facilities.

3.3.5.3.4. The efficiency of European infrastructure also depends upon achieving an optimal combination of the various transport systems. Considerable shortcomings remain, in particular in the goods transport sector. It is therefore essential to bring about a massive extension of trans-shipment facilities (goods distribution centres) for rail, road, inland waterway, maritime and air transport and also to provide support for network- and transport-management by the public sector.

3.3.5.3.5. The Committee advocates making greater use of private-sector finance for transport infrastructure, particularly in view of the lack of scope for financing from national budgets. It is often, however, questionable whether private investors are prepared to accept the risk involved in major transport infrastructure projects. Insofar as such risks have ultimately to be assumed by the state, there are grounds for doubting whether private financing would indeed be better than public financing. Finally, there is a need to carry out a careful examination to define the areas in which private financing of infrastructure investments could conflict with the objective of providing an extensive range of infrastructures which are affordable to small businesses and the individual citizen.

3.3.5.4. There are considerable gaps in the interlinking of energy infrastructures. These shortcomings are particularly apparent in the electricity and gas networks. The reason for the problem is the fact that these structures are largely of a national nature.

3.3.5.4.1. The Commission rightly points out in the White Paper that the problems standing in the way of development of energy networks stem more from administrative restrictions in the Member States than from financing constraints. These restrictions relate to import and export duties, transport monopolies and limited opportunities for building and using electricity and gas networks.

3.3.5.4.2. The Committee has already examined these issues in a number of earlier Opinions, the most recent being its Opinion of 27 January 1993 on the two Proposals for Council Directives concerning common rules for the internal market in electricity and natural gas (1). The Opinion of 27 January 1993 pointed out that the institutional changes at EU level in the electricity and natural gas sectors had to go hand in hand with the development of energy infrastructures, further progress as regards interconnections, and appropriate alignment of the energy policies of the Member States and the financial, tax and environmental provisions governing the electricity and natural gas sectors.

3.3.5.4.3. The Committee is currently drawing up an Own-initiative Opinion which considers the advisability of proposing to the Institutions of the European Union and the inter-governmental conference charged with preparing the revision of the Treaty in 1996 that a specific chapter on energy policy be included in the Treaty. Such a chapter could set out the components of a common energy policy and define the necessary harmonization of other aspects of Member States` energy policies. EU energy policy must seek to bring about security of supply in all regions and make available energy at affordable prices from which small consumers (SMEs and the private consumer), too, are able to benefit, the policy must also accord with the need to protect the environment and it must lead to closer alignment of energy prices in the various EU Member States.

3.3.5.4.4. Without wishing to prejudge the outcome of this debate, the Committee nonetheless considers that one essential goal in this context is to create overall conditions which enable electricity and gas companies to make the investments required to step up the development of trans-national networks.

3.3.5.4.5. The Commission has put forward two proposals for Council decisions on guidelines for trans-European networks in the energy field and measures to create favourable basic conditions for the establishment of trans-European networks in the energy field. The Committee would refer in this context to the observations set out in its Opinion of 27 April on these proposals.

3.3.5.5. When dealing with investment, the White Paper justifiably places particular emphasis on the need to bring about the rapid development of telecommunications infrastructure. The strategic projects cover three inter-dependent levels of the telecommunications networks:

- information-transmission networks;

- generic services;

- information-technology applications.

The aim is to establish a 'common information area`. With this aim in view, national digital networks are to be interconnected, following the example of the telephone networks, and are to be administered in a compatible way. The role to be assigned to the European Union is, above all, that of removing general barriers, such as problems relating to legal protection for businesses, security, training, and protection of individual privacy. Support is also to be given to R& D projects and feasibility studies; loan guarantees and interest subsidies are to be used to facilitate financing. Liberalization is to be set in train in the field of basic telecommunications infrastructure, subject to observance of general political requirements (data protection, generalized provision of services).

3.3.5.5.1. In the Committee`s view, the Commission is right to place the emphasis on information technologies as the full utilization of economies of scale and the establishment of information infrastructures throughout the Community is still being hampered by the fragmentation of the market, inadequate linking of national networks and a lack of inter-operability. With the aid of information technology, the following can be achieved:

- structural change in industry and the service sector will take place more quickly: one prime example is the breaking-down of the former rigid links between technology and work which were a product of the traditional technology of the past. The introduction of information technology has meant that working conditions, job-content and qualification requirements are now to a large extent determined by the way in which work is organized;

- a new mix between industry and services (both production-related services and consumer services);

- influence on and stimulation of the development potential of the regions;

- broadening, at least potentially, of access to education and culture.

3.3.5.5.2. This process will, however, have to be planned. Research and, above all, development must be geared to the incorporation of information technology into environmental, energy and transport policy at an early stage. This will make it possible for the processes to take place in a more ecologically sound manner.

The plan to establish a Community-wide information infrastructure is likely to have a two-edged impact on employment. On the one hand, in the field of hardware manufacture the revolutionization of manufacturing techniques brought about by digitalization will probably have a negative impact on employment; on the other hand, in the software and service sectors employment is likely to be boosted. Steps must however be taken to ensure that those working in the latter sectors - including those teleworking from home - are covered by social security.

3.3.5.5.3. Finally, attention is drawn to the need to assess the consequences of new information technologies in respect of the determination of the individual and, in particular, ensure the individual`s right of control.

Given the urgent need for the measures in the field of information infrastructure, the establishment of a working party is welcomed. The Committee trusts that the proposals put forward by the working party will be implemented without delay.

3.3.5.6. A dynamic industrial development must necessarily be based on the strategic concept of 'sustainable development`. It follows that private and public investment in the environmental field helps to safeguard competitiveness, growth and employment.

3.3.5.6.1. Investment projects should concentrate on the following areas:

- shifting the emphasis of basic research to environmentally-friendly aspects, such as renewable sources of energy, recycling, and new materials and better organization of the transfer of research findings to product development;

- promoting the development of new clean technologies which meet the following criteria, in particular:

a high energy efficiency,

a lower level of consumption of raw materials,

longer product life,

improved operational methods.

- the implementation of investment projects in the priority areas of transport, energy and waste-management.

3.3.5.6.2. Due regard for environmental-policy considerations must be seen as forming an integral part of the extension of trans-European networks proposed in the White Paper. There is a need to set new priorities in the transport field, in particular. These new priorities should be based on the principles of avoiding the need for transport, shifting transport from one mode to another and making optimal use of transport, rather than merely extending the road network to meet the growing demand for transport; the necessary flexibility must not, however, be jeopardized.

3.3.5.6.3. There is no shortage of well-conceived environmental and infrastructure projects. The Committee calls for the following proposals, in particular, to be implemented in the short term:

- Expansion of the capacity of public-transport systems.

- Measures to be taken without delay to ensure continuity of investment in: recycling plants; the renewal of water supply systems; urban sewage systems; and the cleaning-up of the Mediterranean and the Baltic. Generally speaking, these measures largely involve construction work which has a rapid and direct impact on employment.

- Energy-conservation plans must be implemented in the residential-housing sector and in industry. Rapid savings can be made in particular, by improving thermal insulation in housing and elsewhere. A significant number of jobs would be created in the process.

3.3.5.6.4. New types of incentives and steering arrangements must be introduced to eliminate the present disproportion between the scarcity of natural resources and their consumption. The purpose will be to ensure:

- that market prices reflect the actual costs of the consumption of resources, the impact of this consumption on the environment and the destruction of nature (need to internalize external costs);

- that the tax burden on the consumption of natural resources is increased and the tax burden on labour inputs is decreased. The Committee would also refer here to its Opinion on the proposal for a carbon dioxide and energy levy (1);

- that financial incentives are provided for technology which conserves resources and/or develops substitutes;

- that environment-compatible production and product development are an economic proposition for producers and suppliers. This must be furthered by, for instance, specifically linking public procurement with environmental aims.

3.3.6. A European research and technology policy

The strategic emphasis on research and development is a further cornerstone of the blueprint for industrial policy set out in the White Paper. The Committee endorses this emphasis. The Commission points to traditional weaknesses in this sector, drawing attention in particular to the following:

- inadequate funding (financial bottlenecks);

- inadequate coordination of R& D projects pursued at national, company and sectoral levels;

- inadequate translation of research findings into marketable development projects.

3.3.6.1. The following tasks are, in the Committee`s view, particularly pressing:

- improving the transfer of research to the corporate sector, in particular small and medium-sized firms;

- establishing closer links between R& D and the market stage of production (a traditional weakness of European industry in comparison with, in particular, competitors in the Far East);

- coordination of EU and national R& D programmes and projects;

- involvement of users (customers) and producers (workers) at an early stage in the dissemination of technology and assessment of its impact, in order to identify social and ecological consequences at an early stage.

3.3.6.2. Changes in the environment in which we live and in the political environment at world level, together with the growing ecological threat, have focused attention on the urgent nature of the new requirements of society and the plight of particular geographical areas. The White Paper draws attention to 'new social requirements` in the following fields in particular:

- the environment;

- health;

- culture.

3.3.6.3. The challenges facing particular geographical areas are typified by the problems of the 'Third World` and Eastern Europe. The questions of innovation and the transfer of know-how will have to be reassessed in the light of these problems. These is an urgent need to work out and implement an appropriate approach.

3.3.6.4. The Committee welcomes the Commission`s decision of 16 March 1994 (2) on the creation of the European Science and Technology Assembly which is to help the Commission assess the impact of economic and technological development on the economy and society; the Committee expects that the social partners, too, will be represented on the Assembly.

3.3.7. Further development of European regional policy

The Committee points out that restructuring policy has failed to pay adequate attention to the regional dimension of industrial policy. If we are to promote industrial development in less-developed regions and to take account of social requirements, something more is needed than simply strengthening the competitiveness of European enterprises. The Commission must, therefore, above all give greater prominence in its industrial policy blueprint to the interests of the less-developed regions and involve them in the process in a more convincing way. The general reference to the Community`s structural funds is not enough.

3.3.7.1. The Committee considers that it must be possible to back up horizontal measures to facilitate structural change and enhance the flexibility of enterprises by industrial policy measures to promote the necessary (regional and structural) adjustment processes in problem areas. It must also be possible to cushion the social impact of structural changes by appropriate, coordinated transitional measures. Such supplementary action could involve:

- compensatory regional measures to strengthen the potential of less-developed regions and enhance their development capacity;

- compensatory regional measures to assist regions suffering from economic restructuring problems;

- measures to facilitate adjustment by offsetting social hardship arising from structural crises or rationalization measures.

In this context the Committee calls for the introduction of Community initiatives in the field of industrial policy (1), financed by the Structural Funds, with a view to facilitating structural adjustment. These should include measures targeting frontier regions with industrial adaptation problems.

3.4. Dialogue between social and economic interest groups on the reforms needed to implement the White Paper on Growth, Competitiveness and Employment

3.4.1. It would be fatal to think that we can push through solutions to the major challenges regardless of whether they generate social conflict. A forward-looking industrial strategy cannot be successful without proper organization of innovations at all levels (establishment, region, state, EU) or without a dialogue at these levels. This is pointed out in the White Paper. Dialogue and negotiations between socio-economic interest groups do, however, require a readiness to compromise on the part of all the parties concerned. This dialogue between socio-economic interest groups has to take place at all levels. The dialogue at European level must be additional to the dialogue at regional and national level. Some of the institutional machinery for this dialogue still has to be established.

3.4.2. The Committee welcomes the fact that the 'dialogue between management and labour` is legally enshrined in the Social Policy Protocol to the new Treaty on European Union. It is thus now possible, particularly in the field of social policy, to establish relations in respect of industrial matters between the European umbrella associations of employers and trade unions.

3.4.3. This dialogue between management and labour could be supplemented by a dialogue at sector level for the sectors which so desire. The industrial challenges which we face cannot be met without consultation and negotiation at company and sectoral level. There is a need to develop industrial relations at sectoral level, particularly in those industries which are inter-meshed to a high degree at European level (electrical engineering, the chemical industry, motor-vehicle manufacture, maritime industries).

This dialogue should promote the requisite innovation on the basis of mutual understanding. The major 'European undertakings` have a key role to play here.

3.4.4. In the case of a large number of problems, it is not sufficient to involve only the 'traditional` social partners. Many other economic and social agents are sufficiently representative and qualified and in cases where their interests are involved they can play a responsible role at European level, too. The particular examples which come to mind here are representative of small and medium-sized firms, agriculture, consumer and environmental organizations and scientists.

4. Conclusions

4.1. With respect to a European industrial strategy, the European economic and social model entails:

- increasing productivity, above all strengthening and exploiting the capacity to innovate;

- orientation of industry to 'sustainable development`;

- promotion of participatory organization and decision-making processes.

4.2. In order to enable European industry, which is the backbone of the European economy, to cope with the stiffer competition worldwide, policy-makers and the social partners must clearly signal a 'new start`.

4.2.1. The implementation programme in respect of the action plan for public and private investment agreed upon at the Brussels Summit (10/11 December 1993) must play a central role at the present time. Coordinated action by the Member States over the implementation of infrastructure projects of special interest to the Community, as set out in the White Paper, is of key importance in this respect. The Council should take decisions on the following matters on the basis of proposals put forward by the Commission:

- establishment of infrastructure schemes which make a special contribution to closing gaps in networks on the basis of national sub-programmes;

- the quickest possible identification and fulfilment of legal and technical prerequisites for system interoperability;

- concentration on schemes which can be implemented quickly and which are particularly effective from the point of view of generating employment;

- development of a clear-cut time schedule.

On the basis of the above criteria the Member States, working with the enterprises concerned - which operate in particular in the infrastructure field (rail, telecommunications and energy companies) - should ensure funding in addition to the financial assistance provided by the Community and conditions which actively encourage the necessary participation of private investors.

4.2.2. In order to strengthen and make better use of the capacity to innovate, society needs to be open to new technological developments and accept them. A public, democratic discussion, in which national government bodies, the Commission, governments and regional entities, at the various levels play a leading role, is required.

4.2.2.1. As a specific proposal, the Committee recommends establishment of a 'European innovation council` comprising leading figures from the scientific community, companies, and trade unions.

4.2.2.2. This council of experts would issue opinions on the impact of innovation and technology measures, on the ability of industrial sectors to innovate and on their market positions in research-intensive technology fields. In addition, the council would help mobilize researchers` and scientists` capacity to innovate so that economic, social and environmental challenges can be tackled.

4.2.3. Many of Europe`s citizens have lost faith in politicians` ability to act effectively at European level. The Committee expects the Corfu European Council to take decisions. The dispute about who does what must take second place. What matters is that the measures taken should be effective.

4.2.4. The European Union must also demonstrate its ability to act at international level. The Union must build on the Detroit talks between Ministers of Finance, Economic Affairs and Employment and on the decisions taken at the European Council in Corfu and make a credible contribution to employment policy at the World Economic Summit to be held in Naples.

Done at Brussels, 1 June 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN

(1) See the Conclusions of the Presidency, European Council held in Brussels on 10/11. 12. 1993 (Document SN 373/93 Point I.A).

(2) The term 'industry` as used in this Opinion also covers service industries geared to the productive side of the economy, such as banking, insurance, transport, telecommunications and trading companies.

(3) White Paper, point 2.2.

(4) For a more precise appraisal of the comparative data see the report entitled 'Manufacturing Productivity`, McKinsey Global Institute, Washington D.C., October 1993.

(5) White Paper, point 2.3.(b).

(6) See Michel E. Porter: The Competitive Advantage of Nations.

(7) See MIT survey of the motor-vehicle industry.

(8) Point 2.3.(b) of the White Paper.

(9) See the Opinion of the Section for Social, Family, Educational and Cultural Affairs on the social aspects of the White Paper on Growth, Competitiveness and Employment (CES 752/94 fin - Rapporteur: Mr Burnel).

(10) See the Opinion of the Section for Economic, Financial and Monetary Questions on the economic and financial aspects of the White Paper on Growth, Competitiveness and Employment (CES 750/94 fin - Rapporteur: Mr Romoli).

(11) See the Committee`s Opinion on page 151 of OJ No C332 of 31. 12.1990.

(12) See the Opinion of the Section for Social, Family, Educational and Cultural Affairs on the social aspects of the White Paper on Growth, Competitiveness and Employment.

(13) See the Committee`s Opinion of 27 November 1991 (OJ No C 40, 17. 2. 1992, p. 31).

(14) See the Opinion of the Section for Economic, Financial and Monetary Questions on the economic and financial aspects of the White Paper on Growth, Competitiveness and Employment and the Opinion on the proposal for a Council Regulation (EC) on Community financial aid in the field of trans-European networks.

(15) OJ No C 73, 15. 3. 1993, p. 31.

(16) ESC Opinion of 24. 2. 1994 (OJ No C 108, 19. 4. 1993, p. 20).

(17) OJ No L 98, 16. 4. 1994, p. 34.

(18) See the Opinion of the Section for Regional Development and Town and Country Planning on the Future of Community Initiatives under the Structural Funds.

The Community Initiative concerning Urban Areas (URBAN)

The Community Initiative on the modernization of the textile and clothing industry of Portugal (CES 761/94).