COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(94) 319 final 
Brussels, 14.09.1994 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
TO THE EUROPEAN PARLIAMENT, ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
AN INDUSTRIAL 
COMPETITIVENESS POLICY 
FOR THE EUROPEAN UNDN 
SUMMARY AND CONCLUSIONS 
1. It will not be possible to restore growth and consolidate the revival in the European Union 
unless they are based on competitive, efficient and innovatory industry. 
The Union must remain an attractive site for production and investment. 
The Commission's White Paper on "Growth, competitiveness, employment", endorsed by 
the European Council as the benchmark for the action taken by the European Union and its 
Member States, advocated an approach to industrial development aiming at global com­
petitiveness. 
The objective of this approach is to bolster the Union's position on the markets of the fu­
ture generating jobs and value added. 
2. In recent years European industry has improved its competitiveness considerably, both in 
commercial terms and in areas such as companies' research effort and financial structure. 
But now, at a time when it is making an unprecedented effort to restructure and innovate, 
it is facing: 
mounting international competition; 
far-reaching changes in the conditions for industrial competition, particularly under 
the impact of the emergence of the information society and of the uncertainties con­
cerning the environment in which it will develop; 
the need for industrial change in the less developed regions; 
the inadequacy of the major European networks (telecommunications, energy, trans­
port, etc.) for reaping maximum benefit from the large market, which is certainly more 
integrated but is still highly diverse and is not yet operating satisfactorily; 
combinations of technological innovations (information technology, biotechnology, 
new materials, etc.) which have led to intangible investment (in research, patents, 
training, etc.) growing faster than capital investment. 
3. The Treaty on European Union calls on the Community and the Member States, acting in 
line with the subsidiarity principle, to ensure that the conditions necessary for the competi­
tiveness of the Community's industry exist. The Commission considers that this objective 
must be pursued vigorously and dynamically in order to create and attract new jobs in 
Europe. 
Although it is primarily up to businesses to ensure that they are competitive on the market, 
the public authorities in turn must ensure the consistency of all the measures which could 
enhance industrial efficiency. 
4. To this end, the Commission is submitting "An industrial competitiveness policy for the 
European Union", based on the principles set out in the 1990 "Industrial policy in an open 
and competitive environment" and centring on four priorities: promote intangible invest­
ment, develop industrial cooperation, ensure fair competition and modernise the role of the 
public authorities. 
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The Commission has identified the action to be taken on these priorities and intends to 
proceed immediately with the measures for which it is directly responsible. It has made a 
number of proposals already in the communication entitled "Europe's way to the informa­
tion society. An action plan", the follow-up to the May 1994 report on, "Europe and the 
global information society" by the high level working party chaired by Mr Bangemann. 
It calls on all concerned to join forces to ensure rapid implementation of all the action nec­
essary, based on the following guidelines and practical measures: 
Promote intangible investment: 
The Commission: 
will give greater priority to intangible investment in all its policies to support invest­
ment and will include improved vocational training and promotion of human resources 
amongst the top objectives, taking account of the subsidiarity principle; 
will ensure, in keeping with the commitment given in the Community's fourth frame­
work programme on research and development activities (1994 to 1998), that research 
policy takes fuller account of the needs of the market, notably by means of closer co­
operation with the operators concerned; 
will develop an integrated approach to the exploitation of intellectual property. 
Develop industrial cooperation 
The Commission: 
will identify the obstacles to industrial cooperation both inside the Union and outside 
and will take the measures necessary to facilitate such cooperation and ensure that 
businesses can gain easier access to information and assistance which could contribute 
to their schemes; 
will support the organisation of industrial round tables to enable industrialists from 
inside and outside Europe to identify and harness their mutual interests; 
will propose the development of support mechanisms, exploring solutions similar to 
partial guarantees for investments and appropriate technical expertise to assist opera­
tions of interest to the Community as a whole; 
will submit specific proposals on industrial cooperation with some of the Union's part­
ners, such as the countries of Central and Eastern Europe, the Latin American and 
Mediterranean countries with the which the Union has traditional ties and certain 
Asian countries; 
will ensure that the instruments at its disposal are used jointly and closely co-ordinated 
for the benefit of industrial cooperation. 
Ensure fair competition 
The Commission: 
will step up the policy to reduce public aid, taking account of the regional imbalances, 
and will shortly look at possible changes to the mechanisms for controlling state aids. 
The intention will also be to simplify the monitoring mechanisms for minor cases; 
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will re-examine the criteria for approval of aid and simplify the rules, by reformulating 
certain texts and facilitating opportunities for making comments by third parties 
competing; 
will make the rules on State aid and non-structural Community funding more compat­
ible; 
will continue efforts to find a solution to those issues remaining unresolved by the 
Uruguay Round; 
will grant priority to combating fraud, in particular that which concerns product ori­
gin; 
will submit proposals for the development of international rules on competition; 
will establish a data base on the obstacles to proper operation of the markets and an 
Industrial Assessment Mechanism to identify the industrial problems encountered by 
European businesses on markets in third countries; 
will continue to improve the structure of the common customs tariff in order to better 
take into account the industrial interests of producers and users; 
will consider ways of applying commercial policy instruments to services and of co­
ordinating the schemes to promote exports; 
will continue to play an extremely active role in removing distortions of competition 
both inside the Union and at international level. 
Modernise the role of the public authorities 
The Commission: 
will support the working party set up at the request of the European Council to sim­
plify legislation and administrative procedures and will continue its efforts systemati­
cally to streamline procedures and make them more transparent; 
will examine the possibilities offered by the Treaty to end the legislative, administra­
tive or regulatory disparities creating problems for businesses; 
will make use of the opportunities offered by the Community instruments (particularly 
the Structural Funds) to facilitate the development of competitive industrial activities 
in the Union, based on the specific situation in the different regions; 
- ' will encourage administrative cooperation between the Member States and the Com­
mission to overcome any difficulties encountered by businesses wishing to benefit 
from proper operation of the internal market; 
will examine ways of improving the decision-making structures, based on the experi­
ence acquired in the Union and by its partners. 
In accordance with the Treaty, the Commission will take any useful initiative to promote 
coordination of the national and Community action to foster industrial competitiveness. 
Priorities for a competitiveness policy for the European Union 
1. Promote intangible investment 
Objectives Action 
> to adapt vocational training to - promotion of intangible investment in the general 
needs support for investment; examination of ways of taking 
. _ _.. . fuller account of intangible assets, particularly in the > to encourage greater participa- ^ . , , ? T, _f , . . context of taxation tion by both sides of industry m y 
seeking new ways of organising - stepping-up of research: 
worlc 
- by proceeding with further action to take fuller ac-
> to facilitate the emergence of count of the needs of the market in RTD policy 
new markets, of new forms of , , • • ,i # J ^ j 
, * ,. - by modernising the approaches m order to produce 
training and of total quality «. ,,, , . , „ /• , 
°. n ^ wore effective industrial spin-offs from research 
. . - by facilitating the establishment of consortia ofEuro-
> to apply economic intelligence 
vr J ° /&an companies 
> to increase the capacity to keep ^ r I-*. 
, , - , -it- promotion of quality 
ahead of changes m technology 
and on the markets - fuller integration of vocational training schemes in 
other policies 
> to ensure expansion and 
take-up of R&D efforts - creation of a legal environment conducive to research 
> to promote sustainable indus- - development of clean technologies and economic 
trial development incentives 
- introduction of new ways of organising work and 
improvement of the fiscal environment, particularly 
for small firms 
- improvement of the dialogue between the two sides of 
industry 
- rational use of statistics 
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Priorities for a competitiveness policy for the European Union 
2. Develop industrial cooperation 
Objectives Action 
> to bolster the presence of the 
European Union's industry on 
high-growth markets 
> to take fuller account of the 
industrial situation of the Euro­
pean Union's partners 
> to encourage private coopera­
tion schemes of interest to the 
Community 
> to facilitate transfers of experi­
ence and know-how between 
businesses, particularly small 
businesses (a) General measures 
- identification and removal of legal and fiscal obsta­
cles to industrial cooperation 
- development of industrial cooperation tools, using as 
and example the experience ofBC-Net 
- support for the development of trans-national initia­
tives targeted on growth markets using structural 
funds 
- industrial round tables 
- recourse to the Working Party of the Heads of Indus­
trial Policy Departments to facilitate industrial coop­
eration operations and efforts to find information and 
partners 
- develop a coherent legal approach towards a com­
munal and efficient promotion of European foreign 
investment 
(b) Central and Eastern Europe 
- exploring solutions similar to partial guarantees for 
investments 
- support for standardisation and certification 
- expertise in international financial engineering and 
offset activities 
- support for harnessing potential energy resources 
(c) Latin American and Mediterranean countries 
- closer technological cooperation 
- participation in the fourth framework programme on 
• R&D activities and in the developments connected 
with the information society 
- establishment of networks of businesses 
(d) Asian countries 
- cooperation programmes 
- scientific and technological cooperation schemes 
- training and dissemination of technology 
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Priorities for a competitiveness policy for the European Union 
3. Ensure fair competition 
Objectives Action 
External measures 
> to take account of the growing 
number of strategic alliances 
> to identify the obstacles to ex­
port growth and increased in­
vestment 
> to put an end to discriminatory 
bilateral agreements 
> to promote more open trade, 
while encouraging social pro­
gress 
> to consider the establishment of 
multilateral rules to reduce 
distortion of competition caused 
by businesses themselves 
> to establish environmental 
protection criteria and apply 
them effectively 
> to harness more fully the com­
mercial potential of the region 
with which the European Union 
has close ties for historical and 
cultural reasons 
Internal measures 
> to define a consistent approach 
to open up markets and make 
them more competitive 
> to increase discipline within the 
Union 
> to make competition policy 
more consistent with other 
policies External markets: 
- continue efforts to resolve problems not completely 
dealt with by the end of the Uruguay Round 
- efficiently combat fraud 
- development and effective application of international 
rules on competition 
- taking account of the European Union's industrial 
interests, both as an exporter and as an importer 
- establishment of an Industrial Assessment Mechanism 
- continue to improve the structure of the commons 
customs tariff in order to better reflect the industrial 
interests of producers and users 
- database on the obstacles to smooth operation of the 
markets 
- improve commercial policy instruments with the aim 
of making them more efficient and operational 
- consideration of application of commercial policy and 
~ defence instruments to services 
- coordination between the measures taken to promote 
exports and investment and the other policies 
Internal market: 
- further reduction of State aid, taking account of 
regional imbalances 
- shortly look at possible changes to the state aid 
control mechanism 
- re-examination of the aid authorisation criteria 
- improve the coherence between the structural policies 
and the policies for monitoring State aid 
- improve the coherence between the rules applicable to 
state aids and the arrangements for Community fi­
nancing under non-structural policies 
- strengthening of the internal market (in gas, electricity 
and telecommunications) 
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Priorities for a competitiveness policy for the European Union 
4. Modernise the role of the public authorities 
Objectives Action 
> to ensure smooth operation of - further deregulation, examining, for example, the 
the internal market expediency of invoking Articles 101 and 102 of the 
> to improve administrative co- ^ 
operation between the Member - redefinition of public service objectives 
States and the Commission wo* ^ ,r , , . . , , . , , 
- use the Structural Funds to support industrial change 
> to simplify the public media- and to facilitate the development of clusters ofcom-
nisms affecting industrial com- petitive activities 
" - development of partnerships between big businesses 
> to continue deregulation and and small firms 
administrative simplification ,. . , A • r , 
r - streamlining and greater transparency of procedures 
> to modernise the public (contribution to the working party set up to simplify 
authorities administrative procedures and legislation) 
> to ensure closer concertation - faster establishment of trans-European networks for 
with operators on matters af- the interchange of data between administrations 
fecting industrial performance ,. , „ •_ • . . . 
»r _ Use of the Community instruments to support interest 
> to bring the administrative de- cooperation projects of Community interest 
partments responsible for re- . ^. T s- J i , • .. , , - examination of ways of improving decision-making search and industry closer to- , 
J structures gether 
> to reduce the costs arising from 
the regulations 
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CONTENTS 
SUMMARY AND CONCLUSIONS 1 
INTRODUCTION 9 
A. The objective 9 
B. Previous achievements 9 
C. The new challenges 11 
D. Generating new jobs 13 
I. THE INDUSTRIAL COMPETITIVENESS OF THE EUROPEAN UNION 15 
A. Making the European Union more competitive in the global economy 15 
1. The competitive position of European industry 16 
2. Knowledge and human resources 17 
3. Development of trans-European networks and better organisation of production 18 
4. Industrial competitiveness and economic and social cohesion 19 
5. Scientific and technological experience 20 
B. Targeting growth markets 21 
1. The potential of the European Union's industry on growth markets 21 
(a) Strengths and weaknesses of the European Union on global markets 21 
(b) The growth areas: a few examples 21 
2. Harnessing the European Union's industrial tradition 23 
(a) Conditions for competitiveness on established markets 23 
(b) Harnessing the traditional industrial base 24 
II. PRIORITIES FOR ACTION 25 
A. Promote intangible investment 25 
B. Develop industrial cooperation 27 
C. Ensure fair competition 30 
D. Modernise the role of the public authorities... 35 
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INTRODUCTION 
A. The objective 
As the year 2000 approaches, European industry is making an unprecedented effort to restructure 
and innovate in order to boost its competitiveness on the world market. At the same time it is fac-
mounting international competition; 
a longer economic recession than foreseen, in a context where the renewed growth expected 
will not by itself be a decisive factor in job creation; 
combinations of technological innovations (information technology, biotechnology, new mate­
rials, etc.) which have led to intangible investment (in research, patents, training, software, 
etc.) growing faster than capital investment; 
the inadequacy of the major European networks for reaping maximum benefit from the revolu­
tion in progress in the telecommunications and information sectors and the room for improve­
ment in transport and energy transmission on the large market, which is certainly more inte­
grated but is still highly diverse and is not yet operating satisfactorily; 
the need for industrial change in the less developed regions. 
In a global economy in which the various sectors of activity are interdependent, the pressures gen­
erated by the twin imperatives to innovate and to combat unemployment call for reconsideration of 
the conventional forms of organisation of work, production and innovation and of the methods of 
management and intervention employed by companies and the public authorities. 
The communication adopted by the Commission in 1990 on "Industrial policy in an open and com­
petitive environment", the conclusions of which were fully approved by the Council, defined the 
basic principles of an industrial policy for the Community. 
These principles were enshrined in the "industry" section of the Treaty on European Union. 
The White Paper on growth, competitiveness and employment, and in particular the Chapter enti­
tled "Towards global competitiveness", mapped out how these principles could be put into action. 
The objective of and value added by this communication is, based on this past work, to identify and 
propose action to make the Union's industry more competitive, taking account of: 
the new challenges facing industry; 
the need to create jobs and attract new jobs in Europe; 
the fact that competitiveness is not an end in itself, but is an essential means of improving the 
population's living conditions. 
B. Previous achievements 
The 1990 communication from the Commission entitled "Industrial policy in an open and com­
petitive environment" paved the way for a new approach to industrial policy which: 
clearly established the division of responsibilities between businesses which, naturally, are in 
the front line, and the public authorities whose role is, above all, to create a dynamic environ­
ment favourable for industrial development; 
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abandoned the defensive, protectionist sectoral approaches followed all too often in the past. 
This communication made it possible: 
to reach a consensus on a policy tailored to the globalization of the markets and of the prob­
lems facing industry; 
- to highlight the European problem of the different national approaches which, up until then, 
had been artificially over confrontational; 
to devise a modern approach to industrial policy based on the need to keep the various policies 
with an impact on industry complementary: foreign trade, competition, internal market, envi­
ronmental protection, research and development, networks, economic and social cohesion, and 
small business policy. 
Naturally, a stable, predictable macroeconomic environment remains a sine qua non for boosting 
industrial competitiveness. 
Since 1990 these basic principles have been applied successfully in various industrial policy initia­
tives taken by the Commission, particularly in the case of: 
the motor industry, for which a balance has been sought to make Europe more competitive 
during the transition period set by the arrangement with Japan; 
the maritime industries, for which a broad-based forum has been set up in which all parties 
concerned can jointly define solutions suited to undertakings' future; 
biotechnologies, where the objective is to make the Community as attractive as its rivals for 
development of such technologies, while taking due account of the needs to protect public 
health and the environment. 
The Commission is continuing to follow this general approach, particularly in two major new fields 
of activity: 
the information society which, once established, will have a decisive effect on all industrial ac­
tivity in the Union; 
cooperation with the countries of Eastern Europe, which, of course, in no way precludes closer 
cooperation with the Union's other partners, particularly with countries with which it has 
strong historical and cultural links. 
Several of the objectives identified in the 1990 communication to promote industrial competitive­
ness have been largely achieved: 
the completion of the area without internal frontiers in 1993 marked the most significant pro­
gress made by the Union towards making European industry more competitive; 
the GATT negotiations have been completed; 
substantial sums have been made available to promote industrial change under the cohesion 
policy; 
the Union's research policy now takes fuller account of the needs of the market and of busi­
nesses, particularly of small firms, as indicated by the priorities set for the Community's fourth 
framework programme on research and development activities (1994 to 1998); 
greater support is being provided for the establishment of trans-European networks; 
the foundations of a human resources policy have been laid. 
The consensus reached on the principles set out in the 1990 communication allowed inclusion in 
the Treaty on European Union of the legal bases for implementing the industrial policy which, in 
line with the subsidiarity principle, is defined as a general obligation shared between the Com­
munity and the Member States for "the strengthening of the competitiveness of Community 
10 
industry" (Article 3 of the Treaty) and to "ensure that the conditions necessary for the com­
petitiveness of the Community's industry exist" (Article 130(1)). 
It is primarily up to the Member States and the decentralised authorities to foster industrial com­
petitiveness with the aid of a system of open and competitive markets. 
However, Article 130(2) adds that in order to attain these objectives the Member States "shall con­
sult each other in liaison with the Commission and, where necessary, shall co-ordinate their ac­
tion". The Commission is assigned the specific duty to "take any useful initiative to promote such 
coordination. " 
To support this national action, the Community will generally help to achieve this objective of im­
proving competitiveness by taking horizontal measures under a series of common policies (on re­
search, cohesion, vocational training, networks and foreign trade), implemented by qualified ma­
jority vote in most cases, and by implementing the competition policy. 
The Council may also, ruling unanimously on a proposal from the Commission, "decide specific 
measures destined to support actions taken by Member States in order to attain stated objec­
tives" according to Article 130, paragraph 1 of the Treaty. 
Accordingly, a policy for industrial competitiveness has a coherent legal basis in Title XIII 
("Industry") of the Treaty on European Union, Title XV (Articles 13Of et seq.) on research and 
technological development, Title VIII (Article 123) on social policy and industrial changes, Title 
XIV on economic and social cohesion (Articles 130a and 130b) and Title XII on trans-European 
networks. 
C. The new challenges. 
Today the measures taken to implement industrial policy must take account of a series of new 
factors: 
Persistent unemployment: the transformation of the economic situation - with the strong 
growth of the late 1980s giving way to one of the deepest economic crises since the '30s - has 
generated particularly severe levels of unemployment which endanger cohesion. Moreover, this 
high employment reduces the capacity of all concerned to accept the changes necessary in or­
der to boost industrial competitiveness throughout the Union. 
The changes in the international context marked by the geopolitical upheaval, the general 
constraint for mobility in all fields, the conclusion of the Uruguay Round and the decision to 
establish a World Trade Organisation. There are now clear signs that the world-wide recession 
of the early '90s is being overcome. The renewed growth, rapidly falling interest rates and the 
gradual increase in the number of job vacancies only confirm this trend. 
The emergence of new technologies, particularly those associated with the information soci­
ety, which has broken the link between economic growth and raw material consumption. This 
has shifted the principal sources of value added towards control of "intangibles", as reflected 
by the growing importance of services which are steadily becoming an integraf part of indus­
trial activity, a development described by some as the "intelligence revolution". At the same 
time the substitution of capital and labour allowed by the emergence of new production tech­
nologies has broken the link between growth and job creation. Renewed growth is no longer 
enough to increase employment. 
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Environmentally sustainable development implies, as stressed in the Commission's commu­
nication on industrial competitiveness and environmental protection, that environmental quality 
and growth must be considered interdependent.1 Implementation of a global environment policy 
can help industry to manage its resources better and rally public confidence while at the same 
time opening up new commercial outlets. This is all the more important now that the shorter 
life of certain products or the global consequences of using them can call into question their 
economic viability or their contribution to growth. Consequently, industrial development must 
take fuller account of the needs of society. 
The mounting competition is forcing European companies into continuous productivity 
drives. As economies grow increasingly interdependent the competitiveness of businesses in the 
European Union is becoming more and more sensitive to their rivals' industrial strategies. 
Added importance must therefore be attached to the problem of relocation and to relations be­
tween big businesses and their subcontractors, many of which are small firms. From now on 
companies1 strategies and decisions on the international division of their production will play a 
more important part in the pattern of trade than conventional commercial policy measures 
(in-house trade is now thought to account for over 50% of trade between the countries in the 
Triad). 
In addition, the sharp fluctuations in recent years, sometimes by as much as 50 to 100%, in 
the exchange rates between the currencies of the European Union Member States, the USA and 
Japan are a powerful incentive for companies to move production closer to their markets2. 
It is primarily up to businesses to react to these changes, although they also call for updating 
of the policies with an impact on competitiveness. As underlined in the White Paper, the 
conditions for long-term competitiveness depend, in particular, on the establishment of a stable 
macro-economic framework permitting sustainable growth and creating jobs. In such an envi­
ronment, businesses and consumers may operate in a predictable manner, which in turn re­
duces the costs of economic operations. Improving the coordination of economic policies will, 
furthermore, reinforce exchange rate stability. At the same time these policies must take ac­
count of the overriding objective of creating jobs, of the faster pace of industrial change and of 
the new debates on, for example, the relocation of industrial activities. This shows how impor­
tant it is for the competitiveness of European industry that the Union adopt a single currency 
within the time-scale provided for in the Treaty. 
The new dimension of the internal market, where the emphasis has now shifted from comple­
tion to effective and efficient operation. 
The aim is no longer simply to endow the European Union with legislation removing the barri­
ers to trade but to put into operation a "market" in the true sense of the term. This will entail 
liberalisation of financial services, sustained deregulation of certain sectors to allow effective 
access to the markets, greater flexibility on the labour market, reduction of the tax disparities 
which lead to fragmentation of the markets and open, confident acceptance, by the Member 
States, of mutual recognition of standards. 
The Treaty on European Union also strengthened the links between environmental protection and other 
policies by stressing that "environmental protection requirements must be integrated into the definition 
and implementation of other Community policies" and that "in preparing its policy on the environment, 
the Community shall take account of (...) the potential benefits and costs of action or lack of action" and 
"the economic and social development of the Community as a whole and the balanced development of its 
regions", aspects of primordial importance for industrial competitiveness policy. 
See Table 1 of Annex II 
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The internal market has also taken on a new dimension with the establishment of the major 
networks, particularly of the telecommunications and energy transmission infrastructure, where 
the lowering of tariffs and liberalisation are decisive factors in making industry more competi­
tive. 
The public authorities will play an essential role in this respect, both as the bodies responsible 
for the regulatory environment and as investors and purchasers in certain fields. This is dem­
onstrated particularly vividly by the recommendations in the report on "Europe and the global 
information society" compiled, at the request of the European Council, by the high level work­
ing party on the information society, chaired by Mr Bangemann. 
Greater privatisation, more effective regulatory methods and the new role of the public 
services: out of concern to achieve greater economic efficiency, most Member States3 have 
embarked on policies on the privatisation of industrial activities, reduction of the costs arising 
for industry from the regulations and modernisation of public services. All measures which aim 
at improving overall economic productivity in the European Union must be encouraged, taking 
account of experience acquired and of national differences. 
D. Generating new jobs 
It will not be possible to substantially increase levelssustain the improvement in of 
employment and consolidate the revival in growth in the Union unless they are based on 
efficient, innovatory industry operating within an effective regulatory framework combined 
with a more labour-intensive development model. Steps must be taken to ensure that the 
European Union remains an attractive site for production and investment, including 
investment from outside the Union.4 
By adopting the White Paper as the frame of reference for the action taken by the European Union 
and its Member States, the European Council backed an approach to industrial development based 
on global competitiveness as a key factor in growth and employment, with the objective of bolster­
ing the European Union's presence on the markets of the future, particularly in telecommunications, 
information, biotechnology, environmental protection, new materials and energy. 
In practice, employment prospects are brightest, especially amongst small businesses, in the fields 
constantly turning to new technologies, particularly if industrial development is backed up by de­
velopment of the appropriate services. The integrated programme for small businesses recently 
proposed by the Commission bears witness to the importance attached to the contribution which 
businesses like these can make to industrial competitiveness. These are also the fields in which the 
public authorities have a specific role to play, not only because the Member States and the Euro­
pean Union are investors and clients but also because the market and, in particular, the potential 
demand depends on their efforts to promote pilot projects and steer the choices made on health 
care, transport and environmental protection infrastructure. As demonstrated by the work on the in­
formation society, a change of direction seems essential for certain common Community policies, 
particularly on: 
research, which must take industry's needs into consideration at an earlier stage, as was the 
case when preparing the fourth framework programme on R&D activities; 
Cf., for example, the UK White Paper on "Competitiveness - Helping business to win", HMSO, May 1994. 
Cf. on this subject the German Government's report on the future of Germany as an industrial site and 
how to maintain it, Ministry of Economic Affairs, publication 338. 
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vocational training and, beyond that, education in new technologies; 
common commercial policy to establish genuinely equitable conditions of competition at inter­
national level. 
Accordingly, this communication starts with a microeconomic evaluation of the potential com­
petitiveness of the European Union's industry in the context of the global economy for these 
growth markets, which are such an important source of jobs.5 
In the light of this diagnosis, Part II of the communication defines the four basic priorities of a 
competitiveness policy for the European Union tailored to the imperatives of technological change: 
1. promote intangible investment; 
2. develop industrial cooperation; 
3. ensure fair competition inside the Community and at international level; 
4. modernise the role of the public authorities. 
Annex 1 contains an updated analysis of the state of European industry compared with the 1990 
communication. This evaluation is based on the latest information available, particularly from the 
"Panorama of EC industry" compiled by the Commission each year, with the collaboration of all the 
trade associations. 
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I. THE INDUSTRIAL COMPETITIVENESS OF THE EUROPEAN UNION 
A good third of the value added in the European Union is generated by industry, and almost 
one out of every three jobs is provided by manufacturing industry. It is necessary that industry 
be efficient and innovatory if Europe is to return to sustained economic growth and to the 
generation of jobs. 
Many new service activities also depend directly on industrial activity. Industrial innovation 
and investment are vital driving forces for progress in other important fields where the public 
authorities play a key role, such as education, health care and environmental protection. 
Consequently, one of the central objectives must be to ensure that Europe remains attractive 
for industry. 
In a properly functioning market economy the drive for industrial competitiveness must come 
primarily from businesses. The public authorities must assume their responsibilities by sup­
porting development of the markets of the future and keeping ahead of the changes rather than 
reacting to them. 
Consequently, steps must be taken to capitalise on the Union's advantages in order to increase 
its presence on growth markets and create the most favourable conditions for industry's tran­
sition to the 21st century. 
A. Making the European Union more competitive in the global economy 
Competitiveness is a complex concept, much debated by economists6. The OECD defines it as 
the capacity of businesses, industries, regions, nations or supranational associations exposed, 
and remaining exposed, to international competition to secure a relatively high return on the 
factors of production and relatively high employment levels on a sustainable basis. More spe­
cifically, in the long term, increased competitiveness will lead to improved global productivity. 
In particular, increased work productivity is essential to improve competitiveness on markets 
open to international competition , to permit a long term improvement in the quality of indi­
vidual life and to create new jobs. Finally, an increased level of productivity will permit better 
use of competitive advantages, which will no longer be limited to the abundance of natural re­
sources in the economy, and world-wide competition. 
Given the multiple factors to be taken into account when assessing competitiveness and the big 
impact of currency fluctuations, any general judgement about competitiveness is of little rele­
vance. 
Over the last ten years, particularly since 1990, the following points must be stressed: 
the apparent productivity of labour in manufacturing industry has risen faster in the USA 
and Japan than in the European Union; 
labour costs in the European Union have risen less rapidly than in the USA and Japan. 
However, the trends vary widely from one Member State to another; 
Cf. on this subject the analyses in the Commission's latest Annual Economic Report. 
15-
European industry has less of a presence on high-technology markets and markets with 
high growth potential than US and Japanese industry. 
Beyond these indicators of an extremely complex situation, it must be added that competitive­
ness depends on far more varied qualitative factors, where the European Union is better placed 
than it appears. 
1. The competitive position of European industry 
The most marked features of the industrial competitiveness trends in the European Union are the 
contrasting situations, not only on the markets but also with regard to the strengths and weaknesses 
of the individual Member States or of the Union as a whole. 
This is due to the fact that several traditional industries and national champions are in decline but 
other industries and operators, often offering products and services with a higher value added con­
tent, are emerging. Industrial change and the mounting competition throughout the world generate a 
sense of insecurity and pessimism which is accentuated by the weak growth and the calling into 
question of established values. 
In recent years the Union's industrial competitiveness has improved on several fronts. 
Exports of goods grew again in 1993, with extra-Community exports accounting for 9% of 
GDP and intra-Community exports 13%. In this connection, with the growing economic inte­
gration within the European Union some of the trade with the rest of the world has been re­
placed by trade between the Member States7. 
From a deficit of 2.7% of GDP in 1980 the European Union's balance of trade improved in the 
early '80s to a surplus of 0.5% in 1986, then deteriorated again in the late '80s to a deficit of 
0.8% in 1992 (see Figure 6 in the Annex) before recovering again at the start of the '90s8. 
The European Union had a trade deficit with the USA in the late '80s9, but improved its posi­
tion appreciably in the early '90s when it cut its trade deficit with the USA by 90%, from ECU 
21 billion in 1991 to ECU 2 billion in 1993. 
At the same time the European Union's trade deficit with Japan shrank by 17% from ECU 30 
billion to ECU 25 billion, while the USA's trade deficit with Japan rose by almost 45% from 
ECU 35.1 billion to ECU 50.7 billion. 
In 1991 the European Union's trade deficit with Japan was equivalent to 85% of the USA's 
deficit but by 1993 it was down to scarcely 49%. 
The research and development effort by the biggest undertakings in the Union has been grow­
ing faster than that of their US and Japanese counterparts, based on the 50 undertakings with 
the highest research investment in each of these three regions; research spending by European 
companies as a proportion of turnover almost doubled between 1984 and 1992 to stand at 
See Table 5 of Annex II 
The OECD forecasts confirm the significant changes in world trade: Europe is expected to move from a 
deficit at the start of the '90s to a surplus in 1994, while the USA's deficit will continue to grow and 
Japan's surplus will rise rapidly. 
Analysis of trade between the Triad reveals that trans-Atlantic and trans-Pacific trade predominates 
(see Figure 4 in the Annex). 
-16 
4.5% in 1992, whereas it increased by just under 40% for Japanese companies which, nonethe­
less, remain in the lead (on 5.8% in 1992) and by less than 30% for US companies (3.7% in 
1992) (Cf. Table 18 in the Annex). 
European companies' average long-term debt ratio (gearing) remains well below their rivals' 
and their rate of return is generally higher. 
Unit labour cost trends in the Union compare favourably with those of these leading rivals: 
between 1980 and 1993 real unit wage costs fell more sharply in the Union (down 9.7%) than 
in the USA (1.2%) and Japan (8.3%). 
However, a series of handicaps remain or have been aggravated: 
the European Union's share of world-wide exports of manufactured goods, although still bigger 
than that of the USA and Japan, has declined;10 
the Union is still less specialised in high technology products and still has less of a presence on 
high-growth markets than either of its two leading rivals; 
since 1986 the Union has had a trade deficit in high technology products; this deficit has been 
giving particular cause for concern on the markets of most direct relevance to the establishment 
of the information society; 
European industry's productivity has been improving at a slower rate than that of US and 
Japanese industry; 
the research and development effort supported by the public authorities in the Union is far 
more scattered than in Japan or the USA. Competition in the R&D field can speed up technical 
progress and innovation in businesses but the public authorities must ensure that the best pos­
sible use is made of the limited resources at their disposal, in particular those which encourage 
cooperation. 
To help it withstand this situation, the European Union has considerable assets. 
2. Knowledge and human resources 
The European Union must be competitive on world markets in terms of quality, design, prod­
uct reliability and deliverability. These factors are more decisive for export success than pro­
duction costs alone. They imply investment in human resources and flexibility internally, ex­
ternally and in management methods and intervention by the public authorities. The process of 
structural change will continue at a rapid rate and jobs could continue to be lost in traditional 
fields, while being created only very slowly in the emerging activities. Consequently, the 
European Union must find ways of generating new jobs while continuing to support training, 
advice and assistance for all who lose their jobs as a result of structural change. 
National prosperity depends, increasingly, on the use of information and knowledge, with the 
aid of the enormous progress made in information and telecommunications technologies. There 
is a close correlation between the development prospects of individual technologies and prod­
ucts (telephones, active disk readers and combinations thereof) of the programs (computer 
software, data bases, audio-visual programmes, etc.) and of the associated services and net­
works. The European Union is in a strong competitive position in several of these fields and 
has every means of retaining or winning a substantial share of the market (for example, the 
GSM market created on the basis of a European standard). 
10 The share of world trade taken by exports from the European Union fell from 29% in 1980 to 25% in 
1986 and 24% in 1992. In 1992 exports from the USA and Japan accounted for 17.3% and 16.6% of 
world trade respectively (see Figure 3 in the Annex). 
-17 
The European Union's greatest asset for boosting its industrial competitiveness is its capacity 
to generate and use knowledge, with the aid of the great potential of its labour force and the 
social consensus laying the foundation for harnessing it. Accordingly, involvement of the two 
sides of industry in managing economic and social change is a key component of the European 
model. Their contribution to modernisation of labour relations is a powerful factor in increas­
ing cohesion and improving performance. 
The impact of the rapidly emerging information society on all aspects of economic and indus­
trial life and society makes human beings' capacity to extend and manage knowledge more im­
portant than ever. The Community's fourth framework programme on research and devel­
opment activities provides for measures to improve training and make researchers more mo­
bile, including those working in industry. 
Infrastructure and environments must be developed: 
to stimulate the spirit of enterprise; 
to raise training standards; 
to manage industrial change; 
to take up new technologies; 
to speed up dissemination of innovations; 
to allow the reorganisation needed to boost industrial efficiency and to increase the value 
added by production in the Community. 
3. Development of trans-European networks and better organisation of production 
The fact that wealth creation depends increasingly on intangibles is making the economy more 
and more fluid and volatile. As a result, the mobility of factors of production and the capacity 
to combine them effectively have become more important than raw material resources in the 
current context of world-wide competition between businesses and nations. The geographical 
thinking on which most policies with a bearing on industrial competitiveness are based must 
gradually make way for thinking in terms of world-wide networks. 
Rapid establishment of extensive integrated networks allowing efficient movement of persons, 
goods, services, information and energy inside and outside the European Union is therefore a 
key factor in industrial competitiveness. 
The pipeline network is a good example of how integration of the major networks can contrib­
ute towards improving competitiveness. Because industry in the European Union does not yet 
have the benefit of a large European pipeline network it operates under less favourable condi­
tions than its rivals in North America, where such a network already exists. Establishment of a 
large European pipeline network providing a safe means of transport while reducing congestion 
on the roads would therefore help to make European industry more competitive. 
Energy costs affect not only industries with large energy consumption but also industry as a 
whole, for example because of the impact of energy prices on transport costs. Only an open 
market on which energy users are free to choose the fuel they wish and the most efficient sup­
pliers can generate competitive pricing. Completion of the internal energy market is therefore 
needed more than ever. 
Better organisational methods, leaving wide scope for the spirit of enterprise, teamwork and 
cooperation, will have an increasingly decisive impact on the prospects for increasing overall 
productivity and value added. To achieve these, efficient use must be made of all the oppor-
- 18-
tunities offered by information and communication technologies and far closer relations must 
be established between producers and users. Undertakings in the private and public sectors 
must constantly rethink their organisational methods and strategies. This has given birth to the 
BPR (business process re-engineering) concept. All administrative systems must be adapted to 
achieve greater efficiency, transparency and coordination. 
By virtue of this fact - and this takes us to the heart of the debate on the information society -
the conditions of access to information, to the networks carrying it and to the services facilitat­
ing use of the data are playing an increasing role in industrial competitiveness. The availability 
and quality of telecommunications infrastructure and services (including high value-added 
services, data bases, etc.) and, above all, cutting the cost thereof and developing new market 
opportunities are now vital components of the Union's future competitiveness.. 
Industry remains central to production processes and must continue to play a fundamental role 
in the European economy. Increasingly, the efficiency of capital investment depends on the as­
sociated intangible investment (in R&D, training, commercial measures, software, etc.). Al­
ready, intangible investment amounts to over half the sum spent on capital investment. This 
trend dictates that investment should be regarded as all expenditure which improves the future 
profit potential of the existing assets. Business strategies and public policies must take this into 
account. 
The Union has the richest, most varied territory in the world, in terms of quality of infrastruc­
ture, way of life, environment and cultural diversity. Greater use can be made of this consider­
able asset by adopting a more concerted approach to planning and land use, taking account of 
the need for interconnection with other economic blocs, particularly where their geographical 
proximity and similar cultures offer added advantages. 
4. Industrial competitiveness and economic and social cohesion 
The regions covered by the cohesion funds currently face numerous challenges resulting from 
the completion of the internal market, the opening of trade linked to GATT and the opening of 
EU economies to Eastern Europe economies. To respond to these challenges it is necessary 
that the objectives of industrial competitiveness be integrated into economic strategies for these 
regions and, conversely, that cohesion policy be taken fully into account. 
A potential economic loss for the Union is caused by the high degree of centralisation of indus­
trial activities in certain areas. This centralising tendency is not preordained: future competi­
tiveness must rely less upon economies of scale and large series and more upon the capacity to 
assimilate information and to ensure its appropriate dissemination, thereby offering the possi­
bility of decentralised industrial growth. 
In practice, interaction between industrial competitiveness policy and cohesion objectives sig­
nifies that industrial competitiveness policy may initially provide an analysis of the fundamen­
tal axis of future competitiveness such as proposed in the present document. This may lead 
certain regions to fundamentally re-examine their current actions, such as is already happening, 
for example, in the discussions concerning the next generation of community support frame­
works. 
For their part, the structural funds may contribute to the creation of new jobs not only by the 
development of valuable jobs in less favoured regions but also by the promotion of growth 
markets in this segment of the Union. 
19 
The genuine differences between the situation in the less developed and the other regions never­
theless serve as a reminder that globalization could militate against cohesion.11 The European 
Union must therefore ensure that industrial competitiveness and economic and social cohesion 
each add strength to the oilier. Greater economic and social cohesion can generate externalities 
which make the private sector more efficient by improving infrastructure, particularly health 
care, education and research infrastructure, and optimising the general level of investment. 
There is an increasingly direct correlation between economic and social cohesion and industrial 
and economic performance. The Union must make full use of this correlation. 
Future competitiveness will depend far more on the capacity to combine information and dis­
seminate it appropriately. This could create potential for decentralised industrial growth pro­
vided appropriate support is given, particularly at regional level. 
5. Scientific and technological experience 
The European Union must place its science and technology base at the service of industrial 
competitiveness and the needs of the market more effectively. The fourth framework pro­
gramme on research and development activities drafted after detailed consultations with indus­
try will contribute towards this objective. Greater attention must be paid to dissemination, 
transfer and industrial application of research results and to bring up to date the traditional 
distinction between basic research, pre competitive research and applied research which, in the 
past, has not always allowed European industry to benefit from all the research efforts made. 
In this regard account must also be taken of the strategies of our principal tiading partners 
while, at the same time, respecting our international obligations (eg. the GATT code on aids). 
As recommended in the White Paper, all the authorities responsible for supporting research 
activities (the Member States and industry) must step up their overall research effort. The 
Community's RTD activities will help to define, with the circles concerned, a forward-looking 
approach to technologies of interest to Europe as a whole. They are separate from but com­
plement the Eureka programme. All in all, the time has come for the European Union to give 
greater priority to specific applications. This is one of the principal lines followed by the 
Community's fourth framework programme on R&D activities, which, alongside the funda­
mental objective of developing generic technologies, also aims at closer and closer involvement 
by users. The research and technological development chapter of the Treaty on European Un­
ion sets the Community the primary objective of strengthening the scientific and technological 
bases of Community industry and encouraging it to become more competitive at international 
level. Practical measures must be taken to attain this objective, including encouragement for 
the establishment of research and development consortia of businesses from different Member 
States. 
Greater innovation can be achieved if transparent information and stronger competition allow 
wider dissemination of the progress made amongst consumers and operators. Further innova­
tion can also be achieved, closer to the market, by providing better protection for intellectual 
property rights in all fields, both in the European Union and throughout the world, and pursu­
ing an active policy to improve the collection, dissemination and competitive use of information 
of all kinds. 
In the specific field of the defence industries, as the common foreign and security policies are 
developed the European Union must envisage closer coordination of its research and standardi-
/; Cf. on this subject the fifth report on the socio-economic situation and trends in the Community. 
20 
sation work, develop common programmes and, above all, preserve and harness its science and 
technology capacity (particularly its teams of researchers and engineers). 
B. Targeting growth markets 
Efficient companies can be found in every branch of industry and on every market The Euro­
pean Union's overall success against international competition depends on companies' capac­
ity to build up strong positions on growth markets, whatever the product and wherever it is 
sold, from the Union, which must remain a leading production site. Awareness of current 
trends is particularly important to enable operators to adapt to the changes on the markets. 
1. The potential of the European Union's industry on growth markets 
(a) Strengths and weaknesses of the European Union on global markets 
A series of imbalances lie between the European Union's industrial capacity and its relative posi­
tion on certain high-growth markets: 
in geographical terms, i.e. growing presence on neighbouring markets and on the markets of 
the countries with which the European Union traditionally co-operates but insufficient presence 
on Asian markets, creating a risk of imbalances; 
in terms of products, with the Community's position often strongest on stable or slow-growing 
markets but not strong enough in fields with extremely fast-growing demand. 
Diagnosis of this situation points to two conclusions: 
greater efforts must be made to penetrate these markets; and 
in order to achieve this, the European Union must support European industry to secure or in­
crease the opening-up of our trading partners' markets. The measures taken to implement the 
results of the Uruguay Round, determined action to remove obstacles to trade and the activities 
of the World Trade Organisation to be set up must enforce the rules on fair competition and 
fair trade to guarantee everyone equal access to world markets, while observing the disciplines 
imposed on international trade. 
(b) The growth areas: a few examples 
The public authorities do not know which products tomorrow's market will demand. How­
ever, they must adapt to market trends and ensure that the markets are driven by competition. The 
important role played by the public authorities as purchasers and investors can make a significant 
contribution to dynamic growth of such markets: environmental protection, health care and com­
munications are all examples.12 
12 See the Annex for figures on this point. 
21 
13 
14 Markets in knowledge and culture 
The emergence of multimedia activities harnessing the opportunities opened up by the digiti­
sation of information in all its forms (text, image and sound) is creating new markets generat­
ing considerable numbers of jobs. The European Union's industry, particularly telecommunica­
tions, has proved its capacity to design and produce the tools needed for the information soci­
ety of the future. Increasingly, the development of services generating and using such informa­
tion is becoming the crucial question. This goes hand in hand with the development of an in­
dustry capable of generating this information whatever its form, whether audio-visual, scien­
tific, economic or artistic.13 This was the central issue discussed at the recent European confer­
ence on the audio-visual media held from 30 June to 2 July 1994. 
Markets in health care and biotechnologies 
The growth prospects in the field of health care and, more generally, industrial application of 
biotechnologies, are extremely promising. The European Union has all the capacity needed to 
remove the remaining obstacles to the development of these markets. These obstacles have 
been to blame for leaks of industrial property or technologies to the Union's partners in certain 
fields. This problem is examined in detail in the communication on the outlines of an industrial 
policy for the pharmaceutical sector in the European Union.14 
Environmental protection markets 
The growth potential of the environmental protection markets is widely recognised, although at 
the moment the size of the market far from reflects the real needs. This market can be attrib­
uted not only to the new goods and services supplied to abate or control pollution but also to 
all the spending to improve production processes and products and increase energy efficiency, 
combined with the growing markets in "green" products and technologies. 
Also, increasingly, the raising of environmental protection standards on certain markets outside 
the Union is turning use of clean technologies into a precondition for success on international 
markets. 
Top-of-the-range products 
Utilisation of know-how and of the brand image of quality top-of-the-range products with a 
high value added provides a means of harnessing the diversity of local production, preserving 
highly skilled trades and penetrating the most impregnable markets. It is not only a question of 
European industry's performance in luxury products, but also in its most traditional industries 
which must develop appropriate advanced technologies or adapt to technical progress and in 
very high-technology industries such as the space and nuclear industries. 
In order to maintain the acquired social rights and overcome the differences in wage costs, the 
European Union's industries must build on their strengths in manufacturing, the application of 
production technologies and the development of global solutions allowing top quality. Produc­
er the Green Paper on the audio-visual policy of the European Union (COM(94)96). 
COM(93)718. 
22-
tion structures must change wherever necessary in order to attain the critical mass required for 
competitiveness. 
Effective legislation to combat counterfeiting - such as the Regulation agreed by the Council 
on 16 June 1994 - must be developed to ensure fair trade in these products. 
This can be backed up by cooperation with certain non-Union countries with know-how limited 
mainly to the design and marketing of less complex products, thereby strengthening the Euro­
pean Union's overall position on world markets. 
To reap full benefit from this cooperation, steps must be taken to strengthen all possible links 
with the developing countries, whether industrial, economic, commercial, investment or in the 
form of transfers of know-how, in order to contribute to full integration of these countries in 
the world economy. In this connection, the ECIP (European Community Investment Partners) 
scheme and the Generalised System of Preferences offer great opportunities. The Commission 
recently proposed a new Generalised System of Preferences for the next ten years incorporat­
ing a number of significant innovations to encourage, for example, more sustainable forms of 
development and strengthen the links between the economies of the Union and of the newly in­
dustrialised countries. 
2. Harnessing the European Union's industrial tradition 
(a) Conditions for competitiveness on established markets 
On the established markets on which its industries are already in a strong position, the Euro­
pean Union must cope with the general trend towards products with higher value added and 
with the changes in production methods which face all industry, but assume an added dimen­
sion in view of the importance of the industries concerned to the Community's economy. These 
markets could be revitalised by creating a favourable environment for the efforts made by 
businesses on quality, creativity and productivity and on modernisation of their production and 
marketing structures. 
In the basic industries, particularly the steel, aluminium and chemical industries, which face 
specific problems (world price trends, environmental constraints, disequilibrium between sup­
ply and demand, industrial consequences of the transition of the countries of Central and East­
ern Europe to a market economy)^ raw materials, energy, transport and capital investment re­
main the biggest cost items. All the action being taken to cut costs of these types in the Euro­
pean Union must therefore be encouraged. New opportunities for cooperation could be opened 
up by innovatory plurilateral measures such as those agreed by the European Union with 
Russia, the US, Canada, Australia and Norway which has culminated in a Memorandum of 
Understanding linking Russian reductions in productions (together with and estimate of West­
ern reduction of aluminium production) to future industrial cooperation). This type of ap­
proach could no doubt be used for other basic products. 
Certain natural resources (non-metallic ores, rocks, etc.) and secondary resources (waste) are 
in abundant supply in the European Union and can be tapped competitively, hence the need to 
create an environment conducive to rational, sustainable use of such resources and to avoid 
regulations creating unnecessary obstacles. 
The capital goods industries with their important specific role will have to contribute to rapid 
establishment of trans-European infrastructure networks. 
23-
The European Union must also take account of the impact of the world-wide redistribution of 
production in response partly to the growing strength of certain rival countries, whether or not 
newcomers to these markets, and partly to their comparative advantages, particularly on wage, 
raw material and energy costs. In some cases, in order to achieve the structural changes 
needed, a concerted capacity-reduction policy could prove preferable to an approach based 
solely on natural market forces. This is particularly the case where there are barriers to leaving 
the market, in the form of heavy costs which cannot be recovered. Steps must therefore be 
taken to make it easier to leave. The Commission set out the general lines of action which it 
recommends on crisis cartels in its Twenty-third Report on Competition Policy. 
(b) Harnessing the traditional industrial base 
Preservation of the diversity of the Union's traditional industrial fabric plays an important role 
for employment, balanced town and country planning, and the web of small businesses and 
subcontractors. It must also be stressed that rural development is becoming increasingly 
closely linked to the development of industrial activity and of the ancillary services, particu­
larly of small businesses. 
Transitions will therefore have to be organised: 
to ensure that the industries concerned make the necessary adjustments as fast as possible; 
to put irito action the Community policies which can help to speed up these adjustments; 
to avoid perpetuation of situations which prevent competition and damage the European Un­
ion's overall industrial efficiency; 
to provide industries and, in particular, small businesses with the support of efficient infra­
structure. 
-24 
II. PRIORITIES FOR ACTION 
The basic premise underlying the European Union's industrial policy is to follow a dynamic 
horizontal approach smoothing the way for implementation of a consistent package of policies 
to help make industry more competitive. 
In keeping with Article 130 of the Treaty which gives the Commission the possibility to take 
any useful initiative, this communication is intended to identify areas in which it would be in 
European industry's interest to step up the action by the Community. The objective is to show 
how the industrial competitiveness policy can be implemented effectively, by pinpointing a lim­
ited number of objectives and activities in order, in particular, to strengthen European indus­
try's presence on growth markets generating jobs. 
In essence, these are: 
promote intangible investment; 
develop industrial cooperation; 
ensure fair competition; 
modernise the role of the public authorities. 
A. Promote intangible investment 
Effective exploitation by the European Union of the new factors determining industrial com­
petitiveness calls for promotion of knowledge, human resources and the quality of products 
and services, encouragement for innovation to improve the response to market trends and ad­
justment of organisations and structures. 
It calls for all government policies to take fuller account of intangibles and of the needs of the 
market 
1. Objectives 
Promotion of human resources, quality and innovation calls for efforts by both the public and pri­
vate sectors, particularly at local level. But the European Union must facilitate coordination of 
these efforts and: 
bring the vocational training available closer into line with demand, in order to respond to in­
dustry's specific needs; 
promote closer involvement by the two sides of industry at both national and European Union 
level in seeking new ways of organising work; 
facilitate the emergence, within the European Union, of: 
new markets, such as the markets in knowledge and culture, environmental protection, 
health care and biotechnologies; 
new forms of training, such as distance learning, and of organisation, such as dynamic 
management of economic data; and 
25 
"total quality" production; 
capitalise on the European Union's assets for application of the new concept of "economic in­
telligence", which is one of the main features of the information society. The aim must be to 
ensure efficient exploitation, from the retrieval stage to distribution to businessmen, of all the 
information which they need in order to devise and implement consistent strategies and organ­
isational structures to improve their competitiveness; 
increase industry's capacity, with its partners (users, public authorities, etc.), to keep ahead of 
changes in technologies and on the markets (demand, regulatory and fiscal framework, etc.) 
and to employ appropriate strategies, particularly in the research and technology fields 
(creation of the ETAM (European Technology Assessment Mechanism) and of the Seville In­
stitute in the 4th Framework Programme); 
ensure expansion and take-up of the European Union's research and development efforts by 
means of a cross-disciplinary, multisectoral approach taking into account the needs of the mar­
ket in dialogue with industry; 
promote sustainable industrial development by harnessing the competitive advantages stem­
ming from improved environmental protection. 
2. Action 
Promote intangible investment, particularly training and learning which must become the pri­
ority within the general policy to support investment (for example, by improving tax treatment 
for such investment). 
A range of measures must be taken to overcome the fact that the existing education and train­
ing systems are not up to the challenge of long-term competitiveness. Particular attention will 
be paid to continuing training, to improving qualifications and to raising standards in basic 
skills and new technologies. The Commission intends to proceed rapidly, in keeping with the 
subsidiarity principle, with a review of the prospects of taking fuller account of intangible as­
sets, particularly in the context of taxation, and of introducing incentives in favour of business 
and private investors in continuing training. 
Step up the research effort: 
• by companies, the Member States and the European Union: 
• by taking filler account of the needs of the market, based on the Community's fourth 
framework programme on research and development activities, and ensuring closer in­
volvement of users by means of appropriate forms of interaction: Industrial Advisory 
Panels, as already the case with the hew RTD programme on information technologies, on 
industrial development centres and on the networks of laboratories without walls; 
• by modernising the approaches and practices to produce even more effective industrial 
spin-offs, modelled on the best international examples and schemes, while taking account 
of the appreciable differences in social structures, culture and traditions; 
• by facilitating the establishment of consortia of European companies in order to increase 
the synergies in the R&D sector. 
Promote quality, fitting in with the European Union's approach to standardisation, taking ac­
count of the many factors influencing it (total quality management) since this is necessary to 
harness the know-how of businesses in the European Union, while avoiding fragmentation of 
the markets. The Commission will submit a communication on this specific subject to the 
Council. 
-26 
Promote fuller integration of vocational training in the European Union's policies aiming at 
improving industrial competitiveness, particularly in the ADAPT Community initiative, with­
out calling into question decentralisation and the primacy of national policies in this field. 
Create a legal environment conducive to research, by developing an integrated approach to 
intellectual and industrial property, particularly in the field of patents - including patents for 
inventions stemming from biotechnology - trade marks, designs and models, designations of 
origin, etc. 
Step up and co-ordinate the research into clean technologies and develop economic incen­
tives to ensure earlier, wider use thereof in the European Union. In the general context of envi­
ronmental protection, a global approach along the lines followed to reduce C02 emissions 
taking account of the conditions imposed by world-wide competition would be preferable to a 
plethora of different product-by-product taxes. 
Introduce new methods of organising work and improve the fiscal environment, particularly 
for small businesses, by means of measures such as those proposed by the Commission on 
taxation of small businesses, transfers of businesses and improvement of the fiscal environment 
for small businesses. 
Improve the dialogue between the two sides of industry, taking account of national practices 
and experience. 
Promote rational use of data managed and generated by information systems in order to in­
crease the availability and quality of economic data. 
B. Develop industrial cooperation 
Since 1990 the trend towards industrial cooperation in the European Union has gained pace 
despite the slowdown in economic activity, as illustrated by the large number of strategic alli­
ances and mergers of companies. 
Industrial cooperation schemes are, above all, the responsibility of the businesses and busi­
nessmen themselves. However, it is necessary for the public authorities to develop a dynamic 
approach in this area in order to establish a framework conducive to taking account of mutual 
interest and to develop forums bringing together all concerned ("round tables "). 
The Commission's primary objective in this field is to promote cooperation between operators 
in the Community, by encouraging private initiatives of benefit to Europe as a whole wherever 
justified, particularly amongst small businesses. 
As regards the Eastern European countries in particular, a consistent approach is needed to 
globalization, to integration of these countries into the European area and to bolstering Euro­
pean industry's presence on expanding markets, while at the same time abolishing the restric­
tions on imports from these countries and abiding by the rules in force in the Union. 
1. Objectives 
Although the European Union is not responsible for setting up industrial cooperation schemes, it 
must nevertheless endeavour to promote such schemes and: 
help to bolster the presence of the European Union's industry on high-growth markets, on the 
basis of harnessing mutual interests; 
27-
take fuller account of each side's industrial situation in dealings with the European Union's 
partners and, particularly in the case of the countries of Central and Eastern Europe, of the 
objective of bringing their economies closer to the European Union with a view to accession, 
integration in the world economy and strengthening economic ties between them; 
encourage private schemes involving operators from several Member States, particularly where 
the operators face R&D costs beyond their industrial capacity; 
make businesses more competitive by facilitating transfers of experience and know-how be­
tween businesses, particularly small businesses. 
2. Action 
(a) General measures 
Identify and remove the legal and fiscal obstacles to industrial cooperation (for example on 
the protection of intellectual property rights). 
Develop industrial cooperation tools (including legal instruments). The European Union has 
no appropriate legal instruments to support industrial cooperation. EEIGs are unsuitable for 
industrial cooperation schemes, while the proposal concerning the European Company Statute 
is only for big companies and has been blocked for political reasons. Ways in which the new 
statute being discussed for European associations could facilitate industrial cooperation must 
be examined or, where appropriate, a new instrument must be devised to enable undertakings 
or local authorities to conclude cross-frontier industrial cooperation agreements, particularly 
on networks. This would make it possible, for example, to avoid resorting to international 
treaties before going ahead with projects such as the Channel Tunnel. 
Continue to support the development of industrial initiatives targeted on growth markets, 
particularly schemes involving small businesses, and facilitate appropriate use of the 
Structural Funds, for example to assist schemes to set up venture capital undertakings. This 
approach has proved particularly beneficial for implementing Community's PEDIP pro­
gramme. 
Organise industrial round tables as have already been set up with Japan and the Baltic coun­
tries and for specific industries (the Maritime Industries Forum and the round tables with the 
countries of Central and Eastern Europe on the agri-food and consumer electronics industries). 
The objective is to enable industrialists from inside and outside Europe to identify their mutual 
interests from both the multisectoral and geographical angles and to encourage the develop­
ment of private initiatives in the form of joint projects. 
Recourse to the Working Party of Heads of Industrial Policy Departments to make it easier to 
identify and implement industrial cooperation schemes and for companies to find partners and 
information on markets in third countries. 
Continue to reinforce a favourable climate for investment and industrial cooperation by the de­
velopment of a coherent legal approach towards a common and efficient support of Euro­
pean investment in host countries. Such an approach may be developed along the lines of the 
EU position on the principles of protecting investments in ACP countries within the context of 
the Lomé Convention, which was set up on the basis of bilateral agreements on investment 
protection agreed by the Member States and these countries. 
(b) In the case of the countries of Central and Eastern Europe 
The Commission will soon be preparing a communication on the industrial competitiveness of the 
countries of Central and Eastern Europe with a view to their integration in the European Union. 
The following action could be taken already: 
-28-
15 Promote financial engineering, including considering the possibility of improving existing in­
struments and seeking solutions which may partially guarantee investment, in order to 
stimulate specific projects for which there is demand in the partner countries (in Central and 
Eastern Europe) and which businesses in the European Union have the capacity to meet 
(energy saving, water purification, telecommunications, transport schemes, etc.). 
Such an initiative could be based on an analysis of the Member States' guarantee schemes to 
ensure that the action taken by the Community genuinely provides added value. 
Furthermore, Phare's emphasis should continue to shift towards support for investment and the 
private sector and the provision of assistance directly to end-users in beneficiary countries. 
In addition, the Commission may envisage proposing financial medium term assistance to 
complement PHARE subventions and loans by the European Bank for Reconstruction and De­
velopment and the European Investment Bank intended for structural adjustment. 
Continuation of the support for standardisation and certification in Central and Eastern 
Europe already being provided under the PHARE programme and provided for in the Europe 
Agreements with a view to harmonisation with the European Union's industrial standards and 
to application of certification criteria and procedures accepted at international and European 
level: in particular, adoption and observance of European and international standards are es­
sential preconditions for the success of industrial cooperation schemes which will smooth the 
way for subsequent integration of these economies in the European Union's single market. 
Development of expertise in international financial engineering and offset15 activities to ex­
plore the technical prospects for developing cooperation between European industry and the 
countries of Central and Eastern Europe, for raising the financial resources needed to acquire 
the durables, technologies and know-how necessary to restructure their industrial base and es­
tablish modern market economies. Promising applications could be found in the transport, tele­
communications and energy sectors. 
Support for action or initiatives based on the European Energy Charter in order to enable the 
countries of Central and Eastern Europe and the former Soviet Union to harness their potential 
energy resources and contribute towards improving the European Union's security of supply 
and promoting investment by companies from the Union. 
The introduction of guarantees covering part of investments and provision of technical assistance, 
primarily in the form of advice for undertakings in the Union, would imply Community funding 
which would have to be considered separately from the aid for economic reform provided by the 
Commission. 
(c) Latin American and Mediterranean countries 
Cooperation with the countries with which the Union has traditional ties could lead to introduction 
of a more integrated approach to industrial modernisation. This will become increasingly important 
as these countries' growth rates increase, fuelled by their policies on stabilisation of the economy, 
opening up of their markets, regional integration and privatisation. 
The objective of developing this expertise is to supply information on the extremely sophisticated 
techniques necessary in order to mount industrial cooperation operations. 
One such technique is "offset", a form of compensation which places an obligation on foreign suppliers to 
invest in the country which purchases the equipment they sell. In offset arrangements, the seller of 
complex, costly equipment undertakes to grant the purchaser a series of industrial and commercial 
benefits related directly or indirectly to the sale. 
29 
The European Union has always been one of the leading partners and investors in most of these 
countries. Bilateral and regional cooperation agreements, programmes, instruments and institutions 
to promote cooperation already exist and must be stepped up as regional economic integration ad­
vances. 
closer technological cooperation: this will take the form of projects, notably in high-technol­
ogy fields where it is opening up industrial opportunities already; 
- participation in the Community's fourth framework programme on R&D activities and in the 
developments connected with the information society: such participation opens up numerous 
opportunities to strengthen scientific, technological and industrial ties with the European Union 
in both sides' mutual interest; 
establishment of networks of businesses from the European Union and non-member coun­
tries: also, active promotion of the instruments already at the Commission's disposal, such as 
the European Community Investment Partners (ECIP) scheme, combined with encouragement 
for European Investment Bank operations in these countries, would go a long way towards im­
proving the situation. 
(d) Asian countries 
Historically, the Commission has conducted detailed, structured industrial talks with Japan and 
these talks on industrial cooperation policy have indubitably helped to relieve the trade problems 
and have given birth to particularly successful industrial cooperation schemes in both sides' inter­
est. 
Based on this experience, the following action is proposed to improve cooperation with the Asian 
countries: 
Develop cooperation programmes with countries with which mutual interests can be identi­
fied, following the example of the pilot programme between the European Union and Japan on 
parts and components for consumer electronics and of the cooperation project on automobile 
components or on components for computers and office equipment. 
Develop scientific and technological cooperation activities with a high industrial content to 
which industrial cooperation schemes can be added, for example the pilot programme on auto­
mated production set up between the European Union and China or the project on training en­
gineering, also with China. 
Develop training and schemes to promote the transfer and dissemination of technologies and 
know-how acquired in certain third countries (as in the case of various programmes with Ja­
pan). 
C. Ensure fair competition 
One of the objectives of the Treaty on European Union is to open the markets to free competi­
tion. The Union was the first to adopt a policy designed to correct the impact of distortion of 
competition on trade. The Union has a fundamental interest in ensuring that all its trading 
partners also effectively and systematically apply conditions allowing fair competition. Tight-
ening-up of the rules on competition within the Union must be accompanied by fair conditions 
of competition at international leveL 
-30-
The European Union must implement an industrial approach making it possible to reap the 
full benefits of the GATT agreements and to make rapid progress on the questions raised by 
the globalization of the markets, which led to the decision to set up a World Trade Organisa­
tion. 
One particularly important point for the European Union's industrial competitiveness is that 
the opening-up of international trade should be accompanied by development of competition 
on the internal market, with each fuelling the other. Fair competition and fair trade are the 
corollary of free trade. 
1. Objectives 
The current situation as regards the competition on and openness of the markets and application of 
common rules and disciplines remains far from perfect, despite the efforts made by the States and 
international organisations. 
External measures 
The European Union must define the terms of a consistent approach striking a balance between the 
requirements for competitiveness, market competition, the necessary degree of protection for the 
environment and sustainable economic development. 
One consequence of the internationalisation of industry is that companies now have production 
activities in many third countries, creating, in the process, new, complex situations. For ex­
ample, in certain anti-dumping cases the Community's industrial interests can no longer be ap­
proached in purely geographical terms. 
International competition is assuming an increasingly regional dimension: new Member States 
will soon be joining the Union, the world's leading economic bloc, which has also concluded 
economic agreements with the countries of Eastern Europe and Russia. Elsewhere, the USA, 
Canada and Mexico have formed their own economic community (NAFTA) and free trade as­
sociations are being developed in other parts of the world (South-East Asia and South Amer­
ica). 
Account must be taken of the increasing number of strategic alliances in order to avoid the 
build-up of dominant positions world-wide. Parallel measures must be taken to encourage the 
development of alliances of industrial and technological interest while at the same time allow­
ing stronger competition on world markets. A balance, must be struck between these two objec­
tives. 
European companies' export and transplant potential is far from fully exploited because of the 
difficulties created by the continued closure of some markets. Identification of these precise 
obstacles to growth and specific action to remove them could make a significant contribution to 
improving the outlets for the European Union's industries for the products and markets con­
cerned. 
One of the European Union's major concerns must be to avoid recourse to discriminatory bilat­
eral agreements, such as the initial phase of the agreement between the USA and Japan on 
semi-conductors. Markets must be opened up without discrimination. In this connection, it 
must be stressed that failure to apply the rules on competition rigorously would allow indus­
tries in third countries to adopt practices which would stop competition and block or curb im­
ports into their countries. 
31-
At the moment a growing number of countries are industrialising and becoming capable of 
producing an ever wider range of manufactured goods. Many of these countries have liberal­
ised their economies, often in an extremely difficult climate. These countries depend on easier 
access to the markets in the industrialised world for their future prosperity. In return, they offer 
attractive export opportunities for European industry. To ensure equal access to the market 
and growth and job prospects, it is essential that the rules of the multilateral trading system 
should be accepted and observed and that the decisions of the new disputes settlement mecha­
nism expeditiously implemented by all contracting parties. It will therefore be necessary for 
the new World Trade Organisation to deal with these issues in the appropriate way from the 
start and for the procedures for implementing the regulations to offer the flexibility, transpar­
ency and simplicity required to create a climate in which European businesses can flourish. 
Care must be taken to ensure that this situation does not deny European industry access to 
growth markets and give rise to unfair competition which puts European industry in difficulty 
on many markets on which it is well established, and even on the Community market. 
The heavy protection of the markets of a limited number of industrialising countries with low 
social conditions puts the exporting industries at an advantage but creates distortion of com­
petition which becomes more and more serious as skill levels improve. 
It is therefore desirable that, beyond the results of the Uruguay Round, the industrialising 
countries should continue to open up their markets for all, by taking action on customs duties 
and non-tariff measures, and that they apply the rules and disciplines accepted by all their 
partners and agree to combat practices which restrict trade. 
Particular attention should also be accorded to the development of mutual recognition agree­
ments with our principal trading partners which will significantly contribute to trade liberali­
sation. 
These circumstances clearly demonstrate that the World Trade Organisation will provide a forum 
for ensuring fair international trade on a stable multilateral basis defined by the agreements stem­
ming from the Uruguay Round. 
Consequently, the objectives of the action taken by the European Union must be: 
to promote more open trade, while encouraging social progress. The Union will have to 
identify means of contributing to economic and industrial development in the countries which 
subscribe to this objective. It should play an active part in the discussions on social issues 
within the WTO, in collaboration with the International Labour Office, without impinging on 
the comparative advantages enjoyed by the developing countries. However, the concern for 
greater social progress must not turn into a pretext for obstructing these countries' right to eco­
nomic development. In any scenario, in order to ensure effective action in this area, steps must 
be taken to encourage ratification of the ILO conventions and to step up the resources for 
monitoring them; 
to raise, at multilateral level, within both the OECD and the WTO, the question of the intro­
duction of rules to reduce distortion of competition caused by businesses themselves and to 
provide our companies with effective access to markets not yet governed by provisions of this 
type; 
within the committee on trade and the environment, to strive for the establishment and effec­
tive application of environmental protection criteria which safeguard the fundamental prin­
ciples of the GATT, particularly non-discrimination; 
based on the fact that over the last ten years international trade has grown faster inside regional 
trade areas than between them, to endeavour to harness the potential of the geographical 
area with which it has close ties for historical and cultural reasons; 
-32-
• by promoting the international specialisation between the Union, the countries of Central 
and Eastern Europe, Russia and other CIS states and also the Mediterranean countries; 
• by discussing strategy with regard to the specific needs of these countries and on adapta­
tion of industrial production to satisfy them, and not just major export needs; 
• by promoting trade within this vast area, not only between the Union and each of the indi­
vidual countries but also by encouraging these countries to open their markets up to each 
other in order to attain significant economies of scale for local production; 
• by following the example set by the NAFTA agreement between the USA, Mexico and 
Canada and seeking, together with the countries concerned, strict common rules of origin 
to ensure closer economic cooperation and integration within the area plus clauses to avoid 
social and environmental dumping which would inevitably create protectionist tensions 
detrimental to the objective pursued. 
Internal measures 
The procedures for establishment of the European Union's internal market have been completed. 
Now the priority is to make it operate efficiently. In particular, this will imply adequate implemen­
tation of the measures to complete the internal market in every Member State, effective opening-up 
of public contracts, further mutual recognition of standards, more transparent rules for the internal 
market and simplification of VAT, particularly the switch to the definitive taxation system in 1997, 
when the taxes will be collected at the place of purchase, i.e. in the selling country. 
Clear, rigorous application of the rules on competition contained in the Treaty or adopted to 
take account of the new international situation (the Regulation on mergers) stimulates activity 
and reduces inflationary pressures. It makes it possible to adapt industrial structures to the new 
competitive environment and, in particular, to the technological revolution and to the new alli­
ances being formed. 
The European Union is an economic bloc with an extremely elaborate, highly structured com­
petition policy. Completion of its internal market makes this policy even more important for 
encouraging improvements in industrial competitiveness. In practice, since the removal of the 
internal frontiers the risks of dominant positions and the distortions caused by State aid - which 
remain too great - are growing appreciably. 
A stronger competition policy is not an end in itself. It is implemented with an eye to the ob­
jectives of the other Community policies, as steadily demonstrated during implementation of 
the Regulation on mergers, and helps to make them more effective. The disciplines imposed by 
the European Union on competition policy set an example for non-member countries but can be 
made more effective and more transparent. 
The system for monitoring aid is based on a body of rules which have been built up in the 
course of time and have gradually become more complex. In particular, this system includes 
sectoral codes introduced originally for economic or serious structural reasons. Sometimes it is 
based on heterogeneous criteria, such as "overcapacity", for which the definition and imple­
menting provisions have gradually been refined to take fuller account of the features of the 
specific market in question such as progress in production technologies and the degree of 
globalization. Moreover, in the words of the White Paper, some aid criteria encourage "firms 
to increase the capital intensity of production and to boost their physical as opposed to their 
non-physical investment in order to improve productive efficiency". 
The Commission intends to make the system for monitoring State aid even more rigorous, ef­
ficient arid neutral. In order to reflect the orientations contained in the White Paper, it will 
shortly look at possible changes to the mechanism for controlling state aids. At the same time 
-33 
another objective will be to simplify and speed up the procedures for dossiers of minor impor­
tance. 
The policy for monitoring State aid can still be made more compatible with the Community's 
objective of increasing economic and social cohesion. For one thing, the relatively large 
amounts of State aid in the more prosperous regions remain an obstacle to economic and social 
cohesion. 
Finally, a similar effort must be made to make the Community's competition policy with regard 
to State aid and mergers between companies more compatible with the action taken by the 
Union under other policies implementing the Treaty, for example on research and transport. 
2. Action 
External markets 
Continue to seek resolution of issues which were not able to be resolved by the conclusion of 
the Uruguay Round (aeronautics, steel, audio-visual, financial services, etc.) 
effectively combat fraud, in particular that which concerns product origin (for example, high 
technology products and textiles) by applying modern detection methods (notably that of elec­
tronic detection). 
Develop international rules on competition and mechanisms to ensure effective application 
thereof, which take account of the consequences of the trend towards concentration and interp­
énétration of industries world-wide and open up markets still closed by practices which curb 
competition. 
Take account of the European Union's industrial interests both as exporter and as importer in 
developing preferential relations with its trading partners. 
Establish an Industrial Assessment Mechanism along the lines of the Trade Assessment 
Mechanism (TAM) based on the conclusions of the White Paper and on the Commission's ex­
isting resources in order to determine, with the cooperation of the non-member countries con­
cerned, the nature and causes of the European Union's inadequate industrial performance on 
markets on which the European Union's industry is potentially strongly competitive and draw­
ing results therefrom in terms of priorities. 
Continue to improve the structure of the common customs tariff m a manner which better re­
flects the industrial interests of producers and users. 
Establish a database (inventory), in collaboration with European industry, on the obstacles 
standing in the way of European companies, market by market. 
Improve with the intention of making them more effective and operational commercial policy 
instruments, taking account of the changes in production structures and trade trends, particu­
larly of the consequences of the increasing internationalisation of production. 
Consider ways in which commercial policy and defence instruments may contribute to the 
development of services associated with the growing move away from a purely produc­
tion-based economy and to the smooth operation of markets. 
Improve coordination between the measures taken to promote exports and investment and 
other policies. 
Internal market 
Continue to reduce overall public aid, taking account of regional imbalances, particularly by 
making such aid more transparent, clarifying and simplifying the rules, which will entail re­
formulating some texts, and allowing easier intervention by third parties competing. 
34 
Look at, shortly, possible changes to the mechanism for controlling state aids 
Re-examine the aid authorisation criteria in order to redress the current bias towards physical 
investment and to simplify the mechanisms for monitoring cases of minor importance. 
Continue the efforts to make the structural policies more consistent with the policies for 
monitoring State aid. 
Improve coherence between the rules applicable to state aids and the arrangements for 
Community financing under non-structural policies. 
Strengthen the internal market, inter aha by supplying products and services on a competitive 
basis to undertakings which, as industrial users, must have the best quality at the lowest cost if 
they are to withstand international competition, particularly in the gas, electricity and telecom­
munications sectors. 
D. Modernise the role of the public authorities 
Modernisation of the Community and national authorities' organisational structures and sup­
port procedures just as fast as those applied by businesses will avoid adding to taxes and social 
security contributions. This is essential in order to improve industrial competitiveness. Tradi­
tional administrative and managerial practices often excessively cumbersome and slow no 
longer correspond to current economic developments. Public authorities must rapidly adapt to 
this new reality. 
The public authorities must also play their role effectively both in order to create an attractive 
environment for industrial activity in the European Union and to promote the development of 
areas for which they bear direct responsibility as a customer or investor, such as health care, 
education and communications. 
1. Objectives 
The European Union has played a decisive role in the establishment of a single internal market, 
which has removed a host of unnecessary inspections and forms created by the bureaucracy of the 
past. The existence of this single market is a great asset. Completion of the single European market 
without frontiers presents businesses with an opportunity to benefit from economies of scale, to cut 
their administrative and financial costs, to gain easier access to more competitive markets and to 
co-operate more closely with other firms. This integrated market must be harnessed dynamically 
and further improvements made, for example on indirect taxation, standardisation and the opening-
up of public contracts. In order to reap the full benefits, the European Union must modernise its 
support and: 
move on from the phase of establishing a legal framework (the objective for 1992) to the 
phase of giving priority to cooperation. The objective now, in a context marked increasingly 
by deregulation and in which conventional harmonisation has reached its limits, is to enable 
businesses in the Union to reap the full benefits of the integrated internal market by continuing 
to eliminate the distortions created by the legislative, regulatory or administrative disparities. 
To this end, consideration must be given to application, case by case, of the provisions of Ar­
ticles 101 and 102 of the Treaty, as proposed in the Commission's communication on the sub­
sidiarity principle (SEC(92)1990 final), in order to remove certain remaining obstacles with an 
adverse effect on competitiveness; 
35 
encourage administrative cooperation between the Member States and the Commission to 
overcome the difficulties encountered by businesses wishing to benefit from the internal mar­
ket; 
simplify the ways in which the public authorities organise and exercise their responsibilities 
with a bearing on industrial competitiveness, for example by a more systematic cost-benefit 
evaluation of any proposed legislation on the EU's competitivity; 
continue deregulation and administrative simplification in order to remove unnecessary con­
straints which impair companies' competitiveness and act as a disincentive for innovation and 
employment, particularly with a view to facilitating the introduction of new methods of organ­
ising work; 
encourage public authorities to adapt to the globalization of the world economy, which is al­
ready having consequences in the area of the information society for example, along lines 
shared between competing activities and those applicable to the non-competitive sector; 
ensure closer cooperation with operators on matters affecting industrial performance, by im­
proving the information on market trends, technologies and framework conditions likely to in­
fluence the performance of European industry; 
bring the administrative departments responsible for promotion of research and industrial 
development closer together; 
continue the efforts to reduce the costs arising from the national and Community regulations 
by evaluating the costs of and simplifying all new proposals; 
create conditions conducive to business expansion, innovation and research by removing the 
regulatory and other obstacles and guaranteeing the free movement of factors of production in 
the European Union. 
The public decision-making centres shaping industrial activity are growing in number and exercis­
ing their powers without any real overview or constant coordination: 
at world level, these responsibilities are shared between a large number of structures, some 
permanent, others of various forms; often their effectiveness is disputed; 
at Community level, decisions on industrial issues are taken at Council meetings on many dif­
ferent subjects (general affairs, industry, telecommunications, internal market, research, envir­
onment, transport or energy). What is more, Article 13Oh of the Treaty expressly recognises 
the need for coordination, which was stressed by the European Council in Corfu, which invited 
the Commission to take all necessary initiatives to promote such coordination in the area of re­
search, notably in connection with all the issues arising from the information society, which 
will be dealt with by the same Council of Ministers; 
at national and regional level, administrative structures vary from one Member State to another 
and the sharing of responsibility is extremely diverse (arbitrary division between industry, re­
search, telecommunications, business policy, etc.). 
The USA and Japan have addressed these problems by setting up broader cooperation bodies such 
as the Competitiveness Policy Council in the USA, which brings together representatives of the 
leading players involved in industrial development. The public authorities in Europe, including the 
Commission, must consider the action to be taken on these trends. 
2. Action 
Continue the deregulation processes : 
36 
16 
17 
18 
19 
20 • by examining, on the basis of the problems encountered by businesses, the prospects of 
using Articles 101 and 102 to remove certain disparities stemming from the continuation of 
national legislation diverging from that of other countries; 
• in particular, by drawing on the telecommunications scheme started by the Commission 
with the aid of Directives based on Articles 90 and 100a, as regards the harmonisation as­
pects, on Article 129 in the case of the trans-European networks, on the Council Resolu­
tion of 22 June 1993 and on the conclusions of the high-level working party on the infor­
mation society; and 
• adopting a dynamic approach to reinforce competition on the energy market in conjunction 
with redefinition of tasks of general economic interest. 
Redefine public service objectives to make it clearer which tasks cannot be performed on the 
basis of competition alone and define a management framework ensuring better use of regula­
tory instruments. 
Use the European Union's Structural Funds to bring forward and accompany industrial 
change, both in general and with the aid of the new objective 4 of the Community initiative 
programmes. 
Facilitate, notably in the new Community initiative programmes,16 particularly the PME17 and 
ADAPT18 initiatives, the development of partnerships between big businesses and small firms 
and the establishment of the networks and clusters™ essential to promote: 
closer coordination between big businesses and their suppliers, for example between car 
makers and component suppliers;20 
access for small firms to new technologies or technologies to add on to those already at 
their disposal in order to reduce their "entrance fee"; 
harnessing of the European Union's regional diversity, by combining its industrial, tech­
nological and geographical advantages. 
Systematically streamline procedures and make them more transparent, in order to facilitate 
decision-making by operators, based on an analysis of the impact of the national and Com­
munity regulations on competitiveness and employment; for example, in fields such as techni­
cal standards for machinery, rules on biotechnologies, legislation on emissions of pollutants, 
health and safety at work, working hours and admission to certain professions. This exercise 
will centre on the work of the Working Party set up within the Commission by the European 
Council in Corfu to simplify legislation and administrativejjrocedures. 
The Community initiatives are proposals by the Commission to the Member States on action of particular 
interest to the European Union to be taken in certain fields under the Structural Funds. 
The PME initiative is designed to help small firms in industry or the services sector, particularly firms in 
the less developed regions, to adapt to the single market and become competitive at world level. 
The ADAPT initiative is designed to help the workforce to adapt to industrial change and to improve the 
way the labour market works in order to restore growth, employment and the competitiveness of 
undertakings in the European Union. 
A "cluster" is a group of industrial competitors which cooperate to form a dynamic pool of knowledge 
generating external benefits (source: "European industrial competitiveness", Torger Reve & Lars 
Mathiesen, joint study by the European Commission and the UNICE, June 1994). 
Cf. the communication from the Commission on the European Union automobile industry (COM(94)49). 
37-
Speed up the establishment of trans-European networks for the interchange of data between 
administrations and facilitate the development of information infrastructure and services for 
businesses. 
Use the Community's instruments (research, Structural Funds, etc.) to support specific in­
dustrial cooperation projects involving companies from several Member States and to set a 
particularly good example (notably by co-ordinating the appraisals of files by the national 
authorities within the Community support frameworks). 
Finally, the Commission proposes examining the expediency of simplifying the many structures in­
volved in industrial policy and making them more consistent and of evaluating the experience with 
broader concertation bodies such as the Competitiveness Policy Councils. 
38 
EUROPEAN COMMISSION 
Rue de la Loi, 200 B-1049 Brussels, Belgium 
line 32-2-295.79.65 Standard 32-2-299.11.11 . ^ 32-2-296.30.28 
Telex COMEU B.2-1877 - Telegraphic address COMEUR Brussels 
•57 
CONTENTS 
ANNEX I. ANALYSIS OF THE STATE OF THE EUROPEAN INDUSTRY 2 
A. Diagnosis of industry's performance 2 
B. Relative position of the Member States 2 
C. Opinion of industry 3 
D. Competitiveness, cost of factors and relocation 3 
E. Competitiveness and differentiation strategies . 5 
F. Importance of service industries 5 
G. Performance of manufacturing industry '. 6 
ANNEX II. STATISTICAL TABLES 10 
ANNEX III. GRAPHICS 29 
A.l 
ANNEX I. ANALYSIS OF THE STATE OF THE EUROPEAN INDUSTRY 
A. Diagnosis of industry's performance 
In spite of the encouraging economic outlook in the short, medium and long terms, most 
assessments of the state of EU industry continue to emphasize its worrying loss of com­
petitiveness compared with its main competitors, particularly the other members of the 
Triad. 
Although a strict comparison of the European Union's performance in terms of certain 
macroeconomic factors clearly shows that the Union is in an unfavourable position (see the 
tables and graphs annexed to the Communication), this pessimistic finding must be seen in 
perspective: 
— it is based on analysis of a narrow range of factors, while industrial competitiveness 
is a very complex problem extending far beyond a simple comparison of 
macroeconomic variables, however important these may be, 
— the aggregated average figures for the Union do not take account of the relative 
situation of the Member States, some of which have produced remarkable perform­
ances compared with other OECD countries, 
— the growing importance of service industries, which it is estimated account for over 
60% of the added value and employment generated by total EU production, is not 
fully taken into account, 
— it cannot reflect certain fundamental elements underlying all competitive perform­
ance: the microeconomic dimension, the enterprise spirit, individual effort, the 
commercial approach of individual companies, and the dynamism of subsidiaries 
and clusters of companies. The European Union has numerous examples of success 
stories which can be traced back to these elements, the recipes for which merely 
have to be more widely disseminated within the industrial fabric. 
These comments are fiuidamental, because assessments of the state of EU industry are 
being made in a context of economic crisis when it is difficult to determine to what extent 
the unfavourable comparison of certain quantitative factors is not a reflection of the poor 
economic environment. 
It is also important to remember that industrial competitiveness is based essentially on the 
existence, within the industrial fabric, of the largest possible number of companies in a 
position to expand and make profits on all markets on which they are active. The more ex­
acting the demand and the stronger the competition, the more a company's positive per­
formance is indicative of competitiveness. 
These conditions exist in the European Union, and the positive results achieved by a very 
large number of companies demonstrate that they have been able to adjust to this competi­
tive environment. 
B. Relative position of the Member States 
While EU manufacturing industry as a whole has clearly not yet managed to overcome 
certain structural disadvantages, the 1993 edition of the World Competitiveness Report 
paints a less alarming picture of the competitive position of the European Union. Taken 
individually, certain Member States are up among the leaders for most of the 370 
(quantitative and qualitative) factors assessed in this annual report. 
-A.2-
This is true in particular of Denmark (3rd), Germany (5th), the Netherlands (6th) and the 
Belgo-Luxembourg economic union (10th).1 Germany's slide to fifth position (2nd in 
1992) is largely due to the impact of reunification. Other States (France and the United 
Kingdom) have improved their positions compared with previous years and are at absolute 
levels comparable with the best. Only Certain countries in the south of the Union continue 
to have low levels of competitiveness due, to a large extent, to structural problems linked 
to the restructuring of certain basic industries with low value added. 
These rankings are important, because debates about competitiveness are often limited to a 
comparison of certain quantitative (macroeconomic) factors which effectively exclude both 
the relative performances of companies and the growing contribution of services and other 
qualitative factors. 
C. Opinion of industry2 
Industry itself is of the opinion that there is no single factor in Europe to which the relative 
decline in the competitive position of European industry (which is essentially expressed in 
terms of trade performance on external markets) can be attributed. Likewise, there is no 
single solution. 
In addition to the well-known unfavourable elements (deterioration of the balance of trade, 
exchange rate appreciation, lower growth rate, lack of flexibility of the human factor, 
etc.), industry identifies the following additional factors: 
hourly pay rates have increased faster, reaching a differential of about 20% in 1992, 
the tax burden averages 40% in the European Union, compared with 30% for its part­
ners, 
there is a major difference in the productivity of manufacturing industry - about 30% 
compared with the USA and 10% compared with Japan (McKinsey) - in spite of 
similar growth rates over the last ten years, 
there are deficiencies in the promotion of physical and intangible investments by com­
panies (especially small and medium-sized companies) and weaknesses in management 
expertise. 
Among the solutions put forward, industry proposes the adoption of a series of policies 
designed to improve the macroeconomic environment and to make markets work more ef­
ficiently. 
D. Competitiveness, cost of factors and relocation 
In general, EU industry has focused its drive to regain competitiveness on costs and 
productivity, and has achieved significant results in recent years. 
Analysis of the financial state of the 1 380 largest European industrial companies3 for the 
period 1987-1992 shows that turnover per employee grew from ECU 99 000 to 
ECU 136 000,4 or about 6% a year, whereas the number of jobs increased by only 2.5%. 
Moreover, the increase in jobs was partly due to mergers and acquisitions (carried out in 
preparation for completion of the internal market) rather than real needs. 
Japan (1st) and the USA (2nd) took the first two places in 1993. 
UNICE - Competitiveness Report 1994. 
Dable database (DG 111). 
The figures for the USA and Japan for the end of the period are ECU 150 000 and ECU 220 000 
respectively. 
-A.3-
The World Competitiveness Report 93 shows that eight Member States are among the top 
ten OECD members in terms of growth in GDP per employee (period 1983-1991), with 
rates nearing or exceeding 2% a year (Ireland - 3.68%, Italy - 2.60%, Portugal - 2.29%, 
France - 2.15%, Benelux - 1.92% and Spain - 1.91%). Only Germany experienced nega­
tive growth (-2.33%) as a result of unification. As regards value added per employee in 
manufacturing industry (base: 1989), the report shows that six Member States (Benelux, 
France, Germany, Italy) are among the ten leaders, behind Japan. However, Japan's per­
formance is 14% better than that of Benelux (the best placed Member State). The USA is 
down in 11th position with a performance similar to that of Italy. In terms of the produc­
tivity of capital (value added per ECU invested), the USA is well in the lead with 
ECU 6.63, ahead of three Member States (United Kingdom - ECU 5.15, Denmark -
ECU 5.06, Ireland - ECU 5.00). Japan's performance is the weakest of all the countries 
studied (ECU 2.7, or about 1/3 of that of the USA). 
These data tend to confirm that EU companies have clearly targeted their productivity 
drive on reducing the labour factor and its cost, for obvious reasons. 
This trend appears to be far from over. It started in large companies, and is now spread­
ing to small and medium-sized companies, even though the production labour cost factor is 
falling as a proportion of the costs of production of most products and services (at least in 
manufacturing industry), while other factors, such as development, industrialization, con­
trol and distribution costs, are rising. 
This drive for improved cost competitiveness is sometimes accompanied by the drawing-
up of industrial relocation strategies to regions with comparative advantages in terms of 
the cost of certain factors, in particular labour. 
Analysis of the direct foreign investment (DFI) flows of EU companies shows that the 
main objective of relocation strategies is to improve the companies' position on growth 
markets rather than substitution strategies (production intended for re-exportation to 
Europe). The relocation of EU production to low-labour-cost countries is taking place 
on a much smaller scale than is generally believed5 
Relocation is still limited to specific sectors (such as textiles, clothing, footwear, consumer 
electronics, and electronic components) and activities (subcontracting of intellectual work 
with little innovative content) for which the cost and flexibility of the labour factor are still 
relatively important. 
The DFI flows in 1991 of the four* most active Member States (France, Germany, 
Netherlands, United Kingdom) break down as follows: 
1991 ECU billion % 
Total direct foreign investment (DFI) 57.1 100 
- in other Member States 32.5 57 
- outside the Union 24.6 43 
- in non-OECD countries 5.8 10 
-in Asia 3.6 6 
Total national investment of the 4 States* 707.5 
These figures show that DFI accounts for a relatively small proportion (8%) of total na­
tional investment, that the European Union is a major destination for DFI flows 
"Investment strategies of EU companies in non-European countries", Panorama of the industry 
of the Union 94. 
-A4-
(32.5%), and that the proportion of DFI going to the least industrialized countries 
(9.4%) is relatively modest. 
From a sectoral point of view, DFI outside the European Union by EU companies is con­
centrated in manufacturing and energy (mainly oil). No data are available on which activi­
ties are subcontracted. The leading manufacturing sector is chemicals, followed by electri­
cal engineering; food, drink and tobacco; and motor vehicles. However, DFI in the chemi­
cals sector outstrips DFI in all these other sectors put together, accounting for nearly half 
of extra-EU direct foreign investment (1991 data for the UK). 
E. Competitiveness and differentiation strategies 
Although some efforts have been made in this direction, EU industry appears to be less 
active in implementing measures to increase the added value of products by means of 
differentiation and the development of competitive advantages. This is particularly true 
of a very large number of small and medium-sized firms which form part of the logistical 
industrial fabric of large companies. 
The problem of costs of production is very often approached exclusively from the angle of 
reducing the cost of the labour factor by improving productivity. More detailed analysis 
shows that reductions in production costs tend to involve structural changes accompanied 
by increased qualification of labour and added value, rather than simple mechanical re­
ductions in numbers of jobs, particularly production jobs. 
This type of situation tends to affect all products, not only those intended for the final con­
sumer, but also capital goods and intermediate products and their upstream manufacturing 
processes and the services incorpoiated into them. 
Industry itself recognizes the validity of this analysis when it recommends measures tend­
ing to encourage the development of dynamic industrial clusters and to improve manage­
ment practices within companies.6 
F. Importance of service industries 
Measurements of the competitive performance of EU industry (and that of its competi­
tors) generally fail to take account of the growing importance of service industries. 
In the broad sense, service industries include both market services (repairs, commerce, 
catering, accommodation, transport, communications, banking, insurance, etc.) and non-
market services (health care, education, research, social welfare and public services). 
These all help to strengthen the competitive advantages of the Union. 
A recent essay7 gives a clearer understanding of this dimension, in spite of problems of 
methodology, data collection and data analysis. 
In terms of added value and jobs, the service sector accounts for-almost two-thirds of the 
EU economy. Three-quarters of the service sector is made up of market services, mainly 
repairs and wholesale and retail distribution. The remainder is made up of non-market 
services. 
Since 1980 the added value of services has increased by 8.7% a year, whereas the average 
annual increase in total added value in the EU was 7.8%. As a result, the contribution of 
UNlCE's Competitiveness Report 1994. 
Panorama of Industry 1994: "Service industries in a changing EC economy", NEI. 
A.5 
the service sector to total added value has increased by 5.6 points, the share of market 
services having increased slightly during the 1980s and that of non-market services having 
fallen. This growth is largely due to the increase in the share of other market services. 
In terms of intra-EU direct foreign investment (DFI), services accounted for ECU 21.3 
billion in 1989. Intra-EU investment exceeded both investment in the EU from non-EU 
sources (ECU 16.8 billion) and EU investment outside the EU (ECU 11.9 billion). The 
banking sector accounted for about 40% of intra-EU investment, totalling ECU 9.6 billion 
between 1984 and 1989, thus contributing to the increase in intra-EU DFI. During the 
same period, non-EU banking groups increased their investments in the Union by nearly 
ECU 7 billion, out of a total for all service sectors of ECU 13.2 billion. 
Similar trends are observed in terms of jobs. In 1990, nearly two-thirds of EU jobs were in 
service-related activities (about 80 million people in 10 Member States). Compared with 
the situation in 1980, total employment in these sectors had increased by 13.5 million 
(+1.9% a year), whereas in agriculture and manufacturing industry it had decreased by 3 
million and 4 million respectively. The percentage of jobs accounted for by the service 
sector increased by 7.8 points, which is above the rate of growth in value added. 
These data merely confirm the analyses of R. Reich on the new segmentation of the labour 
market.8 They also underline the absolute necessity of developing adequate data collection 
and measurement instruments in this field. 
G. Performance of manufacturing industry 
Analysis of manufacturing trends shows that consumer goods sectors have made the most 
progress in the last six years. Of the 65 sectors analysed (see table below), about 40% (28 
sectors) recorded constant growth, and three-quarters of these (20 sectors) recorded higher 
export rates than internal production rates, examples being food and soft drinks. Most 
sectors producing intermediate products recorded medium to strong growth, the best 
placed sectors being rubber and plastics processing and secondary transformation of met­
als. 
The investment goods sectors, on the other hand, recorded slow growth during this period. 
The weak performance in these sectors appears to be continuing and remains a source of 
concern for the public authorities insofar as these are high-value-added products account­
ing for a large share of extra-EU trade. 
Most of the sectors recording strong growth are high-technology sectors characterized by 
growing worldwide demand in recent years. In contrast, many of the sectors which re­
corded the weakest growth rates or negative growth are directly affected either by changes 
in consumer tastes (e.g. furs, alcoholic beverages, tobacco) or by the increasing market 
share taken by foreign competitors (e.g. musical instruments, watches, toys and sports 
goods) to the detriment of EU producers. 
"The work of Nations" 1991. See also the study of "European Industrial Competitiveness", T. Rev 
and L. Mathiesen, 1994, carried out jointly for DO III/SNF and UN ICE. 
-A.6-
Sectoral analysis of the growth of EU production and the trade balance 
(manufacturing industries) (1986-1992) 
(base = annual % growth) Capital Intermediate Consumer Total 
Number of sectors goods products goods 
Growing 
— improvement of trade balance 5 3 20 28 
greater than growth of EU 
production 
— improvement of trade balance less 1 113 
than growth of EU production 
— growth in EU production accom- 3 13 8 23 
panied by deterioration of trade 
balance 
Declining 
— fall in EU production partly offset 1 1 5 7 
by improvement in trade balance 
— fall in EU production accompanied 3 - 1 4 
by deterioration in trade balance 
Number of sectors analysed ** 18 34 65 
Source: Panorama of Industry 94 
The following tables (see also annexes 24 and 25) analyse the intensity of exports and im­
ports in the main sectors of manufacturing industry for the period 1986-1992, using the 
following classification: rapid-growth sectors (>5% a year), moderate-growth sectors (3-
5% a year) and slow-growth or negative-growth sectors. 
Rapid-growth sectors and intensity of foreign trade 
(base 1992) Annual % Intensity of Intensity of 
growth in exports imports 
production 
(86-92) 
High intensity of exports 
- Pharmaceuticals * 315 337 
- Medical and surgical equipment ' "„ .' 
Telecommunications equipment _', ', *_ 
Office and computer equipment 
Low intensity of exports 
Plastics processing 7.1 9.0 7.1 
Secondary transformation of metals 5.7 4.8 4.5 
- Rubber and plastics 5.3 10.0 8.1 
Soft drinks, mineral waters 5^) 22 0.4 
Source: Panorama of Industry 94 
Two of the eight sectors which have experienced rapid growth (more than 5%), pharma­
ceuticals and medical and surgical equipment, are closely linked to the rapid rise in de­
mand for health services. Two other sectors, telecommunications equipment and office 
computer equipment, have benefited from the sustained demand for industrial services and 
-A.7-
the trend towards "electronification". The growth of three other sectors, rubber, plastics 
and the secondary transformation of metals, is due to the rapid expansion of demand in the 
transport sector. The growth in the soft drinks and mineral waters sector must be inter­
preted in the light of changes in consumer tastes. 
Medium-growth sectors and intensity of foreign trade 
(base 1992) Annual % 
growth in 
production 
(86-92) Intensity of 
exports Intensity of 
imports 
High intensity of exports 
— Electric lighting 
— Electrical engineering 
— Domestic electrical appliances 
— Chemicals and man-made fibres 
— Consumer electronics 
Low intensity of exports 
— Fruit and vegetable processing 
— Motor vehicle parts 
— Semi-finished wood products 
— Cocoa and confectionery 
— Wooden packaging 
— Constructional steelwork 
— Paper, printing and publishing 
— Oils and fats 
-r- Industrial preparation of wood 
— Baking 
— Meat 
— Soaps, detergents and toiletries 
— Pulp, paper, board 
— Forging 
— Motor vehicles and components 
— Animal feedingstuffs 
— Marine products 
— Metal products 
— Paper and board processing 
— Glass 
— Wooden furniture 
— Food, drink, tobacco 4.6 
4.0 
3.8 
3.5 
3.2 
4.9 
4.8 
4.6 
4.5 
4.4 
4.4 
43 
4.3 
4.3 
4.3 
4.2 
4.0 
4.0 
3.9 
3.8 
3.7 
3.7 
3.6 
3.5 
3.3 
3.3 
3.0 17.5 
17.7 
16.0 
16.9 
22.4 
8.4 
11.3 
5.6 
6.9 
2.0 
7.3 
6.1 
8.8 
4.4 
2.8 
4.7 
Ï.9 
8.7 
3.7 
11.5 
8.6 
8.2 
7.7 
7.5 
11.2 
9.1 
6.2 12.7 
19.4 
11.3 
13.0 
40.1 
17.7 
7.2 
21.2 
2.3 
1.8 
3.7 
11.0 
19.3 
50.6 
0.8 
5.1 
2.3 
34.3 
2.8 
8.8 
2.5 
27.3 
5.3 
6.5 
8.2 
7.2 
4.8 
Source: Panorama of Industry 94 
The medium-growth sectors with a high intensity of exports achieved major productivity 
improvements during this period (while employment levels stagnated), which helped to 
maintain their competitiveness on world markets. Those with a low intensity of exports 
include a number of sectors where import penetration is also generally weak (the excep­
tions being wood and pulp, which import a large proportion of their raw materials from the 
Nordic countries). No significant employment trend (upwards or downwards) can be de­
tected on account of the heterogeneity of the sectors concerned. 
A.8 
The main cause of the relative; decline of the slow-growth sectors with low intensity of ex­
ports is the weakness of domestic demand. Many of these sectors are linked to the con­
struction industry and were severely affected by the crisis, while certain foods have been 
affected by a change in consumer tastes. 
Slow-growth sectors and intensity of foreign trade 
(base 1992) Annual % 
growth in 
production 
(86-92) Intensity of 
exports Intensity of 
imports 
High intensity of exports 
Basic industrial chemicals 2.7 
Optical & photographic instruments 2.6 
Footwear 2.6 
Instruments 2.5 
Shipbuilding 2.0 
Ceramic goods 1.6 
Aerospace equipment 1.6 
Toys and sports goods L2 
Railway rolling stock 1.2 
Mechanical engineering 0.9 
Measuring and precision instru­
ments 0.8 
Knitwear 0.3 
Textile machinery -0,2 
Alcohol and spirits -0.2 
Leather & leather goods -0.2 
Transmission equipment -0.3 
Musical instruments -1.4 
Machine tools -1.6 
Clocks and watches -2.9 
Agricultural machinery -4.0 
Furs and fur goods -5.3 18.7 
50.3 
22.3 
34.7 
25.8 
20.4 
39.5 
27.8 
29.3 
31.5 
20.8 
22.1 
61.6 
28.0 
31.8 
25,8 
36.0 
28.1 
73.5 
22.0 
65.1 17.7 
6Ô.4 
23.5 
41.7 
14.4 
9.1 
35.0 
60.1 
8.7 
17.7 
16.7 
38.7 
26.4 
3.4 
35.2 
17.7 
55.7 
18.8 
88.2 
11.5 
59.4 
Low intensity of exports 
Non-metallic mineral products 
Cement, lime, plaster 
Grain 
Clothing 
Clay products 
Dairy products 
Cycles and motorcycles 
Boilers and metal containers 
Foundries 
Tobacco 
- Wine 
Brewing and malting 2.8 
1.9 
1.8 
1,8 
1.6 
1.6 
1.5 
1.0 
0.6 
0.4 
0.1 
0.0 8.6 
2.3 
8.0 
14.9 
3.9 
5.9 
12.5 
7.3 
5.2 
3.7 
6.9 
4.5 4.5 
2.4 
0.4 
29.8 
0.7 
1.2 
42.6 
2.2 
3.3 
1.3 
0.6 
0.4 
Source: Panorama of Industry 94 
A.9-
ANNEX II. STATISTICAL TABLES 
Exchange rate fluctuations 1. 
Link between industrial production and employment creation in the European Union 2. 
Competitive situation of the European Union 
Market shares of main economic regions 3. 
Total trade in the TRIAD 4. 
EU trade in goods 5. 
Total EU trade balance 6. 
Trade by region (in value terms) 7. 
Trade by region - average annual growth 8. 
Leading importers in world trade 9. 
Leading exporters in world trade 10. 
New industrial economies of Asia 11. 
Foreign direct investment outflows 12. 
EU foreign direct investment 13. 
Intangible investment 
Educational expenditure 14. 
R&D investment by economic region (1991) 15. 
EU R&D investment by sector (1989) 16. 
Growth in R&D investment by companies 17. 
Intensity of R&D investment by companies 18. 
Inventions by region of origin 19. 
Balance of technological payments 20. 
Link between R&D and trade performance (1990) 21. 
Link between technological intensity and wage level (1990) 22. 
Wage level as a function of technological intensity 23. 
EU position on growth markets 
Production growth for some sectors in the EU (1986-92) 24. 
Trade balance for some sectors in the EU (1986-92) 25. 
Manufacturing output growth forecast (1992-2010) 26. 
Sectoral specialization of exports of manufactured goods (1992) 27. 
A. 10 
Geographical specialization of exports of manufactured goods (1992) 28. 
Sectoral and geographical specialization of EU exports of manufactured goods (1992) 29. 
Sectoral specialization trends 30. 
Growth markets: some examples 
Data processing and telecommunications industries (1995) 31. 
US information market (1995) 32. 
Environment market: breakdown by region and market (2000) 33. 
Environment industry: production and exports (2000) 34. 
Top-of-the-range products market - breakdown by segment and growth rate 35. 
Top-of-the-range products market - geographical breakdown 36. 
Health and biotechnology market 37. 
Specialization in high technology industries 38. 
High technology products market - EU trade 39. 
High technology products market-level of opening-up 40. 
High technology products market - trade performance 41. 
-All-
1. Exchange rate fluctuations 
Because of the considerable fluctuations in exchange rates between European currencies, 
including the ECU, on the one hand, and the US dollar and Japanese yen, on the other, the 
following assessments of competitiveness should be viewed with caution. 
The US dollar lost 54% of its value against the ECU between 1985 and 1993, while the 
yen appreciated by 29% between 1990 and 1993. 
1980-84 1985-89 1990-93 
ECU/US$ -43% 44% -8% 
ECU/Yen ^41% -16% -29% 
Source: EUROSTAT 
2. Link between industrial production and employment creation in the European Union 
The downward trend of industry's share of GDP and the corresponding upward trend in 
services must not blind us to the essential role that industry plays in the economy. There is 
a clear correlation over a long timescale (1970-1995) between growth in industrial pro­
duction and employment creation. 
Competitive situation of the European Union 
3. Market shares of main economic regions 
Although it is still higher than that of the United States or Japan, the European Union's 
market share of world exports of manufactured goods has fallen: from 29% in 1980 to 
25% in 1986 and 24% in 1992. 
Market share as % of world exports of 1980 1986 1992 
manufactures 
(current prices and exchange rates) 
EU 29% -25% 24% 
USA 18% 14% 17% 
Japan 15% 18% 17% 
Others 39% 43% 42% 
Source: OECD 
4. Total trade in the TRIAD 
Analysis of triangular trade between the members of the Triad - the European Union, the 
United States, and Japan - shows a predominance of transatlantic and transpacific trade. 
The balance of trade between the European Union and the United States went into the red 
in the late 1980s, but recovered substantially in the early 1990s: between 1991 and 1993 
the European Union's trade deficit with the United States fell by 90% from ECU 21 billion 
to ECU 2 billion. 
At the same time, the European Union's trade deficit with Japan fell by 25% from ECU 30 
billion to ECU 25 billion, while the United States' trade deficit with Japan increased by 
45% from ECU 35.1 billion to ECU 50.7 billion. 
-A.12-
In 1991, the European Union's trade deficit with Japan was equivalent to 85% of the 
United States' deficit with Japan. In 1993 it was equivalent to just 49%. 
Trade Balance (ECU billion) 1991 1992 1993 
EU-US 
EU-Japan 
US-Japan -21.0 
-30.0 
-35.1 43.0 
-31,0 
-38.0 -2.0 
-25.0 
-50.7 
Source: OECD 
EU trade in goods 
The increased integration of the European Union has been accompanied by the substitution 
of trade with the rest of the world by trade between Member States of the Union. 
Since the end of the 1960s, intra-EU trade (13% of GDP in 1994) has exceeded exports to 
non-EU countries (9% of GDP in 1994). In recent years this gap has widened on account 
of the relative decline of exports to non-EU countries as a proportion of the GDP of the 
European Union. 
International trade as % of GDP 1980 1990 l?94fcstT) 
Intra-EU trade 
Extra-EU exports 12% 
10% 14% 
9% 13% 
9% 
Source: EUROSTAT 
Total EU trade balance 
Goods still make up the bulk of the European Union's exports. Since the mid-1980s, how­
ever, the contribution of trade in goods to the trade balance has been declining and even 
became negative in the early 1990s. In spite of a relative decline, trade in services contin­
ues to make a positive contribution to the overall balance of trade. 
Trade balance (ECU billion) 1985 mm mm Goods 
Services 9 
27 WE 
11 Ml 
111 
Source: EUROSTAT 
Trade by region (in value terms) 
World trade totalled US$ 3 700 billion in 1992. Asia is the leading trading area, followed 
by North America and the European Union (extra-EU trade). 
US$ billion-1992 Imports Exports Balance 
1 I l»l M I I II III |1 III III I I I I I I I L Ill Hill 
Asia 
- of which Japan 
North America 
-ofwhich USA 
Latin America 
Middle East 
Africa 
Central and Eastern Europe and CIS 
EU (excl. intra-EU trade) 806 
233 
684 
554 
173 
128 
102 
90 
636 885 
340 
583 
448 
151 
125 
95 
92 
569 79 
107 
-101 
406 
-22 
.3. 
*7 
2 
-68 
Source: GATT - Euros tat 
A.13-
8. Trade by region - average annual growth 
The rapid expansion of world trade is a result of the structural changes which have been 
taking place for many years in the world economy and of more recent developments/The 
structural changes include the growing share of manufactured goods in world trade, the 
boost given to world trade by the multiplication of international investments, and the fall in 
the price of transport and communications, while the recent trends include the unification 
of Germany and the resulting surge in imports, the strong growth of imports into North 
America and Latin America and the continuing strength of the markets in certain Asian 
countries. 
The trade figures for these regions for 1992 clearly show that the expansion in world trade 
is due to the large rise in the volume of imports into and exports from North America, 
Europe and Asia, in particular the dynamic economies of Asia. 
Annual growth (1980-1992) - volume Imports Exports 
Asia 
North America 
Western Europe 
Latin America 
Middle East 
Africa 7.3% 
6.5% 
5.6% 
2.8% 
1.9% 
5.0% 8.9% 
5.9% 
6.4% 
2.5% 
-4.4% 
~L9% 
Source: GATT 
9,10. Leading importers and exporters in world trade 
Outside the European Union, in 1992 the United States remained the world's leading goods 
exporter, followed by Japan and Canada. 
The fastest growing markets were Hong Kong, China, South Korea, Taiwan, and Malay­
sia. 
US$ billion -1992 
Imports Exports Balance annual growth 
(1980-92) - volume 
Imports Exports 
EU (extra-EU) 
USA 
Japan 
Canada 
Hong Kong 
South Korea 
China 
Taiwan 
Singapore 
Switzerland 
Mexico 
Austria 
Sweden 
Australia 
Malaysia 636 
554 
233 
129 
123 
82 
81 
72 
72 
66 
62 
54 
50 
44 
40 569 
448 
340 
134 
120 
77 
85 
82 
64 
66 
46 
44 
56 
43 
41 -68 
-106 
107 
5 
-4 
-5 
4 
10 
-9 
0 
-16 
-10 
6 
-1 
1 5% 
7% 
4% 
6% 
15% 
11% 
12% 
11% 
10% 
5% 
9% 
7% 
3% 
6% 
11% 5% 
6% 
8% 
5% 
16% 
13% 
14% 
13% 
10% 
7% 
8% 
8% 
5% 
6% 
10% 
Source: GATT 
A.I4 
11. New industrial economies of Asia 
Trade is developing rapidly in Asia. However, the new industrial economies of Asia are 
still minor trading partners for Europe, and Europe invests much less there than the United 
States and Japan. 
US$billidnil992 Exports Imports Trade 
balance International 
investments 
EU 
USA 
Japan 39 ill II 51 
11;; -12 
is:;-
ii 842 
1298 
1065 
12. Source: OECD 
Foreign direct investment outflows 
The countries of the Triad generate the bulk of international investment. 
Foreign investment by the European Union increased substantially in the 1980s, from an 
annual flow of ECU 10 billion in 1982 to ECU 32 billion in 1991. Investment flows in­
creased dramatically after 1985, reaching ECU 43 billion in 1989, before falling to 
ECU 32 billion in 1991. 
During the 1980s, foreign investment by the United States and Japan followed a similar 
trend to that of the European Union. US foreign investment started rising rapidly in the 
mid-1980s, then slowed down from 1988. In 1989, Japanese foreign investment was 
greater than the foreign investment of the European Union, but it has slowed down consid­
erably since then. 
Source: DRI 
13. EU foreign direct investment 
The stock of foreign investment in the European Union doubled between 1987 and 1991, 
while European investment in the rest of the world increased by 50% over the same period. 
In spite of the faster growth of foreign investment in the European Union, the balance 
remains negative for the European Union, which invests more abroad than it attracts from 
abroad. 
-A.15 
ECU billion imlâirili0ïl Outward FDI Balance 
1987 
1988 
1989 
1990 
1991 108 
134 
169 
170 
195 201 
253 
275 
275 
297 93 
119 
106 
105 
103 
Source: DRI 
Intangible investment 
14. Educational expenditure 
Education is a prime example of intangible investment, as it prepares the future of the 
individual and of society. 
The resources devoted to education can be measured in terms of public expenditure on 
education expressed as a percentage of GNP. During the 1980s the relative weight of pub­
lic expenditure on education fell slightly in the Triad to a similar level of about 5% of 
GDP/GNP. 
Educational expenditure as % of 
GDP/GNP 1980 1985 1989 
EU 
USA 
Japan 5.3% 
6.7% 
5.8% 5.1% 
5.0% 
5.0% 4.9% 
5.3% 
4.7% 
Source: UNESCO 
15. R&D investment by economic region (1991) 
Total EU expenditure on R&D expressed as a percentage of GNP is barely equal to the 
world average and is much lower than that of Japan, the United States and the new indus­
trial economies of Asia. 
R&D spending as a % of GDP 1991 
EU 
USA 
Japan 
Industrialized Asia 
World 2.0% 
2.8% 
3.1% 
2.7% 
2.0% 
Source: UNESCO 
16. EU R&D investment by sector (1989) 
Industrial R&D is generally concentrated in high-demand, high-technology sectors, which 
account for 75% of total research and development. 
-A.16 
R&D in industrial production (EU) mm Aerospace 
Pharmaceuticals 
Electronics 
Chemicals 
Land transport 
Capital goods 
Other industries 
Total 17.0% 
12.1% 
11.5% 
3.8% 
3.2% 
2.5% 
0.5% 
2.3% 
Source: OECD 
17. Growth in R&D investment by companies 
In the European Union, the average annual rate of growth of industrial R&D was around 
5% during the 1980s. In the United States, which accounts for almost half of all R&D in 
OECD countries, R&D expenditure has more or less stagnated since 1985. In Japan, R&D 
expenditure rose rapidly up to 1985 (increasing by more than 10%). The rate of increase 
in R&D spending by Japanese companies also appears to have slackened since 1985, but 
is still high compared with other countries (about 8%). 
Average annual growth rate 75-81 81-85 85-89 89-92 
EU, 
USA 
Japan 4.8% 
4.5% 
8,2% 4.9% 
8.6% 
11.2% 4.8% 
1.3% 
7.4% 2.1% 
-0.8% 
8.5% 
Source: OECD 
18. Intensity of R&D investment by companies 
EU companies have increased their spending on research and development more rapidly 
than their US and Japanese competitors: if we look at the 50 companies with the highest 
research budgets in each of these three areas, research spending as a percentage of turn­
over almost doubled between 1984 and 1992 at European companies, reaching 4.5% in 
1992, while at Japanese companies it increased by a little under 40%, although Japan still 
has the highest level (5.8%), and at US companies it increased by less than 30% (to 3.7% 
in 1992). 
RSiD as % of turnover 
(50 big R&D spenders) EU USA Japan 
1984 
1988 
1992 2.7% 
4.4% 
4.5% 2.9% 
3.3% 
3.7% 4.2% 
5.4% 
5.8% 
19. Source: DABLE 
Inventions by region of origin 
In terms of the number of inventions of supranational importance, Europe was the leading 
producer of new technologies during the last two decades: it registered 40% of world pat­
ents between 1985 and 1989. 
However, the European Union's leading position is slowly being eroded: its share fell from 
43% in the period 1975-79 to 40% during the period 1980-84 and 38% during the period 
1985-89. Japan has shown the fastest growth in the number of inventions. 
-A.17 
Inventions in thousands 1975-79 1980-84 1985-89 
EU 
North America 
Japan 
Others 120 
82 
43 
37 136 
97 
68 
43 147 
105 
95 
42 
20. Source: Panorama 
As regards scientific production, the European Union, with 30% of scientific publications 
in 1993 compared with 24% in 1983, comes second after the United States (40%). The 
disciplines in which the European Union has made the greatest progress are clinical medi­
cine, biomedical research, biology, chemistry and science in general. 
Balance of technological payments 
Trade in technology covers imports of technologically complex goods, the purchase of 
technologies (patents, licences, know-how, services with a technical content, etc.) and the 
setting-up and purchase of production and distribution units as part of direct foreign in­
vestment operations. 
Technological imports into the European Union are far higher than technological exports, 
whereas the United States has a large technological trade surplus and Japanese technologi­
cal trade is broadly balanced. 
Technological payments in US$ billion 
1990 Receipts Payments Balance 
EU 
USA 
Japan 13.1 
16.5 
2.3 18.4 
3.1 
2,6 -5.3 
13.4 
-0.3 
Source: OECD 
21. Link between R&D and trade performance (1990) 
The degree to which R&D spending is reflected in an economy's trade performance de­
pends on its capacity to innovate: paradoxically, and in contrast to the situation observed 
in Japan, the European Union's research spending yields a poorer performance on high-
technology markets than on the market in general. 
As % of omtmmmmm Company R&D 
investment High-tech 
exports Total ex-
ports 
EU 
USA 
Japan 
Others 28% 
45% 
21% 
6% 36% 
24% 
19% 
21% 41% 
15% 
13% 
31% 
Source: OECD 
22. Link between technological intensity and wage level (1990) 
High-technology industries generally have high wage levels. Economies with a higher pro­
portion of high-technology industries also have a higher proportion of high wage indus­
tries. 
-A.18-
Share of added value (1990) High tech in­
dustries High wage indus­
tries 
Italy 
UK 
Japan 
USA 
Germany 14% 
20% 
22% 
20% 
21% 16% 
25% 
23% 
29% 
29% 
Source: OECD 
23. Wage level as a function of technological intensity 
The positive correlation between the degree of technological sophistication and the wage 
level is observed everywhere, except in the medium-technology sectors in Japan, Germany 
and the United Kingdom, which have a wage level equal to or higher than that of the high-
technology sectors. 
Total manufacturing = 100 ; High tech-
nology Medium 
technology Low tech-
nology 
UK (1988) 
Germany (1989) 
USA (1989) 
Japan (1989) 108 
U0 
118 
100 108 
116 
112 
115 93 ill • 
il Source: OECD 
-A.19-
EU position on growth markets 
24. Production growth for some sectors in the EU (1986-92) 
Average real annual growth (1986-92) 
niW 1111 111111 w, 11in ru Pharmaceuticals 7.3% 
Plastics processing 7.1% 
Secondary transformation of metals 5.7% 
Telecom equipment 5.4% 
Rubber and plastics 5.3% 
Computer & office equipment 5.1% 
Soft drinks* mineral water 5.0% 
Processing of fruit and vegetables 4.9% 
Motor vehicle parts 4.8% 
Electric lighting 4.6% 
Semi-finished wood products 4,6% 
Cocoa & sugar confectionery 4.5% 
Wooden containers 4.4% 
Constructional steelwork 4.4% 
Paper, printing and publishing 4.3% 
Oils and fats 4.3% 
Sawing and first processing of wood 4.3% 
Bread and flour 4.3% 
Meat 4.2% 
Soaps, detergents, perfumes & toiletries 4.0% 
Pulp, paper & board 4.0% 
Forging 3.9% 
Motor vehicles & parts 3.8% 
Domestic electrical appliances 3.8% 
Compound feed 3.7% 
Processing and preserving of fish 3.7% 
Metal products 3.6% 
Man-made fibres 3.5% 
Paper and board processing 3.5% 
Glass 3.3% 
Wooden furniture 3.3% 
Consumer electronics 3.2% 
Foods, drink & tobacco 3.0% Non-metallic mineral products 2.8% 
Basic industrial chemicals 2.7% 
Optical & photographic equipment 2+6% 
Instrument engineering 2.5% 
Footwear and clothing 2.1% 
Shipbuilding 2.0% 
Grain milling LS% 
Clothing 1.8% 
Clay products 1,6% 
Ceramic goods L6% 
Aerospace equipment 1.6% 
Dairy products L6% 
Cycles and motorcycles 1.5% 
Toys and sports goods L2% 
Railway rolling stock 1.2% 
Boilers & metal containers 1.0% 
Mechanical engineering 0.9% 
Measuring & precision instruments 0.8% 
Foundries 0.6% 
Tobacco 0.4% 
Knitwear 0.3% 
Wine 0.0% 
Brewing & malting 0.0% 
Textile machinery -0.2% 
Alcohol & spirits -0.2% 
Leather & leather goods -0.2% 
Transmission equipment -0.3% 
Musical instruments -1.4% 
Machine tools -1.6% 
Clocks & watches -2.9% 
Agricultural machinery -4.0% 
Furs and fur goods -5.3% 
Source: DEBA 
A.20 
25. Trade balance for some sectors in the EU (1986-92) 
ECU million (1992) (*) (*) 
Mechanical engineering 36 543 0.4% 
Computer & office equipment 11791 1,2% 
Motor vehicles & parts 8 367 -13?. 8% 
Food, drink & tobacco 6 601 15.2% 
Pharmaceuticals 4 889 4.4% 
Metal products 4 647 -6.8% 
Non-metallic mineral prod­
ucts 4 282 -2,4% 
Textile machinery 4 065 7.4% 
Soaps, detergents, perfumes 
& toiletries 3 320 9.3% 
Dairy products 3 221 5.9% 
Alcohol & spirits 3 216 8.4% 
Aerospace equipment 3 010 31.5% 
Machine tools 2 414 -3.5% 
Shipbuilding 2 400 15.7% 
Rubber and plastics 2 317 -9.1% 
Motor vehicle parts 2 181 -15.3% 
Ceramic goods 2 024 2.4% 
Plastics processing 1755 -5.7% 
Agricultural machinery 1429 -4.9% 
Basic industrial chemicals 1322 -18.8% 
Telecom equipment 1295 -12.6% 
Domestic electrical appli­
ances 1247 8.7% 
Railway rolling stock 1209 8.4% 
Cocoa & sugar confectionery 1 149 8.9% 
Constructional steelwork 1 147 -7.9% 
Transmission equipment 1 138 1.6% 
Brewing & malting 1061 2.5% 
Boilers & metal containers 1 022 0.0% 
Tobacco 941 18.7% 
Grain milling 874 10.6% 
Wooden furniture 777 -13.7% Glass 731 -7.9% 
Wine 629 -1.8% 
Bread and flour 568 5.5% 
Electric lighting 494 -2.0% 
Paper and board processing 483 -4.5% 
Measuring & precision in­
struments 468 -6.8% 
Foundries 366 -5.8% 
Soft drinks, mineral water 316 8.0% 
Clay products 194 -3.1% 
Forging 140 -5.0% 
Secondary transformation of 
metals 79 15.9% 
Furs and fur goods 74 -12.3% 
Wooden containers 6 16.7% 
Meat -278 12.6% 
Man-made fibres -348 NA 
Musical instruments -354 7.5% 
Leather & leather goods -510 16.7% 
Optical & photographic in­
struments -1563 13.2% 
Semi-finished wood products -1589 4.7% 
Clocks & watches . -1694 10.0% 
Processing of fruit and vege­
tables -2 088 12.1% 
Oils and fats -2 320 -4.3% 
Processing and preserving of 
fish -2 325 14.3% 
Cycles and motorcycles -2 445 40.6% 
Instrument engineering -2 949 37.9% 
Toys & sports goods -4 592 33.6% 
Sawing and first processing 
of wood -5 466 3.5% 
Knitwear -5 472 50.4% 
Paper, printing & publishing -9 139 6.5% 
Clothing -9 739 23.5% 
Footwear and clothing -10 863 57.6% 
Pulp, paper & board -11875 5.3% 
(*) Annual growth (1986-1992) 
Source: DEBA 
A.21 -
26. Manufacturing output growth forecast (1992-2010) 
The growth forecasts for the main industrial sectors identify the following growth markets: 
Average annual growth in the EU 1992-2010 
Office & EDP equipment 
Rubber & plastics 
Electrical equipment 
Transport equipment 
Pulp, paper and printing 
Mechanical engineering 
Metal products 
Chemicals 
Non-metallic minerals 
AVERAGE 
Miscellaneous products 
Textiles and clothing 
Food, drink & tobacco 
Ore & metals 4.2% 
4.1% 
3.0% 
3.0% 
2.9% 
2.8% 
2.8% 
2+7% 
2.6% 
2.6% 
2.6% 
1.8% 
1.7% 
-1.9% 
27. Source: DR1 
Sectoral specialization of exports of manufactured goods (1992) 
To assess the extent to which industries have succeeded in adjusting to changes in the 
structure of demand, manufacturing subsectors have been grouped into three categories 
according to demand growth: 
strong-demand sectors for which international demand is growing more rapidly 
than economic activity in general (chemicals, pharmaceuticals, office machinery 
and computer equipment, precision and optical instruments, and electrical equip­
ment and machinery); 
moderate-demand sectors for which demand is keeping pace with the average 
growth of the economy (machinery and equipment, transport equipment, food, 
drink and tobacco, paper and printing, rubber and plastics); 
weak-demand sectors for which international demand is growing slowly (ferrous 
and non-ferrous metals, non-metallic minerals, metal products, textiles, clothing, 
leather goods and footwear, and other manufactured products). 
Most of the strong-demand sectors have a high technological content. Conversely, weak-
demand sectors are characterized by low technological content, high natural resources 
and/or labour input and low wage levels. 
The situation of EU industry is marked by a higher level of specialization than the Triad 
average on low-growth markets but a lower level on medium- and high-growth markets. 
Sectoral distribution of manufacturing Weak de- Moderate Strong 
exports (1992). Average = 0 mand demand demand 
EU 
USA 
Japan 19 
-27 
-44 -4 
8 
7 -11 
11 
29 
Source: COMEXT, Commission departments 
- A.22 -
28. Geographical specialization of exports of manufactured goods (1992) 
For our analysis of the geographical specialization of European exports of manufactured 
goods, world markets have been divided into eight economic areas: EFTA, United States 
and Canada, Japan, NICs, China, Latin America, ACP countries and the rest of the world. 
This breakdown shows whether the European Union is performing well on the most dy­
namic international markets, such as Latin America and certain countries in Asia (newly 
industrialized countries and China), where forecast medium-term growth rates exceed 3%. 
Geographical specialization within the Triad is measured by dividing the shares of the 
European Union, the United States and Japan by the Triad average. 
On this basis, we find that the European Union trades mainly with EFTA member coun­
tries and ACP countries, and very little with the NICs, China and Latin America. The 
United States trades mainly with Japan, Latin America and the European Union. Japan's 
trade focuses on the European Union, the United States and Canada, the newly industrial­
ized countries and China. 
Geographical distribution of exports of EU USA Japan 
manufactured goods (1992). 
Average — 0 
NICs -46 -7 79 
Latuiv America -43 98 -49 
China -26 -23 68 
USA + CA -16 -8 34 
Japan -8 95 NA 
Other 49 -46 -22 
ACP 52-31 -45 
EFTA 112 -80 -79 
Source: COMEXT 
29. Sectoral and geographical specialization of EU exports of manufactured goods 
Neither the sectoral not the geographical specialization of the European Union's manufac­
turing industry is optimal. 
Analysis of the sectoral and geographical breakdown of the European Union's exports of 
manufactured goods shows that: 
for sectors with strong demand and high technological content, the European 
Union has a clear specialization only in exports to the ACP countries and Latin 
America; 
for sectors with moderate demand, the European Union is specialized only in 
exports to China; 
the share of the sectors with weak demand in total EU exports is the highest of 
the Triad as regards exports to all geographical areas except China and Latin 
America. 
As regards the most dynamic geographic markets, the European Union has a slight spe­
cialization in strong-demand sectors in its exports to Latin America, a specialization in 
weak-demand sectors in its exports to the newly industrialized countries, and a specializa­
tion in moderate-demand sectors in its exports to China. 
- A.23 
1992 - Average = 0 Weak de­
mand Moderate 
demand Strong 
demand 
EFTA 
USA + CA 
Japan 
NICs 
China 
Latin America 
ACP 
Others 9 
29 
7 
23 
-37 
-12 
0 
15 -5 
-7 
-6 
8 
20 
2 
-5 -3 
-4 
3 
-21 
-7 
4 
13 
2 
Source: COMEXT 
However, the European Union is the only industrial region with a substantial presence in 
all industrial sectors. v 
30. Sectoral specialization trends 
To stimulate growth in manufacturing industry, production capacity must be redirected 
towards products for which demand is strong (office machinery and computer equipment, 
information technology, electrical and electronic equipment and machinery, chemicals and 
pharmaceuticals). The more companies focus on growth markets, the stronger and more 
sustained will be the growth of manufacturing industry. 
Between 1980 and 1990, European industry did not succeed in adjusting as quickly as in­
dustry in the United States and Japan in order to take advantage of openings on growth 
markets: the contribution to value added of European companies producing goods for 
which demand is strong increased less quickly than in Japan, while the contribution of 
sectors with weak growth fell less quickly than in the United States and Japan. 
Gross value added in manufacturing 
(1980-90) 'T EU-6 USA: Japan 
Weak demand sectors 
Moderate demand sectors 
Strong demand sectors -4% 
-1% 
5% -5% 
1% 
4% -9% 
-8% 
17% 
Source: national accounts 
Growth markets: some examples 
31. Data processing and telecommunications industries (1995) 
The world market for data processing and telecommunications is forecast to be worth 
ECU 880 billion in 1995. Of this, 45% will come from data processing (hardware, soft­
ware and services) and 55% from telecommunications equipment and services. 
The European market for data processing and telecommunications is expected to account 
for more than a quarter of the world market - ECU 250 billion in 1995 - of which 45% 
will come from data processing (hardware, software and services) and 55% from tele­
communications equipment and services. 
A.24 
19t95 (in ECU billion) 
Data processing hardware 
Software 
Data processing services 
Telecom equipment 
Telecom services 
Total World 
market EU market 
20% 
8% 
17% 
13% 
42% 
880 18% 
8% 
19% 
10% 
45% 
290 
Source: EITO 94 
32. US information market (1995) 
The US information market is forecast to be worth US$ 995 billion in 1995. Of this, 
45.3% will come from data processing (hardware, software and services) and 25.3% from 
telecommunications equipment and services. The remaining 29.2% is accounted for by 
media markets. 
1995 Annual sales - US$ 
billion Relative share 
Computer and electronic equipment 
Telecom equipment 
Long distance service 
Local & cellular telephone services 
Yellow pages 
Radio 
Video 
Cable TV 
Broadcasting 
Printing & Publishing 
Software and information services 
Total 318 
47 
52 
140 
13 
11 
23 
17 
33 
207 
132 
993 32.0% 
4.7% 
5.2% 
14.1% 
1.3% 
1.1% 
2.3% 
1.7% 
3.3% 
20.8% 
13.3% 
100.0% 
33.' Source: Columbia University, CTIS 
Environment market: breakdown by region and market (2000) 
The market for environmental protection products is growing rapidly, especially in the in­
dustrialized countries. The average rate of growth is estimated to be between 5% and 6% a 
year. The world market is expected to be worth US$ 300 billion in the year 2000. 
In the year 2000, the largest national market is expected to be the United States, accoun­
ting for 38% of the total. Europe is expected to account for 26%. 
The main segments of the environmental protection industry, defined according to their 
final use, are water and effluent treatment, waste management, and air quality monitoring. 
Breakdown by region Breakdown by market 
Others 
Japan 
USA 
Europe 23% Services 
13% Other equipment 
38% Air 
26% Waste 
Water 27% 
11% 
14% 
21% 
28% 
Source: OECD 
- A.25 
34. Environment industry: production and exports (2000) 
The main producers of environmental equipment and services are the United States, Ger­
many and Japan. Production straddles a number of sectors, including industrial machinery, 
electrical equipment, chemicals and services. 
2000 Production (US$ billion) Export rate (as % of production) 
Europe 
USA 
Japan 68 
80 
30 20% 
10% 
6% 
35. Source: OECD 
Top-of-the-range products market - breakdown by segment and growth rate 
Top-of-the-range products are those which can sustain a high price, i.e. a price substan­
tially higher than that of products which are functionally comparable. 
The main top-of-the-range markets are haute couture, motor vehicles, clothing and foot­
wear, cosmetics and perfumes, spirits, wines and champagne, clocks and watches, porce­
lain, crystal glass and silverware, and jewellery. Between 1985 and 1989, all these markets 
recorded annual growth rates of between 4% (porcelain) and 17% (clocks and watches), 
i.e. substantially higher than the average rate of market growth. 
Breakdown by 
segment (1989) Growth rate 
(1986-89) 
Haute couture 
Automobiles 
Fashion accessories, leather goods 
Cosmetics 
Perfumes 
Spirits 
Watchmaking 
Champagne 
Shoes 
Chinaware 
Jewellery 
Wine 
Goldware 
Crystal making 
Total top-of-the-range products 
Total manufacturing industry 23% 
18% 
14% 
10% 
10% 
9% 
4% 
3% 
3% 
3% 
\ 2% 
1% 
1% 
1% 
100% 8.5% 
6.0% 
9.0% 
7.0% 
11.0% 
7.0% 
17.0% 
10.5% 
6.5% 
4.0% 
13.0% 
5.5% 
4.5% 
7.5% 
8.2% 
5.4% 
Source: McKinsey 
36. Top-of-the-range products market - geographical breakdown 
In 1989, the total market for top-of-the-range products was worth ECU 42 billion. Europe 
is the main market for top-of-the-range products, accounting for 43% of the world market 
in 1989. However, demand for top-of-the-range products is growing most rapidly in. the 
United States (13%), followed by Europe (10%) and Japan (7.5%). 
A.2(> 
Geographical breakdown Market share (1989) Annual growth 
(1985-89) 
EU-4 
USA 
Japan 
Others 43% 
32% 
17% 
8% 10.0% 
13.0% 
7.5% 
7.9% 
Source: McKinsey 
37. Health and biotechnology market 
The European Union is world leader in terms of production and exports of pharmaceutical 
products. Total EU production was worth ECU 64 billion in 1992. This sector has a sus­
tained trade surplus. 
The production and consumption of pharmaceuticals increased rapidly from 1983 to 1992, 
at an average real rate of about 7% a year. Exports grew by 2.6% a year, while imports 
grew by an average 5.4% a year: these rates of growth are much higher than the average 
rates for manufacturing industry. 
Pharmaceuticals will remain a rapid growth sector throughout the 1990s on account of 
health concerns and demographic ageing. 
Pharmaceutical products in the EU 
(ECU billion) Apparent con-
sumption Production Exports 
1985 
Ë990 
1995 35 
55 
74 39 
59 
79 6 
iliii 
il 
38. Source: EUROSTAT/DRI 
Specialization in high technology industries 
In 1990, the United States accounted for 24% of OECD exports of high technology prod­
ucts, 13% of exports of medium technology products and 11% of exports of low technol­
ogy products. The European Union, on the other hand, accounted for 36% of OECD ex­
ports of high technology products, 44% of exports of medium technology products and 
41 % of exports of low technology products. 
By specializing in relatively unsophisticated products for which world markets are not 
growing, European industry is becoming increasing exposed to price competition. 
Indeed, European industry is already facing growing competition from the countries of 
South-East Asia for labour-intensive, low- to medium-technology products. 
Specialization index = relative share of high technol-
ogy exports - Average = 0 1970 1992 
EU 
USA 
Japan m 
59 
24 -18 
51 
44 
39. Source: OECD 
High technology products market - EU trade 
The definition of high technology products used here is based on a classification of each 
industry according to its spending on research and development (R&D expenditure as a 
A.27 
proportion of turnover or production). Products which are highly dependent on R&D ex­
penditure are considered to be high technology products. 
At the end of the 1980s, high technology products accounted for about a quarter of the 
value of all trade in manufactured products among developed countries. The value of EU 
exports of high technology products increased from ECU 27 billion in 1978 to some 
ECU 71 billion in 1990, while the value of EU imports had increased fivefold since 1978, 
reaching ECU 93 billion in 1990. 
During the period 1982-1990, EU exports of high technology products increased a little 
more rapidly (59.5%) than total EU exports (47.8%), while during the same period EU 
imports of high technology products increased three times as much (137.8%) as total EU 
imports (38%). In other words, EU imports of high technology products increased at an 
average annual rate of 11.4%, double the rate of increase of EU exports of such products 
(6%). This resulted in a progressive deterioration in the European Union's trade balance in 
high technology products, which went from a surplus of ECU 5 billion in 1982 to a deficit 
of ECU 22 billion in 1990. 
EU trade - ECU billion Exports Imports Balance 
1978 
1984 
1989 27 
59 
71 19 
60 
IP 7 
-1 
-22 
Source: EUROSTAT 
40. High technology products market - level of opening-up 
Analysis of the openness of those economies for which these figures exist shows that the 
propensity to import high technology products is inversely proportional to its capacity to 
export such products. 
Level of opening (1990) Proportion of con-
sumption imported Proportion of pro-
duction exported 
Germany 
UK 
USA 
Japan 33% 
37% 
17% 
7% 15% 
9% 
24% 
19% 
Source: OECD 
41. High technology products market - trade performance 
The European Union's relative trade performance on high technology markets deteriorated 
between 1980 and 1990: the European share of world exports fell from 40% to 36%. 
Trade performance 
(relative share of world exports) 1980 1990 
EU-4 
USA 
Japan 
Others 40% 
25% 
15% 
20% 36% 
24% 
19% 
21% 
Source: OECD 
A.28-
ANNEX III. GRAPHICS 
Exchange rate fluctuations 1. 
Link between industrial production and employment creation in the European Union 2. 
Competitive situation of the European Union 
Market shares of main economic regions 3. 
Total trade in the TRIAD 4. 
EU trade in goods 5. 
Total EU trade balance 6. 
Trade by region (in value terms) 7. 
Trade by region - average annual growth 8. 
Leading importers in world trade 9. 
Leading exporters in world trade 10. 
New industrial economies of Asia 11. 
Foreign direct investment outflows 12. 
EU foreign direct investment 13. 
Intangible investment 
Educational expenditure 14. 
R&D investment by economic region (1991) 15. 
EU R&D investment by sector (1989) 16. 
Growth in R&D investment by companies 17. 
Intensity of R&D investment by companies 18. 
Inventions by region of origin 19. 
Balance of technological payments 20. 
Link between R&D and trade performance (1990) 21. 
Link between technological intensity and wage level (1990) 22. 
Wage level as a function of technological intensity 23. 
EU position on growth markets 
Production growth for some sectors in the EU (1986-92) 24. 
Trade balance for some sectors in the EU (1986-92) 25. 
Manufacturing output growth forecast (1992-2010) 26. 
Sectoral specialization of exports of manufactured goods (1992) 27. 
Geographical specialization of exports of manufactured goods (1992) 28. 
Sectoral and geographical specialization of EU exports of manufactured goods (1992) 29. 
Sectoral specialization trends 30. 
-A.29 
Growth markets: some examples 
Data processing and telecommumcations industries (1995) 31. 
US information market (1995) 32. 
Environment market: breakdown by region and market (2000) 33. 
Environment industry: production and exports (2000) 34. 
Top-of-the-range products market - breakdown by segment and growth rate 35. 
Top-of-the-range products market - geographical breakdown 36. 
Health and biotechnology market 37. 
Specialization in high technology industries 38. 
High technology products market - EU trade 39. 
High technology products market- level of opening-up 40. 
High technology products market -trade performance 41. 
-A.30 
Figure 1: Exchange rate fluctuations 
Figure 2: Link between industrial production and 
employment creation in the European Union 
10% 
5% 
0% 
-5% 
•10% 
1970 1975 1980 1985 1990 
Source: Eurostat. 2% 
1% 
0% 
•1% 
1995 •2% 
Figure 3: Market shares of main economic regions 
as % of world exports of manufactured products 
Source: OECD. 
Figure 4: Total trade in the Triad 
exports (value - billion ECUs) 
US->Japan® 
Japan->US 
balance 
EU->Japan 
Japan->EU 
balance 
EU->US@ 
US->EU 
balance 71.2 
91.9 
•21 
Source: Eurostat & OECD, 
Figure 5: EU merchandise trade 
15% as % of GDP 
13% 
11% 
9% intra-EU trade 
extra-EU exports 
<llgg§llNK> Jjf 
7% 
1970 1975 
Source: Eurostat. 1980 1985 1990 15% 
13% 
11% 
9% 
7% 
Figure 6: Total EU trade balance 
billion ECU 
Source: Eurostat. 
Figure 7: Merchandise trade by region 
billion $US -1992 
Asia 
-> of which Japan 
North America 
-> of which USA 
Latin America 
Middle East 
Africa 
Central and Eastern 
Europe and CIS 
EU (excl. intra EU trade) 
Source: GATT. 0 Imports 
•Exports 
200 400 600 800 
^ 
Figure 8: Merchandise trade by region 
average annual growth (1980-1992) in volume 
Asia 
North 
America 
Western 
Europe 
Latin 
America 
Middle 
East 
Africa 
World 
-4% 
Source: GATT. -2% 0% 2% 4% 6% Imports 
M Exports 
8% 10% 
Figure 9: Leading importers in world trade 
EU (extra-EU) 
USA 
Japan 
Canada 
Hong-Kong 
South Korea 
China 
Taiwan 
Singapore 
Switzerland 
Mexico 
Austria 
Sweden 
Australia 
Thailand 
Malaysia 
700 600 500 400 300 200 100.-OK 2% 4% 6% 8% 10% 12% 14% 16% 
Imports (billion $US -1992) average annual growth 
(1980-92) in volume 
Source: GATT. 
Figure 10: Leading exporters in world trade 
Source: GATT. 
Figure 11: New industrial economies of Asia (*) 
billion $US -1992 
40 
20 
0 
-20 . . 
•• 
EU trade balance 
international investments (**) 
USA Japan 1500 
1000 
500 
0 
•500 
exports 
imports 39.1 
50.7 54.8 
82.6 78.9 
31.5 
(*) Hong-Kong, Taiwan, South Korea and Singapore. 
(**) Investments coming from the EU, USA and Japan in the new industrial economies of Asia. 
Source: OECD. 
Figure 12: Foreign direct investment outflows 
billion ECU 
Source: DRI. 
Figure 13: EU foreign direct investment 
billion ECU 
Source: DRI. 
Figure 14: Educational expenditure 
as % of GDP/GNP 
Source: UNESCO. 
.r-
Figure 15: R&D investment by economic region 
ratio R&D expenditure/GDP (1991) 
EU 
USA 
Japan 
industrialised 
Asia 
World 
0% 
R&D spending/GDP EU 
2% 1% 
USA 
2.8% 2% 
Japan 
3.1% industrialised 
Asia 
2.7% 3% 
World 
2% 
Source: UNESCO. 
Figure 16: R&D investment by sector 
R&D expenditure/industrial production (EU-1989) 
aerospace 
pharmaceutical 
electronics 
chemical 
ground transport 
equipment goods 
other industries 
total 
0% 5% 10% 15% 
Source: OECD. 
\S 
Figure 17: Enterprises R&D investment 
average annual growth rate (current prices and exchange rates) 
l«75-R1 ŒR1-R5 MRfi-R9 fflR9-9? I 
Source: OECD. 
Figure 18: Enterprises R&D investment 
6% R&D as % of turnover (50 big R&D spenders) 
5% 
4% 
3% 
2% mmmmmi^iimmmmam ...WA««*K::::%:::#£::%::^ 
EU «USA ««Japan 
1984 1985 1986 1987 1988 1989 1990 1991 1992 
EU 
USA' 
Japan 2.7% 
2.9% 
'4.2% 2.9% 
3% 
4.6% 4% 
3.5% 
5.3% 4.2% 
3.4% 
5.5% 4.4% 
3.3% 
5.4% 4.3% 
3.4% 
5.5% 4.4% 
3.4% 
5.5% 4.3% 
3.6% 
5.7% 4.5% 
3.7% 
5.8% 
Source: Dable. 
Figure 19: Inventions by region of origin 
in thousands 
160 
140 
120 
100 
80 
60 
40 
20 
0 
EU North America 1975-79 «1980-84 «1985-89 
Japan Others 
1975-79 
1980-84 
1985-89 120 
136 
147 82 
97 
105 43 
68 
95 37 
43 
42 
Source: Panorama of EU Industry. 
Figure 20: Balance of technological payments (*) 
billion $US -1990 
(*) Operations related to elements of industrial property (patent, technical licences, process, know-how, drawings, models) and to services 
with technical content and to intellectual services (engineer studies, technical assistance, R&D services, etc.). 
Source: OECD. 
\3\ 
Figure 21: R&D effort and trade performance 
in % of OECD total (1990) 
EU 
USA 
Japan 
others 
0% 10% 
enterprises 
R&D investment 
high tech exports 
total exports EU 
28.3% 
36.2% 
41.1% 20% 
USA 
45.1% 
23.7% 
14.8% 30% 
Japan 
20.5% 
19.1% 
12.8% 40% 50 
others 
6.1% 
21% 
31.3% 
Source: OECD. 
Figure 22: Technological intensity and wages 
30% 
25% 
20% 
15% 
10% 
5% 
0% share in the added value -1990 
high tech industries^) Bhigh wage industries( 
Germany 
high tech industries!*) 
high wage industriesf**) 19.7% 
24.8% 21.9% 
23% 20% 
28.6% 20.5% 
28.9% 
(*) High technology industries include aerospace, EDP, radio and telecom equipment, electrical machinery, pharmaceutical products and precision 
instruments. 
(**) High wage industries include industries in which wages are 15% above average. 
Source: OECD. 
^>, 
Figure 23: Wage level and technological intensity^) 
total manufacturing = 100 
120 
110 
100 
90 
80 high technology •medium technology Blow technology 
UK (1988) Germany (1989) USA (1989) Japan (1989) 
high technology 
medium technology 
low technology 108 
108 
93 110 
116 
83 118 
112. 
86 100 
115 
91 
(*) Industries are grouped according to the R&D intensity which is defined as the R&D/turnover ratio. 
Source: OECD. 
^?. 
Fig. 24: Production growth for some industrial sectors in the EU 
Pharmaceuticals 
Plastics processing 
Secondary transformation of metals 
Telecom equipment 
Rubber and plastics 
Computer & office equipment 
Soft drinks, mineral water 
Processing offrait and vegetables 
Motor vehicles parts 
Electric lighting 
Semi-finished wood products 
Cocoa & sugar confectionery 
Wooden containers 
Constructional steelwork 
Paper, printing & publishing 
Oils and fats 
Sawing and first processing of wood 
Bread and flour 
Meat 
Soaps, detergents, perfumes & toiletries 
Pulp, paper & board 
Forging 
Motor vehicles & parts 
Domestic electrical appliances 
Compound feed 
Processing and preserving of fish 
Metal products 
Man-made fibres 
Paper and board processing 
Glass 
Wooden furniture 
Consumer electronics 
Food, drink & tobacco 
Non-metallic mineral products 
Basic industrial chemicals 
Optical & photographic instruments 
Instrument engineering 
Footwear and clothing 
Shipbuilding 
Grain milling 
Clothing 
Clay products 
Ceramic goods 
Aerospace equipment 
Dairy products 
Cycles and motorcycles 
Toys & sports goods 
Railway rolling stock 
Boilers & metal containers 
Mechanical engineering 
Measuring & precision instruments 
Foundries 
Tobacco 
Knitting 
Wine 
Brewing & malting 
Textile machinery 
Alcohol & spirits 
Leather & leather goods 
Transmission equipment 
Musical instruments 
Machine tools 
Clpcks & watches 
Agricultural machinery 
Furs and fur goods 
-6% -4% -2% 0% 2% 4% 6% 8% 
average real annual growth (1986-92) 
Source: DEBA. 
tfs^ 
Fig.25: Trade balance for some industrial sectors in the EU 
Mechanical engineering 
Computer & office equipment 
Motor vehicles & parts 
Food, drink & tobacco 
Pharmaceuticals 
Metal products 
Non-metallic mineral products 
Textile machinery 
Soaps, detergents, perfumes & toiletries 
Dairy products 
Alcohol & spirits 
Aerospace equipment 
Machine tools 
Shipbuilding 
Rubber and plastics 
Motor vehicles parts 
Ceramic goods 
Plastics processing 
Agricultural machinery 
Basic industrial chemicals 
Telecom equipment 
Domestic type electrical appliances 
Domestic electrical appliances 
Railway rolling stock 
Cocoa & sugar confectionery 
Constructional steelwork 
Transmission equipment 
Brewing & malting 
Boilers & metal containers 
Tobacco 
Grain milling 
Wooden furniture 
Glass 
Wine 
Bread and flour 
Electric lighting 
Paper and board processing 
Measuring & precision instruments 
Foundries 
Soft drinks, mineral water 
Clay products 
Forging 
Secondary transformation of metals 
Furs and fur goods 
Wooden containers 
Meat 
Man-made fibres 
Musical instruments 
Leather & leather goods 
Optical & photographic instruments 
Semi-finished wood products 
Clocks & watches 
Processing of fruit and vegetables 
Oils and fats 
Processing and preserving of fish 
Cycles and motorcycles 
Instrument engineering 
Toys & sports goods 
Sawing and first processing of wood 
Knitting 
Paper, printing & publishing 
Clothing 
Footwear and clothing 
Pulp, paper & board 1986 
1992 
I I L_J I I I L J I I L 
-20 -10 0 10 20 30 40 
billion ECU 
Source: DEBA. 
Figure 26: Production growth in manufacturing 
average annual growth forecast in the EU (1992-2010) in volume 
office & EDP 
rubber & plastics 
electrical equipment 
transport equipment 
pulp, paper and printing 
mechanical engineering 
metal products 
chemicals 
non-metallic minerals 
AVERAGE 
miscellaneous products 
textiles and clothing 
food, drink & tobacco 
ore & metals 
-2% -1% 0% 1% 2% 3% 4% 5% 
Source: DRI. 
Figure 27: Specialisation of exports 
sectoral distribution of manufacturing exports (1992) 
20 
0 
-20 
-40 •weak demand 
S moderate demand 
•strong demand 
weak demand 
moderate demand 
strong demand 19.3 
'•4.3 
•10.5 •27.4 
8.4 
10.8 
Specialisation index = market share in a given sector compared to average market share of the TRIAD. 
Strong demand sectors = chemicals, pharmaceuticals, EDP, precision and optical instruments and electrical goods. 
Moderate demand sectors = machinery, transport equipment, food, beverages and tobacco, paper and printing products, and rubber and 
plastics. 
Weak demand sectors = metals, non-metallic minerals, metal products, textiles, clothing, leather and footwear, and other manufactured 
products. 
Source: Eurostat, Commission services. 
^ 
Figure 28: Specialisation of exports 
geographical distribution of manufacturing exports (1992) 
100 
50 
0 
-50 
• EU • USA. • Japan «te 
&$> 
VA' 
fi**,/ *'' 
NICs Latin 
America China USA+CA Japan Other ACP EFTA 
EU 
USA 
Japan •46 
•6.7 
79.4 •43.2 
97.8 
•48.9 •25.7 
•23.4 
67.8 •16.2 
•7.6 
34.2 •7.8 
94.5 49.2 
•45.7 
•22.2 ™r»'*| ^Z I 1^1 I ^ I ^ I I ÎZÏ L 
specialisation index = market share in a given sector compared to average market share of the TRIAD 52.4 
•30.8 
•44.9 111.6 
•79.5 
•79.1 
Source: Eurostat. 
^0} 
Figure 29: Specialisation of EU exports 
geographical and sectoral distribution of manufacturing exports (1992) 
Specialisation index = market share in a given sector compared to average market share of the TRIAD. 
Strong demand sectors = chemicals, pharmaceuticals, EDP, precision and optical instruments and electrical goods. 
Moderate demand sectors = machinery, transport equipment, food, beverages and tobacco, paper and printing products, and rubber and plastics. 
Weak demand sectors = metals, non-metallic minerals, metal products, textiles, clothing, leather and footwear, and other manufactured products. 
Source: Eurostat. 
k 
Figure 30: Sectoral specialisation of industry 
20% 
15% 
10% 
5% 
0% 
•5% 
10% evolution of gross value added in manufacturing (1980-90) 
IB EU-6 EHUSA • Japon 
weak demand sectors moderate demand sectors strong demand sectors 
EU-6 
USA 
Japon •3.8% 
•5.3% 
•9.4% -1.2% 
1% 
•7.7% 5% 
4.2% 
17.2% 
Strong demand sectors = chemicals, pharmaceuticals, EDP, precision and optical instruments and electrical goods. 
Moderate demand sectors = machinery, transport equipment, food, beverages and tobacco, paper and printing products, and rubber and plastics. 
Weak demand sectors = metals, non-metallic minerals, metal products, textiles, clothing, leather and footwear, and other manufactured products. 
Source: National accounts. 
\ 
Figure 31: Data processing and telecom markets 
(1995) 
world market = ECU 880 Bn European market = ECU 290 Bn 
hardware 
software 
data services hardware 
telecom 
equipment telecom 
services software 
data services 
telecom 
equipment telecom 
services 
Source: EITO 94. 
Figure 32: U.S. Information market 
1995: $995 Billion = 16% of GDP Computer & 
Electronic 32.0% 
Telecom 
Equipment 4.7% 
Long Distance 
Service 5.2% 
Local & Cellular 
Telep 14.1% 
Yellow Pages 1.3% 
Radio 1.1% 
Video 2.3% 
Cable TV 1.7% 
Broadcast 3.3% 
Printing & 
Publishing 20.8% 
Source: Columbia Univ., CTIS - U.S. Industrial Outlook - BellSouth Corp. - NBI, Inc. Software & 
Info. Servi 13.3% 
Figure 33: Environment market 
breakdown by region and market (2000) 
Others 
Japan Europe Services 
Other 
equipment 
USA Water 
Waste 
Source: OECD 1992, 
Figure 34: Environment industry 
20 production (billion $US - 2000) 
40 60 80 
Europe 
USA 
Japan 
0% ^^^M WÊÊÊÊÊÊÊmfrW 
5% 10% 15% 
export rate (as % of production - 2000) 20% 
i production 
exports Europe 
68 
20% USA 
80 
10% Japan 
30 
6% 
Source: OECD, 
Figure 35: Top of the range products market 
haute couture 
automobile 
fashion accessories, leather goods 
cosmetic 
perfumery 
spirits 
watch making 
champagne 
shoes 
chinaware 
jewellery 
wine 
silver & goldware 
crystalware 
total top of the range products 
total manufacturing total top of the range products 
= 100% 
25% 20% 15% 10% 5% 0% 5% 10% 15% 20% 
breakdown by segment (1989) growth rate (1985-89) 
Source: McKinsey. 
Figure 36: Top of the range products market 
geographical breakdown 
EU-4 
USA 
Japan 
other ••••• *'• T7m^ *'*< 
50% 40% 30% 20% 10% 
worldwide market share (1989) 0% 5% 10% 
average annual growth (1985-89) 
! market share M 
(1989) 
annual growth il 
i (1985-89) EU-4 
43% 
10% USA 
32% 
13% Japan 
17% 
7.5% other 
8% 
7.9% 
Source: McKinsey. 
Figure 37: Health and biotechnology market 
100 pharmaceutical products in the Ell (billion ECU) 
80 
60 
40 
20 
0 ««apparent consumption 
«production 
"•exports 
*àê 
«*S0 ^stfSSiPP*5' .^gP*^ Safe-". 
1985 
Source: Eurostat / DRI. 1990 1995 
Figure 38: Specialisation in high tech industries 
specialisation index = relative share of high technology exports (*) 
EC 
USA 
Japan 
-20 0 20 40 60 
1970 
1992 EC 
-14 
-18 USA 
59 
51 Japan 
24 
44 
(*) The definition of high technology products is related to the level of intensity ofR & D (ratio R&D expenditures/production). High 
technology industries include aerospace, EDP, radio and telecom equipment, electrical machinery, pharmaceutical products and 
precision instruments. 
Source: OECD. 
Figure 39: High technology products market (*) 
100 
80 
60 
40 
20 EU trading - billion ECU 
"Exports 
Imports 
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 
(*) The definition of high technology products is related to the level of intensity ofR & D (ratio R&D expenditures/production). 
Source: Eurostat. 
Figure 40: High technology products market (*) 
level of opening up (1990) 
Germany 
UK 
USA 
Japan I imported share 
of consumption 
I exported share 
of production 
0% 10% 20% 30% 40% 
imported share 
of consumption 
exported share 
of production Germany 
32.8% 
14.6% UK 
37% 
9.2% USA 
17.4% 
23.7% Japan 
7.4% 
19.1% 
(*) The definition of high technology products is related to the level of intensity of R&D (ratio R&D expenditures/production). High technology 
markets include aerospace, EDP, radio and telecom equipment, electrical machinery, pharmaceutical products and precision instruments. 
Source: OECD. 
Figure 41: High technology products market (*) 
trade performance (relative share in world exports) 
39.6% 
36.2% USA 
25.1% 
23.7% htWm 
Others 
15.3% 
19.1% 20% 
21% 
(*) The definition of high technology products is related to the level of intensity ofR & D (ratio R&D expenditures/production). High 
technology markets include aerospace, EDP, radio and telecom equipment, electrical machinery, pharmaceutical products and 
precision instruments. 
Source: OECD. 
COMMUNICATION FROM THE 
COMMISSION ON AN INDUSTRIAL COMPETITIVENESS 
POLICY FOR THE EUROPEAN UNION 
FINANCIAL STATEMENT 
1. TITLE OF OPERATION 
An industrial competitiveness policy for the European Union. 
2. BUDGET HEADING INVOLVED: 
See point 7.2. 
3. LEGAL BASIS 
Treaty on European Union and, in particular, Articles 3 and 130 thereofj Title XIII 
on industry, Title XV on research and technological development (Articles 13 Of 
et seq.), Title VIII on social policy and industrial changes (Article 123) and 
Title XII on trans-European networks. 
4. Description of operation 
4.1 Specific objectives of operation 
• To make European industry more competitive. 
• To coordinate the consultations between the Member States and the decentralized 
authorities: 
=> by taking general horizontal measures under a series of common policies (on 
research, networks and foreign trade); 
=> by taking specific measures to help industry to adapt to structural changes more 
effectively, to create an environment conducive to initiative, to the development of 
undertakings and to cooperation between undertakings and to foster fuller 
exploitation of the industrial potential of innovation, research and technological 
development policies. 
4.2 Duration 
The action proposed in this communication forms part of a continuous industrial 
policy. 
,^n 
4.3 Target population 
Member States, regional and local authorities, businesses, etc. 
5. CLASSIFICATION OF EXPENDITURE OR REVENUE 
5.1 Non-compulsory expenditure. 
5.2 Differentiated appropriations. 
5.3 Type of revenue involved. 
Not applicable. 
6. TYPE OF EXPENDITURE OR REVENUE 
Specific arrangements are planned for each measure referred to in point 7.2. 
7. FINANCIAL IMPACT 
7.1 Method of calculating total cost of operation 
This communication and the action provided for therein will have no fresh impact 
on the budget. 
7.2 Itemized breakdown of cost 
This communication will have no additional impact on the budget and fits in with 
the financial perspectives for 1993 to 1999. 
7.3 Operating expenditure on studies, meetings of experts, etc. 
Not applicable. 
7.4 Indicative schedule of commitment appropriations 
Not applicable. 
8. ELEMENTS OF COST-EFFECTIVENESS ANALYSIS 
8.1 Specific and quantifiable objectives; target population 
To make industry more competitive, closer coordination will be needed, partly via 
a series of common policies, particularly on research, cohesion, vocational 
training, networks and foreign trade, and partly by closer consultation between the 
Member States. The priority actions, already identified in the White Paper on 
growth, competitiveness and employment, will be to promote intangible 
investment, to develop industrial cooperation, to ensure fair competition and to 
modernize the role of the public authorities. 
8.2 Grounds for the operation 
European industry is making an unprecedented effort to restructure and innovate 
in order to boost its competitiveness on the world market. In particular, these 
efforts must enable it to withstand the changes in the international context (marked 
by the geopolitical upheaval and the conclusion of the Uruguay Round) and the 
mounting international competition, partly from undertakings with the advantage 
of less stringent social, regulatory or fiscal constraints, together with the economic 
recession, the rapid development of combinations of technological innovations 
(information technology, biotechnology, new materials, etc.) which have led to 
intangible investment (in research, patents, training, software, etc.) growing faster 
than capital investment and the inadequacy of the major European networks for 
reaping maximum benefit from the revolution in progress in the 
telecommunications and information sectors. 
Cost: 
Not applicable 
Spin-offs 
8.3 Evaluation 
Regular evaluations are provided for by the specific procedures for each measure 
mentioned in point 7.2. 
In addition, the Commission must submit an annual report on competitiveness to 
the Council from 1994 on. 
9. ADMINISTRATIVE EXPENDITURE 
The action provided for in this communication comes under a number of common 
policies and is covered by the general headings mentioned in paragraph 7.2. It will 
have no additional impact on the budget. Nevertheless, the expansion of certain 
activities and, in particular, the growing coordinating role to be played by the 
European Union, as defined in Title XIII of the Treaty on European Union, could 
probably generate requests for extra staff. However, no firm estimates can be 
made at this juncture, before analysing the requirements in detail, with the 
Member States where appropriate. 
y/?< 
ISSN 0254-1475 
COM(94) 319 final 
DOCUMENTS 
EN 0113 IO 
Catalogue number : CB-CO-94-417-EN-C , 
ISBN 92-77-80657-5 
Office for Official Publications of the European Communities 
L-2985 Luxembourg