Opinion on the communication from the Commission on an industrial competitiveness policy for the European Union (96/C 100/03)

On 15 November 1994, the Bureau of the Committee of the Regions, acting under Article 198c of the Treaty establishing the European Community, decided to draw up an Own-initiative Opinion on the above-mentioned communication.

Commission 1 for Regional Development, Economic Development and Local and Regional Finances of the Committee of the Regions, which was responsible for drawing up the Committee's work on the subject, adopted its Opinion on 17 March 1995. The Rapporteur was Mr Jean Kaltenbach.

At its 7th Plenary Session on 20 and 21 April 1995 (meeting of 21 April), the Committee of the Regions adopted the following Opinion.

THE COMMITTEE OF THE REGIONS,

With reference to Article 130 of the Treaty on European Union, comprising its Title XIII 'Industry`, under which the Community and Member States shall ensure that the conditions necessary for the competitiveness of industry exist; and, more specifically, with reference to Article 130(3), which states that the Community shall contribute to the achievement of these objectives through the policies and activities it pursues under the provisions of the Treaty;

Noting:

- the 1990 Commission communication on the guidelines for an industrial policy in an open and competitive environment,

- the December 1993 Commission White Paper on growth, competitiveness and employment and the COR Opinion (CdR 85/94) thereon,

- the July 1994 Commission communication on 'Europe's way to the information society: An action plan`, and the COR Opinion (CdR 231/94) thereon,

- the Commission communication on an integrated programme in favour of SMEs and the craft sector, and the COR Opinion (CdR 18/95) thereon;

Whereas EU unemployment levels continue to be very high;

Whereas without industrial competitiveness, it will be impossible to create enough jobs and take up the new challenges facing the Community, the Member States and the Regions;

Given the need to strengthen economic and social cohesion within the European Union;

Given the need to improve the competitiveness of the regions within the framework of this policy,

issues the following Opinion.

INTRODUCTION

A. The competitiveness of European industry has improved considerably over the last few years. This is clear from the turnaround in the EU trade balance, the improvement in corporate finances, and the trend in unit labour costs. Headway is being made in all these areas within the European Union, particularly when compared to the USA and Japan.

B. These positive aspects aside, European companies are facing new challenges and are still to be found wanting in some important areas. International competition grows ever keener, and on top of this, there are other, diverse developments, such as the increasing importance of new technologies, the way in which the effects of geopolitical upheaval are dealt with, and the inadequate presence of European industry in rapidly developing markets. All these factors make corporate life more difficult, particularly as far as SMEs and the employment situation are concerned. Furthermore, EU productivity is increasing less rapidly than in the USA and Japan, and the research effort is insufficient to cope with market demands.

C. Although it is generally accepted (cf. the 1990 communication) that 'it is primarily up to businesses to ensure that they are competitive`, the public authorities have a duty to create a favourable environment for industrial competitiveness. In order to organize and focus action on job creating growth markets, the Commission has designated four priority action-areas:

- promotion of intangible investment;

- development of industrial cooperation;

- ensuring fair competition;

- modernization of the industrial role of the public authorities.

GENERAL COMMENTS

THE COMMITTEE OF THE REGIONS:

1. notes the Commission's analysis of the industrial competitiveness policy for the European Union, of the new challenges and of possible action to achieve sustainable economic growth;

2. welcomes the Commission communication's global approach to industrial competitiveness and endorses the idea that public policies must, of necessity, be complementary in order to create an environment conducive to competitiveness at Community, national and regional level;

3. feels that aid to less-favoured regions must lead to greater overall competitiveness in the Union, and backs the theory that industrial competitiveness and economic and social cohesion must each reinforce each other, as stated in the 5th Commission report on the socio-economic situation and trends in the EU regions;

4. would point out however that the demands of economic and social cohesion must not stand in the way of competitiveness;

5. believes the effects of the structural funds on regional economies to be key factors in achieving the convergence which is crucial to the completion of economic and monetary union;

6. endorses the statement in the communication that the persistently high levels of unemployment in Member States are a particularly serious obstacle to cohesion, to willingness to accept the changes required, and to innovation. The COR therefore calls for European industry policy to take greater account of employment aspects;

7. would point out that, in addition to the economic disparities between the regions, industrial conversion and transformation have produced complex, diverse changes within the EU, as well as developments, which could lead to new locational patterns;

8. welcomes the fact that the priorities outlined in the communication are consistently tailored to market requirements;

9. regrets however that the proposed method sometimes reads like a statement of intention, and would ask the Commission to prepare an operational implementation programme which considers industrial competitiveness within the context of the sustainable development model proposed in the Delors White Paper;

10. would point out that this is all the more necessary since companies - especially SMEs - are particularly involved in regional and local affairs. Regional and local authorities are especially interested in this policy as this is a key issue in the long term sustainable development of local and regional economies.

Promotion of intangible investment

THE COMMITTEE OF THE REGIONS:

11. subscribes to the theory that intangible investment is a key factor in industrial competitiveness, since it provides a response to corporate needs and market trends, and can even anticipate them;

12. believes that the promotion of intangible investment should be underpinned by public action, and particularly by the tax incentives Member States have at their disposal;

13. feels that investment behaviour has been altered by economic changes, particularly the emergence of sophisticated new markets and by new requirements such as the demand for 'total quality` products or respect for the environment. The Committee believes that public action should be taken by regional and other authorities to help firms - particularly SMEs and small and medium-sized industries - recognize these changes and adapt to them, for instance anticipating training and research requirements;

14. notes with interest the argument that employment prospects are more favourable in sectors which make systematic use of new technologies;

15. endorses the belief that life-long vocational training and an overall improvement in skills are vital to the pursuit of competitiveness, and emphasizes that the regions have particular responsibility in this area;

16. underlines the importance of the European Structural Funds including the use of Objective 4;

17. shares the conviction that research must be stepped up continually, and that development of the EU's research effort will largely determine its ability to compete successfully in the global marketplace;

18. recommends concentrating on applied research and optimal dissemination of findings, in particular, via public and private sector cooperation schemes, and via partnership and know-how transfer networks, including inter-regional ones;

19. believes that SMEs and small and medium-sized industries - particularly in isolated and less-favoured regions - can make a contribution to overall EU competitiveness by playing an active role in partnership and know-how transfer networks;

20. notes that there are considerable practical difficulties in implementing these recommendations, particularly those concerning dissemination of R& D findings, and know-how transfers. These difficulties are to be found in the areas of intellectual property and legal cooperation frameworks. The Committee would point out that the Commission communication makes no suggestions for these areas;

21. reiterates the point made in the White Paper, that R& D work designed to achieve keener industrial competitiveness will only be useful if it takes environmental compatibility into account;

22. underlines the fact that technological research and know-how must be applied to the environmental issues in which the regions are heavily involved.

Development of industrial cooperation

THE COMMITTEE OF THE REGIONS:

23. endorses the view that industrial cooperation is, above all, the responsibility of businesses, and welcomes the fact that, despite the continuing economic difficulties worldwide, industrial cooperation between EU companies has intensified;

24. emphasizes, however, the urgent need for Community, national and regional authorities to work even harder to create the best possible conditions for the promotion of industrial cooperation;

25. endorses the view that removing legal obstacles, particularly to definition of an adequate legal framework for industrial cooperation, and to the protection of intellectual property rights, would make industrial cooperation more efficient and lead to greater activity in this area; the Committee consequently urges the Member States to adopt a constructive attitude to these issues;

26. warmly welcomes the Commission proposal to bolster growth markets by using the Structural Funds through transnational initiatives, and would emphasize that the regions are particularly concerned by this type of action, which could be introduced in programmes such as Interreg. The Commission should take all appropriate steps to encourage through whatever means necessary Member States, regional and local authorities to use the Structural Funds and the Community initiatives (especially the transnational initiatives) to the maximum in order to encourage industrial competitiveness;

27. endorses the Commission proposal to step up cooperation with the countries of Central and Eastern Europe and to concentrate - mainly through the Phare programme - on concrete economic action, such as aid for financial engineering and for the development of corporate standardization and certification procedures. It is the Committee's belief that these measures will smooth the way for eventual integration in the European Union;

28. believes that measures for promoting industrial cooperation will be all the more effective if they involve firms in both the countries of Central and Eastern Europe and EU countries. Consequently, the Committee endorses the Commission proposal to promote financial assistance for CEEC companies, within the framework of concrete projects, as an adjunct to existing aid facilities (Phare and EIB loans). The COR particularly welcomes the plan to guarantee a portion of investment by EU companies, which must be able to exploit the scope offered by these new markets;

29. accepts that the material promotion of cooperation with the countries of Central and Eastern Europe should focus on microeconomic and financial aspects, but would wish that room could also be found for intangible investment, particularly in training, and for the promotion of regional and cross-border cooperation between EU and CEEC regions;

30. welcomes the proposal to extend 'Industrial Round Tables` - already up and running in certain countries (Japan, Baltic countries) - to CEECs, in order to enable industrial representatives from those countries to identify their mutual interests; and emphasizes the case for adopting a pragmatic, sectoral approach towards developing cooperation;

31. welcomes the Commission proposals to make better use of the existing instruments for cooperation with Latin American, Mediterranean and Asian countries; and believes that any measures to promote business cooperation networks between the EU and these countries can only be beneficial;

32. notes that industrial cooperation with ALAMED, CEEC and Asian countries would benefit from an analysis of the legal questions outlined in point 22, and would point out that the Commission communication makes no mention of these problems.

Fair competition

THE COMMITTEE OF THE REGIONS:

33. notes with interest the view that the international economy is increasingly organized around powerful regional trade blocs, and notes that 'discriminatory` bilateral agreements, contrary to the principles of the multilateral trading system, are increasingly common;

34. is concerned that the competition practices adopted in certain third countries and regional trade blocs do not necessarily ensure a level playing field for all businesses, particularly for European businesses;

35. understands the need to strike a balance between the exigencies of competition and the advantages to be gained from strategic alliances, particularly where industrial cooperation is conducive to competitiveness. It would point out, however, that the Commission provides no precise recommendations as to how this balance is to be achieved;

36. warmly welcomes the proposal to strengthen trade links with those countries and regions, such as the Mediterranean countries and the CEECs, which make up a particularly active trade area with the European Union; and welcomes concrete measures to bolster the economic integration of the countries in the area;

37. emphasizes the need to step up the fight against fraud in trade between the EU and third countries, and notes that the communication touches briefly on this problem;

38. shares the view that promotion of more open international trade and action to step up competition within the single market should be considered as complementary, and as determining factors in improving industrial competitiveness;

39. feels that monitoring state aid is perfectly in keeping with the aim of achieving optimal performance of the single market, but would also emphasize that this aim needs a clear approach to the role of regional aid to businesses;

40. emphasizes that, whilst strict monitoring of public aid remains the best guarantee of corporate competitiveness and protects the regions from the risk of dangerous outbidding, it is important to ensure that aid monitoring does not hinder investment, which is the cornerstone of corporate competitiveness;

41. therefore emphasizes the need:

- to ensure that monitoring procedures do not treat SMEs less favourably than large companies, which sometimes enjoy special treatment, to the surprise of SMEs;

- to retain or even promote regional and local borrowing - guarantee arrangements which facilitate SME investment without distorting competition;

42. regrets that the communication does not give details of the proposed measures for possible changes to the arrangements for monitoring aid, and feels that the wish to implement these changes rapidly should not overshadow the need for a detailed evaluation of the situation, or prejudice decisions on whether to phase in these changes over a period of time;

43. welcomes the attempt to ensure consistency between monitoring of State aid and the arrangement for Community financing under structural and non-structural policies.

Modernizing the role of the public authorities

THE COMMITTEE OF THE REGIONS:

44. shares the view that current economic trends require a new response, not just from businesses but also from Community, national, regional and local authorities; agrees that European businesses have to rely all too often on the authorities' ability to react and adapt to new conditions in the market;

45. welcomes action in favour of corporate competitiveness, such as those Community initiatives which offer outstanding opportunities for setting up partnership networks between businesses, especially big businesses and SMEs;

46. emphasizes that transnational and inter-regional partnership networks will have to be set up in order to provide training in these new administrative procedures for officials from Member States and regional authorities;

47. feels that the countries of the EU trading area, such as the CEECs and the countries on the Mediterranean flanks, could usefully take part in these networks;

48. is particularly interested in the positive action on the exchange of data between public authorities and access to information, particularly through telecommunications networks; and feels that these networks could have a positive influence on the efficiency and response-time of local and regional administrations;

49. emphasizes that Community initiative programmes provide regional and local bodies with an excellent opportunity to combine their first-hand knowledge of the local economy with their capacity for initiative and innovation; and that this active role in providing a stimulus and focused information about the opportunities afforded by Community schemes is totally in keeping with the notion of a modern regional or local administration. Regional and local authorities should foster partnerships enabling SMEs to exploit R& D findings and technological innovation;

50. believes, finally, that modernization of the role of the public authorities requires a new, more innovative evaluation of public action to boost competitiveness. This could, for example, include improving the cultural attractions of the regions and the quality of public services, since these aspects obviously play an important role in the general environment for businesses.

Done at Brussels, 21 April 1995.

The Chairman of the Committee of the Regions

Jacques BLANC