Opinion of the Committee of the Regions on 'The competitiveness of European enterprises in the face of globalisation - How it can be encouraged'
Date: 1999-11-18
Institutions: European Committee of the Regions
Subjects: European undertaking, competitiveness, international market

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Opinion of the Committee of the Regions on ‘The competitiveness of European enterprises in
the face of globalisation — How it can be encouraged’

(2000/C 57/05)

THE COMMITTEE OF THE REGIONS,

the Communication from the Commission entitled ‘The competitiveness of European enterprises in the
face of globalisation — How it can be encouraged’ (COM(1998) 718 final);

having regard to the decision taken by the Commission on 25 January 1999, under the first paragraph of
Article 198c of the Treaty establishing the European Community, to consult the Committee of the
Regions on the matter;

having regard to the decision taken by its Bureau on 10 March 1999, under the fourth paragraph of
Article 198c of the Treaty establishing the European Community, to draw up an opinion on this matter
and to instruct Commission 6 for Employment, Economic Policy, Single Market, Industry and SMEs to
undertake the preparatory work;

having regard to the draft opinion (CdR 134/99 rev. 1) adopted by Commission 6 on 27 September
1999 (rapporteur: Mr Joseph, F-PSE),

adopted the following opinion, by a unanimous vote, at its 31st plenary session, held on 17 and
18 November 1999 (meeting of 18 November).

1.

Introduction

1.1.
The Committee of the Regions welcomes the Commis-
sion’s communication, which seeks to flesh out courses of
action to tackle EU competitiveness at a time of more rapid
movement towards the establishment of a global economy. It
is important to initiate discussion of the instruments which
need to be introduced if we are to move from words to action.
The Committee of the Regions fully intends to contribute to
this discussion.

1.2.
There is no doubt that the most appropriate level for
introducing policies and tools is the EU level, provided that
the subsidiarity principle is applied wherever necessary at
national and local
is a
clear-cut concept. The term ‘competitiveness of geographical
areas’ is, however, somewhat nebulous.

‘Competitiveness of

levels.

firms’

Globalisation is undoubtedly an unavoidable process.
1.3.
In this opinion we should clearly not concern ourselves with
assessing whether globalisation is the best way to achieve
economic and social development. Instead, we must consider
how to place the EU in an optimal position for confronting
tomorrow’s world. Not just the optimal economic position in
terms of market share. The goal is to meet public aspirations
in the EU with respect to level and quality of life, to set the EU
on course for sustainable development and to prepare a
framework of prosperity, respect for human rights and the
environment, and peace and interchange with all the peoples
of our planet.

1.4.
The Committee of the Regions is however surprised at
the very negative assessment in the Commission’s communica-
tion of the situation of the EU and of EU enterprises in the face
of globalisation. There is no doubting the need to draw up a
hard-hitting assessment of EU strengths and weaknesses in
order to enable a debate to be held on the approach to be
pursued and the measures to be implemented. Although the
Commission’s Communication provides an accurate analysis
of a number of shortcomings in the EU situation, it makes
only passing references to the positive aspects of the EU’s
potential and the success of the ‘European model’ which has
made it possible to build a united Europe based on solidarity.
The constant references, on the other hand, to the success of
the ‘US model’ disguises the fact that this model also has its
own downsides (growing inequality and poverty, violence,
etc.) and the fact that, by definition, a development model has
elements of an ideological, historical, cultural, etc. nature and
cannot be regarded as entirely transferable. It is, of course,
perfectly possible to find in the ‘US model’, as in other models,
concepts which will enable us to pinpoint effective courses of
action. The Japanese model, for example, is one of the factors
behind the establishment of the major EU cooperative research
programmes. Irrespective of these arguments, our task is to set
out a blueprint for the construction of a Europe based on
fairness and strength and promoting the success of EU
enterprises in the global market place.

Although it is not fully complete (with regard to aspects
1.5.
such as services and intellectual property) the construction of
the European single market is an initial success. It is currently
the largest internal market in the world at a time when it is
unanimously agreed that the size of the US market remains a
decisive factor in US competitiveness. EU cooperative research
has been marred by a number of shortcomings, but the overall

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performance is positive. This model, based on the Framework
Programmes and the Structural Funds, has succeeded in
strengthening both EU competitiveness and economic and
social cohesion in the EU (1).

fact that many enterprises have more than one place of
business and therefore operate in an economic area which
does not generally match the borders of the relevant geographi-
cal area.

Any analysis should take account of

1.6.
the historic
process of European integration and globalisation. In neither
of these cases can the process be regarded as complete. This
implies,
in particular, that the ways in which the world
economy operate are not immutable. The rules of the game
have not been finally established. It is up to the EU to find
ways of ensuring that it is involved in the formulation of these
rules and is able to turn them to its advantage (2). In its
communication the Commission highlights the importance of
the current and future negotiations on international trade and
direct international investment. Although it is a matter of the
utmost concern, the construction of a global economic system
cannot be defined in terms only of international trade carried
out on the basis of the doctrine of free trade. We must adopt a
broader perspective and consider how to put Europe in a
position of strength, whilst at the same time maintaining both
its specific characteristics and its diversity. It is for this reason
that the Europe of regions, towns and villages is a factor which
has to be taken into consideration when defining a European
approach to competitiveness.

2. Competitiveness, the construction of Europe and

economic and social cohesion

2.1.
The Committee of the Regions notes that ‘competitive-
ness’ of enterprises differs from the ‘competitiveness’ of
geographical areas (the EU, Member States, regions). In the
case of enterprises, the term ‘competitiveness’ means the ability
of the enterprise to compete in a given market (local, national,
EU or world markets); the meaning of the term becomes
clouded however, when we are dealing with the competitive-
ness of a geographical area. Furthermore, in the context of
globalisation, issues relating to size become particularly delica-
te, as the Commission is very careful to note. It would appear
that the issue of ‘competitiveness’ should be tackled at the
following three levels in particular:

First of all, the link between the competitiveness of
2.2.
enterprises and that of geographical areas is tricky. It is vital to
understand the relevance of this link in order to grasp the
extent to which the competitiveness of EU enterprises has a
bearing on the political construction of the EU and in order to
devise a policy for stimulating the competitiveness of EU
enterprises. This link is all the more complex in view of the

(1) Cf, example, M. Sharp ‘Competitiveness and cohesion — are the

two compatible?’, Research policy 27 (1998) 569-588.

(2) The major strategic industrial alliances have a role to play here;
see, for example, M. Delapierre and L.K. Mytelka ‘The alliance
strategies of European firms in the information technology
industry and the role of ESPRIT’, Journal of Common Market
Studies, Volume XXVI, No 2, December 1987.

Secondly, depending upon the level of the geographical
2.3.
entity concerned (Europe, the EU Member States,
local or
regional levels), the content and meaning of the concept of
‘competitiveness’ do not always exactly correspond and they
may even be out of kilter with geographical and political
entities. A region could, for the purpose of job creation, seek
to attract foreign investment, which may be at variance with
the cohesion of national or even European industrial potential
in a given sector. Globalisation does not respect boundaries
and industrial networks no longer match political boundaries.

the nationality of

the enterprise’s capital,

2.4.
Thirdly, there is the issue of the nationality or rather
the European character of enterprises. Which criteria should
be used for determining whether an enterprise is a ‘European
enterprise’:
the
location of its head office, the nationality of the members of
the management team, or the geographical location of the
places of business? It is clear that none of these criteria
provides an adequate basis for identifying the nationality or
European character of enterprises. To what extent should an
enterprise of foreign origin which, through its branches in the
EU, provides employment and tax revenue in Europe and has
a bearing on the European economy, be regarded as less
‘European’
than an enterprise of European origin whose
competitiveness is based on the operation of branches situated
in the US or Asia?

2.5.
It should also be noted that the issues of competition
and the competitiveness of enterprises at inter-EU level play a
role in the EU’s external competitiveness. EU enterprises which
compete with each other on the EU market may also be rivals
on markets outside the EU.

The Committee of

2.6.
the Regions acknowledges the
soundness of a large number of definitions of the term
‘competitiveness’ which highlight the goal of maintaining and
improving the standard of living and public welfare. The
OECD, for example, defines competitiveness as the ability of
enterprises, economic sectors, regions, states and supra-
national regions to generate a relatively high income and to
achieve a high level of employment, whilst being exposed to
international competition. The Committee of the Regions
would, however, stress that the fundamental aim of regional
competitiveness must be to help to create jobs in the long
term and to promote sustainable economic development. The
Committee shares the views of the experts on the Consultative
Group on Competitiveness who have pointed out that ‘a
number of more specific goals, such as increasing profitability
or share of world markets, must be regarded as subordinate to
the fundamental goal of creating an economy based on high
added value and providing a high level of employment. One
cannot therefore talk of a choice between competitiveness and

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social cohesion. The tensions which occur are bound up with
deciding how to carry out the necessary adjustments and the
timetable for making these adjustments’ (1).

3.

Internationalisation, free trade, growth and sustainab-
le development

Consequently it is essential to remember that achieve-
2.7.
ment of these goals of competitiveness depends on establish-
ment, development and consolidation at the various geograp-
hical levels of production systems which are (a) sustainable
and (b) able to generate wealth and channel a considerable
part of such wealth to good effect.

2.8.
In accordance with the principles underlying the
construction of Europe, these goals should be pursued in a
manner compatible with the strengthening of economic and
social cohesion in the EU. To put it another way, the success
of the ‘winner regions’ must not be achieved at the expense of
the ‘loser regions’ (2). Attention should also be drawn to the
fact that internal disparities in the EU do not simply reflect
they also risk
different standards of
creating an undesirable level of intra-EU competition,
i.e.
economic and social dumping.

living and lifestyles;

2.9.
On a broader level, the ‘European model’, and in
particular the social dimension of this model, must not be
regarded as a handicap, as a constraint which has to be
tolerated. The European model reflects the values of European
society and, for this reason, it should be defended; there should
be no conflict between economy and society. The Commission
communication rightly considers that the European model is a
source of competitiveness in the long term: being able to call
upon skilled, motivated, fit workers will increasingly provide
the key to long-term competitiveness based on innovation and
quality.

2.10.
Against the background of an unstoppable move
towards globalisation, it is vital for the EU to be competitive
in order to maintain, perpetuate and strengthen the European
model. It is essential to be competitive if we are to build a
lasting, sustainable Europe, able to hold its own in the world
of the future and to provide good living conditions, prosperity
and social cohesion, rather than unemployment, social exclu-
sion, disparities, poverty and insecurity. Competitiveness must
be regarded as a means, rather than an end.

(1) A. Jacquemin and L.R. Pench (Eds.): ‘Pour une compétitivité euro-
péenne’ — Rapports du Groupe Consultatif sur la Compétitivité,
De Boeck Université, 1997, p. 9.

(2) G. Benko and A. Lipietz,

‘Les régions qui gagnent’ (the winner

regions), Presses Universitaires de France, 1992.

3.1.
Should the expansion of international trade be regarded
as a vital source for growth and prosperity in Europe? It is
difficult to go along with such an equation. Although there is
an undeniable correlation between the two factors, growth is
generated by a whole series of
factors: macro-economic
policies and monetary stability; the single market; scientific
and technical progress; education and cultural development;
protection of the environment; improvements in economic,
social and industrial infrastructure and organisations, etc. This
being the case, globalisation should be regarded not as a source
of growth but as a specific type of growth based on the
expansion of markets. Three key points should be made in this
context.

3.2.
Firstly, it is clear that there has been a stronger increase
in intra-branch trade than in inter-branch trade. This means
that international specialisation based on comparative advanta-
ge has not been intensified; it is the geographical area involved
which has increased. Industry is now organised in such a way
that industrial ‘regions’ develop at international level as a result
of the effects of competition and complementarity between
firms of different nationalities. The extent and form of this
transnational organisation of industry vary very considerably
from sector to sector. The international division of labour is
therefore primarily brought about by advantages deriving from
the combined effect of enterprises’ operating and development
strategies and from the establishment of resources at different
geographical levels (local/regional, national and European).

3.3.
Secondly, a sizeable proportion of international trade
is intra-company. This fact underscores the role played by
multinational companies in the establishment of a global
economic system, even though political decisions are also of
decisive importance in the fields of deregulation, privatisation,
reduction of customs tariffs and international competition
rules. This once again raises the question of the link between
the competitiveness of enterprises and of geographical areas
and the definition of the ‘European enterprise’.

3.4.
Although a number of products and standards are
undoubtedly becoming global in nature, the global economic
system is still being established in piecemeal fashion, with
distinctions being made in the light of consumer tastes and
standards and innovation systems geared to differing specific
territorial potentials. Globalisation does not mean moving
towards a homogenous world; the EU, too, should bring its
own specific characteristics to the global economy and main-
tain its differences.

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3.5.
The Committee of the Regions points out that although
globalisation is generally recognised as having an overall
beneficial effect, the way in which these benefits are allocated
is frequently inequitable and may well vary. ‘Recent economic
theories point to the fact that both sustainable long-term
economic growth and a deepening of the income disparities
between countries derive from the accumulation of capital —
is
both physical and human. This accumulation,
influenced by international trade’ (1). To put it another way,
since competitiveness is based on the existence and develop-
ment of favourable terms of trade — i.e. unequal terms of
trade — it is, by its very nature, a source of imbalance. It is
significant that whilst the EU’s terms of trade with the USA
and Japan are, taken overall, unfavourable, they are globally
favourable in respect of third countries. This means that a
major proportion of favourable terms of trade enjoyed by the
EU are with less-developed countries.

in turn,

According to the 1998 report on the competitiveness
3.6.
of European industry,
living in Europe,
the standard of
measured in terms of GDP per capita and expressed in
purchasing power standard (PPS), is 33 % below that of the US
and 13 % below that of Japan. Furthermore, there is a wide
range in the distribution of purchasing power within the EU;
the level of purchasing power in the various Member States
varies by a factor of up to 2.6. The difference in purchasing
power in the poorest and the richest regions of the EU varies
by a factor of up to 4.5. The regional contrast is undoubtedly
more marked in countries where the level is above that of the
EU average than in countries where the level is below that of
the average for the EU (2).

3.7.
The overall growth indicators at EU level mask conside-
rable imbalances. The establishment of the single market
promoted a growth in intra-branch trade; trade in products of
different price and quality has increased more sharply, whereas
trade in similar products has remained stable. This trend is the
result of different forms of specialisation: firstly in top-of-the-
range products (based on design, R&D and advertising);
secondly,
in bottom-of-the-range products (based on cost
cutting). Clearly one and the same country can pursue the two
strategies in different sectors. If we take the case of the four
leading industrialised countries in the EU, however, there is a
clear tendency to specialise in top-of-the-range products in the
case of Germany, in middle and top-of-the-range products in
the case of France, and in middle-of-the-range products in the
case of the UK, whereas Italy specialises more than the other
three countries in bottom-of-the-range products and less in
top-of-the-range products. A similar variation may also be
observed in respect of foreign investment, which varies by a
factor of 4.5 — in Italy it represents 0,4 % of GDP, whereas in
the UK it represents 1,8 % of GDP and includes substantial
non-EU investment. There is also a considerable variation at
both national and sectoral level in the concentration of foreign
investment. The level of divergence was higher for the period
1985 to 1995 and was also more marked in respect of those

(1) A. Jacquemin and L.R. Pench, op. cit. p. 8.
(2) M. Hannoun and C. Lelong ‘Une comparaison des PIB régionaux
de l’Union Europeénne’, INSEE Première, No 602, August 1998,
article
reproduced in Problèmes Economiques, No 2585,
7 October 1998.

countries benefiting from average levels of foreign investment.
This also implies that ‘European integration appears to be
taking place against the background of the co-existence of
different models’ (3).

The issue of the convergence of industrial structures
3.8.
has been at the heart of the process of monetary unification. On
a more general note, social cohesion and regional imbalances
continue to be central to European integration. One of the
roles of regional policy and the Structural Funds is to help
break down imbalances in these areas. The most widely used
macro-economic indicators point to a steady convergence; a
recent study (4) has, however, revealed other less visible
imbalances which may have serious consequences in the long
term, thereby making them a matter of concern. An analysis
of Member State trade in high technology products reveals
sharp differences which, whilst
they have little macro-
economic impact in the short term, need to be taken very
seriously in the light of the long-term prospects for the
integration of the Member States into the global economy.

Spain,

for example, which has provided a model
3.9.
example of the pursuit of convergence, is in a vulnerable
position in respect of high-technology products; it is one of
the countries with the highest trade deficit in hi-tech products,
a group which also includes Greece and Portugal. This example
serves to explain why, with its share of 10 % of international
trade in high-technology products, the EU enjoys an overall
advantageous position (a trade surplus of 1,7 ‰) which
conceals a trade deficit
in bottom-of-the-range products
(- 2,7 ‰), offset by trade surpluses in medium-range products
(+ 1,2 ‰) and top-of-the-range products (+ 3,1 ‰).

3.10.
The Committee of the Regions draws the Commis-
sion’s attention to the danger of promoting the competitive-
ness of European enterprises without taking account of this
type of imbalance which, whilst being evident at national level,
would undoubtedly be shown to be even more sharp at
regional level if a similar study could be carried out. Competi-
tion policy may have the contrary effect of helping to enhance
these disparities. Although high-technology products strictly
represent only a small part of international trade, the cumulati-

(3) P.A. Buigues and A. Sapir ‘L’impact du marché unique sur les
grands pays européens — The impact of the Single Market on
Large European Countries’, Revue d’Economie Politique 109 (2),
March-April 1999. This study is based on the economic assess-
ment of the impact of the implementation of the single market
legislative programme carried out by the European Commission
from 1993 and published in 1996 in a special edition of European
Economy, under the title ‘Economic Evaluation of the Internal
Market’.

(4) L. Fontagné, M. Freudenberg and D. U¨ nal-Kesenci, ‘Haute techno-
logie et échelles de qualité: de fortes asymétries en Europe’,
Document de Travail CEPII, 1999 — 8 June, Paris.

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ve and localised nature of hi-tech industry — a typical feature
of a knowledge-based economy — means that it has much
more profound effects on long-term growth. These statistics
should be taken into account in a more effective way than the
Structural Funds have so far managed to do if we are to avoid
a progressive intra-EU split and excessive polarisation based
on specialisation in high-technology products.

4. Globalisation, competitiveness and spatial develop-

ment

4.1.
As has already been pointed out above, globalisation
does not mean a uniform world. Multinational companies
have fully understood this; they have organised their operations
at world level in such a way as to benefit from differences in
factor costs and specific resources. There is no one standard
template at world level or EU level. One of the EU’s key assets
is its diversity.

4.2.
Globalisation is a term for the increasing complexity
and opening-up of the world for the interpenetration of
geographical areas and sectors. It is the combination of these
factors which makes globalisation and the acceleration of
international trade such major forces for growth.

4.3.
This two-fold dimension of globalisation is spectacular-
ly illustrated by the following strategies adopted by enterprises:

— a speeding-up of the process of operating at international
level; this process has not been triggered simply by the
interpenetration of markets; it has also been prompted by
a desire to gain access to specific local resources, such as
skills, proximity to other companies and the ‘cluster’ effect;

— a speeding-up of the process of ‘technological hybridisa-
tion’: movement into new activities, purchase of enterprises
in new niche markets, industrial alliances and cooperation,
etc.

Geographical areas (regions and sub-regional areas)

4.4.
promote industrial growth in one of two ways:

— cost (offering the opportunity to produce goods more

cheaply than they can be produced elsewhere);

— access to specific resources (offering an opportunity to
engage in economic activities which could not be carried
out elsewhere).

long-term perspective based on differentiation and innovation.
These two approaches do not conflict and may well comple-
ment each other.

4.6. With respect to geographical areas, the abovementio-
ned distinction involves two alternative approaches and con-
cerns. The first approach takes the form of an overriding focus
on factor prices at a given site. In this context, state grants to
attract industries to a particular area are designed to offset the
cost advantages of other sites. Competition between different
sites based solely on factor cost frequently leads to individual
areas bidding up public aid to a level which can far exceed
what is reasonable. Worse still, this serves as a pretext for
employing tax and social dumping strategies, an approach
by territorial authorities which is, all
things considered,
dangerously negative. Such a trend, which is regrettably still
very prevalent, promotes volatile behaviour and ‘bounty-
hunting’ on the part of enterprises.

The second approach places the accent on building up
4.7.
resources in a given area. This self-reinforcing process is driven
by strong interactions between enterprises situated in a
given area and all the other players operating nearby: public
institutions and related bodies, research and training providers,
etc. It is, however, rare for such a process to get underway of
its own accord. Sometimes it is part of a long historical
process; on other occasions it is triggered by the presence of a
centre of scientific and technological excellence (Stanford in
the case of Silicon Valley, the MIT in the case of Boston and
Route 128, or Orsay and the CEA in the case of Paris-Sud,
etc.); on other occasions it is set in train by deliberate action
on the part of a powerful public or private industrial player
(such as CNES at Toulouse or IBM at Montpellier); and it may
also be brought about as a result of deliberate public policy
(Sophia Antipolis, Silicon Glen, etc.).

4.8.
Local growth and development thus no longer depend
solely on attracting productive investment; they are generated
by mutual support between investment from outside (external-
forces promoting
ly-generated development) and regional
growth and innovation (internally-generated development).
Whilst enterprises are having to become increasingly nomadic
as a result of the need to be global players, they also have to
become more involved in the areas in which they operate and
to engage in ‘territorial anchoring’.

These two above aspects involve two dimensions of
4.5.
the competitiveness of enterprises,
linked to the widely
accepted distinction between competitiveness based on cost
and competitiveness on non-cost grounds. This distinction
mirrors two aspects of business strategy: a short-term perspec-
tive based on the production of standardised goods and a

Defining the competitiveness of an area solely in terms
4.9.
of its ability to attract productive investment — a practice
which is frequently followed — would thus appear to be
extremely simplistic. There is also a need to maintain local
enterprises and newly-established enterprises and therefore
to provide them with the requisite conditions for their
development. Competitiveness should thus be based on exploi-

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ting differences, against the background of world trade and
global interactions, rather than seeking to align on a single
model. The problem of the distinction between the competiti-
veness of enterprises and the competitiveness of areas is
resolved by convergence between the interests of enterprises
and areas. This also renders the issue of the ‘nationality’ of an
enterprise meaningless, the important point being the ‘territo-
rial attachment’ of the enterprise.

there is a need to highlight

Against a background of growth strongly driven by
4.10.
innovation,
the role played
by geographical areas (innovation clusters) (1). Innovation is
affected by a large number of factors which are sometimes
intermeshed at international level. The US economist Michael
the modern
Porter highlighted one of
the paradoxes of
economy by pointing out
that ‘the enduring competitive
advantages in a global economy lie increasingly in local things
— knowledge, relationships, motivation — that distant rivals
cannot match’ (2).

4.11.
The Committee of the Regions has therefore already
underlined the need to establish and consolidate regional
potential for research and technological development (R & TD)
and innovation (3). To be effective such potential needs to
attain a critical mass and mesh together the main players in a
network characterised by a ‘culture of
innovation’ and a
‘culture of excellence’. Local and regional authorities should
endeavour to identify innovation potential and develop this
potential with a view to creating new jobs. It is also desirable
for EU regional policy expressly to provide support for steps
to develop a culture of cooperation in regions and localities.
In particular, the European Union should give effective backing
to area-based networking and R&D schemes which tap the
skills and potential synergies of industrial and technological
players. (4) Moreover, it is to be hoped that public procurement
will play an active part in such schemes (framing of specifica-
tions, testing etc.) and underwriting seed capital.

The launch and success of Gemplus and the smart
4.12.
card ‘hub’
in the Provence-Alpes-Côte d’Azur region of
France for instance was made possible largely thanks to the

(1) See, inter alia, the recent study entitled ‘Boosting innovation —

the cluster approach’, OECD Proceedings, Paris 1999.

(2) M.E Porter,

‘Clusters and the new economies of competition’,

Harvard Business Review, November-December 1998.

(3) Draft opinion of Commission 1 — Regional Policy, Structural
Funds, Economic and Social Cohesion and Cross-border and
Inter-regional Cooperation — on independent local and regional
authority initiatives as instruments of regional policy in a competi-
tive Europe, CdR 108/99 rev. of 21 May 1999.

(4) The establishment of such cooperative innovation schemes should
obviously not rule out non-local, outside cooperation. Local
resources also include the option of drawing on effective outside
cooperation, since, in essence, this brings operators’ ‘social capital’
into play in their dealings with others.

from SGS-Thomson.) Then,

‘confidence’ of a number of public operators. First of all, France
Télécom ordered more than a million telephone cards from
Gemplus shortly after its launch in 1988. (It had been hived
off
local authorities such as
the Bouches-du-Rhône Conseil Général also became clients,
piloting the development of new applications in canteens,
healthcare, etc. In the space of eight years, Gemplus, the world
leader with a 43 % market share, was a flourishing enterprise
with turnover in excess of 3 billion francs and the creation of
more than 3 000 jobs to its credit, half of them in its Provence
hub.

4.13.
In terms of boosting competitiveness, the Committee
of the Regions has stressed the importance of centres of
excellence which zero in on a particular area and industry to
focus ‘high-level knowledge, skills and technical and admini-
strative infrastructure in one viable, sustainable economic
sector.’ (5) We must, however, guard against concentrating too
much on one particular area, since this tends to generate
‘enclaves of the global economy’ cut off from their economic
and social background, whose sole determining factor is their
global linkage. Excessive polarisation may also unduly sharpen
imbalances (6) in production and wealth distribution between
‘pockets of modernity’ which harness any ‘added value’
generated, and exclusively residential and consumption-based
surrounding areas.

Centres of excellence of this kind are not restricted or
4.14.
narrow in scope, but may take a wide variety of
forms
depending on specific circumstances and the geographical
background on which they rely. Such flexibility helps reinforce
these centres’ links with the economic and social fabric and
puts them on a more solid and durable footing. Lastly, it
should be noted that centres of excellence are not confined to
high-tech operations. Michael Porter cites examples of ‘clusters’
in wine growing, the leather industry and catering; examples
from Europe could include areas of Italy famed for clothing or
furniture and the shoemaking district of Elche in Valencia,
Spain (7).

(5) CdR 108/99 op. cit.
(6) The French economist François Perroux used his concept of
‘centre of growth’ to show that these imbalances had a knock-on
impact on the economy and a multiplier effect on growth. Once
polarisation has reached a certain point, however, the centre of
growth swallows up any knock-on effects, thereby preventing
their impact at local level.

(7) The organisational dimension in both rural areas (Prato) and
urban districts (Elche) plays a key role in an area’s competitiveness.

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5. SMEs, infrastructure and financing

5.1. SMEs’ role in the European economy and the importance of

boosting their competitiveness

In its Opinion of 3 June 1999 (CdR 387/98 fin) on
5.1.1.
the BEST report and the Commission’s response, (1)
the
Committee of the Regions stressed the important role played
by SMEs within the European Union. They account for 60 %
of overall production by value and 66 % of jobs. The COR
reiterated its commitment to strengthening the competitive-
ness of SMEs, which are operating in an ever wider economic
area as economies become more global in scope. SMEs are,
moreover, often the key to local development, most often
working in conjunction — above all — with local and regional
authorities. What is more, they often play a decisive role in
anchoring large companies to a particular area since they
provide services and skills on which these companies can
draw.

5.1.2.
The Committee of Regions admires the remarkable
track records of high-tech SMEs which, in the space of just a
few years, have become global
leaders in their field. The
Committee would point out however that while SMEs of this
kind merit special consideration, given their impact on the
strong long-term performance of European industry, they
currently make up only a very small proportion of companies
and jobs. Although action must clearly be taken to assist these
enterprises in building up their competitive position, such
measures must under no circumstances have a deleterious
effect on the drive needed to boost the competitiveness of the
majority of SMEs which are less technologically advanced and,
in geographical terms, serve a more limited range of markets.

5.1.3.
At the level of public policy, moves to boost SME
competitiveness must hinge on genuine improvements in their
working environment, not only in terms of bureaucracy and
red tape, (2) but also with regard to their access to sources of
finance and information, and with regard to international
development facilities (exports, cross-border cooperation, in-
ternational joint operations etc.) The COR firmly supports the
proposals set out in the BEST and Commission reports. There
would also appear to be a need to make available to
SMEs information tools and tools for providing legal and
management assistance, with a view to establishing a level

(1) Opinion on the report of the Business Environment Simplification
Task Force (BEST) and the Commission Communication ‘Promo-
ting Entrepreneurship and Competitiveness’ — the Commission’s
response to the BEST Task Force report.

(2) It is worth remembering, for instance, that, in Europe, it takes an
average of twelve separate procedures to set up a company against
six in the US (Report from the Commission — Economic and
structural reform in the EU (Cardiff II), COM(1999) 61 final,
17.2.1999).

playing field in competition between SMEs and large enterpri-
ses. It is also important for public authorities — particularly
regional and local authorities — to give careful consideration,
when awarding public contracts, to bids submitted by local
SMEs and to bear in mind the impact which the award of the
contracts to these enterprises would have on local develop-
ment.

The position which SMEs occupy in the European
5.1.4.
economic and cultural model and their crucial role in providing
employment, justify special attention being paid to them and
provision being made for them to have access, under certain
circumstances, to specific funding and to benefit from tax
breaks. On a more general level, consideration could be given
to how a specific system of exceptional arrangements could be
introduced with regard to public aid (rules and procedures).

5.1.5.
The Committee of the Regions would particularly
highlight the importance of encouraging and facilitating SME
access to modern information channels, in particular through
the development of new information and communication
technologies and the associated infrastructure. The competiti-
veness of SMEs is strengthened by access to a high standard of
technological developments in
information on the latest
their fields, on market conditions and on any technological
partnerships they may be able to join (complementary skills).
The effectiveness of such measures, however, hinges on two
factors. Firstly, access to information facilities must be backed
up by attractive and relatively inexpensive training opportuni-
ties for potential users. Secondly,
there should be pan-
European input into building up — or rather refining — the
information on offer. This should include an ongoing invento-
ry of databases, the compilation of a directory, the develop-
ment of specialised search engines to surf the Internet and the
establishment of European technological, legal and tax-related
databases. It should also include regional technological and
industrial skills registers — to be drawn up in cooperation
with the regions — together with databases relating to public
procurement. The Committee of the Regions would propose
that, prior to such steps being taken, an inventory be made of
studies on this issue (role of data infrastructure in SME
development) and on what data resources are already available.

In the light of this situation, the Committee of
5.1.6.
the Regions has noted that
the need to encourage SME
competitiveness by every available means should under no
circumstances work to the detriment of social dialogue,
compliance with working conditions and collective agree-
ments, respect for the environment or consumer interests and
rights. Easing these rules to promote jobs at any cost would
embroil Europe’s regions in unbridled competition involving
environmental and social dumping, with disastrous long-term
effects. Since, however, European competitiveness can only be
built up in the long term, it must be underpinned by constant
improvements in product quality and the skills base and a

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dynamic blend of high standards and innovation. We cannot
claim to have achieved these targets unless we can be confident
of worker motivation and satisfaction; workers need to be a
part of the collective effort, both as players and beneficiaries.
In this way, the European social model can serve to bolster
long-term competitiveness.

5.2. The need to enhance trans-European infrastructure

The Committee of the Regions shares the view that
5.2.1.
building a competitive Europe entails substantial enhancement
of trans-European infrastructure networks (information tech-
nologies, transport, communications etc.) The first thing to
note is that these infrastructure networks are still generally the
product of policies and development programmes implemen-
ted nationally by the Member States. As such, they remain
overly circumscribed by the constraints of national geography.
In many cases, they are also in need of modernisation and
expansion, not least, of course, since infrastructure density
varies considerably from one EU country and region to the
next. Cooperation between the Member States represents
an important first step towards establishing trans-European
infrastructure.

5.2.4.
As far as new information and communication
technologies are concerned, the European Union should make
a genuine effort to improve quantity, density and quality. The
Committee of the Regions feels that it is particularly important
that carrier and content should not be treated as two separate
issues. High-performance, easily accessible networks must be
set up. One notable target for Europe is the faster establishment
of a high-speed second generation Internet, sometimes referred
to as Internet 2 — a project
likely to become a reality
very soon in the United States — with a view to giving
across-the-board access to all economic operators. Responsibi-
lity for content is clearly shared between public and private
players and consideration must be given to laying down a
public policy on this issue which provides for a balanced
allocation of responsibilities between the European Union, the
Member States and the regions.

5.2.5.
The Committee stresses the need for strong Euro-
pean-level coordination, while preserving genuine sovereignty
and ensuring continued local and regional authority involve-
ment at the various geographical levels. Establishing a high-s-
peed rail link or reorganising air traffic involves restrictions
and disruption for the areas concerned; as a result, such
projects cannot be approved without the involvement of the
authorities concerned and a bona fide attempt at social
dialogue. Much can be learnt in this regard from the experience
of France in building up its high-speed network, for instance
the south-eastern line.

The Committee stresses the vital need to enhance
5.2.2.
trans-European infrastructure in this way, not only for large
companies but also for SMEs, whose integration into the fabric
of a competitive Europe such moves are calculated to reinforce
and accelerate. For instance, a small sub-contracting firm
specialising in micro-electronics sometimes has to reach scales
of production in a specific market niche which involve
supplying a wide range of clients spread across a large number
of different locations (Munich, Newcastle, Corbeil, Catania etc.)
Such a company’s competitiveness will thus largely depend on
how long it takes a package to be delivered to its clients.

5.3. Access to sources of finance

5.3.1.
Access to sources of finance is of key importance for
the competitiveness of European SMEs, and innovative SMEs
in particular. Clearly, the access afforded by the European
financial system is inadequate and risk culture is too often
absent from banking practices which, instead, seek an abun-
dance of all-round high guarantees. The Committee of the
Regions backs initiatives aimed at facilitating company access
to sources of finance and seed capital via ‘business angels,’
venture capital, European grants and the like.

5.2.3.
European high-speed rail links must be fostered and
expanded. Air traffic must be reviewed from a pan-European
angle by increasing the number of key air junctions — the
current junctions are at saturation point — at additional
locations, flying to more destinations. There must be more
intermodal platforms (hubs), not least for air-land connections
and for both freight and passenger transport. Cross-sectoral
and trans-European links must be radically reviewed with an
overall vision for the future in mind, since,
in the long
term, they impact on Europe’s continued progress and the
competitiveness of its companies. In the road-rail debate,
Member States should give serious consideration to issues
raised and conduct genuine negotiations so that, wherever it is
not possible to agree on a common line of approach, the
decisions taken and policies implemented can be coordinated
closely and effectively.

It

is vital

5.3.2.
for the competitiveness of European
companies to establish an effective system of venture capital,
provided, however, that access to it is not restricted to major
money markets but is also practicable at regional level. The
Committee of the Regions would point out, however, that
venture capital alone is not a catch-all remedy for problems of
corporate financing. A study conducted recently in the United
States (1) clearly shows that venture capital is little used in
financing the initial stages of innovation. Of the $10 billion

(1) B. Zider, How venture capital works, Harvard Business Review,

11-12/1998.

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and

large

($63 billion)

invested in the USA in 1997, barely 6 % was earmarked to
finance start-ups. Instead, start-up finance came mainly from
companies
the public purse
($133 billion). Most venture capital investments were directed
at the next stage in the cycle of innovation in which companies
have to work very hard at growth, and thus at investments, at
a time when their material assets and acquired trading position
are insufficient to provide the guarantees required by the
banking market. Venture capital comes into play in this
acceleration phase of the famous S-curve of industrial develop-
ment by giving backing to sectors or market niches with a
high growth potential, rather than to people or ideas. It should
also be noted that, at this stage, it is very difficult to distinguish
winners from losers. The overall yardstick remains quality of
management.

5.3.3.
On this last point, the Committee of the Regions
notes that, while SMEs may be at the forefront of job creation,
they are also the cause of a high proportion of job losses (only
half of SMEs survive beyond five years). The Committee
stresses the importance of SME management aid, particularly
for newly established enterprises and those in the growth
phase. Management generally requires a different set of skills
than those needed to set up a company. Many schemes have
been launched in various different places, in particular as part
of enterprise ‘nurseries’ or business incubators. The Committee
recommends that an assessment be made of the work done in
this field and that a list be drawn up of the most effective
measures in the management aid field.

5.3.4.
The Committee has endorsed the Commission’s
proposal to set up three new financial instruments to back
innovative SMEs and support them in the growth phase
facility, scheme supporting the establishment
(risk capital
joint-ventures, guarantee facility) (1). It did
of transnational
however stress how important it was ‘to draw on the expertise
of regional/local intermediaries in the implementation of all
three schemes (and)
... to make sure that the authorities
responsible for regional development are kept fully informed
and are notified as to which funds and financial institutions
are operating as intermediaries for the schemes in each region.’
The establishment of an ETF start-up facility is a welcome
response to the need for seed capital, provided, however, that
the necessary action is taken to ensure that entrepreneurs from
peripheral regions have the same access to potential European
investors as other operators.

(1) CdR 46/98, Opinion of the Committee of the Regions of 14 May
1998 on the proposal for a Council Decision on measures of
financial assistance for innovative and job-creating small and
medium-sized enterprises (SMEs) — the growth and employment
initiative (COM(1998) 26 final).

5.3.5.
The Committee has also endorsed (CdR 387/98 fin
of 3 June 1999) the establishment of enterprise boards ‘to act
as clearing points between public funding agencies, banks and
entrepreneurs with the capacity to grant or refuse finance
quickly’.

5.3.6.
Lastly, the Committee reiterates its reservations about
pension fund investments in venture capital. These should be
permitted only if appropriate guidelines are set in place.

5.4.
The promotion by local and regional authorities in
less-developed regions of policies to boost employment in
SMEs should be wholeheartedly supported by the EU, which
should also offer support with regard to funding. The Commit-
tee of the Regions would also highlight the need for the level
of financial aid and fiscal support to SMEs to be geared to the
number of jobs to be created or safeguarded.

6. Employment

6.1.
Employment remains one of the main reasons for
promoting the competitiveness of European companies. Bet-
ween 1987 and 1997 European GDP grew by 2,5 % annually,
matching the US rate over that period. However, as the 1998
European Commission report on the competitiveness of
European industry points out, in Europe this rise is due to
strong growth in labour productivity, coupled with a marginal
increase in employment. This contrasts with the USA, where
the rise in GDP is the result of weak productivity gains and an
appreciable increase in employment. Be that as it may, despite
some gradual catching-up, labour productivity (calculated as
GDP per job) is still 20 % lower in Europe than in the United
States. On the jobs front, Europe is suffering as a result.

6.2. Regional disparities

6.2.1.
In Europe, half of productivity gains are due to the
impact of capital-labour substitution; the corresponding figure
for the USA is barely 25 %. At the same time, the relative
labour costs have risen more quickly in Europe than in the
United States. This chronic shortfall in job creation in Europe
is reflected by major differences in increases in the labour-force
participation rate growth as between Europe and the USA on
the one hand and Japan on the other. This is doubtless the
main reason for the differences in overall standards of living

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between Europe and United States. The report notes, however,
that while this holds true in particular for high-tech sectors
where American companies have created many new jobs,
European companies still performed less well across all sectors
during the period 1985-1995.

6.2.2.
The average EU participation rate remains below
61 % and intra-European disparities are very pronounced.
These disparities between the Member States relate mainly to
three key groups: women, young people of both sexes and
older male workers. Unemployment within the European
Union varies from less than 3 % to more than 30 %, and
participation rates range from 80 % of the population of
working age in certain parts of Denmark and south-east
England, to 40 % in some southern regions of Italy or Spain (1).
The Commission has proposed a long-term target of pushing
the participation rate up towards 70 % to match similar
levels in the United States and Japan. Since job creation is
accompanied by the loss of existing jobs and skills,
the
Commission has clearly stated the need to set up and expand
new companies as an engine of renewal
in the European
economy. In broader terms, improving company competitive-
ness is an essential element in this process.

6.2.3.
However, any opportunity also constitutes a threat.
The Committee of the Regions would therefore underline the
fact that this ‘creative destruction’ (i.e. loss of existing jobs and
skills on the one hand, creation of new jobs and skills on the
other) does not necessarily follow any balanced or uniform
geographical pattern. As a result, this doubtless unavoidable
process is highly likely to widen internal disparities within the
European Union. Such a scenario, which would run counter
to the principles underlying the construction of Europe, could,
in the long term, give rise to clear divergences in patterns of
regional development. One of the roles of the Structural Funds
is to seek to combat disparities and to establish a new internal
balance — a vital prerequisite for achieving a more effective
competitiveness, both on the internal market and on the
world market. It is thus particularly important to make local
development a fully-fledged component of
the European
Union’s employment strategy. On this point, the COR fully
endorses the Commission’s view on the ‘leading role of the
local actors in the process of job creation’ (1). In this context,
close attention should be paid to preserving the existing
vocational heritage, taking full advantage of reusable technical
advances and redeveloping out-dated skills. This also highlights
the urgent need to link any employment strategy to all aspects
of human capital development and infrastructure policy,
including education, training and the Structural Funds.

(1) Commission communication on Community policies in support

of employment, COM(1999) 167 final, 21.1.1999.

6.3. The need to involve regional and local operators

6.3.1.
Redistribution and solidarity are clearly needed wit-
hin the European Union to consolidate long-term convergence
and economic and social cohesion. However, action of this
kind cannot be contemplated without close cooperation with
local operators in the field of economic development. The
Committee underscores the importance here of taking effective
account of endogenous input
into economic growth, as
opposed to focusing exclusively on attracting outside invest-
ment. In this regard, the Committee has proposed that the
regions analyse their strengths and weaknesses and then
consciously build on their strengths (2) so as to move as far as
possible towards developing ‘centres of excellence’ which can
become the mainstay of sustainable local growth.

6.3.2.
Although the opening or closure of a plant of a
major company can radically alter a region’s employment
situation, two things are nonetheless clear:

1.

in every respect, a company’s long-term operations are
very much contingent on local territorial dynamics;

2.

job creation is above all still a product of local schemes
and cannot always rely on outside decisions.

The Committee of the Regions and the Council of
6.3.3.
European Municipalities and Regions (CEMR) have developed
a Local Action for Employment initiative for 1999-2000 to
encourage mayors and local authorities to help implement the
employment guidelines. The Commission has given its full
backing to the scheme. For its part, the Committee of the
Regions endorses the Commission proposal to conduct a
systematic appraisal of experience acquired in the implementa-
tion of the territorial employment pacts so as to catalogue
examples of good practice which could be extended to other
regions. The COR proposes that the Commission develop an
ongoing progress report, together with a list of measures
available for consultation on the Internet. Those involved in
local development would thereby be encouraged to bring in
their own assessments and local experience. Such an initiative
should obviously be undertaken with the agreement and
assistance of the regions. It could be considered an extension
of the electronic forum already in place on the European
institutions’ website on http://europa.eu.int/comm/pacts/.

(2) Appendix to the Draft Opinion of Commission 1 (Regional Policy,
Structural Funds, Economic and Social Cohesion, Cross-Border
and Inter-Regional Cooperation) on independent local and regio-
nal authority initiatives as instruments of regional policy in a
competitive Europe, conclusions of the Commission 1 seminar
held in Augsburg on 8 June 1999, CdR 108/99 rev. 1 Appendix,
June 1999.

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6.4. Competition between geographical areas and subsidy hunters

6.4.1.
The Committee of Regions has warned against a
trend that has come to light in some multinational groups to
routinely compare all the incentives available at a possible
operating location (subsidies, direct and indirect aid, social
dumping, tax dumping etc.) in order to identify the most
attractive ‘territorial dumping’.
‘The competition — given
persistently high levels of unemployment — to attract compa-
nies is increasingly fierce. The danger is that sustainable
employment will be undermined by short-term measures
to entice companies.’ (1). Companies often relocate to take
advantage of ruinous competition between geographical areas.
In this regard, the Committee again calls for more stringent
monitoring of state aid and effective measures to combat social
and environmental dumping.

6.4.2.
In broader terms, aid is designed to offset a cost
disadvantage compared with supposedly less expensive loca-
tions; this enhances the volatility of cost-driven corporate
behaviour. By making this the sole yardstick, such a rationale
runs counter to injection into industrial and technological
operations of a territorial dimension which is the bedrock of
sustainable job creation.

6.5. Company performance and social cohesion: the pillars of new

competitiveness

6.5.1.
The final report of the high level group on the
economic and social implications of industrial change categori-
cally rejects the drift towards inter-area competition (2). The
Committee welcomes the findings and broadly endorses the
analysis and proposed guidelines. The group’s work rests on
the premise that ‘Europe must face these changes by combining
innovation with social cohesion and by improving its capacity
to manage change.’

6.5.2.
Industrial dynamics must take the lead from best-
performing companies and seamlessly combine benchmar-
king, innovation and social dialogue. This reflects the fact that
(i) social dialogue is a key element in worker motivation, which
in turn is indispensable to a company’s success; (ii) companies
and workers are on course for change; and (iii) workers’
employability (i.e. their continued capacity for integration into
labour market) is the responsibility not only of the individual
workers themselves, but also of the companies that employ
them and the public authorities. The ultimate result is reinfor-
cement of company performance and competitiveness on the
one hand, and prosperity and social cohesion on the other.

6.5.3.
Effective social dialogue is essential if such a virtuous
circle is to be re-established. Europe must do well in this area,
if it is to hold its own and play a part in the world of
tomorrow. With this is mind, an industrial policy must
be pursued which incorporates long-term prosperity, social
cohesion and corporate competitiveness. In the same vein, we
agree with the working group experts that
‘the guiding
principle for companies is to be competitive and profitable
while living up to their social responsibilities.’ In this way,
these companies help establish an ongoing, beneficial environ-
ment on which to base their long-term competitiveness. Future
employment prospects in the information society thus look
very promising, not least because the spread of potential jobs
in this field and the availability of skilled workers already
constitute a key element in corporate competitiveness and are
set to play an even greater role in the future.

6.5.4.
The Committee stresses that local links of this kind
are essential to companies which adopt area-based ground
rules and make this aspect a key element in their competitive-
ness. The COR proposes that this territorial yardstick (3) be
applied — rather than yardstick of nationality of capital —
when deciding whether a company can be considered Euro-
pean or not, and can, by that token, be given public support
to maintain and boost its competitiveness.

6.5.5.
In a very similar vein, the above-mentioned experts
recommend that ‘any company proceeding with dismissal
without having taken the necessary steps to safeguard the
employability of those dismissed should be barred from access
to public aids.’ (op. cit.)

(1) Draft Opinion of Commission 1 (Regional Policy, Structural
Funds, Economic and Social Cohesion and Cross-border and
Inter-regional Cooperation) on the impact of regional policy on
incentive packages for investment: a different approach in the use
of Structural Funds, CdR 127/99 rev. 1, 21 June 1999.

(2) Managing change — final report of the high level group on the
economic and social implications of industrial change, 1998 .

(3) This in no way rules out ‘multi-territoriality’

in a multi-plant

company tied to a number of different locations.

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6.6. Tourism and employment

tourist

The European Union possesses a remarkably diverse
6.6.1.
range of places of
interest. The European tourist
industry’s function as a major source of employment must be
enhanced by boosting the industry’s competitiveness. The
COR would stress that, apart from its capacity for job creation,
this sector also helps promote social convergence, not only
among EU Member States, but with people from all over the
world, as the free movement of tourists gives scope for direct
contacts and exchanges.

6.6.2.
Europe must undoubtedly make the most of every-
thing it has to offer. Its diversity means that it can meet a very
broad range of requirements, in terms of budget, age group,
type of area etc. These strengths are also reflected in the wide
variety of options produced by combining different resources
(tourist trails). Thus, the Committee of the Regions feels it is
important to adopt an integrated strategy for the promotion
of Europe’s tourism resources which does not focus attention
on a limited number of key sites (top seaside resorts or
mountain areas, prestigious urban sites etc.), but also highlights
regional and local attractions which might be able to accom-
modate a more modest influx of tourists without disturbing
the quality or integrity of the sites and areas concerned. This
means, in other words, working on the basis of sustainable
development. Moreover such an approach, which is aimed
both at individuals and at organised groups (tour operators), is
best placed to ensure that, in geographical terms, jobs are
spread out more evenly.

The fact that the EU has no official tourism policy
6.6.3.
means that the needs of the tourism sector are rarely given
sufficient consideration when EU policies are formulated in
areas which affect tourism, such as consumer protection,
environmental protection and transport. Efforts must be made
to ensure that the legitimate interests of Europe’s tourist
industry are given due consideration by making tourism an
integral part of other Community policies so as to maintain
the industry’s competitiveness in the international tourism
market.

tourism and employment (1) to establish ‘an on-line European
Observatory Network on Tourism (“EurONnet”) (which) could
contribute to fulfilling the existing gap in knowledge on
tourism at European level by linking together proven sources
of information through exploiting facilities provided by new
technologies’. The COR recommends extending this one-stop
shop principle via the Internet to give as broad-based area
coverage as possible. The aim is to encourage the kind of
balanced and sustainable growth set out above and to give
those areas which desire it the opportunity to become less
isolated. Such action should clearly involve the regions as
go-betweens and local co-ordinators and should be based on a
voluntary request from the local authorities concerned. Such a
network could also back up exchanges of experience among
tourism professionals and among the relevant local authorities.

7. Culture, Education, intellectual property

7.1. Clear, definitive stance in the discussion on cultural identity

The COR is pleased that the Commission communi-
7.1.1.
cation takes account of the need to preserve Europe’s identity,
especially as regards culture and heritage. Unlike the USA or
the ‘New World’ in general, the cultural identity of the ‘Old
Continent’ lies above all in its diversity. This diversity, which
can be found on both a national and regional scale, is anchored
in history. It helps make Europe richer culturally (obviously),
economically, socially and in all forms of creativity (literature,
the arts, intellectually and technically).

7.1.2.
This largely explains why, in sectors like the cinema,
industrialisation has only been partial and covered a limited
period (Studios de Boulogne, Cinecittà) because it has been
impossible to reach the critical mass necessary to compete
with the power of the Hollywood studios (2). If creativity —
and therefore cultural diversity — is to be preserved as one of
the fundamental values of Europe, then the cultural sector,

The Committee notes that action in the fields of
6.6.4.
trans-European transport and communications infrastructure
will have a direct impact on the competitiveness of the
European tourism industry. The Committee would particularly
recommend that this aspect be taken into account when key
decisions come to be taken on the provision of services.

6.6.5.
The Committee endorses the Commission’s proposal
in the light of the work done by the high level group on

(1) Communication from the Commission to the Council, the Euro-
pean Parliament, the Economic and Social Committee (for infor-
mation) and the Committee of the Regions (for information) on
enhancing tourism’s potential for employment — follow-up to
the conclusions and recommendations of the high level group on
tourism and employment (OJ C 178, 23.6.1999). European
tourism — new partnerships for jobs — conclusions and recom-
mendations of the high level group on tourism and employment,
European Commission — DG XXIII, October 1998.

(2) See ‘Le drôle de drame du cinéma mondial’, C.A. Michalet, La
Découverte, Paris, 1987 and ‘Une histoire économique du cinéma
français, regards croisés franco-américains’, P.J. Benghozi and
C. Delage (Eds.), L’Harmattan, Paris, 1997.

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particularly the audio-visual sector, cannot be brutally exposed
to the winds of international competition but must be kept
out of the competition equation altogether. However, while
the creative side must be saved and preserved, technical
support sectors, such as multimedia and digital technologies,
cannot claim they should be shielded from competition.

the EU, that a study be undertaken into the most appropriate
ways of publicising practices and experiences, and that funds
be provided for helping such bodies do their bit towards
achieving the objectives that have been set.

7.1.3.
The EU ought to define and adopt a clear common
position here, so it can defend the sector properly at the next
round of WTO talks.

7.2. Competitiveness, culture and education

7.2.1.
The COR agrees with the EU Commission that there
is a need to mobilise the educational system in order to build
a dynamic and united Europe. Obviously, such modernisation
involves bringing education more into line with the business
world and with all processes in the economy and in society.
But this does not mean compromising the independence of
the educational system, which obviously has much more to do
than play a purely economic role. However,
its job of
transmitting skills does have to be brought more into line with
companies’ current and future needs. And it is essential that
the educational system help close the gap between ordinary
people and the business world and spread a culture of
enterprise and innovation.

7.2.2.
Local and regional operators should, in accordance
with the principle of mainstreaming, incorporate the develop-
ment of entrepreneurship in all aspects of education policy.
Schools and universities should familiarise students with
entreprises and the way in which they operate. Furthermore,
promoting entrepreneurship should involve both developing
the spirit of entrepreneurship within organisations and foste-
ring a pro-entrepreneurial mentality.

7.2.3.
The spirit of enterprise must be made more popular
on a local scale, since new jobs are created primarily by smaller
firms that have either just been set up or have a strong growth
potential. At this level too, geographical closeness must help
dispel the myth that business is a closed world which is only
accessible to those who work in it. The COR would stress the
importance of encouraging firms to make themselves more
accessible to society as a whole and of making it easier to
organise visits to companies for schools, colleges, universities
or for ordinary people who just want to get acquainted with
their region’s industrial and technological heritage. Use should
also be made of existing national, regional or local bodies
which help make the educational system and the general
public aware of science and technology. In France one can
mention, at national level, the City of Science and Industry at
level, the Centres for
La Villette in Paris and, at regional
Scientific, Technical and Industrial Culture (CCSTI). The COR
suggests that a census be carried out of such bodies throughout

The COR also approves the idea put forward by the
7.2.4.
Commission that promoting risk-taking goes hand in hand
with making failure acceptable. There is a real cultural problem
here that varies from country to country or region to region
in the EU. The right to fail, which is recognised in American
culture, is vital to popularising the right to individual initiative
and the freedom to undertake projects. But first there must be
certain developments in the field of regulations (bankruptcy
law), finance (risk capital) and, of course, education.

It

is vital

Finally, there is the question of mutual recognition
7.2.5.
of qualifications within the EU.
to encourage
It
communication gateways and the recognition of qualifications
between member states. But
the COR would stress the
importance of not trying to develop a unified European model
for education. Once again, Europe’s diversity is a source of
is important to leave room for decentralised
richness.
initiatives so as to get full benefit from this economic, social,
cultural and historical diversity of the regions of Europe when
forming human capital. Here, as elsewhere, cohesion does not
mean unification. In particular, an accreditation system which
is too powerful would lead to local qualifications being
replaced, and would mean a new form of centralisation in the
education system, which is just what we want to avoid. The
strength of the American universities lies in just the opposite:
the affirmation of their differences, their variety and their
individual identities.

7.3. Protection of intellectual property

7.3.1.
The present system for protecting intellectual proper-
ty in Europe is complex, and the patents system is incomplete.
In addition, there is an obvious culture gap as regards reflexes
for protecting innovation. These two things help explain the
shortcomings noted by the Commission communication and
their impact on the competitiveness of European firms.

7.3.2.
There are two, or even three sides to the problem.
First, there is the question of moving towards a proper single
EU patent that can guarantee protection throughout the EU
market on the basis of one single application. Finalising such
an instrument must be considered one of
the necessary
conditions for completing the single market. Apart from
unifying administrative and legal procedures, it would also
involve setting up a unified base of precedent, a true state of
the art in Europe, and a formidable tool for providing technical
information on Europe’s technological and industrial potential.

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7.3.3.
The second question is how to maximise Europe’s
scientific potential, which has a worldwide reputation for
excellence. Of course, every research body should try and
showcase itself effectively. But such attempts often fall well
short of what is needed, given the dynamism of the research
work behind them. Without any doubt, this is due to the lack
of reflexes and motivation among researchers to protect
intellectual property and get due recognition for their scientific
work, and to the regulations that hamper linkage between
research and industry. So, in France there is a bill being drafted
that is designed to help researchers to set up businesses and
remove the obstacles that currently prevent active researchers
from sitting on the boards of private companies. Of course,
situations vary in the EU member states and it would be useful
to have an overall picture of the exact details, the relevant
regulations and recent trends. Any move towards greater
financial and operational autonomy in universities should also
help European universities, like their American counterparts,
to set up proper systems for deriving an economic benefit
from research. Some, like the University of Cambridge, have
already developed some exemplary practices that could useful-
ly be studies.

7.3.4.
A third side to the problem is that smaller firms do
not make much use of patents and intellectual property
protection because there is too much red tape involved and
the costs are high (2 to 3 times higher in Europe than in the
USA). Such firms have a remarkable potential for innovation,
but by staying outside any system of protection they very
often fall far short of realising their real economic capabilities
and are threatened by better armed potential competitors.
Also, they are very often at a lost when it comes to seeking
legal redress or defending their rights in the courts.

To try and make headway in this disturbing area, the
7.3.5.
COR proposes to help push minds and practices forward by
playing the proximity card with many of the actors concerned.
It recommends setting up Intellectual Property Regional Bu-
reaus in the European regions, which would be regional
representatives of both the European Patents Office and
national intellectual property bodies (1). Such bureaus could
take on several tasks. First, they could be offices for providing
information and submitting requests for standard European
patents, as soon as these are introduced. They could offer a
package of information and advisory services for the actors
concerned, especially smaller firms and research laboratories.
Then they should help develop the reflex of getting the

(1) Representations of national bodies already exist in some Member

States, such as the INPI in France.

most out of scientific production. In particular, they would
encourage partnerships between research and business, espe-
cially if these formed part of regional innovation programmes.
Hopefully, this could lead to better anchoring and greater
regional fall-out from research projects. Finally, these regional
bureaus should help develop an intellectual property culture
at regional level through campaigns to inform and heighten
the awareness of people in industry, research, education and
of the general public.

7.3.6.
Creating such regional intellectual property bodies
would make it possible to set up interlinked regional centres
that would provide information on the contents of registered
patents. The patents system has two objectives: to protect the
inventor and to spread relevant technical information, revealed
by patents, through the production system. So, it would be
possible to build a base for knowledge about patents registered
in the regions and held by regional businesses. Such a base
could be a big help in regionalising technological potential
by facilitating the search for partners and complementary
technologies at a regional level.

7.4. The non-universality of patents systems: the case of software

7.4.1.
The COR would draw the Commission’s attention to
the dangers that might arise from systematically relying on
patents in the field of
intellectual property, since patent
protection is not universal. This applies mainly to the new
technologies, and especially to information technologies and
the life sciences, which are the subject of a detailed and heated
debate.

In the case of software, the debates that have taken
7.4.2.
place since the 1970s in the main countries concerned have
all led to a copyright system, although such a legal framework
is not entirely suited to the sector’s specific requirements. The
European Directive of 1 January 1993 has shown some
wisdom in encouraging interoperability among programmes
so as to counteract the anti-competitive strategies of seeking a
dominant position. But for several years now, US case law has
been led into allowing the issuing of patents for software
‘components’, a practice to which it had previously been
hostile. And the US is putting increasing pressure on Europe
to allow software patenting.

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7.4.3.
The stakes here are extremely high. Such a practice
would threaten the progress of innovation in this industry,
since it would lead to a compartmentalisation of knowledge
and procedures, thereby preventing any interaction (1). The
multitude of patents registered and granted in the USA include
a very large number of procedures, or even algorithms. Many
of them seem a long way from satisfying the criteria of novelty
and originality which, theoretically, are the basis for issuing a
patent (2).
the issuing of patents for software became
institutionalised, it would strengthen the dominant position of
the biggest US market leaders in the sector. It would be a direct
threat to the huge number of innovating smaller firms in
Europe, the USA and in other countries. Finally, it would be a
very severe handicap for the European software industry,
which has a hard time remaining commercially competitive
despite its high level of competence.

If

8.3.
All this shows how wrong it would be to judge whether
territories were competitive solely by their capacity to attract
productive investment, without taking into account whether
they are able to hold on to such investment and to provide it
with favourable conditions linked to local development — in
a word, whether they are able to promote ‘territorial ancho-
ring’. The COR warns against competitive bidding to attract
firms and the competitive tax and wage-cutting that may
result. It suggests stricter controls on public-sector location aid
in collaboration with national and local authorities. Local
development projects must try as far as possible to reconcile
the need to attract external
investment with the needs of
endogenous development. To enhance the permanence of
regional production infrastructure, firms must be encouraged
to put down roots at a time when globalisation seems
inevitably to be turning them into nomads.

8. Conclusions and recommendations

In concluding this analysis, the COR would point out
8.1.
that the competitiveness of European firms must be a concern
for the EU, since it has a bearing on the successful construction
of Europe, jobs, well-being and prosperity, growth and sustai-
nable development in all European regions. The objective of
competitiveness must not be sought at the expense of social
cohesion, justice, respect for human rights and the environ-
ment. Social dialogue must be considered not as a constraint
of the European model but as a constructive factor with a view
to Europe’s competitiveness in the long term.

8.2. With economic and technological globalisation, local
and regional territories are, paradoxically, taking on a new key
importance in promoting a dynamic industry and innovation.
It
is essential that the consequences of this situation be
recognised simultaneously at the various levels involved. The
results of this development — in terms of local development
and increased employment — will sow the seed for the success
of the European venture as a whole. Consequently, it would
appear to be the responsibility of all public institutions —
from local level to EU level — to strive to achieve these results.
This is why local development, which lies at the root of job
creation, must be one of the priorities in building a competitive
Europe. The COR has already stressed the importance of
setting up regional RTD potential and ‘centres of excellence’
that will help give territories an identity and make them an
active and integral part of the whole industrial and production
fabric.

(1) See for example:

‘Un régime de droit d’auteur:

la propriété
intellectuelle du logiciel’
J.B. Zimmermann, Réseaux, Numéro
Spécial sur la Propriété Intellectuelle, No 88/89, March-June 1998.
(2) There is no state of the art here and previous research has been

very approximate and of little credibility.

8.4.
The COR trusts that the EU can provide effective
support for networking and research and innovation initiatives
based on deriving maximum benefit from the expertise and
synergies of industrial and technological actors within a given
It is also to be hoped that public works contracts
area.
can actively help such projects as pilot users (definition of
specifications, testing) and as a surety for acquiring start-up
capital.

8.5.
The COR stresses the importance of helping smaller
firms gain access to modern means of information by, for
instance, developing new information and communication
technologies and the infrastructures associated with them. But
this course of action assumes that training for such potential
users will be attractive and cheap and that the supply of
information will be improved on a pan-European scale,
technologically, legally, taxation-wise, etc. The COR suggests
that, before taking such action, there should be a survey of
what studies exist on this subject (role of IT infrastructures in
the development of smaller firms) and of the IT resources
currently available.

The COR supports the idea that Europe cannot possibly
8.6.
be competitive unless there is a big improvement in trans-Euro-
pean infrastructures. The COR stresses that this may be vital
not only to large firms but also to smaller firms, which must
be integrated more quickly and thoroughly into a competitive
European set-up. In transport, this would mean developing
European high-speed train links, reorganising air traffic on a
European scale, developing the European waterway transport
network and creating intermodal platforms. As for the rail-road
it is urgent to co-ordinate national policies and
trade-off,
decisions closely, in the absence of convergence on a common
doctrine.

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8.7.
As far as new information and communication techno-
logies are concerned, the EU must make a real effort to
improve quantity, density and quality. The COR particularly
stresses that an effort on content must not be separated from
one on containers. High-performance networks must be set
up that are easy to access and work must be accelerated on the
introduction of a high speed Internet. As for the contents,
thought must be given to drafting a public policy that
shares out harmoniously the responsibilities for providing
information between the EU, the Member States and the
regions.

part of the EU employment strategy. This also explains why it is
equally important that Community action focus on countering
those processes which tend to widen internal disparities in the
Union and take the most appropriate steps to prevent these
destructive processes from having an irreversible effect and, in
any case, preserving the existing vocational heritage, reusable
technical know-how and human resources which can be
redeployed.

8.8.
Regarding access to funding, if European firms are to
be competitive it is vital to set up a high-performance venture
capital scheme, though access must not be restricted to the big
financial centres but should also be available in the regions.
The COR has already come out in favour of setting up ‘business
agencies’ in the regions, which would act as clearing houses
between aid-granting authorities, banks and businessmen and
would be able to give a quick decision on whether or not to
provide funding. The COR also repeats its reluctance to see
pension funds being invested in venture capital; this should
only be authorised if appropriate guidelines are laid down.

As a complement to funding issues, the COR would
8.9.
stress the importance of helping management in smaller firms,
especially those which have just been set up or are in their
growth phase. Management generally requires different skills
from setting up a business. A lot of initiatives have been taken
here and there, especially in connection with business nurseries
or incubators. There should be an assessment of such initiatives
and a list of
those measures that are of most help to
management.

8.12.
The COR would stress the importance of local roots
to firms that have adopted them as a principle and have made
them a key factor in being competitive. The COR suggests
keeping this rule for firms, rather than the nationality of
capital, when deciding whether or not a firm should be
considered European and thus worthy of public support for
making itself more competitive.

8.13.
The COR feels that, when formulating EU policies in
areas which affect tourism, efforts must be made to ensure
that the needs of the tourism sector are given due considera-
tion. This is especially urgent because tourism is highly
labour-intensive and a competitive industry has a big job
creation potential, especially for some of those sections of the
labour force that are hardest hit by unemployment (young
people and women).

8.14.
The COR would point out that any effort in the field
of trans-European transport and communication infrastructure
will have a direct impact on the competitiveness of the
European tourism industry and recommends that particular
account be taken of this aspect when taking big equipment
decisions.

On the employment front, the Council of European
8.10.
Municipalities and Regions (CEMR) have drafted a programme
‘Local action to promote employment’ for 1999-2000, for
which they have received the Commission’s full support. The
COR approves the Commission’s proposal to systematically
examine experiences acquired in implementing the Territorial
Employment Pacts with a view to compiling benchmarking
examples for other regions, and suggests that this assessment
should be accessible on the Internet as part of the extension of
the electronic forum already in place on the European
institutions’ website.

8.15.
The COR approves the principle put forward by the
Commission of creating an on-line European Observatory
Network on Tourism (‘EurONet’) and recommends that this
one-stop shop be extended, using the Internet, to cover as
much territory as possible so as to encourage harmonious and
sustainable growth and enable those sites that wish it to be
opened up. Such a network could also act as a means for
exchanging experiences between tourism professionals and
concerned local authorities.

8.11.
As any opportunity is also a threat, the COR wishes
to stress that there is no reason why the twofold movement of
destroying old jobs and skills and creating new ones has to be
geographically balanced or homogenous, and it may lead to
gaps widening within the EU. This explains why it is so
important to consider local development as a fully integral

8.16.
The COR wants the EU to take a clear and final
position in the cultural exception debate. If creativity — and
therefore cultural diversity — is to be preserved as one of
the fundamental values of Europe, then the cultural sector,
particularly the audio-visual sector, cannot be brutally exposed
to the winds of international competition but must be kept

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out of the competition equation altogether. However, while
the creative side must be saved and preserved, technical
support sectors, such as multimedia and digital technologies,
cannot claim they should be shielded from competition. The
EU ought to define and adopt a clear common position here,
so it can defend the sector properly at the next round of WTO
talks.

8.17.
The COR would stress the importance of the world
of business and the world of education and training opening
themselves up to each other. It suggests making it easier to
organise visits to companies for schools, colleges, universities
or for ordinary people who just want to get acquainted with
their region’s industrial and technological heritage. It suggests
actively supporting national, regional or local bodies which
help make the educational system and the general public aware
of science and technology. It suggests that a census be carried
out of such bodies throughout the EU, that a study be
undertaken into the most appropriate ways of publicising
practices and experiences, and that funds be provided for
helping such bodies do their bit
towards achieving the
objectives that have been set.

it

is vital

As far as the question of mutual recognition of
8.18.
qualifications within the EU is concerned,
to
encourage communication gateways and the recognition of
qualifications between member states. But the COR would
stress the importance of not trying to develop a unified
European model for education because, once again, Europe’s
diversity is a source of richness and here, as elsewhere,
cohesion does not mean unification. In particular, an accredita-
tion system which is too powerful would lead to local
qualifications being replaced, and would mean a new form of

Brussels, 18 November 1999.

centralisation in the education system, which is just what we
want to avoid.

8.19.
Finally, as regards intellectual property, the COR
recommends setting up Intellectual Property Regional Bureaus
in the European regions, which would be regional representati-
ves of both the European Patents Office and national intellec-
tual property bodies. Such bureaus could take on several tasks.
First, they could be offices for providing information, advice
and for submitting requests for standard European patents, as
soon as these are introduced. They could offer a package of
information and advisory services for the actors concerned,
especially smaller firms and research laboratories. They should
also help develop the reflex of getting the most out of scientific
production, encourage partnerships between research and
business and develop an intellectual property culture at
regional level. They could also be the building bricks in a
system for providing information about patents registered in
the regions and held by regional businesses, which would be a
big help in regionalising technological potential by facilitating
the search for partners and complementary technologies at a
regional level.

Finally,

8.20.
the COR would draw the Commission’s
attention to the dangers that might arise from systematically
relying on patents in the field of intellectual property, since
patent protection is not universal. This applies mainly to the
new technologies, and especially to information technologies
and the life sciences, which are the subject of a detailed and
heated debate. The present current in the software sector is
symptomatic of a trend that must be resisted, while maintai-
ning the spirit of wisdom and competition behind the Euro-
pean Directive of 1993.

The President

of the Committee of the Regions

Manfred DAMMEYER