Opinion of the Committee of the Regions on the "Communication of the European Commission on Productivity: the Key to Competitiveness of European Economies and Enterprises"
Date: 2003-02-12
Institutions: European Committee of the Regions
Subjects: European undertaking, competitiveness, industrial development, innovation, productivity, service, standard of living, sustainable development, working population

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Official Journal of the European Union

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II

(Preparatory Acts)

COMMITTEE OF THE REGIONS

Opinion of the Committee of the Regions on the ‘Communication of the European Commission
on Productivity: the Key to Competitiveness of European Economies and Enterprises’

(2003/C 128/01)

THE COMMITTEE OF THE REGIONS,

having regard to the Communication of the European Commission ‘Productivity: the Key to Competi-
tiveness of European Economies and Enterprises’, COM(2002) 262 final;

having regard to the Decision of the European Commission of 4 March 2002 to consult it on this matter,
under the first paragraph of Article 265 of the Treaty establishing the European Community;

having regard to the Decision of its Bureau of 12 March 2002 to instruct the Commission for ‘Economic
and Social Policy’ to prepare the Committee’s work on this subject;

having regard to the Presidency Conclusions of the Lisbon European Council of 23 and 24 March 2000;

having regard to the Presidency Conclusions of the Barcelona European Council 15 and 16 March 2002;

whereas in March 2000 the Lisbon Council decided that the European Union should set the new strategic
goal for the next decade: to become the most competitive and dynamic knowledge based economy in the
world, capable of sustainable economic growth with more and better jobs and greater social cohesion;

whereas only two years later the trends in productivity growth are not sufficient to attain the goals of the
Lisbon Strategy in the remaining years until 2010;

whereas the causes and remedies of the underperformance of the EU productivity growth are known;
insufficient willingness and ability to change are the real obstacle to reforms and attaining the Lisbon
goals;

whereas the need for reform is becoming even more urgent in view of the forthcoming enlargement of
the Union;

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whereas local and regional authorities are not only directly affected by the Lisbon Strategy, they are also
key to achieving the goals of the Lisbon Strategy;

having regard to its draft opinion (CdR 224/2002 rev.) adopted on 25 September 2002 by the
Commission for Economic and Social Policy (rapporteur: Mr Peter Moore, Liberal Democrat Member of
Sheffield Metropolitan Borough Council, UK/ELDR),

adopted the following opinion at its 48th plenary session, held on 12 and 13 February 2003 (meeting of
12 February).

THE COMMITTEE OF THE REGIONS’ VIEWS AND
RECOMMENDATIONS

1. General comments

The Committee of the Regions

believes that the underperformance of

1.1.
the EU in
labour-productivity growth and the failure to implement the
reforms necessary to attain the goals of the Lisbon Strategy are
reason for concern. The EU and its Member States must step
up considerably the implementation of the Lisbon Strategy,
and show ambition and courage to introduce the necessary
and long overdue reforms;

1.2.
stresses that local and regional authorities are key to
achieving the goals of the Lisbon strategy. Equally, these
the room for
measures determine to a certain extent
manoeuvre of local and regional authorities. It is therefore
regrettable that the report does not mention the role of local
and regional authorities, notably in the areas of ICT, education
and training, R&D. The Lisbon Strategy should be implemented
in a way that best matches the needs and specificities of local
and regional authorities. A study into the role that local and
regional authorities play in augmenting productivity and
competitiveness is therefore needed;

1.3. maintains that
the forthcoming accession of new
Member States will have an important impact on the pro-
ductivity of the EU as a whole. Given the relative differences
between current and future Member States in the structure and
strength of their economies, the composition of their labour
forces,
it would be
appropriate for the applicant countries to be included in the
communication.

their ability to change and innovate,

2.2.
underlines the importance of labour market flexibility
across the EU, and calls for a better analysis of each dimension
of flexibility, such as working patterns, wage, numerical,
functional, skill and geographical, identifying its relevance to
economic performance and job creation. Although the variety
of national weaknesses and strengths will necessitate cus-
tomised solutions in Member States, there must be an inte-
grated and mutually reinforcing approach to meet the Lisbon
targets of high growth and full employment, while remaining
on the path of sustainable development. Job creation and the
promotion of ‘employability’ will be the core of any successful
employment strategy. Subsiding ailing businesses to preserve
existing jobs must not threaten structural change;

2.3.
believes that special attention must be given to strat-
egies to be implemented in the applicant countries with a view
to bringing employability levels into line with those in the
other European countries as quickly as possible; here too, local
and regional authorities will have a crucial part to play.

3. The role of ICT and Innovation in Productivity

growth

The Committee of the Regions

2. Productivity and standards of living in the EU

The Committee of the Regions

endorses the priority area recognised by the Barcelona
2.1.
Council: further development of employment policies with a
particular focus on labour market reforms;

3.1.
believes that diffusion of ICT plays a key role, and
depends on the right framework conditions, whereas the
existence of a large ICT producing industry is neither a
necessary nor a sufficient condition to successfully experience
the growth effects of ICT. With regard to the diffusion of ICT,
as well as education and training, local and regional authorities
play a key role. The CoR therefore suggests therefore that the
European Commission includes local and regional authorities
in its proposals and encourages them to prioritise the diffusion
of ICT in remote and less favoured areas;

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3.2.
wishes to stress that efforts behind the eEurope initiat-
ive must be stepped up. In this respect the CoR welcomes the
comprehensive eEurope 2005 Action Plan, presented at the
Seville European Council and, given its role in the development
of
ICT and its impact on productivity, draws particular
attention to the importance of ensuring widespread availability
of broadband access at competitive prices for all EU regions,
including the most disadvantaged and outermost regions,
thereby helping at least partially to alleviate the physical
isolation of the latter;

calls on the European Commission, on the basis of the
3.3.
second paragraph of Article 299,
to make the necessary
adjustments to allow the outermost regions to harness the
opportunities offered by ICT and R&D and put
forward
concrete projects using existing instruments such as the
innovative actions,
Interreg III, the sixth framework pro-
gramme and ERA-NET. On a number of occasions, these
instruments have proved insufficiently adapted to the special
position of the outermost regions;

believes that the shortage of skilled labour at crucial
3.4.
technological modernisation must be urgently
stages of
addressed.
initiatives listed in the
It is imperative that all
Presidency Conclusions of the Barcelona Council in this regard
to be taken forward by the Member States;

3.5.
urges that the issue of a Community Patent must finally
be resolved in order to boost innovation. In addition, the CoR
would like to underline the importance of harmonising
Member States’ legislation on the patentability of inventions
related to computer programs;

in Research and
3.6. maintains that more investment
Development
is needed. The CoR endorses the target of
Research and Development spending of 3 % of GDP by the
end of the decade — two-thirds of which should be private,
with special emphasis on encouraging the involvement of SLEs
in RD activities (Barcelona Council). Furthermore, the CoR
advocates a stronger link between industry and science both
nationally and internationally across Member States, both
within and outside the EU. Local and regional authorities play
a vital role in this area. It is particularly important that all
regions should be involved in the European Research Area
(ERA), with special attention for the outermost regions, as
stipulated in the European Commission’s communication on
the regional dimension of the European Research Area (1);

3.7.
calls for an action plan on the Commission’s communi-
cation ‘Life Sciences and Biotechnology — a Strategy for
Europe’ (2), taking account of social/ethical concerns and the
precautionary principle. Therefore we recommend that the
barriers and the way forward identified for biotechnology in
the following be considered and implemented: European
Competitiveness Report 2001 (3), Innovation and Competi-
tiveness in European Biotechnology (4);

3.8.
calls for a progress report from the Commission on its
intention to better integrate innovation into a European
Knowledge Area, with the aim of
improving intellectual
property rights across Europe.

4. Productivity growth in manufacturing in recent years

The Committee of the Regions

recommends more research on the relation between
4.1.
labour costs and productivity in this sector; and recognises the
need to increase the share of technology driven industries in
the EU.

4.2.
recommends that incentives and programmes to mod-
ernise production processes and non human capital be more
widely deployed in the member states.

4.3.
recommends increasing venture capital, seed capital
and participating loans to set up new companies, in particular
those in technology and ITC, in their start-up and development
phases; providing incentives to train managers who are
specialised in these financial
instruments; and supporting
private and public local operators so that they can be involved
in financing these measures.

5. Productivity growth in the European service sector

in recent years

The Committee of the Regions

calls for better collection, collation and analysis of

5.1.
comparable data on productivity across the Member States;

( 1) COM(2001) 549 final.

(4) Enterprise Papers No 7, Enterprise DG, European Commission.

(2) COM(2002) 27 final.
(3) COM(2002) 27 final, chapter V and in A. Allansdottir et. al.

(2002).

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5.2.
stresses that a more favourable climate must be created
for entrepreneurship. The rules that govern the setting up of
new firms in the distribution and retail sectors must be eased.
The CoR also supports the call for incentives for innovation
in the service sector, as well as the reduction/removal of
bureaucratic/systemic impediments to entrepreneurship. How-
ever the CoR does not support the de-regulation of hiring
and firing, believing it would be counterproductive in both
economic and social terms, inimical to the European Social
Model and detrimental to the efforts of local and regional
authorities to secure the well-being of their localities and
regions;

supports the vigorous pursuit of market liberalisation
5.3.
towards a single market for financial services and the Financial
Services Action Plan;

of all groups who are currently excluded from the labour
market. There are substantial benefits in productivity and
competitiveness to be gained through increasing skills at
managing diversity;

6.3. maintains that further measures are needed to remove
obstacles to mobility. Member States must eliminate barriers
to recognition of professional qualifications. ICT and language
skills are essential tools for mobility. As local and regional
authorities are often responsible for these areas, they should
be included in any Commission proposals. The CoR also
supports the Commission Action Plan to remove barriers by
2005.

5.4.
strongly believes that barriers in the internal market
for services must be eliminated. European, national, regional
and local authorities must all increase efforts to remove legal
and other obstacles.

7. Enterprise policy, Competition Policy and Pro-

ductivity Growth

The Committee of the Regions

6. Human Capital and Productivity Growth

The Committee of the Regions

6.1.
recognises that the quality and composition of the
labour force is a determining factor in productivity. Therefore
elements such as equal opportunities, immigration, lifelong
learning and mobility should have a prominent place in the
debate on productivity. New paradigms and methods of
training and education must be explored. In particular, e-
learning will become a core component of vocational training,
level, and in particular
at both shopfloor and managerial
during specialisation, ongoing training and re-training. More
software will also be designed incorporating the most up-to-
date educational and user-friendly techniques for students;

believes that the importance of

6.2.
increasing labour
market participation must be emphasized more strongly.
The CoR feels that Lisbon, the Barcelona Council and the
Commission should all have also recognised the importance
of increasing labour force participation for women. This also
applies to other disadvantaged groups such as older, disabled,
ethnic minority, and lesbian/gay/bisexual workers. There is a
huge need for increasing labour force participation as a whole.
Productivity can be boosted by mobilising the unused potential

supports the Commission’s recognition of the need to
7.1.
decrease centralisation and state aid, while ensuring that
measures to support economic growth are put in place and
built upon. CoR welcomes less and better targeted state aid,
targeted towards more horizontal shared objectives and at
clearly identified market failures. Priorities should be estab-
lished for state aid policies, with the main criteria being the
extent to which they foster innovation and risk-taking and
encourage SMEs;

7.2.
feels that the Commission’s communication should
better address venture capital provisions and entrepreneurship,
and in particular the role of local and regional authorities in
this area. Policy,
impediments,
facilitation of access to finance, incentives to promote inno-
vation and R&D, are some of the ways to encourage private
investment and a vibrant start-up culture in the EU;

the removal of structural

7.3.
believes that there is a need to improve corporate
governance by taking steps to guarantee transparency of
management and accounting, and to protect shareholders as
well as other stakeholders such as employees from the
consequences of mismanagement;

7.4.
endorses that the Merger Review should assess whether
the existing tools could be improved under the Merger
Regulation, to permit verifiable merger-specific efficiency gains
and offset negative effects such as price increases caused by
the creation/strengthening of a dominant market position.

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8. Enterprise policy and Sustainable Development in

Manufacturing

The Committee of the Regions

8.1.
supports the implementation of structural economic
reforms and environmental policies that avoid the trade-off
between growth and environmental progress in manufactur-
ing. The CoR recognises that environmental policies can
contribute to competitiveness and growth by introducing
greater production efficiency and creating new markets, despite
imposing some costs on industry;

8.2.
endorses the call of the Barcelona Council for a report
on the sustainability impact assessment for all major policy
proposals and initiatives, analysing their economic, social and
environmental consequences, so that the process of adapting
EU policy and practice can be continued.

8.3.
recommends that a comparative study be carried out
of the differences in costs to businesses of using essential
infrastructure. Such differences must be analysed, with a view
to boosting the competitiveness of companies which may
suffer discrimination due to higher infrastructure costs.

Brussels, 12 February 2003.

The President

of the Committee of the Regions

Albert BORE