Communication from the Commission to the Council and the European Parliament - Some Key Issues in Europe's Competitiveness - Towards an Integrated Approach
Date: 2003-11-21
Institutions: European Commission
Subjects: EU action, EU industrial policy, competitiveness, entrepreneurship, industrial research, international competition, research and development, transfer of businesses

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 21.11.2003
COM(2003) 704 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Some Key Issues in Europe’s Competitiveness – Towards an Integrated Approach

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Some Key Issues in Europe’s Competitiveness – Towards an Integrated Approach

Table of content

1.

2.

3.

4.

4.1.

4.2.

5.

5.1.

5.2.

5.3.

5.4.

6.

Introduction................................................................................................................ 3

Some competitiveness policy issues in the EU ......................................................... 4

Europe’s competitiveness challenges........................................................................ 5

Recent developments in industrial competitiveness................................................ 7

Productivity growth and de-industrialization............................................................... 7

De-localization ............................................................................................................. 9

How to better address competitiveness issues ....................................................... 11

Competitiveness analysis as the foundation for action .............................................. 11

Get the regulatory framework right............................................................................ 12

Increase efforts to foster research, innovation and entrepreneurship......................... 16

The Commission’s contribution................................................................................. 17

Conclusions ............................................................................................................... 17

ANNEXES ............................................................................................................................... 19

2

1.

INTRODUCTION

Europe  must  become  more  competitive.  A  competitive  European  economy  will  give  us  the
means  to  support  our  social  model  and  to  ensure  a  high  level  of  consumer,  health  and
environmental  protection,  thus  enabling  us  to  enjoy  a  high  quality  of  life  and  to  raise  our
standards of living.

The  2003  Spring  European  Council  placed  competitiveness  firmly  at  the  centre  of  political
attention. It set the Competitiveness Council1 the task of reinforcing the economic dimension
of  the  Lisbon  Strategy  by  asking  it  to  “actively  assume  its  horizontal  role  of  enhancing
competitiveness and growth in the framework of an integrated strategy for competitiveness to
be developed  by  the  Commission,  reviewing on  a regular basis both horizontal and sectoral
issues”.

The purpose of this Communication is twofold:

(cid:1)  First, to alert the Council to the range of issues that must be addressed and kept prominent
in  its  policy  agenda  and  to  propose  a  method  of  work  which  will  make  it  possible  to
systematically  identify  and  respond  to  competitiveness  questions.  These  issues  clearly
constitute elements of an integrated approach to competitiveness;

(cid:1)  Secondly, to respond to the request of the October 2003 European Council and address in a
preliminary manner recent concerns about the process of de-industrialization, a risk which
Europe is apparently believed to be facing. The Commission will provide a more complete
response in the coming months and it will study in depth the conditions affecting Europe’s
specialization  and  place  in  the  international  division  of  labour.  The  Commission’s
reflection  will  take  place  in  the  context  of  its  forthcoming  review  in  an  industrial  policy
Communication and in light of the preparation of the new Financial Perspectives.

Clearly,  deindustrialization  and  competitiveness  policies  are  closely  related.  Policies
supporting competitiveness will contribute to arresting the de-industrialization process; such
policies  will  also  contribute  to  the  orderly  transition  towards  a  modern  industrial  economy.
This  transition  will  entail  changes  in  the  distribution  of  employment  across  sectors.
Historically,  losses  in  manufacturing  employment  have  been  more  than  compensated  by
employment increases in the service sectors. While these structural changes will continue to
take  place,  it  will  become  increasingly  difficult  for  the  low-skilled  to  regain  employment.
This  is  a  particularly  vulnerable  segment  of  our  labour  force  in  the  adjustment  process.
Whereas  it  is  undeniable  that  such  adjustments  can  be  onerous  in  local  economies  and  in
social  terms,  the  resulting  better  resource  allocation  will  improve  national  income  and
welfare. Policies that raise our innovation potential and our human capital base will also raise
labour productivity and strengthen our comparative advantage internationally.

In this respect, and with a view to improving our competitiveness, the Communication points
to (outstanding) decisions and actions of high political significance or economic urgency that
the  Council,  the  European  Parliament,  Member  States  and  the  Commission  should  take  to
close the delivery gap on economic reform. The 2003 Spring European Council stressed that
the Lisbon goal will not be achieved unless efforts to adopt and implement structural reforms

1

The Council streamlined the way it works in the summer of 2002. As a result the Competitiveness Council
was created regrouping the former Internal Market, Research and Industry Councils.

3

                                                
in Europe are significantly stepped up.  In many of these  reform areas poor  progress flies in
the face of the commitments and timetables agreed by Heads of State and Government within
the European Council.

2.

SOME COMPETITIVENESS POLICY ISSUES IN THE EU

It should be stressed at the outset that preoccupations about Europe’s competitiveness are not
new  but  have  been  central  in  the  Council’s  and  in  the  Commission’s  policy  reflections.
Indeed,

–  The  Union  has  launched  a  comprehensive  10-year  road  map  for  economic,  social  and
environmental  reform  through  the  Lisbon  Strategy  which  incorporates  the  Gothenburg
European Council. Over the last twelve months the Commission has presented a number
of  mutually  reinforcing  political  or  strategic  documents  that  have  an  immediate
impact  on  competitiveness.  These  concern  issues  such  as  how  to  maximise  the
advantages  of  an  enlarged  Internal  Market,  how  to  foster  industrial  competitiveness,  and
how  to  promote  research,  innovation  and  entrepreneurship2.  The  Commission  is  also
carrying out an ambitious programme of policy reforms in antitrust, merger and State aid
fields  in  order  to  improve  the  effectiveness  of  its  competition  policy  instruments.
Moreover,  the  Broad  Economic  Policy  Guidelines  (BEPG)  call  for  sound  economic
governance and more rapid  economic reforms in order to raise the EU's  growth potential
by  giving  an  additional  stimulus  to  labour  productivity  and  business  dynamism.  Most
recently, the Commission has launched a European initiative for growth, which is intended
to boost investment in the two critical areas of investment in networks and knowledge.3 In
its  final  report  on  the  Growth  initiative,  the  Commission  has  identified  a  quick  start
programme of projects in the areas of Trans-European Networks for transport and energy,
as  well  as  for  broadband  or  high-speed  internet,  and  in  research  and  development  and
innovation. These are projects which are ready  to start immediately, have  a strong cross-
border impact and will yield positive results of growth and jobs.

–  Europe is not implementing  reforms  fast  enough  according  to  the  2003  Spring  European
Council. Therefore, rather than proposing yet another strategy, this document’s purpose is
to mobilise sufficient forces for an integrated approach to competitiveness in order to
build renewed momentum  for  change.  The  added  value  of  an  integrated  approach  is  that
the whole is more than the sum of its parts. Many of the actions before the Council and
the  European  Parliament  produce  benefits  which  go  far  beyond  their  immediate  scope,
triggering positive changes across many areas. An example is the Community Patent. Once
implemented  it  will  not  only  improve  the  functioning  of  the  Internal  Market,  but  also
provide more affordable ways of translating research results into commercial applications.
Every day that passes without companies being able to protect their inventions affordably
on an EU-wide basis will see Europe losing important productivity gains arising from the
Internal Market, research and development and entrepreneurial initiative.

2

3

These documents are the Communication “Internal Market Strategy Priorities 2003 – 2006” (COM(2003)238
final) of 07.05.2003, the Communication “Investing in research: an action plan for Europe (COM(2003)226
final/2) of 04.06.2003, the Communication “Industrial Policy in an Enlarged Europe” (COM(2002)714 final)
of 11.12 2002, the Green Paper on Entrepreneurship in Europe (based on COM(2003)27 final) of 21.01.2003
and  the  Communication  “Innovation  policy:  updating  the  Union’s  approach  in  the  context  of  the  Lisbon
strategy” (COM(2003)112 final) of 11.03.2003.
“An initiative for growth: investing in Trans-European Networks and major R&D projects”, SEC(2003) 819,
09.07.2003 as well as the final report to the European Council “A European initiative for growth: Investing in
networks and knowledge for growth and jobs”, COM(2003)690 final, 11.11.2003.

4

                                                
–  Competitiveness is determined by productivity growth; a competitive economy is one that
experiences high and sustained productivity growth leading to an increase in standards of
living.  Many  factors  determine  productivity  performance.  Key  among  these  are:
opportunities  provided  by  market  reforms  to  stimulate  investment;  the  level  of
competition; the ability to innovate, both through increased investment in R&D and human
capital  development,  notably  through  education  and  training;  the  capacity  rapidly  to
transform  technological  and  non-technological  innovations  into  economic  goods;  the
reorganisation  of  working  practices 
information  and
communication  technologies;  competition  regulations  and  consumer  protection  rules  that
ensure that competitive pressure operates fully in  the  Internal Market4 (inter  alia in areas
where  the  obstacles  to  competition  and  competitiveness  take  the  form  of  restrictive
regulations  and  monopoly)  thus  maintaining  incentives  for  higher  productivity;  and  an
integrated market for goods and services that ensures that all potential gains are realised.

the  adoption  of 

through 

–  The European institutions and the Member States each have important roles to play
as “guardians of competitiveness”. Their common aim is to put in place the framework
conditions which will enable European companies to grow and compete successfully in a
fiercely competitive global market. The emergence of strong new competitors from South
East Asia and Latin America makes meeting this challenge all the more important. In order
to  ensure  that  the  European  Union  is  on  the  right  track  we  must  systematically  monitor
developments  and  review  the  state  of  competitiveness  of  our  economies  and  our
enterprises.  Moreover, 
the  economic,  social  and
environmental impact of its key legislative proposals whilst ensuring that its policy choices
take  full  account  of  their  effects  on  competitiveness.  Public  consultation  and  thorough
impact analysis are crucial instruments to this end. The impact assessments carried out on
major Commission proposals should also allow the Council and the European Parliament
to appreciate their effects on competitiveness. However, the latter institutions should also
ensure  that  the  impact  assessment  process  continues  as  proposals  advance  through  the
different stages of the legislative process.

the  Commission  must  assess 

3.

EUROPE’S COMPETITIVENESS CHALLENGES

Europe’s overall productivity growth has slowed down markedly, although performance
across  the  Member  States  has  been  mixed,  since  1995.  The  Commission  has  stressed  on
several  occasions  the  importance  of  this  development5.  A  review  of  the  key  factors
influencing  EU  competitiveness  paints  a  worrying  picture.  The  principal  causes  of  the
slowdown  are  our  weakness  in  taking  advantage  of  information  and  communication
technologies (ICTs), slow innovations in our work environment and development of new and
relevant skills, and weak organisational change.

The  efficiency  of  hourly  work  in  the  EU  is  below  that  of  the  US;  in  2002  productivity  per
hour  worked  in  the  EU  was  at  86.8%  of  the  US  level6.  However,  this  figure  masks  wide

4

5

6

This concerns both the level of retail and B2B transactions. The fact that the full force of competition has not
been felt in the B2C Internal Market is illustrated by the substantial variations in prices for identical goods
and services from one Member State to another, as recent price surveys and the latest Cardiff report confirm.
See  the  2001,  2002  and  2003  editions  of  the  European  Competitiveness  Report,  SEC  (2001)  1705  of  29
October  2001;  SEC  (2002)  528  of  May  2002;  and  SEC  (1299)  of  17  November  2003,  respectively.  The
Commission  has  also  alerted  the  Council  and  the  European  Parliament  of  the  risks  involved  in  the
Communication “Productivity: The Key to Competitiveness of European Economies and Enterprises”, COM
(2002) 262 final of 25 May 2002.
See European Competitiveness Report, 2003 edition, op. cit. footnote 5.

5

                                                
differences  between  Member  States’  performances7.  Labour  productivity  growth  per  hour
worked advanced at a rate of 2.5% per annum in the EU during 1990-1995, but slowed down
to 1.3% over the period 1995-2000. In the US, the corresponding figures are 1.1% and 1.9%.

Europe’s  economic  integration  remains  far  from  complete.  In  particular,  the  Internal
Market’s benefits have not yet been effectively felt in those areas where there has been less
reform,  and  consequently,  less  competition  such  as  energy  markets,  transport  and  service
markets. Intra-EU trade in goods grew faster than GDP between 1996 and 2000, but has lost
momentum since 20018. Trade in services has almost doubled since 1993 from € 194 billion
to € 362 billion, but there is clearly a potential for further integration through enhanced trade
and FDI.

Europe’s R&D efforts lag behind those of the US and Japan. Despite positive initiatives in
some Member States, measures to increase the volume of, and improve the environment for,
research  investment  have  been  fragmented  and  sluggish.  While  the  latest  available  figures
(2001) show overall R&D investment in the EU15 increasing slowly and approaching 2 % of
GDP,  its  highest  level  ever,  the  average  annual  growth  rate  of  1.3  %  remains  wholly
insufficient to catch up with the levels in the US and Japan and meet the 3 % target by 2010.
Furthermore, the R&D investment gap with the United States has continued to widen from €
120  billion  in  2000  to  €  140  billion  in  2001  mainly  due  to  comparatively  lower  private
expenditure in the EU.

Europe’s innovation performance also continues to lag behind its main competitors. The
latest data9 show that, for a range of key indicators, large gaps remain between the EU and the
US. The European weakness in patenting  persists, in  particular  in  high-tech  areas.  The  data
also suggest a worrying decline in life-long learning. This needs to be seen in context of the
general  lack  of  private  sector  investment  in  higher  education  and  vocational  training  in
Europe compared to its main competitors10. But some of the indicators justify a more positive
note. For instance, the share of Science and Technology graduates among all new graduates in
the EU is significantly higher than in the US, and the gap in ICT expenditures has been cut by
half since 1996.

Europe continues to suffer from an “entrepreneurship gap”11. Entrepreneurship is far less
frequently  considered  as  a  professional  option  than  in  the  US.  It  is  essential  to  improve
attitudes towards entrepreneurship and to strengthen the incentives for self-employment.

Europe  not  only  needs  more  entrepreneurs,  but  also  needs  conditions  that  support
enterprise growth. Lack of financial support, complex administrative procedures and lack of
skilled labour are still identified as the key barriers to starting and expanding a business. This
is particularly true for technology-intensive sectors such as biotechnology, where the number

7

8

9

10

11

During  the  period  1996-2002  average  hourly  productivity  growth  was  higher  in  Belgium  (2.16%),  Greece
(3.16%),  Ireland  (5.12%),  Luxembourg  (2.04%),  Austria  (2.43%)  and  Finland  (2.58%)  than  in  the  US
(1.86%); also, while GDP per hour worked in the EU was 86.8% of the US level in 2002, hourly productivity
in Belgium, France and Luxembourg exceeded that of the US; see European Competitiveness Report, 2003
edition, op. cit. footnote 5..
See  “Economic  Reform:  Report  on  the  functioning  of  community  product  and  capital  markets”
(COM(2002)743 final) of 23.12. 2002
See “2003 European Innovation Scoreboard”, SEC(2003 )1255 of 10.11.2003
See “Education & training 2010 – The success of the Lisbon Strategy hinges on urgent reforms (Joint interim
report on the implementation of the detailed work programme on the follow-up of the objectives of education
and training systems in Europe), COM(2003)685 final of 11.11.2003
See Benchmarking Enterprise Policy: Results from the 2003 Scoreboard, SEC(2003)1278  of 11  November
2003.

6

                                                
of  new  start-ups  has  recently  been  larger  in  Europe  than  in  the  US,  but  whose  growth  is
severely hampered by inadequate access to risk capital.

4.

RECENT DEVELOPMENTS IN INDUSTRIAL COMPETITIVENESS

Europe’s  competitiveness  problems  have  been  reflected  in  concerns  about  the  risk  that
Europe  might  be  heading  for  de-industrialisation.  In  recent  months  such  concerns  have
been raised in public debates and also at the highest political levels, most notably in a letter to
the President of the Commission from the Heads of State or Government of France, Germany
and the UK. These concerns are not new and are invariably strongest during periods of slow
economic growth or in recessions12. There is no doubt that the adjustment process associated
with the changing structure of our economies can be very costly, especially at the local level.
However,  good  macroeconomic  performance  will  provide  not  only  the  environment  for  the
EU manufacturing sector to improve its productivity and ultimately to compete internationally
and to create jobs but also the conditions for the growth of the service sector.

Section 4.1 discusses some elements related to de-industrialization and the following section
reviews  some  ideas  about  de-localization.  These  issues  are  emerging  as  part  of  a  wider
reflection about the performance and future of the EU industry. This perhaps reflects an
ambition that Europe remains a global power in industrial sectors that are considered essential
for strategic or other reasons. Moreover, this could reflect an ambition to restore performance
in areas where Europe has been weak. This echoes the concern that, because the EU industry
is  less  specialised  in  technology-based  sectors  than  in  the  US  or  Japan,  it  must  retain  its
present strong position in traditional, mature sectors, even if this will not be enough to ensure
long-term  economic  success13.  Finally,  enlargement  may  accelerate  the  pace  of  structural
change in some industrial sectors in the EU.

4.1.

Productivity growth and de-industrialization14

De-industrialization is a process of structural change. The decline in the relative presence
of the manufacturing sector in national income primarily during the post-war II years mirrors
the decline in the share of the primary sector in earlier years.

Developments  in  EU  industry  competitiveness  in  recent  years  show  considerable  diversity;
see Annex 2. Productivity growth in manufacturing began to decelerate in the mid-1990s and
it  has  since  fallen  behind  the  US.  The  sectors  that  have  contributed  to  the  widening  of  the
productivity  gap  are  mainly  high-tech  sectors.  However,  European  ICT-producing
manufacturing and services have performed extremely well, but productivity growth in ICT-
using  sectors  has  not  accelerated  as  in  the  US.  It  is  clear  that  ICT  has  been  a  key  factor  in
sectoral productivity performance.

Productivity  developments  would  play  a  key  role  in  any  process  of  de-industrialization
because they influence directly the competitiveness of enterprises. It is important to consider
how our performance compares to that of the US as a benchmark.

12

13

14

During the early 1980s in the US and in the UK, for example, a severe process of de-industrialization was set
in motion but it subsequently led to restructuring and recovery of enterprises and to a more general change in
the structure of the industrial sector.
Communication “Industrial Policy in an Enlarged Europe” (COM(2002)714 final) of 11.12 2002
The data discussed in this section are from M. O’Mahony and B. van Ark (ed., 2003): EU Productivity and
Competitiveness: An Industry Perspective Can Europe Resume the Catching-up Process?, a study prepared
for the Enterprise Directorate-General.

7

                                                
De-industrialisation is the long-term (not cyclical) decline of the manufacturing sector15. This
implies an absolute decline in employment, production, profitability and capital stock in the
manufacturing sector, as well as an absolute decline in exports of manufactured goods and the
emergence of persistent manufacturing trade deficits.

Throughout  the  post–1979  period  and  in  sub-periods  therein  the  manufacturing  sector  has
experienced employment losses. The largest declines in employment during the period 1979–
1995  were  registered  in  the  primary  sector  but  also  in  the  telecommunications  equipment,
radio  and  television  and  transport  equipment  sectors.  These  employment  losses  continued,
with some small exceptions,  through the  period  1995-2001  and during  more  recent  quarters
reflecting the slowdown in economic activity.

Nevertheless,  growth in value  added advanced at a  considerable  pace  during  the  1979-1995
period. The largest increases were noted in chemicals (3.5% compound annual rate of value
added  in  1995  prices),  office  machinery  (6.9%),  electronics  (6.3%),  telecommunications
equipment  (4.4%),  and  scientific  instrument  and  other  instruments  (2.4%).  Growth  rates  in
added  value  in  the  period  1995-2001  have  generally  been  robust  and  diverse.  Sectors  that
stand  out  in  this  respect  are  electronics  (value  added  up  by  14.7%  compound  annual  rate),
telecommunications equipment (up by 15.5%) and radio and television receivers (up 10.1%).

Only in a minority of sectors has employment and output declined. These sectors are textiles
and  clothing,  leather  and  footwear,  mining  and  quarrying,  mineral  oil  refining,  coke  and
nuclear fuels. The share of the latter sectors in manufacturing output declined from 14.1% in
1979  to  8.7%  in  2001,  but  the  shares  of  sectors  such  as  chemicals,  telecommunications
equipment, office machinery and electrical equipment have seen marked increases16.

The  fundamental  determinant  of  manufacturing  output  growth  has  been  rapid
productivity growth. Reflecting the productivity convergence process under way during the
period up to 1995, output per person employed  grew virtually in all industrial sectors in the
EU. However, the growth rate of productivity slowed down significantly in several sectors in
the period 1995-2001 even though it remained  positive across virtually  all. Yet,  even in  the
latter period productivity growth accelerated in several cases, growing by a compound annual
rate of 14.7% in the telecommunications equipment sector, by 12% in electronics, by 9.7% in
office machinery and by 5.2% in electricity, gas and water supply.

The EU  manufacturing  sector  is  also  performing  well  in  international  trade.  The  surplus  on
manufactured  goods  has  improved  over  time,  rising  from  €  31.5  billion  (0.6%  of  GDP)  in
1989  to  95.2  billion  (1.1%  of  GDP)  in  2001.  Only  those  few  industry  sectors,  mentioned
previously, that have experienced an absolute decline in output have recorded increasing trade
deficits.  With  few  other  exceptions,  all  other  manufacturing  sectors  experienced  increasing
surpluses over the period 1989-2001.

One should keep in mind that, as mentioned earlier, a process of relative de-industrialisation17
has  indeed  been  taking  place  throughout  history.  High  productivity  growth  in  the
manufacturing  sector  has  contributed  to  raising  real  incomes  and  to  making  manufactured

15

16

17

Secular or absolute de-industrialization should be distinguished from relative de-industrialization. The latter
is the decline in the share of manufacturing in GDP. This is also a longer-term process that reflects the rapid
growth in productivity in manufacturing, the consequent increases in real incomes and the rising demand for
the output of the service sectors. Under these conditions  the decline  in  the  share  of  manufacturing  in  GDP
reflects a process of structural change towards a service-dominated economy.
See Annex 2.
See footnote 15 for the concept of relative de-industrialization.

8

                                                
good  relatively  cheaper  than  goods  produced  in  the  services  sectors.  Thus,  inevitably,  the
share of manufacturing in national income and employment will follow a trend decline. This
has already occurred and it continues to occur in our economies.

For  better  understanding  of  the  process  of  structural  change,  and  despite  the  obvious  short-
term costs adjustment costs associated with the process of structural change, it is important to
ask  what  the  economic  implications  of  some  form  of  de-industrialisation  would  be,  should
they begin to emerge.

It should be noted at the outset that concerns about de-industrialisation appear to be based on
a  partial  view  of  economic  realities.  Relocation  of  industrial  activities  internationally  is  a
reflection of changing comparative advantages:

(cid:1)  However,  international  trade  linkages  ensure  that  such  relocations  do  not  benefit
exclusively the host countries. Increased exports from them will be matched by increased
imports by them. It is clear that relocation implies that EU exports will inevitably increase
as  economic  growth  abroad  accelerates,  thus  contributing  to  output  and  employment
growth  in  our  economies  albeit  in  other  sectors/industries.  Jobs  will,  therefore,
permanently decrease in regions from which industries leave only if they are not matched
by exports to the regions where industries have migrated. That said, this process will take
time to complete and it will involve considerable adjustment costs; hence, the need for an
adaptable labour force with skills that are continuously upgraded.

(cid:1)  Secondly, the share of imported manufactured goods from the host countries will continue
to be only a small fraction of total expenditure in the EU.  Domestically produced  goods,
but  primarily  services,  will  continue  to  dominate  domestic  expenditure  and  support
employment growth.

(cid:1)  Finally,  it  is  important  to  recall  that  the  nations  towards  which  industries  are  likely  to
migrate  are  invariable  less  wealthy,  developing,  nations.  These  nations  need  capital
imports to develop their economies, which implies that they must run for the foreseeable
future trade deficits. These deficits will mirror the rest of the world’s, (including the EU’s),
capital  exports  or,  correspondingly,  trade  surpluses.  It  is  unrealistic  to  believe  that
developing  nations,  where  industries  could  migrate,  would  become  major  exporters  of
capital to high–wage nations in the industrialized world such as the EU.

On  the  basis  of  the  data  reviewed  here,  there  is  no  evidence  that  the  EU  economy  is
showing  signs  of  de-industrialisation.  Nevertheless,  it  is  possible  that  during  a  period  of
slow  growth  and  poor  productivity  and  innovation  performance,  conditions  contributing  to
setting out such a process might emerge.

This  suggests  that  policy  makers  should  be  alert  to  this  potential  risk.  Moreover,  it  is
essential that the Competitiveness Council is regularly informed and the Commission monitor
on a systematic basis such developments in industrial performance.

4.2.

De-localization

De-localization  concerns  the  transfer  of  production  and  of  other  manufacturing  activities  to
locations outside the home country. De-localization has already taken place within the EU and
reflects  the  changing  comparative  advantage  of  different  locations  and/or  different  policy
conditions.

9

De-localization has created significant concerns among policy-makers, the social partners and
the public more generally. These concerns were  already  expressed when EU enlargement to
countries of Central and Eastern Europe was first discussed and has resurfaced in the context
of  globalisation.  Clearly,  better  cost  conditions  abroad  will  inevitably  attract  industries
that  are  unable  to  produce  in  the  high-wage  environment  of  modern  industrial
economies; this, of course, is contributing to the growth of less wealthy trading partners.

De-localisation  has,  indeed,  been  limited  to  low-technology,  labour-intensive  activities.
However, such re-location is often accompanied by the retention of, or creation of new, jobs
in  Europe  in  service  areas  such  as  design,  marketing  and  distribution.  This  changing
specialisation is a reflection of a changing comparative advantage where the EU retains those
jobs that are human capital– and technology–intensive and characterised by high productivity
and correspondingly high real  wages.  One lesson  that can be  drawn  from  this  is  that,  today
and in the future, Europe must develop and strengthen further its competitive manufacturing
base.  To  achieve  this,  it  is  necessary  to  raise  its  R&D  and  innovation  performance,  to
strengthen  its  human  capital  base  and  to  develop  conditions  supportive  of  enterprise  and  of
productivity growth.

However,  other  aspects  of  de-localisation,  such  as  the  migration  of  R&D  activities,
constitute genuine threats to Europe’s future. Companies are conducting a growing share
of their research outside Europe, particularly in high-technology, research-intensive sectors
such  as  pharmaceuticals  or  biotechnology.  These  activities  increasingly  move  to  the  US  to
take  advantage  of  more  favourable  regulatory,  structural  or  finance  conditions  and  of  the
availability  of  skilled  workers.  According  to  a  survey  carried  out  by  the  European  Round
Table  (ERT)  in  2002,  major  European  firms  warned  that  unless  framework  conditions
improved  drastically  most  of  their  new  R&D  investment  would  take  place  outside  the  EU
where they already locate 40 % of their R&D. This warning should alert policy-makers to the
risk that science- and knowledge-based activities promising for our future standards of living
may become marginal in the EU.

Clearly, while there are economic forces about which EU policy makers can or should do
little, there  are others where they should play an active  role. For example, they should take
into  account  the  current  process  of  industrial  transformation  by  facilitating  the  increasing
osmosis (or interpenetration) between manufacturing and services. They should also be alert
to  the  role  that  industrial  framework  conditions  play  in  decisions  to  relocate.  For
example,  if  the  potential  migration  of  some  of  Europe’s  most  competitive  industrial  sectors
were to be motivated by uncompetitive framework conditions in the EU rather than costs or
market access, the policies in question should be reconsidered. In the event, this would raise
serious  questions  about  Europe’s  ability  to  retain  its  leading  roles  in  these  sectors  which
generate important spill-overs in the rest of the economy.

A further enlarged EU, with its increased variety of wage structures  and  technological
skills, will provide European industry with opportunities for competitive reorganisation.
Furthermore, the objective of offering the prospect of a stake in the EU’s Internal Market
to the neighbours of the enlarged EU18, in particular Russia, the countries of the Western NIS
and the Southern Mediterranean provided that these countries fully align their legislation with
and  implement  the  “acquis”,  will  –  like  the  Europe  Agreements  a  decade  ago  –  offer  EU
enterprises both a large domestic market and with easier access to abundant human or

18

As spelt out in the Communication “Wider Europe – Neighbourhood: A new Framework for Relations with
our Eastern and Southern Neighbours” (COM(2003)104 final of 11.03.2003.

10

                                                
physical production factors. This will strengthen the competitiveness of EU producers  and
will  enable  them  to  remain  present  in  market  segments  characterised  by  strong  competition
from  Far  East  producers.  Such  patterns  of  co-operation  are  already  being  developed  by  EU
textile and apparel producers in some of the Mediterranean Partner States, and other industry
or service sectors could certainly take advantage of similar arrangements.

Although  a  firm’s  competitiveness  ultimately  depends  on  the  efficiency  with  which  it
combines  the  various  resources  that  are  available  to  it,  public  authorities  can  play  an
important role in facilitating this process, by helping create appropriate framework conditions.
It is clear that inappropriate framework conditions and a poor business environment can
act as significant burdens on business activity, not to speak of the cumulative effects of
additional layers of  regulation. Clearly,  the policies in  question  range  widely and  concern
both  the  Member  States  and  the  Commission  and  the  European  Parliament,  as  will  be
discussed in section 5 below19.

5.

HOW TO BETTER ADDRESS COMPETITIVENESS ISSUES

5.1.

Competitiveness analysis as the foundation for action

In order to be properly targeted and effective, EU competitiveness policies must be based on
sound economic analysis. This concerns both the horizontal and the sectoral aspects of such
policies. Over the last twelve months the  Commission  has presented  a  number  of  analytical
documents addressing different policy areas20.

The Commission’s competitiveness analysis has both a general and a specific character,
and  it  involves  instruments  that  are  directly  and  singularly  aimed  at  competitiveness  issues
and  others  that  are  less  so  –  education  policies  and  regional  policies,  for  example.  The
specific analytical instruments are the  Commission’s  annual Competitiveness Report and ad
hoc competitiveness studies that accompany reviews of sectoral economic performance. This
year, a new study21 will enable us to get a clearer picture of the productivity performance of
individual  industrial  sectors  as  well  as  provide  a  coherent  statistical  basis,  which  will  be
updated annually, on which to build sound analysis.

The Communication on  Industrial  policy of  December  2002 stressed that  industrial  policy,
while horizontal in its nature, will have to take into account the competitive situation of
individual sectors. This approach was confirmed by the recent European Council in October
2003.  The  Commission  will  continue  to  provide  analysis  of  individual  industry  sectors,
both as a basis for identifying sector specific competitiveness problems and for ensuring the
optimal mix of measures across an array of policy areas that influence that sector’s framework
conditions.  This  should  also  allow  the  Commission  to  reflect  on  instruments  to  anticipate
industrial sector restructuring. These analyses will be carried out  in close dialogue with all
interested parties. They express their views in the form of recommendations for actions to be
taken  on  EU  and  national  levels.  One  example  for  this  approach  is  the  “G10  Medicines”
initiative. A study in 2000 highlighted this sector’s  alarming competitiveness problems  and

19

20

21

For a more detailed discussion of framework conditions see the “Communication on Industrial Policy in an
Enlarged Europe’ (COM(2002)714 final) of 11.12.2002.
These include the Cardiff Report on the functioning of the Internal Market for goods and capital markets, the
Competitiveness Report, the Internal Market Scoreboard, as well as the Scoreboards on enterprise policy and
innovation.
See M. O’Mahony and B. van Ark (ed., 2003), op. cit., footnote 14.

11

                                                
pointed to a need for actions to improve its framework conditions. As a result a small group of
11 high level decision-makers22, representing Member States and stakeholders, met to  reach
consensus  on  the  future  of  this  industrial  sector.  The  group  agreed  on  14  wide-ranging
recommendations23  in  2002.  In  response,  the  Commission  proposed  a  series  of  actions
through which it and Member States can work together to implement these recommendations.
The  Council  adopted  substantive  conclusions  underlining  the  importance  of  retaining  a
competitive  pharmaceutical  industry  in  Europe  to  support  our  science  base,  high  quality
employment and play a full role in meeting our public health objectives. The Council invited
Member States to look on ways to improve their pricing and reimbursement schemes and the
Commission to  launch a  reflection  to support this  process. Other examples  of this  approach
include STAR 21 for the aerospace industry, and LeaderShip 2015 for the shipbuilding
industry.

The Commission  is currently involved  in an exercise  concerning  the  competitiveness  of  the
textile  and  clothing  sector,  and  is  also  turning  its  attention  to  business  services.  Other
initiatives, notably on the mechanical engineering and automotive sector, will soon follow.
The  automotive  industry  is  one  of  the  backbones  of  the  EU’s  economy.  The  Commission
plans to set  up a  high-level  group to analyse major challenges  affecting this sector, identify
ways  and  means  to  improve  the  industrial  framework  conditions,  so  as  to  fully  exploit  and
develop its industrial assets and contribute to an integrated policy approach. This will enable
the competitiveness of this sector to be reviewed including assessment of the consequences of
previous and forthcoming regulatory and other decisions.

5.2.

Get the regulatory framework right

As  part  of  its  contribution  to  the  EU’s  ”Better  Regulation”  initiative,  the  Commission  is
committed to consulting extensively all stakeholders and has put in place an effective system
for assessing the economic, social and environmental impact of its proposals before deciding
whether a legislative initiative is appropriate. Challenging the very necessity of a legislative
response  and  considering  possible  alternative  approaches  to  legislation  is  an  important
element of this process. In 2004, around half of the Commission proposals in the main part of
its work programme will benefit from an extended impact assessment in contrast to around 20
percent in the first year of the system’s operation. Overall, the Commission will strengthen its
efforts  to  ensure  that  competitiveness  is  properly  taken  into  account  in  the  proposals  it
presents to Council, the European Parliament and the Member States will be strengthened.

A  simple  and  effective  regulatory  environment  is  essential  to  achieve  our  competitiveness
goal,  and  at  European  level  this  means  in  particular  a  well-functioning  and  vibrant  Internal
Market  and  effective  competition  rules.  Council,  European  Parliament  and  Member  States
each have to contribute to speed up the reform process in this area.

5.2.1. Deliver on pending legislative issues

Since the launch of the Lisbon Strategy more than 25 legislative measures have been adopted
to  extend  the  reforms  in  these  areas,  and  a  further  twenty  proposals  are  pending  before
Council  and  the  European  Parliament.  The  Internal  Market  Strategy  2003-200624  sets  out  a
comprehensive programme for action to achieve maximum benefits from the Internal Market

22

23

24

The High Level Group on Innovation and the Provision of Medicines
The Group’s 2002 report and other G10-related material is available at: http://pharmacos.eudra.org
Communication “Internal Market Strategy Priorities 2003 – 2006” (COM(2003) 238 final) of 07.05.2003.

12

                                                
after  enlargement.  This  programme  is  important  as  a  whole  and  must  be  implemented
vigorously.

There remain, however, a number of pending legislative proposals on which Council and
the European Parliament need to decide quickly. These proposals form important building
blocks to the competitiveness of an enlarged Europe, but only if their inter-relationships and
complementarities are properly taken into account will they result in maximum benefits to the
business environment. This Communication does not claim to provide a comprehensive list of
these  proposals.  However,  by  referring  to  some  selected  examples  of  high  political  or
economic  significance  it  aims  to  illustrate  the  strong  cross-cutting  synergies  which  Council
and European Parliament should consider:

–  The  Community  framework  for  the  protection  of  intellectual  property  is  an  essential
element of an efficient Internal Market, but also underpins research and innovation. If the
EU  is  to  remain  attractive  for  investments  in  research,  innovative  ideas  and  products,  it
must ensure  that  intellectual property is  protected  across its  Member  States.  At  the  same
time,  we  must  ensure  that  protecting  intellectual  property  does  not  hinder  the  process  of
innovation  and  its  dissemination,  for  example  by  introducing  unduly  long  protection
periods, and that it is not used to hinder competition. Although considerable progress has
been  made  in this  area over recent  years, the Council and the  European  Parliament  must
rapidly finalise and implement pending legislative proposals that form key components of
an effective intellectual property system. These include

(cid:1)  The  draft  Regulation  providing  for  a  legally  secure  and  affordable  Community
Patent. The Commission will shortly be submitting a formal proposal concerning
the jurisdiction. The Community patent system also requires also a revision of the
European Patent Convention.

(cid:1)  The draft Directive on the patentability of computer-implemented inventions.

(cid:1)  The  Draft  Directive  on  measures  and  procedures  to  ensure  enforcement  of
intellectual  property  rights.  This  proposal  complements  the  recently  adopted
Regulation to facilitate seizures by customs of counterfeit and pirated goods from
outside the EU25.

–  The  proposal  for  a  Directive  on  permits  for  the  entry  and  stay  of  third  country
researchers  needs  to  be  seen  against  the  background  of  a  broad  and  dynamic  European
knowledge  base,  with  sufficient  and  highly  qualified  human  resources.  This  proposal  as
well as the coherent development of actions at national level (see section 4.2) is necessary
to  make  Europe  more  attractive  for  the  best  researchers  in  the  world  and  ensure  the
availability of the human resources required to sustain increased investment in research.

–  Europe  needs  a  business  environment  that  ensures  a  fair  competitive  environment  and
allows European-based companies to adapt more efficiently within the Internal Market in
order to reinforce their competitiveness. The Commission proposal on the take-over bids
Directive  will  help  business  development:  it  will  subject  company  managements  to
effective  market-disciplines,  and  facilitate  corporate  restructuring  whilst  maintaining
essential  protection  rights.  The  new  Merger  Regulation  currently  under  discussion  in

25

Council Regulation (EC) No 1383/2003 of 22.07.2003 concerning customs action against goods suspected of
infringing  certain  intellectual  property  rights  and  the  measures  to  be  taken  against  goods  found  to  have
infringed such rights, OJ L/196/7 of 2.8.2003.

13

                                                
Council and European  Parliament provides  for a simplification  for  the  referral  of  merger
cases from the Commission to the Member States competition authorities for investigation,
clarifies the substantive test to assess the competitive impact of mergers, and introduces a
degree of flexibility in the timeframe for merger investigations. This regulation should be
adopted by the end of 2003.

–  Adoption  and  effective  implementation  of  the  legislative  package  is  essential  to
modernising  Europe’s  public  procurement  system  and  making  it  more  transparent  and
open  to  competition.  The  European  Union’s  public  procurement  market,  representing
around  16  %  of  EU  GDP,  is  still  far  from  having  reached  its  full  potential.  Public
procurement  is  a  driver  of  entrepreneurial  activity  since  it  is  a  major  or  even  leading
component of demand in a number of sectors such as health care, transport, environmental
protection and defence. Furthermore, public procurement often plays a crucial role in the
development  of  core  technologies.  Without  this  proposed  legislative  package  neither  a
Europe-wide  “electronic  procurement”  market  can  be  achieved,  nor  will  Europe  have  a
legal framework suitable for complex contracts, such as Trans-European Networks. At the
same time, open procurement demands a pro-active competition policy to ensure that anti-
competitive  practices  (i.e.  state  aids,  cartels)  do  not  undo  the  benefits  that  open
procurement procedures can bring.

–  A  dynamic  Internal  Market  for  retailing  will  enable  both  economic  operators  and  users,
including  final  consumers,  to  reap  the  full  benefit  of  the  Internal  Market.  It  must  ensure
that  consumers  are  able  to  choose  the  goods  and  services  that  best  meet  their  needs
anywhere in the internal market through a vigorous EU consumer policy. However, much
remains  to  be  done  in  the  retail  area,  as  regards  both  goods  and  services,  to  ensure  the
proper  functioning  of  the  Internal  Market  and  to  spur  cross  border  transactions.  The
proposal for a framework directive on unfair commercial practices and the proposal for
a  regulation  on  administrative  co-operation  are  important  initiatives  to  reduce
fragmentation of the national consumer legislation in the EU and market fragmentation.

–  Improving  framework  conditions  for  industrial  sectors  requires  actions  in  the  non-
regulatory  field  as  well  as  in  the  regulatory  field.  Key  examples  in  the  regulatory  field
include the review  of  the  EU’s pharmaceutical  legislation  currently  being  discussed  by
Council and European Parliament, and more recently, the Commission’s proposal for the
new Chemical legislation which was significantly revised after a public consultation and a
thorough  impact  assessment.  The  October  2003  European  Council  stated  that  EU
legislation should not be a handicap to EU competitiveness compared to that of other major
economic  areas.  Against  this  background,  it  stressed  that  the  proposal  for  the  new
Chemical legislation  will  be the  first test  for  implementing  this  approach.  It  will  provide
industry  with  a  stable,  predictable  framework  within  which  it  can  plan  and  develop,  and
will safeguard competitiveness and encourage innovation.

–  More broadly, the Commission’s European Initiative for Growth has highlighted additional
important  pending  decisions  designed  to  mobilise  public  and  private  investment  in
trans-European transport networks, in the roll out of broadband communications and in
supporting research, development and innovation. These networks will all be a key factor
in improving competitive conditions within the Union. While the complementary roles of
public  and  private  sectors  in  infrastructure  need  to  be  explored  more  thoroughly,  the
importance of the role of public financing remains clear. Initiatives to be highlighted in this
context include recent proposals  updating  the guidelines and  financing  rules for  trans-
European networks, modifications to the Eurovignette system and proposals in the area
of taxation in relation to the treatment of parents and subsidiaries and of mergers.

14

5.2.2.

Ensure that competitiveness aspects are properly taken into account

If Europe is to speed up structural reform decisions to boost competitiveness and growth as a
means to safeguard our social and environmental objectives, the Council and the European
Parliament should follow the lead of the Commission in ensuring that the measures they
adopt  take  proper  account  of  effects  on  competitiveness.  To  do  so  requires  open
consultation  of  all  stakeholders  and  sound  assessment  of  the  economic,  social  and
environmental impact  of  proposals  throughout  their  legislative  lifespan.  The  Commission  is
ready to support this effort by providing impact assessments and by helping other institutions,
if they so wish,  in assessing  the  impacts  of  the  changes  proposed.  In  this  context,  the  2003
Spring  European  Council  assigned  an  important  role  to  the  Competitiveness  Council.  It
stressed  that  the  Competitiveness  Council  should  be  consulted  on  any  proposals  that
may have substantial effects on competitiveness - even if they do not fall under its direct
responsibility.

5.2.3.

Transpose and implement legislation on national level

It is not enough to adopt sound legislation, based on a serious assessment of its impact. Once
adopted  by  the  Council,  Member  States  must  transpose  legislation  that  is  not  directly
applicable,  implement  it  within  the  given  delays  with  all  the  administrative  actions  this
implies, and apply it correctly in practice. Recent figures give a rather depressing picture of
Member States’  commitment  in  this  area.  The  average  time  required  for  adoption  and  legal
transposition  of  Internal  Market  directives  adopted  between  1993  and  April  2002  was  2.28
years.  Undue  delays  in  transposition  beyond  the  established  deadlines  delay  effective
implementation by a further 2.21 years on average. This amounts to an average time lapse of
4.49  years  for  implementing  an  average  reform  measure.  For  example,  only  a  few  Member
States  have  yet  transposed  the  Directive  on  the  legal  protection  of  biotechnological
inventions,  which  should  have  been  transformed  into  national  law  by  30  July  2000.  This
directive, together with the Community Patent, is crucial  for  providing a clear  and effective
framework  for  intellectual  property  in  the  knowledge  dependant  field  of  life  sciences  and
biotechnology. In the same field, a number of Member States failed to transpose the Directive
on  the  deliberate  release  of  genetically  modified  organisms,  within  the  deadline  set  for  17
October  2002.  This  Directive  is,  however,  essential  for  providing  both  a  reliable  legal
framework  at  EU  level  for  economic  operators  and  a  strict,  transparent  and  effective
authorisation procedure without which the EU science and technology base in this area will
become seriously undermined26.

5.2.4.

Ensure coherence between national and EU legislation

Finally,  Member  States  must  be  aware  of  and  assess  the  impact  of  new  and  existing
national legislation on competitiveness. Member States issue a vast amount of legislation
in a number of areas where the Community has no competences, or where the Community
has not yet proposed legislation, or where EC legislation leaves Member States a certain room
for manoeuvre. In the area of regulations on products and information society services alone,
Member States draft between 500 and 600 regulations every  year, the majority being in the

26

With  further  decreases  in  research  and  development  investment  in  GMOs  in  the  EU,  which  has  already
dropped  by  39  %  in  recent  years  according  to  a  recent  study  (“Review  of  GMOs  under  research  and
development  and  in  the  pipeline  in  Europe,  IPTS/JRC,  2003,  ISBN:  92-894-5572-1)  and  the  relocation  of
innovative research, field trials and commercialisation of new GMOs outside the EU.

15

                                                
fields  of  food  and  agriculture,  telecommunications  and  transport27.  On  average,  10%  of  the
drafts  notified  to  the  Commission  by  Member  States  are  incompatible  with  either  the  EC
Treaty or secondary EC legislation and require modification before adoption. Member States
should  ensure  that  new  legislation  does  not  have  a  negative  effect  on  the  business
environment  and  that  it  does  not  create  distortions  or  unjustified  obstacles  to  trade.  In  this
context, the Commission is encouraging Member States to provide impact assessments when
notifying technical regulations on products and information society services.

5.3.

Increase efforts to foster research, innovation and entrepreneurship

Creating  a  business  environment  favourable  to  research,  innovation  and  entrepreneurship  is
crucial.  While  it  is  essential  to  provide  an  EU-wide  regulatory  framework  favourable  to
business,  Europe  still  needs  to  do  more  to  promote  competitiveness.  The  research
investment  action  plan28  aims  to  make  Europe  more  attractive  to  private  research
investment, thereby achieving the targets fixed by the Barcelona European Council in March
2002 of a total investment level of 3 % of GDP of which 2/3rds should come from the private
sector.  The  action  plan  includes  a  coherent  ensemble  of  legislative,  co-ordination  and
stimulation measures across several policy fields such as research, innovation, IPR, financial
markets,  human  resources,  product-market  regulation,  fiscal  incentives,  and  competition
policy. It is aimed at Member States, the Commission and concerned stakeholders (industry,
investors and the public research sector), and as such, it is a good example of a Commission
policy document embodying an integrated approach to competitiveness.

Strengthening  research,  fostering  innovation  and  promoting  entrepreneurship  are,  however,
areas where progress lies above all in the hands of Member States and their commitment
to take the necessary decisions at national level. Here as well, Member States should look at
how  national  policies  interact  and  influence  competitiveness.  The  open  method  of
coordination  can  be  a  valuable  tool  by  going  beyond  the  question  of  competence  and
enabling the EU to contribute to progress in areas where the Union has no legislative powers.
Taking  into  account  national  differences,  it  helps  to  achieve  greater  consistency  and
convergence  of  national  policies  towards  agreed  EU  objectives  by  putting  in  place  a
mechanism  for  mutual  learning  based  on  the  dissemination  and  exchange  of  good  practices
and benchmarking specific topics.  It also provides for periodic monitoring of progress made
by setting indicators and targets, and conducting peer reviews.

Member  States  should,  in  particular,  step  up  efforts  to  reinforce  their  commitment  in  the
following areas of application of the open method of coordination:

–  In  Enterprise  Policy  where  the  Council  invited  Member  States  and  the  Commission  in
November  2002  to  continue  work  on  quantitative  and  qualitative  targets  on  a  voluntary
basis  in  seven  policy  areas  identified  as  crucial  to  competitiveness  in  the  Enterprise
Scoreboard,  and to consider the organisation  of  periodic  monitoring,  evaluation  and  peer
review  to  discuss  policies  developed  in  the  Member  States.  The  Council  also  invited
Member  States  and  the  Commission  to  give  new  momentum  to  the  promotion  of
entrepreneurship and small businesses by setting quantitative and qualitative targets in the
framework of the European Charter for Small Enterprises in order to allow an assessment
of progress made over time before the Spring European Council in 2004.

27

28

These  measures  were  notified  under  Directive  98/34/EC  of  the  European  Parliament  and  of  the  Council
laying down a procedure for the provision of information in the field of technical standards and regulations
and of rules on Information Society services.
Communication “Investing in research: an action plan for Europe” (COM(2003)226 final/2) of 04.06.2003.

16

                                                
–  In the area of innovation where Member States and the Commission should intensify their
cooperation  in  order  to  strengthen  existing  processes  for  the  co-ordination  of  innovation
policies  at  national  level  in  the  framework  of  the  Trend  Chart  on  Innovation.  Member
States  and  the  Commission  should  also  create  a  framework  of  common  objectives  for
strengthening  innovation  in  the  EU  and  put  in  place  a  mechanism  for  assessment  of
progress.

–  And  most  recently  in  the  area  of  research  policy  and  the  establishment  of  the  European
Research  Area.  Here  the  Council  invited  Member  States  and  the  Commission  to  use  the
open  method  of  coordination  as  a  tool  to  share  experience,  prepare  mutually  consistent
reforms  to  progress  towards  the  3  %  research  investment  objectives  and  in  particular  to
support  the  implementation  of  those  parts  of  the  action  plan  on  investment  in  research
which  depend  on  Member  States.  The  same  applies  for  actions  in  the  area  of  human
resources for research notably those under the mobility strategy of ERA, and in particular,
the  urgent  measures  contained  in  the  recently  adopted  Communication  on  researcher
careers.29

In this context and taking into account their structural weaknesses, the education and training
systems require urgent reform in order to achieve the Lisbon strategy goals30.

5.4.

The Commission’s contribution

The  Commission  will  contribute  to  giving  the  Council,  the  European  Parliament  and  the
Member  States  a  more  integrated  view  to  its  work  related  to  competitiveness  by
systematically 
to
competitiveness.  It  is  currently  conducting  a  “screening  exercise”  of  most  EU  policies  to
identify possibilities for improving their contribution to industrial competitiveness.

identifying  synergies  between  policy  actions  directly  contributing 

In its work on competitiveness, the Commission will first provide analysis both at horizontal
and sectoral level in order to identify the need for action. Only then, will it take the necessary
measures  in  the  regulatory  field  as  well  as  in  the  area  of  research,  innovation  and
entrepreneurship.

Finally, the Commission intends to better highlight the proposals on which it will perform an
extended impact assessment when presenting its annual work programme. Annex 1 provides
more details on key initiatives aimed at improving competitiveness the Commission intends to
launch or pursue in the coming 12 months.

6.

CONCLUSIONS

The  continuing  structural  transformation  of  our  economies,  with  an  ever  increasing  role  for
the  services  sector,  is  economically  inevitable.  With  this,  some  de-localisation  and  other
adjustments are bound to come. These cause social and economic hardship to those directly
affected. The increasing importance of services in the economy does not imply that industrial
output  should  decline.  Indeed,  this  process  has  so  far  been  associated  with  a  continuous
growth  in  industrial  output,  despite  declining  industrial  employment,  which  has  been  made
possible by the steady increase of industrial productivity.

29

30

Communication “Researchers in the European Research Area: one profession, multiple careers” COM(2003)
436 of 18.07.2003.
See footnote 10.

17

                                                
The slowdown in Europe’s productivity growth represents a loss of competitiveness. This is a
serious cause for concern because of the risks which it implies for our industrial performance
and  for  our  capacity  to  handle  structural  adjustment.  For  loss  of  industrial  competitiveness
and de-industrialisation are opposite sides of the same coin.

On the basis of available data, there is, at the moment, no compelling evidence that Europe is
undergoing  de-industrialisation  in  an  absolute  sense.  Nevertheless,  the  on-going  structural
adjustment  of  our  economies  is  causing  hardship  in  local  economies  even  if  the  national
economy is better off from improving resource allocation. To ease this process and increase
employment  creation  it  is  essential  to  raise  our  productivity  potential  and  to  boost  our
competitiveness. To this end, investments in research, innovation, training and ICT as well as
re-organisation  of  work  constitute  key  ingredients  of  the  transition  process.  Finally,  it  is
essential to anticipate and to better prepare for these adjustment challenges.

The present Communication constitutes only a preliminary analysis of these developments. In
coming  months,  the  Commission  intends  to  deepen  further  this  analysis  and  to  put  forward
proposals on the occasion of the follow-up to its Industrial Policy Communication. These will
also  be  placed  within  the  framework  of  the  preparatory  work  for  the  future  Financial
Perspectives, which will aim at providing a political project for the enlarged Union from 2006
onwards.

The  Commission  has  repeatedly  acknowledged  the  significance  of  competitiveness  for  our
economic  performance.  It  will  continue  to  insist  on  the  importance  of  raising  productivity
growth  and  will  take  the  opportunity  to  address  this  issue  again  in  the  forthcoming  Spring
2004 Report.

It  is  also  crucial  that  the  European  Parliament  and  the  Council  decide  on  the  important
proposals  pending  before  them  that  affect  competitiveness.  It  is  also  crucial  that  they  both
take full account of the competitiveness consequences of all their decisions. The Council has
assigned an important task to the Competitiveness Council, that it must be consulted on, and
give its views on, major proposals affecting competitiveness that do not fall under its  direct
responsibility. To carry out this task, the Council must reflect on how its different  elements
should interact. The European Parliament has already developed such mechanisms.

European competitiveness is also affected by policies at national level. Economic integration
means that the competitiveness of the whole cannot be divorced from the competitiveness of
the parts. Unless the Member States each take the measures that are needed at their level, the
competitiveness of the EU will not be assured.

For its part, the Commission will continue to provide analysis with the aim of identifying key
competitiveness issues.  Where needed, it  will  make  appropriate  proposals,  after  considering
alternatives  to  legislation,  publicly  consulting  stakeholders  and  carrying  out  impact
assessment.

18

ANNEX 1:

Commission’s activities and initiatives affecting competitiveness

1.

Industrial policy as an instrument for addressing challenges to EU industry

In-depth analysis and regular monitoring of the situation of specific individual sectors enable
the  Commission  to  identify  actions  needed  to  ensure  that  the  conditions  are  present  for
industry to develop and realise its competitive potential. In its Communication  on  industrial
policy of December 2002, the Commission stated that most EU policies have a contribution to
make towards  creating  an environment in which  businesses  will thrive,  thereby  creating  the
conditions  to  help  Europe  meet  the  challenges  it  set  itself  in  Lisbon  and  Gothenburg.  The
Commission insisted in  particular on the need to  pursue a balanced  approach  to the  EU’s
sustainable development strategy, and to ensure that one pillar of sustainable development
is not developed to the detriment of the others.

In 2003 the Commission carried out an internal screening exercise of most EU policies. This
has  led  to  the  analysis  of  some  horizontal  issues  which  underlie  various  different  policies,
such  as  the  role  of  knowledge  as  a  factor  of  economic  development  and  growth  or  the
interaction between productivity growth and increases in the employment rate. Another
exercise focused on industrial competitiveness and environmental protection and aimed to
increase the convergence of analyses underpinning environment policy and industrial policy.
The  screening  also  identified  possibilities  for  improving  the  contribution  of  EU  policies  to
industrial  competitiveness,  whilst  respecting  the  primary  objectives  of  these  policies.  As  a
result of this exercise, the Commission has identified some potential for synergy, for example

(cid:1)  Regional policy: Addressing the industrial consequences of enlargement, notably

at the sectoral level; better stimulating regional innovation systems.

(cid:1)  Research and development policy: Technology platforms as a flagship initiative
that will contribute to sectoral competitiveness, both in key technology areas and
in mature industries.

(cid:1)  Information Society Policy: Stimulating development, adoption and use of ICTs,
important  source  of  productivity  growth  and  increased  efficiency  in  the  public
sector through three pillars: the eEurope Action Plan stimulating competition and
investment  through  a  predictable  legal  environment,  and  fostering  innovation
through support to research and development.

(cid:1)  Education  and  training  policy:  Progress  on  recognition  of  professional
qualifications,  actions  to  monitor  skill  shortages  and  to  ensure  the  supply  of
skilled labour, partnerships between education and the business community with a
view to fostering entrepreneurship would all benefit industry.

(cid:1)  Trade  policy:  Developing  the  external  dimension  of  the  single  market,  for
example  by  promoting  EU  approaches  to  technical  regulation  and  conformity
assessment; fostering EU exporters’ access to third country markets; as far as the
textile  and  clothing  industry  is  concerned,  improvement  of  competitiveness
factors associated to innovation, research, skills, technology and value-added as a

19

means  to  adapt,  in  particular  in  the  perspective  of  the  abolition  of  remaining
quotas in the textile and clothing sector.

(cid:1)  Environment policy: Exploring the scope for voluntary alternatives to regulation,
developing  a  sustainable  production  policy  and  analysing  the  conditions  for
further development of eco-industries, and balancing the short-term costs and the
long-term gains of enhanced environmental protection.

(cid:1)  Competition  policy:  Potential  for  analysis  of  a  range  of  important  issues  for
industrial competitiveness, such as the issue of the relevant geographic market or
how innovation and its diffusion can be stimulated in a way that is consistent with
competition rules.

(cid:1)  Taxation policy: Exploring the use of home country taxation of SMEs could open
a path to facilitate the creation, development and transfer of businesses; increased
recourse  to  a  variety  of  instruments,  including  the  exchange  of  best  practices,
could help Member States identify useful improvements to in the tax treatment of
businesses without raising competence problems.

(cid:1)  Internal  market:  Optimising  defence  procurement  would  bring  enormous

industrial benefits.

(cid:1)  Employment  policy:  The  discussion  of  competitiveness  issues  in  the  sectoral

social dialogue would be useful.

(cid:1)  Health and consumer protection policy: Ensuring that the aims of a high level
of  health  and  consumer  protection  are  achieved  without  affecting 
the
competitiveness of business, especially SMEs.

(cid:1)  Transport and energy policies: Long-term developments in the energy (notably
price levels) and transport sectors need to be anticipated, especially with regard to
their impacts on  industrial  competitiveness.  In  addition,  the  EU  will  promote  its
own approaches to standards issues in international fora such as ICAO or IMO.

The Commission intends to report more extensively on the results of the screening process at
the beginning of 2004.

2.

Further progress towards a predictable legal framework

The Commission will continue efforts to improve the legislative framework for enterprises by
tabling some important initiatives:

–  A  thriving  Internal  Market  for  goods:  The  Commission  intends  to  submit  a  number  of
legislative  proposals  designed  to  strengthen  the  functioning  of  the  Internal  Market  for
products.  A  proposal  for  a  regulation  on  the  application  of  mutual  recognition  would
aim at improving the free movement of goods in non-harmonised sectors. The submission
of  a  proposal  addressing  aspects  applicable  to  all  sectors  covered  by  the  “New
Approach  system”,  would  allow  strengthening  the  consistency  of  “New  Approach”
Directives and improving their uniform implementation.

–  A modernised State aid regime: The Commission is currently taking several initiatives as
part  of  its  ongoing  work  on  reforming  and  modernising  the  State  aid  rules.  This  process

20

aims  to  simplify  the  approval  of  aid  which  furthers  the  economic  objectives  of  the
Community  while  maintaining  a  strict  control  of  more  distorting  forms  of  aid.  The
proposed initiatives include:

(cid:1)  A  draft  regulation  extending  the  block  exemption  on  state  aid  for  R&D  to
SMEs 
in  early  2004.  This  will  greatly  simplify
implementation  of  schemes  to  support  investment  by  SMEs  in  R&D  in  the
Member States;

is  due  for  adoption 

(cid:1)  A  revision  of  the  Community  guidelines  on  State  aid  for  rescuing  and
restructuring companies in difficulty in order to speed up the approval of rescue
measures  while  minimising  the  adverse  effects  of  longer-term  restructuring
measures on the competitive environment;

(cid:1)  The  Commission  intends to launch  consultations with Member  States  before  the
end of 2003 on a greatly simplified approach for the assessment of certain types of
aid  which  can  be  considered,  by  reason  of  their  amount  or  the  sectors  in  which
they are granted, to be unlikely to have significant effects on competition or trade
within  the  Community.  This  particularly  concerns  aid  directed  at  achieving
important  Community  objectives,  such  as  promoting  research  and  development,
protecting  the  environment,  creating  new  and  better  employment,  promoting
training and promotion of SMEs."

–  A  real  Internal  Market  for  Services:  Services  account  for  almost  70  %  of  GDP  and
employment in the EU. However, in many service sectors – such as tourism, distribution,
construction, engineering,  consultancy  and  employment  agencies  -  the  Internal  Market  is
far  from  being  a  reality.  Legal  fragmentation  prevents  service  providers  from  realising
economies of scale, results  in  losses of  efficiency, stifles  competition  and  holds back the
potential of the service sector to create more dynamic entrepreneurs and more jobs. Before
the end of 2003, the Commission will make a proposal for a Directive on services in the
Internal  Market  establishing  a  legal  framework  for  providing  cross-boarder  services
between Member States. It will be complemented by non-legislative measures aimed at
improving the competitiveness of business-related services and promoting entrepreneurial
activity  in  these  sectors.  A  further  proposal  will  extend  the  system  of  notification  of
national legislation currently applied in the area of goods and telecommunications to
the  service  sector.  Member  States  should  give  priority  to  the  rapid  adoption  and
transposition of these proposals if they are to have a real effect on the EU economy before
the  2010  deadline  set  by  Lisbon.  It  is  not  enough,  however,  to  focus  efforts  on  the
forthcoming  proposal  on  services.  The  Directive  on  the  mutual  recognition  of
professional qualifications, the Regulation on sales promotion as well as the Framework
Directive  on  unfair  commercial  practices  are  closely  related  to  the  proposal  for  a
Directive on services  and are essential  if  the  Internal  Market  for  services  is  to  become  a
reality.

–  Complete  the  Internal  Market  for  financial  services:  Financial  service  and  market
integration  will  act  as  a  catalyst  for  competitiveness  and  growth  across  all  sectors  of  the
economy.  It  will  reduce  the  cost  of  capital  for  businesses,  particularly  for  innovative  or
high-tech business start-ups. With 36 of the 42 measures foreseen in the Financial Services
Action Plan already adopted, reform in this area is well underway. The Commission will
present  the  last  proposals  provided  for  under  the  action  plan,  including  a  new  Capital
Adequacy  Directive,  in  2004  and  will  launch  discussions,  involving  all  major
stakeholders, aiming at assessing the state of integration of EU financial markets.

21

–  Much remains to be done in the retail area, as regards both goods and services, to ensure
the  proper  functioning  of  the  Internal  Market  and  to  spur  cross  border  transactions.  The
Commission is already committed to reviewing the existing consumer protection acquis
in  order  to  identify  internal  market  barriers  and  areas  that  could  be  consolidate  or
simplified. In 2004, the Commission will set out a strategy and work programme for this
review.

3.

Fostering research, innovation and entrepreneurship

Building on initiatives and actions started in 2002 and 2003, the Commission will pursue efforts
and make proposals to foster research, innovation and entrepreneurship across the EU.

–  In  the  context  of  its  efforts  to  create  European  Research  Area  and  foster  increased
investment in research, the Commission is setting up European Technology Platforms31
in  key  areas  of  technology  development.  European  Technology  Platforms  bring  together
various  public  and  private  stakeholders  to  devise  and  implement  a  common  vision  and
strategy  for  the  development  and  the  use  of  key  technologies  in  Europe.  Their  aim  is  to
encourage  increased  and  more  effective  mobilisation  of  research  efforts  and  to  address
non-technical barriers. They may also provide valuable input to the work related to sectoral
competitiveness.

At the beginning of September, building on the early experience of European Technology
Platforms  in  the  areas  of  aeronautics  and  rail  transport,  the  Commission  initiated  the
launching  of  a  European  Partnership  for  the  Sustainable  Hydrogen  Economy  to
contribute  to  the  development  of  an  integrated  strategy  for  this  key  fuel  of  the  future.
Further technology platforms are being set up in key areas32 and a first progress report is in
preparation. By June 2004 the process of launching a first wave of European Technology
Platforms should be completed.

–  Work  to  establish  European  strategies  or  foster  joint  technology  development  in  space,
defence  and  security-related  sectors  will  be  pursued  aiming  at  ensuring  a  competitive
industrial base in these areas in the long term:

(cid:1)  The  Commission’s  Communication  on  “European  Defence  –  Industrial  and
Market Issues”33 helped focus attention on the advantages of creating an Internal
Market for defence products and the need for greater co-operation in procurement,
as well as in  defence  and security  related  research.  As a  result,  the  Commission
will  present  in  2004  a  Green  Paper  on  public  procurement  in  the  defence
sector as well as a European Handbook on defence standardisation (to be used
for defence  procurement contracts).  Furthermore, a  “Group of  Personalities”  has
been established to develop a vision and to give guidance on the orientation for
a future security related research programme. In that spirit, in December 2003
a  preparatory  action  on  security-related  research  with  a  budget  of  €  65  million
between 2004 and 2006 will be proposed. It should be adopted and launched early
in 2004. Finally, the Commission will  contribute  to the work on  establishing,  in
the course of 2004, an agency in the field of defence capabilities development,

31

32

33

As  announced  in  the  Communication  “Investing  in  research:  an  action  plan  for  Europe”  (COM(2003)226
final/2) of 04.06.2003 and the Commission’s initiative for growth.
For example plant genomics, road transport, specific areas of nanotechnology and ICTs, and steel.
Communication  “European  Defence  –  Industrial  and  Market  Issues  –  Towards  an  EU  Defence  Equipment
Policy” (COM(2003)113 final of 11.3.2003.

22

                                                
research,  acquisition  and  armaments,  as  decided  by  the  June  2003  European
Council.

(cid:1)  Space is an “enabling” industry that contributes to the implementation of a whole
range  of  Community  policies,  from  environment,  agriculture  and  transport  to
development  co-operation  and  external  relations,  and  has  a  tremendous  social,
economic  and  commercial  potential.  The  White  Paper  on  European  Space
Policy34, is a call to mobilise all stakeholder to meet new goal and challenges. It
incorporates  a  strategy,  basic  guidelines  for  the  roles  and  responsibilities  of  the
main  actors,  an  action  plan,  and  initial  thoughts  on  resources.  The  policy
objectives  include  a  more  secure  and  predictable  framework  for  stakeholders  to
plan, invest and build up their share of fast growing commercial and institutional
markets.  The  GALILEO  international  programme  for  radio  navigation  by
satellite,  GMES  (Global  Monitoring  for  Environment  and  Security),  and  its
potential  to  provide  broadband  access  to  remote  and  rural  areas  with  other
technologies to bridge the digital divide are among the activities encompassed by
the White Paper. Both initiatives will benefit from the mechanism foreseen in the
Framework Agreement between the European Community and ESA.

–  In life sciences and biotechnology sectors, a core pillar of the emerging knowledge-based
economy,  the  Commission  established  a  framework  for  action  in  this  area  in  its
Communication on Life Sciences and Biotechnology35. Its 30 point action plan sets out an
integrated approach to the industry’s competitiveness that aims at exploiting research and
innovation  potential  whilst  widening  the  scope  to  include  societal  and  regulatory  issues.
The lack of sufficient capital supply is a major constraint for biotechnology companies to
grow and consolidate from the "start-up" to a more mature stage. The way ahead should be
a co-operative  action  of the Commission,  the  EIB group  and  Member States, to  examine
their  respective  instruments  ranging  from  investment  funds  to  the  fiscal  framework,  in
order to optimise the use of existing capacity. In this field as in other research-based and
highly innovative industries, a functioning European risk capital market is of fundamental
importance.

–  The  Commission  and  the  European  Investment  Bank  (EIB)  will  pursue  their  close  co-
operation  to  ensure  both  complementarity  and  synergy  between  their  respective
instruments to promote research and innovation. The EIB plans substantial increase in its
means of investment support for research and innovation from € 15.3 billion invested since
2000 to more than € 50 billion for the entire decade to 2010 under the new  “Innovation
2010  Initiative”  (i2010i).  Furthermore,  efforts  will  focus  on  making  optimal  use  of  the
broader range of instruments being put in place by the EIB to respond better to the needs of
firms at different stages of their development, in particular for the financing of large trans-
national R&D projects (i.e. in the frame of the growth initiative), as well as for improving
access to risk capital for high growth companies in technology-based sectors.

–  In  coherence  with  the  industrial  policy  objectives  and  the  Action  Plan  on  investment  in
research, the Commission will identify  in the  framework  of the  forthcoming action plan
on innovation, criteria to define innovative  enterprises which will allow a more efficient
application  of  Community  policies  and  better  targeting  of  national  initiatives  having  an

34

35

White paper “Space: a new European frontier for an expanding Union. An action plan for implementing the
European Space policy”, COM(2003)673 of 11.11.2003.
Communication  “Life  Sciences  and  Biotechnology:  A  Strategy  for  Europe”  COM(2002)27  final  of
23.1.2002.

23

                                                
impact on innovation. This Community framework should also reinforce the emergence of
a European consensus on "the imperative to innovate" by allowing the definition of precise
and  quantified  objectives  relating  to  the  regulatory  environment  and  by  encouraging
supporting measures.  The  action plan  should mobilise  the actors  of innovation and co-
ordinate  their  efforts  through  a  series  of  measures  designed  complete  the  concept  of  a
European  Research  and  Innovation  Area  by  developing  the  latter  with  a  view  to
reinforcing trans-national technology transfer and increasing the number and effectiveness
of clusters in Europe. This involves for example initiatives for the creation of a “European
network  of  networks”  in  the  field  of  technology  transfer,  the  professionalisation  of  local
and  regional  network  and  support  structures  for  companies,  for  example  through  quality
charters,  labels  of  excellence  or  training  in  the  domain  of  intellectual  property,  the
interlinking of European initiatives with other international actions such as EUREKA, the
identification  of  good  practices  or  possibly  a  quality  charter  for  clusters  (involving  the
sectors concerned). Innovation is a multi-dimensional phenomenon, and these actions will
therefore  also  cover  the  non-technological  aspects  of  innovation,  such  as  management
innovation or design.

–  The Green paper on Entrepreneurship published at the beginning of this year launched a
broad  debate  on  how  to  encourage  entrepreneurial  activity  and  enterprise  growth.  The
responses to the public consultation, which lasted until June 2003, pointed to the need for a
wide  ranging  co-ordinated  approach  to  make  initiatives  in  various  policy  areas  and  at
different policy levels compatible and mutually supportive. In 2004, the Commission will
come  forward  with  an  action  plan  to  tackle  the  key  challenges  identified.  The  action
plan will cover a range of policy fields and address 3 areas: Reducing barriers for Europe’s
entrepreneurs,  in  particular  SMEs;  unlocking  entrepreneurs’  ambitions  for  growth;  and
encouraging more people to start a business. Particular attention will be given to domains
where  measurable  progress  needs  to  be  achieved  quickly,  such  as  entrepreneurship
education,  strengthening  of  balance  sheets,  better  listening  to  SMEs,  social  protection  of
SMEs, building business networks and fostering business support networks.

–  The  European education and training systems show  structural weaknesses  and  require
urgent  reform  to  achieve  the  Lisbon  Strategy  goal.  Without  resolute  reforms  and
investments the deficits in this area will no doubt increase. On the basis of the conclusions
of  the  working  groups  set  up  in  the  framework  of  the  “Education  and  Training  2010”
initiative  and  the  national  reports  on  education,  life-long  learning  and  mobility,  the
Commission  has  developed  proposals  for  reform  set  out  in  its  recently  adopted
Communication36 on this issue. These focus on 4 priority levers: Concentrating reform on
investments  on  key  points  in  each  country;  making  life  long  learning  a  reality;  create  a
Europe of education and training, and give “Education & Training 2010” its rightful place
in the implementation of the Lisbon Strategy.

–  In 2004, the Commission and the Member States will continue the discussion of the policy
and  regulatory  framework  for  structural  and  cohesion  funds  interventions  after  2006.
Support for research, innovation and entrepreneurship will be at the core of future regional
development strategies.

36

See footnote 10.

24

                                                
Annex 2: Basic data on the manufacturing industry

Value added, employment and
labour productivity growth, 1979-2001(cid:1)
(Compound annual growth in percent)

Share of manufacturing(cid:1)

EU15 trade balance+

(in percent of value added, 1995 prices)

( EUR billion)

Industry

Electronic valves and tubes
Telecommunication equipment
Office machinery
Radio and television receivers
Mining and quarrying
Chemicals
Other instruments
Basic metals
Electricity, gas and water supply
Clothing
Other electrical machinery and aparatus nec
Building and repairing of ships and boats
Pulp, paper & paper products
Railroad equipment and transport equipment nec
Aircraft and spacecraft
Scientific instruments
Textiles
Non-metallic mineral products
Motor vehicles
Leather and footwear
Wood & products of wood and cork
Insulated wire
Rubber & plastics
Food, drink & tobacco
Printing & publishing
Mechanical engineering
Fabricated metal products
Furniture, miscellaneous manufacturing; recycling
Mineral oil refining, coke & nuclear fuel

Value added
(1995 prices)
8.5
7.3
7.4
3.9
-0.2
3.4
2.5
0.7
2.2
-0.2
2.5
-0.1
2.0
0.7
2.1
2.4
-0.8
1.1
1.6
-1.1
1.1
1.1
2.4
1.1
1.6
0.6
0.8
0.4
-3.6

Employment

-0.1
-1.2
-0.6
-2.3
-5.1
-1.3
-1.8
-3.1
-1.2
-3.4
-0.7
-3.3
-1.0
-2.1
-0.6
-0.2
-3.2
-1.3
-0.7
-3.3
-1.0
-1.0
0.6
-0.6
-0.1
-1.1
-0.8
-0.7
-2.0

Labour
Productivity
8.6
8.6
8.0
6.3
4.9
4.7
4.4
3.7
3.4
3.2
3.2
3.1
3.0
2.8
2.7
2.6
2.3
2.3
2.3
2.2
2.1
2.1
1.8
1.7
1.7
1.7
1.6
1.1
-1.7

1979

2001

0.2
0.4
0.3
0.3
3.4
4.7
0.4
2.9
7.1
2.2
2.4
0.6
1.8
0.4
0.9
1.1
3.7
3.6
4.5
1.4
1.7
0.3
2.7
7.1
3.7
7.7
6.7
3.2
2.8

1.0
1.6
1.2
0.6
2.5
7.5
0.5
2.6
8.6
1.6
3.2
0.5
2.1
0.3
1.1
1.4
2.3
3.4
4.8
0.9
1.6
0.3
3.5
6.9
4.0
6.7
6.1
2.7
0.9

1989

na
na
- 16.3
- 11.9
na
14.0
na
- 5.1
- 0.5
- 9.1
3.5
na
0.8
34.7
na
- 1.6
- 0.2
5.4
16.7
0.9
- 4.4
na
2.5
2.3
1.7
na
5.4
2.0
- 7.5

2001

na
na
- 33.5
- 17.7
na
53.5
na
- 15.6
0.6
- 29.1
4.6
na
5.3
68.3
na
0.8
- 0.8
7.6
43.3
- 3.0
- 4.8
na
4.4
7.0
3.1
na
6.9
- 6.2
- 6.4

Source:(cid:1) M. O’Mahony and B. van Ark (ed., 2003): EU Productivity and Competitiveness: An Industry Perspective Can Europe Resume the Catching-up Process?, a study prepared for the Enterprise Directorate-General..
+ Eurostat: Panorama of European Business, 2002 edition; na = not available.

25

ANNEX 3:

The slowdown in EU manufacturing productivity growth in recent years
is also reflected in the substantial opening of the productivity gap against the US

E U  Lab our P ro du ctivity in Manu facturin g and 
Total E co nom y (U S A=1.0) 

1

0.95

0.9

0.85

0.8

0.75

1979 1982 1985 1988 1991 1994 1997 2000

M anufac turing

Total E c onom y

Source: M. O’Mahony and B. van Ark (ed., 2003): EU Productivity and Competitiveness: An Industry Perspective Can Europe
Resume the Catching-up Process?, a study prepared for the Enterprise Directorate-General.

26