Commission staff working document - Annex to the : Communication from the Commission ”Implementing the Community Lisbon Programme : A policy framework to strengthen EU manufacturing - Towards a more integrated approach for industrial policy” {COM(2005) 474 final}
Date: 2005-10-17
Institutions: European Commission
Subjects: EU programme, economic and social cohesion, economic policy, impact study, industrial policy, processing industry, small and medium-sized enterprises, social policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.10.2005 
SEC(2005) 1215/2 

Corrigendum 
Annule et remplace 
l’annexe 2 (p. 26/27) 

COMMISSION STAFF WORKING DOCUMENT 

Annex to the : 

Communication from the Commission 

”Implementing the Community Lisbon Programme: 
A policy framework to strengthen EU manufacturing -  
Towards a more integrated approach for industrial policy” 

{COM(2005) 474 final} 

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   EN 

 
 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

4. 

4.1. 

4.2. 

5. 

EU Industrial Policy and the Action Programme for Growth and Employment ......... 3 

The evolution of Industry and its sectors in the European Economy .......................... 4 

EU manufacturing sectoral developments ................................................................... 4 

Is there a process of relocation? ................................................................................... 7 

EU manufacturing performance and industrial policy ................................................. 8 

Combining the horizontal and sectoral dimensions of EU industrial policy: meeting 
the challenges ahead..................................................................................................... 9 

Ensuring an open and competitive Single Market ..................................................... 10 

Supporting research, innovation, and skills ............................................................... 11 

Better regulation......................................................................................................... 13 

Ensuring synergies between competitiveness, energy, and environmental policies.. 14 

Ensuring full and fair participation in global markets ............................................... 16 

Facilitating social and economic cohesion................................................................. 17 

Towards an Outline of Work for Industrial Policy .................................................... 18 

Cross-sectoral policy initiatives ................................................................................. 19 

Sector-specific initiatives ........................................................................................... 22 

Conclusion.................................................................................................................. 23

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IMPLEMENTING THE COMMUNITY LISBON PROGRAMME: A POLICY 
FRAMEWORK TO STRENGTHEN EU MANUFACTURING - TOWARDS A MORE 
INTEGRATED APPROACH FOR INDUSTRIAL POLICY  

1. 

EU  INDUSTRIAL  POLICY  AND  THE  ACTION  PROGRAMME  FOR  GROWTH  AND 
EMPLOYMENT 

The  Lisbon  Action  Programme  for  Growth  and  Employment1  stressed  the  fundamental 
importance of boosting growth and creating jobs to unlock the resources needed to meet the 
EU’s economic and social ambitions and to reach its environmental objectives. It recognised 
the key importance of a strong industrial sector in order to be able to fully exploit the EU’s 
technological  potential  and  to  enhance  and  sustain  the  EU’s  economic  and  technological 
performance. 

The  manufacturing  sector  plays  a  very  important  role  in  the  EU’s  economy.  It  provides 
around a fifth of EU output and employs some 34 million people in the EU. Manufacturing 
accounts  for  three-quarters  of  EU  exports  and  over  80%  of  EU  private  sector  R&D 
expenditures2. It is also closely inter-linked with the service industries, providing demand for 
business services and supplying the key inputs to the services industries. 

Continual  technological  breakthroughs  and  the  increasing  internationalisation  of  the  world 
economy  are  creating  important  new  opportunities  and  challenges  for  EU  manufacturing. 
New technologies allow for the fast introduction of new products and production processes, 
enabling  dynamic  firms  to  gain  market  shares  and  profit  opportunities.  Increased 
internationalisation of trade is driven by improving transport linkages, falling communication 
costs,  reduced  barriers  to  trade,  and  more  vigorous  competition.  Internationalisation  of 
investment  and  R&D  is  also  gaining  momentum  as  emerging  economies  develop  their 
research systems and attract foreign direct investment. These forces bring the opportunities of 
new  markets,  but  also  the  challenge  of  new  competitors.  Adaptability  and  structural  change 
are the key factors needed to respond to these developments and to ensure the competitiveness 
of  EU  manufacturing,  especially  in  the  light  of  increasingly  strong  competition  from  China 
and the emerging Asian economies3. 

The  Commission  is  committed  to  the  horizontal  nature  of  industrial  policy  and  to  avoid  a 
return  to  selective  interventionist  policies.  Nevertheless,  the  scope  of  policy  instruments 
should  not  be  seen  just  as  only  very  broad  horizontal  measures.  For  industrial  policy  to  be 
effective, account needs to be taken of the specific context of individual sectors. Policies need 
to be combined in a tailor-made manner on the basis of the concrete characteristics of sectors 
and  the  particular  opportunities  and  challenges  that  they  face.  This  inevitably  has  as  a 
consequence that whilst all policies are important, in the EU today some policies have greater 
importance  for  some  sectors  than  others.  The  Commission  therefore  stands  by  its  previous 
commitments  to  encourage  and  facilitate  the  process  of  industrial  innovation  and  change4. 

1 
2 
3 

4 

“Working Together for Growth and Jobs: a New Start for the Lisbon Strategy” COM(2005) 24. 
Sources: Eurostat Business Statistics. 
See  also  the  forthcoming  EU  Annual  Economic  Review  that  analyses  the  factors  affecting  the 
competitiveness of the EU economy as a whole. 
See  “Industrial  Policy  in  an Enlarged Europe”  COM(2002) 714  and  “Fostering Industrial  Change:  an 
Industrial Policy for an Enlarged Europe” COM(2004) 274. 

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However, a new approach to industrial policy is required aimed at achieving better designed 
policies  that  are  more  relevant,  integrated,  and  consensual.  The  Communication  on 
“Implementing  the  Community  Lisbon  Programme:  A  Policy  Framework  to  Strengthen  EU 
Manufacturing - towards a more integrated approach for Industrial Policy” aims at deepening 
and  supplementing  the  framework  for  industrial  policy  by  focussing  on  its  practical 
application  to  individual  sectors,  and  is  based  on  this  document.  This  purpose  of  this 
document  sets  out  the  core  findings  on  which  the  Communication’s  policy  initiatives  are 
based.  The  range  and  diversity  of  the  policy  challenges  posed  by  different  sectors  has  thus 
been  examined  in  some  detail,  based  upon  a  systematic  screening  of  opportunities  and 
challenges  for  27  separate  sectors  of  EU  manufacturing  industry  and  construction5.  On  this 
basis, the outline of work for industrial policy over the coming years has been constructed. 

The  next  section  of  this  working  document  reviews  the  evidence  on  the  importance  of  EU 
manufacturing,  the  diversity  of  sectoral  performances,  and  the  extent  and  nature  of 
international  competition  for  investment  and  R&D.  The  third  section  then  gives  a  detailed 
account of the individual challenges for industrial policy that have been identified through the 
screening process. The fourth section, for convenience, sets out the Outline of Work for future 
horizontal  and  sectoral  policy  initiatives  as  stated  in  the  Communication.  Section  five 
concludes. 

2. 

THE EVOLUTION OF INDUSTRY AND ITS SECTORS IN THE EUROPEAN ECONOMY  

2.1. 

EU manufacturing sectoral developments  

Over  the  period  1993-2004  manufacturing  value-added  in  the  EU-25  grew  at  an  average 
annual  rate  of  2.3%.  Manufacturing  output  therefore  grew  substantially  in  real  terms, 
notwithstanding  some  cyclical  variation.  Relative  to  other  industrialized  countries  over  the 
same period, EU-25 manufacturing production grew slower than the 3.7% US manufacturing 
production growth rate, but faster than the 0.7% growth in Japan. 

This  positive  trend  of  manufacturing  output  has  been  accompanied  by  a  steady  decrease  in 
both manufacturing employment and its value added share in the economy at large, consistent 
with  the  long-term  overall  economic  growth  process.  The  faster  growth  in  the  demand  for 
services  due  to  higher  incomes  and  sustained  above-average  productivity  growth  in  the 
manufacturing sector explains these trends.  

As a result of the screening, individual sectors have been grouped into four broad categories 
the  food  and  life  sciences  industries;  the  machinery  and  systems  industries;  the  fashion  and 
design industries; and the basic and intermediate product industries6.  

5 

6 

See  the  accompanying  Staff  Working  Paper  SEC  (2005)  1216.  The  challenges  facing  the  Business 
related  services  sectors  are  described  in  the  Communication  on  the  Competitiveness  of  Business 
Related Services and their Contribution to the Performance of European Enterprises, COM(2003) 747, 
which also announced an Action Plan on Business Related Services. 
See  the  table  in  Annex  I  for  an  overview  of  the  classification.  A  broadly  similar,  but  not  identical, 
classification was used in the “Industry Memorandum: Heart for Industry” of the Netherlands Ministry 
of Economic Affairs (October 2004). The classification was based on common industry challenges and 
on other similarities in characteristics such as products, processes etc. 

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Food and life science industries makes up just under a fifth of manufacturing value-added and 
also  exhibit  a  broadly  similar  growth  rate  to  manufacturing  as  a  whole.  The  case  of 
pharmaceuticals (5.7%) has to be underlined, as this sector exhibits the highest growth rate in 
this group and one of the highest among all manufacturing sectors.  

Share of Value-added in 
manufacturing in 2004 (% points) 

Average annual growth 
rate 1993-2004 (%)  

Food and life 
science 

Machine and 
systems 

Fashion and 
design 

Basic and 
intermediate 

Total 
Manufacturing 

Source: Eurostat 

18.1 

33.1 

7.5 

41.3 

100.0 

2.4 

3.5 

-2.0 

2.1 

2.3 

The group of machine and system industries makes up a third of manufacturing value-added 
in 2004. The group is characterized by a high average annual growth rate of 3.5%. However, 
there  is  substantial  variation  between  sectors  within  this  group.  Overall,  the  ICT 
manufacturing industries and motor vehicles experienced the fastest growth rates.  

The  poorest  growth  performance  corresponds  to  fashion  and  design  industries  (making  up 
7.5%  of  EU  manufacturing).  Whilst  the  average  growth  rate  for  the  group  was  markedly 
negative  at  -2.0%,  certain  sectors  and  sub-sectors  within  it  have  performed  more  strongly, 
such as the furniture sector and certain sub-sectors of textiles.  

Finally,  basic  and  intermediate  goods  industries  make  up  some  40%  of  total  manufacturing 
value-added,  with  an  annual  growth  rate  of  2.1%,  a  little  lower  than  manufacturing  as  a 
whole. Important exceptions to this pattern are chemicals and rubber, whose growth rates of 
3.4% and 2.9% respectively are above the manufacturing average.  

Productivity  growth  is  one  of  the  most  important  indicators  of  sectoral  competitiveness.  It 
reflects changes in factors such as capital investment, technology, organization, physical and 
human capital deepening, and it determines, to a large extent, price competitiveness. Further 
insight  into  the  diversity  of  the  EU’s  manufacturing  productivity  growth  process  can  be 
obtained  from  a  comparison  of  the  EU  and  an  aggregate  of  seven  industrialized  countries7. 

7 

The data used comes refers to an EU25 aggregate minus Slovenia, the Baltic states, Malta, and Cyprus. 
The seven comparison countries are US, Japan, Canada, Australia, Norway, South Korea and Taiwan. 

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Relative to these countries productivity growth rates in the majority of sectors are, in general, 
higher in the EU. However, sectoral composition (particularly, the lower share of high-growth 
sectors like office machinery, electronic valves & tubes, and telecommunications equipment 
in  the  EU  relative  to  the  seven  countries)  explains  to  a  large  extent  the  lower  productivity 
growth of EU manufacturing industry as a whole. Although the share of these sectors in the 
economy  is  not  particularly  high,  their  very  high  productivity  growth  rates  makes  the 
difference,  due  to  the  fact  that  their  shares  are  substantially  higher  in  the  average  of  other 
industrialised countries than in the EU8. 

There  is  a  clear  association  between  EU  relative  productivity  growth  and  performance  in 
external  markets,  indicating  the  relevance  of  productivity  growth  for  competitiveness  in 
international  markets.  However,  non-price  competitiveness  factors,  such  as  R&D  intensity 
and innovation performance, also play a significant role in the performance of several sectors. 
For  example,  the  electrical  machinery  sector  performs  well  in  terms  of  exports,  despite 
relatively  slower  productivity  growth  than  in  the  average  of  other  industrialised  economies. 
Hence,  while  price  competitiveness  is  an  important  component  of  competitiveness,  factors 
such  as  product  quality,  marketing,  innovation  and  other  components  of  non-price 
competitiveness are also crucial, and underline the importance of policies aiming at improving 
sectoral performance in these areas. 

Nevertheless, the industrial structure of the EU economy as a whole makes it less than ideally 
positioned  to  face  the  ongoing  process  of  globalisation.  While  important  EU  manufacturing 
sectors  such  as  mechanical  engineering,  chemicals  and  motor  vehicles  have  a  substantial 
revealed comparative advantage and record trade surpluses against the rest of the world, EU 
trade  is  overall  still  concentrated  in  sectors  with  medium-high  technologies  and  low  to 
intermediate labour skills9. This exposes the EU to competition from producers in emerging 
economies that are upgrading the skill intensity of their exports and catching up in terms of 
the non-price factors that often underlie the EU competitive edge on world markets. Hence, 
adaptability  and  structural  change,  allowing  a  shift  towards  a  more  robust  situation  of 
comparative advantage, are critically needed if the EU is to maximise the gains arising from 
the integration in the world economy of China, India, and other fast growing economies. 

In  addition  to  their  own  direct  contribution  to  productivity  growth,  the  manufacturing 
industries  are  closely  linked  to  the  service  industries.  In  particular,  a  sizable  share  of  the 
labour  productivity  growth  recorded  in  the  services  sector  is  caused  by  capital  deepening 
through increasing uptake of ICT. This effect is highest in sectors considered in finance and 
communications and other services using ICT intensively. Using data on the composition of 
labour productivity growth available for four EU countries (France, Germany, the Netherlands 
and  the  UK),  it  is  clear  that  ICT  capital  induced  more  than  50%  of  the  annual  productivity 
gain  registered  in  financial  intermediation  activities  over  the  80s  and  90s10.  According  to 
those data, ICT use has also had a major impact on labour productivity in real estate activities 

8 

9 
10 

The Sectoral classification is more aggregated and the time period covered shorter (1993-2001) than the 
ones used above. 
This confirms the generality of the results of O’Mahony and van Ark (2003) that the EU productivity 
outperformed the US in most industries, excepting the ICT producing-industries. See also C. Denis et 
al, “The Lisbon Strategy and the EU structural productivity problem” DG ECFIN, February 2005. 
See section VI of the EU Sectoral Competitiveness Indicators 2005. 
Source: O’Mahony and van Ark (2003), EU productivity and competitiveness: An industry perspective, 
European Commission.  

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and  business  services,  as  well  as  an  increasing  influence  in  wholesale  and  retail  trade 
activities. The sum of these effects plus those induced by other capital goods – such as tools 
and  scientific  instruments  –  highlights  the  importance  of  manufacturing  as  a  whole  to  the 
successful development of the service economy in Europe. 

2.2. 

Is there a process of relocation?  

There  is  significant  public  concern  about  a  presumed  continuous  process  of  relocation  of 
industrial  activities  from  the  EU  to  the  emerging  Asian  economies,  especially  China  and 
India. Furthermore, the perception of this phenomenon undermines public confidence in the 
ability of EU manufacturing to provide jobs and to create wealth.  

Undeniably,  relocations  may  pose  local  and  sectoral  problems  and  particularly  impact  upon 
lower  skilled  workers  that  should  be  helped  to  cope  with  the  consequences  of  industrial 
restructuring. These costs are very often concentrated in some sectors and some regions. This 
is for example the case of the group of fashion and design industries. The production in these 
sectors remaining in the EU has refocused itself on higher-value and higher quality products, 
having undergone a largely successful process of structural adjustment. The group of sectors 
concerned  by  relocations  also  includes  some  parts  of  the  food,  machinery,  and  electrical 
equipment industries, some non-ferrous metals industries, and business services.  

However, the process of relocation of jobs to low cost countries should not be confused with 
the  more  general  internationalisation  of  manufacturing  production  stimulated  by  the 
development of new markets. Manufacturing has been involved in the process of globalisation 
for  many  decades,  with  the  overwhelmingly  majority  of  manufacturing  foreign  direct 
investment going to industrialised countries. The United States alone receives nearly one third 
of  EU  manufacturing  outflows.  The  EU-15  outflows  towards  the  new  Member  States  has 
stabilised at about 13% of total EU-15 FDI outflows. Investment flows towards China have 
certainly increased a great deal since the 1999-2000s, but represented in 2003 only 3.8% of all 
outflows11. The share of India is even lower.  

Foreign direct investment (FDI) statistics give a picture of how manufacturing companies are 
active in the process of internationalisation. However, the statistics do not indicate what share 
of these flows correspond to relocation. Whilst there are no available statistics on relocations, 
many  studies  have  attempted  to  estimate  the  share  of  relocations.  They  all  conclude  on  the 
small share of relocation/outsourcing in FDI12 or restructuring13 and on the limited impact on 
unemployment14  in  the  economy  as  a  whole.  Moreover,  relocations/outsourcing  may  help 
reorganise  the  value  chain  and  lead  to  productivity  gains  that  are  a  key  source  of 
competitiveness  for  EU  industry.  Cost  is  only  one  of  the  many  factors  responsible  for 
relocation;  availability  of  skilled  labour,  infrastructures,  and  market  opportunities  are  often 
more  important.  The  attractiveness  of  the  regulatory  environment  is  another,  especially  the 

11 
12 

13 
14 

Eurostat “EU Foreign Direct Investment in 2003” Statistics in Focus, 20/2005 
D. Marin, “A nation of Poets and thinkers – Less so with Eastern Enlargement. Austria and Germany”, 
CEPR Discussion Paper 4358, 2004. Note from the French Ministry of Economics and Finance, 2004. 
The  French  Institute  INSEE  estimate  an  average  13  500  job  losses  per  year  for  France  due  to 
relocations, of which 6 400 were due to relocations to low cost countries (Rapport sur les Comptes de la 
Nation, 2004).  
See European Monitor Restructuring  
See D. Marin, Mc Kinsey Global Institute. “Offshoring, is it a win-win game”, 2003.  

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degree  to  which  it  favours  or  curtails  the  development  and  deployment  of  innovative  goods 
and services, and the setting up and expansion of new businesses. 

International  competition  is  also  increasing  for  R&D  investment.  Relocation  of  production 
may  have  adverse  effects  since  R&D  activities  may  follow  manufacturing  production.  For 
example,  to  access  new  and  large  markets,  companies  need  to  adapt  their  products  to  meet 
local  requirements  and  tastes,  resulting  in  R&D  conducted  closer  to  the  customer.  In  some 
sectors such as microelectronics, R&D and production activities are highly interrelated. As a 
consequence, the relocation of manufacturing may lead to the relocation of R&D, creating a 
domino effect within the sector.  

Other  factors  that  are  key  for  the  location  of  R&D  investment  are  the  availability  of  highly 
qualified human resources, the quality of the local research and innovation systems, and the 
presence of clusters or poles of excellence. In addition, government policy may also directly 
affect  R&D  spending  e.g.  the  increasing  attractiveness  of  the  U.S.  as  a  prime  location  for 
healthcare-related  R&D  can  be  attributed  at  least  partly  to  its  more  favourable  market 
conditions  and  higher  returns,  a  consequence  of  differing  government  pricing  and 
reimbursement rules. 

Available  indicators  show  that,  relative  to  the  USA  and  Japan,  the  EU  is  a  somewhat  less 
attractive  place  for  location  of  R&D.  In  2000,  US  companies  spent  €11.5bn  on  their  R&D 
activities in the EU-15 whilst the European companies spent €15.2bn in the US, meaning that 
the US attracted one third more R&D expenditure than the EU. The situation is even worse 
between the EU and Japan, even though it is on a smaller scale (€1.4bn versus €0.4 billion). 
Estimates for 2004 indicate that these trends have not improved15. There is emerging evidence 
that  countries  such  as  China  and  India  are  becoming  important  locations  for  new  R&D 
investments. For instance, US investment has also been growing at a much faster rate in areas 
outside the EU – notably China, than in the EU16. The US has also been more successful than 
the EU in attracting researchers and highly skilled staff. 

Given the significant positive spill-over effects from R&D activities and R&D expenditure to 
other  parts  of  the  economy,  this  could  also  have  wider  negative  effects.  Such  a  situation 
would  be  a  matter  of  concern  and  should  be  addressed.  While  relocations  as  such  might 
require targeted measures to mitigate adjustments costs, R&D location choices and the loss of 
skilled personnel might require a range of policies that improve the framework conditions. 

2.3. 

EU manufacturing performance and industrial policy 

The discussion indicates:  

•  Productivity  growth  is  one  of  the  most  important  indicators  of  competitiveness.  The 
manufacturing  productivity  growth  differential  between  the  EU  and  other  industrialised 
economies,  particularly  the  US,  has  to  some  extent  been  the  result  of  an  industrial 
composition effect due to the lower share of ICT-producing sectors in EU manufacturing. 
In  particular,  the  differential  has  been  the  result  of  a  smaller  size  and  the  slower 
productivity growth of the ICT sector in the EU.  

15 
16 

DG RTD Statistics on Research and Development (2005). 
EU  “Key  Figures  2005  on  Science,  Technology,  and  Innovation:  Towards  a  European  Knowledge 
Area”. 

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•  In fact, the majority of individual EU manufacturing sectors have on the whole performed 

well in comparison with their counterparts in other industrialised economies.  

•  However, the industrial structure of the EU economy as a whole makes it less than ideally 
positioned  to  face  the  ongoing  globalisation  process,  since  much  of  EU  trade  is  still 
concentrated  in  sectors  with  medium-high  technologies  and  low  to  intermediate  labour 
skills. This exposes the EU to competition from producers in emerging economies that are 
upgrading  the  skill  intensity  of  their  exports  and  catching  up  in  terms  of  the  non-price 
factors that often underlie the EU competitive edge on world markets. 

•  Hence, adaptability and structural change, allowing a shift towards a more robust situation 
of comparative advantage, are critically needed if the EU is to maximise the gains arising 
from  the  integration  in  the  world  economy  of  China,  India,  and  other  fast  growing 
economies. 

•  EU foreign direct investment flows towards the emerging Asian economies have increased 
in recent years, however their share in total flows remains limited. International relocations 
of EU jobs to low cost countries are limited in most manufacturing sectors, although still 
can have painful consequences on a local or individual sectoral basis, especially on lower 
skilled workers, justifying actions to try to reduce the social and economic costs of these 
changes. 

•  There  is  increasing  intense  international  competition  for  R&D  investment  and  skilled 
researchers, and evidence that the EU is not competitive enough as a location for research. 
These trends are a matter of considerable concern in so far as they lead to a loss of R&D 
investment and researchers from the EU. 

On the whole therefore, while the performance of individual EU manufacturing sectors over 
the  recent  past  has  been  positive,  there  are  still  important  challenges  ahead.  In  particular, 
promoting the conditions to ensure increased adaptability and structural change is essential in 
order  to  ensure  the  competitiveness  of  EU  manufacturing,  especially  in  the  light  of 
increasingly strong competition from China and the emerging Asian economies. In the light of 
this  assessment,  the  Commission  services  have  therefore  undertaken  a  detailed  screening  of 
the competitiveness of individual sectors of manufacturing industry in order to determine to 
what  extent  their  performance  is  or  could  be  influenced  by  the  instruments  of  industrial 
policy. 

3. 

COMBINING  THE  HORIZONTAL  AND  SECTORAL  DIMENSIONS  OF  EU  INDUSTRIAL 
POLICY: MEETING THE CHALLENGES AHEAD 

To carry out an assessment of the potential role of industrial policy in individual sectors, over 
the  last  months  the  Commission  services  have  undertaken  a  systematic  screening  of  27 
separate sectors of manufacturing industry and the construction industry17. For each sector, a 
competitiveness assessment has been made with inputs from stakeholders and Member states. 

17 

Since  only  limited  sectoral  data  was  available  on  the  New  Member  states,  the  screening  must  be 
regarded as preliminary. The missing data is currently being compiled and analysed by the Commission 
and will be fed into the on-going policy initiatives. 

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An evaluation of opportunities and threats has been undertaken, leading to an assessment of 
the relevance and priority of various key policy areas for each sector.  

The policy areas chosen for screening were those identified by the 2004 Communication18 as 
being  particularly  relevant  to  industry.  These  areas  were:  (1)  ensuring  an  open  and 
competitive Single Market, including competition; (2) providing a supportive framework for 
research,  innovation  and  skills;  (3)  better  regulation;  (4)  ensuring  synergies  between 
competitiveness, energy, and environmental policies; (5) ensuring full and fair participation in 
global  markets;  and  (6)  facilitating  social  and  economic  cohesion.  Whilst  these  policy 
dimensions  are  not  exhaustive,  they  were  selected  because  of  their  particular  relevance  to 
sector productivity growth and international competitiveness. 

The  screening  process  has  resulted  in  a  thorough  and  systematic  identification  of  the 
competitiveness  and  policy  challenges  of  each  individual  sector  in  both  a  quantitative  and 
qualitative fashion. The following sections set out the main policy challenges that have been 
identified, explaining and illustrating their relevance for individual sectors. The tables indicate 
with  crosses,  the  cases  in  which  a  policy  challenge  is  considered  of  the  highest  priority  for 
each sector amongst the many relevant policy challenges. Hence the absence of a cross does 
not therefore necessarily denote that the challenge is unimportant to a sector, only that it is not 
considered as an issue of greatest priority. More detail on these and other issues are set out in 
the accompanying fiches. 

3.1. 

Ensuring an open and competitive Single Market 

An  essential  precondition  of  competitiveness  is  the  maintenance  of  open  and  competitive 
markets. However, relatively little firm information is currently available on market structure 
and  the  intensity  of  competition  between  different  sectors  in  the  EU  and  further  work  is 
planned to be undertaken in this area. Nevertheless some clear policy issues emerged from the 
screening exercise. 

•  Whilst  the  Single  Market  programme  has  successfully  delivered  an  EU-wide  market  for 
most  sectors,  increasing  competition,  enabling  exploitation  of  economies  of  scale,  and 
providing better consumer protection19, progress seems still possible to be made on certain 
sectors, such as in public procurement for defence industries, and in relation to creating a 
fully  competitive  single  market  for  pharmaceuticals.  In  general,  the  completion  of  the 
single  market  for  services  remains  a  core  requirement  to  increase  the  competitiveness  of 
EU businesses, including the manufacturing and other industries. 

•  Liberalisation  of  communication  services  has  substantially  reduced  input  costs  for 
industrial users, however there appears room to improve the efficiency of energy and other 
service  industries  further.  This  is  particularly  relevant  for  many  energy-intensive  basic 
industries. 

•  The change-over to the euro has reinforced competition between lenders, increasing access 
and reducing costs of finance to industry. Still further progress would need to be made in 
ensuring the availability of finance and venture capital, particularly for SMEs. This is an 

18 
19 

See footnote 3. 
EUC Ten Years Internal Market Without Frontiers, Internal Market Scoreboard, November 2002.  

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important  factor  for  several  sectors  based  on  innovative  SMEs,  especially  in  the  life 
sciences and fashion and design industries.  

•  Competition  policy  has  an  important  role  in  making  industries  more  competitive  and 
ensuring  that  companies  operate  so  as  to  achieve  the  highest  value  added  production 
consistent  with  their  comparative  advantage.  Vigorous  competition  is  thus  an  important 
driver for competitiveness and economic growth whereas anti-competitive agreements and 
mergers cause damage to innovation and competitiveness of the European Industry. 

3.2. 

Supporting research, innovation, and skills 

Amongst the key strengths of the EU economy are its strong science base and its skilled and 
creative  workforce,  which  are  increasingly  seen  as  drivers  of  productivity  growth  and 
competitiveness. The role of the private sector is to use these factors to continually develop 
new  products  and  processes  and  improve  skills  to  obtain  new  competitive  advantage  and 
profitability in global markets. The corresponding role of public authorities would be to assist 
this  process,  through  ensuring  optimal  framework  conditions  for  private  firms  to  conduct 
R&D and improve their innovative performance, providing a range of incentives to increase 
private  investment  in  research  and  innovation;  ensuring  the  intellectual  protection  of  new 
ideas, and facilitating the development of a skilled and healthy workforce. In particular, there 
would be synergies from jointly addressing the development of strong industrial clusters and 
innovation poles, bringing together research and innovation actors from different regions and 
Member states, particularly in fields where for reasons of scale or scope individual Member 
states cannot succeed in isolation to tackle market failures.  

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Industry

Food, drink & tobacco

Cosmetics

Pharmaceuticals

Biotech

Medical devices

ICT •)

Mechanical engineering

Electrical engineering

Motor vehicles

Aerospace

Defence industries

Shipbuilding

Textiles

Leather and leather goods

Footwear

Furniture

Non-energy extractive industries

Non-ferrous metals

Cement and lime

Ceramics

Glass

Wood & products of wood

Pulp, paper & paper products

Printing & publishing

Steel

Chemicals, rubber, and plastics  

Construction

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R&D/Innovation

IPR, Counterfeiting

Skills

Access to finance for SMEs

KNOWLEDGE

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•) ICT: challenges are sector specific; ICT uptake is a general challenge for the industry. 

•  The Community Action Programme for Growth and Employment identified several areas 
for  action  to  encourage  higher  and  better  investment  in  research  and  innovation  such  as 
improving the links between basic research in universities and industrial R&D, guidelines 
for  optimising  the  EU-wide  use  of  fiscal  incentives  for  R&D,  facilitating  state  aids  for 
innovation  to  tackle  market  failures  hampering  innovation,  and  intensifying  EU-wide 
industrial  R&D  networking  and  public-private  partnerships  via  the  7th  RTD  Framework 
Programme. These issues are particularly important to the R&D-intensive life science and 
machine and systems industries.  

•  Most  sectors  including  traditional  ones  play  a  key  role  in  fostering  entrepreneurial 
innovation.  Therefore  enhanced  efforts  should be  undertaken  to  better  understand  sector-
specific barriers to innovation and facilitate networking among innovative companies. 

•  The  absence  of  a  Community  patent  makes  it  difficult  for  many  enterprises  particularly 
SMEs  to  protect  their  inventions  at  a  reasonable  cost.  Combating  counterfeiting  is  also 
essential  to  protect  intellectual  property.  These  are  key  issues  for  a  range  of  industries, 
including  the  ICT  and  engineering  industries,  the  fashion  and  design  industries,  and 
ceramics and glass.  

•  The  development  of  human  capital  and  the  availability  of  a  highly  skilled  workforce  are 
essential  issues  for  research-intensive  sectors  such  as  the  ICT  industries.  However, 
traditional  labour-intensive  sectors  also  need  to  improve  the  skills  of  their  workforce, 
notably e-skills, in order to enhance competitiveness and to increase the employability of 
workers and the transferability of their skills.  

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3.3. 

Better regulation 

Regulation is essential to many industries. It provides guarantees for public and occupational 
health  and  safety,  consumer  and  environmental  protection  etc.  and  allows  the  setting  of 
common  technical  standards  to  allow  increased  competition  between  goods  and  services.  It 
sets  a  level  playing  field  for  fair  competition  in  the  internal  market  and  a  predictable 
environment  for  business.  However,  regulation  is  not  always  efficient  and  may  not  be 
sufficiently  flexible  to  accomodate  new  technological  developments.  Better  regulation 
measures at all levels improves the quality of both new and existing legislation to ensure that 
the  regulatory  framework  is  more  efficient  and  conducive  to  competitiveness,  whilst 
satisfying the objectives of other policies. It also improves governance, through increasing the 
transparency of decision making and actively involving stakeholders.  

Industry

Administration burden/ Complexity of 
sectoral regulation

Internal Market

Health and Safety

Techn. Standards

BETTER REGULATION

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Food, drink & tobacco
Cosmetics
Pharmaceuticals
Biotech
Medical devices
ICT 
Mechanical engineering
Electrical engineering
Motor vehicles
Aerospace
Defence industries
Shipbuilding
Textiles
Leather and leather goods
Footwear
Furniture; 
Non-energy extractive industries
Non-ferrous metals
Cement and lime
Ceramics
Glass
Wood & products of wood
Pulp, paper & paper products
Printing & publishing
Steel
Chemicals, rubber, and plastics  
Construction

X

X

X

X

X

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X •) 
 X •)
X

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•)  Market Surveillance

X
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X

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Key better regulation issues applying to industry are: 

•  Ensuring the development of the framework of legislation to be able to keep up with new 
technological developments, while ensuring health and safety for the public and workers. 
This is an essential priority in ensuring the future development and competitiveness of the 
food and life sciences industries, as well as other industries such as construction. 

•  Health and safety with environmental issues, which are critical for the chemicals industry 
and  to  the  wide  range  of  manufacturing  sectors  dependent  on  chemicals  to  maintain 
competitiveness  and  to  stimulate  innovation,  are  being  addressed  in  the  context  of  the 
proposals for the REACH regulation20. The Commission has stressed the need to arrive at a 
decision on REACH that is consistent with the Lisbon goals as regards the competitiveness 
of the European industries and encouraging innovation, and which will achieve a marked 
improvement  in  health  and  the  environment.  It  has  said  it  will  search  for  pragmatic 
solutions to the key issues that have emerged in order to improve the cost-effectiveness and 
workability of REACH.  

20 

Registration, Evaluation, and Authorisation of CHemicals. 

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•  Timely development or revision of standards or technical specifications in industries such 
as  ICT,  wood  and  wood  products,  and  the  construction  industry.  The  access  of  SMEs  to 
standards  and  the  involvement  of  SMEs  in  the  process  of  standardisation  could  be 
improved. 

•  Improving  the  efficiency  and  functioning  of  the  Single  Market  through  better  market 
surveillance  and  further  harmonisation  could  be  of  major  importance  for  the  mechanical 
and electrical engineering industries, as well as the automotive industry. 

•  An  anticipative  approach  to  product  market  regulation,  dealing  early  with  obstacles  to 
developing  and  exploiting  new  technologies  and  taking  future  regulatory  needs  into 
account, is particularly relevant to sectors such as biotechnology, pharmaceuticals and ICT. 

3.4. 

Ensuring synergies between competitiveness, energy, and environmental policies  

EU  manufacturing  has  already  achieved  significant  progress  in  decoupling  environmental 
impacts from economic growth21. Over the last twenty years, the EU manufacturing industry 
has  in  many  areas  achieved  an  absolute  decoupling  of  its  environmental  impact  from 
production  growth.  For  instance,  industry  emissions  of  acidifying  gases  (such  as  sulphur 
dioxide and nitrogen oxides) have been reduced by two thirds since 1980. Moreover, with a 
more  than  18  per  cent  cut  in  industrial  greenhouse  gas  emissions  since  1990,  the 
manufacturing sector alone contributed to 80 per cent of the total EU reduction achieved since 
then.  Important  advances  have  also  been  made  in  diminishing  energy,  water,  and  material 
inputs.  These  improvements  contrast  favourably  with  other  economic  sectors  (energy, 
transport,  agriculture,  households)  and  other  economic  blocks  (US,  Japan).  Indeed  it  is 
recognised  that  for  global  environmental  challenges,  such  as  climate  change  and  the 
protection of the ozone layer, taking further effective and cost-efficient action requires wider 
international commitment and participation22. 

The  environmental  progress  of  EU  industry  has  in  part  been  stimulated  by  a  significant 
expansion of environmental and energy legislation. Industry is now faced with a great number 
of different regulatory requirements which may cause potential difficulties in implementation. 
Moreover,  making  further  progress  towards  sustainable  production  patterns  including  eco-
efficiency gains and absolute decoupling results in increasingly complex and – in some cases 
– more costly challenges23. Action to address remaining environmental problems – such as the 
impacts of resource use, waste, or climate change – often require more costly, complex and 
integrated measures. A well-designed regulatory framework however may result in innovation 
in processes and products. The development of environmental technologies by industry, and 
investment in new and existing technologies therefore needs to be secured within a stable and 
predictable  regulatory  framework.  In  this  context,  the  complementarity  of  environmental, 
energy,  and  industrial  policies,  as  well  as  the  coherence  of  the  accumulated  legislation 
become  essential  priorities  to  ensure  the  sustainability  and  competitiveness  of  EU  industry. 
The  combination  of  well-designed  environmental  and  energy  policies,  and  competitiveness 

21 

22 
23 

Commission Staff Working Paper, SEC (2002) 528. This overall trend has also been highlighted by the 
European  Environment  Agency  (see  for  instance  the  overview  table  on  page  11  of  the  EEA’s 
Environmental Signals 2001 report). 
e.g. “Winning the Battle Against Global Climate Change” COM(2005) 35. 
Environmental  protection  expenditures  in  the  EU25  have  averaged  around  1.7%  of  industry  value-
added over the last three available years (2000-2002). 

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policies  can  result  in  innovation,  more  efficient  use  of  natural  resources,  more  energy-
efficiency, and first-mover advantages in certain technologies. 

Priority issues to be addressed are: 

•  Concerning climate change, end-of-pipe technologies largely do not exist and progress can 
only be made by making technical changes or efficiency gains across the whole production 
process. For energy suppliers, progress in technologies is also needed in order to shift to 
less  carbon-intensive  energy  sources  or  to  capture  and  sequestrate  carbon.  The  EU 
Emissions Trading Scheme intends to make reductions in the most cost-efficient manner. 
The scope of the scheme includes the steel, cement, paper and pulp, and the ceramics and 
glass industries. It would be essential to carefully study whether and how high oil prices, 
the  unfinished  liberalisation  of  the  European  electricity  market,  and  recent  increases  in 
CO2  emissions  permit  prices  could,  increase  the  costs  of  production  in  these  highly 
energy-intensive sectors.  

•  Recycling and waste issues also involve complex potential trade-offs, involving the whole 
life-cycle of material and resource use. For many industries, waste has become a valuable 
resource. Many sectors are covered by specific legislation, that needs to be fully coherent 
with each other. Access to secondary raw materials and their availability within the single 
market are an issue for many basic industries and could be promoted by the regulation of 
transboundary shipments of waste.  

•  Substantially reducing harmful emissions to water and air is a key issue for a number of 
industries,  in  particular  stemming  from  the  Water  Framework  directive  and  its  daughter 
directives that are still in the course of either negotiation or introduction. This is a priority 
challenge  for  many  basic  and  intermediate  goods  industries  (particularly  chemicals  and 
pulp and paper), as well as the textiles and leather industries. 

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ENVIRONMENT & ENERGY 

Industry

Climate change

Waste

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Food, drink & tobacco
Cosmetics
Pharmaceuticals
Biotech
Medical devices

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ICT 

Mechanical engineering
Electrical engineering
Motor vehicles
Aerospace
Defence industries
Shipbuilding
Textiles
Leather and leather goods
Footwear
Furniture; 

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Non-energy extractive industries

Non-ferrous metals
Cement and lime
Ceramics
Glass
Wood & products of wood
Pulp, paper & paper products
Printing & publishing
Steel
Chemicals, rubber, and plastics  
Construction

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Water 

X

Air

Intensive 
Energy Use

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•  The  objectives  of  energy  policy  include  making  energy  markets  more  efficient  through 
liberalisation  measures,  increasing  investment  in  renewable  and  non-fossil  fuels,  and 
integrating  climate  change  into  energy  policy,  for  instance  through  the  EU  emissions 
trading scheme. The exact balance between these different policies is crucial especially for 
most  energy-intensive  industries  because  of  their  effects  on  energy  prices.  In  addition, 
increasing  the  demand  for  wood  as  a  non-fossil  fuel,  affects  raw  materials  costs  for  the 
pulp and paper industry. Ensuring the coherence between the multiple energy initiatives is 
therefore a considerable challenge for industry. 

3.5. 

Ensuring full and fair participation in global markets 

Falling international transport and communication costs and reductions in world trade barriers 
have led to an increasingly internationalised economy. This has reduced prices for consumers 
and has both created new opportunities and new challenges for EU industry. It has increased 
the  importance  of  the  international  dimension  of  industrial  policy,  covering  international 
market access, the use of trade instruments, and regulatory dialogue with some partners. Here 
again,  the  diversity  of  sectors  implies  that  some  tools  are  more  appropriate  than  other.  The 
degree  of  openness  varies  greatly  between  sectors,  depending  on  particular  products  and 
market  opportunities.  As  a  result,  the  international  dimension  of  industrial  policy  also  must 
adapt to the specific needs and problems of the sector.  

•  An important factor for competitiveness is the ability to compete fairly in foreign markets. 
Whilst enormous progress has been made towards this objective through multilateral trade 
negotiations and a network of bilateral free trade agreements, market access continues to 
be  a  priority  issue  for  several  sectors,  particularly  for  the  internationalisation  of  SMEs. 
These include cosmetics and pharmaceuticals, the engineering and automotive  industries, 

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most  of  the  fashion  and  design  industries,  and  a  number  of  basic  industries  (ceramics, 
glass, and wood industries).  

Industry

Food, drink & tobacco
Cosmetics
Pharmaceuticals
Biotech
Medical devices
ICT 
Mechanical engineering
Electrical engineering
Motor vehicles
Aerospace
Defence industries
Shipbuilding
Textiles
Leather and leather goods
Footwear
Furniture

Non-energy extractive industries

Non-ferrous metals
Cement and lime
Ceramics
Glass
Wood & products of wood
Pulp, paper & paper products
Printing & publishing
Steel
Chemicals, rubber, and plastics  
Construction

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Access to markets

Access to raw materials

Trade subsidies / dumping

Regulatory issues

TRADE

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•  The  need  for  an  international  dialogue  on  regulatory  issues  is  an  increasingly  important 
issue  for  many  innovative  sectors  trading  internationally.  The  GHS  agreement  on  the 
classification  and  labelling  of  chemicals  is  a  good  example  of  what  is  possible. 
International regulatory harmonisation is an important issue for several sectors, including 
medical devices and cosmetics. Moreover in some industries such as the automotive sector, 
there  is  potential  to  “export”  European  standards  as  has  been  happening  already  in  the 
Asian region where EU standards have been adopted in most markets. 

•  Access to raw materials and foodstuffs from international markets is an issue for a number 

of basic industries and the leather and food industries. 

•  In  some  cases  there  would  be  a  need  to  correct  distorting  trade  practices  from  third 
countries’  competitors  that  affect  the  competitiveness  of  European  operators.  The 
antidumping  and  anti-subsidy  instruments  based  on  WTO  rules  enable  the  European 
industry to compete on fair terms on the European market and also to launch itself from a 
solid  home  base  into  third  country  markets.  A  number  of  sectors  have  faced  dumping  or 
subsidies  problems  in  the  past.  It  would  be  important  to  continue  to  ensure  the  effective 
application  and  enforcement  of  these  instruments  by  the  EC  and  to  guarantee  that  the 
relevant  WTO  rules  are  also  properly  applied  by  third  countries  should  they  target  EU 
imports. 

3.6. 

Facilitating social and economic cohesion 

Mobilising  the  potential  for  growth  that  exists  in  all  regions,  including  those  affected  by 
changes  in  the  manufacturing  industry,  would  help  to  improve  the  geographical  balance  of 
economic  development  and  raises  the  potential  rate  of  growth  in  the  Union  as  a  whole. 

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Economic and social cohesion can also be strengthened by addressing the appropriate sectoral 
challenges and by enhancing the co-operation across regions faced with similar problems. 

•  In  particular,  there  would  seem  to  be  a  need  for  continued  flexibility  and  structural 
adjustment  to  make  the  most  of  the  new  opportunities  presented  by  enlargement,  the 
developments  of  new  technologies,  and  the  internationalization  of  the  economy.  The 
primary  responsibility  for  these  adjustments  rests  with  the  private  sector.  For  instance, 
many of the fashion and design industries would to make adjustments in the face of strong 
international  competition  from  low-wage  countries  to  ensure  an  increase  the  value-added 
of  their  products.  However,  some  policy  challenges  may  arise  from  the  scope  to 
appropriately  facilitate  this  adjustment.  For  instance,  a  highly  educated,  healthy,  well-
trained and adaptable workforce is a key element in competitiveness, productivity and the 
growth of employment. A series of actions to improve human capital and worker skills and 
health, and to bolster training would therefore be particularly relevant to a wide range of 
sectors. Relevant actions would include specific employment, training and support services 
for  workers  in  the  context  of  company  and  sector  restructuring,  such  as  rapid  response 
schemes in the case of collective lay-offs 

•  In  terms  of  wider  social  development,  voluntary  business  initiatives  in  the  form  of 
corporate social responsibility (CSR) practices can contribute positively, whilst enhancing 
the  EU’s  potential  for  growth,  innovation  and  competitiveness.  The  promotion  of  CSR 
practices  in  third  countries  would  facilitate  the  convergent  implementation  of  the  OECD 
Guidelines for Multinational Enterprises and ILO social conventions. 

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s
u
d
n
I

s
d
o
o
G
e
t
a
i
d
e
m
r
e
t
n
I

d
n
a

c
i
s
a
B

s
e
i
r
t
s
u
d
n
I

Industry

Food, drink & tobacco
Cosmetics
Pharmaceuticals
Biotech
Medical devices
ICT 
Mechanical engineering
Electrical engineering
Motor vehicles
Aerospace
Defence industries
Shipbuilding
Textiles
Leather and leather goods
Footwear

Furniture; 

Non-energy extractive industries

Non-ferrous metals
Cement and lime
Ceramics
Glass
Wood & products of wood
Pulp, paper & paper products
Printing & publishing
Steel
Chemicals, rubber, and plastics  
Construction

STRUCTURAL CHANGE

  X

X

X
 X
 X
X

 X

X

X
X

4. 

TOWARDS AN OUTLINE OF WORK FOR INDUSTRIAL POLICY 

The outline of work set out in this section involves a new approach to industrial policy, aimed 
at  achieving  better  designed  policies  that  are  more  relevant,  integrated,  and  consensual. 

EN 

18 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Starting from the screening of horizontal policies in terms of their concrete implications for 
specific  industrial  sectors,  this  approach  enables  the  identification  of  the  policies  most 
relevant  for  each  sector.  Through  linking  together  under  a  single  initiative,  a  number  of 
different policy dimensions of key relevance to industry, it will provide increased coherence 
and integration between policies with a more powerful effect on competitiveness. Finally, it 
attempts to achieve a greater consensus over policy, through the involvement at an early stage 
of  key  stakeholders  and  Member  states  in  policy  making.  The  European  social  partners  are 
invited to contribute to this work, both at horizontal and sectoral level. 

The outline of work in this section focuses on a series of specifically new initiatives to foster 
the competitiveness of different sectors. It is thus not exhaustive. Under the new Community 
Lisbon  Programme,  a  number  of  other  actions  and  policy  initiatives  with  an  impact  on 
industry  in  general  and  on  sectors  have  already  been  launched  across  the  range  of  policy 
domains.. 

4.1. 

Cross-sectoral policy initiatives 

Seven major cross-sectoral policy initiatives are announced in this Communication in order 
to address the common challenges across groupings of different industries and to reinforce the 
synergies between different policy areas in the light of competitiveness considerations.  

An Intellectual Property Rights and Counterfeiting Initiative (2006) 

Intellectual and industrial property rights (IPR) are of key importance for the competitiveness 
of many industrial sectors. While key areas have already been harmonized, more can be done 
to  ensure  that  the  regulatory  framework  meets  the  needs  of  industry  at  a  time  of  rapid 
technological development and societal change. Companies and their clients need IPR which 
stimulates innovation, provides a stable context in which to make investment decisions, and 
encourages the development of efficient new business models. The debate engendered by the 
proposed directive on the patentability of computer-implemented inventions has demonstrated 
that framing IPR rules which balance the needs of all stakeholders is by no means easy. The 
Commission  will  therefore  launch  a  dialogue  with  industry  and  other  interested  parties  in 
2006  to  determine  what  more  might  usefully  be  done  to  provide  European  industry  with  a 
sound IPR framework. In addition, the proper enforcement of IPR within the internal market 
and in third countries is of the highest importance to fight counterfeiting and piracy occurring 
in  many  sectors.  Infringements  of  IPR  can  jeopardize  legitimate  businesses,  threaten 
innovation  and  sometimes  pose  problems  to  public  health  and  safety.  Many  companies,  in 
particular  SMEs,  are  still  not  aware  of  their  rights  to  obtain  adequate  IP  protection,  whilst 
counterfeiting  continues  to  be  a  major  problem  in  many  areas  of  trade.  Taking  account 
existing and planned anti-counterfeiting and anti-piracy instruments and measures, including 
those  in  the  enforcement24  and  customs  fields,  the  Commission  will  review  the  state  of 
progress in the whole area of IPR with a focus on competitiveness issues and come up with 
suggestions on how to improve the situation in 2006. 

High Level Group on Competitiveness, Energy, and the Environment (end 2005) 

Competitiveness, energy and environmental policies are closely interrelated in their objectives 
and  their  impact  is  of  significant  importance  in  particular  for  many  basic  and  intermediate 

24 

Including  the  Commission  proposals  for  a  directive  on  “EU  criminal  law  provisions  to  combat 
infringements of intellectual property rights”, July 2005.  

EN 

19 

   EN 

 
                                                 
product industries. Given the need for consistency of policy and legislative initiatives in these 
areas  and  in  order  to  exploit  fully  the  synergies  between  them,  closer  coordination  and  the 
development of an integrated approach is of the essence. For this purpose a High Level Group 
on  Competitiveness,  Energy  and  the  Environment  will  be  set  up.  It  will  function  as  an 
advisory  platform  bringing  together  the  Members  of  the  Commission  for  Enterprise  and 
Industry, Competition, Energy, and the Environment as well as all relevant stakeholders. It is 
designed to examine the links between industrial, energy and environmental legislation and to 
ensure  the  coherence  of  individual  initiatives,  whilst  improving  both  sustainability  and 
competitiveness. This will be achieved through the balanced participation of all stakeholders 
with  the  objective  of  creating  a  stable  and  predictable  regulatory  framework  where 
competitiveness,  energy  and  environment  go  hand  in  hand.  Likely  issues  to  be  addressed 
include:  (i)  concrete  implementation  of  better  regulation  principles;  (ii)  climate  change, 
particularly  the  emissions  trading  scheme,  energy-efficiency  and  renewables;  (iii)  the 
functioning of energy markets, particularly the electricity market; (iv) implementation of the 
Thematic  Strategy  on  the  Prevention  and  Recycling  of  Waste  and  related  legislation  (v)  the 
improvement  of  resource  efficiency  and  the  uptake  of  environmental  and  other  innovative 
technologies.  

External Aspects of Competitiveness and Market Access (Spring 2006) 

Access to international markets is a priority issue for most of the sectors. The Commission is 
currently working on a possible Communication on the revision of Market Access Strategy, 
reviewing  the  existing  Strategy  and  instruments  to  focus  on  those  sectors  and  markets  with 
greatest  potential  gains  for  competitiveness.  Market  access  objectives  will  be  regularly 
prioritised  in  combination  with  a  more  effective  use  of  the  Trade  Barriers  Regulation.  In 
cooperation  with  stakeholders,  a  detailed  strategy  will  be  developed  and  implemented  to 
tackle barriers in the selected sectors and countries. A specific market access action plan has 
already  been  introduced  for  textiles,  and  has  been  expanded  to  cover  leather  and  footwear 
products. The Commission also intends to launch a wide process of reflection and debate on 
the  external  aspects  of  EU  competitiveness  through  a  further  Communication  dealing  inter 
alia with trade issues related to Intellectual Property Rights, regulatory issues, investment and 
government  procurement,  particularly 
the  possibility  of  an  “External  Procurement 
Instrument”  to  create  incentives  for  third  countries  to  negotiate  the  opening  of  their  public 
procurement markets on a reciprocal basis. 

New Legislative Simplification Programme (October 2005) 

Better regulation at various levels has been identified as a key challenge for several sectors, 
including  construction,  motor  vehicles,  ICT  industries,  and  the  food  and  life  sciences 
industries. In addition, the waste regulations have been identified as important to a wide series 
of different sectors, and particularly to SMEs. The Commission has already announced25 that 
it  intends  to  re-launch  its  work  on  the  simplification  of  existing  legislation.  Following 
consultation with stakeholders,  a Communication  will  be  published  in  October  setting  out  a 
Simplification  work  programme  including  the  three  priorities  that  have  already  been 
identified  for  this  approach:  the  automotive  sector,  the  construction  sector,  and  waste 
legislation. In fact, the CARS21 High Level Group started the screening of existing legislation 
with the aim of completing this process by the end of 2005. 

25 

In the Communication on Better Regulation for Growth and Jobs 

EN 

20 

   EN 

 
                                                 
Improving Sectoral Skills (2006) 

Skill  shortages  were  identified  as  a  key  challenge  in  a  wide  range  of  different  industries, 
including the ICT and engineering industries, the textile and leather industries, and a number 
of basic and intermediate goods industries. Moreover there is some evidence that relocation of 
industrial activity is in some cases motivated more by skill shortages than by cost factors. The 
Commission has already begun to address skill shortage issues through a number of policies, 
such  as  the  Education  and  Training  2010  work  programme,  including  the  European 
Qualification  Framework  (EQF)  that  will  serve  as  a  common  reference  for  European 
education  and  training  systems,  facilitating  the  transparency,  transfer,  and  recognition  of 
qualifications  with  a  special  reference  to  the  sectoral  level26.  To  supplement  these  existing 
initiatives, it is proposed to make assessments of the nature of the skill problems in particular 
industries.  These  assessments  would  include  the  identification  of  current  sectoral  skill 
requirements  and  skill  gaps,  and  would  examine  likely  developments  in  sector-specific 
competences, including where possible effects on SMEs. Building upon the on-going work by 
the  Cedefop,  this  information  base  would  allow  the  articulation  of  future  specific  policy 
initiatives in the light of sectoral competitiveness requirements. 

Managing Structural Change in Manufacturing (End 2005) 

The  private  sector  has  the  primary  responsibility  for  undertaking  structural  adjustment. 
Nevertheless, the EU has useful levers at its disposal to anticipate and accompany change, as 
acknowledged in the recent Communication on the employment effects of restructuring27. It is 
essential that EU-level industrial initiatives are fully integrated with the use of the Structural 
funds  and  the  policy  instruments  of  individual  Member  states.  The  screening  process  has 
identified  the  following  industries  for  which  potential  structural  adjustment  is  an  issue:  the 
textiles,  leather,  furniture,  footwear,  and  ceramics  industries,  printing,  motor  vehicles, 
shipbuilding,  steel,  and  parts  of  the  food  industries.  The  Commission  intends  to  ensure  that 
better  anticipation  and  positive  management  of  economic  restructuring  are  included  in  the 
new  Structural  Funds  programmes.  In  line  with  the  Community  Strategic  Guidelines  for 
Cohesion, 2007-2013, support for programmes aimed at modernisation of labour markets and 
anticipation  of  gradual  changes  throughout  the  Union  in  sectors  for  which  structural 
adjustment has been identified as an issue needs to be included in the new Structural Funds 
programmes,  alongside  active  measures  to  reinforce  the  economic  well-being  of  regions28. 
The  Commission  will  also  further  explore  the  issue  of  enhancing  the  co-operation  across 
regions faced with similar problems and challenges. 

An Integrated European approach to Industrial Research and Innovation (2005) 

The forthcoming Communication on Research and Innovation29 will set out a new, integrated 
approach to policies and actions in support of research and innovation, including a number of 
initiatives highly relevant for industrial sectors. The recent Communication on State Aid for 
Innovation  additionally  proposes  to  facilitate  the  granting  of  state  aid  that  tackles  market 

26 

27 
28 
29 

“Work Programme on the Objectives of Education and Training Systems” adopted by the Council and 
the Commission on 14 February 2002; see also the “Commision’s Action Plan on Skills and Mobility” 
COM(2002) 72. 
“Communication on Restructuring and Employment” COM(2005) 120. 
COM(2005) 299 final, 5.7.2005. 
“More  Research  and  Innovation:  Investing  for  Growth  and  Employment:  A  Common  Approach” 
COM(2005) forthcoming.  

EN 

21 

   EN 

 
                                                 
failures hampering innovation. As part of the follow up to Communication on Research and 
Innovation,  a  European  Industrial  Research  and  Innovation  Monitoring  System  will  be 
established in 2006 to provide a consolidated overview and analysis of developments relevant 
to industrial research and innovation, and a conduit for stakeholder views. This will ensure the 
availability  of  industry-  and  policy-relevant  data  and  intelligence,  helping  to  anticipate  both 
barriers  and  opportunities  to  improving  research  and  innovation  investment,  and  the 
commercialisation  of  new  technologies  in  Europe.  A  High-level  Stakeholders  Group, 
including  policy-maker  representatives,  will  be  set  up  to  provide  guidance  and  feedback  on 
the focus and relevance of this activity for competitiveness.  

The  European  Technology  Platforms30,  which  have  already  demonstrated  themselves  as  an 
important  voluntary,  bottom-up  process  for  shaping  industrial  and  policy  strategies  in  well-
defined  key  technology  domains  via  their  ‘strategic  research  agendas’,  will  contribute  to 
increasing  industrial  investment  in  research  and  innovation  and  Europe's  capacity  to 
commercialise new technologies. 

4.2. 

Sector-specific initiatives 

In  addition  to  the  cross-sectoral  initiatives,  a  number  of  new  political  sector-specific 
initiatives  have  been  identified,  based  on  their  nature  or  particular  importance.  These 
initiatives take a variety of different forms. Some of these involve new high-level groups or 
policy fora, following up the successful examples of G10 Medicines, the LeaderSHIP 2015, 
and  the  CARS21  which  will  continue  to  make  an  important  contribution  in  the  future. 
Whenever  a  new  sectoral  initiative  is  proposed,  full  attention  will  be  given  to  ensuring  its 
coherence  with  other  initiatives,  particularly  the  recently  proposed  technology  platforms, 
sectoral innovation panels, and networking initiatives under the European INNOVA initiative 
and  the  i2010  initative  on  a  European  Information  Society  for  Growth  and  Employment.  A 
full  list  of  new  and  existing  cross-sectoral  and  sector-specific  initiatives  for  all  of  the 
individual sectors is summarised in Annex 2. These include political, regulatory, or technical 
actions, depending on the nature of the issue.  

The new initiatives the Commission will bring forward are: 

•  Pharmaceuticals Forum (first meeting in 2006) 

The pharmaceuticals strategy will be overseen by an annual Pharmaceutical Forum consisting 
of  Member  States  (at  Ministerial  level),  senior  representatives  of  industry  and  other  key 
stakeholders,  such  as  patients  and  health  professionals.  Addressing  the  fragmentation  of  the 
European  pharmaceutical  market,  work  will  focus  on  R&D  issues  and  regulatory  matters  at 
Member state level, such as the crucial issues related to pricing and relative effectiveness. 

•  Mid-Term Review of Life Sciences and Biotechnology Strategy (2006-2007) 

The Life sciences and biotechnology strategy will undergo a mid-term review in 2006-2007. 
This  will  involve  closer  cooperation  with  industry  through  the  Competitiveness  in 
Biotechnology  Advisory  Group  and  a  regular  annual  triangular  dialogue  with  industry  and 

30 

Report to the European Council on European Technology Platforms and Joint Technology Initiatives: 
Fostering  Public-Private  R&D  partnerships 
industrial  competitiveness. 
SEC(2005)800 of 10 June 2005 

to  boost  Europe’s 

EN 

22 

   EN 

 
                                                 
Member  states 
recommendations for actions.  

in  order 

to  help 

identify  problems,  propose  priorities,  and  make 

•  New High-Level Groups on the Chemicals Industry (2007) and the Defence Industry 

Following  the  expected  adoption  of  REACH  in  2007,  the  new  chemicals  regulatory 
framework,  it  is  proposed  to  set  up  a  High-level  Group  to  examine  how  to  enhance  the 
competitiveness  of  the  chemicals  industry.  A  further  High-Level  group  will  be  set  for  the 
defence industries, examining issues such as the transfer of defence goods, procurement and 
standardization in the defense area. 

•  European Space Programme  

The  European  Space  Programme  will  be  the  common,  inclusive  and  flexible  programmatic 
basis  for  the  activities  of  European  Space  Agency,  EU  and  their  respective  Member  states. 
Work is also underway on a Communication on the Global Monitoring for Environment and 
Security (GMES) outlining how to move towards operational services in 2008. 

•  Taskforce on ICT Competitiveness (2005/2006) 

To ensure that public policy provides a supportive environment for the competitiveness of an 
evolving ICT sector, a taskforce with stakeholders’ representatives will be set up. Adding to 
the initiatives the Commission is undertaking under i201031, it will identify key obstacles to 
competitiveness  and  possible  policy  responses,  for  example  in  terms  of  better  regulation, 
skills, IPR, and standardization. The taskforce will also permit a structured dialogue to help 
mobilize  the  sector  and  to  draw  the  attention  of  Member  states  to  the  barriers  to  the 
competitiveness  of  ICT  manufacturing  in  Europe  and  to  the  obstacles  to  wide  and  effective 
take-up. 

•  Mechanical Engineering Policy Dialogue (2005/2006) 

The mechanical engineering policy dialogue will analyse the future strengths and weaknesses 
of the sectors and anticipate how any weaknesses could be addressed in the longer term.  

•  A  series  of  competitiveness  studies,  including  for  the  ICT,  food,  and  fashion  and  design 

industries 

These studies will analyse the trends affecting the competitiveness of industrial sectors with a 
view to deriving further proposals for concrete policies and actions where necessary. 

5. 

CONCLUSION 

This document summarizes the analysis upon which the Communication “Implementing the 
Community  Lisbon  Programme:  A  Policy  Framework  to  Strengthen  EU  Manufacturing  - 
towards a more integrated approach for Industrial Policy” is based. That Communication sets 
out an outline of work on industrial policy in manufacturing industries for the coming years. 
The Commission thereby stands by its commitments in the Action Programme for Growth and 
Employment  to  contribute  to  a  strong  industrial  base.  To  achieve  this,  it  will  take  the 

31 

“i2010 – A European Information Society for growth and employment” COM(2005) 229, June 2005. 

EN 

23 

   EN 

 
                                                 
necessary  actions  to  improve  the  framework  conditions  for  manufacturing  industry  and  to 
ensure the consistency of various policy areas. The horizontal and sectoral initiatives outlined 
in  the  Communication  are  intended  to  complement  work  at  Member  State  level  to  help 
address  the  key  challenges  faced  by  the  various  sectors  of  manufacturing  industry.  The 
Communication  announces  that  the  approach  will  have  to  be  extended  through  further 
analysis  and  proposals  for  concrete  policies  and  actions  as  necessary  and  that  a  mid-term 
review  of  the  outline  of  work  will  be  undertaken  in  a  Communication  scheduled  for  2007. 
This will report on progress on the work programme presented above and consider possible 
further  possible  extensions  to  other  focuses  of  the  economy,  such  as  for  example 
environmental technologies. 

EN 

24 

   EN 

 
KNOWLEDGE

BETTER REGULATION

ENVIRONMENT & ENERGY 2)

TRADE

STRUCTURAL 
CHANGE

SECTOR 
SPECIFITIES

SECTORAL ACTIONS 4)

Annex 1

Industry

R&D/Inno
vation

IPR, 
Counter-
feiting

Skills

Access to 
finance for 
SMEs

Admin. 
burden/ 
Complexity 
of sectoral 
regulation

Internal 
Market

Health and 
Safety

Techn. 
Standards

Climate 
change1) Waste

Water 

Air

Intensive 
Energy 
Use

Access to 
markets

Access to 
raw 
materials

Trade 
distortions 
subsidies / 
dumping

Regulatory 
issues

e
f
i
L
d
n
a

d
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o
F

s
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a
B

Food, drink & tobacco

Cosmetics

Pharmaceuticals

Biotech

Medical devices

ICT 3)

Mechanical engineering

Electrical engineering

Motor vehicles

Aerospace

Defence industries

Shipbuilding

Textiles

Leather and leather goods

Footwear

Furniture

Non-energy extractive industries

Non-ferrous metals

Cement and lime

Ceramics

Glass

Wood & products of wood

Pulp, paper & paper products

Printing & publishing

Steel

Chemicals, rubber, and plastics  

Construction

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X 

X

X

X

X

X

X

X

X

 X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X 10)

X 10)

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

  X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X 5)

X 6)

X 7)

X 8)

X 9)

X

 X

X

X

X

 X

X

X

X

Pharmaceutical Forum

Mid-Term Review of Strategy "Life sciences and bitoechnology"

Taskforce on ICT Competitiveness

Dialogue for mechanical engineering

CARS 21 HLG

European Space programme/GMES

HLG Defence

HLG LeaderSHIP 2015

HLG (2007)

IPR

Int. Euro. Approach 
to Industrial R&I

New Legislative Simplification 
Programme

External Aspects of Competitiveness and 
Market Access

Improving Sectoral 
Skills

HLG on Competitiveness, energy, and 
environment

Structural Change

1) With regard to installations belonging to energy activities all sectors fall under the 
ETS provided the installation in question is above the capacity threshold indicated in 
Annex I of the Emisisons Trading Directive 2003(87) EC. The sectors marked in this 
table are included in the ETS for their process related CO2 emissions.

2) Many sectors will also be affected by the new legislation framework for 
chemicals (REACH) 

3) ICT: challenges are sector specific; ICT uptake is a general 
challenge for the industry. 

5) GMO

8) Access to land

6) Energy Using Products (EUP)

9) Energy and feedstock costs, logistics

4) Includes legislative  actions and/or actions involving members of the Commission

7) Financial instrument 

10)  Market surveillance

EN 

The table indicates with crosses, the cases in which a policy challenge is considered of the highest priority for each sector amongst the many relevant policy challenges. 
Hence the absence of a cross does not therefore necessarily denote that the challenge is unimportant to a sector, only that it is not considered as an issue of greatest priority.

25 
EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 2  

SECTOR

Sectoral Actions

Horizontal Actions

Follow-up Textiles High Level Group

European Techology Platform on Textiles

Textiles & clothing

Innovation Panel for Textiles

Leather and leather goods

Study on competitiveness, economic situation, and location of production in 
textiles and clothing, footwear, leather, and furniture industries

Discussions with social partners on structural adjustment
Reduce/eliminate trade barriers for access to raw materials

Study on competitiveness, economic situation, and location of production in 
textiles and clothing, footwear, leather, and furniture industries

Discussions with social partners on structural adjustment

Footwear

Study on competitiveness, economic situation, and location of production in 
textiles and clothing, footwear, leather, and furniture industries

Furniture

Shipbuilding

Discussions with social partners on structural adjustment
European Technology Platform on Forest products

Study on competitiveness, economic situation, and location of production in 
textiles and clothing, footwear, leather, and furniture industries

HLG LeaderSHIP 2015

European Technology Platform on Shipbuilding (Waterborne)

Discussions on access to finance (within Commission and with EIB) 

OECD negotiations/possible bilaterals with China

High Level Group

Defence industries

Internal Market: measures on transfers, procurement and standardisation

Mapping of defence related industries

European Space Programme

Aerospace

Global Monitoring for Environment and Safety (GMES) initiative as the 
Community's contribution to the European Space Programme

European Technology Platform and potential Joint Technology Initiative  on 
aeronautics, air transport and air traffic management

Potential Joint Technology Initiative "GMES"

Follow-up of Boeing-Airbus WTO  dispute

Dialogue on mechnaical engineering

Mechanical Engineering

Study/competitiveness analysis (EU-10, including electrical engineering)

European Technology Platform on advanced engineering materials 

European Technology Platform Manufuture

Electrical Engineering

Study/competitiveness analysis (EU-10)

IPR and counterfeiting

Skills 

Market Access 

Restructuring

IPR and counterfeiting
Skills 

Market Access 

Restructuring

IPR and counterfeiting
Skills 

Market Access 

Restructuring
IPR and counterfeiting
Skills 

Market Access 

Restructuring

IPR and counterfeting

Restructuring 

Skills

IPR and counterfeiting

Skills 

Market Access

IPR and counterfeiting

Skills 

Market Access

Non energy extractive industries

In depth assessment of the competitiveness of the sector/ External evaluation of 
the Communication on promoting sustainable development in the  non-energy 
extractive industry

High level group on competitiveness, energy, and 
the environment

European Technology Platform on Sustainable Mineral Resources 
Communication on the impact of raw materials and energy supply on the 
competitiveness of the European metals industry

Skills
High level group on competitiveness, energy, and 
the environment

Steel

European technology platform on steel (ESTEP)

Skills

Non-ferrous metals

Remove obstacles to access to raw materials
Communication on the impact of raw materials and energy supply on the 
competitiveness of the European metals industry

High level group on competitiveness, energy, and 
the environment

Remove obstacles to access to raw materials

Skills

Cement and lime

Competitiveness analysis

High level group on competitiveness, energy, and 
the environment

Continuation of working group set up in 2004 on the future of glass and 
ceramics industries.

High level group on competitiveness, energy, and 
the environment

Ceramics

Staff working paper on competitiveness

Market Access 

IPR and counterfeiting

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SECTOR

Sectoral Actions

Horizontal Actions

Chemicals and Rubber

HLG on the competitiveness of the chemical sector
European Technology Platform on Sustainable Chemistry

High level group on competitiveness, energy, and 
the environment

Staff working paper on competitiveness

Glass

High level group on competitiveness, energy, and 
the environment

Construction & construction products

Continuation of working group set up in 2004 on the future of glass and 
ceramics industries.

Market Access 

IPR and counterfeiting 

Simplication of Construction Products Directive                                  

Simplification of legislation

European Technology platform on construction

Competitiveness assessement with stakeholders

Initiative against illegal logging ( EU FLEGT action plan)

Skills

High level group on competitiveness, energy, and 
the environment

Wood & products of wood

European Technology platform on the forest sector

Skills

Pulp, paper & paper products

Rationalisation of technical standards regarding wood products

Communication on Forest-based Industries
Remove obstacles to wood supply in various policies: biodiversity, bioenergy, 
forestry strategy

European Technology platform on the forest sector

Printing & publishing

Launch of a study on delocalisation

High level group on the competitiveness, energy, 
and the environment

High level group on the competitiveness, energy, 
and the environment

Restructuring Task Force

Skills

Skills

IPR  and counterteiting 

Restructuring 

Market Access

Market Access

IPR and counterfeiting

Market Access

IPR and counterfeiting

Simplification of legislation

Task Force on ICT Competitiveness 
Analysis of the competitiveness, strengths and weaknesses of the of ICT sector
European Technology Platform and potential Joint Technology Initiative on 
nanoelectronics
European Technology Platform and potential Joint Technology Initiative on 
"Embebbed Computing Systems"

European Technology Platform on mobile wireless communications

European Technology Platform on new electronic media

Innovation Panel for ICT

Review the ICT standardisation policy of the Commission 

Cars 21 HLG

Innovation Panel for Automotives

European Technology Platform on Road Transport
European Technology Platform and potential Joint Technology Initiative  
"Hydrogen and Fuel Cells"

Implementing actions of the 7th amendment (Directive 2003/15/EC) of the 
Cosmetics Directive
Continuation of international regulatory dialogue in Cosmetics Harmonisation 
and International Cooperation meetings 

Pharmaceutical Forum 

European Technology Platform and potential Joint Technology Initiative on 
Innovative medicines

Mid-term review of the strategy "Life sciences and biotechnology - A 
strategy for Europe" started in 2002
Comprehensive cost-benefit analysis of economic, social and environmental 
effects of biotechnology
Innovation Panel on Biotechnology

European Techology Platform on Plants for the Future

European Techology Platform on Sustainable Chemistry

Review of directive 93/42/EEC concerning medical devices

Active participation within the Global Harmonization Task Force

ICT

Automotive

Cosmetics

Pharmaceuticals

Biotechnology

Medical devices

Food, drink & tobacco

Launch of a Study on the competitiveness of the Food processing industry

Restructuring

European Techology Platform on Food for Life
Communication on the competitiveness strategy for  the food industry 
accompanied by an Action Plan 

Simplification of legislation

Market access

The sectoral actions include only studies and actions directly related to identified challenges, 
unless otherwise addressed through horizontal actions. The Integrated European Approach to 
Industrial Research and Innovation by its nature will apply across the board to all sectors.  

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