Opinion of the European Economic and Social Committee on Implementing the Community Lisbon Programme: Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions — More Research and Innovation — Investing for Growth and Employment: A Common Approach COM(2005) 488 final
Date: 2006-07-05
Institutions: European Economic and Social Committee
Subjects: EU programme, competitiveness, economic growth, innovation, research and development, research policy

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on Implementing the Community
Lisbon Programme: Communication from the Commission to the Council, the European Parlia-
ment, the European Economic and Social Committee and the Committee of the Regions — More
Research and Innovation — Investing for Growth and Employment: A Common Approach

COM(2005) 488 final

(2006/C 309/02)

On 12 October 2005 the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned
proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 31 May 2006. The rapporteur was Ms Fusco.

At its 428th plenary session, held on 5 and 6 July 2006 (meeting of 5 July), the European Economic and
Social Committee adopted the following opinion with 152 votes in favour and three abstentions.

1. Background and gist of the Commission communica-

tion

response to the considerable need for greater competitiveness
in the face of global competition.

the implementation of

The Commission communication aims

1.1
to offer a
common approach (1)
to research and innovation in the
the Lisbon programme,
context of
which was written into the decisions taken by the Lisbon Euro-
pean Council in March 2000, and which set the EU the goal of
becoming ‘the most
competitive and dynamic knowledge-based
economy in the world, capable of sustainable economic growth with
more and better jobs and greater social cohesion’ by 2010. That
Council endorsed the plan set out by the Commission in its
Communication entitled ‘Towards a European research area’ (2).

the objective of

In its resolution of March 2002, the Barcelona European
1.2
Council set
in
research and development (R&D) to 3 % by 2010 and raising
the proportion of private funding to two thirds. The Brussels
European Council in March 2003, meanwhile, called for prac-
tical measures.

increasing EU investment

In its Communication of 30 April 2003 ‘Investing in
1.3
research: an action plan for Europe’ the Commission outlined the
measures required at national and European level, in accord-
ance with an earlier Communication of September 2002
entitled ‘More research for Europe — Towards 3 % of GDP’ (3).
The first official figures for R&D show that in 2003 ‘the R&D
intensity was almost stagnant at 1.93 % of EU-25 GDP’. Only
Finland and Sweden achieved the objective.

In March 2005, the European Council relaunched the
1.4
Lisbon Strategy (4). The joint political will to do this had been
reaffirmed in October 2005 in Hampton Court at an informal
in
meeting of European heads of state and government,

(1) SEC(2005) 1289, Annex to COM(2005) 488 final, Impact Assess-
in which the Commission chooses the third option — a

ment,
common approach.
(2) OJ C 204 of 18.7.2000.
(3) COM(2002) 499 final.
(4) ‘Working together for growth and jobs — A new start for the
Lisbon Strategy’ [COM(2005) 24 final] of 2.2.2005 and ‘Common
Actions for Growth and Employment: The Community Lisbon
Programme’ [COM(2005) 330 final] of 20.7.2005.

1.5
The Commission's first initiative since signing up to the
relaunched Lisbon Strategy was on the European Information
Society 2010 (5).
It required Member States to define their
national information society priorities in their National Reform
Programmes by mid-October 2005 with a view to contributing
to the objectives set out in the communication on i2010.

1.6
Justification for the options and activities proposed
stems from the contrast between external and internal factors:
fierce global competition on the one hand; and rigidity and
fragmentation in national markets faced with the need to build
a single European area and promote the mobility of highly
skilled workers, on the other. Accepting its limited expertise in
this area, the Commission is seeking above all to act as a cata-
lyst.

1.7
The Commission is seeking to strengthen the links
between research and innovation, by means of a research
policy centred on the production of new knowledge and its
applications and on the provision of a structure for research
and an innovation policy that focuses on translating knowl-
edge into economic value and commercial success. In the bid
to improve regulation, all measures with a potential impact on
competitiveness are to undergo an impact assessment.

The assessment that accompanies the present communi-

1.8
cation chooses the last of three considered policy options (6):

— do nothing;

— policy integration;

— a common approach.

(5) COM(2005) 229 final and SEC (2005) 717 of 1 June 2005 on
‘i2010 — A European Information Society for growth and employ-
ment’ promoting growth and employment in information society
industries and the media. This sector of the EU economy accounts
for 40 % of the EU's productivity growth and 25 % of GDP growth.

(6) SEC(2005) 1289, Impact Assessment.

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The action plan set out in the communication is divided

1.9
into four parts:

2. General comments

— Research and innovation at the heart of EU policies

— Research and innovation at the heart of EU funding

— Research and innovation at the heart of business

— Improved research and innovation policies

There are 19 actions covering three main fields: public
1.10
policy and regulation, finance and taxation (7) and the role of
the private sector (8).

Although the present

communication appears

1.11
to
continue along the path traced out by its predecessor in 2003,
the Commission now makes research and innovation a firm
priority of the National Reform Programmes (NRP). The NRP
are thus supported by Community funding targeting activities
of European interest, by advice on coordinated policy develop-
ment, and by improved platforms for mutual learning, in all
regions where transnational cooperation offers high value
in
added. R&D efforts are recognised in the stability pact,
which spending on R&D is authorised in excess of the 3 %
deficit limit.

1.12
The EESC would also refer to the Esko Aho Report,
despite it not being the subject of this consultation, noting in
particular that the Commission mentions it in point 3.1 of its
communication to the 2006 Spring European Council
(Investing more in knowledge and innovation) but does not
mention COM(2005) 488 final. The EESC regrets not having
been consulted on that report and not having been able to
make a prior assessment of it, and therefore includes it in the
present debate.

In October 2005, in Hampton Court, a group of four
1.13
people were appointed, with Mr Esko Aho acting as coordi-
nator. The January 2006 report, which was submitted to the
Commission with a view to the 2006 Spring European
Council, made recommendations on accelerating the implemen-
initiatives for research and
tation of European and national
innovation. The report is based on the present communication
but
integration [option 2, SEC(2005)
1289]. The report was presented to the Competitiveness
Council and the Brussels European Council
in March 2006.
The European Council stressed the report's importance, and
asked the Commission to assess it by September 2006 (9).

recommends greater

(7) Mobilisation of public and private resources; tax incentives; Euro-

pean Structural Funds; SME access to finance.

(8) University-industry partnerships; poles and clusters; pro-active busi-

ness support services; innovative services.

(9) Presidency conclusions of the Brussels European Council of 23-24

March 2006.

2.1
The EESC welcomes the communication, whose starting
point is the partnership for growth and jobs, as it seeks to cover
the complete gamut of research and innovation, including non-
technological
that would
exceed the Barcelona 3 % objective (10) and describes in general
terms the commitments made by the Community, detailing
current and future measures to support research and innova-
tion (11).

It outlines initiatives

innovation.

2.2
As the communication mentions, global competition to
attract investment in research and innovation is constantly on
the increase, not least in emerging economies such as China,
India and Brazil. ‘The gap in research investment between the Euro-
pean Union and the United States is already in excess of EUR 120
billion per year and widening fast’ (12). The level of competition is
such that in Europe no one country can succeed alone. Trans-
national synergy is the only way to promote research and inno-
vation and to convert them into growth and jobs. In addition,
research and innovation are needed to make the EU economy
more sustainable, by finding solutions for economic growth,
social development and environmental protection.

2.3
Under the Action Plan, the majority of Member States
have begun to introduce national measures to stimulate R&D
in the private sector and have set targets to raise investment in
research to 2.6 % of GDP by 2010. This is where tax incentives
come into their own (13). However, the level of research in the
EU appears to be more or less stagnant,
including in the
private sector. The situation is a matter for concern.

2.4
The justification for the measures opens the debate on
comparison of productivity between EU Member States and
other countries.

2.4.1
First, there are various definitions of productivity (the
ratio between the quantity of a good or service produced and
the number of production factor units used). The most
commonly used measure employs a single factor, labour, with
hourly output per worker in the industrial sector as an indi-
cator. This is the easiest figure to obtain, but it gives an incom-
plete picture and excludes capital from the production process.

(10) INI/2006/2005: European Parliament analysis of COM(2005) 488

final.

(11) SEC(2005) 1253 Annex to COM(2005) 488 final,

‘Steps to the

implementation’.

(12) COM(2003) 226 final, point 2.
(13) In the eight Member States that have already introduced them, they

account for 13 % of direct investment in research.

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Second,

2.4.2
it is important not to make generalisations
when comparing Europe and the USA but rather to pinpoint
the main differences by sector and State, even within a country
such as the USA. There are competitive European sectors and
countries
in their
that are making considerable progress
productivity. According to O'Mahony and van Ark (2003),
calculations of unit labour costs in the manufacturing sector
for the EU as a whole suggest that the EU is not competitive
is elsewhere.
vis à vis the USA in high-tech sectors, but
However, it is the low wages in third countries, not the United
States, that are the main source of competition in the tradi-
tional industries and that are putting real pressure on the EU.
Dosi, Llerena and Labini (2005) are more critical and feel that
the need for a European industrial policy should not be treated
as taboo.

2.6
The shortcomings of the market as a generator of inno-
vation are widely recognised in literature on the subject,
starting with Arrow (1962) and Dasgupta and Stiglitz (1980).
The Commission's framework programmes have been broadly
based on a rationale of active support at micro level
for
company R&D, through a mixture of support for R&D and
promotion of cooperation to overcome the most discouraging
obstacles (facilitating the search for partners and promoting
synergy-generating benefits in terms of market entry, down-
streaming and economies of scale). However, these initiatives
have not been sufficient to kick-start a sustainable innovation
dynamic throughout the EU.

2.4.3
Third, the best measure is total factor productivity (TFP),
‘achieved by adjusting GDP for differences in all the inputs
used’
(Calderon, 2001), which enables a better comparison
between countries. To explain cross-country differences in
productivity, empirical surveys have classified determinants of
labour (and/or total) productivity growth into three groups.
interdependence between countries,
However,
Calderón states that the differences in TFP between countries
appear to be driven by the speed of technological diffusion
(through trade, direct foreign investment or migration) (14).

given the

If securing rapid diffusion makes all the difference,
2.4.4
innovative SMEs must be key to dissemination while devel-
oping new markets. For the same reason, the choice of strategic
priorities for research and innovation might favour the more
speedy dissemination of knowledge.

Lastly, securing skilled personnel and company invest-
2.4.5
ment is a concern for the USA and Europe alike, especially vis
à vis competition from China, itself short of the 75 000 highly
skilled workers it needs to move into a service economy.

2.5 Meanwhile, there are two ‘macro’ visions that influence
policy choice. On the one hand, there is an urgent need for
organisational innovation as a precondition for technical inno-
vation (Lam 2005 and OECD 2005), and this also applies to
the European institutions (Sachwald 2005, Sapir et al 2003,
Esko Aho 2006); and on the other, the reason why companies
do not invest enough in R&D and innovation in Europe is the
absence of an innovation-friendly market on which to launch
new products and services (Esko Aho 2006). However, the
EESC points out that the spirit of enterprise and risk-taking
remain essential.

(14) Ibid, Calderón 2001, page 19.

The

EESC therefore welcomes

2.7
the Commission's
emphasis on the meso, sectoral and cross-border dimensions.
Partnerships, networks, clusters, agglomerations,
forums and
dialogues highlight the importance of linkages, externalities and
spillovers between companies and organisations, and in terms
of geography, to facilitate innovation. Coordination of this kind
can more easily identify factors impacting on levels of invest-
ment in innovation and bottlenecks.

2.8
However, although considerable resources and coordina-
tion potential will be required in order to see through the
approach and measures proposed, no budgetary indications are
provided. Furthermore, on the very page of its communication
to the 2006 Spring Council where the Commission makes its
only reference to the present communication, it mentions that
‘legislative proposals will only produce practical effects once adopted
by Council and Parliament.
the financing
actions depend on the finalisation and implementation of the financial
perspectives 2007-2013’. The ‘proposed actions are therefore only of
an indicative nature’.

In addition, many of

for instance 2008. Furthermore,

The EESC calls on the Commission to provide budget
2.9
indications as soon as possible and to include a clear system
setting a precise date for monitoring and evaluating this
communication,
the EESC
believes there is a need for a Commission report that brings
together all the expert group reports relating directly to the
communication, accompanied by an evaluation of the recom-
mendations made. These indications must be consistent with
the option and actions chosen. Lastly, as part of the drive to
overcome existing fragmentation, it would be useful to have a
chart listing all the people responsible at all
levels (in the
regions, Member States and European institutions) for coordi-
nating the actions proposed in COM(2005) 488. The Commis-
sion has made prodigious efforts with the country trendcharts.
These describe research and innovation institutions and could
be used as the basis for such a chart. It would also be worth-
while looking into the experiences of US virtual agencies with
regard to research and innovation.

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The EESC would also note that the communication
2.10
fails to define key concepts (research,
innovation, knowledge
and technology). The Commission, however, has backed trans-
European research to arrive at those definitions. Work has also
been done by Eurostat and the OECD to define innovation. The
latest European Innovation Scoreboard on the ratio between
innovation input and output develops the concept of innova-
tion efficiency and views R&D as an innovation input. In addi-
tion, a clearer distinction must be drawn between actions
targeting research and innovation as such and policies to
promote the right conditions for innovation (such as: training,
reception and support for worker mobility, support for SMEs
and less-favoured regions during ICT uptake, where the costs
are proportionately higher than for other players).
In other
words, a distinction must be made between innovation in the
form of new products and services on the market and innova-
tion as a process. The first is a necessary but not sufficient
condition for dynamic endogenous growth.

2.11
The EESC has been following this matter very closely
and has issued a number of opinions on the vast field covered
by COM(2005) 488, but there is only room for a brief mention
of them here. They include in particular an opinion on the
European research area (CESE 595/2000), which picks up on
all the themes covered in COM 488, especially in point 7 on
‘Research and technological
innovation’ and point 8 on the
‘Staff exchanges between research centres and
need for
industry’.

2.12
Opinion CESE 724/2001 on Science and society noted
the role which fundamental research has played in most of the
great discoveries. The EESC's opinion on Europe and basic
research (15) looks at the link with applied research, and stresses
the question of patents: point 2.5 mentions the urgent need for
a system of European patents that includes a grace period
between the publication of scientific findings and the patenting
of
It must be
following the example of the USA.
possible to obtain the Community patent quickly and at low
cost. The EESC regrets the delay on this, which has been
caused by language issues.

its use,

2.13
The EESC opinion on researchers in the European
Research Area (16) backed the European Researcher's Charter
and in point 5.4 agreed on the imperative need for exchanges
between academia and industry. Recommending that greater
value be placed on experts with years of experience,
the
opinion stressed the need for a greater compatibility and recog-
nition of the various aspects of social security and housing, all
family cohesion (point 5.5.5).
the while aiming to protect

(15) OJ C 110 of 30.4.2004.
(16) OJ C 110 of 30.4.2004.

Another opinion of note looked at science and technology (17).
In its opinion on the seventh framework programme for
research (18),
the
endeavour and commented on the funding and organisation
into sub-programmes and nine research subjects, on which it
issued separate opinions (19).

the Committee stressed the importance of

2.14
In its opinion on competitiveness and innovation
2007-2013 (20), the EESC noted the importance of participation
by SMEs and the social partners in innovation (21): for innova-
tion to be successful, they have to be closely involved. In its
recent opinion on a policy framework to strengthen EU manu-
facturing,
the EESC welcomed the sectoral emphasis, but
pointed out that coordination requires resources, whereas there
is no budget. It hoped that workers' skills, which remain a
cross-sectoral issue, would receive the necessary attention. A
more integrated industrial policy is very important: the EU
manufacturing industry ‘employs over 34 million people’ and ‘over
80 % of EU private sector R&D expenditures are spent in manufac-
turing’.

3. Specific comments

The EESC especially welcomes the Commission's efforts
3.1
to promote a competitive European system for intellectual
property and to lay down rules for disseminating research
results (2007-2013), and recommends paying special attention
to the management of innovative patents in the context of the
instruments mentioned in point 2.7.

3.2
A better system for disseminating knowledge is key to
competitiveness. Attention should be given to the Innovation
Relay Centres initiative and the Commission's idea of providing
SMEs with vouchers
innovation-strategy consultancy
services as part of the CIP. Cross-border clusters would facilitate
dissemination, and their importance will be recognised in a
forthcoming communication on clusters in Europe. Work on a
clusters database is due to start in 2006.

for

The EESC stresses the importance of the social dimen-
3.3
sion of innovation, and of actions to raise the value of human
and social resources as generators of research and innovation.
It hopes that the next version of the Oslo Manual (OECD-Euro-
including
include statistics to take account of this,
stat) will
indicators for qualified human capital and for other places that
spawn innovation: universities and other educational
institu-
tions and joint industry/State body/university platforms.

(17) OJ C 157 of 26.6.2005.
(18) OJ C 65 of 17.3.2006.
(19) Nanotechnology, biotechnology, health research, information tech-
nology, energy research (including fusion energy research), space
and security research.
(20) OJ C 65 of 17.3.2006.
(21) ‘98 % of businesses in Europe are small and medium-sized enter-
prises (SMEs). They provide 55 % of private-sector jobs. In terms of
production processes, products and services SMEs have consider-
able innovative potential.’

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3.4
As regards State aid for innovation, which can have a
major leverage effect on company spending on research, the
EESC welcomes the attention given to SMEs and asks the
Commission to view job creation as an investment in research
and innovation, if the jobs are specifically targeted on these
two areas. The EESC also underlines the need to promote inno-
vative SME start-ups using instruments such as venture capital
funds including the involvement of the European Investment
Fund.

3.5
Given the global competition mentioned in point 2.4.5
above, an important factor in innovation is having the right
human resources at all levels. The communication focuses on
scientific resources. However, non-scientific skilled jobs are also
worthy of attention. Supply and demand for specific skills and
expertise should be more closely matched according to sectoral
needs. With a view to finding swift and effective solutions, it
would be useful to involve all the social partners and stake-
holders concerned. The EESC asks the Commission to launch a
debate on this subject.

In addition,

3.6
in order to offer mobility, progress is
needed on joint European skill charts, necessary for each sector
or theme, not forgetting the qualitative dimension of education
(values, equal opportunities). As the Employment and Educa-
tion and Culture DGs also deal with the subject of ‘human
resources’, their research and innovation initiatives should also
be included in the present communication in order to cover
the entire gamut.

The EESC invites the Commission to promote research
3.7
and innovation in all possible
competitiveness
problems are not exclusive to the hi-tech sector. The proposed
measures could include the strategic management of change
following a massive uptake of new technologies in SMEs. The
involvement of social partners and other stakeholders would be
essential here.

sectors:

The EESC agrees with the Esko Aho report that compa-
3.8
nies with more than 250 workers are not given proper atten-
tion, probably because the definition of SME is too restrictive
compared with those of the United States and Japan. In the
EESC's view, the special attention given to funding innovative
SMEs is necessary for creating a European economy of innova-
tion with social cohesion.
It is no surprise that the Emilia
Romagna Paxis region is one of the most active despite the fact
that other innovation indicators in Italy are less favourable.

Brussels, 5 July 2006

Similarly, business support services must be specialised to cater
for the specific characteristics of SMEs in their various forms
(cooperatives, other third sector undertakings, etc.).

3.9
The EESC would like the Commission to mention
research and innovation measures involving other regions. The
Commission already takes a world view in the Trendcharts and
a number of other initiatives. Following Communication 346
of 25 June 2001 on ‘The International dimension of the Euro-
pean Research Area’, the INCO section of the FP6 made a point
of encouraging the involvement of third countries, and this is
set to continue in the FP7. These measures could be highlighted
in a special section. The role which urban and metropolitan
areas play in innovation also deserves greater study.

technological

The EESC recommends that the Commission evaluate
3.10
the timing of
liberalisation and
restructuring, given that companies, especially large ones, have
the same time as
to consider changes in management at
research and innovation investment needs (for instance in the
field of energy, transport and network industries).

investment,

3.11
Furthermore, the EESC would point out that it may be
necessary to strike the right balance between promoting inno-
vation, focusing on the joint marketing and licensing of new
products and services by companies, and competition law.

3.12
The EESC considers innovation to be an input for a
competitive economy with social cohesion and not as an end
in itself. While accepting that this will be a challenge, the EESC
would call on the Commission to collate statistics and promote
studies in order to gauge the links between innovation, compe-
titiveness and social cohesion more effectively, with a view to
evaluating results clearly and effectively and putting them
across to the European public in a convincing way. As others
have said:
technologically daring missions
justifiable for their intrinsic social and political value’ (Dosi et
al, 2005).

‘build ambitious,

3.13
In addition, viewing innovation as a system, the EESC
asks the Commission to coordinate its work with the European
Investment Bank (EIB) in order to secure a synergistic relation-
ship between EIB programmes, the European Investment Fund,
the seventh research framework programme and the frame-
work programme for competitiveness and innovation (CIP),
and thus ensure that innovation becomes a dynamic and well
structured system.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND