Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Mid-term review of industrial policy: A contribution to the EU’s Growth and Jobs Strategy {SEC(2007) 917}
Date: 2007-07-04
Institutions: European Commission
Subjects: economic and social cohesion, economic growth, economic policy, employment policy, industrial policy, social policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.7.2007 
COM(2007) 374 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Mid-term review of industrial policy 
A contribution to the EU’s Growth and Jobs Strategy 

{SEC(2007) 917} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

3.3. 

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

Economic situation and challenges .............................................................................. 3 

The programme of work on industrial policy .............................................................. 5 

Assessment of progress and current state of play ........................................................ 5 

Planning ahead ............................................................................................................. 6 

Building on ongoing work, and responding to new challenges ................................... 6 

3.3.1.  Horizontal initiatives.................................................................................................... 7 

3.3.2.  Sectoral initiatives...................................................................................................... 11 

4. 

Conclusions ................................................................................................................ 14 

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1. 

INTRODUCTION 

In  its  Communication  of  20051  the  Commission  set  out  for  the  first  time  an  Integrated 
Approach to industrial policy based on a concrete work programme of horizontal and sectoral 
initiatives. This policy, which is an important pillar of the Lisbon strategy, is anchored in the 
EU’s  drive  to  ensure  a  well-functioning  Internal  Market2  as  well  as  open  and  competitive 
markets across the world, and respond to environmental challenges. Both the Council3 and the 
European  Parliament4  endorsed  the  approach,  requesting  the  Commission  to  implement  the 
policy initiatives and come up in 2007 with a review of progress made, and new initiatives. 

The purpose of this Communication is threefold:  

•  first to describe the current economic situation of the EU industry and to identify the key 

challenges it is currently facing;  

•  second, to take stock of the progress achieved on the horizontal and sectoral actions set out 

in the 2005 Industrial Policy Communication;  

•  and  third,  in  consideration  of  the  current  figures  and  challenges  as  well  as  the  progress 

achieved, to set out the measures for the period 2007-2009.  

The main role of industrial policy at EU level is to proactively provide the right framework 
conditions  for  enterprise  development  and  innovation  in  order  to  make  the  EU  an  attractive 
place  for  industrial  investment  and  job  creation,  taking  account  of  the  fact  that  most 
businesses are small and medium-sized enterprises (SMEs).  

An  effective  and  functioning  industrial  policy  in  the  EU  must  be  based  on  coherent  and 
coordinated  efforts  at  national  and  European  level  as  recognised  in  Article  157  of  the  EC 
Treaty. Many elements of major impact for the competitiveness of European industry are set 
at  national  level.  Nevertheless,  important  challenges  such  as  the  creation  of  an  open  and 
competitive Single Market, but also the industrial policy response to the energy and climate 
change agenda can not, or only be insufficiently addressed at national level, and hence require 
action at European level as well. 

2. 

ECONOMIC SITUATION AND CHALLENGES 

Although  the  picture  is  different  from  sector  to  sector5,  in  general,  industry  is  healthy  and 
dynamic, contributing substantially to growth and jobs in the Community. Industry continues 
to  be  an  important  driver  of  the  European  economy6.  Directly,  industry  represents  around  a 
fifth of the Community’s output and grew by 2.6% on average over the last two years. It is 
central  to  innovation,  performing  81%  of  private  sector  R&D  expenditure  and  providing  an 
increasing number of high skilled jobs, thus playing a central role in transforming Europe into 

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COM(2005) 474. 
A comprehensive Internal Market review is currently under way. 
Competitiveness Council 29-30 May 2006 and Competitiveness Council 21-22 May 2007. 
Resolution on industrial policy, 5 July 2006. 
EU Industrial Structure (DG Enterprise and Industry, 2007). 
For  further  details,  see 
Communication. 

the  Staff  Working  Document  SEC(2007)  917  accompanying 

this 

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a  knowledge  economy.  Over  the  past  three  years  employment  in  industry  has  remained 
relatively constant, after a decline of almost 5% between 2000 and 20047. Indirectly, industry 
is  responsible  for  the  dynamism  of  many  services  sectors  contributing  significantly  to 
employment growth. In a number of industrial sectors such as ICT, electrical and mechanical 
engineering,  there  has  been  long  and  steady  growth  in  value  added,  which  has  even 
accelerated in recent years8. In 2006, the Community also succeeded to attract more foreign 
direct investments which rose by 42%, compared to an increase of outflows of 35%9. 

Whilst  industry  is  currently  performing  well  and  is  taking  full  advantage  of  the  favourable 
business cycle, globalisation, technological advances and environmental challenges are likely 
to intensify in the coming years. 

The  EU  has  done  well  in  goods  trade,  in  which  its  export  share  in  world  trade  stabilized 
around 15%. Yet, globalisation is no longer exclusively about trade in goods. More recently, 
the  range  of  activities  that  companies  trade  and  outsource  has  been  increasing  as  ICT, 
organisational innovations and the growing skills base in India and China allow companies to 
slice-up  value  chains  and  outsource  intermediate  inputs  and  tasks.  In  this  changing 
environment  competitive  advantage  lies  in  optimising  the  global  value  chain.  In  doing  so 
companies  need  to  control  the  important  parts  of  the  value  chain  such  as  innovation  and 
customised products, sometimes through clusters that anchor innovative capacity in  Europe. 
Companies  are  also  increasingly  providing  integrated  solutions  consisting  of  bundles  of 
services and manufacturing activities.  

Rapid  advances  in  science  and  technology  create  opportunities  for  manufacturers  to  adapt 
and  exploit  new  technical  possibilities.  However,  EU  manufacturing  remains  specialised  in 
medium-tech  sectors  and  has  not  taken  advantage  of  the  fast  growth  of  certain  high  tech 
sectors,  nor  has  it  fully  exploited  the  potential  of  ICT  uptake.  Heavy  product  regulations  in 
certain  markets  tend  to  hamper  the  necessary  upgrading  of  industry.  Standards,  Intellectual 
Property  Rights  (IPR),  and  procurement  practices  could  also  be  made  more  supportive  of 
innovative  industries.  While  improving  demand  is  important  for  the  innovative  capacity  of 
industry, some industries are held back by unfavourable market structures. The lack of a large, 
unified  defence  market  prevents  the  sector  from  reaching  its  full  innovative  and  economic 
potential. To some extent this also applies to pharmaceuticals. 

The  EU  has  set  ambitious  environmental  goals  to  increase  energy  efficiency  and  reduce 
greenhouse  gas  emissions  by  at  least  20%  by  2020,  and  to  promote  renewable  energy 
sources10. So far, European industry has already made significant advances in improving its 
energy  efficiency.  It  is  also  well  placed  to  grasp  the  opportunities  of  the  emergence  of 
environmental  industries.  Environmental  industries  in  Europe  are  at  the  global  forefront  on 
technologies  generating  a  turnover  of  approximately  2.2%  of  EU  GDP,  and  employing  3.4 
million people. To overcome regulatory and other obstacles, which can however prevent the 
full  exploitation  of  the  new  market  opportunities,  a  range  of  policy  tools  including  market 
based instruments and well designed regulation will be needed. When realising these policy 

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Eurostat: Labour Force Survey. 
EU  Industrial  Structure  (DG  Enterprise  and  Industry,  2007):  In  ICT  the  average  annual  growth  rate 
from 1995 to 2006 was 6%, but rose to 10% in the period 2004-2006. Comparable figures for electrical 
and mechanical engineering were 2% and 5%. 
Eurostat news release 70/2007 - 24 May 2007. 
The  Commission  Communication  “An  energy  policy  for  Europe”  -  COM(2007)  1  -  set  quantitative 
objectives and targets. 

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tools,  due  account  must  be  taken  of  the  competitive  position  of  those  energy  intensive 
industries that are exposed to international competition.  

3. 

THE PROGRAMME OF WORK ON INDUSTRIAL POLICY 

3.1. 

Assessment of progress and current state of play 

The 2005 Communication announced a number of horizontal and sectoral policy initiatives on 
most of which good progress has already been made11. In all the cases consultation played an 
important role. 

The initiatives which have already delivered their results have had an appreciable impact on 
policy development. They helped to bring together, sometimes through High Level Groups, a 
wide spectrum of stakeholders responsible for the different policy areas which constitute the 
framework for industry activity, and to build consensus on key issues and the way forward. 

•  This  applies  in  particular  to  the  High  Level  Group  on  Competitiveness,  Energy,  and  the 
Environment that helped to merge the three different policy strands and made significant 
contributions  e.g.  to  the  debate  in  the  run-up  to  the  Commission's  energy  and  climate 
change package and the development of a sustainable industrial policy.  

•  It also applies to the CARS21 initiative, whose recommendations formed the basis for the 
Commission’s  Communication  on  the  automotive  regulatory  framework  and  led  to 
important  legislative  proposals  e.g.  on  extending  the  European  whole-vehicle  type-
approval system and on simplification.  

•  The  High  Level  Group  on  Textiles  was  instrumental  in  helping  to  identify  the  policy 
priorities,  and  at  a  practical  level,  setting  up  an  industry-wide  platform  for  research  and 
development.  

•  The  EnginEurope  initiative  on  mechanical  engineering  and  the  task  force  on  ICT 
competitiveness have delivered reports that have helped in shaping our industrial policy.  

•  The High Level Group LeaderSHIP 2015 developed a broad set of recommendations that 
helped to turn European maritime industries that were heavily depending on State Aid for 
its  operational  business  into  a  vibrant  and  competitive  industry,  whose  shipyards  only 
benefit of innovation aid with aid, intensities tailored to reflect and reward intelligent risk-
taking and enhance technological ascendancy.  

•  Other  groups  that  are  still  in  progress  have  delivered  partial  results,  such  as  the 
Pharmaceuticals  Forum  and  the  Defence  Industry  Forum.  The  High  Level  Group  on 
Chemicals will start its work soon. 

•  The  initiatives  on  IPR  and  on  skills12  have  both  shown  that  these  policies  are  essential 
components of a strategy for industrial competitiveness. The first has led to several actions, 
including  a  joint  EU/US  Action  Strategy  on  IPR  and  counterfeiting,  and  IPR  dialogues 

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Full details of progress can be found in the document SEC(2007) 917. 
The Commission is preparing a Communication considering presenting its views on a long-term e-skills 
strategy for adoption in 2007. 

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with  priority  countries  for  IPR  enforcement.  The  latter  is  addressing  skills  shortage  and 
mismatches in industry through a number of actions.  

The  Cohesion  Policy  also  made  an  important  contribution  to  improving  the  industry’s 
competitiveness.  In  line  with  the  Community  Strategic  Guidelines  for  Cohesion  2007-2013, 
Member States are focusing investments of the European Regional Development Fund and of 
the European Social Fund in areas closely linked to the growth and jobs agenda, in particular 
on up-grading human capital, on research, innovation, entrepreneurship, and support to SMEs. 

Furthermore, the Commission has laid down a fully fledged strategy13 regarding the external 
competitiveness  of  EU  industry,  to  seize  the  benefits  of  globalisation  and  ensure  a  more 
favourable international environment for EU companies. 

Most of the horizontal and sectoral initiatives described in the 2005 Communication are long 
term projects, which will continue during the period 2007-2009.  

In summary, recent economic developments as well as experiences and feedback on the key 
pillars of the 2005 Industrial Policy indicate that there is no need for a fundamental change of 
this policy.  

3.2. 

Planning ahead 

Based  on  the  assessment  of  the  current  situation,  and  building  on  the  achievements  since 
2005, the Commission envisages strengthening some of the ongoing initiatives and launching 
some new initiatives in response to recent challenges. 

Annex 1 provides a detailed overview of the horizontal and sectoral initiatives and indicates 
which challenge is considered of the highest priority for each sector. The implementation will 
be  preceded  by  an  impact  assessment,  where  relevant.  Drawing  on  recent  information,  the 
overview  updates  that  of  the  2005  Communication  which  built  on  broad  consultation  of 
Member States and stakeholders.  

Policy  actions  fostering  industrial  competitiveness  are  partly  carried  out  at  Community  and 
partly  at  Member  State  level,  but  the  link  between  EU  industrial  policy  and  national  policy 
actions remains weak. The renewed Lisbon strategy provides a good opportunity to strengthen 
these  interactions,  especially  as  the  integrated  guidelines  adopted  by  the  Council  include  a 
guideline on Industrial Policy. Member  States should report in their annual  progress reports 
policy actions related to industrial competitiveness, which are linked to Member States’ key 
challenges. On selected issues the Commission would work together with the Member States, 
with  a  view  to  identifying  and  spreading  good  practice.  This  would  also  allow  the 
Commission to better integrate the national dimensions of policy making in the horizontal and 
sectoral initiatives announced in this Communication. 

3.3. 

Building on ongoing work, and responding to new challenges 

Although  the  general  design  of  the  2005  Industrial  Policy  still  appears  appropriate,  some 
challenges  remain  and  some  have  grown  in  significance.  Globalization,  technological  and 
climate change all put competitive pressure on our economy to adjust: a process which leads 
to resources being deployed where they add most value.  

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COM(2006) 567: “Global Europe: competing in the world”. 

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3.3.1.  Horizontal initiatives 

1.  Simplifying  and 
improving  the  regulatory  environment  and  reducing  the 
administrative burden on enterprises will remain a top priority for the Commission, as well 
as  the  need  to  ensure  that  regulation  is  designed  to  promote  “eco-innovation”  and  more 
sustainable consumption and production patterns. The Commission’s efforts will intensify in 
the  future  and  particular  attention  will  be  paid  to  areas  such  as  construction,  business 
statistics,  health  and  safety,  employment  relations,  transport  and  fiscal  issues/VAT.  The 
Commission  is  also  committed  to  continue  measuring  administrative  costs  and  reducing 
administrative burdens.  

A concrete example of how this can be applied in a particular sector is the follow-up to the 
CARS21 initiative, whereby the Commission will seek to simplify the regulatory framework 
for the automotive industry through constant application of better regulation principles. The 
main  priorities  of  the  Commission  are:  replacement,  starting  in  2007,  of  a  number  of  EC 
Directives  with  international  regulations;  introduction  of  self  and  virtual  testing  in  certain 
areas;  developing  legislation  for  achieving  ambitious  standards  for  emissions,  including 
achievement  of  120g/Km  CO2  emission  by  2012  through  an  integrated  approach14; 
introduction  of  safety-related  improvements  in  vehicle  construction,  such  as  Electronic 
Stability Control (2008). 

This  approach  might  set  an  example  for  other  sectors,  and  is  of  particular  significance  to 
SMEs. Through their light structures and natural capacity to interact with their environment, 
SMEs  are  well  equipped  to  provide  innovative  solutions  and  transform  challenges  into 
business opportunities. They also form an essential part of business clusters mentioned below. 
At  the  same  time,  they  are  less  well  equipped  to  cope  with  regulation  and  administrative 
burdens – often entailing costs that are not directly related to the size of the enterprise. And 
they are also proportionally more affected by any measures which require fixed investments, 
such as could be associated with the introduction of more demanding environmental standards 
for processes or final products.  

2. A further set of horizontal initiatives derive from the fact that innovation, and response to 
rapidly  evolving  technologies,  can  not  be  stimulated  by  the  regulatory  framework  alone. 
Community  funding  programmes15,  as  well  as  current  and  planned  European  Technology 
Platforms and Joint Technology Initiatives build open partnerships and foster innovation, but 
other forms of pro-active response are also required. 

A successful innovation with global reach generates a number of competitive advantages for 
the “lead market” such as faster returns on investments and thus higher incentive for private 
investment  in  further  R&D;  location  advantages  for  R&D  and  production  facilities;  higher 
productivity and exports or increased growth and employment. 

The  aim  of  the  lead  market  initiative  is  to  contribute  to  unlocking  market  potential  for 
innovative  products  and  services  by  lifting  obstacles  that  hinder  the  development  of  new 
markets  through  a  prospective,  concerted  and  focused  approach  of  regulatory  and  other 
policy instruments to allow a varied set of technologies and of innovative business models to 
meet  rapidly  the  demand  with  a  global  perspective.  The  instruments  include  the  legal  and 

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COM(2007) 22. 
Research Framework Programme (FP7) and the Competitiveness and Innovation Programme (CIP). 

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framework, 

regulatory 
fostering  of  open-innovation  mechanisms,  standards,  public 
procurement practices, intellectual property protection, or the availability of venture capital. 
The Commission will prepare a policy paper later this year proposing the implementation of a 
lead market approach. 

3. A further means of speeding up the process of innovation, as suggested in the Lahti paper16, 
lies in the use of standards, which are not only facilitators of access to markets for innovative 
products,  services  and  processes,  but  also  act  as  a  diffusion  mechanism  for  much  of  the 
knowledge created in R&D. Furthermore, by ensuring consistency in the quality and safety of 
new  products  and  delivery  of  services,  standards  promote  more  confident  and  sustainable 
consumption patterns, with greater returns on growth. 

The standards initiative will aim at making it easier for the results of R&D to find their way 
to  market,  and  facilitate,  for  example,  the  uptake  of  new  low  carbon  and  energy  efficient 
technologies.  However  the  pace  of  technological  change,  and  convergence  of  technologies, 
requires  the  European  standards  organisations  to  adapt  their  processes  so  that  they  can 
deliver  the  appropriate  products  in  a  timely  fashion.  They  must  also  continue  developing 
global standards. But the full benefits can only be harvested if all stakeholders are involved in 
the standard-setting process, and the standards are also widely used. Greater efforts must be 
made  to  engage  with  SMEs  and  the  research  community.  To  this  end,  the  Commission  will 
present  in  late  2007  a  Communication  on  increasing  the  contribution  of  standardisation  to 
innovation, and propose measures to tackle the issues mentioned above. 

4. Globalisation is leading to structural transformation. This calls for the creation of new and 
strong  cross-border  relationships  and  alliances.  Collaborative  networks,  such  as  innovation 
poles  and  research-driven  clusters,  can  be  powerful  engines  of  regional  economic 
development  and  drivers  of  innovation.  This  goes  hand  in  hand  with  the  need  for  more 
regional  specialisation  in  research  and  technological  development  in  a  globally  competitive 
European Research Area. The European Institute of Technology (EIT) initiative builds on and 
takes further trans-national innovation poles and clusters. Its mission is to bring together the 
best European players in education,  research and innovation to deliver concrete solutions to 
major social, economic and environmental challenges. 

The  Clusters  initiative  will  assess  how  combined  actions  of  the  Member  States  and  the 
Commission,  supporting  clusters  and  their  cooperation,  can  help  the  European  knowledge 
area  to  progressively  structure  itself  as  a  powerful  web  of  competitive  world-class  clusters 
that foster the competitiveness of industry and services. 

5. European industry is already well positioned to build on its strong position in the market for 
new  products,  services  and  processes,  based  on  environmental  technologies.  In  addition, 
European  companies  are  more  and  more  sensitive  to  environmental  performance  as  part  of 
their corporate social responsibility approaches.  

To build on these strengths and help industry to benefit from the emergence of new markets in 
environmental technologies, a new initiative on a sustainable industrial policy is envisaged. 
The main thrust is to turn potential challenges into opportunities for EU industry, in order to 
lead  the  transition  towards  a  low  carbon  and  resource  efficient  economy.  It  will  thus 

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COM(2006) 589. 

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contribute to reaching the objectives of the energy and climate change package adopted by the 
European Council in March 2007.  

The  Commission  will  also  draw  up  a  complementary  Action  Plan  to  promote  sustainable 
production and consumption in the EU. This Action Plan will respond to the request made to 
the Commission in the renewed EU Sustainable Development Strategy.  

The three basic principles of the sustainable industrial policy, which will be followed up by an 
Action Plan in early 2008, are the following:  

Stimulate  the  development  and  commercialisation  of  low  carbon  and  energy  efficient 
technologies,  products  and  services,  for  example  by  fostering  lead  markets  and  creating 
incentives  for  frontrunners.  This  may  require  appropriate  financing  instruments  and  the 
development  of  market-based  instruments  that  encourage  the  uptake  of  environmentally 
friendlier products and services, including through a better internalisation of environmental 
costs, without prejudice to state aid rules. 

Creation  of  a  dynamic  internal  market:  Under  consideration  of  the  ongoing  review  of  the 
internal market legislation, the Commission will develop a strong product policy and remove 
obstacles in the internal market. This will include realistic and progressively more ambitious 
minimum  requirements  complemented  with,  where  appropriate,  voluntary  "lead"  standards 
and incentives, such as labelling, to drive performance upwards. An extended EuP Directive 
in order to promote “eco-design” of the most significant products will be the cornerstone of 
this  approach.  Environmental  management  schemes  and  energy  services  for  firms  and 
households will also be promoted, supported by a simple, user-friendly framework. 

Creation  of  global  markets  for  low  carbon  and  energy  efficient  technologies,  products  and 
services:  Faster  uptake  of  environmental  technologies  and  standards  for  more  sustainable 
technologies,  products  and  services  in  the  EU  can  pave  the  way  to  the  development  of 
international  standards  which  better  integrate  environmental  aspects,  taking  a  life-cycle 
approach.  This  can  give  European  companies  “first-mover”  advantages  in  global 
competition.  International  sectoral  agreements  for  energy  intensive  industries  hold  out  a 
significant  potential  to  set  global  benchmarks for  energy  and  resource  efficiency  and  foster 
technologies  that  are  meeting  these  benchmarks.  Such  sectoral  agreements,  which  must 
comply  with  competition  rules  and  environmental  objectives,  should  help  create  export 
markets 
technologies,  services  and  products.  They  can  be 
complemented  through  international  or  bilateral  agreements  on  the  diffusion  and  use  of 
environmental  technologies,  by  facilitating  the  use  of  the  Kyoto  flexible  instruments  and 
through trade and development policy. 

leading  European 

for 

6.  Energy  Intensive  Industries  will  require  particular  attention,  as  recognized  by  the 
European Council17. Cost-efficient measures are needed to improve both the competitiveness 
and  the  environmental  impact  of  such  European  industries.  The  Commission  will  publish  a 
policy document in the autumn setting out possible ways how this goal could best be met. 

7.  In  addition,  access  to  natural  resources  and  raw  materials  is  essential  to  European 
industry. Measures contributing to ensuring sustainable and safe access should be developed, 
including improving the resource efficiency and access to domestic raw materials, opening up 

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Conclusions of 8/9 March 2007. 

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the  EU  market  for  renewable  raw  materials,  supporting  the  development  of  exploration 
technologies  and  ensuring  the  availability  of  skilled  staff.  In  addition,  multilateral  and 
bilateral  trade  agreements  must  ensure  that  third  countries  support  open  and  undistorted 
markets,  and  ensure  security  and  diversity  of  feedstock  supplies,  taking  into  account  the 
Commission’s Thematic Strategy on the sustainable use of natural resources. The request to 
the  Commission  from  the  Competitiveness  Council  of  21  May  2007  to  develop  a  coherent 
political approach to raw materials supply for industry, encompassing all relevant internal and 
external Community policies, will be actively followed up. 

The Commission will seek to use its external energy policy in international relations, its trade 
policy  and  its  industrial  and  environment  policy  dialogues,  and  where  appropriate,  help 
implement  them  through  technical  assistance,  to  encourage  sustainable  energy  and  climate 
change policies in partner nations.  

8.  In  more  general  terms,  external  aspects  of  competitiveness  and  market  access  remains 
crucial for the EU’s industrial performance.  

The  initiative  on  competitiveness  and  market  access  will  focus  its  efforts  and  resources  on 
those  sectors  and  markets  with  the  highest  potential  gains  for  competitiveness.  The 
Commission  will  pursue  multilateral  trade  negotiations  as  a  priority,  notably  the  Doha 
Development  Round,  but  also  seek  to  conclude  newly  launched  bilateral  free  trade 
agreements,  bring  forward  the  transatlantic  agenda  with  the  US  and  the  partnership  with 
China, and tackle non-tariff barriers, which have gained in importance in recent years due to 
the  progressive  dismantling  of  tariffs.  This  includes  regulatory  issues,  foreign  direct 
investment,  competition,  public  procurement,  safety  and  security  and  the  protection  of 
intellectual property rights and other intangible assets, and the fight against counterfeiting. 
This also means that rejection of protectionism at home must be accompanied by the active 
use of all available instruments in creating open markets and fair conditions for trade abroad. 

9.  Industry’s  competitiveness  also  depends  on  its  ability  to  undertake  structural  change  in 
response  to  the  challenges  of  globalisation  and  technological  advances.  To  address  the 
consequences  the  EU  has  developed  legislation  dealing  with  restructuring18  and  provides 
financial assistance through the structural funds and the European Globalisation Adjustment 
Fund. The Commission has made a positive assessment on the first two applications for the 
Fund  and  requested  the  budgetary  authority  to  make  available  the  necessary  appropriations. 
However, more needs to be done to anticipate trends of structural change, better prepare for 
restructuring, and improve synergy between different policy strands, with the involvement of 
all stakeholders.  

With the initiative on structural change the Commission will extend its analytical work and 
act  as  facilitator  for  exchange  of  best  practice.  A  first  annual  Restructuring  Report  will  be 
published in mid-2008. The 2005 Communication on Restructuring and Employment19 will be 
reviewed with the aim of encouraging a large partnership at European level. In the medium 

18

19 

Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council 
or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the 
purposes of informing and consulting employees, Council Directive 98/59/EC of 20 July 1998 on the 
approximation  of  the  laws  of  the  Member  States  relating  to  collective  redundancies,  and  Directive 
2002/14/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  2002  establishing  a  general 
framework for informing and consulting employees in the European Community. 
COM(2005) 120. 

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10 

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term,  the  initiative  aims  at  equipping  all  actors  concerned  with  better  information  on 
restructuring and how to deal with its consequences. Consideration should also be given on 
how  EU  funds  can  best  be  used  in  this  context.  The  Commission  will  evaluate  whether  to 
revise its State Aid guidelines on rescue and restructuring by 2009. 

10. One of the main structural changes has been the shift in employment towards services in 
highly developed economies. This should not be equated with de-industrialisation. It reflects 
the  deepening  international  division  of  labour  and  a  disaggregation  of  previously  integrated 
vertical value chains. As a consequence, industry and services are inextricably linked. The 
cost,  quality  and  productivity  of  certain  service  sectors,  in  particular  Knowledge  Intensive 
Business  Services,  have  an  impact  on  the  competitiveness  of  industry.  For  example, 
regulations which affect the performance of professional and other business services, financial 
services  or  the  retail  and  distribution  sector  also  have  an  impact  on  industry.  In  addition, 
competitive  network  industries  enhance  the  competitiveness  of  industry  as  a  whole. 
Furthermore,  industry  is  both  a  user  and  provider  of  a  growing  range  of  services  related  to 
innovative technologies and products.  

The  industry/services  initiative  will  conduct  a  detailed  screening  and  competitiveness 
analysis of the service sectors and their impact on industrial competitiveness, and if necessary 
further  sectoral  monitoring.  The  outcome  would  be  the  identification  of  all  obstacles  to 
improved  competitiveness,  and  possible  market  failures,  which  might  justify  actions  to 
address specific problems in individual industrial and/or service sectors. 

In  line  with  the  Commission’s  Modern  SME  Policy  for  Growth  and  Employment20,  the 
Commission  will  continue  ensuring  that  its  industrial  policy  initiatives  take  account  of  the 
interests of SMEs, which play a vital role in creating sustainable growth and more and better 
jobs. 

3.3.2. 

Sectoral initiatives 

In addition to horizontal initiatives, the strategy of looking in depth at sector-specific issues 
has proved its worth. Two new initiatives will be undertaken in the fields of food processing 
and electrical engineering, both of which are large sectors with high potential for creation of 
growth and jobs. 

All of the sectoral initiatives should make appropriate use of the modern instruments of the 
Research  Framework  Programme,  namely  Technology  Platforms  and  Joint  Technology 
initiatives and their recommendations. 

11. Following successive CAP reforms which have shifted support from the product to direct 
payments  to  farmers  and  put  the  focus  on  market  orientation  and  competitiveness,  the 
European  food  industry  has  entered  a  period  of  adjustment.  In  the  global  context,  this 
adjustment is taking place in the presence of high commodity prices, limitations of access to 
key  raw  materials  and  development  of  external  trade  policy  on  market  access.  Low  labour 
productivity,  persistent  weakness  of  innovation,  changing  consumer  preferences,  and 
regulation  which  has  built  up  in  recent  years  in  order  to  address  concerns  of  consumers 
relating  to  health  and  the  environment  are  all  contributing  to  the  challenges  faced  by  the 
industry. However, harmonised EU legislation on food continues to contribute to food safety 

20 

COM(2005) 551. 

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11 

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and consumer confidence across the Union, and to the development of the agro-food sector in 
the EU. 

With  a  targeted  initiative  the  Commission  intends  to  address  the  above  challenges  and  the 
persistent  lack  of  innovation,  particularly  in  view  of  the  large  proportion  of  SMEs  in  the 
sector.  Based  on  a  competitiveness  analysis  and  an  extensive  stakeholder  consultation  in 
2007, and building on the work of the “Food for Life” Technology Platform, the Commission 
will set out a package of measures to be undertaken in a Communication in 2008. These may 
include a strategy for more value added products, targeted uptake of R&D results, sustained 
innovation  efforts  in  SMEs  (including  wholesale  and  retail  issues)  and  strengthening  the 
international dimension, better market access to third countries, and where justified, reducing 
the  administrative  burden.  The  measures  would  complement  the  ongoing  review  of  food 
legislation  and  the  initiatives  in  the  domain  of  novel  foods  and  food  labelling  which  will 
substantially simplify the legislative framework and reduce the burden imposed at EU level on 
enterprises. 

12. The electrical engineering sector plays an important role in the EU economy as supplier 
of  intermediate  goods,  finished  capital  goods  and  consumer  goods.  It  is  facing  increasing 
competitive  pressure  from  both  established  and  emerging  economies;  counterfeiting  and  the 
protection of intellectual property rights are issues of the utmost importance for the sector.  

ELECTRA is a joint industry/Commission initiative aimed at identifying the main competitive 
challenges facing the European electrical engineering sector in the long term, and eventually 
developing recommendations for strengthening its global competitiveness of this sector. The 
initiative  would  explore  the  potential  for  applying  better  regulation  principles  and 
contributions to the debate on energy efficiency and lead markets. Based on its outcome the 
Commission could propose further actions in 2008. 

In addition, ongoing work will be stepped up in a number of sectors which are confronted 
not only with the need to respond both to rapid technological and scientific developments, but 
are also hampered by obstacles to fully exploiting the benefits of the Internal Market. 

13. As concerns the space industry, the European Space Policy21 has been jointly developed 
by the Commission and ESA. It is accompanied by preliminary elements of a European Space 
Programme,  which  should  be  developed  to  achieve  the  maximum  complementarity  and 
transparency  among  all  space  programmes,  thus  ensuring  the  most  efficient  use  of 
investments in space in Europe.  

The Commission will evaluate the need for a European regulatory framework for control of 
satellite-derived data dissemination, and assess the need for supporting standards. It will also 
evaluate, following the consultation on the Green Paper on GALILEO22 applications to what 
extent European or national legislation could support the development of such applications. It 
will  further  encourage  the  move  to  a  market  based  approach  for  spectrum  allocation, 
encourage  pan-EU  approaches  to  spectrum  use,  and  discuss  with  Member  States  and 
international  partners  how  to  better  streamline  export  control  regulations.  ESA  and  the 
Commission  will  propose  new  R&D  projects  on  integrated  space  applications,  including 

21 
22 

COM(2007) 212. 
The Galileo radio-navigation system will deliver positioning services following deployment of the 30 
satellite constellation in the coming years. 

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integration  with  terrestrial  systems  before  the  end  of  2008.  ESA  will  prepare  funding 
proposals  in  support  of  its  long-term  plan  for  space  science  by  2008  and  propose  new 
technology  R&D  activities.  The  Global  Monitoring  for  Environment  and  Security  (GMES) 
initiative will provide space-based environmental services enabling monitoring and control of 
climate change impacts. 

14. Defence industries in Europe are subject to very different national rules, a situation which 
has  retarded  their  development  on  a  European  scale  handicapping  them  with  respect  to 
international  competitors  and  giving  poor  value  for  money  spent  on  security  and  defence. 
The  Commission  intends  to  strengthen  the  competitiveness  of  the  European  Defence 
Technological and Industrial Base in a joint effort with the European Defence Agency. 

To  this  end  an  initiative  will  focus  on  the  development  of  a  European  Defence  Equipment 
Market,  technological  development  as  well  as  improving  the  global  competitiveness  of  EU 
defence  companies.  The  Commission  is  preparing  a  “framework”  Communication  covering 
industrial  and  market  issues,  a  Directive  on  defence  and  security  procurement  and  a 
Regulation on intra-EU transfers of defence goods. Further results expected by 2009 are an 
EU wide homogeneous Mapping of the European Defence Technological and Industrial Base, 
a European Defence Standardisation Handbook.  

15.  Furthermore,  the  Commission  is  pursuing  an  initiative  on  the  specific  challenges  of 
security  research  which  takes  due  account  of  the  close  links  to  defence  related  issues 
reflected e.g. in the above Directive on defence and security procurement.  

It envisages setting up a European Security Research and Innovation Forum to develop a 
Joint  Security  Research  Agenda  by  the  end  of  2009.  It  will  at  the  same  time  enhance  the 
public-private dialogue in the field of European security research and increase transparency 
and coordination between the various ongoing programmes and initiatives. 

16.  The  European  pharmaceutical  sector  is  under  threat  as  investment  in  pharmaceutical 
R&D is diverted to the United States and, increasingly, to the Far East. The ability of Europe 
to  respond  effectively  is  hampered  largely  by  the  lack  of  an  effective  single  market  in 
pharmaceuticals.  

To  tackle  this,  the  Commission  has  established  a  twin-track  approach  of  modernising  the 
European  legislative  framework  through  the  Pharmaceutical  Review,  and  the  ongoing 
Pharmaceutical  Forum  where  critical  issues  affecting  competitiveness,  such  as  pricing  & 
reimbursement,  are  addressed  directly  with  Member  States  and  key  stakeholders.  To  bring 
these  strands  together,  the  Commission  will  publish  a  Communication,  by  the  end  of  2007, 
setting out our strategy and vision for the future competitiveness of this key sector. The basis 
will be a public consultation to be launched during the summer of 2007. 

17.  In  response  to  commitments  in  the  2005  Communication  on  industrial  policy,  the 
Commission  is  now  preparing  two  sector-specific  Communications  in  relation  to  the 
competitiveness of the metals and of the forest-based industries.  

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13 

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4. 

CONCLUSIONS 

At  present  industry  operates  in  a  relatively  benign  macroeconomic  climate,  but  this  is  no 
reason for complacency.  

The  actions  described  in  the  2005  Communication  have  helped  to  shape  our  policy  which 
benefits  Europe's  industries,  both  large  companies  and  SMEs.  The  integrated  approach  has 
proved successful, and has the support of Parliament and the Member States. Continuity and 
commitment to the existing policy strategy is, therefore, called for, and requires the backing 
of a balanced set of all stakeholders. Within this framework the priority will be to put in place 
the policy framework to allow industry to best respond to globalisation and climate change.

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Industry 

Food, drink and tobacco 

Cosmetics 

Pharmaceuticals 

Biotech 

Medical Devices 
ICT 4) 

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 and products of wood 

Pulp, paper and paper products 

Printing and publishing 

Steel 

Chemicals, rubber and plastics 

Construction 

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2009 

KNOWLEDGE 

BETTER REGULATION 

ENVIRONMENT AND 
ENERGY 2)  

TRADE 

STRUCTURAL 
CHANGE 

SECTOR 
SPECIFICITIES 

SECTORAL ACTIONS 2005-2009 

Annex 1: Existing and Envisaged Initiatives 

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x5) 

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Pharmaceutical Forum 

Pharma Communication 

MTR Strategy “Life sciences and Biotechnology” 

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Electra 

CARS 21 HLG 

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European Space Programme/GMES 

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Defence Package 

x7) 

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x8) 

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Footnotes 
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 1 of the 
Emissions Trading Directive 2003(87)EC. The sectors marked in this Table are included in the 
ETS for their process related CO2 emissions. 
2) The new legal framework for chemicals (REACH) will also effect many sectors. 
3) Based on the input-output tables (use of services) contained in EC (2007) EU Ind. Structure. 
4) ICT: challenges are sector specific; ICT uptake is a general challenge for the industry 
5) GMO 
6) Energy Using Products (EUP) 
7) Financial instrument 
8 Access to land 
9) Energy and feedstock costs, logistics 
10) Market surveillance 

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. 

EU and National Lisbon Reform Programmes 

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