COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS INDUSTRIAL POLICY COMMUNICATION UPDATE A STRONGER EUROPEAN INDUSTRY FOR GROWTH AND ECONOMIC RECOVERY
Date: 2012-10-10
Institutions: European Commission
Subjects: competitiveness, foreign trade, industrial cooperation, industrial financing, industrial infrastructure, industrial property, industrial reorganisation, innovation, investment promotion, job creation, research and development, single market, small and medium-sized enterprises, technological change

EUROPEAN 
COMMISSION 

Brussels, 10.10.2012  
SWD(2012) 297 final 

COMMISSION STAFF WORKING DOCUMENT 
Accompanying the document 

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

INDUSTRIAL POLICY COMMUNICATION UPDATE 
A STRONGER EUROPEAN INDUSTRY FOR GROWTH AND ECONOMIC 
RECOVERY 

{COM(2012) 582 final} 
{SWD(2012) 298 final} 
{SWD(2012) 299 final} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

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

State of implementation of the industrial policy flagship initiative .............................4 

Situation of EU industry ...............................................................................................8 

Analysis of priority areas............................................................................................24 

4.1. 

Industrial innovation...................................................................................................24 

4.1.1.  Priority areas for intervention in industrial innovation...............................................27 

4.1.2.  Future workplaces and design for innovation.............................................................35 

4.1.3.  Demand side innovation .............................................................................................36 

4.2. 

Internal Market ...........................................................................................................38 

4.2.1. 

Internal Market for goods in non-harmonised sector .................................................39 

4.2.2.  The EU Defence industry ...........................................................................................41 

4.2.3.  Services sector ............................................................................................................42 

4.2.4.  Entrepreneurship in the Internal Market: Digital Single Market................................44 

4.2.5. 

Intellectual Property Rights ........................................................................................47 

4.3. 

4.4. 

4.5. 

5. 

International markets ..................................................................................................52 

Access to finance ........................................................................................................59 

The crucial role of human capital ...............................................................................66 

ANNEX ......................................................................................................................71 

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1. 

INTRODUCTION 

In  2010,  the  Commission  adopted  the  Europe  2020  flagship  initiative  on  “An  Integrated 
Industrial  Policy  for  the  Globalisation  Era”  in  the  context  of  our  Europe  2020  strategy  for 
smart,  sustainable  and  inclusive  growth'.  The  prolonged  aftermath  of  the  financial  and 
economic  crisis  has  brought  about  new  challenges.  Instability  has  spread  from  financial 
markets  to  sovereign  debt  markets,  compromising  the  sustainability  of  public  finances  in 
several Member States. Economic confidence has deteriorated and business plans have been 
delayed.  As  a  result  recovery  of  manufacturing  has  been  subdued.  There  has  been  a  good 
progress of our flagship with a high rate of implementation of the 70 key actions announced 
in the flagship.  

The communication  updating  the  2010 industrial Policy aims at  accelerating the impacts of 
the  reforms  included  in  the  flagship  communication  by  introducing  some  new  actions  with 
effects  on  the  short  term  and  others  to  remove  barriers  blocking  progress  in  the 
implementation of the 70 proposals presented in 2010. It is in this way that industry can make 
a  more  substantial  contribution  to  the  recovery  from  the  crisis  and  to  smart,  inclusive  and 
sustainable growth, our ultimate objectives. 

This  staff  working  document  has  two  purposes.  First,  it  presents  progress  made  in  the 
implementation  of  the  policies  announced  in  2010  as  well  as  the  overview  of  the  current 
developments.  However,  since  most  of  the  actions  included  in  the  flagship  communication 
only have a mid- to long-term impact, their effects on the economy are hardly visible at this 
stage.  Therefore,  we  present  here  steps  taken  to  date  for  the  implementation  of  the 
communication establishing connections with proposals presented in the new communication 
update.  

Secondly, we present evidence on the current situation and performance of the EU industry 
paying attention to the impact of the crisis as well as to the previous record of our industry in 
the preceding decade. This evidence is based on studies conducted over the last two years and 
the  permanent  monitoring  of  EU  industry  conducted  by  the  Commission  services.  This  is 
helpful to underpin the importance of the four elements proposed as pillars for our industrial 
policy in the communication: investment in innovation, skills, markets and access to capital. 

The new communication relies on these four main ingredients: restoring confidence to kick-
start  industrial  investment  in  innovations  and  new  technologies  that  can  increase 
competitiveness  at  the  same  time  that  it  reactivates  internal  demand  and  job  creation; 
improving  skills  base  necessary  for  maintaining  industrial  competitiveness1;  fostering  the 
development  of  entrepreneurship  and  better  market  conditions  for  EU  firms,  both  in  the 
Internal Market and in global markets; finally, actions to facilitate access to capital markets – 
in particular to SMEs – are proposed.  

The next section gives account of developments in the implementation of the 2010 flagship 
communication while the rest of the report presents a quantitative description of the situation 

1 

The analysis of skills supply and demand in industry is not included in the scope of this document, as it 
has been already covered by a wider policy agenda on skills. 

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of industry putting emphasis on innovation, the Internal Market and globalisation, access to 
capital and skills.  

2. 

STATE OF IMPLEMENTATION OF THE INDUSTRIAL POLICY FLAGSHIP INITIATIVE 

In  the  course  of  the  last  two  years  significant  progress  has  been  achieved  in  the 
implementation of the flagship communication and a number of actions have been adopted (a 
detailed  overview  of  the  implementation  of  the  2010  Communication  is  presented  in  the 
annexed table). The 2010 Communication has been successful in articulating different policy 
initiatives  in  the  pursuit  of  competitiveness  as  one  of  the  major  objectives  of  the  EU2020 
strategy.  This  emphasis  on  industrial  issues  is  already  visible  in  the  plans  for  future  policy 
orientations (e.g. Horizon 2020), where deployment of technological innovations has gained 
in  importance.  This  is  also  reflected  in  other  areas  that  were  addressed  in  the  2010 
Communication, notably competitiveness proofing, industrial innovation and globalisation of 
EU industry.  

A  major  development  was  the  publication  in  January  2012  of  an  'Operational  guidance  for 
assessing  impacts  on  sectoral  Competitiveness  within  the  Commission  Impact  Assessment 
System'2, a Commission Staff Working Document, which builds on best practices inside and 
outside  the  EU.  It  has  provided  the  Commission  with  an  effective  tool  to  deliver  more 
thorough analyses of the impact of new proposals on competitiveness. The Commission now 
implements  competitiveness  proofing  through  an  in-depth  assessment  of  the  impacts  on 
competitiveness and on SMEs of its new policy proposals with significant impacts. This has 
been  the  case  for  some  half  dozen  proposals,  including  issues  such  as  the  ETS  State  aid 
Guidelines to address the risk of carbon leakage. It addresses the impacts of a policy proposal 
on  enterprise  competitiveness  through  its  effects  on  the  cost  of  doing  business,  on  the 
affected  sectors'  capacity  to  innovate,  and  on  their  international  competitiveness.  The  task 
now is to streamline its application in the Commission's impact assessment practices and to 
promote  its  application  at  national  level.  Commission  services  are  continuously  developing 
methods for an efficient application of this instrument, as well as the "fitness checks". 

In the area of industrial innovation, the High-Level Group on Key Enabling Technologies 
presented  its  final  report  in  June  2011  with  concrete  recommendations  on  the  development 
and  deployment  of  these  technologies3.  A  follow-up  Communication  with  a  European 
strategy for Key Enabling Technologies was adopted in June 2012. These technologies have 
enormous market potential with annual growth rates estimated between 5% and 16% per year 
up to 2020 and also provide crucial spill-over effects to key downstream industry sectors in 
terms of innovation and growth. The strategy will focus EU policies in the next multi-annual 
financial framework on research and innovation and prioritise EIB lending activities in favour 
of  KETs  deployment.  It  will  also  ensure  coordination  of  EU  and  national  activities  in  this 
area,  which  is  coming  ever  more  into  the  focus  of  European  policy.  The  transition  towards 
industrial market application of these technologies is a top priority action line in the update of 
our industrial policy. 

Furthermore,  to  promote  the  commercialisation  and  deployment  of  key  environmental 
technologies,  in  December  2011  the  Commission  adopted  the  Communication  "Innovation 

2 
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SEC(2012) 9. 
Available at: http://ec.europa.eu/enterprise/sectors/ict/key_technologies/kets_high_level_group_en.htm  

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for a sustainable Future - The Eco-innovation Action Plan" (EcoAP)4. This Action Plan is a 
follow-up  of  the  Innovation  Union  Flagship  Initiative  and  a  natural  evolution  of  the 
Environmental  Technologies  Action  Plan  (ETAP)  launched  in  2004,  although  it  also 
complements  other  Europe  2020  Flagship  Initiatives,  i.e.  Resource-efficient  Europe5, 
Industrial policy for a globalized era6 and Agenda for new skills and jobs7. The EcoAP aims 
at  promoting  the  market  uptake  of  eco-innovation  through  concrete  actions  both  on  the 
demand and supply side, on research and industry, and on a policy and financial instruments. 
The Commission is now working on a Strategic Implementation Plan (SIP) to take further the 
implementation of the EcoAP.  

The  Communication  foresees  promotion  and  market  uptake  of  eco-innovation  through 
concrete actions in the environmental policy and legislation, including development of new 
standards,  mobilisation  of  financial  instruments  and  support  services  for  SMEs,  and 
establishing the European Innovation Partnerships foreseen under the Innovation Union. 

The 2010 Communication also had a focus on  globalisation  that is maintained in the 2012 
update of our flagship. This has led to actions such as impact assessments of trade negotiation 
agreements  and  international  regulatory  co-operation  initiatives.  Another  breakthrough  has 
been  the  high-level  business  diplomacy  Missions  for  Growth  undertaken  by  Vice-President 
Tajani. This has so far led to agreements and joint declarations on co-operation with growing 
economies in Latin America, notably Chile, Brazil, and Mexico. The areas concerned include 
sectors  of  strategic  industrial  importance,  such  as  space  policy  and  radio-navigation  by 
satellite.  

In December 2011 the Commission presented an Action Plan to improve access to finance 
for  SMEs.  It  was  accompanied  by  a  proposal  to  facilitate  access  to  venture  capital  across 
Europe through an EU passport that will allow venture capital funds to raise capital in all 27 
Member States on the basis of a single registration. If successful, this initiative could create 
up  to  315,000  additional  jobs  and  €  100  billion  additional  GDP.  In  addition,  in  2012  the 
Commission  aims  to  complete  its  examination8  of  the  tax  obstacles  to  cross-border  venture 
capital  investment  with  a  view  to  presenting  solutions  in  2013  aimed  at  eliminating  the 
obstacles while at the  same time  preventing  tax avoidance and evasion. Furthermore, given 
the  deterioration  in  the  conditions  of  access  to  capital  markets  especially  for  SMEs,  more 
public sector financial support to SMEs and measures to improve access to capital markets to 
business are presented in the flagship’s update. 

The  Commission  also  continued  its  efforts  to  improve  the  business  environment  for  SMEs. 
The  Small  Business  Act  for  Europe  was  reviewed  in  February  20119  putting  emphasis  on 
improved  access  to  finance,  more  favourable  regulation  environment  and  helping  SMEs 
facing globalisation challenges. The latter aspect was further developed in related follow-up 
actions, like the new strategy to support the internationalisation of SMEs that was adopted in 
November  201110.  The  review  also  recalled  the  need  for  Member  States  to  prioritise  the 

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COM(2011) 899. 
COM(2011) 21. 
COM(2010) 614. 
COM (2010) 682. 
To  this  end  the  Commission  has  launched  a  public  consultation  inviting  all  stakeholders  to  provide 
factual  evidence  of  the  tax  problems  encountered  and  suggestions  for  possible  solutions.  See: 
http://ec.europa.eu/taxation_customs/common/consultations/tax/2012_venture_capital_en.htm 
COM(2011) 78. 
http://ec.europa.eu/enterprise/policies/sme/market-access/internationalisation/index_en.htm 

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business  environment  through  smart  regulation,  reducing  unnecessary  regulations  and 
permits, introducing simpler procedures through e-government, and reducing the set-up time 
for a new business to 3 working days.  

An  important  step  towards  modernisation  of  the  Single  Market  was  the  Commission's 
proposal,  made  in  June  2011,  for  a  major  modernisation  of  the  European  standardisation 
system11  by,  amongst  others,  issuing  standards  on  services  and  giving  more  recognition  to 
ICT  industrial  specifications.  The  proposal  also  announced  more  transparent  cooperation 
between  national  standardisation  bodies,  better  planning  of  the  Commission  mandates  and 
improved representation of SMEs and societal stakeholders in European standardisation. This 
is  an  area  of  fundamental  importance  for  industry,  as  it  has  direct  implications  for  the 
innovation  process.  These  improvements  in  standardisation  will  be  put  to  the  test  in  the 
implementation  of  the  six  priority  action  lines  presented  in  the  2012  Industrial  Policy 
communication update. 

As  regards  raw  materials,  a  new  strategy  for  the  sector  has  been  set  out  in  a  dedicated 
Commission Communication12. It reinforced the initiative on raw materials initiated in 2008 
and put forward an array of measures aimed at promoting fair and sustainable supply of raw 
materials  from  international  markets,  fostering  sustainable  supply  within  the  EU,  and 
boosting  resource  efficiency  and  promoting  recycling.  It  also  identified  14  materials  which 
are  critical  to  the  EU  industry.  Furthermore,  the  Commission  aims  to  launch  an  innovation 
partnership  on  raw  materials  in  2013  (subject  to  Council  decision  in  2012)  to  foster 
innovation  along  the  entire  raw  material  value  chain.  External  actions  on  raw  materials  are 
developed further in the 2012 update of our flagship. 

As  a  part  of  actions  aiming  at  the  promotion  of  industrial  modernisation,  the  Commission 
adopted  in  January  2012  a  'Green  Paper  on  restructuring  and  anticipation  of  change'13 
followed by a public consultation. The aim was to identify successful practices and policies 
in the field. This consultation also helped to select specific restructuring measures that could 
facilitate European companies improving competitiveness through innovation and a fast, but 
smooth adaptation to change. 

Concerning skills, preparations are under way for a Communication on "Re-thinking skills". 
Its aim is to steer the modernisation of Europe's education and training systems, in order to 
increase  the  quantity,  quality  and  relevance  of  skills  supply.  The  recently  adopted 
communication on reinforcement of the European Research Area14 proposed linking funding 
to the implementation of the EU Principles on Innovative Doctoral Training. This will allow 
Europe to provide better and faster industry-relevant doctoral training, which is instrumental 
in meeting the demand for expert human capital.  

Furthermore,  a  comprehensive  EU  Action  Plan  for  the  implementation  of  the  renewed  EU 
Corporate  Social  Responsibility  Strategy  2011-2014,  adopted  in  October  2011,  is  being 
discussed  with  Member  States  and  the  main  EU  private  stakeholders  (business  and  non-
business  organisations).  It  outlines  actions  such  as  launching,  from  2012  onwards,  a 
European  award  scheme  for  CSR  partnerships  between  enterprises  and  other  stakeholders, 
and creating a peer review mechanism with Member States in 2012 for national CSR policies. 

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13 
14 

COM(2011) 311 and COM(2011) 315. 
COM(2011) 25. 
COM(2012) 7. 
COM (2012) 392.  

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Multi-stakeholder CSR platforms will be created in 2013 in a number of relevant industrial 
sectors, for enterprises, their workers and other stakeholders to make public commitments on 
the CSR issues relevant to each sector and jointly monitor progress.  

Notwithstanding  these  horizontal  actions,  the  Commission  has  also  put  forward  a  range  of 
sector-specific  initiatives,  such  as  the  adoption  of  a  strategy  for  space  policy15  aiming  at 
strengthening  the  European  space  sector  or  the  initiative  on  "Innovating  for  Sustainable 
Growth: A Bioeconomy for Europe"16. The former will be the subject of a communication on 
Industrial Policy exclusively dedicated to the space sector. The latter puts in place conditions 
to create bio-based markets, one of the priority action lines included in our communication. 

Given the major market potential for clean vehicles, the Commission re-launched the CARS 
21  process  with  an  objective  to  obtain  an  input  to  the  EU's  strategy  for  clean  and  energy 
efficient vehicles. In June 2012, the members of the CARS 21 High Level Group had their 
final meeting and adopted a final report, thereby setting an industrial policy strategy for the 
automotive  sector  towards  2020  with  recommendations  for  rapid  progress  on  important 
subjects such as electro-mobility, road safety, market access strategy and a review of the CO2 
emissions  from  cars  and  vans.  The  report  also  announced  concrete  actions  to  be  taken  in 
reaction  to  the  current  economic  situation.  Concretely,  the  report  puts  a  clear  emphasis  on 
providing  EU  financing  for  research,  on  smart  regulation,  and  on  improving  international 
market access. These conclusions will find their follow up in the priority action line included 
in the 2012 Industrial Policy communication update. 

In  October  2011,  the  Commission  published  a  Communication17  on  Industrial  Policy  in 
Member  States  highlighting  key  actions  to  improve  competitiveness  at  national  level.  The 
package  included  the  second  Annual  Report  on  Member  States  competitiveness 
performance and policies18, which pointed out that there are considerable differences among 
Member States as concerns for instance the labour productivity in manufacturing, or share of 
innovating companies. Faced with this scenario, the Commission encouraged Member States 
to rapidly implement policies to converge to competitive levels coherent with participation in 
the euro and the Internal Market. In this context, it should be pointed out that several Member 
States  have  recently  taken  concrete  steps  to  formulate  and  implement  national  industrial 
policies,  which  are  largely  in  line  with  the  2010  Communication.  The  complementarities 
between  national  and  EU  interventions  in  industrial  policy  are  a  fundamental  condition  for 
the success of European industrial policy  

Results 

The  different  tools  of  the  integrated  industrial  policy  adopted  in  2010  vary  considerably  in 
their scope and depth. They also have different implementation delays and their impacts will 
not be traceable until some time after they have been implemented. Therefore, it is too early 
to  detect  their  impact  on  industry.  Furthermore,  they  also  present  a  mix  of  actions  under 
Community competence and of actions under Member States' competence. This also means 
that benchmarks and indicators cannot readily be compared, in particular since many of the 
measures  concern  not  competitiveness  performance  as  such,  but  rather  competitiveness 
policies.  

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COM(2011) 152. 
COM(2012) 60. 
COM (2011) 642. 
SEC (2011) 1187. 

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When the 2010 Communication was adopted, the focus of policy makers was mainly on long-
term structural challenges, in particular maintaining global competitiveness, climate change, 
energy, skills and knowledge. Given the short time since the 2010 Communication, as well as 
the nature of the measure proposed therein, it would be unrealistic to expect any measurable 
results or evidence on such policy variables. It is possible, however, to report on the state of 
implementation of the Communication. 

The implementation table (see Annex) shows that a majority of the actions have been, or are 
being,  implemented.  Around  60%  of  the  actions  have  been  fully  implemented,  and  for 
another  24%  implementation  has  started  and  is  under  way.  Since  some  actions  consist  of 
constant  monitoring  or  implementation  by  Member  states,  implementation  has  been 
completed or is well ongoing in around 90% of the actions in the 2010 Communication. So in 
most cases, the work is done, or good progress is being made.  

The 2010 Communication focused on the long term as part of the 2020 strategy. This is also 
illustrated in the implementation table, with most of the measures actually expected to show 
results on the real economy only in the longer term (over 5 years or more). A glance at the 
table indicates that only 1 in 7 measures would be expected to have some effect in the short 
term. A bit more than half of the measures could show some effects in the medium-term (less 
than  5  years)  and  the  rest  of  the  measures  would  have  effects  only  in  the  longer  term  (see 
table). 

The 2012 Communication has a more streamlined focus. While preserving current efforts on-
going  implementation  of  long  term  initiatives,  it  focuses  on  actions  that  will  have  a  more 
immediate impact on the real economy. 

3. 

SITUATION OF EU INDUSTRY  

Manufacturing - powerhouse of the EU economy 

The  financial  crisis  has  had  a  serious  impact  on  the  manufacturing  sector.  Nonetheless,  the 
recent  moderation  of  recovery  should  not  be  associated  with  the  poor  state  of  European 
industry, but rather with the general weak economic situation in Europe.  

in 

the  business  models  and 

Over the last decade the share of manufacturing in EU value-added and employment has been 
declining. However, in 2011 it accounted for over 14% of employment and over 15% of total 
value  added,  which  represented  some  23%  of  employment  and  22%  of  value  added  in  the 
non-financial  business  economy.  This  negative  trend  has  to  be  put  in  the  context  of  the 
change 
increasingly  blurred  distinction  between 
manufacturing and services. Consequently, the fall in jobs in manufacturing is accompanied 
by a rise of employment in business related services This is in part the result of the increasing 
importance of services for manufacturing goods, but also of outsourcing of service-type jobs 
to companies outside the manufacturing sector).19 Roughly speaking, it is estimated that for 
every  job  in  manufacturing  a  further  complementary  job  is  needed  in  related  business 
services, such as logistics, marketing or legal advice.  

the 

19 

Daria  Ciriaci  and  Daniela  Palma,  To  what  extent  are  knowledge-intensive  business  services 
contributing  to  manufacturing?  A  subsystem  analysis.  IPTS  Working  Paper  on  Corporate  R&D  and 
Innovation - No. 02/2012 

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Manufacturing has also been the main driver of productivity growth. From 2000 up to 2007 
the  average  productivity  growth  stood  at  around  3%,  compared  to  the  average  for  total 
economy  at  1%.  The  crisis  had  a  serious  impact  on  productivity  in  manufacturing,  but  the 
subsequent recovery was also relatively fast bringing the productivity growth back to the pre-
crisis trend. Industry is clearly a driver of knowledge-based economy, being responsible for 
some 80% of private R&D. 

Furthermore,  manufacturing  is  the  most  important  sector  for  European  international  trade 
accounting for over 90% of overall exports of goods. The fast recovery of exports indicates a 
strong competitive position of European manufacturing and its ability to compete in foreign 
markets.  This  good  performance  is  also  confirmed  by  the  high  positive  trade  balance  in 
industrial  goods.  If  we  add  to  the  economic  importance  the  fact  that  industry  is  a  major 
generator of demand and innovation and contributes to our long-term societal objectives, it is 
obvious that industry deserves to be in the centre of policy focus.  

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Figure 1: Quarterly labour productivity per person and employment in manufacturing in EU27 
(at basic prices) 

Potential for reindustrialisation 

Source: Eurostat 

Over  the  last  20  years  manufacturing  in  Europe  and  other  developed  economies  like  the 
United States has been under pressure of delocalisation of production facilities. However, it 
seems that this process might be approaching a reversal point. Much as the unit labour cost 
still  do  not  favour  localisation  in  Europe,  the  advantages  of  cheap  labour  are  gradually 
diminishing. In recent years wages in industrial areas in China have been growing at a 20% 
rate per year in industrialised regions (exceeding substantially improvements in productivity) 
making them less and less cost attractive locations for manufacturing facilities. Indeed, rising 
labour costs are increasingly perceived by European investors as a significant risk for doing 
business in China20. 

In  addition,  labour  costs  seem  to  be  becoming  a  diminishing  part  of  total  production  costs. 
When accounting for logistics, duties, industrial real estate and other costs, the advantages of 
manufacturing  in  China  could  be  relatively  less  important  than  years  ago.  While 
improvements  and automation of  production in China will lead to higher productivity, they 
are likely to undermine what has been up to now China's primary attraction, i.e. its low labour 
costs. This situation increases the importance of raising productivity in Europe. 

Furthermore,  companies  that  located  their  production  sites  in  Asia  will  to  a  larger  extent 
serve the increasing local demand for goods. This may encourage companies to bring some of 
their  production  capacities  serving  the  European  market  back  to  Europe,  especially 
considering  increasing  risks  and  costs  related  to  the  management  of  global  value  chains. 
Companies would need to balance the diminishing cost benefits with persisting localised risks 
linked to high density of production in one geographical area. These risks include for instance 

20 

European Union Chamber of Commerce in China, Business Confidence Survey 2012. 

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natural catastrophes, socio-political disruptions and security issues (counterfeiting, sabotage, 
misappropriation)21. 

21 

ECORYS,  DTI,  Study  on  internationalisation  and  fragmentation  of  value  chains  and  security  of 
supply, January 2012. 

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Figure 2: Average hourly wage in China by industry (in US$ per hour) 

Source: Accenture22 

New  technologies  that  are  about  to  appear  on  the  market  will  open  new  possibilities  to 
redesign  the  comparative  advantages  of  nations.  The  European  orientation  towards 
sustainable  growth  will  help  in  getting  a  lead  in  energy  and  resource  savings  in  production 
processes. Customised production will gain importance and favour closeness to the customer 
rather than mass standardised production.  

These  trends  will  favour  more  current  European  strengths  i.e.  strong  micro-economic 
environment, high productivity, large, integrated market, and qualified, flexible labour force. 
One  should  not  forget  that  Europe  is  an  extremely  important  market  accounting  for  some 
30% of global personal consumption expenditures in 2010, which is more than double than 
BRICS combined (around 14%). Besides, despite the problems reported by industry of skills 
mismatch,  Europe  leads  in  the  number  of  graduates  in  natural  science  and  engineering, 
accounting for 18% and 17% respectively of the world total. 

Nonetheless, in order to grasp these opportunities European industry needs also to deal with 
several challenges. Much as the cost structure in industry changes, cost competitiveness will 
continue to be the key factor of industrial location that cannot be ignored by policy makers. 
Emerging  economies  are  moving  towards  more  knowledge-intensive  sectors  and  start  to 
compete not only with lower costs but also with increasingly qualified labour and improved 
infrastructures. Finally, the protracted consequences of the crisis put European industry in a 
difficult economic context to carry out the necessary efforts to increase their competitiveness 
by technological changes and innovations into the European industrial landscape. 

Negative macroeconomic conditions hamper industrial recovery 

As mentioned earlier, the impact of the crisis on industrial sectors has been quite severe. It 
has delayed the process of long-term adjustment and created short-term stressful conditions 

22 

Accenture, Wage Increases in China: Should Multinationals Rethink their Manufacturing and Sourcing 
Strategies?, 2011. 

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for  SMEs  that  are  perfectly  competitive  in  the  long-term.  The  financial  crisis  has  first 
compromised the stability  of  public  finances and is currently threatening the real  economy. 
This is the case especially in those countries more seriously touched by the crisis but also of 
SMEs in general across the EU.  

Since  the  beginning  of  the  crisis,  employment  in  manufacturing  has  fallen  by  almost  11%. 
The  initial  fall  that  followed  the  2008-2009  shock  was  somehow  mitigated  by  the  use  of 
short-term  working  schemes,  which  resulted  in  a  reduction  in  the  number  of  hours  worked 
and productivity growth. The subsequent recovery in 2010 led to an increase in the average 
number of hours worked but has not improved significantly employment in industry. This is a 
first  clear  indication  of  the  lack  of  confidence  in  the  demand  for  industrial  products  that 
resulted  in  a  drop  in  investments  of  manufacturing  companies.  Unfortunately,  the  recent 
moderation  of  the  recovery  has  kept  employment  levels  in  manufacturing  low  and  the 
perspectives of a fast rebound remain rather weak. 

Figure  3:  Evolution  of  employment  and  average  hours  worked  in  manufacturing  in  EU27 
(percentage change compared to Q12008)  

Source: Eurostat 

The subdued economic conditions in the European economy are a major factor explaining the 
recent  deterioration  of  Europe’s  industrial  performance.  Low  internal  demand  and  private 
consumption keep markets for industrial goods downcast. Uncertainties about the economic 
outlook,  relatively  high  international  raw  materials  and  energy  prices  and  on-going 
difficulties in access to finance for SMEs continue to weigh down business confidence.  

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Figure 4: EU27 manufacturing output and industrial confidence (2005=100) 

Source: Eurostat, DG ECFIN 

Investments do not show recovery since the outbreak of the crisis 

Persisting uncertainties have a negative impact on the level of investments. Despite the end of 
the  recession,  fragile  GDP  growth  and  the  overall  weak  economic  situation  hold  back 
industrial  investment.  As  a  consequence  of  the  crisis,  the  share  of  gross  fixed  capital 
formation  in  total  GDP  has  fallen  by  some  2.5  percentage  points,  which  corresponds  to  a 
decline of some € 350 billion co mpared to the level in 2007 (see figure below). What is more, 
the subsequent recovery did not increase the level of investment that remains low since 2008 
and shows few signs of improvement. Successive Commission forecasts on investment have 
had to be reviewed downwards since 2010. Without reversing this trend it will be difficult to 
achieve a sustainable recovery. 

Figure  5:  Changes  in  the  annual  growth  rate  of  GDP  compared  to  the  share  of  gross  fixed 
capital formation in total GDP (EU27, current prices, €) 

Source: AMECO database, ECFIN economic forecasts 

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The  depressed  context  for  industrial  investment  in  the  EU  is  highlighted  by  the  slow  and 
partial  recovery  in  new  orders  for  capital  goods,  typically  those  needed  to  maintain  and 
expand  production  capacity.  After  having  reached  a  maximum  level  in  late  2007  –  early 
2008,  new  orders  for  capital  goods  fell  by  more  than  35%  during  the  2008-2009  recession 
and have only partly recovered since. This recovery ended in the summer of 2011.  

Figure 6: New orders – capital goods (2005=100) 

Source: Eurostat 

The seriousness of the impact of the current crisis on industry is also reflected by replies to 
the  Commission's  investment  survey,  carried  out  twice  a  year  among  industrial  companies, 
which  shows  that  expectations  for  investments  for  the  extension  of  the  production  capacity 
are quite low (increase by 4% for the EU). Financial resources and expected profits together 
with  other  factors  (mainly  related  to  public  policies)  are  perceived  as  little  stimulating  for 
further investments at the moment.23 

Figure  7:  Extension  of  production  capacity  (%  respondents  that  choose  this  category  as  the 
most relevant) 

23 

DG ECFIN, Business and Consumer Survey Results, April 2012. 

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Source: European Commission, Investment survey 

Figure  8  suggests  that  in  addition  to  the  uncertainties  due  to  the  crisis,  the  lack  of  new 
expectations of market expansion is also contributing to hold back investment in the EU. This 
additional factor seems to have been present since the effects of the creation of the Internal 
Market in the early 1990s were exhausted towards the end of that decade. Only the “irrational 
exuberance” of the years previous to the crisis led to a higher increase in production capacity. 

Comparing  the  evolution  of  investment  in  equipment  in  the  EU,  the  USA  and  Japan  it 
becomes  apparent  that  these  three  economic  areas  show  a  slightly  downward  trend  in 
investment as a percentage of GDP between 1999 and 2011. Nonetheless, Japan has managed 
to  keep  a  significantly  higher  share  of  investment  over  GDP  than  the  other  two  regions. 
Finally, although this indicator experienced a sharper drop in the USA following the crisis, it 
seems to be rebounding faster and stronger in the USA than in Europe at present. 

Figure 8: Gross fixed capital formation on equipment as a percentage of GDP (current prices, 
national currencies) 

Source: AMECO database 

European industry has to overcome its cost competitiveness disadvantage 

In  addition  to  the  unfavourable  investment  climate,  relatively  high  input  costs  add  to  the 
challenges that EU industry has to deal with in the medium-term. Energy prices, the evolution 
of labour costs and exchange rates have not helped to increase our competitiveness. 

In general terms, nominal unit labour costs have remained stable and this has not contributed 
to increase productivity in Europe compared to the top 36 industrialised countries (the “IC36” 
group). Labour costs in the USA have also been rather stable over the last decade, whereas 
Japan has managed to improve substantially its labour cost performance24.  

The overall cost competitiveness of EU27 has deteriorated due to the impact of exchange rate 
fluctuations  and  a  relative  appreciation  of  euro.  The  USA  and  Japan  managed  to  improve 
their  competitive  positions  following  the  relative  depreciation  of  their  currencies,  but  the 

24 

Data are not available for China, India and Brazil. 

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latter  has  lost  most  of  its  advantage  following  a  strong  appreciation  of  the  yen  since  the 
beginning of the crisis 

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Figure  9:  Changes  in  the  competiveness  based  on  the  nominal  unit  labour  costs  and  effective 
exchange rate (relative to IC36) 

NEER/REER* 100/REER* 

Increase of indicators indicates improvement of the competitive position versus other countries 

* Real effective exchange rate deflated by nominal unit labour costs 

Source: DG ECFIN, Price and Cost Competitiveness database 

Box 1: Factors affecting European cost competitiveness 

An in depth analysis of the unit labour costs (ULC) covering the BRIC countries25 shows that 
the  real  effective  exchange  rate  calculated  for  a  group  of  16  EU  Member  States26  (REER) 
deteriorated substantially over 2000-2007. Moreover, the estimated deterioration in EU unit 
labour  cost  competitiveness  is  markedly  worse  when  BRIC  countries  are  included  in  the 
competitors  group:  a  deterioration  of  nearly  50%  compared  with  just  over  40%  if  they  are 
excluded. Virtually the whole of this impact is due to the inclusion of China. Chinese imports 
have risen very sharply in some sectors (mainly, but not only in low labour cost sectors such 
as wearing apparel and textiles). 

Figure 10: Manufacturing REER for alternative groups of competitors 

25 

26 

ECORYS, Study on the cost competitiveness of European industry in the globalisation era - empirical 
evidence on the basis of relative unit labour costs (ULC) at sectoral level, July 2011 
Austria,  Belgium,  Czech  Republic  ,  Denmark,  Finland,  France,  Germany,  Greece,  Hungary,  Italy, 
Netherlands, Slovakia, Slovenia, Spain, Sweden, UK 

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EU16: Austria, Belgium, Czech Republic , Denmark, Finland, France, Germany, Greece, Hungary, Italy, 
Netherlands, Slovakia, Slovenia, Spain, Sweden, UK.  
Selected competitors: Portugal, Canada, Japan, Norway, South Korea, USA, Estonia, Iceland.  

Selected  competitors+BIC:  Canada,  Estonia,  Iceland,  Japan,  Norway,  Portugal  ,  South  Korea,  USA,  ,  Brazil, 
India, China.  

Source: ECORYS 

Currency  movements  (the  relative  appreciation  of  the  euro)  have  a  strong  impact  on  the 
relative  competitive  positions  of  BRICS.  Competitive  improvements  in  REERs  of  Brazil, 
India and China have been sustained by the evolution of their exchange rates. This effect was 
especially  substantial  for  Brazil,  and  relatively  less  for  China.  On  the  other  hand,  trends  in 
unit labour costs (ULC) show that, with the exception of China, differences across countries 
were  not  substantial  and  they  contributed  little  to  changes  in  cost  competitiveness. 
Consequently,  Brazil's  improved  cost  competitiveness  was  supported  by  the  massive 
devaluation of the real. Similarly, in India where the increase of ULC was faster than in the 
EU16,  gains  in  cost  competitiveness  were  also assisted  by  currency  depreciation.  In  China, 
though, the rapid fall in ULCs, which was spurred by improvements in labour productivity, 
combined  with  currency  depreciation  (following  the  US  dollar)  gave  a  sustained 
improvement in its REER. 

Figure 11: Brazil, China and India unit labour costs in manufacturing 

Source: ECORYS 

The negative effects of the appreciation of the euro were to some extent reduced by the recent 
depreciation of euro, but  the real ULC has remained broadly unchanged. Still in the longer 
term the manufacturing sector has to further increase its productivity in order to improve its 
competitiveness performance.27 

Affordable  and  reliable  access  to  energy  and  raw  materials  are  becoming  increasingly 
important as they account for a significant part of the cost in many industries. Energy prices 
for European industry went up by 27% in real terms between 2005 and early 2012, which is 
significantly more than in most other industrialised nations, especially the US.28  

27 
28 

See also: European Commission, European Competitiveness Report 2009, pages: 27-32. 
IEA, Energy prices and taxes, Quarterly Statistics, 2nd quarter 2012 

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Figure 12: Indices of real energy prices for industry (total energy, 2005 = index 100) 

Source: IEA energy prices and statistics 

As regards electricity more specifically, European industry is on average facing significantly 
higher prices than industries in other developed economies such as the US, Canada, Mexico 
and  Korea  –  and  the  difference  has  on  most  accounts  increased  drastically  over  the  last 
decade. The differences in prices are also evident in the gas market, which is in part due to 
substantial reductions of gas prices in the USA in the last couple of years, thanks to the "shale 
gas"  boom.  Consequently,  the  impacts  on  the  price  of  energy  in  Europe  must  be  carefully 
considered when defining future policies for energy and related areas.  

Figure 13: Energy prices for industry  

Electricity (EUR/MWh; US data excl. tax) 

Natural gas (EUR/MWh) 

Source: IEA energy prices and statistics 

The need to promote innovation as a driver of competitiveness 

Our  innovative  performance  has  been  poor  compared  to  our  main  trading  partners.  The 
evolution of Total Factor Productivity (TFP) does not provide very optimistic results for the 
EU27 and euro area. Since 2000, the TFP has remained broadly flat for the euro area while 

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the improvement for the entire EU27 was relatively small and lagged behind that of the USA 
and Japan. This indicates that the EU is not only losing its cost competitiveness, but is also 
performing worse than its competitors in terms of exploiting new technological developments 
or improving efficiency. The relatively better performance of the EU27 than euro area might 
point  to  some  catching  up  effect  of  the  Member  States  that  joined  the  Union  after  2004 
(EU12), but the overall pace of TFP improvement for the EU27 has been slower than in the 
USA or Japan. 

This situation reflects the relatively slow evolution of competitiveness in the EU last decade 
compared to emerging countries and the USA. The distribution of manufacturing value-added 
among high-tech, medium-tech and low-tech industries  is  basically  the  same  as  in  1979.  In 
contrast,  in  the  USA  there  has  been  a  significant  shift  in  industrial  structure  towards  more 
high-tech  and  knowledge  intensive  manufacturing  and  service  sectors.  The  industrial 
structure of Europe is relatively more focused on medium and medium-high tech sectors and 
relatively less on high-tech sectors. These trends were also visible in the recent years. In the 
period between 2006 and 2009 high-tech industries were losing their importance in favour of 
medium-tech  industries,  whilst  in  the  USA  exactly  the  opposite  happened.  Despite  the 
importance and contribution of the medium-tech sectors to GDP, this lack of structural shift 
in Europe suggests that the European economy has been less dynamic and less competitive in 
exploiting the opportunities from new technologies.29 

Figure 14: Total factor productivity: total economy (2000=100) 

Table 1: Technology specialisation of manufacturing industry 

Source: AMECO 

Manufacturing value added by type of industry (% of total) 

2006 

2009 

EU 

12 

32 

26 

30 

USA 

18 

25 

23 

34 

EU 

10 

33 

27 

30 

USA 

21 

22 

23 

34 

High-tech 

Medium-high-tech 

Medium-low-tech 

Low-tech 

29 

See also:European Commission, European Competitiveness Report 2011, pages: 45-49. 

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Total manufacturing 

100 

100 

100 

100 

Notes:  *High-tech:  office  machinery  and  computers  (30),  radio,  television  and  communication  equipment  and  apparatus 
(32),  medical,  precision  and  optical  instruments,  watches  and  clocks  (33),  aircraft  and  spacecraft  (35.3),  pharmaceuticals, 
medicinal chemicals and botanical products (24.4). 

* Medium-high-tech: machinery and equipment (29), electrical machinery and apparatus (31), motor vehicles, trailers and 
semi-trailers (34), other transport equipment (35) excluding building and repairing of ships and boats (35.1) and excluding 
aircraft  and  spacecraft  (35.3),  chemicals  and  chemical  products  (24)  excluding  pharmaceuticals,  medicinal  chemicals  and 
botanical products (24.4). 

* Medium-low-tech: coke, refined petroleum products and nuclear fuel (23), rubber and plastic products (25), non-metallic 
mineral products (26), basic metals (27), fabricated metal products (28), building and repairing of ships and boats (35.1). 

* Low-tech: food products and beverages (15), tobacco products (16), textiles (17), wearing apparel; dressing and dyeing of 
fur (18), tanning and dressing of leather, manufacture of luggage, handbags, saddlery and harness (19), wood and products of 
wood  and  cork,  except  furniture  (20),  pulp,  paper  and  paper  products  (21),  publishing,  printing  and  recorded  media  (22), 
furniture and other manufacturing (36), recycling (37). 

Source: Eurostat, OECD, own estimations 

The  differences  in  firm  demographics  between  the  USA  and  Europe  illustrate  the  point 
further.  Data  on  the  firm  growth  rates  indicate  that  a  significantly  higher  proportion  of 
European firms experience only modest or zero growth compared to the USA, and that there 
is a significantly larger proportion of both contracting and expanding firms in the USA30. An 
examination of data at sectoral level shows a similar picture, suggesting that the difference is 
systemic and not limited to the manufacturing sector.  

An analysis of data from the R&D investment scoreboard31 confirms this conclusion for high-
tech firms. In particular, it shows that a larger proportion of the USA scoreboard companies 
are  young  companies  and  that  these  USA  companies  are  also  comparatively  more  R&D 
intensive.32  In  other  words,  in  Europe  fewer  newly  founded  firms  grow  to  become  large 
companies  (i.e.  fewer  "Google's”  or  “Microsofts")  and  large  European  companies  are  more 
often older compared to the USA.  

The increasing difference between the USA and Europe in the adoption of new technologies 
can also be explained by data on manufacturing R&D intensity a few years ago, which is an 
indicator  of  the  level  of  technological  innovation.  These  data  show  that  there  was  a  lower 
level of R&D in Europe compared to the USA. It is well-documented that this overall "R&D 
gap" between Europe and the USA is, to a large extent, explained by a higher proportion of 
high-tech  industries  in  combination  with  a  higher  R&D  intensity  of  those  industries  in  the 
USA. This gap seems to have been growing over time.  

Figure 15: Europe-USA gap in firms distribution by type of company 

30 
31 

32 

Albert Bravo-Biosca, A look at business growth and contraction in Europe, October 2011 
Joint Research Centre, European Commission, The 2011 EU Industrial R&D Investment Scoreboard, 
Technical Report EUR-24977-EN, http://iri.jrc.es/research/scoreboard_2011.htm 
Moncada-Paternò-Castello, P.; Ciupagea, C., Smith, K. and Tübke, A., Does Europe perform too little 
R&D?  A  comparison  of  EU  and  non-EU  corporate  R&D  performance,  Research  Policy,  39,  2010, 
pp.523-536 

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Source: Bravo-Biosca, 2011 

These  data  also  show  that  the  European  R&D  intensity  tends  to  be  lower  also  in  the  more 
mature low-tech and medium-high tech sectors. While R&D is an integral part of the business 
strategy  of  firms  in  high-tech  industries,  which  are  characterised  by  a  more  rapid 
technological  development, all sectors  are  today confronted  with the need to face up to the 
challenges and opportunities from technological developments.  

Therefore,  it  is  important  to  increase  the  share  of  high-tech  sector  over  value  added  in 
Europe,  because  these  sectors  display  the  highest  levels  of  R&D  and  innovation.  However, 
exploiting  the  potential  for  innovation  is  crucial  for  the  competitiveness  also  of  mature 
industries, and in terms of growth of jobs this may be economically as important as R&D in 
high-tech industries. 

Table 2: R&D by type of industry 

Manufacturing BERD as % of manufacturing value 
added by type of industry ( 2006) 

High-tech 

Medium-high-tech 

Medium-low-tech 

Low-tech 

Total manufacturing 

EU 

24.1 

8.5 

1.8 

1.0 

6.5 

USA 

38.4 

9.2 

1.7 

1.6 

10.1 

Notes: 
EU aggregate account for more than 90% of total manufacturing value added and manufacturing BERD in the EU 

* EU does not include BG, EE, IE, EL, CY, LV, LT, MT, PT, RO and SK. The 15 member states included in the 

* USA building and repairing of ships and boats was classified as medium-high-tech rather than medium-low-tech 

* The manufacturing BERD data for BE, FR, FI, SE, UK were classified by product field; the data for all other countries 
were classified by main activity 

Source: DG RTD, Eurostat, OECD 

Notwithstanding  this  relative  innovation  underperformance,  Europe  has  strong  competitive 
positions  in  a  number  of  industries  and  it  has  many  world  class-companies.  Among  the 
dominant  market  players  the  European  firms  account  for  the  highest  share  in  the  total 
worldwide  investments  in  R&D  in  sectors  such  as  automotive,  chemicals,  aerospace  or 

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industrial engineering.33 However, globalisation is putting the traditionally strong positions of 
European  industry  that  are  being  threatened  by  the  BRICs  rapidly  catching  up  across  all 
sectors  increasingly  under  pressure.  Thus,  in  order  to  remain  competitive  it  is  necessary  to 
improve innovation performance in all manufacturing and service sectors of the economy.  

4. 

ANALYSIS OF PRIORITY AREAS 

4.1. 

Industrial innovation 

Despite  the  economic  slowdown,  Europe  needs  to  continue  to  make  major  investments  in 
new technologies and promote their adoption and diffusion in the economy. This is essential 
not only to maintain the competitiveness of industry, but also to facilitate the achievement of 
our wider social and environmental objectives. In this context, Europe should strengthen its 
industrial  base  through  ensuring  the  timely  commercialisation  and  deployment  of  the  key 
enabling technologies and the development of the market framework for new products such 
as electric and hybrid vehicles. It is also crucial to make a step change in the transition to an 
energy-  and  resource-efficient  economy  of  our  industry  and  to  increase  the  degree  of 
recycling and reuse. This requires upgrading our electricity infrastructure and smart grids to 
accommodate  the  massive  roll  out  of  renewable  energies  in  tune  with  our  2050 
decarbonisation  targets,  and  ensuring  a  major  improvement  in  the  energy-efficiency  of 
residential and office buildings.  

Box 2: The potential of the new industrial revolution for manufacturing competitiveness 
and addressing societal challenges 

A  variety  of  radical  new  industrial  technologies  are  emerging  in  the  course  of  a  "new 
industrial  revolution"  that  will  lead  to  the  formation  of  new  goods,  services,  and  business 
models that will reshape EU industry. Some prominent examples include: 

-  The  development  of  "intelligent  products  that  do  the  job"  including  clean,  safe  and 
intelligent vehicles that combine electric power trains that reduce emissions with new safety 
and comfort features such as auto-piloting that improve security and performance and allow 
the more intensive and efficient use of infrastructure. The development of such products will 
improve assisted living and will be essential to allow elderly and disabled people maintain an 
active and healthy lifestyle. 

-  The  deployment  of  advanced  manufacturing  technologies  that  allow  customised 
production in much smaller quantities than is currently economically feasible. So-called 3D 
printing  technologies  are  increasingly  used  to  make  plastic  and  metal  production  parts  by 
carmakers, aerospace firms and consumer-products companies. These “printers” use very thin 
layers  of  powdered  materials  fused  by  lasers  or  electron  beams  enabling  the  production  of 
precision products whilst saving energy and raw materials34. The wide availability of low cost 
small production runs will increase opportunities for innovative SMEs to develop new niche 
products and business models. 

-  The  development  of  key  enabling  technologies  such  as  advanced  materials  and 
nanotechnology  may  result  in  a  reversal  of  the  current  tendencies  for  basic  production  and 
processing in heavy industries to be outsourced to third countries. Advanced materials with 

33 
34 

European Commission, JRC/DG RTD, The 2011 EU Industrial R&D Investment Scoreboard  
Economist, 10 February 2011 http://www.economist.com/node/18114221 

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special properties such as heat-resistant or high-strength steel for aircraft and intelligent nano-
materials  such  as  corrosion-resistant  steel  for  bridges  are  being  developed  in  Europe.  This 
provides  the  opportunity  for  Europe  to  become  a  competitive  location  once  more  for  the 
upstream part of the steel value chain. 

-  New  business  models  are  emerging  that  link  manufacturing  closer  to  services.  The 
development of new services and business models is enabled by technological innovation. 
The  development  of  smart  phones  that  bundle  internet  services  with  equipment  is  a  clear 
example.  The  development  of  RFID  (Radio  frequency  identification)  that  has  resulted  in  a 
vast  increase  in  timely  information  availability  allowing  the  closer  integration  of  market 
research, logistics, and manufacturing businesses, resulting in faster responsiveness to market 
demands and increased energy-efficiency of the transport sector is another good example35. 
These  developments  also  affect  more  traditional  services  such  as  cleaning  (ultrasonic 
cleaning) and chemicals leasing, rather than outright sale, when this is feasible. 

Technologies developed by industry will also be indispensable to find solutions to the major 
societal challenges facing the EU and the world. Over the next five to ten years, EU industry 
will: 

-  Contribute  significantly  to  the  reduction  of  the  "environmental  footprint"  of  mankind 
(climate  change,  air,  water  and  soil  protection  and  waste  management).  In  particular,  the 
environmental  challenges  triggered  by  the  aspiration  of  a  growing  number  of  emerging 
market economies to EU-levels of living standards will increase enormously the demand and 
opportunities for eco-technologies and services. EU industry is in a strong position to supply 
such demands. 

-  Deliver  clean  production  and  a  sustainable  resource  footprint  for  the  economy  (resource 
and energy efficiency, use of renewable forms of energy, recycling, management of depleting 
raw materials). For example, heavy investment in energy- and resource-efficiency will lead to 
the  development  of  the  clean  factory  that  maximises  energy  and  resource  efficiency  and 
produces  zero  waste  and  near  zero  emissions.  Such  factories  would  employ  energy  and 
material  efficient  processes  and  machinery,  utilise  renewable  power  sources,  and  employ 
smart energy management with extensive recovery of heat and dissipated energy36. 

-  Provide  solutions  for  a  healthily  aging  society.  For  example,  the  exploitation  of  the 
potential of the life sciences will enable the development of new medicines based on biotech 
and  genomics  providing  more  targeted  interventions,  blurring  the  distinction  between 
therapeutic and diagnostic interventions and leading to the availability of new treatments as 
well as the prevention of certain conditions such as asthma and diabetes37. 

- Contribute to providing global security in the face of natural disasters and terrorist threats. 
For example, once operational GMES services will provide the monitoring and forecasting of 
the  Earth's  subsystems,  including  climate  change.  GMES  will  also  address  emergency 
response e.g. in case of natural disaster, technological accidents or humanitarian crises, and 
security-related issues such as maritime surveillance, border control. 

35 
36 
37 

Services Innovation Expert Panel: Case Studies, 2011. 
Factories for the Future Roadmap 
E.g. the Imidia and U-biopred initiatives of the Innovative medicines initiative. 

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Despite a strong research base, Europe has traditionally been slow at translating its research 
strength into the deployment and commercialisation of new products, processes and services. 
The  results  of  the  Lead  Market  initiatives38,  Key  Enabling  Technologies  Communication39 
and  subsequent  High-Level  Group40  drew  attention  to  the  need  for  a  more  ambitious 
industrial  innovation  policy  that  addresses  the  reasons  for  the  failure  of  the  EU  to  take 
sufficient and timely commercial advantage of its excellent research base: 

- The fragmentation of the EU Internal Market reduces the market for new goods and services 
developed from new technologies. There is a need to improve the framework conditions for 
developing  and  implementing  new  technologies,  goods,  services  and  business  models, 
including  an  earlier  provision  of  regulation  and  standards  needed  to  create  the  Internal 
Market for new products and services and appropriate widespread development and usage of 
innovative public procurement. 

- The technology policies of the EU and Member States are insufficiently co-ordinated and 
lack integration. This leads to delays and wasteful duplication relative to practices in the USA 
and  Asia.  It  also  importantly  reduces  the  scope  for  economies  of  scale  and  synergies  in 
innovation: in particular, it is often necessary to integrate together different technologies to be 
able to create highly innovative goods and services. 

- The successful development and commercialisation of technologies into goods and services 
requires  the  undertaking  of  high-cost  and  high-risk  demonstration  and  proof-of–concept 
projects.  The  costs  of  such  "experimental  development"  activities  are  considerably  greater 
than  the  costs  of  R&D,  resulting  in  what  the  HLG  on  Key  Enabling  Technologies  called  a 
"valley  of  death"  in  the  development  of  new  products.  In  particular  there  is  the  need  to 
develop risk- and cost-sharing facilities to ensure the timely carrying out of such projects. 

-  There  is  a  relative  shortage  in  the  EU  of  technology  entrepreneurs  and  skilled  labour 
capable of handling the highly multi-disciplinary nature of technological development. There 
is  a  need  to  improve  the  EU's  skills  base,  increasing  the  number  of  science,  technology, 
engineering  and  mathematics  (STEM)  graduates,  fostering  inter-disciplinarily  in  education, 
promoting entrepreneurship education and training. 

- There is also a major shortage of risk and venture capital in the EU compared for example 
to  the  USA  market.  Priorities  are  improving  the  financing  of  innovation  and  risk  capital 
especially  for  young  innovative  SMEs,  including  through  improved  venture  capital,  risk 
sharing facilities, and project bonds. 

4.1.1.  Priority areas for intervention in industrial innovation 

Successful delivery of key investments in technologies and innovation will require substantial 
co-ordination between private and public sectors. Proactive intervention of the Commission 
requires setting out flanking measures such as targets and timetables for the development of 
the  legislation  (especially  Internal  Market  legislation),  technical  standards  and  other 
necessary  steps  to  create  an  appropriate  and  predictable  legal  environment  for  the 
development of the market, as well as further R&D measures. 

38 
39 
40 

http://ec.europa.eu/enterprise/policies/innovation/policy/lead-market-initiative/#h2-1 
COM(2009) 512. 
http://ec.europa.eu/enterprise/sectors/ict/files/kets/hlg_report_final_en.pdf 

EN 

26 

   EN 

 
                                                 
The  focus  of  policies  should  be  on  a  limited  number  of  new  markets  where  ready  to  adopt 
innovations are already available. At the same time, the policies need to enable exploiting the 
potential  of  the  emerging  technologies  resulting  from  the  new  industrial  revolution.  Thus, 
considering  their  market  potential  and  possible  role  in  meeting  the  societal  challenges 
following markets and sectors have been identified as areas where policy intervention could 
have the highest impact. 

Advanced manufacturing technologies for clean production  

Markets  for  clean  production  technologies  are  expected  to  grow  strongly  with  the  world 
market almost doubling up to 2020 from some € 380 billion in 2007 to € 765 billion in 2020. 
The most important parts of this market are in production technologies. Europe already has a 
35% plus share in production machinery. The world markets for electric motors and control 
devices  are  expected  to  double  from  370  billion  in  2007  to  €  730  billion  in  2020.  Smaller 
markets such as that for water efficiency are expected to grow at even faster rates, by some 
10%  p.a.  Very  fast  growth  is  also  expected  in  automatic  waste  separation,  a  sector  where 
Europe has dominant market share: the world market is expected to growth by a factor of five 
by 2020. 

Table 3: World markets for clean production technologies (2010-20, € billion p.a.) 

Sector 

2007 

2020 forecast 

Annualised growth 
rate 

Measurement and control 

Electric motors for production 

Water efficiency in production 

Automatic waste separation 

TOTAL 

250 

120 

9 

0.3 

380 

470 

260 

33 

1.5 

765 

5% 

6% 

10% 

15% 

5.5% 

Source: Roland Berger "GreenTech Made in Germany" 2009 (updated 2012)41 

Amongst the principal technological opportunities for advanced manufacturing are42: 

• 

• 

• 

• 

41 

42 

EN 

Developing  new  manufacturing  processes  such  as  3-D  printing,  photonics-based 
processing technologies and innovative physico-chemical processes; 

Developing  smarter  manufacturing  through  advanced  control  and  monitoring 
technologies  to  generate  high-value  in  terms  of  quality  and  productivity  whilst 
consuming less energy and generating less waste; 

Developing  better  collaboration,  security,  and  mobile  information  processing 
through deployment of ICT, facilitating e.g. the sale of products as services; 

Developing  modelling,  simulation  and  forecasting  methods 
optimisation of processing systems and improved product design and management; 

to  enable 

the 

http://www.bmu.de/files/english/pdf/application/pdf/greentech2009_en.pdf, 
http://www.rolandberger.com/media/pdf/Roland_Berger_Umbau_Energiesystem_20120208.pdf 
Factories of the Future Roadmap 2020 Consultation Document (2012) and SPIRE R&I Roadmap for 
the European Process Industry (July 2012). 

updated 

2012 

in 

27 

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• 

• 

• 

Developing  and  integrating  new  sustainable  materials  and  waste  as  industrial 
feedstocks; 

Using  novel  advanced  energy  systems  and  industrial  symbiosis  to  radically  reduce 
energy usage; 

Developing  waste  into  resources  through  separation,  extraction,  sorting  and 
harvesting of gaseous, liquid and solid waste streams. 

Amongst the key challenges: 

• 

• 

• 

• 

• 

Ensuring a stable and predictable legal environment that would set clear targets and 
minimum requirements; 

Developing  incentives  that  would  mobilise  economically  attractive  investments  in 
clean technologies; 

Stimulating market through investment plans in public infrastructure and buildings; 

Enabling the financing of risky and costly demonstration projects; 

Ensuring the availability of appropriately skilled workers and engineers. 

Sustainable construction and industrial products 

The  construction  industry  accounts  for  over  6%  of  GDP  and  provides  around  15.5  million 
direct jobs, mainly in micro and small enterprises (data for 2011). This economic importance 
of  the  sector,  however,  is  accompanied  by  its  substantial  impact  on  the  environment.  The 
manufacturing and transport of construction products are responsible for about 10 % of final 
energy consumption and about 50 % of all materials extracted from earth. Besides, buildings 
account  for  the  largest  share  of  the  total  EU  final  energy  consumption  (42%)  and  produce 
about 35% of all greenhouse emissions.43  

The construction sector has been seriously affected by the current crisis leading to a loss of 
some  2  million  jobs.  Consequently,  supporting  sustainable  construction  is  a  not  only 
important  for  employment  and  economic  growth,  but  also  a  major  element  of  the  EU 
sustainable  development  strategy.  According 
the 
contribution  of  the  buildings  sector  to  the  overall  EU's  long-term  80-95%  greenhouse  gas 
emission  reduction  objective  is  high,  with  low-cost  and  short-term  opportunities  to  reduce 
emissions of around 40 to 50% in 2030 and around 90% in 205044. Higher energy efficiency 
in  new  and  existing  buildings  is  also  crucial  for  the  transformation  of  the  EU’s  energy 
system. 

the  Commission  assessments, 

to 

To  achieve  these  potentials,  appropriate  policies  to  promote  demand  and  encourage 
investment  are  needed.  These  investments  would  also  contribute  substantially  to  the 
competitiveness of the European construction sector and job creation45. The areas concerned 
are  quite  wide  and  cover  both  residential  and  non-residential  buildings  as  well  as 

43 
44 
45 

SWD(2012) 236. 
COM(2011) 112. 
It  is  estimated  that  275 000  new  jobs  could  be  created  in  the  sector  by  2020.  CEDEFOP  ‘Skills, 
Demand and Supply’ 2010, p. 96 - http://www.cedefop.europa.eu/en/Files/3052_en.pdf . 

EN 

28 

   EN 

 
                                                 
infrastructure construction and modernisation. They also involve different aspects of business 
activity, from the use of ecologically sound building materials to assessing the environmental 
impact of urban development strategies. 

Moreover,  sustainable  construction  and  industry  is  tightly  linked  with  development  of 
markets  for  sustainable  products.  Encouraging  the  supply  and  the  demand  for  sustainable 
construction  products  enables  manufacturers  and  suppliers  to  compete  on  parameters  other 
than price, i.e. energy and environmental performance. This requires better reflecting the key 
environmental impacts of a product over its life cycle, both for highlighting improvement and 
cost  saving  opportunities,  and  providing  the  possibility  to  differentiate  the  product  on  the 
market. 

Sustainable construction markets have an important local element as construction markets are 
mainly  local.  Thus,  the  use  of  recycled  or  reused  materials  depends  on  the  local 
infrastructures and the distance that recovered materials need to be transported. Nonetheless, 
development  of  a  more  efficient  Internal  Market  for  waste  and  in  particular  for  recycling 
would  greatly  contribute  to  a  further  reduction  of  waste  going  to  disposal  as  well  as 
consumption of natural resources and to additional improvements in energy efficiency. The 
EU  has  around  50%  of  world  share  of  the  waste  and  recycling  industries  and  its  recycling 
sector has a turnover of € 24 billion, employing about 500 000 persons. Given the fact that 
the  European  industry  is  facing  increasing  price  volatility  on  commodity  markets  and 
difficulties in accessing certain critical materials, addressing the challenges in the recycling 
industry  is  fundamental  to  achieving  sustainable  materials  management  by  European 
companies.  

Key challenges are: 

• 

• 

• 

• 

• 

Overcoming  the  mismatch  of  building  regulations  at  the  EU  and  national  levels 
which leads to considerable administrative burdens and fragmentation of sustainable 
construction market; 

Better value-chain integration leading to an increase in innovation spill-over effects 
and spreading of good practices; 

Providing right investment conditions, funding and incentives for innovative energy-
efficient solutions in buildings renovations and infrastructure maintenance as well as 
an enhanced up-take of renewable energy technologies; 

Adapting the market and preparing of the labour-force for the introduction of Nearly 
Zero Energy Buildings; 

Developing  European  market  for  eco-products  by  combining  various  instruments 
such  as  public  procurement,  standardisation,  advisory  services,  technology  support 
and regulation to boost demand and attract companies to invest in eco-products; 

• 

Facilitating further use of waste as a resource for industry.  

(a) 

Clean vehicles and vessels 

The European automotive industry is a key sector for the European economy, providing over 
12  million  jobs  and  a  positive  contribution  to  the  trade  balance  of  around  €  90  billion  (in 

EN 

29 

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2011), which is essential for continued European prosperity. The global car fleet is predicted 
to grow from 800 million to 1.6 billion vehicles by 203046.  

In  order  to  meet  the  EU's  climate  change  goals  and  to  reduce  oil  dependency,  a  variety  of 
alternative  fuels  need  to  be  developed,  including  renewable  electricity,  biofuels,  methane, 
hydrogen  and  LPG.  The  market  penetration  of  these  fuels  requires  the  development  of 
appropriate  standards  and  regulations,  the  development  of  infrastructure,  and  support  for 
initial R&D and demonstration projects. 

The  Renewable  Energy  Directive  (2009/28/EC)  established  a  10%  share  of  renewables  in 
transport  by  2020.  Biofuels  are  expected  to  play  a  major  role  in  fulfilling  these  targets, 
according  to  the  National  Renewable  Energy  Plans.  There  is  a  need  to  further  harmonise 
these  fuels  across  the  Single  Market.  The  challenge  is  to  make  the  transition  from  first-
generation biofuels to more sustainable second generation biofuels, including from waste and 
other residues or sustainable energy plants.  

Electric  vehicles  are  a  niche  market  at  present,  but  sales  are  then  expected  to  expand  as 
battery technologies improve, reducing costs and increasing vehicle ranges. Initially plug-in 
hybrid  vehicles  are  likely  to  dominate  the  market  first,  and  from  2020  onwards,  battery 
electric vehicles will gain in importance, with full-cell electric vehicles developing later. An 
industry study projects fuel cell vehicles becoming competitive with battery electric vehicles 
by 202547. A recent study predicts that in 2020 about 7% of the European new vehicle will be 
electric  vehicles  (5%  for  Plug-In  Hybrids  and  about  2%  for  Battery  Electric  Vehicles  and 
Range  Extender).  Additionally,  about  9%  of  the  EU  new  vehicle  registrations  will  be 
represented by Full Hybrids. In 2030 approximately 31% of the EU vehicle registrations will 
be  Electric  Vehicles.48  Which  of  these  forecasts  is  closer  to  the  truth  will  depend  to  large 
extent on the policy support. 

Despite the increasing globalisation and outsourcing, the European value added is expected to 
decrease  only  slightly  as  a  result  of  the  transition  to  electromobility.  Consequently, 
employment in automotive sector should also not change substantially. In case of services, it 
is predicted that field maintenance and repair sectors might experience some decline, because 
electric  vehicles  will  not  require  as  much  servicing  as  vehicles  with  internal  combustion 
engines. However, it is also expected that new services linked to electromobility will emerge 
in the long term (e.g. charging, recycling). 

The construction of charging stations for electric vehicles will require investments in the grid 
upstream  to  accommodate  the  additional  demand  for  electricity.  Investments  in  reinforcing 
the  grid  are  part  of  the  regulated  activity,  and  do  not  bear  high  financial  risk  for  the 
Distribution  System  Operator  (DSO)  as  long  as  the  regulator  approves  the  investments. 
However, investments in the charging stations can be done either by the DSO as part of the 
regulated activity, or they can be operated as a commercial activity.  

It  is  important  to  assure  that  public  charging  points  are  'smart'  i.e.  control  of  charging  and 
communication  is  possible  between  wholesale  electricity  providers,  management  of  the 
distribution  grid  and  charging  stations.  This  should  ensure  that  the  choice  of  electricity 
supplier at the public charging point is possible, while billing is adequate and the impact of 

46 

47 

48 

United  Nations  Economic  Commission  for  Europe  -  World  Forum  for  Harmonization  of  Vehicle 
Regulations (UNECE-WP.29): Informal document GRPE-58-02. 
McKinsey&Company,  A  portfolio  of  power-trains  for  Europe:  a  fact-based  analysis.  The  Role  of 
Battery Electric Vehicles, Plug-in Hybrids and Fuel Cell Electric Vehicles, 2010. 
Universitaet Duisburg-Essen, Competitiveness of the EU automotive industry in electric vehicles, 2012 
(initial findings). 

EN 

30 

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vehicle charging on the grid is manageable and can contribute to the grid's flexibility. This 
should  allow  for  business  models  where  electricity  (including  the  flexibility  that  controlled 
charging enables) is sold together with an electric vehicle.  

For  investments  in  charging  points  for  electric  vehicles  in  households,  the  EU  smart  meter 
policy (Annex I.2 of Directive 2009/72/EC) needs to be taken into account. This means that 
the  Member  States  policies  on  separate  charging  points  for  private  locations  should  be 
consistent with smart meter roll-out plans i.e. when smart meters are planned to be installed 
they  need  to  ensure  that  the  electric  vehicle  charging  benefits  from  it.  Vice-versa,  smart 
meters may become also more cost-beneficial for owners of electric vehicles.  

Currently,  there  is  no  overall  European  policy  framework  for  electric  vehicles,  although 
policy will play a major role in accelerating the transition to electric mobility. It is essential to 
support automotive industry by introducing economically efficient policy measures.  

(b) 

Bio-based products 

The  bio-based  products  cover  a  broad  range  of  intermediate  products,  product  components, 
and  ready-made  products,  e.g.  bio-based  plastics,  bio-lubricants,  bio-fibres  for  textiles, 
composite materials for construction and automotive, chemical and pharmaceutical building 
blocks, organic acids, amino acids, and enzymes. The total market or markets for bio-based 
products  globally  and  within  the  European  Union  (EU)  are  difficult  to  estimate.  Generally 
there  is  a  strong  tendency  to  focus  on  markets  where  bio-based  products  can  substitute  for 
products based on other raw materials and the possibilities to estimate the extent of markets 
for  these  new  bio-based  products  are  limited.  Thus,  since  the  sector  is  expected  to  change 
over  time  as  bio-based  products  evolve,  it  is  extremely  difficult  to  make  an  exhaustive 
definition or a list of bio-based products and to identify corresponding data.49  

Nonetheless,  in  2009  the  market  of  bio-based  was  estimated  at  some  57  billion  euros  and 
accounted for over 300 000 work places.  

Table 4: Market size of bio-based industries 

Sector 

Annual turnover 
(billion €) 

Employment 
(thousands) 

Data source 

Bio-chemicals 
plastics 

and 

50 (estimation*) 

150 (estimation*) 

Enzymes 

0.8 (estimation*) 

5 (estimation*) 

USDA, Arthur D Little, Festel, 
McKinsey, CEFIC 

Amfep, Novozymes, 
Danisco/Genencor, DSM 

Biofuels 

6** 

150 

EBB, eBio 

*Estimation  for  Europe  for  2009,  **Estimation  based  on  a  production  of  2.2  million  tonnes  bioethanol  and  7.7  million 
tonnes of biodiesel at average market price in Europe 

Key challenges: 

•  More  coherent  policy  framework  including  more  consistent  standardisation, 

labelling and certification to encourage the diffusion of innovative practices; 

49 

CSES, Final Evaluation of the Lead Market Initiative, June 2011 

EN 

31 

   EN 

 
 
                                                 
• 

• 

• 

Increasing investment in research, innovation and skills;  

Development  of  bio-based  markets  e.g.  through  unambiguous  European  and 
international standards, binding targets or specific labels;   

Stronger policy coordination and better communication with the public. 

(c) 

Key enabling technologies 

technologies  (KETs) 

Key  enabling 
include  micro-/nanoelectronics,  nanotechnology, 
photonics,  advanced  materials,  industrial  biotechnology  and  advanced  manufacturing 
systems.  Market  potential  for  these  technologies  is  difficult  to  estimate,  as  they  represent 
technologies  and  products  which  are  often  at  a  pre-commercial  or  even  conceptual  stage. 
Future  demand  is  largely  unknown  and,  as  past  experience  shows,  many  of  the  most 
important application areas of new technologies are difficult to envisage at the early stages of 
technological development. In any case, the market volume was roughly estimated at some $ 
830-970  billion  in  2008  and  was  projected  to  grow  to  $  1.3-4.4  trillion  around  2015.50 
However,  key  enabling  technologies  should  be  also  considered  as  enablers  of  entirely  new 
applications  in  many  fields  of  manufacturing  that  will  help  establish  new  markets  which 
cannot be measured by current market volumes.  

Table 5: Estimated global market potentials of key enabling technologies 

Nanotechnology 
Micro and nanoelectronics 
Industrial biotechnology 
Photonics 
Adv. materials 
Adv. manufacturing techn. 

Current market size 
(around 2006/08; $) 
80bn 
250 bn 
90 bn 
230 bn 
100 bn 
150 bn 

Expected size in 2015 
(around 2012/15; $) 
1500 *bn 
325 bn 
135 bn 
480 bn 
150 bn 
200 bn 

Expected compound 
annual growth rate 
30% 
9% 
8% 
8% 
6% 
5% 

* Average estimation with high variance 

Source: ECR 2010; Confindustria (2009) 

It  may  also  be  noted  that  communication  network  and  service  platforms  represent  critical 
enabling technologies with huge downstream market potential, as 2015 global market figures 
indicate:  

(a)  Communication network equipment: € 360 bn  

(b)  Communication network services: € 1270 bn 

(c) 

IT equipment: € 390 bn 

(d) 

IT services: € 890 bn 

As European industry represents more than 25% in several of these sectors, their inclusion as 
part  of  an  enlarged  set  of  KET's  will  be  considered.  Existing  platforms,  like  the  Future 

50 

European  Commission,  European  Competitieness  Report  2010,  European  Competitiveness  in  Key 
Enabling Technologies, 2010 

EN 

32 

   EN 

 
 
                                                 
Internet PPP51 and a possible successor PPP in Horizon 2020, could provide the mechanisms 
to articulate the sector actors in these sectors.  

Key challenges include: 

• 

• 

• 

• 

• 

• 

Industrial deployment and commercialisation of solutions from KETs research base; 

Exploiting the synergies between KETs; 

Assuring  sufficient  funds  for  industrial  research  and  experimental  development 
activities; 

Pooling resources for European industrial projects; 

Ensuring non-discriminatory and transparent environment for KETs development; 

Assuring sufficiently skilled labour and entrepreneurs. 

(e) 

Smart grids 

There  is  an  urgent  need  to  upgrade  the  EU's  energy  network  to  a  smart  energy  grid.  Smart 
grids  would  allow  the  two-way  communication  between  suppliers  and  consumers,  improve 
the  efficiency  and  flexibility  of  the  grids,  enhance  the  control  of  energy  transmission  and 
distribution,  and  allow  consumers  to  control  their  energy  consumption  through  intelligent 
metering  and  monitoring  systems.  They  would  also  enable  the  mass  integration  of 
intermittent energy renewable energy sources into the EU energy system, including consumer 
own-generated  power,  and  they  will  be  essential  to  facilitate  the  wide-scale  use  of  electric 
and plug-in hybrid vehicles.  

Conservative  market  projections  show  investment  spending  on  smart  grids  is  likely  to 
increase  very  fast  from  just  over  €  1  billion  per  year  at  present  to  over  4  or  5  billion  by 
201552.  The  estimated  cumulative  investment  cost  of  upgrading  and  modernising  the 
European electricity grid network is a steep acceleration from € 5.5 bn today to € 56 billion 
by 2020. The IEA estimates cumulative investment expenditure to rise to some € 480 billion 
by 2035. The number of smart meters installed in the EU will rise from some 45 million at 
present to at least 240 million by 2020. 

The benefits from smart metering are likely to be considerable – between 2 to 10% or more 
improvement  in  household  energy  efficiency.  Some  €  3  billion,  more  than  half  of  the 
cumulative investment up to present, has been spent on the deployment of some 45 million 
smart meters. Other applications of smart grids include: 

• 

• 

• 

Consumer  applications:  from  in-home  displays  to  home-area  networks  (feedback 
controls); 

Demand response: empowering the consumer and providing higher grid flexibility; 

Advanced  metering  infrastructure:  communication  of  smart  meters  with  utility, 
suppliers and aggregators; 

51 
52 

http://www.fi-ppp.eu/ 
Pike Research, Smart Grid Technologies, 2011 

EN 

33 

   EN 

 
                                                 
• 

• 

Grid  applications:  monitoring  and  diagnostics,  Volt-VAR  optimisation,  fault 
detection and restoral, wide area measurement to improve grid reliability; 

Storage and smart network balancing. 

Table 6: Cumulative EU investment in Smart Grids 

Cumulative 
investment 

Installed 
meters 

Source  

2010 

€5.5 bn 

2020 

€ 56 bn 

2035 

€ 480 billion 

smart 

45 million 

240 million 

n.a. 

JRC Smart Grid Projects 
in Europe 2011 

Pike Research "Smart 
Grids in Europe"2011  

IEA World Energy 
Outlook 2010 

The  Commission  Communication  COM(2011)  202  Smart  Grids:  from  innovation  to 
deployment, adopted in April 2011, sets policy directions to drive forward the deployment of 
future  European  electricity  networks.  The  Commission  proposes  to  focus  on  the  following 
challenges: 

• 

• 

• 

• 

• 

Developing technical standards; 

Ensuring data protection for consumers; 

Establishing  a  regulatory  framework  to  provide  incentives  for  Smart  Grid 
deployment; 

Guaranteeing an open and competitive retail market in the interest of consumers; 

Providing continued support to innovation for technology and systems 

for  Smart  Grid 

Actions  already  launched  by  the  Commission  are:  the  Commission's  Mandate  M/490  to 
European  Standard  Organisations 
the  Commission 
Recommendation [C/2012/1342] of 9 March on the preparation for roll-out of smart metering 
systems  which  includes  guidance  for  Member  States  with  respect  to  data  protection  and 
security  requirements;  and  the  Commission  proposal  for  a  Regulation  for  Energy 
Infrastructure  COM(2011)  658,  published  on  19  October  2011,  which  includes  the 
identification  of  Smart  Grid  Projects  of  European  Interest  and  means  to  leverage  their 
financing. Furthermore, the Commission have also launched two related industrial initiatives: 
the European Grids and the Smart Cities and Communities. 

standards; 

Key challenges ahead for the development of these markets include: 

• 

• 

Regulating  other  aspects  of  smart  grids  than  smart  metering  (privacy  and  security, 
home area networks and grid applications, demand response); 

Identifying  the  ways  of  financing  of  smart  grids:  Member  States,  consumers, 
network operators or electricity retailers, aggregators and energy service companies; 

EN 

34 

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• 

• 

• 

Fill the gaps of EU-wide technical standards: different countries adopting different 
technology standards for smart grids and smart metering systems; 

Lack of clarity about future deployment of some of the technologies for which smart 
grids will be needed such as electric vehicles; 

Lack  of  consumer  demand:  short-term  costs  to  consumers  vs.  long-term  benefits, 
low awareness of potential benefits of smart grids. 

4.1.2.  Future workplaces and design for innovation  

The advent of a new industrial economy is likely to generate readjustments and restructuring 
in  labour  markets.  The  digitalisation  of  manufacturing  leads  to  higher  demand  for 
multidisciplinary skills and high-skilled engineers who can combine mechanical and software 
engineering. The retraining of workers for new skills will also be important in fields such as 
bio-based products or the automotive sector. An anticipative adaptation of the manufacturing 
workforce  to  new  skill  requirements  is  required,  although  this  is  particularly  difficult  for 
small  companies  to  manage.  Stronger  governmental  support  and  government-academia-
industry cooperation could reduce cost and improve vocational training provision. 

Labour  mobility  is  a  key  adjustment  variable  in  these  processes  of  industrial  change.  The 
crisis has made apparent severe imbalances in the supply of skilled labour across the EU. The 
smooth operation of the Internal Market for labour will eliminate considerable delays in the 
adoption of new technologies and innovations. New working practices will help companies to 
employ an aging workforce and attract skilled people to manufacturing.53 Novel technologies 
change the mix of jobs and change the mix of tasks inside jobs. So, an environment should be 
created  that  stimulates  transformation  of  workplaces,  that  promotes  new  forms  of  ‘active 
jobs’54  and  encourages 
innovation  and 
entrepreneurial skills).  

the  development  of  new  skills  (including 

Another  key  driver  of  innovation  and  productivity  is  the  mainstreaming  of  design  as  a 
strategic  company  asset.  Strategic  design  is  understood  to  go  beyond  purely  aesthetical 
considerations and represents a tool for solving complex problems in modern business 

As announced in the Commission's Innovation Union flagship initiative, a European Design 
Leadership  Board  has  developed  proposals  for  enhancing  the  role  of  design  in  innovation 
across  Europe.  Grouped  into  six  strategic  design  actions,  they  include  the  need  to 
differentiate European design on the global stage, to strengthen design competencies, and to 
position  design  within  the  European  research  and  innovation  system.  The  Commission  will 
implement these recommendations through a comprehensive plan of targeted actions in this 
field. 

4.1.3.  Demand side innovation 

A  well-functioning  market  for  innovations  will  attract  a  new  generation  of  competitive 
manufacturing  and  services,  and  help  respond  to  societal  challenges.  Private  and  business 

53 
54 

See report: http://ec.europa.eu/enterprise/policies/innovation/policy/social-innovation/index_en.htm 
Jobs  in  which  workers  have  sufficient  autonomy  to  control  their  work  demands  coupled  to  more 
discretionary  capacity  for  learning  and  problem-solving  (see  Dortmund/Brussels  Position  Paper  on 
Workplace Innovation, 26 June 2012, http://ec.europa.eu/enterprise/policies/innovation/files/dortmund-
brussels-position-paper-workplace-innovation_en.pdf)  

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35 

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consumers  may  need  initial  incentives  to  buy  innovative  products  and  services.  High 
uncertainty55 and low levels of demand in many innovation markets hold back investment in 
innovation, product design and prototypes.  

Realising  this  potential  will  require  a  significant  shift  in  the  policy  interventions  to  spur 
European  innovations  to  the  European  and  global  marketplace.  Europe  has  a  tradition  in 
investing  public  and  private  money  in  research  and  innovation  by  grants,  loans  and  tax 
incentives. However, we also need to create market pull for innovations, thereby cutting the 
long and arduous journey to market. For example, more innovation inside the public sector56 
leads  to  better  and  more  efficient  services  for  civil  society  and  for  business,  and  it  brings 
about  amplification  of  impact  of  public  spending  on  R&D  with  the  public  sector  acting  as 
'lead users'. Company surveys show that companies benefit from a first government customer 
as much as from public research grants. At the same time, a more balanced approach57 (use of 
demand-  and  supply-side  tools)  could  in  many  cases  increase  the  impact,  compared  to  a 
situation that demand- and supply side tools are used separately. It is currently quite rare that 
demand-side and supply-side (research) measures are combined towards the same goal. 

Europe  has  some  initial  experience  in  demand-side  policies58  through  the  Lead  Market 
Initiative59 (LMI) that was launched in 2007. This piloted holistic roadmaps of demand-side 
tools tailored to sector/market needs and their innovation dynamics. The final evaluation of 
the LMI concluded that there was added value in coordinating the use of these tools in most 
of the pilot sectors. Furthermore, it indicated that engagement with users and supply chains 
from  the  private  sector  brings  additional  value  to  the  initiative.  In  the  last  5  years,  policy 
makers have focused on piloting these distinct demand-side policy interventions for pulling 
particular solutions to end-users; pre-commercial public procurement of e-health; low-energy 
public buildings or zero-emission buses. 

The identification process of the sectors in the LMI was done in a top-down manner in 2007. 
Although  this  sped  up  the  LMI's  time-to-launch,  it  led  to  lower  engagement  by  potential 
stakeholders during the implementation phase. Learning from this experience, the services of 
the  European  Commission  ran  a  public  consultation  on  "demand-side  policies  to  spur 
European  industrial  innovations  in  a  global  market"60  that  gauged  the  interest  in  including 
new  sectors  in  the  LMI's  successor  amongst  European  business  and  policy  makers,  This 
results  of  this  consultation  and  discussions  with  policy  makers,  industry  and  other 
stakeholders will contribute to defining sectors for demand-side actions, that complement the 
six priority action lines that have been identified in the Communication.  

The Commission will plan, in close cooperation with Member States, industry, civil society 
and other stakeholders over the period 2012 to approximately 2018 a horizontal action plan to 
boost  sales  of  European  products  on  global  markets.  This  action  plan  consists  of  the 
following three subsequent phases:  

55 

56 
57 
58 
59 
60 

The  2010  survey  amongst  Finnish  companies  found  that  uncertain  demand  for  innovative  goods  or 
services was the critical factor that prevented firms from innovating. 
Innobarometer: public procurement is responsible for 40% of innovations in public sector organisations 
L. Georghiou, Demanding Innovation, NESTA Provocation 2, 2008. 
http://www.proinno-europe.eu/inno-policy-trendchart/page/thematic-papers 
ENTR successfully piloted the Lead Market Initiative in 2008-2011. 
See: 
http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=5967&lang=en&title=Public%2Dc
onsultation%2Don%2Ddemand%2Dside%2Dpolicies%2Dto%2Dspur%2DEuropean%2Dindustrial%2
Dinnovations%2Din%2Da%2Dglobal%2Dmarket 

EN 

36 

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i) 

ii) 

A set of markets (sectors), which would benefit from demand-driven growth models 
will be identified. In due course, other sectors could be added.  

Following the identification of a number of candidate markets, strategic roadmaps for 
demand-side  measures  for  specific  sectors  (e.g.  5  to  8)  will  be  developed  and 
implemented  (possibly  four  years).  These  sectors  may  be  identified  from  (sub-) 
sectors  of  the  six  priority  action  lines,  by  outcome  of  public  consultation  and 
economic  studies,  or  suggested  bottom-up  by  industry  and  policy  makers.  These 
roadmaps  can  plan  the  demand-side  actions  in  larger  initiatives,  such  as  European 
Innovation  Partnerships,  in  public-private  partnerships  in  Horizon  2020  and  in 
programmes at national and regional levels.  

iii) 

The actions form the roadmaps will be executed in the candidate markets selected in 
the second phase.  

In  addition,  a  new  monitoring  system  will  be  set  up  to  measure  the  impact  of  the 
implementation of the strategic roadmaps. This system will also act as a platform to exchange 
best practices in defining, implementing and evaluating actions at any operational level. The 
Enterprise Policy Group (and its sub-group on innovation) will continue to play a major role 
in this policy area. 

Figure 16: Structure of the action plan to boost sales of European products on global markets 

4.2. 

Internal Market  

Companies in the European Union benefit from easy access to the European Internal Market 
and  its  nearly  500  million  consumers  thanks  to  common  procedures,  standards  and  rules 
between the countries. The Internal Market continues to be the main destination and origin of 
goods  sold  in  the  EU.  The  share  of  intra-EU  trade  in  total  EU  trade  in  goods  in  2010  was 
almost  64%.  Before  2007  imports  from  other  Member  States  were  rising  in  all  EU27 
countries, with the fastest growth rate of imports registered in the new Member States. The 
recent crisis, though, led to a substantial drop in trade in goods, both of imports from outside 
and inside of the EU. Interestingly, despite the generally subdued internal demand, the former 

EN 

37 

   EN 

 
 
experienced  a  more  pronounced  subsequent  recovery  exceeding  their  pre-crisis  levels.  This 
could indicate some substitution of internal imports with imports from foreign markets.61 

Looking  at  the  structure  of  EU  imports  following  the  impact  of  the  crisis,  it  turns  out  that 
while the trends follow similar patterns, the magnitudes of changes in imports of consumer, 
intermediate  and  capital  goods  differ  somehow.  In  particular  imports  of  capital  goods  from 
foreign markets seem to have been relatively less affected by the crisis than imports within 
the  Internal  Market,  which  are  still  more  than  10%  below  the  levels  from  the  first  half  of 
2008 and are lagging the recovery in other sectors. 

Figure  17:  EU  imports  in  volumes  in  selected  sectors  (BEC),  three  month  moving  average 
(H12008=100) 

Intra-EU 

Extra-EU 

Source: Eurostat 

Figure  18:  Value  of  intra-  and  extra-EU  exports  as  a  share  of  the  EU  GDP  large, 
integrated market 

Source: Eurostat 

61 

Eurostat,  Intra  EU  share  of  EU-27  trade  in  goods,  services  and  foreign  direct  investments  remains 
more than 50% in 2010, Statistics in Focus 3/2012. 

EN 

38 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
4.2.1. 

Internal Market for goods in non-harmonised sector 

Looking  at  the  importance  of  trade  for  the  economy  it  turns  out  that  the  share  of  intra-EU 
trade in the GDP has not increased much in the last decade and in 2011 its value was equal to 
some 22% of the EU27 gross domestic product. On the other hand, the growth of extra-EU 
exports was much more dynamic, but its value equals only some 12% of the EU GDP. This 
indicates that the Internal Market is still of huge importance for European companies and that 
there  is  some  space  for  improvement  in  order  to  stimulate  growth  of  the  intra-EU  trade. 
However, the Internal Market regulations should also help boosting extra-EU trade, given the 
high growth potential of external markets.  

Some  aspects  of  the  Internal  Market  are  still  governed  by  non-harmonised  national 
provisions. Approximately half of the trade in goods within the EU is covered by harmonised 
regulations,  while  the  other  half  is  accounted  for  by  the  “non-harmonised”  sector,  which  is 
either regulated by national technical regulations or not specifically regulated at all. National 
technical  regulations  must  be  notified  at  the  draft  stage  to  the  Commission  and  the  other 
member  states  under  directive  98/34  (the  so-called  "transparency  directive")  which  verify, 
during a standstill period of three months, whether they comply with the free movement of 
goods  (and  Information  Society  services)  rules.  In  the  last  10  years  (1  January  2002-  1 
January 2012) Member States notified 6882 technical regulations on which the Commission 
and the other Members States reacted by delivering 1230 detailed opinions which prevented 
several obstacles to the free movement of goods from arising.62 

These  are  lower-risk  sectors  that  have  in  general  not  been  the  subject  of  legislation  on  a 
European level. Trade in this “non-harmonised” segment of the market normally relies on the 
“mutual  recognition”  principle,  under  which  products  legally  manufactured  or  marketed  in 
one Member State should in principle be able to move freely throughout the EU.  

Nonetheless,  national  rules  often  create  unnecessary  administrative  burdens/costs  and  have 
the effect of shielding national markets/products from foreign competition. That  is why the 
principle  of  mutual  recognition  has  been  re-emphasised  and  strengthened  in  Regulation 
764/2008.  In  addition,  the  Commission  regularly  updates  a  non-exhaustive  list  of  products 
not subject to Community harmonisation legislation to facilitate the exchange of information 
between economic operators, Product Contact Points and/or the competent authorities of the 
Member States63.  

In the First Report on the application of the Regulation N° 764/2008 it is concluded that the 
Regulation works by and large in a satisfactory way and that there is no need for amendments 
at present.64 However, it also shows that there are certain specific categories of products, such 
as foodstuffs, food additives and medicines, energy drinks, electrical equipment and precious 
metals,  where  the  difficulties  in  the  application  of  the  Regulation  and  notifications  on 
marketing  restrictions  seem  to  concentrate.  Because  of  differences  in  national  legislation, 
which  may  affect  the  free  movement  of  goods,  further  harmonisation  in  foodstuffs,  food 
additives  and  medicines  has  been  recommended.  Moreover,  the  application  of  the  Mutual 
Recognition  Regulation  will  require  continued  monitoring  and  may  be  subject  to  further 
clarification, as regards: 

62 
63 

64 

EN 

Source TRIS (Technical Regulation Information System) database. 
The  Commission 
list  of  products  not 
http://ec.europa.eu/enterprise/intsub/a12/index.cfm?fuseaction=a12.menuproducts 
COM(2012) 292 

to  EU  harmonisation 

subject 

is  available  at 

39 

   EN 

 
                                                 
• 

• 

• 

• 

Difficulties  to  demonstrate  that  a  product  has  been  lawfully  marketed  in  another 
Member State; 

Difficulties  in  identifying  which  legal  provisions  apply  and  which  are  the  relevant 
national authorities in charge; 

Different  testing  methods  relied  upon  by  the  Member  States  and  their  possible 
compatibility through mutual recognition; 

The role of prior authorisation procedures. 

Market surveillance  

According  to  recent  assessments,  capital  goods  manufactured  by  the  European  machinery 
industry  are  exposed  to  shortcomings  in  the  Internal  Market  in  terms  of  weak  market 
surveillance.65  The  presence  of  non-compliant  machines  in  the  European  market  has 
contributed  to  losses  in  sales,  unfair  competition,  loss  of  competitiveness  and  jobs, 
compromised safety and sustainability. Strengthening market surveillance is vitally important 
for maintaining level playing field, keeping Europe as a strategic manufacturing location and 
ultimately ensuring the effectiveness of the rules that protect health and safety of workers and 
the environment.  

The Commission is therefore elaborating a Product Safety and Market surveillance Package, 
which  will  benefit  all  parties,  including  national  authorities,  business  and  consumers.  The 
Package  will  include  four  elements:  (a)  the  new  General  Product  Safety  Directive;  (b)  the 
new Single Market Surveillance Framework; (c) a communication on a multi annual market 
surveillance plan and (d) a report on the implementation of the current regulation 765/2008 
on  market  surveillance.  The  new  Market  Surveillance  Framework  under  this  initiative  will 
cover  both  harmonised  and  non-harmonised  consumer  products  and  also  harmonised 
professional/non-consumer  products,  while  non-harmonised  professional/non-consumer 
products will be considered at a later stage. 

4.2.2.  The EU Defence industry 

The defence industry is a hi-tech research-intensive sector of the EU economy that makes a 
major contribution to EU exports. It has a turnover of some € 94 billion and provides over 
200,000 highly skilled jobs in the naval and military sectors and a high proportion of the half 
a million jobs in aerospace. However, the industry is currently confronted with the impact of 
cuts to national defence budgets that affect new and existing programmes and will lead to a 
substantial reduction in R&D. This will erode the industry's ability to compete in the longer 
term in the international market.  

The sector is still characterised by a focus on national markets and industries which prevents 
the industry from benefiting from economies of scale that operation at EU level can provide. 
Actions are underway already to further integrate the sector at EU scale with the transposition 
of  two  directives66  on  intra-EU  transfers  of  defence-related  products  and  on  defence  and 
security  procurement.  These  internal  market  measures  will  help  to  generate  a  genuine 

DG ENTR conference on Market Surveillance and Machinery, 24 November 2011: 

65 
http://ec.europa.eu/enterprise/sectors/mechanical/machinery/market-surveillance/index_en.htm 
66 

2009/43/EC and 2009/81/EC respectively. 

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40 

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European defence market to support the development of an industry to give Member States 
with the most cost effective options for their defence needs and to provide the framework for 
Europe's most competitive and innovative defence companies to thrive.  

However,  these  measures  by  themselves  will  not  provide  the  transformation  of  the  sector 
needed  to  face  the  challenges  ahead  and  prevent  the  erosion  of  the  industry.  Support  for 
research and innovation are fundamental inputs for the high-tech segment of the sector and 
the industry, especially SMEs, needs support to adapt to the changes to the defence industrial 
landscape in Europe. The Commission has established a Task Force on Defence to examine 
ways  the  Commission  can  use  the  tools  at  its  disposal,  and  within  its  own  competence,  to 
support the competitiveness of the industry, strengthen the internal market, increase Member 
State  co-operation,  and  maximise  the  synergies  between  European  security  and  defence 
research.  

4.2.3. 

Services sector 

The services sector is a significant driver of growth in the EU as it represents more than 65% 
of  EU  GDP  and  employment.  However,  while  the  Internal  Market  for  goods  has  been 
functioning  reasonably  well,  the  Single  Market  for  services  is  not  equally  integrated.  The 
Services Directive 2006/123/EC is the most important measure to remedy that.67  

The  Directive  was  adopted  in  2006  and  its  implementation  deadline  was  set  for  December 
2009.  The  transposition  was  completed  by  all  Member  States  by  the  end  of  2011.  The 
Directive  does  not  oblige  Member  States  to  remove  all  market  obstacles  and  allows 
maintaining  some  level  of  national  regulation.  As  some  Member  States  have  been  more 
ambitious  than  others  and  some  heterogeneity  in  the  implementation  of  the  Directive  is 
inevitable. 

As  a  recent  report  on  the  implementation  of  the  Directive  shows68,  many  barriers  to  the 
Single Market for services have been removed. The Directive facilitated the establishment of 
service providers in another Member State. In contrast, the cross-border provision of services 
seems to have been less affected and continues to face obstacles. Besides, implementation is 
still not complete in all Member States. In some cases problems arise because of inconsistent 
or  incorrect  application  of  other  EU  instruments  such  as  the  Directive  on  Recognition  of 
Professional Qualifications or the E-Commerce Directive. 

According  to  the  most  recent  economic  assessment  of  the  implementation  of  the  Services 
Directive69, implementation will generate an additional 0.8% of EU GDP over the 5–10 years 

67 

68 

69 

The  Services Directive  covers  an  extremely  broad range of  activities,  representing  about 45% of  EU 
GDP.  The  sectors  covered  by  the  Services  Directive  include:  business  services  (share  of  EU  GDP: 
11.7%),  real  estate  (share  of  EU  GDP:  11.8%),  wholesale  and  retail  distribution  (share  of  EU  GDP: 
11.1%), construction (share of EU GDP: 6.3%), tourism (share of EU GDP: 4.4%) and entertainment 
(share  of  EU  GDP:  2%).  Several  services  are  excluded  from  its  scope,  notably  financial  services, 
transport, telecommunications network services, gambling, health and certain social services. 
Commission  Staff  Working  Paper  "On  the  process  of  mutual  evaluation  of  the  Services  Directive" 
(SWD  (2012)148  final)  accompanying  the  Communication  "Towards  a  better  functioning  Single 
Market for services – building on the results of the mutual evaluation process of the Services Directive" 
(COM(2011) 20). 
Josefa  Monteagudo,  Aleksander  Rutkowski  and  Dimitri  Lorenzani,  European  Commission,  The 
economic  impact  of  the  Services  Directive:  A  first  assessment  following  implementation,  Economic 
Papers 456, June 2012. 
http://ec.europa.eu/economy_finance/publications/economic_paper/2012/pdf/ecp_456_en.pdf 

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following  its  adoption.  But  this  figure  could  be  increased  to  2.6%  if  Member  States  would 
open  up  their  services  markets  covered  by  the  Directive  more  ambitiously.  Furthermore, 
better  transposition  and  implementation  of  EU  legislation  could  reduce  administrative 
burdens for businesses by a third, leading to an overall saving of nearly 40 billion euro.70  

Currently  only  about  8  per  cent  of  European  SMEs  do  business  in  other  Member  States. 
Barriers  of  trade  within  the  Internal  Market  have  a  serious  negative  effect  on  the  cost  and 
quality of services. Small and medium sized enterprises, in particular, are disproportionately 
affected by complex administrative and legal requirements due to lack of resources and staff 
to deal with burdensome red tape and formalities. Consequently, SMEs are more likely than 
larger firms to turn down cross-border opportunities. Less-regulated services would provide 
more competition in the sector and boost economic growth and jobs. 

Business services 

The  business  services  sector  has  been  one  of  the  fastest  growing  sectors  of  advanced 
economies  in  the  past  decade.  It  accounts  for  an  increasing  share  of  the  EU  economy 
corresponding  to  some  12%  of  GDP  (2009).  The  sector  was  growing  at  an  average  annual 
growth rate of 2.4% in the period of 1999-2009, which is clearly above the 1.1% growth rate 
for all the sectors of the EU economy. It consists of many different activities, for example, 
professional  business  services  (such  as  legal  services),  consultancy  services  (such  as 
management  consultancy),  technical  services  (such  as  engineering  consultancy),  marketing 
services (such as advertising or market research), design and facility management.  

Given the trend towards building up services together with physical goods ("convergence of 
manufacturing  and  services"),  business  services  and  in  particular  those  relying  on 
professional  knowledge  i.e.  knowledge  intensive  business  services  (KIBS)  are  becoming 
more  and  more  important  for  industrial  competitiveness.  In  major  manufacturing  industries 
with  global  outreach,  such  as  the  aerospace,  automotive,  high-tech  and  telecom  equipment 
sectors, the service output of manufacturing firms is now related in various ways to research, 
development  and  innovation.  Business  services  are  of  particular  importance  for  the 
competitiveness  of  SMEs  which  rely  more  on  purchasing  services  from  the  market 
(outsourcing) compared to large companies' in-house service provision. 

In addition, the manufacturing sector is not only a purchaser, but also increasingly a producer 
of  knowledge  intensive  business  services.  During  1995-2005  the  share  of  services  in  total 
manufacturing output increased in all but three EU27 countries (Poland, Czech Republic, and 
Hungary).  The  largest  shares  are  found  in  the  Finnish  and  Dutch  manufacturing  industries, 
where services constitute around 8% of total manufacturing output.71  

The linkage between services and manufacturing activity offers an additional opportunity for 
the  European  manufacturing  sector  to  innovate  by  opening  up  new  markets,  exploit 
economies  of  scale,  and  finding  new  sources  of  revenue  around  their  products.  However 
cross-border trade in the business services sector remains modest and lags behind trade in the 
manufacturing  sector.  Industrial  users  of  external  services  are  confronted  with  a  European 
market  that  is  fragmented,  non-transparent,  and  often  lacking  well-defined  quality 
benchmarks.  

70 

71 

EN 

SWD(2012) 147 final. 

EU Industrial Structure 2011, DG Enterprise and Industry. 

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The recent performance check of the Services Directive72 points out to outstanding barriers 
and  restrictions  in  many  Member  States  as  regards  corporate  structures  available  for 
professional services and possibilities to attract outside capital. Limitations on the available 
legal  forms  can  be  the  cause  of  difficulties  for  companies  or  professionals  wanting  to 
establish  in  another  Member  State  as  they  restrict  their  choice  of  the  most  appropriate 
corporate vehicle. Similarly, requirements relating to capital ownership may result in reduced 
options for the acquisition of financing and in limitations on available business models.73 The 
Services  Directive  established  thar  Member  States  must  ensure  that  these  requirements 
comply  with  the  principles  of  non-discrimination,  necessity  and  proportionality.  However, 
Member States have often opted for preserving the status quo in this exercise. Companies in 
the  business  services  sector  are  thus  obliged  to  adapt  their  structure  when  they  establish  in 
other Member States or sometimes even when they wish to provide cross-border services.  

This lack of dynamism not only hampers choice for consumers, but also prevents small and 
innovative  businesses  to  grow,  develop  their  activities  and  become  more  competitive.  A 
the 
properly  functioning  Internal  Market  for  services  would, 
competitiveness  of  manufacturing  firms  by  decreasing  costs  of  cross-border  trade  and 
promoting innovation through new offerings of packages of services and goods.  

therefore, 

increase 

Apart  from  the  business  services  sector's  direct  contribution  to  employment  and  wealth 
creation, it has a key role to play in promoting the competitiveness and growth prospects of 
other  sectors,  thereby  also  contributing  indirectly  to  job  and  wealth  creation  across  a  broad 
range of economic activities. For these reasons, promotion of the business services sector has 
become an increasingly important aim of the EU. Business services have been identified as a 
service  sector  where  the  level  of  productivity  could  be  significantly  improved.  The 
Commission,  as  announced  in  the  Single  Market  Act74  and  "the  Industrial  Policy  for  the 
Globalisation Era" Communication75, is setting up a High-Level Group on Business-Related 
Services  to  study  the  shortcomings  of  this  particular  sector.  This  Group  will  focus  on  four 
specific  business  services  sectors:  (i)  marketing  and  advertising;  (ii)  facility  management; 
(iii) technical and engineering services; and (iv) design. A special emphasis will be placed on 
the links between EU business services and manufacturing. 

4.2.4.  Entrepreneurship in the Internal Market: Digital Single Market 

The wide application of the Internet in business activities of companies has a huge potential 
to  increase  productivity  growth.  It  can  significantly  reduce  the  cost  of  many  transactions 
necessary  to  produce  and  distribute  goods  and  services.  It  can  also  increase  management 
efficiency, especially by enabling firms to manage their supply chains more effectively and 
communicate more easily both within the firm and with customers and suppliers. Thanks to 
the Internet, competition is increased, prices are more transparent and markets for buyers and 
sellers are broadened. Businesses that fail to get digitally connected will be simply excluded 
from  the  global  market.  Some  figures  capture  the  emerging  trends:  more  than  75%  of  the 
value added created by the Internet is in traditional industries. For every job destroyed by the 
emergence  of  the  Internet,  2.6  new  jobs  were  created.  SMEs  grow  two-three  times  faster 
when they embrace the Internet. However, even in the most digitally advanced industries, the 

72 
73 

74 
75 

SWD(2012) 147. 
Performance  checks,  State  of  play  of  the  Internal  Market  in  the  business  sector,  Background  note, 
Expert Group Meeting, 28th February 2012 
COM(2011) 206. 
COM(2010) 614. 

EN 

43 

   EN 

 
                                                 
vast  majority  of  smaller  enterprises  remain  out  of  the  digital  arena.  Moreover,  in  OECD 
countries,  only  35%  of  businesses  with  10  or  more  employees  used  the  Internet  for 
purchasing and 18% for selling goods or services76. 

Despite a double digit growth rate before 2010, e-commerce accounts only for some 3-4% of 
Europe's  goods  and  services  sold  through  the  Internet.  In  order  to  promote  a  “highly 
competitive market economy”, the Commission has placed the need for a more efficient use 
of  digital  technologies  and  innovation  at  the  heart  of  its  concerns,  under  the  Europe  2020 
strategy,  the  flagship  initiatives  “The  Digital  Agenda”,  “The  Innovation  Union”,  "Small 
Business  Act"  for  Europe,  the  “Single  Market  Act”  and  the  “Industrial  policy  for  the 
globalization  era”  itself.  All  these  initiatives  pursue,  among  others,  the  goal  of  enabling 
Europe to reap the full potential of the Internet economy. As underlined by a recent OECD 
Digital Economy Paper77, measuring the Internet and its economic impact presents a number 
of  significant  data  challenges  due  to  the  inadequacy  of  traditional  metrics  and  to  the 
increasingly  indistinguishable  nature  of  the  Internet  economy  in  relation  to  the  overall 
economy.  

However, a recent report78 estimates that in the G20 nations the Internet economy will grow 
by more than ten per cent a year between now and 2016. And it will be developing markets 
leading  the  way,  with  Argentina  growing  at  24%  per  annum  and  India  seeing  an  annual 
growth  of  23  %.  In  2016  it  is  predicted  that  the  online  economy  will  contribute  some  $4.2 
trillion to the total GDP of the G20. 

The  biggest  driver  will  come  from  the  increase  in  the  Internet  users  worldwide,  from  1.9 
billion  in  2010  to  3  billion  in  2016.  Increased  use  of  mobile  devices,  notably  smartphones, 
and the growth of social media are among the other factors. The falling costs of smartphones 
will  result  in  about  80%  of  all  Internet  users  accessing  the  web  by  mobile  phone  in  2016. 
Online product search before the offline purchase will be worth $1.3 trillion of goods or 2.7% 
of GDP in G-20 countries, representing at least $3,000 per connected household. 

It may also be noted that some reports79 clearly indicate that Internet economic performance 
is directly correlated with mastering of a strong supply ecosystem (see figure below). From 
that perspective,  it is  of  high importance for European industry to maintain and develop its 
position as a supplier of underlying Internet technologies and services (see above 4.1.1. iv).  

Figure 19. Relation between internet supply and its contribution to GDP 

76 

77 

78 

79 

The  future  of  the  Internet  Economy.  A  Statistical  Profile.  OECD,  June  2011  update.  Available  at 
http://www.oecd.org/dataoecd/24/5/48255770.pdf  
Lehr,  W.  (2012),  Measuring  the  Internet:  The  Data  Challenge,  OECD  Digital  Economy  Papers,  No. 
194, OECD Publishing. Available at http://dx.doi.org/10.1787/5k9bhk5fzvzx-en  
Boston Consulting Group, The Internet Economy in the G-20. The $4.2 Trillion Growth Opportunity, 
March 2012. 
McKinsey  Global  Institute,  Internet  matters.  The  Net's  sweeping  impact  on  growth,  jobs,  and 
prosperity, May 2011 

EN 

44 

   EN 

 
                                                 
Another  important  driver  is  cloud  computing,  which  has  a  potential  to  slash  users'  IT 
expenditure  and  to  enable  many  new  services  to  be  developed.  Using  the  cloud,  even  the 
smallest  firms  can  reach  out  to  larger  markets  while  governments  can  make  their  services 
more attractive and efficient. 

The industry recommendations presented to the European Commission in December 201180 
are  corroborated  by  a  recently  published  report,  funded  by  the  European  Parliament's 
Economic  Policy  Department,  which  identifies  key  barriers  to  the  digital  single  market  in 
cloud computing:81 

• 

• 

80 

81 

Fragmentation of the digital single market due to differing national or regional legal 
frameworks  –  the  report  points  to  limited  level  of  harmonisation  in  the  digital 
content and electronic communications. Rights and responsibilities in the cloud are 
still  not  clear  due  to  lack  of  transparency,  difficulties  in  finding  information, 
problems with contracts and complexities of multiple jurisdictions.  

Lack of standardised contracts, with specific requirements regarding safety, security 
and  reliability  –  cloud  provider  contracts  sometimes  disclaim  liability,  contain 
inappropriate or illegal clauses, and lack certain key pieces of information, such as 

See  Industry  Recommendations  To  Vice  President  Neelie  Kroes  On  The  Orientation  Of  A  European 
Cloud 
Strategy 
Computing 
http://ec.europa.eu/information_society/activities/cloudcomputing/docs/industryrecommendations-
ccstrategy-nov2011.pdf 
European Parliament (2012) Cloud Computing Study for Policy Department, economic and scientific 
policy, 
http://www.europarl.europa.eu/committees/en/studiesdownload.html?languageDocument=EN&file=73
411. 

EN 

45 

   EN 

 
 
                                                 
location  of  data  centres.  In  particular,  service  contracts  offered  to  SMEs  are  rigid, 
with little room for negotiation.  

The  report  also  indicates  that,  according  to  the  stakeholders,  the  EU's  main  actions  should 
concern clarification of the applicable law and jurisdiction, where relevant, harmonisation of 
the  national  legal  frameworks  –  and  to  some  degree  –  standardisation  and  certification  of 
cloud and cloud services.82  

In  the  case  barriers  to  cloud  computing  are  resolved,  the  "policy  driven"  scenario  from  a 
recent Commission study83 indicates that:  

• 

• 

• 

Public  cloud  spending  would  grow  at  a  38.3%  compound  annual  growth  rate 
reaching to nearly € 80 billion in 2020 agai nst € 35 billion in the "no intervention" 
scenario; 

Growth  rates  would  strengthen  across  all  vertical  markets,  and  in  particular  in  the 
government sector; 

SMEs  (especially  companies  with  100-249  employees)  would  increasingly  rely  on 
cloud solutions and their share of total public cloud spending would increase to 25% 
in 2020. In particular, cloud would help EU SMEs gaining efficiency and help their 
competitive position on the global market; 

•  Moreover,  IDC  estimates  that  the  public  cloud  would  generate  some  €  250  billion 
GDP in 2020 in the policy driven scenario against € 88 billion in the no intervention 
scenario,  leading  to  extra  cumulative  impacts  of  €  600  billion  as  against  the 
"business as usual" scenario. 

4.2.5. 

Intellectual Property Rights 

Improving  the  functioning  of  the  innovation  system  based  on  Industrial  Property: 
Accounting of intellectual property assets 

The  market  for  trading  intellectual  property  (IP)  in  the  Union  is  not  yet  fully  developed  in 
spite of the progress made in the legal framework conditions. The unitary patent creates the 
necessary  conditions  for  improvement  to  this  legal  framework.  The  major  outstanding 
barriers,  especially  for  SMEs,  are  unnecessarily  high  transaction  costs  that  have  multiple 
causes, including an unsatisfactory transparency in market information.  84 This barrier must 
be  lowered  for  SMEs  to  benefit  more  from  the  patent  system  and  from  the  technology 
transfer85.  

82 
83 

84 

85 

EN 

Ibid. 
IDC  (2012)  Quantitative  Estimates  of  the  Demand  for  Cloud  Computing  in  Europe  and  the  Likely 
Barriers to Take-up. 
http://ec.europa.eu/enterprise/policies/innovation/files/options-eu-instrument-patent-
valorisation_en.pdf 
Regarding 
http://iri.jrc.es/research/docs/survey/2012/Survey2012.pdf 

licencing  behaviour  of 

companies 

in  R&D 

intensive 

sectors 

refer 

to: 

46 

   EN 

 
                                                 
As indicated in the Report on Options for an EU instrument for patent valorisation,86 there are 
a  number  of  opportunities  to  facilitate  the  trading  of  patents:  The  development  of  the  IP 
market is hindered, among other factors, by a lack of clear and generally accepted valuation 
methods  which  would  reduce  transactions  costs.  In  addition,  companies  could  better  seize 
opportunities  related  to  patents  if  services  for  patent  valorisation  and  related  training  were 
further developed.  

Finally, the time has come to give to intellectual property assets their full value. The potential 
market value of patents in the EU is estimated at about € 100 bn. 87 In the USA, since more 
than a decade business investment in knowledge based capital (KBC) is more significant than 
in  tangible  capital  (see  Figure  20)88.  The  GDP  shares  of  intangible  investment  in  all  EU15 
Member  States  increased  from  1995  to  2007  while  the  rate  of  tangible  investment  fell  or 
remained more or less flat.  
Figure  20:  Business  investment  in  KBC  and  tangible  capital,  United  States,  %  GDP 
(1947-2009) 

Figure 21: Tangible vs Intangible GDP shares: 1995-2007 (percentage changes) 

86 

87 

88 

EN 

http://ec.europa.eu/enterprise/policies/innovation/files/options-eu-instrument-patent-
valorisation_en.pdf 
http://ec.europa.eu/enterprise/policies/innovation/files/creating-financial-market-for-ipr-in-
europe_en.pdf 
OECD:  New  Sources  of  Growth:  Knowledge-Based  Capital 
http://www.oecd.org/general/50452962.pdf; cf: www.intan-invest.net  

- 

Interim  Project  Findings 

47 

   EN 

 
 
 
 
 
 
 
                                                 
Source: Intangible Capital and Growth in Advanced Economies: Measurement Methods and 
Comparative Results.89 

This increasing significance of intangible assets is not reflected in the business environment 
for investments.90 The different treatment given to physical and immaterial assets in financial 
markets introduces a considerable bias in favour of physical assets.91  

In  particular,  intellectual  property  is  seldom  accepted  as  collateral  in  financial  market 
operations,  even  if  it  has  contractual  relationships  (e.g.  licencing  contracts)  guaranteeing  a 
flow of income (royalties). In contrast, physical assets do not present that problem. This bias 
discourages innovation since it has a negative impact on the investment choices of firms that 
will  always  see  an  extra  financial  value  in  the  use  of  material  assets  that  can  be  used  as 
collateral. As a result, high-tech companies with a large portfolio of IPR assets will be at a 
disadvantage when looking for capital in financial markets vis-à-vis other firms with material 
assets.  

A changing patent landscape and its impact on industrial innovation and standardization 

An increasing part of the value of companies is now contained in intangible assets. Together 
with  technological  progress  this  has  significantly  changed  the  way  companies  approach 
patenting. This presents new challenges to the patent system and also to the standardization 
system, where ever more standards include patented technologies. 

Since the 1990s the number of patents applied for and granted has increased massively, with 
annual grants in Europe alone tripling from 24,756 in 1990 to 60,754 in 2010. With 4 million 
patent applications awaiting to be processed in the world's major patent offices, there  is no 
end  in  sight  for  this  upward  trend92.  This  massive  increase  in  patent  filing  numbers,  as 
positive as it otherwise is, presents a huge challenge for patent office to maintain quality, to 

89 

90 

91 

92 

Carol Corrado, The Conference Board, New York, Jonathan Haskel, Imperial College Business School, 
CEPR  and  IZA,  Cecilia  Jona-Lasinio°,  ISTAT  and  LLEE,  Rome,  Massimiliano  Iommi°,  ISTAT  and 
LLEE, Rome. Cf. to www.intan-invest.net  
New  Sources  of  Growth.  Knowledge-based  capital  driving  investment  and  productivity  in  the  21st 
century. Interim project findings. http://www.oecd.org/dataoecd/62/20/50498841.pdf  
Roya  Ghafele,  Getting  a  Grip  on  Accounting  and 
www.wipo.int/sme/en/documents/ip_accounting.html  
Cf. 
wipo_pub_941_2011.pdf 
backlog.htm.  

http://www.wipo.int/export/sites/www/freepublications/en/intproperty/941/ 
http://www.ipo.gov.uk/pro-types/pro-patent/p-policy/p-policy-

Intellectual  Property,,  WIPO  – 

and 

to 

EN 

48 

   EN 

 
 
                                                 
process  applications  in  due  time  and  for  manufacturing  companies  to  navigate  the  most 
patent-rich technological areas.  

In  Europe,  a  major  push  to  reduce  the  complexity  consists  in  the  introduction  of  a  unitary 
patent and a unified patent litigation system. This effective one stop registration for European 
patents  with  unitary  effect  will  also  reduce  registration  and  translation  costs  for  companies 
seeking patent protection in Europe by 80%. In addition, a cost free automatic translation tool 
which  is  being  introduced  step  by  step93,  will  make  the  technical  information  contained  in 
patent applications and patents easily accessible for the benefit of subsequent inventions. 

Patent applicants can use a number of tools available for accelerated patent applications. For 
example  under  the  Patent  Prosecution  Highway,  consisting  of  a  number  of  bilateral 
agreements  signed  between  patent  offices,  applicants  can  request  a  fast-track  examination 
procedure during which the work products from the other offices can be used. 

Increasing technological complexity and denser patenting has given rise to the phenomenon 
of  patent  thickets94.  Such  thickets  have  been  identified  in  crucial  areas  such  as 
communication  technology,  semiconductors,  optics,  electrical  machinery  and  medical 
technology95.  Patent  thickets  lead  to  high  transaction  costs  for  those  wanting  to  market 
products,  entail  the  risk  of  market  failure  in  the  form  of  royalty  stacking  and  are  prone  to 
result in hold-up and patent war problems.96 

Cross  licensing  and  patent  pools  are  market  driven  solutions  to  the  problems  of  patent 
thickets. Pro-competitive cross licencing and patent pools reduce transaction costs (including 
total litigation costs), ensure that the sum of royalty rates is not inefficiently high and create a 
level  playing  field  for  the  patent  users.  Their  success  depends  however  on  the  regulatory 
regime97  and  they  are  neither  cheap  nor  easy  to  set  up.  Setting  up  a  patent  pool  requires  a 
significant outlay of pre-financing and can take two years or more, as a recent example of a 
patent pool for optical disc technology shows98. 

Patent  thickets  are  furthermore  particularly  fertile  ground  for  patent  wars,  such  as  those 
raging in the smartphone sector, which have dominated the headlines of the business press. 
Patent  litigation,  driven  by  patent  number  explosion,  by  more  aggressive  types  of  patent 
holders  (such  as  patent  trolls)  and  by  reduced  patent  transparency,  has  cost  enterprises  a 

93 
94 

95 

96 
97 

98 

See "Patent Translate", http://www.epo.org/searching/free/patent-translate.html. 
A patent thicket is commonly defined as an overlapping set of patent rights requiring that those seeking 
to commercialize new technology obtain licences potentially from multiple patentees; cf. for example 
to  Carl  Shapiro,  Navigating  the  Patent  Thicket:  Cross  Licences,  Patent  Pools,  and  Standard  Setting, 
2000. 
Cf. to "Georg von Graevenitz, Stefan Wagner and Dietmar Harhoff – Incidence and growth of patent 
thickets: the impact of technological opportunities and complexity – CEPR discussion paper, 2008" for 
an 
to 
http://www.nytimes.com/2012/04/10/technology/microsoft-to-buy-aol-patents-for-more-than-1-
billion.html?_r=1&pagewanted=all for an estimate of the number of patent claims bearing on a modern 
smartphone (one patent usually comprises several patent claims). 
Cf. to : European Commission, European Competitiveness Report 2011, page: 52. 
Cf.  to  Richard  Gilbert  –  Ties  that  bind:  Policies  to  promote  (Good)  Patent  Pools  –  2009"  for  a 
discussion of the effects of regulatory policy on patent pools 
http://www.one-blue.com/data/downloadables/4/5/iam-magazine_september-october-2011_article-
oneblue.pdf 

prevalence 

empirical 

thickets; 

analysis 

patent 

the 

Cf 

of 

of 

EN 

49 

   EN 

 
                                                 
staggering  $  80  billion  per  year  in  the  USA  alone99.  The  patent  wars  have  furthermore 
resulted  in  defensive  patent  portfolio  acquisitions  in  the  tune  of  $  18  billion  in  2011/2012 
alone100. 

The  changing  patenting  landscape  has  also  a  significant  impact  on  the  standardization 
process. In the areas where interoperability is of particular importance, such as information 
and  communication  technologies,  it  is  more  and  more  common  for  standards  to  include 
reference to patented technologies. For example, different generations of the main standards 
for  mobile  telecommunication  have  incorporated  an  increasing  number  of  patented 
technologies.  While  the  GSM  standard  (2G)  relied  on  140  patent  families,  the  subsequent 
UMTS  standard  (3G)  relied  on  1,227  patent  families101.  Thus,  if  a  standard  referring  to 
specific technologies becomes a successful lock-in, it can give a very strong market power to 
the holders of the relevant patents. This can lead to an abusive behaviour (e.g. limitations or 
costly  licencing),  which  could  destroy  much  of  the  societal  benefits  that  standardization 
normally brings. 

The standardization system has devised safeguards to deal with the issues resulting from the 
inclusion of IPR into standards, such as the obligation to declare patents before the standard 
is adopted or the commitment of patent holders to licence their essential patents covered by 
the  standard  on  fair,  reasonable  and  non-discriminatory  (FRAND)  terms.  These  safeguards 
are  also  relevant  where  legislation  refers  to  patented  technology.  The  changed  patent 
landscape,  however,  puts  these  safeguards  under  increasing  pressure.  The  decrease  in 
transparency of the  patent  situation,  for example, allows for the so-called patent ambushes, 
where  a  participant  in  a  standardization  process  discloses  its  ownership  of  essential  patents 
only after the lock-in into the standard has occurred. 

There is an increasing trade in patents, which leads to situations where a current holder of a 
patent is not the one who agreed to a FRAND commitment. The existing patent thickets and 
the very fast product cycles in some industries make the threat of patent-related injunctions 
against  marketing  of  the  latest  generation  of  products  particularly  potent,  and  could  lead  to 
anti-competitive  outcomes.  Where  standards  are  adopted  in  areas  of  patent  thickets,  the 
additional  thorny  problem  arises  of  how  it  can  be  assured  that  the  sum  of  the  individual 
royalty rates for a standard or a stack of standards meets the FRAND criterion as well. 

Trade secrecy 

As a complementary solution to patents, trade secrets protection is an integral and important 
part  of  the  overall  system  of  intellectual  property  protections  available  to  EU  firms.  Trade 
secrecy  is  important  to  both  product  and  process  inventions,  and  in  a  variety  of  innovation 
environments,  including  market  conditions  where  technology  evolves  quickly,  where 
inventions  may  (and  do)  occur  simultaneously,  where  innovations  occur  in  a  cumulative 
manner, where combinations of trade secrets, patents, and other forms of intellectual property 

99 

100 

101 

Cf. to "James Bessen, Jennifer Ford, Michael J. Meurer – The private and social costs of patent trolls – 
BU working paper 11-45, 2011" 
Among  these  transactions  were  the  $  12.5  billion  acquisition  by  Google  of  Motorola  Mobility, 
including  physical  assets  but  mainly  driven  by  its  pool  of  17,000  patents,  the  earlier  $  4.5  billion 
purchase of Nortel Networks' portfolio of 6,000 patents and, finally, the $ 1.1 billion purchase of 925 
AOL patents by Microsoft.  
Cf. to "Knut Blind et al. – Study on the Interplay between Standards and Intellectual Property Rights – 
2011"  

EN 

50 

   EN 

 
                                                 
are embedded in “complex” products, or in circumstances where patent rights are considered 
as  weak.  The  perceived  higher  cost  of  patent  ownership  and  the  material  impact  that 
disclosure  may  have  on  SME  firm  value  and  performance  encourage  use  of  secrecy  as  a 
protection mechanism. In the Member States, differences exist on the means of redress and 
respective remedies and some of them have no specific provisions on trade secret protection. 
It  needs  to  be  analysed  to  what  extent  these  differences  influence  the  effective  level  of 
protection of trade secrets. 

4.3. 

International markets 

Internationalization drives the growth of EU industry  

Trade  has  been  a  key  driver  for  the  global  economic  recovery  following  the  2008-2009 
recession.  After  an  unprecedented  drop  in  world  trade  in  2009  (-10.5%),  there  was  a 
spectacular  rebound  in  2010  (+12.9%).  Trade  growth  has  lost  momentum  in  2011  but  still 
registered a significant increase (+5.8%). A further slowdown is foreseen this year (+4.0%). 

In general, the trade rebound has been more marked in emerging and developing economies 
(+8.8% in imports for 2011, compared to +4.3% for advanced economies).  

Looking at the EU economy, exports have been by far the most dynamic component of the 
recovery, increasing by nearly 11% in 2010 and by more than 6% in 2011. This is largely a 
consequence of expansion of trade with extra EU countries (exports grew by 22.9% in 2010 
and by 13.4% in 2011) rather than trade within the Single Market. 

The United States remain the EU's largest trade partner, but China, already our main import 
partner for a number of years, is catching up fast. China is now the EU's second main export 
destination,  with  export  volumes  nearly  doubling  between  2007  and  2011  (they  did  not 
decrease even in exceptionally negative 2009).  

Besides,  the  EU  turns  out  to  be  the  main  trade  partner  for  China,  representing  20%  of  its 
exports and 13% of its imports in 2010, as well as Russia, India and Brazil. Overall, BRIC 
economies represented in 2011 nearly 28% of total EU external trade, compared to 17% for 
NAFTA and 11% for EFTA.  

Figure 22: World trade (imports of non-EA countries), extra-EU exports and intra-EU 
trade (index in volumes, seasonally adjusted, H1/2008=100) 

EN 

51 

   EN 

 
Source: CPB, Eurostat 

Looking at the bilateral trade balances, the EU presents trade surpluses with the United States 
(€  76.3  bn.  in  2011),  Switzerla nd  (30.5  bn.)  and  Turkey  (25.1bn)  and  trade  deficits  with 
China (155.9 bn.), Russia (89.9 bn.) Norway (46.9 bn.) and Japan (18.5 bn.). 

Overall,  the  EU  has  a  trade  deficit  with  the  rest  of  the  world  (€  154  bn.  in  2011),  largely 
related  to  the  deficit  in  primary  products  and  especially  energy  (€  387.7  bn.).  At  the  same 
time, there is a significant trade surplus in manufactured goods with the rest of the world (€ 
264.8 bn.),but not with China (€ 162 bn. deficit in 2011).  

Technology specialisation and leading export sectors  

The increasing role of China in world trade clearly appears in high technology manufactured 
goods102  where  its  share  in  global  exports  has  more  than  doubled  between  1995  and  2010. 
The  share  of  Japan  has  fallen  sharply  from  19  to  6.5%.  The  share  of  the  EU  is  slightly 
diminishing  (from  17.3%  in  1995  to  15.7%  in  2010)  while  the  United  States  has  recently 
regained  ground.  Although  the  EU  is  performing  very  well  in  the  pharmaceutics,  scientific 
instruments  and  aircraft  sectors,  it  has  a  low  share  in  communication,  semiconductors  and 
computers (sectors dominated by emerging Asia exports).  

In medium high technology sectors, the EU remains by far the main trade actor, although it 
has lost some ground (23.1% of world exports in 2010 compared to 25.9% in 1995), while 
the United States' share has been relatively stable, Japan is declining and China is growing 
fast (from only 3.8% in 1995 to 14.3% in 2010, a year where it surpassed both the USA and 
Japan).  

Figure 23: Share (%) of global exports of high-tech manufactured goods 

102 

High  tech  manufacturing  sectors  include  pharmaceuticals,  office  machinery  and  computers, 
communication equipment, aircraft and spacecraft.  

EN 

52 

   EN 

 
 
                                                 
Source: National Science Foundation, "Science and Engineering Indicators 2012" 103 

The  EU  has  a  higher  comparative  advantage  in  this  technology  category,  which  includes 
some  of  its  larger  industrial  sectors  such  as  machinery,  chemicals  and  motor  vehicles.  In 
terms  of  comparative  advantage,  it  is  interesting  to  note  that  China  appears  to  be  highly 
competitive both in high technology and in low technology sectors, whereas in the medium 
high tech category the EU is behind the United States and, most significantly, Japan.  

Figure 24: Share (%) of global exports of medium-high tech manufactured goods 

Source: National Science Foundation, "Science and Engineering Indicators 2012" 

103 

Excludes intra-EU trade. "Emerging Asia" includes India, Indonesia, Malaysia, Philippines, Singapore, 
South Korea, Taiwan and Thailand. China includes Hong Kong.  

EN 

53 

   EN 

 
 
 
 
 
 
                                                 
Table 7: Revealed comparative advantage (RCA) by technology category, 2009 

High tech 

Medium high 
tech 

Medium low 
tech 

Low tech 

EU 

United States 

Japan 

China 

0.84 

0.93 

0.81 

1.49 

1.14 

1.25 

1.49 

0.67 

0.89 

0.89 

0.97 

0.88 

1.03 

0.68 

0.18 

1.30 

Source: EU Industrial Structure 2011, DG Enterprise and Industry 

When  looking  at  the  export  performance  of  sectors,  it  becomes  evident  that  chemicals, 
machinery and equipment, and motor vehicles industries account for over 40% of total extra-
EU exports. Although the majority of sectors managed to recover from the drop of extra-EU 
exports  as  a  consequence  of  the  crisis  the  differences  are  also  visible  here.  Among  large 
sectors, food, chemical, motor vehicle and basic metals industries grew by over 25% in the 
period 2009-2011, with an average for manufacturing total of 18%.  

Figure 25: Extra-EU exports in value for manufacturing sectors 

EN 

54 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing average 

Chemicals, Chemical Products A

Machinery And Equipment N.E.C.

Motor Vehicles, Trailers And S

Other Transport Equipment

Basic Metals

Coke, Refined Petroleum Produc

Food Products And Beverages

Electrical Machinery And Appar

Medical, Precision And Optical

Radio, Television And Communic

Fabricated Metal Products, Exc

Furniture; Other Manufactured 

Rubber And Plastic Products

Office Machinery And Computers

Pulp, Paper And Paper Products

Other Non-Metallic Mineral Pro

Textiles

Wearing Apparel; Furs

Leather And Leather Products

Wood And Products Of Wood And 

Printed Matter And Recorded Me

Tobacco Products

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Share in total exports in 2010

Total growth 2009-2011

Table 8: Share of EU and main trade partners in world markets by sectors in 2009 

Nace  Commodity description  EU-27

EU-27 
without 
intra trade

Japan USA BRIC Brazil  China  Russia India 

Food 
Beverages 
Tobacco 
Textiles 
Clothing 
Leather & footwear 

C10 
C11 
C12 
C13 
C14 
C15 
C16  Wood & wood products 
C17 
C18 
C19 
C20 
C21 
C22 

Paper 
Printing 
Refined petroleum 
Chemicals 
Pharmaceuticals 
Rubber & plastics 
Non-metallic mineral 
products 
Basic metals 

C23 
C24 
C25  Metal products 

Computers, electronic & 
optical 
Electrical equipment 

C26 
C27 
C28  Machinery n.e.c. 
C29  Motor vehicles 
C30 
C31 
C32 

Other transport eq. 
Furniture 
Other manufacturing 

46.8 
69.0 
68.3 
29.5 
32.5 
38.6 
50.1 
57.2 
76.0 
32.8 
49.5 
65.5 
50.2 

50.2 
35.0 
49.3 

24.3 
41.7 
50.3 
55.5 
49.0 
50.9 
32.0 

14.8 
48.4 
30.3 
11.4 
10.3 
16.2 
21.4 
25.1 
49.4 
14.8 
24.8 
41.9 
19.2 

24.0 
14.2 
23.3 

9.7 
21.3 
32.9 
24.8 
34.8 
21.5 
16.3 

8.2 
0.5 
6.0 
0.3 
2.6 
0.4 
4.8 
2.7 
1.4 
0.1 
1.9 
0.2 
0.1 
5.2 
1.5  10.7 
6.1 
1.1 
2.4 
9.4 
5.7  13.1 
1.0  10.1 
9.3 
6.1 

5.3 
7.1 
3.8 

6.3 
6.4 
8.2 

9.3 
6.7 
6.4 
8.0 
9.4  12.3 
8.7 
12.1 
4.5 
8.6 
0.8 
4.2 
2.6  14.3 

12.7 
1.9 
5.5 
37.2 
39.3 
37.0 
19.4 
9.3 
4.0 
20.6 
9.9 
4.3 
13.6 

20.7 
14.6 
18.9 

24.5 
19.6 
10.9 
4.5 
13.4 
27.0 
23.9 

5.5 
0.1 
0.7 
0.5 
0.1 
2.1 
2.2 
3.0 
0.3 
0.7 
1.1 
0.3 
0.8 

1.2 
2.1 
0.9 

0.2 
0.6 
0.7 
1.0 
1.5 
0.8 
0.2 

4.7 
1.2 
1.9 
32.0 
35.2 
32.5 
12.1 
4.7 
1.9 
3.3 
5.6 
2.6 
11.5 

17.4 
5.8 
16.2 

23.8 
18.0 
9.1 
2.8 
9.6 
25.5 
14.1 

0.8 
0.5 
2.1 
0.1 
0.0 
0.1 
4.8 
1.4 
0.1 
11.4 
1.7 
0.1 
0.4 

0.8 
4.9 
0.5 

0.1 
0.3 
0.3 
0.2 
0.7 
0.3 
0.1 

1.7 
0.2 
0.8 
4.6 
4.0 
2.2 
0.2 
0.3 
1.7 
5.2 
1.5 
1.4 
0.9 

1.3 
1.8 
1.3 

0.4 
0.7 
0.7 
0.6 
1.6 
0.5 
9.5 

Source: EU Industrial Structure 2011, DG Enterprise and Industry 

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55 

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The  EU  remains  the  dominant  trade  actor  in  a  wide  number  of  industrial  sectors  such  as 
printing,  pharmaceuticals,  transport  equipment  and  machinery.  China  has  clearly  taken  the 
lead in textiles, clothing and footwear as well as in furniture and computers and electronics.  

Growing interdependence with foreign markets 

External markets are not only a destination for European goods but also a source of inputs for 
products  manufactured  in  Europe.  Actually,  it  is  estimated  that  two  thirds  of  European 
imports are not of final products but of intermediate goods and raw materials. 

More generally, European industry is increasingly internationalised and its value chains have 
become more complex and fragmented.  

It should be stressed that Europe is still predominantly dependent on inputs coming from the 
Internal Market and less on imports from outside of the EU. Over 85% of the value of EU-15 
exports is produced internally, while for the EU-12 group of new Member States this share is 
70%, with the additional 15% coming from the EU-15.  

However, in the period between 1995 and 2007, the share of extra-EU inputs in the value of 
EU  exports  has  grown  (this  has  been  partly  reversed  in  2009,  which  is  however  an 
exceptional  year  with  an  unprecedented  drop  in world  trade)  and  about  13%  of  exports  are 
directly dependent on external inputs. 

Looking at the source of the foreign contents of exports, an increasing importance of China – 
basically  inexistent  in  1995  –  is  also  becoming  apparent.  Indeed,  China  has  managed  to 
increase its share in the value of European exports also in the exceptionally difficult 2009.  

Table 9: Content of total exports, by partner 

Country 

EU-12 

EU-15 

1995  2000  2005 2007 2009 1995 2000 2005 2007  2009 

BRII 

3.1 

2.8 

2.6 

2.6 

2.1 

0.8 

0.9 

1.3 

1.5 

1.3 

Canada 

0.2 

0.2 

0.2 

0.3 

0.2 

0.3 

0.3 

0.3 

0.3 

0.3 

China 

EU-12 

EU-15 

Japan 

Korea 

0.2 

0.8 

2.1 

3.4 

4.8 

0.4 

0.8 

1.3 

2.0 

2.8 

79.0  70.2  68.4  66.4  70.1  0.6 

0.9 

1.3 

1.6 

1.6 

13.1  18.4  18.6  18.6  15.7  92.0  88.8  87.8  86.0  86.8 

0.5 

0.3 

1.1 

0.5 

1.1 

1.2 

0.9 

1.0 

1.1 

0.8 

0.8 

0.7 

0.7 

0.9 

0.8 

0.3 

0.4 

0.5 

0.4 

0.4 

Mexico 

0.0 

0.1 

0.1 

0.1 

0.1 

0.1 

0.2 

0.2 

0.2 

0.1 

USA 

1.1 

1.9 

1.4 

1.4 

1.3 

1.8 

2.5 

1.8 

1.9 

1.8 

Rest of world  2.4 

4.0 

4.7 

5.1 

4.0 

2.8 

4.1 

4.6 

5.2 

4.3 

Note: BRII comprises Brazil, Russia, India and Indonesia.  

Source: WIOD; authors’ calculations. 

Furthermore,  a  recent  study  of  the  Commission  suggests  that  value  chains  are  becoming 
increasingly fragmented with manufacturers increasingly outsourcing or off-shoring parts of 
their  activities.  This  is  the  case  of  products  moving  to  mature  stages  (semiconductors, 
electronic goods) once the technologies and manufacturing processes are more standardised 

EN 

56 

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and  price  competition  becomes  more  important.  However,  in  some  markets  there  is  also  a 
tendency of vertical integration where manufacturers prefer to maintain full control over the 
value chain (e.g. smart phones, electric vehicles).  

Despite  the  initial  collapse  of  trade,  the  recent  crisis  does  not  seem  to  have  caused  a 
'deglobalisation  '  of  production  patterns.  The  tendency  of  consolidation  of  supply  chains  in 
some sectors started already before the crisis and it could only be accelerated in some cases 
by  the  global  downturn.  The  consequent  sharp  fall  in  demand  for  consumer  durable  and 
investment  goods,  which  are  produced  in  globally  integrated  sectors,  together  with 
difficulties  in  access  to  credit  could  lead  to  a  further  breakdown  of  some  supply  chains. 
However, a strong rebound of world imports of intermediate goods already in 2009 indicates 
a quick re-establishment of production chains.104  

The  high  level  of  specialisation  and  mutual  dependence  of  European  industry  on  external 
suppliers  is  not  a  problem  in  itself  as  long  as  it  is  mutual,  balanced  and  transparent.  The 
concerns arise when the level playing field is not maintained and European companies might 
lose  their  position  in  the  value  chain  due  to  risks  related  to  national  industrial  policies 
favouring  domestic  firms,  breach  of  IPR,  limitations  in  access  to  certain  technologies, 
components or raw materials, incompatibility of standards.105 

Notwithstanding the inherent risks of internationalisation, it is clear that integration with the 
global economy is positive for European industry. Outward Foreign Direct Investments (FDI) 
do not only allow grasping the opportunities of the new markets, but also lead to increased 
productivity and higher employment in the long-run.106 Besides, integration  in international 
value  chains  help  companies  to  lower  their  costs,  get  access  to  new  technologies,  improve 
their quality or lower the dependence on local supplier base. Consequently, it is not surprising 
that  strong  position  of  European  manufacturing  is  accompanied  by  relatively  high  share  of 
import content in exports (around 40% and with an increasing trend). 

Concerning  FDI,  it  should  be  noted  that  EU  flows  to  the  rest  of  the  world  reached  €  370 
billion  in  2011,  returning  to  levels  comparable  to  pre-crisis  ones  after  a  sharp  reduction  in 
2010 (146 billion). FDI into the EU27 from the rest of the world were at 225 billion in 2011, 
rebounding from much lower level of 104 billion in 2010.  

Main partners, in both inflows and outflows of FDI, are the United States and Switzerland. 
Some emerging economies play a significant role for outflows, notably Brazil. Inflows from 
BRIC  economies  remain  relatively  marginal,  but  are  growing,  for  example  in  the  case  of 
China.  

Most FDI is concentrated in services sectors, notably finance and real estate. Manufacturing 
is also targeted and in particular energy-intensive sectors.  

Box 3: Industrial policies in emerging economies  

Emerging economies have put in place industrial policies aimed at structurally changing their 
production  patterns  and  affecting  their  international  specialisation.  These  industrial  policies 
sometimes  include  trade-restrictive  measures  or  discriminatory  practices.  Local  content 

104 
105 

106 

European Commission, DG ECFIN, Quarterly report on the euro area, Volume 1 No 2 (2012). 
ECORYS,  DTI,  Study  on  internationalisation  and  fragmentation  of  value  chains  and  security  of 
supply, January 2012 
Copenhagen Economics, Impacts of EU outward FDI, May 2010 

EN 

57 

   EN 

 
                                                 
requirements, often in connection with investment and government procurement, appear to be 
one  of 
the  context  of 
industrialisation107. 

the  most  used  kinds  of 

trade-distortive 

instruments 

in 

China's 12th Five Year Plan adopted in March 2011 puts an emphasis on quality upgrading 
with an overall objective of moving up the value chain of manufacturing and making China's 
growth  more  sustainable.  In  this  framework,  China  has  selected  "strategic  emerging 
industries"  (e.g.  clean  energy,  electrical  vehicles,  ICT  and  broadband,  pharmaceuticals 
industries),  which  might  be  supported  by  a  range  of  measures  including  through  steering 
investment (often in the form of mandatory requirements for technology transfer), subsidies 
and export financing.  

India's National Manufacturing Policy (NMP) intends to increase the share of manufacturing 
in  GDP  from  16%  to  25%  by  2022,  with  a  focus  on  indigenous  production.  The  plan 
combines elements of preference for domestic products in government procurement and local 
content requirements in purchases of private operators, with tax concessions and government 
subsidies benefitting the development of indigenous technologies.  

In  Brazil,  the  "Plano  Brasil  Maior"  adopted  in  August  2011  foresees  such  instruments  as 
indirect  subsidization  or  fiscal  exemptions  benefitting  specific  manufacturing  sectors  (e.g. 
textile and footwear, mobile and software industry, among others).  

Argentina's  trade  policy  has  been  characterised  over  the  last  years  by  moves  towards 
"managed  trade"  and  import  substitution  policies,  including  through  measures  affecting 
import and export. 

4.4. 

Access to finance 

Europe's economic success and recovery depend on enterprises having adequate access to the 
various types of financing. The financial market crisis and difficult situation of the banking 
sector has led to a substantial reduction of availability of finance to companies. While bigger 
companies have some alternative possibilities to overcoming shortage of credits, SMEs face 
increasing difficulties in obtaining finance for their operation and investments. Problems are 
in particular acute for young firms needing venture capital. 

Bank lending remains subdued  

Following  the  bankruptcy  of  Lehman  Brothers  in  2007  the  lending  to  non-financial 
corporations  declined  substantially.  Due  to  heavy  reliance  of  European  companies  on  bank 
loans, the instability and deleveraging of the banking sector had an immediate impact on the 
financing of the real economy. Credit restraints and reduced demand had a negative impact 
on those sectors requiring restructuring, which even before the crisis had difficulties in access 
to finance. The recovery in 2009-2010 led to some small improvements but did not resolve 
the structural problems with access to finance.  

The  negative  trend  for  loan  flows  is  visible  again  since  the  end  of  2011,  with  the  main 
outflow observed for short-term loans.  

107 

COM(2012)70, "Trade and Investment barriers Report 2012". 

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58 

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The  persistently  weak  lending  of  monetary  and  financial  institutions  (MFI)  to  the  non-
financial private sector is likely, to a substantial degree, to reflect subdued credit demand, 
given the current stage of the business cycle and prevailing high uncertainty. Moreover, the 
need  to  adjust  for  the  excessive  loan  growth  of  the  past  is  weighing  on  both  supply  and 
demand for loans. On the demand side, this is visible in the high leverage ratios prevailing in 
the corporate sector. On the supply side, the impact of excessive loan growth in the past has 
resulted  in  increased  bank  capital  needs  to  cover  potential  losses.  This,  together  with  the 
higher  capital  ratio  requirements  arising  from  the  Basel  III  regulation,  is  likely  to  have 
reduced  the  availability  of  loans  to  the  economy.  All  these  effects  are  having  an  uneven 
impact  across  the  euro  area,  which  explains  why  cross-country  heterogeneity  in  loan 
dynamics remains sizeable108.  

Figure 26: Loans to non-financial corporations in the euro area (€ billion, last three months) 

Note: Negative flows indicate that more loans are repaid than granted 

Source: ECB 

Supply  side  factors  are  also  behind  the  lending  cuts.  Net  lending  conditions  have  been 
constantly deteriorating since the second half of 2007. After a short-lived recovery in 2009, 
banks  again  tightened  substantially  their  requirements  for  loans  in  the  second  half  of  2011. 
Although  the  first  quarter  of  2012  brought  some  moderation  of  this  negative  trend,  the 
European Central Bank’s Bank Lending Survey for the second quarter of 2012 indicates no 
further improvements in credit conditions for bank loans. Hence, in the second quarter a net 
10%  of  the  surveyed  euro  area  banks  tightened  their  credit  standards  to  non-financial 
corporations.  Given  the  soft  patch  the  European  economy  is  going  through,  survey 
respondents expect a further decline in the net tightening.109  

Figure 27: Access to bank lending for SMEs* 

108 
109 

Ibid. 
ECB, The Euro Area Bank Lending Survey, July 2012. 

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59 

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*  A  composite  indicator  of  SME  access  to  bank  lending,  ranging  from  zero  (worst  possible  situation)  to  1  (best  possible 
situation).  

Source: Survey on the access to finance of SMEs in the euro area October 2011 to March 
2012, April 2012, ECB. 

According to the results of the ECB SME Access to Finance Survey, euro area SMEs external 
financing  needs  increased  between  October  2011  and  March  2012.  At  the  same  time,  the 
survey  results  show  that  access  to  bank  loans  continued  to  deteriorate.  On  balance,  SMEs 
reported  a  worsening  in  the  availability  of  bank  loans  (20%,  up  from  14%  in  the  previous 
survey round). Moreover, the survey results point to a higher rejection rates when applying 
for a loan (13%, up from 10%). This is the highest percentage since the peak of 18% in the 
second  half  of  2009,  thus  reflecting  SMEs’  constraints  in  their  access  to  bank  loans.  In 
particular  micro  firms  reported  a  substantial  rejection  rate  (20%,  up  from  15%  from  the 
previous  period).  Meanwhile,  the  percentage  of  respondents  reporting  access  to  finance  as 
their main problem remained broadly unchanged (17%, compared with 16%). 110 

As regards new credit volumes the picture remains rather negative. ECB figures for the year-
to-year percentage change of new credit under € 1,000,000 indicate that since October 2008 
this category has followed a declining trend on a continuous basis. A similar picture emerges 
for new credit under € 250,000 with year-t o-year changes in the negative. 

SMEs face difficulties in accessing bond market 

Large listed corporations with direct access to the financial market can issue corporate bonds 
relatively easily. In contrast small and medium-sized enterprises rely mainly on bank loans. 
In  the  first  three  months  of  2012  many  large  non-financial  corporations  issued  significant 
amounts of marketable debt in an environment of strong demand for corporate securities, thus 
reducing their need for bank loans.111 

As regards securitisation of SME loans, following a fast development since the beginning of 
this  century,  the  market  reached  its  peak  in  2008  at  more  than  €  700  billion  and  then 
collapsed  to  the  level  of  approximately  2005.112  The  latest  data  indicate  that  the  market 

110 

111 
112 

Survey on the access to finance of SMEs in the euro area October 2011 to March 2012, April 2012, 
ECB. 
ECB Monthly Bulletin, April 2012. 
AFME, Securitisation Date Report Q4:2011 

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(excluding  pure  ECB-related  transactions)  is  slowly  restarting  in  the  parts  of  Europe  (UK, 
Germany, Benelux, Italy) that have more experience in it.113  

The issuance of  bonds  is  a  viable  option only for larger companies with  an external  rating. 
The overwhelming majority of SMEs and midcaps do not have an external rating and in any 
case look for smaller  tickets of  financing which are potentially  more difficult to  place with 
investors. In addition SMEs’ ‘internal’ rating with their banks is often not comparable across 
banks.  Consequently,  the  ongoing  deleveraging  of  bank  balance  sheets  and  the  tightened 
regulatory  environment  might  affect  the  European  banking  sector  as  the  main  source  of 
finance  to  the  real  economy  that  it  was  before  the  crisis.  Lending  to  businesses  might  be 
further hampered, if the securitisation markets for small business loans will not take off in the 
near future. 

Box 4: Creating bonds market for medium-sized companies 

Boerse  Stuttgart  is  Germany's  leading  player  in  the  area  of  intermediary-based  stock 
exchange trading. In 2010 it launched a Bond Trading Scheme for medium-sized companies 
(BondM)  –  a  regulated  unofficial  market  supervised  by  the  public  law.  It  was  aimed  at 
industrial  and  industry-related  middle  class  companies  (German  Mittelstand),  offering  a 
possibility of a direct bond issuance in a volume of approximately 50 (in some cases 25) up 
to 150 millions of euro. 

Thanks  to  a  high  level  of  transparency,  issuer  rating,  general  simplicity  and  auxiliary 
services,  such  as  coaching  for  potential  issuers  and  BondM  Index,  after  two  years  of  its 
functioning BondM has become a market leader in the SME bond segment with 22 issues and 
1.6bn  euro  subscription  volume.  The  simple  platform  offered  by  Boerse  Stuttgart  seems  to 
properly  respond  to  the  needs  of  the  market.  A  survey  conducted  by  Boerse  Stuttgart  in 
September 2011 showed that almost one in four of middle-sized companies was planning to 
issue bonds. It also pointed out that corporate bonds should gain in importance in the future, 
as they give companies more independence from banks, greater financing security and a more 
balanced investor structure.  

Venture capital is stagnating 

European venture capital funds continue to be largely nationally oriented, too small and often 
unable  to  secure  a  deal  flow.  Venture  capital  fund  managers  can  rarely  benefit  from  the 
passport that has been introduced in the Directive on Alternative Investment Fund Managers 
(AIFM),  because  its  threshold  of  €  500  million  is  higher  than 
the  size  of  most  EU  venture 
capital funds. 

The deteriorating economic outlook and the sovereign debt crisis have taken their toll on the 
availability of venture capital as well. Many venture capital funds are nursing their portfolio 
of companies and are shunning new deals. Venture exits have decreased by 25%, amounting 
to € 1 billion. Venture performance has remained  weak, apart from those in the top quartile, 
emphasising the importance of careful selection by investors.114 

Of the about € 4 billion that EU venture capit al firms managed to raise in 2011—half of the 
2007  total—around  40%  came  from  government  agencies.  That  is  a  big  increase  from  pre-

113 
114 

European Small Business Outlook, 2/2011, EIF. 
EIF, European Small Business Outlook, 2/2011. 

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61 

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crisis  days,  when  government  funds  provided  10%  of  new  capital;  and  a  lot  more  than 
European  private-equity  firms,  which  drew  8%  of  their  funding  from  public  sources  in 
2011.115 

European early-stage investing is now unquestionably in a protracted slump. With limited LP 
interest in the segment due to historically poor returns and a volatile climate exacerbating the 
risks  of  investing  in  young  businesses,  the  venture  capital  sector  has  seen  activity  dwindle 
further from the already low levels witnessed through 2011. In the first quarter of 2012, the 
deal  volume  registered  its  third  successive  decline  and  plummeted  from  43  transactions  to 
just 22, while aggregated value dropped by around 33% from € 263m to  a little less than € 
177m.116 

Box 5: Market failures negatively affect SMEs 

On average, SMEs are likely to suffer more from market failures than large companies. The 
most  prominent  market  failures  faced  by  SMEs  are  considered  to  be  capital  market 
imperfections and asymmetric information. Both of these market failures are likely to restrain 
SMEs' access to finance. 

The market failures relating to the capital market imperfections result from the mismatch 
between the demand and the supply of the different types of financial instruments for SMEs. 
Distinction can be made between debt financing, one hand, and equity financing, on the other 
hand. In general terms, equity financing plays a more crucial role in the star-up and emerging 
growth phase, whereas debt financing instruments (credits and loans) are more used during 
the emerging growth and development phases and later stages.117 

With respect to credits and loans, which are the  most  significant  type  of  external  financing 
currently  relied  upon  by  SMEs,  an  increasingly  risk  sensitive  banking  sector  is  asking  for 
more collateral and higher risk premium, which makes the financing more costly for SMEs 
and  is  likely  to  result  in  insufficient  finance  and  missed  business  and  employment 
opportunities.  Riskier  business  projects  like  start-ups  and  innovation-intensive  SMEs  are 
likely  to  be  especially  vulnerable.  Young  companies  are  also  particularly  exposed  to  this 
problem  because  of  their  lack  of  material  assets  that  could  be  used  as  loan  collateral.  The 
pertinence  of  this  problem  is  illustrated  in  the  recent  European  Central  Bank's  survey  on 
SME's  access  to  finance:  Between  April  and  September  2011,  the  percentage  of  SMEs 
perceiving  deterioration  in  the  availability  of  bank  loans  increased  to  14%  from  9%  in 
2010.118 Furthermore, 54% of SMEs reported increases in interest rates (compared to 44% in 
2010) and almost half of SMEs had also experienced an increase in other costs of financing.  

As to the market failures linked to equity financing, one of the main issues having a negative 
effect  on  SMEs'  access  to  finance  is  the  underdevelopment  of  venture  capital  markets.  In 
particular, European venture capital market lacks critical mass.119 For example, it is estimated 
that  venture  capitalists  are  active  nationally  with  a  budget  of  approximately  €  15m  and  a 
portfolio of 10 companies (INNO-Partnering Forum, Task Force 'Risk Capital', 2011). Thus, 
in  general,  funds  operating  in  Europe  are  deemed  to  be  too  small,  which  even  sometimes 

115 
116 
117 
118 
119 

Economist, 19 April 2012. http://www.economist.com/node/21552936  
Arle, unquote, Private Equity Barometer, Q1 2012 
Feasibility Study, p.38. 
ECB Study, p. 4 
Feasibility Study, p.38. 

EN 

62 

   EN 

 
                                                 
leads  to  difficulties  in  obtaining  support  from  the  existing  EU  funding  programmes.(The 
European Venture Fund Investors Network, 2011). Furthermore, another issue hampering the 
development of the European venture capital market is its fragmented nature. This is mainly 
due to the varying national regulatory regimes and the lack of coherence between the 27 tax 
systems  in  the  EU  ,  which  makes  cross-border  venture  capital  investments  difficult.  In 
addition  to  the  structural  challenges  in  this  market,  the  financial  crisis  also  constrained 
venture  capital  investments.  The  figures  for  2009-2010  indicate  that  the  annual  amount 
invested  by  European  venture  capital  funds  in  SMEs  was  significantly  decreased  in 
comparison to the pre-crisis period (€ 3-4 millio n compared to € 6-7 million). The effects of 
the  credit  crunch  on  the  venture  capital  investments  has  also  been  proven  by  the  study 
showing that the degree of cyclicality of venture capital finance is indeed by far the largest 
compared to other types of SME finance.120  

As to the market failure of information asymmetries, SMEs are likely to suffer more from 
this  problem  due  to  the  lack  of  credible  company  information  (e.g.  credit-rating)  that  they 
could transmit to banks and other investors with whom they are negotiating their financing. 
121 This may make the costs of customer acquisition and subsequent due diligence so high for 
the lenders that they would not obtain any profits on smaller sized loans. As a result, banks 
could lend profitably only to existing small business customers about whom they had decent 
prior  knowledge  (NESTA,  2011b).  Also  the  lack  of  performance  measurement  data  ("track 
records") on investment in SME growth capital is likely to make investors more risk averse 
and  can  result  in  a  higher  level  of  required  return  for  an  investment  or  lower  levels  of 
investments  being  committed  at  all.  Such  information  gaps  naturally  impact  negatively 
innovative new companies.122  

In  addition  to  imperfect  information  identified  on  the  supply-side,  there  are  information 
failures  also  on  the  demand-side.  These  include,  among  others,  lack  of  "investment 
readiness" by entrepreneurs (e.g. poor business plans or inadequate management skills) and 
lack  of  knowledge  among  SMEs  on  the  nature  and  availability  of  financing  and  related 
support measures. There is also some evidence that owners of SMEs are not always willing to 
concede  a  stake  in  their  business  in  return  for  equity  investment,  and  may  also  in  general 
perceive  that  debt  finance  is  the  most  suitable  type  of  financing  for  their  business. 
Furthermore, it is also likely that complexity of support measures and related procedures may 
discourage entrepreneurs from applying them.  

Alternative forms of financing and new financial products need to be developed 

The latest ECB SME Access to Finance Survey123 indicates that the composition of SMEs’ 
sources of external financing changed little between October 2011 and March 2012 compared 
with the previous survey round. The percentage of euro area SMEs using bank loans (35%, 
up from 33%) and bank overdrafts or credit lines (42%, up from 40%) increased somewhat, 
confirming  that  bank  financing  remains  their  most  important  source  of  external  financing. 
The use of trade credits was reported to be increasing gradually, while leasing, hire purchase 
and factoring moderated slightly in April 2012 compared with the previous survey round in 
October 2011.  

120 
121 
122 
123 

(EIM Business & Policy Research, 2009 
Study http://ec.europa.eu/dgs/competition/economist/esac.pdf  
Feasibility study page 40. 
ECB, Survey on the access to finance of SMEs in the euro area October 2011 to March 2012, April 
2012. 

EN 

63 

   EN 

 
                                                 
Figure 28: Sources of external financing of euro area SMEs 

(Over the preceding six months; percentage of respondents) 

Source: Survey on the access to finance of SMEs in the euro area October 2011 to March 
2012, April 2012, ECB. 

The upcoming restructuring of the banking sector and regulatory reforms in financial markets 
might  lead  to  wider  diversification  of  financing  choices  to  non-financial  companies  and  in 
particular to SMEs and midcaps. Trade credit is increasingly an important source of financing 
for SMEs which are unable to obtain bank loans because it is too costly for a bank to monitor 
them. Consequently, trade credit payable serves to some extent as a substitute for unavailable 
(bank  or  other)  external  financing.  It  also  can  play  a  buffer  role  in  the  downturn.  A  closer 
analysis of the evolution of credit during the latest crisis shows that the decline in the annual 
growth of trade credit payable between non-financial corporations has been less pronounced 
than that in nominal GDP growth. What is more, trade credit payable started to recover well 
before,  and  faster  than,  short-term  loans.  This  confirms  that  firms  which  were  unable  to 
obtain financing from banks have turned to their suppliers for credit.124  

Asset  based  finance  products  enable  companies  to  obtain  finance  against  the  value  of  their 
assets. This source of finance can be used by start-up firms as well as companies with a good 
trading  history.  It  is  relatively  flexible  as  the  available  finance  can  increase  with  the 
expansion  of  companies'  order  books.  Typical  products  include  factoring  and  invoice 
discounting. 

The  total  turnover  of  the  factoring  and  commercial  finance  industry  in  the  EU  in  2010 
amounted  to  €  986  billion,  an  increase  of  17%  on  the  2009  figure.  This  growth  has  taken 
place in an environment of low economic growth and highlights the importance of factoring 
as an alternative source of financing to SMEs. In 2010 the four largest factoring markets in 
Europe  (UK,  Germany,  France  and  Italy)  served  more  than  100,000  customers,  mostly 
SMEs.125  This  shows  that  there  is  still  ample  room  for  growth  in  the  segment  and  that 
factoring  can  also  contribute  to  reducing  the  financing  gap  caused  by  banks’  more 
conservative lending practices. 

124 
125 

ECB, Monthly Bulletin, April 2011 
EU Federation for the Factoring and Commercial Finance Industry, Reply to the Public Consultation on 
the European Commission’s document “Small Business, Big World”, July 2011. 

EN 

64 

   EN 

 
 
                                                 
Another  important  source  of  financing  for  SMEs  is  leasing.  Around  17%  of  total  SME 
investment was financed by leasing in 2010 (around € 100 bn). SM Es use leasing to finance a 
greater portion of their investments than larger businesses. In a sample of SMEs, 40% used 
leasing  in  2010  and  the  figure  was  expected  to  rise  by  43%  in  2011.  According  to  this 
estimate, leasing would allow to approximately 6 million of SMEs gaining access to another 
source of financing. An even greater uptake of leasing by European companies would boost 
economic  growth  and  fill  in  some  of  the  gap  left  by  the  dearth  in  bank  financing.  One 
estimate suggests that a greater uptake would add an extra 0.9% to 1.5% to the level of GDP 
by 2020.126 

Consequently, in order to meet short-term liquidity needs, European firms need to diversify 
their  access  channels  to  capital  markets.  The  right  framework  conditions  are  necessary  in 
order  to  ensure  operate  that  these  markets  are  competitive  and  open  to  new  entrants.  In 
particular, ICT-enhanced supply chain financing is an area where appropriate conditions still 
need to be developed. 

4.5. 

The crucial role of human capital 

Challenges faced by industry 

Internationalisation,  specialisation,  rising  climate  concerns,  ICT  and  new  technological 
possibilities  lead  to  a  need  for  continuous  up-skilling of  the  labour  force  in  all  economic 
sectors.  These  challenges  are  more  important  when  we  consider  the  forecast  of  a  shrinking 
labour supply due to the ageing of the European population.127 Despite current high level of 
unemployment, industry continues to have difficulties in finding staff with the right skills and 
qualifications.  These  are  wide  spread  concerns  because  without  a  qualified  labour  force, 
European  industry  might  face  serious  difficulties  in  incorporating  innovation  and  advanced 
technologies necessary to compete with companies from the emerging economies. 
According  to  the  2010  report  of  the  Group  of  Experts  on  New  Skills128  nearly  one  third  of 
Europe’s population aged 25-64 – around 77 million people – did not have or had low formal 
qualifications  and  only  one  quarter  have  high  level  qualifications.  Besides,  those  with  low 
qualifications  are  much  less  likely  to  upgrade  their  skills  and  follow  lifelong  learning. 
Another challenge is to ensure that people have the right skills. Labour market  mismatches 
still exist and create the painful and wasteful situation of both skill shortages and skill gaps 
co-existing with unemployment, also among graduates of universities. 

Figure 29: Difficulties in recruiting staff for skilled jobs by NACE sector (EU-27; 2009) 

126 
127 

128 

EN 

The use of leasing amongst European SMEs, Leaseurope, November 2011. 
Oxford  Research,  Transversal  Analysis  on  the  Evolution  of  Skills  Needs  in  19  Economic  Sectors, 
January 2010 
New  Skills  for  New  Jobs:  Action  Now.  A  report  by  the  Expert  Group  on  New  Skills  for  New  Jobs 
prepared 
at 
Commission, 
http://ec.europa.eu/social/main.jsp?catId=568&langId=en  

European 

February 

available 

2010 

the 

for 

65 

   EN 

 
                                                 
NB: Establishment weights used. 

Source: ECS; Eurofound. 

The  CEDEFOP’s  forecast  indicates  that  although  further  economic  troubles  will  affect  the 
projected  number  of  job  opportunities,  the  major  trends,  including  a  shift  to  more  skill-
intensive  jobs  and  more  jobs  in  services,  will  continue.  CEDEFOP  points  out  to  skills 
shortages  in  particular  in  occupations  requiring  highly  specific  qualifications  such  as  life 
science  engineering  and  health  associate  professionals  and  teaching-associate  professionals. 
But there are also pointers to shortages in sales, services and some elementary occupations.129 

The Commission analysis on the evolution of skills needs in selected sectors130 also confirms 
the  increasing  polarization  of the  demand  for  skills and  competencies.  The  development  of 
new  technologies  and  increasing  competition  will  drive  a strong  demand  for  high  skilled 
professionals, but at the same time the growth of service industries will increase demand for 
both  high  skilled  and  low  skilled  workers.  At  the  same  time  off-shoring  of  production 
activities is lowering the number of skilled jobs in Europe.  

Figure 30: Skills forecast for the period until 2020: Job openings by occupation (in 000), EU27+ 

129 
130 

Ibid. 
Oxford  Research,  Transversal  Analysis  on  the  Evolution  of  Skills  Needs  in  19  Economic  Sectors, 
January 2010. 

EN 

66 

   EN 

 
 
 
 
                                                 
Source: CEDEFOP, Skills forecast 2012 

Industrial  representatives  are  in  particular  concerned  that  deficit  of  qualified  Science, 
Technology, Engineering and Mathematics (STEM) graduates might have negative impact on 
European  industry  competitiveness  and  slow  down  the  recovery.  According  to  recent 
estimates  Asian  countries  train  twice  as  many  scientists  compared  to  European  member 
states, and three times as many engineers.131 Even if Europe has experienced a large increase 
in the absolute number of tertiary level STEM graduates in recent years, this has been mainly 
a  result  of  considerable  increases  in  access  to  education.  Removing  the  impact  of 
demography  and  educational  attainment  on  the  figures  by  assessing  the  choice  of  MST 
subjects  in  relation  to  the  total  student  population  reveals  a  10.8%  proportional  decrease  in 
MST  graduates  from  1998  to  2006.  What  is  worse,  the  academic  achievement  of  European 
graduates falls well behind that of their Asian counterparts according to PISA statistics.132 

At  the  same  time,  demand  for  STEM  graduates  is  likely  to  increase,  creating  a  workforce 
deficit. Negative attitudes to education and work in science and technology amongst young 
Europeans further underline the problem.133 

Similar  findings  could  be  found  in  the  2010  version  of  the  VDMA  (German  Engineering 
Federation) engineer survey. The survey is carried out every third year, and in the last version 
companies were asked whether they expect a shortage of qualified applicants in the various 
fields  of  activity  of  engineers.  It  reports  serious  concerns  of  shortages  of  skilled  job 
candidates with an engineering background. Almost two thirds of the companies that will be 
in  search  of  engineers  for  R&D/design  or  sales  positions  think  that  they  will  encounter 
difficulties to adequately fill these positions134. 

131 

132 

133 
134 

No 

left 

European 

scientists 
inGenious, 
http://www.ert.eu/sites/default/files/14Dec_ECB-inGenious%20Press%20Conference%20-
%20Press%20Release.pdf 
European  Round  Table  of  Industrialists,  Mathematics,  Science  &  Technology  Education  Report, 
http://www.ert.eu/sites/default/files/MST%20Report%20FINAL.pdf 
Ibid. 
VDMA, Ingenieure in Maschinen- und Anlagenbau, Ergebnisse der VDMA Ingenieurerhebung 2010 , 
Oktober 2010, 

December 

2020?, 

2011, 

by 

EN 

67 

   EN 

 
 
                                                 
In  addition,  reports  from  specific  industrial  sectors  such  as  the  chemical  industry135  or 
electrical/electronics  industries136  point  out  that  skills  shortage  is  a  major  concern.  Several 
measures to increase the supply of engineering and science graduates are proposed, such as 
increased  attractiveness  of  the  education,  improved  equivalence  of  all  technical  degrees 
across  the  EU,  the  creation  of  engineering  apprenticeships,  improved  business  skills  for 
scientists etc. 

Concerning  the  specific  skills  areas,  IT  skills  are  of  particular  importance  for  the  industry. 
Given  the  fast  progress  and  wide  application  of  IT  technologies,  IT  literacy  is  not  only 
becoming  a  prerequisite  for  employment,  but  also  requires  continuous  up-skilling,  so  that 
companies could fully benefit from the latest IT solutions. For instance, in the UK 77% of the 
total  workforce  use  IT  in  their  jobs  (with  a  rising  trend)  and  92%  of  advertised  vacancies 
require applicants to have basic IT skills. However, 1 out of 10 businesses report gaps in IT 
user skills.137 Thus, ensuring the right level of IT literacy of the employed labour force will 
be necessary at all stages of education and training. 

The respondents to the stakeholder consultation are also concerned about the existing labour-
market mismatches and insufficient number of students with STEM skills. They emphasised 
that  highly  skilled  and  educated  workforce  underpinned  sustainable  economic  growth. 
Consequently, they considered modern education and training systems reflecting needs of the 
labour  market  as  prerequisites  for  innovation  and  effective  transition  to  a  knowledge-based 
economy.138  

Job potential of green economy 

The green economy offers number of new job opportunities. For instance, new investments 
and regulation in the energy sector will result in higher employment and increasing demand 
for  skilled  workers  in  the  renewable  energy  sector.  The  construction  sector,  on  the  other 
hand, will benefit directly from investments in climate adaptation measures, which shall lead 
to new employment opportunities in such activities as extending coastal defences, reinforcing 
buildings and infrastructures, water management and relocation of exposed settlements. 

It should be noted however that the job potential of the new rising green sectors is to a large 
extent dependent on the public support needed to stimulate the markets in their initial stage of 
development. In times of economic crisis, this is a particular challenge for small green sectors 
whose  growth  is  slowed  down  by  lack  of  necessary  investments.  Consequently,  dedicated 
investment plans are needed to un-tap the job creation potential and to overcome the shortage 
of funds for new emerging and rising sectors. For instance, leveraging private investments by 
mobilisation of the EU funding could play an important role in this respect.  

Moreover,  it  is  to  be  noted  that  young  people  are  not  very  keen  on  taking  up  green  jobs, 
because  they  lack  attractiveness  and  are  often  perceived  as  a  low-pay,  'dirty'  manual  work. 
Poor  working  conditions  already  result  in  skills/labour  shortages  in  buildings  or  renewable 

135 

136 
137 
138 

http://www.vdma.org/wps/wcm/connect/e6ef0300447d57d4933db79c93f511f4/Ingenieurerhebung_20
10_Publikation.pdf?MOD=AJPERES&CACHEID=e6ef0300447d57d4933db79c93f511f4 
Available  at:  http://www.cefic.org/Documents/PolicyCentre/Skills-for-Innovation-in-the-European-
Chemical-Industry.pdf 
Available at: http://ec.europa.eu/enterprise/sectors/electrical/files/electrareport_en.pdf 
E-skills UK, Technology Insights 2011: Summary report, 2011 
European  Commission,  Public  Consultation  Report.  Public  consultation  on  the  Industrial  Policy 
Communication 2012. 

EN 

68 

   EN 

 
                                                                                                                                                        
energy sectors. Also many jobs in waste management, recycling and agriculture, all of which 
are sectors with employment potential in a greener economy, are characterised by extremely 
poor  working  conditions  (low  pay,  unsocial  working  hours,  hazardous  health  and  safety 
conditions,  employment  contracts).  Thus,  in  order  to  prevent  labour  shortages,  efforts  to 
upgrade skills must be accompanied by the improvement of working conditions. 

Investment in skills and training 

Europe has to be able to count on a skilled workforce, capable of contributing and adjusting 
to technological change and new patterns of work organisation. Ensuring that workers have 
right  skills  will  be  a  challenging  task  as  it  will  require  mapping  employers'  fast  evolving 
needs in nascent fields and delivering adequate training. It is crucial that requalification and 
skills upgrade of the current workforce goes in hand with the up-take of new technologies in 
the sectors they work in, so that the lack of relevant skills does not hamper the transition to 
green economy or result in business failures.  

Multiple  entry  routes,  varied  levels  of  qualification  and  insufficient  recognition  of  skills 
acquired through non-formal or informal learning often limits the mobility of workers, also 
into  low  carbon  occupations.  Moreover,  a  lack  of  qualified  professional  coaches/trainers 
enabling the delivery of new skills to workers may also slowdown the process of equipping 
the workforce with the skills sought by employers. 

When it comes to tapping on the job potential of a green economy, special attention should be 
paid  to  SMEs  and  their  needs,  as  they  could  benefit  in  particular  from  external  support  in 
upgrading skills of their workforce. SMEs are often not aware of training schemes offered by 
public  employment  services  and/or  are  sceptical  about  such  programs  because  of  the 
disruption  it  may  cause  to  their  business.  However,  SMEs  are  open  to  in-house  informal 
training (e.g. tutorship, mentorship, apprenticeship) as a preferential way of recruiting proven 
workers.  That  is  why  policies  must  take  into  account  the  specificities  and  needs  of  this 
particular group of companies. Normally SMEs are at a disadvantage when recruiting high-
skilled or intermediary-skilled workers, as SMEs cannot match the wages and non-financial 
arrangements  offered  by  larger  companies.  Also,  it  has  to  be  noted  that  SMEs  have  more 
difficulties to train their workforce in-house as compared to larger companies. 

Estimates  concerning  the  overall  scale  of  a  transition  to  a  green  economy  show  that  while 
yearly labour market turnover in the EU is estimated at 22-25%, the "total" churn linked to 
the shift to a green economy is expected to be in the region of 2-3% of the overall estimate of 
around  48  million  labour  market  churn.  Some  sectors  are  already  experiencing  strong 
employment  dynamics.  Solar,  wind  and  biomass  are  the  technologies  progressing  most 
rapidly  and  the  renewables  sector  in  Europe  has  seen  an  increase  of  300,000  employees 
within only five years (2005-2009). 

EN 

69 

   EN 

 
5. 

ANNEX 

Theme  Sub-

Nr 

Action 

theme 

Deliverables 

Date 
of 
implementation  

Implementation of the Industrial Policy Communication COM(2010) 614 

State of 
implementation 
A = Done or 
Well underway 
B = starting 
C = Not started 
D = Regular 
monitoring/MS 
impl. 

Time-range for 
impact on industry 
or general 
economy 
S = Short-term  
(1-2- yrs) 
M = Medium-term 
(3-4 yrs) 
L = Long-term 
(5-10 yrs) 

1.1.1 

carry out competitiveness proofing within the 
impact assessment process to ensure a reinforced 
analysis of the impacts on industrial competitiveness 
for important new policy proposals 

1.1.2  

ex-post evaluations and ‘fitness checks’ to screen 
existing EU legislation should include a focus on 
industrial competitiveness issues  

R
O
F
S
N
O
I
T
I
D
N
O
C
K
R
O
W
E
M
A
R
F
G
N
I
V
O
R
P
M

I

.
1

*
]
3
r
e
t
p
a
h
c
[

Y
R
T
S
U
D
N
I

t
r
a
m

s

g
n

i
t
n
e
m
e
l

p
m

i

d
n
a
g
n
i
f
o
o
r
p
-
s
s
e
n
e
v
i
t
i
t
e
p
m
o
C
1
.
1

]
1
.
3
[
n
o
i
t
a
l
u
g
e
r

Implementation ongoing  
* Commission SWD "Operational guidance for assessing 
impacts on sectoral Competitiveness within the Commission 
impact assessment System.  
A "Competitiveness Proofing" Toolkit for use in Impact 
Assessments" - SEC(2012) 91 - 27.1.2012 
* initial identification of relevant policy initiatives where 
competitiveness at Commissioners group on industrial policy 
(January 2011) 
* growing number of policy initiatives undergoing 
competitiveness proofing e.g.  
- the amendments to the toy safety directive 
- policy on security industry 
- working time directive 
- roadmap for a low-carbon economy 
* operational guidelines have been developed and are under 
testing 
* competitiveness proofing helpdesk and coaching in place 
In 2010 pilot exercises have started in four policy areas: 
environment, transport, employment and social policy and 
industrial policy. The results will be presented in 2012. 
* Alignment of ten directives to the New Legislative 
Framework (Decision 768/2008) – July 2011  
* Report on the results of the Fitness Check for the Food chain – 
2012 
* Fitness check on the automotive sector (type approval system 
for motor vehicles) 
* Evaluation of chemical market after REACH – June 2012  

2011 onwards 

A 

L 

2011 onwards 

A 

L 

EN 

70 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.1.3  

review the Small Business Act in order to continue 
to improve the business environment for SMEs  

1.1.4  

1.1.5  

1.2.1 

Member States should ensure an assessment of the 
impacts on industrial competitiveness along with 
economic, social and environmental impacts of 
major policy proposals and implement ‘fitness 
checks’ of their existing legislation 

Member States should implement the Small Business 
Act, make further improvements in the business 
environment, and ‘think small first’ 

initiate appropriate legislation to make financial 
markets more resilient and efficient, whilst ensuring 
the financing needs of businesses and SMEs  

IMPLEMENTED 
*Communication Review of the Small Business Act for 
Europe COM(2011) 78 - 23.02.2011 
* Report Minimizing regulatory burden for SMEs 
COM(2011) 803 – 23.11.2011 

Monitored through annual Article 173 Review 

Monitored through annual Article 173 Review  

IMPLEMENTED 
New legislation: 
* Single Market Act COM(2011) 206/4 – adopted 13.4.2011 
* Revision of Capital Requirements Directives ("CRD IV") – 
Commission Proposal 20.07 2011 
* Regulation on European Venture Capital Funds – 
Commission Proposal COM(2011) 860/2 – 7.12.2011 
* Action Plan for improving SMEs access to capital markets 
COM(2011)870/2 – 7.12.2011 

2011 

A 

2011 onwards 

D 

2011 onwards 

2010 onwards 

D 

A 

M 

M 

M 

M 

1.2.2 

refocus European financial instruments to help 
overcome market failures in financing small 
businesses and innovation post-2013 

IMPLEMENTED 
* Proposal for the MFF 2014-2020 – 29.6.2011 - Substantial 
increase of funds for financing SMEs and innovation was 
proposed in the Horizon 2020 and COSME financial 
programmes. 

2011-12 

A 

L 

1.2.3 

develop and share best practices on Member State 
schemes for access to finance  

* Report on the results of a study on best practices on schemes 
for access to finance in Member States - 2012 

2011 -12 

B 

M 

]
2
.
3
[

s
e
s
s
e
n
i
s
u
b
r
o
f

e
c
n
a
n
i
f
o
t

s
s
e
c
c
a

g
n
i
v
o
r
p
m

I

2
.
1

EN 

71 

EN 

 
  
 
 
 
 
 
 
 
 
2.1.1 

ensure the timely implementation of the Single 
Market Act 

IMPLEMENTED 
* Single Market Act COM(2011) 206/4 – adopted 13.4.2011 
* Stocktaking of the progress - end of 2012  

2011-2012 

]
4
r
e
t
p
a
h
c
[

T
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K
R
A
M
E
L
G
N
I
S
E
H
T
G
N
I
N
E
H
T
G
N
E
R
T
S

.
2

]
1
.
4
[

s
t
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g
n

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D
1
.
2

2.1.2 

* draw up a EU action plan to develop EU market 
surveillance.  
* develop guidelines for customs controls for 
product safety with national customs and market 
surveillance authorities 

2.1.3 

screen EU legislation, including the free movement 
of goods, to identify further harmonisation to 
significantly reduce the costs of doing business 
across borders 

2.1.4 

2.1.5 

2.1.6 

set up a High Level Group on Business Services to 
examine market gaps, standards, innovation and 
internal market issues in (i) marketing and 
advertising; (ii) facility management; (iii) technical 
and engineering services; and (iv) design  

enhance enforcement of intellectual property 
rights, including strengthening the European 
Observatory on Counterfeiting and Piracy 

urgent adoption of the proposals for an EU unitary 
patent protection and the applicable translation 
arrangements, and creation of a unified patent 
litigation system to allow the first European patents 
with unitary effect to be issued in 2014 

* Revision of the General Product Safety Directive (GPSD) and 
of the Regulation 765/2008 on Market Surveillance  
* New horizontal single legislative proposal on market 
surveillance – December 2012 
* Commission Decision on a multiannual plan for Market 
Surveillance (Report of the expert group on Market 
Surveillance) - Q4 2012 
* Draft roadmap is under preparation 
* Guidelines on import controls for product safety and 
compliance 
* Action plan for European e-invoicing with European 
Forum to monitor progress - Communication and decision 
adopted on 2.12.2010 COM(2010)712  
* As part of the REACH evaluation and review, examine the 
harmonization of REACH risk management requirements on the 
intra-EU chemicals trade and eliminate potential 
overlaps/conflicts with other EU legislation – 2012 
* Communication on regulatory aspects of nanomaterials –
September 2012 
* HLG will be launched by the end of 2012 

* Communication on a Single Market for intellectual 
property rights adopted 24.5.2011 

Commission proposals for regulations implementing enhanced 
cooperation in the area of the creation of unitary patent 
protection and with regard to the applicable translation 
arrangements – by 2012 

2.1.7 

develop and share best practices and materials 
relating to market surveillance, customs, and 
general business support to improve the 
enforcement of intellectual property rights 

* Best practice 2 on IPR enforcement support to SMEs, the 
group will make recommendation to further improve IPR 
enforcement support to EU SMEs by end 2012 
* Customs expert group on e-counterfeiting : identify problems 
and solutions and share best practices on the customs handling of 
small parcels resulting from internet sales 

A 

B 

2011 onwards 

2011 onwards 

B 

2012-14 

C 

Spring 2011 

2011 - 12 

D 

A 

2011 

B 

M 

M 

L 

L 

S 

S 

S 

EN 

72 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.2.1 

develop an efficient Internal Market in road, air, 
rail and waterborne transport and overcome 
transport bottlenecks through the upcoming 
revision of the TEN-T guidelines  

2.2.2 

adopt an energy infrastructure package to support the 
development of an internal energy market 
addressing missing infrastructure links of European 
significance  

2.2.3 

liberalise EU energy markets in order to enhance 
competition in the energy sector and avoid putting 
the EU’s manufacturing industry at a significant 
disadvantage in the global markets 

2.2.4 

develop an infrastructure funding strategy 
including the creation of EU project bonds and 
fostering public private partnerships 

2.2.5 

address identified transport bottlenecks and cross-
border inter-connection of energy grids 

IMPLEMENTED 
* White Paper: Roadmap to a Single European Transport 
Area adopted 28.03.2011 
* SWD on the new TEN-T Policy SEC(2011) 101 – January 
2011 
* Revision of TEN-T guidelines: Proposal for a regulation on 
Union guidelines for the development of the trans-European 
transport network – 19.10.2011 
IMPLEMENTED 
* Communication Energy infrastructure priorities for 2020 
and beyond COM(2010) 677- 17.11.2010 
* Proposal for a regulation on guidelines for trans-European 
energy infrastructure (COM(2011) 658) – 19.10.2011 

* Communication Energy 2020 A strategy for competitive, 
sustainable and secure energy adopted 10.11.2010 
* Implementation  

2011 
onwards 

* Consultation on the Europe 2020 Project Bond Initiative 
closed on 2 May 2011 
* Conference in April 2011 
* Proposal for a regulation establishing the Connecting 
Europe Facility (COM(2011) 665) – 19.10.2011 
* Regular monitoring by the Commission 

2.2.6 

promptly implement the Third Internal Energy 
Market Package 

* Regular monitoring by the Commission 

2.3.1 

present a Standardisation strategy to promote a 
stronger role for European standard setting in a 
rapidly changing world and society 

IMPLEMENTED 
* Communication plus the revision of Directive 98/34/EC, 
Decision 87/95/EEC on ICT Standardisation and Decision 
1673/2006 on the financing of European Standardisation, 
including revision of the ICT Standardisation policy - 
1.6.2011 

2011 

A 

2011 
onwards 

2011 onwards 

2011 onwards 

2011 onwards 

2011 

A 

A 

A 

D 

D 

A 

M 

L 

L 

L 

M 

M 

L 

]
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73 

EN 

 
  
 
 
 
 
 
 
 
3.1.1 

3.1.2 

follow up the work of the HLG on Key Enabling 
Technologies to promote the wide and timely 
deployment, take-up and commercialisation of new 
technologies  

* High-Level Group - final report published 28.6.2011 
* Communication with an Action Plan on Key Enabling 
Technology deployment – adopted on 26.6.2012 
(COM(2012)341. 

promote industrial research, development and 
innovation on advanced manufacturing 
technologies to facilitate the modernisation of the 
EU industrial base and provide responses to societal 
challenges like energy efficiency, climate change 
and resource scarcity 

* Communication Partnering in Research and Innovation 
COM(2011) 572 – 21.9.2011 
* Continuation of the Factories of the Future Private-public 
partnership in the Horizon 2020.  
* Studies of how REACH could be further streamlined for the 
benefit of innovations, and emerging technologies, including 
nanotechnologies 

]
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3.1.3 

promote initiatives such as the Universities-Business 
Forum pilot action funding Knowledge Alliances to 
bring together higher education and businesses to 
improve EU's high-skilled workforce,  

3.1.4 

promote new business concepts and related 
manufacturing technologies focused on the 
development of sustainable, user-driven design-
based products in the textile and clothing sector as 
well as other large consumer markets  

* Fourth European University-Business Forum took place in 
March 2011 
* Supporting growth and jobs – an agenda for the 
modernisation of Europe's higher education systems 
COM(2011) 567 – 20.9.2011 
* Communication Rethinking skills in Europe - foreseen in Q3 
2012  
* Communication on skills governance – foreseen in Sep 2012 
* Major study on the competitiveness and future prospect for the 
textiles/clothing and footwear sectors will be finalised in 2012. 
Conferences with stakeholders will be organised as a follow-up. 

3.1.5 

develop policy approaches for greater cross-
fertilisation of innovation including into traditional 
manufacturing sectors and SMEs 

* improving use of ICT and creative industries for industrial 
competitiveness through the European Creative Industries 
Alliance and through large-scale demonstrators with impact on 
sectors  

3.1.6 

present a new strategy for globally competitive 
clusters and networks including specific action to 
promote globally competitive clusters and networks 
in both traditional and emerging industries  

* Communication on fostering industrial competitiveness and 
innovation in the EU through world-class competitive clusters – 
on hold until the study is completed 
* Study on relation between business networks and clusters (Eur. 
Comp Report 2012) - final report expected in Q3 
* 3 CIP Calls launched, on studying clusters in emerging 
industries, on internationalisation of clusters, and on cluster 
management excellence – results expected Q2 2013 

]
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A

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2010-12 

Ongoing 

A 

A 

*Jul 2011 
*Q3 2011 

A 

2011-2012 

C 

2011 

2012-2013 

C 

B 

M 

M 

L 

L 

M 

L 

3.1.7 

encourage the parallel notification of aid to cross-
border collaborative R&D&I projects 

* on-going monitoring 

Continuous activity 

D 

M 

EN 

74 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
3.1.8 

3.1.9 

foster closer cooperation between policies for key 
enabling technologies to maximise synergies and 
complementarities in technology deployment 

* Communication with an Action Plan on Key Enabling 
Technology deployment – adopted on 26.6.2012 
COM(2012)341. 

promote ‘smart specialisation’ through EU 
Regional policies to develop clusters and improve 
the innovation performance of regions 

* Launch Smart Specialisation Platform – 24.6.2011 

3.2.1 

promote e-skills for ICT practitioners, users and 
managers  

3.2.2 

3.2.3 

encourage the networking of Member State 
industry, education and employment authorities to 
share information and best practice on labour 
markets and skill strategies 

propose guidance principles on framework 
conditions for job creation, including on 
investment in the development of graduates in 
science, technology, engineering and maths 

* External Evaluation report onf the implementation of the 
Commission's Communication on "e-Skills for the 21st Century" 
and several studies in progress - 2012 
* European e-Skills Week - 26/30 March 2012 

Implementation of Strategic Framework for EU cooperation in 
"Education & Training 2020" 
* KNOWFACT – A Knowledge Partnership for the definition 
and launch of the European Teaching Factory Paradigm in 
manufacturing education – launched Dec 2011 
* Proposal for a Council Decision on guidelines for the 
employment policies of the Member States COM(2011) 813 – 
23.11.2011 

2012 

2011 

2012 

Ongoing 

2011 

3.2.4 

increase the usage of the European Social Fund for 
skills upgrading and restructuring 

* Within framework of 2007-2013 Structural and Cohesion 
Programmes 

Ongoing 

4.1.1 

ensure that an analysis of impacts on 
competitiveness is performed for all trade 
negotiation mandates within the impact assessment 
process  

4.1.2 

prepare for the Council and the Parliament an 
economic analysis of consequences of the 
proposed deal for the EU, prior to signature 

* Impact assessment of upcoming mandates, e.g. possible Free 
Trade Agreement with Japan 

2011 onwards 

* Undertaken after a new trade agreement is concluded 

2011 onwards 

A 

A 

A 

A 

A 

B 

A 

B 

4.1.3 

make an annual report on trade and investment 
barriers for the Spring European Council, including 
‘beyond the borders’ measures and industrial policy 
practices and identifying priorities for market access 
strategy and enforcement action 

IMPLEMENTED 
* First Trade and Investment Barriers Report 2011 
COM(2011) 114 
* Annual reporting 

2011 onwards 

A 

M 

M 

M 

M 

M 

M 

L 

L 

L 

75 

EN 

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4.1.4 

4.1.5 

develop international regulatory co-operation 
initiatives with a view to develop globally 
compatible rules and standards. In that respect, our 
trade agreements should also promote the use by our 
partners of international rules and standards, as well 
as of trade-friendly conformity assessment 
procedures 

seek closer economic integration with neighbouring 
countries through the European Neighbourhood 
Policy (negotiating Agreements on Conformity 
Assessment (ACAAs) with neighbouring countries 
that have completed the preparations);  

give greater priority to market institutions and 
economic governance in relations with development 
partners  

* Trans-Atlantic Economic Council.  
* Other regulatory dialogues. 
* Technical Barriers to Trade committee 

Ongoing 

A 

* Communication on a Partnership for Democracy and 
Shared Prosperity 8.3.2011 COM (2011) 200 
* Communication on the European Neighbourhood Policy – 
2011-12 
* ACAAs - Countries concerned (1st phase): Egypt (toys, gas 
appl.) and Tunisia (construction, electric. prod.); integration of 
ACAAs in other FTAs (e.g. Ukraine and Croatia, FYRoM, 
Albania)  
* Communication on trade and development – January 2012 

2011 onwards 

A 

L 

L 

4.1.6 

present a strategy for support for the 
internationalisation of SMEs with concrete 
measures building on policies set out in the Small 
Business Act  

IMPLEMENTED 
* A study is on-going 
* Communication: 'Small Business, Big World - a new 
partnership to help SMEs seize global opportunities’ 
COM(2011) 702 – 9.11.2011 

2011 

A 

M 

4.1.7 

4.1.8 

4.1.9 

integrate traceability requirements for third 
country producers in Commission proposals where 
relevant 

accelerate the adoption of the Commission’s 
proposal on the indication of the country of origin 
of certain products imported from third countries ; 
- include where relevant in FTAs 

review Strategy for the Enforcement of 
Intellectual Property Rights in Third Countries that 
defines a broad framework to fight IPR infringement 
in third countries, as well as specific action lines to 
do so 

* Inclusion of traceability requirements in legislation where 
relevant 

ongoing 

* Adoption of the Commission proposal 
* Ensure that FTAs include appropriate IP regimes 

* Inter-service group 
* Communication on a revised strategy for the protection and 
enforcement of intellectual property rights in third countries – 
end of 2012 

2011 

B 

A 

B 

L 

L 

L 

EN 

76 

EN 

 
  
 
  
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4.2.1 

present a Strategy on Raw Materials including 
proposals on fostering better framework conditions 
for sustainable supplies of domestic primary raw 
materials, increased recycling, and finding 
substitutes for other raw materials 

IMPLEMENTED 
* Communication on commodity markets and raw materials 
COM(2011) 25 – adopted 02.02.2011 
* Communication on the Innovation Partnership on Raw 
Materials COM(2012) 82– adopted on 29.02.2012 
* continued implementation of the strategy on Raw materials: 
2010-2011 report on raw materials – March 2012  

2011 onwards 

A 

M 

5.1.1 

develop the long-term sectoral industrial 
strategies and policies needed to assist the transition 
to a low-carbon, resource and energy-efficient 
economy in line with the EU roadmap for a low 
carbon economy by 2050, 

* Study on EU Industry in a Sustainable Growth Context – 
October 2011 

2011 

B 

5.1.2 

monitor sustainable competitiveness, including EU 
industry’s voluntary initiatives aimed at resource 
sustainability 

* Study on Competitiveness of the European Companies and 
Resource 
Efficiency – July 2011 

5.1.3 

review the Sustainable Consumption and 
Production / Sustainable Industrial Policy  
and consider the possible extension of the Eco-
design Directive to new products  

* Communication reviewing the Sustainable Industrial 
Policy/Sustainable Consumption & Production Action Plan (of 
2008) - foreseen Q3 2012 
* Evaluation of Ecodesign Directive completed by the end 2011.
* Review of the Ecodesign Directive 2009/125/EC – foreseen 
Q4 2012 

2011 

2012 

A 

B 

5.1.4 

launch an Eco-innovation Action Plan to ensure the 
commercialisation and deployment of key 
environmental technologies 

IMPLEMENTED 
* Communication on innovation for a sustainable Future - 
The Eco-innovation Action Plan COM(2011) 899 – 
15.12.2011 

2011 

A 

5.1.5 

foster closer coordination between policies for 
environmental technologies to maximise synergies 
and complementarities in technology deployment, 
including policies for boosting demand, in particular 
in eco-innovation 

Monitored through annual Article 173 Review (ENTR B3) 

2011 onwards 

D 

L 

L 

M 

M 

M 

EN 

77 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.2.1 

review Community support for re-integrating 
redundant workers into new jobs including through 
the review of the European Globalisation 
Adjustment Fund (EGF) regulation 

IMPLEMENTED 
*The derogation of 2008 in the application of the EGF has been 
extended until the end of 2013.  
* Proposal for a regulation on the European Globalisation 
Adjustment Fund (2014 - 2020) – 6.10.2011 

2011 

A 

5.2.2 

launch a consultation of European social partners on 
a European framework for restructuring 

5.2.3 

review the Rescue and Restructuring Guidelines 
for State Aid 

IMPLEMENTED 
* Green Paper Restructuring and anticipation of change: 
what lessons from recent experience– COM(2012) 7 - 
17.1.2012 
* Guidelines on Rescue and Restructuring to be revised in 2012, 
planned adoption 2013  

present proposals to accelerate the implementation 
and improve the focus of European Structural 
Funds through the Fifth Cohesion Report and in the 
new Cohesion policy regulatory framework 

* 5th Cohesion Report published, COM(2010) 642 final - 
09.11.2010 
* Regulatory framework proposal on 6th October - Negotiation 
phase on-going. 

put forward a new policy initiative on corporate 
social responsibility addressing emerging issues 
such as business and human rights, and company 
disclosure of environmental, social, employment-
related, and governance information 

IMPLEMENTED 
* Communication 'A renewed EU strategy 2011-14 for 
Corporate Social Responsibility' COM(2011) 681 – 
25.10.2011 

valorise EU industry’s voluntary initiatives aimed at 
resource sustainability 

Commission evaluation of stakeholder transparency initiative in 
the chemicals industry 

2011 onwards 

examine the possibility of an initiative on the 
Environmental Footprint of Products 

A harmonised methodology for the calculation of the 
environmental footprint of products (including carbon footprint) 
is under development. Testing is on-going. Final methodological 
guide planned for September 2012.  

2011-12 

S 

L 

S 

M 

M 

M 

M 

2012 

2012 

2010-11 

2011 

A 

C 

A 

A 

B 

B 

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5.3.1 

5.3.2 

5.3.3 

EN 

78 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
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6.1.1 

propose measures to implement the priorities of 
the space policy  

2011 

A 

S 

*Communication on an EU Space Strategy at Citizens' 
Service COM 2011(152) – adopted 04.04 2011 
* Communication on the European Earth Monitoring 
Programme (GMES) and its operations (from 2014 onwards) 
COM(2011)831 – 30.11.2011 
* Proposal for a regulation on the implementation and 
exploitation of European satellite navigation systems 
COM(2011) 814 – 30.11.2011 
* Two legislative proposals expected in 2012 
* Communication on industrial policy for the space industry – 
foreseen Q4 2012  
* Regulation establishing a Third Party Liability regime for the 
EU Global Navigation Satellite Systems - foreseen November 
2012 
* Proposal for a Regulation on the setting up and operations of 
Space Surveillance and Tracking (SST) services at European 
level - foreseen July 2012 

6.1.2 

6.2.1 

6.2.2 

6.2.3 

pursue a Space Industrial policy developed in close 
collaboration with the European Space Agency 
and Member States 

propose a Clean and Energy-efficient Vehicles 
platform to ensure infrastructure investments, 
including pilot projects, and to launch research 
initiatives on key technologies and materials  

* CARS 21 HLG work ongoing 
- Interim Report – 2.12.2011 
- Final report on 6 June 2012 
* Communication - Report on the results of the CARS 21 High 
Level Group – Q3 2012 

2011-12 

2011-12 

A 

A 

launch a Strategic Transport Technology Plan, 
including a strategic initiative on Clean Transport 
Systems and an e-mobility package, to enhance the 
efficiency and the safety of the transport sector 

* Communication on Strategic Transport Technology Plan 
(September 2012) 
* Communication on alternative fuels strategy (late 2012) 

2011 onwards 

A 

undertake a feasibility study on rail energy storage 
and the hybridisation of diesel traction, enabling 
demonstration and further research projects to 
increase energy efficiency and strengthen 
competitiveness 

* Study overview and competitiveness survey of the railway 
supply industry – launched in October 2011 

2012-13 

B 

M 

M 

M 

EN 

79 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.3.1 

6.3.2 

6.3.3 

6.3.4 

6.4.1 

6.4.2 

promote corporate responsibility, improve access to 
medicines, and strengthen the competitiveness of the 
pharmaceutical industry;  
facilitate the functioning of the Internal Market for 
medicines through a review of Directive 
89/105/EEC on the transparency of pricing and 
reimbursement procedures 

present a Security Industry initiative, including a 
fast-track system for approval of priority 
technologies, setting priorities for harmonisation and 
standardisation and considering coordinated public 
procurement, and setting up a European Security and 
Dual-use Platform  
develop a strategy for the Sustainable 
Competitiveness of Construction to ensure 
appropriate framework conditions for construction 
products and services, improve resource efficiency 
and environmental performances of construction 
enterprises, and promote skills, innovation and 
technological development 

put in place conditions to create bio-based markets, 
improving relevant legislation and framework 
conditions for industrial use, promoting innovation 
through demonstration projects, and developing 
European and international standards  

* Process on Corporate Responsibility in the field of 
Pharmaceuticals launched in 2010 
*Transparency Directive COM(2012)84 adopted on 1/3/2012 

2010 onward 

A 

S 

* Communication Industrial Policy for Security Industry – 
adopted on 26 July 2012 (COM(2012) 417).  

2012 

A (July 2012) 

M 

* Competitiveness study completed in March 2011 
* Communication on the strategy for the sustainable 
competitiveness of the EU construction sector – due July 2012 

2011 

A (July 2012) 

M 

* Communication " Innovating for Sustainable Growth: A 
Bioeconomy for Europe" COM(2012) 60 – 13 February 2012
* Standardisation activities are on-going  

2011-12 

A 

M 

follow up the High Level Group on the 
competitiveness of the chemicals industry, notably 
its potential contribution to providing solutions to 
critical societal challenges through Innovation 
Partnerships 

IMPLEMENTED 
* Staff Working Paper on the progress with the 
implementation of the recommendations of the HLG on 
chemicals industry - adopted 04.02.2011 

2011 

A 

use the High Level Forum for a Better Functioning 
Food Supply Chain to ensure the swift 
implementation of the recommendations of the High 
Level Group on the Competitiveness of the Agro-
Food Industry  

* Action plan adopted by the Forum on 16.11.2010;  
* The Forum will deliver a Final report on the results achieved at 
the last HLF meeting at the end of the year 2012 

2011-12 

A 

S 

S 

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6.4.3 

propose strategic initiatives following the Green 
paper on Unlocking the potential of cultural and 
creative industries, including  
- a Communication on key aspects of the 
competitiveness of the fashion industry,  
- a European Creative Industries Alliance (ECIA) 
to establish policy dialogue on industrial and 
innovation strategies based on service innovation in 
this area 
- an Expert Forum on Innovative Creative 
Industries to extract lessons from the work carried 
out under ECIA  

6.4.4 

propose strategic initiatives in emerging industries 
notably those that demonstrate the transformative 
power of service innovation  
- a European Mobile and Mobility Industries 
Alliance (EMMIA) to establish policy dialogue on 
industrial and innovation strategies based on service 
innovation in this area  

e
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A
5
6

.

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6.5.1  

adapt State aid rules to allow for an appropriate 
compensation for indirect Emission Trading Scheme 
costs, such as those passed on through electricity 
prices, while ensuring a level playing field in the 
Single Market and the attainment of the Community 
objectives on emission reduction 

6.5.2 

6.5.3 

bring forward a Sustainable Industry Low Carbon 
Scheme (SILC) to coordinate framework conditions, 
funding actions, data collection, and other activities 
of the EU and Member States promoting 
development and uptake of low carbon technologies 
in line with the SET-Plan  

consider an energy-intensive industries low carbon 
implementation initiative in the context of the 
discussion on future research Public-Private 
Partnerships to ensure the appropriate R&D, 
financing and deployment strategies for low-carbon 
production 

* Communication Unlocking the potential of cultural and 
creative industries – foreseen September 2012 
* Communication on fashion on industry – (on hold) foreseen 
2013. 
* ECIA will be launched in February 2012 (specific deliverables 
after 2-3 years, depending on projects) 

2011-14 

B 

M 

* EMMIA will be launched in March 2012 (specific deliverables 
expected after 2-3 years, depending on projects)  
* A concrete action specific to GMES will be launched in 2012. 

2011-2014 

A 

* Guidelines on certain State Aid Measures in the context of the 
Greenhouse Gas Emission Allowance Trading Scheme – 
adopted on 22.5.2012 

2011 

A 

* Publication of a call for proposals – deadline 30.8.2011;  
* Signing specific contracts - Q4 2011; 
* Second round of CfP – 2012 
* Final report - Q4 2012  

2011 onwards 

A 

S 

S 

S 

Energy-intensive Industries PPP to be proposed 
(Covered under SPIRE) 

2012 onwards 

B 

M 

EN 

81 

EN 

 
  
 
 
 
 
 
 
 
6.5.4 

promote demonstration projects and uptake for 
ultra-low carbon production technologies, 
including industrial carbon capture and storage, 
while avoiding distortions to competition 

IMPLEMENTED 
* Support for sustainable and low-carbon technologies in 
energy-intensive process industries has been included in the 
Horizon 2020 financial framework 

further explore the opportunities to bring in further 
innovative incentive mechanisms linked to the 
carbon market, namely for fast movers 

consult with stakeholders on the best way to use and 
strengthen the industrial dimension of Joint 
Technology Initiatives and European Innovation 
Partnerships as announced in the Innovation Union 
Initiative, and on priorities in this respect 

Study launched: Support to the Commission in the development 
of an instrument for fostering investment in clean technologies 
with allowances for the EU Emission Trading System – Dec 
2011 
Input into Common Strategic Framework for Research and 
Innovation: e.g. the Innovation Partnerships on Smart Cities and 
Raw Materials,  
- New Private-public partnership (PPP) on Energy-Intensive 
Industries and renewal post-2013 of existing PPPs on Factories 
for the Future, Energy-efficient buildings, and Green Cars.  

2011-16 

A 

2012 

2011 

A 

B 

M 

M 

M 

monitor the actions outlined in this Communication 
to strengthen the European policy framework for 
industrial policy, working closely with the Council 
and European Parliament 

report to the Council and the European Parliament 
on the EU’s and Member States’ industrial 
competitiveness and related policies and 
performance on an annual basis 

Quarterly monitoring through the DG Enterprise Rolling Plan 
and the Competitiveness Inter-Service Group 

2010 onwards 

D 

Annual reporting in the framework of Article 173: 
* Communication: Implementing the Industrial Policy 
Flagship: Reinforcing Industrial Competitiveness Across the 
EU COM(2011) 642 – 14.10.2011 
* European Competitiveness Report 2011 – SEC(2011) 1187 
- 14.10.2011  

2011 onwards 

A 

7.1.3 

initiate peer reviews and exchanges of good 
practices with Member States to improve 
cooperation on industrial policies across the EU 

Peer reviews, technical missions to the MS 

2010 onwards 

D 

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6.5.5 

6.6.1 

7.1.1 

7.1.2 

E
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V
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U
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W
E
N
A

.
7

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* In square brackets a reference to the chapters in the original text of the Communication is made 

EN 

82 

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