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# 51995AC1296

**OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE on the communications from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: an industrial competitiveness policy for the European Union, and the action programme and timetable for implementation of the action announced in the communication on an industrial competitiveness policy for the European Union** 
  
*Official Journal C 039 , 12/02/1996 P. 0001*

  

Opinion on the communications from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions:

- an industrial competitiveness policy for the European Union, and

- the action programme and timetable for implementation of the action announced in the communication on an industrial competitiveness policy for the European Union

(96/C 39/01)

On 11 November 1994 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Economic Community, on 'an industrial competitiveness policy for the European Union'.

On 20 September 1995 the Council decided to consult the Economic and Social Committee, under Article 130 of the Treaty establishing the European Economic Community, on 'the action programme and timetable for implementation of the action announced in the communication on an industrial competitiveness policy for the European Union - draft proposal for a Council Decision on implementation of a Community action programme to strengthen the competitiveness of European industry'.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 7 November 1995. The Rapporteur was Mr Petersen.

At its 330th Plenary Session (meeting of 22 November 1995), the Economic and Social Committee unanimously adopted the following Opinion.

SUMMARY

I. Introduction (page 4)

The Committee supports the Commission's plan for a policy setting clear and predictable conditions for the optimum allocation of resources via the market, accelerating the process of structural adaptation and boosting the competitiveness of European firms. The public authorities play the role of catalyst and pathbreaker for innovation, and firms can expect them to provide not only clear and predictable conditions but also the right prospects for their activities. The main responsibility for industrial competitiveness lies however with firms themselves. (See point 1.1.3.)

The Committee feels that Article 130 of the EC Treaty provides a coherent legal basis for a horizontal Community industrial competitiveness policy. (See point 1.2.5.)

II. The competitiveness of European industry (page 6)

The macroeconomic variables used by the Commission in its empirical analysis show that the position of European firms in the context of the international division of labour is clearly inferior to that of major competitors. The Committee regrets that the Commission has paid insufficient attention in its analysis to the time factor (shorter production cycles). (See points 2.1.3 to 2.1.7.)

The Commission is right to point out that macroeconomic data cannot reflect certain fundamental elements underlying competitiveness: the microeconomic dimension, the enterprise spirit, high quality of the labour force, individual effort. (See point 2.2.1.)

The Committee therefore supported the strategic line of the White Paper on Growth, Competitiveness and Employment, which identifies a technology-intensive, highly productive and profitable industry as the backbone of a European economic development model. (See points 2.1.1 and 2.1.2.)

III.

The Community's priorities for industrial policy action (page 8)

In its Opinion the Committee concentrates on the Commission's industrial policy action programme of March 1995. The Committee feels however that the priorities break down into too many individual measures and that existing policy areas are dispersed. It is also unclear how the roles are to be allocated between firms and the state and between the Community and its Member States. There is also a lack of clarity over the allocation of objectives and measures if the industrial policy Communication is compared with the action programme - (COM(95) 87 final). (See points 3.1.1 and 3.1.2.)

The Committee supports the (two-year?) priorities for action put forward in the Commission's action programme: development of the internal market, better taking industry's needs into account in research policy, establishment of the information society and promotion of industrial cooperation. It is surprising however that other, no less important priorities are mentioned only in passing or are indeed entirely omitted. (See point 3.2.1.)

The Commission has submitted an action programme with objectives and programmed measures and an indicative timetable for the implementation of the industrial competitiveness policy. As in its industrial policy communication of September 1994, the Commission here sets out four priorities for action, reflecting the need for technological change and guiding the future approach to industry policy:

- promote intangible investment;

- develop industrial cooperation;

- ensure fair competition;

- modernize the role of the public authorities.

Promotion of intangible investment (page 11)

The Committee regrets however that the proposed individual measures for education show no evidence of an overall plan. Only if education and employment systems are better coordinated than in the past can labour-market tensions and problems be alleviated. More weight must be given to further vocational education. (See point 3.3.3.1.)

The Committee regrets however that whilst the Commission specifically advocates modernization of the forms of labour organization, it does not propose concrete measures. (See point 3.3.3.4.)

The Commission's intention of laying down a suitable framework for promoting the development of environment-friendly technologies and ensuring their rapid dissemination is to be welcomed. (See point 3.3.3.6.)

Promotion of industrial cooperation (page 13)

As the Commission rightly points out, the European Union is not responsible for setting up industrial cooperation schemes. The EU must nevertheless endeavour to promote such schemes, inter alia by establishing discussion rounds in the industry. The Committee regrets that the Commission says nothing about the composition of these discussion rounds. (See point 3.3.4.1.)

The Committee unreservedly shares the Commission's view that there are still no suitable legal instruments for cross-border organization and cooperation for EU firms. It is now time to offer firms European legal vehicles. The European Company proposals are particularly relevant here. (See point 3.3.4.2.)

The Committee supports the initiatives listed concerning closer cooperation with the associated Central European states and the independent republics of the former Soviet Union. (See point 3.3.4.5.)

Guarantee of fair competition (page 14)

The Commission's intention of seeking multilateral competition rules and effective control mechanisms aimed at achieving greater openness of foreign markets deserves support. The Committee fears, however, that plans such as competition rules with binding arbitration procedures are at present unrealistic. The Commission should, as a first step, improve cooperation between the existing competition authorities of the main trading partners in order to achieve convergence of administrative practice. (See point 3.3.5.3.)

With regard to the internal market, the Committee regrets that in the field of competition policy the Commission has concentrated purely on subsidies. Here it is doing insufficient justice to the role of competition policy as one of the pillars of European industrial policy. The Committee feels that EU competition policy has not kept pace with the internationalization of business activity. With the exception of merger control, the Community's procedures in matters of competition date from the early 1960s and were designed for six Member States. (See points 3.3.5.8, 3.3.5.9 and 3.3.5.11.)

The Committee unreservedly welcomes the Commission's announcement that it will reconsider its policy on monitoring national subsidies. The results of the Commission's most recent report on subsidies confirm the Committee's fears, that during the reporting period (1990/1992), differences between the Member States widened relatively, to the detriment of the Member States in the process of 'catching up' (Greece, Ireland, Portugal and Spain). The Commission must do more to document and assess the distortions of competition caused by national subsidies. (Publicly accessible register proposed). (See points 3.3.5.12 to 3.3.5.14.)

Modernization of the role of the public authorities (page 16)

The Committee welcomes the Commission's initiative to redefine the responsibilities of the public authorities. This will include the further, targeted development of the instruments with which the state carries out its many policy tasks. Anyone expecting the Commission to put forward concrete proposals in the action programme will be disappointed. However, the Committee also regrets that in its action programme the Commission deals only sporadically with macroeconomic conditions. In its relevant Opinions the Committee has repeatedly stressed the importance of stable and foreseeable macroeconomic conditions for the strengthening of industrial competitiveness. (See points 3.3.6.1 and 3.3.6.2.)

Other areas for joint state action are the promotion of socially significant growth sectors of the kind referred to by the Commission in its strategic objectives. The Committee feels that the Community and its Member States have considerable scope for action in these growth areas, in particular the whole area of infrastructure (transport, energy, environment). There is further scope for action in the setting of legal, public order, regulatory and political conditions. The Committee feels that government should make specifically targeted use of its scope for action, creating conditions conducive to the release of innovative energies. Wherever possible and appropriate, the commitment of the private sector can be exploited to smooth the way. (See point 3.3.6.5.)

For the Commission the continuation of the process of deregulation is an integral part of its action programme. The Committee feels that too many unduly complicated provisions, guided too little by economic criteria, risk restricting firms' ability to act, weaken the market's self-regulatory forces and threaten corporate flexibility, especially in the small/medium business sector. At the same time the Committee stressed that the flexibility which firms needed to have should not jeopardize workers' social protection. In relation to the report on legislative and administrative simplification submitted by an independent group of experts, the Committee supports the proposal that all new draft laws should indicate the expected positive or negative impact on employment and competitiveness, costs and innovation. (See points 3.3.6.6 to 3.3.6.8.)

The Commission intends to support and accelerate industrial change with the help of structural policy financial instruments, in particular via improvements in the new programmes for Community initiatives, forming partnerships between large firms and SMEs and setting up networks and clusters. The Committee appreciates these plans but points out that official influence going beyond this catalytic function would be out of place. Government should encourage the various parties and the industrial operators to come together in a dialogue. (See point 3.3.6.9.)

The Committee feels that further expansion of the objectives of the Structural Funds should not be allowed to place an excessive burden on the system. The Commission should therefore constantly review its list of measures qualifying for support (timely evaluation) and set more priorities. The Committee also feels that the individual Funds should be more closely coordinated than in the past. (See point 3.3.6.10.)

Timetable for the action programme (page 18)

The Committee regrets that the Commission's timetable for its numerous initiatives is incomplete. Above all, in relation to certain important actions to strengthen industrial competitiveness, there appears to be no plan as to the steps to be taken or the timetable. The Committee hopes that the report on the progress of the industrial policy measures, and possible adjustments, to the action programme, which the Council asked be drawn up for 1996, will be used by the Commission to fill gaps. (See point 3.3.7.1.)

IV. Coordination of industrial policy activities (page 19)

The Committee shares the Commission's concern that the public decision-making centres shaping industrial activity are growing in number and exercising their powers without any real overview or constant coordination and reminds the Commission that Article 130(2) of the EC Treaty stipulates that the Member States shall consult each other in liaison with the Commission and, where necessary, shall coordinate their action. (See point 4.1.)

The Committee feels that the Commission's coordinating task covers two main areas: first, coordination of national industrial policies with each other and with Community-level industrial policy initiatives; secondly, closer coordination of the numerous industrial policy activities between the Commission's departments. The Committee considers the first of these two areas to be imperative. The Council should therefore adopt the proposal for a Decision submitted by the Commission on implementation of a Community action programme to strengthen the competitiveness of European industry. The priorities should be implemented without delay by the Commission and the Member States. (See point 4.2.)

The Committee feels that social dialogue is an important component of the competitiveness of European industry. Although the Committee fully supports the ongoing dialogue between government and the various groups, it is concerned at the number of advisory bodies and the speed with which they are multiplying. The Committee urges that in setting up such bodies more attention be paid than hitherto to transparent selection criteria and the professional competence of their members; due consideration should be given to the social groups here (e.g. employers' and workers' representatives). Finally, the Commission should also make the results of these bodies' discussions public and ensure that there is an appropriate follow-up. (See points 4.3 and 4.4.)

1. Introduction

1.1. Towards a modern and dynamic industrial policy

1.1.1. 'If there is any area in which the Community needs strengthening and deepening, it is industrial policy' (). The Commission has firmly held to the belief that industrial development policy could be used to give an impetus to European policy in general. But for decades initiatives met with little response. The Member States' widely differing views on industrial policy nipped in the bud any attempt to establish a Community policy. Some Member States placed more emphasis on interventionism, subsidies and external protection, whilst others concentrated on the market and competition (). The Commission repeatedly attempted to resolve this basic disagreement by making concessions to both sides. The desired consensus was not achieved however. The fundamental differences in the Member States' industrial and trade-policy views persisted, and were bridged with great difficulty by European Councils.

1.1.2. The Commission's first success on developing a Community industrial policy came at the end of 1990, with its Communication on Industrial Policy in an Open and Competitive Environment: Guidelines for a Community approach (). The very title showed that the Commission had begun to place more emphasis on market economy principles in its approach to industrial policy, as a way of securing the industrial base. What was needed according to the Commission was a revived Community industry. The Committee entirely agreed with the Commission's assertion that for years the debate on the theme of industrial policy had been blurred by the lack of an appropriate conceptual framework (). The Committee therefore welcomed the Commission's attempt to develop a blueprint for a modern and dynamic industrial policy for the Community as a whole, which could at the same time be integrated into a long-term industrial and technological plan.

1.1.3. Basically, the Commission is aiming for a policy setting clear and predictable conditions for the optimum allocation of resources via the market, accelerating the process of structural adaptation and boosting the competitiveness of European firms. Defensive, protectionist and sectoral approaches, which, the Commission admits, were pursued all too often in the past, are eschewed. Instead, industrial problems at regional or sectoral level are increasingly to be solved by means of horizontal measures. The public authorities play the role of catalyst and pathbreaker for innovation, and firms can expect them to provide not only clear and predictable conditions but also the right prospects for their activities. The main responsibility for industrial competitiveness lies however with firms themselves.

1.1.4. This Communication was followed by a number of Council Resolutions and Conclusions on industrial policy. Several Commission Communications and Reports, as well as the White Paper on Growth, Competitiveness and Employment, underpin and complement the Community's activities. The Commission justifies this multiplicity of measures with the argument that 'the action taken by the Community on industrial policy contributes to a general improvement in competitiveness by means of measures under all the relevant Community policies' (). Nor should the Commission's sectoral initiatives be forgotten, which aim to improve the economic environment in individual markets. In this connection the Commission mentions the aviation, motor vehicle, electronics, mechanical engineering and textiles industries, as well as the maritime economy.

1.2. Article 130 of the EC Treaty

1.2.1. The Committee considers it logical that the main principles of the market-orientated industrial policy proposed in 1990 should have been incorporated into the Treaty on European Union. Article 130 of the EU Treaty empowers the Community and its Member States to ensure that the conditions necessary for the competitiveness of the Community's industry exist in accordance with a system of open and competitive markets. Measures which might distort competition are prohibited. Specific action in support of industrial policy measures taken in the Member States in order to achieve the Council's objectives may be adopted only by unanimity.

1.2.2. The Commission's 1990 Communication met with approval even in those Member States which had hitherto adopted - mainly on grounds of public policy - a reserved attitude to all the Community's industrial policy ambitions. Some reservations have, however, been expressed over the inclusion of Title XIII (Industry) in the EU Treaty. Criticism is focused primarily on the blurred division between national and Community-level industrial policy responsibilities. The Commission's contention that industrial policy must be implemented in accordance with the principle of subsidiarity is a statement which is too 'broad brush' to be satisfactory. However the Committee endorses the Commission's reproach that the views advanced by the Member States in the Council often have less to do with Article 3b of the EU Treaty than with their basic position on the content of a proposal. The Committee therefore feels that the Commission should periodically remind the Member States that the subsidiarity principle is not intended as a way of impeding Community policy without justification or blocking it from the outset. This applies in particular to the completion of the Internal Market.

1.2.3. The Commission should also point out that in the sensitive area of European industrial policy the interdependence of national and Community responsibilities is long established in certain areas and that the demarcation functions. To quote a single example which is of great significance for industrial policy, the principle of subsidiarity has been enshrined in the competition provisions of the Treaty of Rome from the outset. Articles 85, 86, 92 and also 90 of the EU Treaty apply only where agreements between undertakings, decisions by associations of undertakings and concerted practices may 'affect trade between Member States'. European merger control too, under which the allocation of responsibility to either national or Community level is determined by a threshold, also takes sufficient account of subsidiarity ().

1.2.4. Other objections are levelled at the fields of activity listed in Article 130(1) of the EU Treaty. Its all-embracing and yet vague drafting contains no clear and binding restriction on forms of dirigistic industrial policy (). In view of the public policy principles contained in the same Article, the Committee does not, however, feel that there are grounds for concern. At the same time the Committee regrets that insufficient attention is paid to the Commission's 1990 Communication on which Title XIII (Industry) is based. If the discussion of industrial policy in the EU Member States were more greatly influenced by this Communication, the debate would be more credible and some of the reservations expressed would lose their force.

1.2.5. Critics of European industrial policy quote theoretical examples to underline its alleged dangers. It is hardly surprising therefore that it has been suggested in various quarters that the 1996 Intergovernmental Conference should scrap Article 130 of the EU Treaty. The Committee opposes this proposal, pointing out that Title XIII is an important component of a coherent legal basis for a horizontal Community industrial competitiveness policy. Remove this component, with its important public policy principles, and European industrial policy will once again become a patchwork, as it was for many years. There is a real danger that the defensive, sectoral and protectionist policies of the past will return, and much sooner than some of the critics would like. Essential processes of adjustment would be delayed and impeded. This would tie up resources which could be used more productively elsewhere.

1.3. Industrial policy principles put to the test

1.3.1. In its Resolution on the strengthening of the competitiveness of Community industry of November 1994 () the Council quite rightly notes that the industrial policy principles agreed in 1990 have proved their worth. Important objectives set at the time (completion of the internal market, conclusion of the GATT Uruguay Round) had also been achieved. At the same time the Council called on the Commission to report on all measures implementing the Resolutions and Conclusions adopted by the Council on questions of European industrial policy since 1990.

1.3.2. The Committee welcomes the Report recently submitted by the Commission () and considers it comprehensive and instructive. Some of the measures taken have related to horizontal industrial policy, whilst other initiatives have aimed at improving the economic environment in individual markets. There is no evidence of dirigistic interference in the structure of the economy. The Media II programme is the only concrete example of application of Article 130(3) of the EU Treaty (). Under this programme the Council, at the proposal of the Commission, is to adopt by unanimity specific measures to promote European enterprises in the audiovisual programme industry. With a view to the measures planned by the Commission over the next five-year period, the Committee feels that it would be appropriate for further reports to be drawn up from time to time on the implementation of Council Resolutions and conclusions.

2. The competitiveness of European industry

2.1. Macroeconomic findings

2.1.1. Over the last few years cyclical and structural disruptions slowed overall economic growth, leading to significant job losses in the European Union and an intolerable rise in unemployment. Although a new cyclical upswing is now underway, there are, as the Commission rightly points out, still considerable dangers, and important economic policy questions remain unresolved. One welcome development at least is the increasing recognition that in the long term economic recovery requires European industry to be competitive, efficient and innovative. In one of its Opinions on the Commission's White Paper on Growth, Competitiveness and Employment () the Committee said that the position of European industry was at stake and needed to be strengthened, otherwise the whole of the European economy would be the loser and jobs would be at risk. In the long term the social security system would be at risk. If firms can be made more competitive the chances will improve of securing jobs permanently and creating new ones. But all the efforts to improve productivity and employment growth require a flexible economy in order to be able to exploit the opportunities offered by a rapidly changing technological and social environment.

2.1.2. At the same time the Committee endorses the view of the Competitiveness Advisory Group, which in its first report () stressed that whilst competitiveness embraces issues such as productivity, efficiency and profitability, it is not an end in itself. Rather, it is an important instrument for raising living standards and increasing social welfare, in other words a means to an end. It follows therefore that competitiveness cannot be judged in isolation from the development model desired for the future. The Committee supported the strategic line of the White Paper on Growth, Competitiveness and Employment, which identifies a technology-intensive, highly productive and profitable industry as the backbone of a European economic development model.

2.1.3. The Commission's empirical analysis of European industry's efficiency presents a varied picture. Strengths and weaknesses vary between markets, sectors and Member States as well as between the European Union and non-Community countries, and the picture is constantly changing. Sectoral and employment structures are in a constant state of flux. As impressively shown by the Commission study on the state of, and outlook for, EU industry and services, some traditional industries and 'national champions' are undergoing a structural crisis, whilst other sectors are showing positive development trends (). These (changing) imbalances and shifting proportions need not be a bad thing per se; rather, they are the expression of macroeconomic trends. Furthermore, industries written off as having no future have often improved their growth prospects by developing new products, achieving productivity gains and opening up new markets.

2.1.4. If scope for economic growth becomes more restricted, structural adjustment is made more difficult, employment problems are exacerbated and social tensions heightened. In its industrial policy Opinion of November 1991, the Committee therefore argued that horizontal measures facilitating structural change and corporate flexibility must be supplemented by industrial-policy action to buttress necessary (regional and sectoral) adjustment measures in problem areas to cushion the social effects of structural change. Specifically, what is needed is a regional balancing policy, which - with due regard to growth objectives - will strengthen the potential and ability to develop of underdeveloped regions or regions with structural adaptation problems. This must be supplemented in the event of structural crises and rationalization measures involving significant job losses by specific temporary measures to facilitate adaptation and offset social hardships.

2.1.5. The macroeconomic variables selected show that the position of European firms in the context of the international division of labour is clearly inferior to that of major competitors (). The discrepancy between the EU's leading position in certain peripheral markets and inadequate presence in the markets of newly industrialized countries, e.g. in the Pacific, can be criticized. There is an imbalance between the EU's high market share in mature or slow-growing markets and its relatively weaker position in more dynamic markets. But the Commission also points out that the results have to be treated with caution. The empirical analysis is based on only a few macroeconomic indicators. Other studies (e.g. the World Competitiveness Report) have used a large number of quantitative and qualitative variables. Moreover, the selected indicators used are usually highly aggregated averages which conceal a great deal and vary widely from Member State to Member State and sector to sector. Coverage of the services sector is insufficient, although, according to Commission estimates, this sector accounts for more than 60 % of the value added and employment of the Community's entire productive economy. The problem of defining and measuring technology-intensive products has also not been adequately solved. The same applies to world market share which, as studies show, only applies to international trade. And finally, the Commission refers to the weak level of macroeconomic activity over the last few years; it is not known to what extent this may have influenced and distorted the indicators.

2.1.6. The weaknesses highlighted by the Commission, the Committee feels, also point to the need for European firms to become more competitive, be it on the internal or world market. It is above all high manufacturing costs (labour, capital and energy costs), inadequate expenditure on research and development, delays in turning R& D results into marketable products and clear shortcomings in infrastructure, public administration and education which have caused long-term damage to firms' competitiveness.

2.1.7. The Committee regrets that the Commission has paid insufficient attention in its industry policy scenarios to the time factor, although this has become a strategic objective for firms, alongside costs, quality and world-wide mobility. Product cycles are becoming shorter and the costs of developing and launching new products (including manufacturing investment) are constantly rising. These costs have to be recovered in the markets in an ever shorter time in order to keep up in the race. Economies of scale through high volumes are becoming a significant contributing factor to success. Merely delaying the market launch of a product by a few months can in many cases significantly impact a firm's growth and profit potential. The dizzy pace of innovation and huge increases in output are particularly striking in microelectronics, which in turn affects the competitiveness of firms in other large and important sectors. Timing is all-important for firms in this sector. Being competitive means winning the race.

2.2. The microeconomic approach

2.2.1. Strictly speaking, the discussion of economies' attractiveness to business on the basis of macroeconomic data is meaningful only if at the same time the causes of the weaknesses revealed are sought and identified. Individual indicators - which refer to other factors - tell us relatively little about firms' competitiveness. The Commission is right to point out that macroeconomic data cannot reflect certain fundamental elements underlying all competitive performance: the microeconomic dimension, e.g. the enterprise spirit, high quality of the labour force, individual effort, the commercial approach of individual companies, and the dynamism of subsidiaries and clusters of companies.

2.2.2. In a 1991 Opinion on industrial policy the Committee stressed that the idea of global competitiveness, often referred to as the objective of a Community industrial policy, is vague and ambiguous. Clearly the business environment is of significance for European firms' worldwide competitiveness. It is however impossible to speak of the general competitiveness of the European Union, the Member States or individual sectors. A different (microeconomic) approach is therefore needed to assess the competitiveness of individual firms. Benchmarking is increasingly used by firms. This is defined as a process whereby a firm constantly compares and measures itself against other firms worldwide. The purpose of benchmarking is to 'ensure that a firm's attention is permanently fixed on the outside world and to protect it against misassessment of its own competitiveness' (). Detailed study is needed to assess whether competition benchmarking can, as recently suggested at the European Round Table of industrialists (), also make a contribution in the economic policy arena, providing new insights and strategies to improve the macroeconomic environment in the Member States. At present the Committee is sceptical, given the fundamental objections to the use of macrodata for assessing the competitiveness of firms.

3. Main areas of Community industrial policy activity

3.1. Industrial competitiveness policy

3.1.1. In this section of the Opinion the Committee concentrates on the Commission's industrial policy Communication and draft proposal for a Council Decision on implementation of a Community action programme to strengthen the competitiveness of European industry (hereafter referred to as the 'action programme') of March 1995 (). The Commission's proposals are however closely connected with those contained in the September 1994 Communication (hereafter referred to as the 'industrial policy Communication') (). The Committee considered it appropriate therefore to touch on the earlier Communication in the part of its Opinion dealing with political processes, and - where necessary - to highlight differences between the two Communications requiring clarification.

3.1.2. In its Communication of September 1994 the Commission identifies areas in which the action by the Community should be stepped up. The Commission's main concern is an improved presence for European industry presence on markets offering good future prospects and employment-generating potential. The Commission states that its 'industrial competitiveness policy can be implemented effectively by pinpointing a limited number of objectives and activities'. Contrary to the Commission's stated intentions however, the priorities break down into numerous individual measures. Existing policy areas (such as research and development policy) are dispersed among several priorities. It is virtually impossible, for example, to gauge whether the individual policy fields form a coherent whole. Some passages are regrettable being either too weak or ambiguous. Ultimately it remains unclear how the roles are to be allocated between economic players, between firms and the state and between the Community and its Member States.

3.1.3. In its Resolution of 21 November 1994 () the Council welcomed the Commission's Communication of September 1994 on an industrial competitiveness policy and noted its conclusions. At the same time it reminded the Commission of its objectives and industry policy initiatives for the second half of the 1990s. The Council drew attention in particular to the Commission's failure to spell out the details of the programme and to lay down a timetable for the implementation of the proposed initiatives. The Council considers that action by the Community and the Member States within the framework of their respective powers is particularly urgent in the following five spheres, each of which were subdivided: creation of stable, economically viable framework conditions, eliminating unnecessary bureaucratic burdens for enterprises, ensuring undistorted internal and external competition, strengthening of industrial cooperation with the third countries most concerned and promotion of intangible competitive factors.

3.1.4. The Commission's March 1995 Communication contains the clarifications requested by the Council. An action programme is submitted with objectives and programmed measures and an indicative timetable for the implementation of the industrial competitiveness policy. This primarily concerns actions intended to bring existing Community policies up to date or to introduce initiatives which do not require a new formal decision. This includes most of the follow-up measures which the Commission listed in its Report on the implementation of the Council Resolutions and Conclusions on industrial policy (). A variety of objectives and measures is proposed. This variety once again demonstrates the breadth of the EU's approach to industrial policy. But there will be a lack of clarity if the allocation criteria are changed within a few months. The September 1994 Communication contained a list of measures which only six months later became a list of objectives, whilst the original list of objectives had been effectively dropped.

3.1.5. In the introduction to the Communication of March 1995 () the Commission once again stresses that it is up to companies to ensure their own competitiveness. It is government's job to provide the necessary conditions. Moreover, industrial competitiveness and economic and social cohesion should mutually strengthen each other. The Committee fully endorses these statements. But the views which the Commission goes on to advance on economic and social cohesion do not accord with the Committee's expectations of this area of policy. The Committee has repeatedly referred the Commission to Article 130a of the EU Treaty, which unequivocally states that 'in order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion'. There is little evidence of this objective in the Commission's paper. What, for example, does the following sentence actually mean? 'Greater economic and social cohesion can generate externalities which make the private sector more efficient by improving infrastructure and optimising the general level of investment'? The Committee feels that clear strategies need to be developed and clearly formulated.

3.2. Comments on the priorities for industrial policy action

3.2.1. As mentioned above, in its action programme the Commission lists four objectives (priorities for action) which are of the greatest importance for industrial competitiveness policy:

- development of the internal market;

- better taking industry's needs into account in research policy;

- establishment of the information society; and

- promotion of industrial cooperation ().

The Committee agrees with the Commission that these objectives are of great relevance to an industrial competitiveness policy. What is surprising however is that other, no less important industrial policy objectives are mentioned only in passing or in very general terms, or indeed entirely omitted. In its September 1994 Communication () the Commission, in the context of investment promotion policy, still attached the highest priority to intangible investment, which for the Committee includes investment in the humanization of labour, and placed the improvement of vocational training and the promotion of human resources at the top of its list of objectives. It also stated that the opening up of world trade and the promotion of competition on the internal market were particularly important for industrial competitiveness and needed to progress and strengthen each other mutually. The Commission also said that the modernization of the role of the public authorities was an absolute precondition for improving industrial competitiveness. In these areas the Commission proposed a common procedure to all the parties concerned, to ensure that the necessary initiatives would rapidly show results. The Committee cannot see why the Commission has within a few months changed so radically the weighting of the measures which it announced in September 1994 and described as urgent.

3.2.2.

Development of the internal market

3.2.2.1. The Commission sees the EU's main contribution to strengthening industrial competitiveness as the further development of the internal market, in order to ensure that it will actually function. From an overall economic point of view the Committee endorses this view. The Committee is pleased to note that the Competitiveness Advisory Group has now taken up this issue and that it wholeheartedly endorses the Committee's view that the internal market process should be specifically promoted, both with regard to its implementation and to more far-reaching integration through fewer and better EU rules. The Competitiveness Advisory Group feels that if existing obstacles were removed in this area this would have a positive impact on jobs and the quality of services.

3.2.2.2. Unfortunately, the Commission's comments on the development of the internal market are very general. The Committee feels that it would have been better had the Commission submitted in its Communication a detailed package of measures to accelerate the intra-Community process of integration. Last year the Committee began to monitor regularly the implementation of the measures establishing the legal framework of the internal market. To this end an additional working instrument-an observatory-was established. In its first Opinion on the question () the Committee made a series of recommendations aimed at the further consolidation of the internal market. The Committee suggests that the Commission adopt these recommendations and implement them.

3.2.2.3. With regard to the free movement of goods, the Commission should above all urge that Article 115 of the EC Treaty finally be dropped. As the Committee argued in its 1991 industry policy Opinion, national protective measures are incompatible with the principles of an open, competitive industrial policy. At the time the Committee emphatically supported the Commission's view that the removal of national quotas and measures of similar effect applicable to non-Community countries was an important aspect of industrial policy. National markets would thus be exposed to a greater degree of worldwide competition, which would prepare them better for global challenges. If Article 115 were to be dropped however, the Committee feels that in particularly difficult cases it would be appropriate to adopt accompanying structural measures so that structural adjustments can be made relatively smoothly.

3.2.2.4. There are problems with the lack of transparency and uniformity of the rules and practices relating to standards, in the product safety and liability rules, as well as in the environmental and product-labelling rules. Nor should the liberalization of public purchasing be forgotten, which is of great significance in all areas. The Committee has repeatedly noted with concern that SMEs still have inadequate access to public purchasing contracts. Further improvements are needed in particular with regard to sub-contracting; upper limits should be set in individual cases. There are also barriers to free movement of services, persons and capital. The Commission must set about dismantling these barriers as rapidly as possible by means of appropriate measures. The Committee also hopes that in future reports the Competitiveness Advisory Group will make specific recommendations on selected internal market areas.

3.2.3.

Better taking industry's needs into account in research policy

3.2.3.1. In justification of its second priority for action, the Commission states that innovation plays a decisive role in improving industrial competitiveness. The Committee fully shares this view. Product, process and market innovations, complemented by new forms of networked thinking, can make a central contribution to solving growth and employment problems. That firms actively involved in research and innovation have better market prospects and offer good employment opportunities is beyond dispute. The Commission argues, however, that the transfer and use of research results in industry must be permanently improved.

3.2.3.2. The cost of research and innovation is rising steadily. This is a considerable burden, particularly for small and medium-sized companies, and constrains their R& D work. If these companies are not to have to do without technological innovations, they must, in full accordance with the Commission's approach, be provided with know-how via technology transfer and advice. This will at the same time tangibly accelerate the translation of technological discoveries into marketable products and processes.

3.2.3.3. The Committee is pleased to note that the Commission intends to develop several joint projects of industrial interest in order to pool R& TD efforts through closer cooperation (including cross-border cooperation) and to create synergies through use of the internal market. The Committee also supports the plan to draw up a Communication on linking research and industry and a Green Paper on promoting innovation policy in the European Union. The annual report on research and technological development activities and the dissemination of results required by Article 130p of the EU Treaty is, the Committee feels, an important instrument for making research policy transparent. The Committee hopes that the Commission will be submitting the first report this year.

3.2.4.

Establishment of the information society

3.2.4.1. The Commission sees measures to promote the information society as another priority step. The new technological revolution will tangibly influence all industrial activity, and not only in the European Union. It will secure and strengthen firms' ability to innovate, it will put its stamp on future production and employment and it will affect the development of living and working conditions in many ways. The Committee has supported the Commission's information society initiatives from the beginning, as well as the action plan to prepare Europe for the information society. In its relevant Opinion () the Committee regrets however that the action programme does not provide the same precise initiatives for all the areas. Moreover, insufficient attention is paid to social and cultural aspects. Whilst they play a part in the proposed measures, they continue to be disregarded in the actions already underway. This applies particularly to the areas of health, education, environment, vocational training, the disabled and the film industry.

3.2.4.2. At present the Commission sees one priority task as being to accelerate the process of liberalization in the telecommunications sector, with infrastructures (cables, radio networks, satellites) and services at present still in monopoly hands being opened up to competition. In its 1995 work programme the Commission said that the priority objective was therefore to create a regulatory framework for competition in the telecommunications sector.

3.2.4.3. The Committee agrees with the Commission that conditions of access to information, to the networks through which information moves and to the services which facilitate its use will play an increasing part in industrial competitiveness. The Committee therefore welcomes the intention of creating a clear and reliable public order framework, but at the same time feels that the transition to the information society needs to be accompanied by other measures in the fields of technology, employment and social policy.

3.2.4.4. With a view to the numerous challenges to be encountered on the road to the information society, the Committee supports the setting up of two independent advisory bodies which will maintain close contacts with all the parties concerned. This is no doubt the right step to ensure that the information society can meet the needs of all citizens and firms (). In the Information Society Forum representatives of social groups (including MPs, social partners, user groups and network operators) will meet to discuss various aspects of the information society. An annual report will provide information on the work of the Forum and the overall progress achieved. The second body, a high-level group of social experts, will elucidate the social aspects of the information society and its work will cover the six main themes highlighted in the paper submitted to the Essen European Council entitled The Information Society in Europe: a first assessment since Corfu (). The fourteen experts have also been appointed and an initial interim report (which will also cover employment potential) is to be drawn up by November 1995.

3.2.4.5. Also to be welcomed is the Commission's intention of using pilot projects to increase acceptance of the information society and to amass further experience of modern information and communications technologies. An information society office is to serve as a central coordinating point for such pilot projects and to promote the exchange of experience.

3.2.5.

Promotion of industrial cooperation

3.2.5.1. That leaves the fourth pillar of the priorities for action, which also has its own place in the Commission's (multiannual) action programme (paragraph 3.3.5). In order to prevent overlap as far as possible the Committee will restrict itself to a few comments at this point. In particular the Commission refers to the Leonardo programme which promotes cooperation between firms and other vocational training operators. The Commission also mentions the Integrated Programme in favour of SMEs and the Craft Sector of May 1994, through which the growth and employment potential of SMEs is in particular to be mobilized (). The Committee gave full expression to its approval of the Integrated Programme last year (). In particular, it welcomed the attempt to approach the problems of European SMEs in an integrated way and to coordinate and combine the various programmes in favour of SMEs at EU level and in the Member States. The Commission should, however, ensure that in assessing specific support measures or in attempting to raise the efficiency of the support programmes, sight is not lost of the necessary dismantling of national and Community subsidies.

3.2.5.2. The Committee regrets that the Commission has not given priority to any further specific measures to develop industrial cooperation. Instead, there is merely the statement that 'The Union must therefore endeavour to remove the obstacles to industrial cooperation while developing tools for industrial cooperation'. The Committee feels that the Commission should work for the development at European level of guidelines for improved supply relationships between firms of different size and between manufacturing and service industry. Complex manufacturing systems mean that European industry more than ever needs partnerships between firms with the aim of long-term cooperation. The classic (three-sector) structural model for industrial change must be replaced by an integrated approach. A new kind of network of goods, services and information is needed. What is needed is qualitative changes in existing structures, which will certainly necessitate a considerable effort by all concerned. The close cooperation between firms must begin at an earlier stage. Manufacturers and suppliers should work together on joint cost planning, rationalization, quality control and logistics for future products. Unsatisfactory therefore the Commission's sweeping statement that 'to promote such cooperation, every possible industrial, economic, commercial and investment link and transfers of know-how to third countries must be strengthened to help integrate these countries fully in the world economy'. Above all, the Committee sees no evidence of concrete initiatives by the Commission, for instance a statement of its intention to re-examine European competition law to establish whether it hinders global industrial cooperation.

3.3. Comments on the (multiannual) industrial policy priorities for action

3.3.1. In accordance with the multiannual action programme (), the Commission Communication of September 1994 makes clear that four priorities for action, reflecting the need for technological change, will guide the Commission's approach to industry policy in future:

- promote intangible investment;

- develop industrial cooperation;

- ensure fair competition;

- modernize the role of the public authorities.

3.3.2. The priorities for action embrace three categories of measure: action already underway or which can be started in the near future and which could make an immediate contribution to industrial competitiveness; action requiring more detailed political guidelines so that a start can be made in due course; action requiring the adoption of proposals for legislation.

3.3.3.

Promotion of intangible investment

3.3.3.1. The Commission's intention of promoting intangible investment is strongly endorsed. The Committee regrets however that the proposed individual measures for education show no evidence of an overall plan. In its 1991 industrial policy Opinion () the Committee made it clear that the spread of data and information technologies into all branches of the economy and society made the proper handling of new technology an important part of more and more people's lives and plans. The new information technologies can provide specific information at a speed and in quantities hitherto undreamt of. The ability to sort details and to recognize links is becoming increasingly important. These changes pose new challenges for the education systems of the Member States. They have to take account of the new, mostly higher, skills needed to cope with technological change and help to ensure that basic instruction in information technology is provided at school. At the same time education must help people to master this change intellectually.

3.3.3.2. Only if education and employment systems are better coordinated than in the past can skills be matched more successfully to demand and labour-market tensions and problems be alleviated. Differing gifts and differing workplace requirements in terms of knowledge skills and abilities will create a need for a greater variety of courses and qualifications of equal value. Connected, analytical thinking should be particularly encouraged, as use of the new technologies requires this to a high degree. Training in school, college and workplace provides only the basic equipment, however, which needs to be constantly developed in the course of the individual's working life. More weight must therefore be given to further vocational education, so that the exploitation of technical progress does not fail for want of skills and acceptance. The Competitiveness Advisory Group has said that, in their own interests and for the good of society at large, European firms must play a greater role in education. There is an extraordinarily important role to be played in the retraining of workers and in promoting the habit of life-long learning. What is needed is further education which is customized and tailored to needs.

3.3.3.3. The further education of managers is also essential. Management practices have a lasting impact on the quality of work, the working climate, motivation and other factors affecting firms' efficiency. The objectives of further education must be geared to this. In addition to the deepening of specialist and job-related knowledge, what is required is above all schooling in the use of modern methods of industrial management. Further education must contribute to the rapid and successful application of useful knowledge derived from research and practice. Entrepreneurs will be failing in their task if their answer to the dynamic progress of technology and innovation is to maintain the status quo while waiting on events. Stronger international competition makes it necessary constantly to develop and apply new solutions. Entrepreneurs must be open to change - in the interests of their employees.

3.3.3.4. The Commission advocates modernization of the forms of labour organization, but does not propose concrete measures. Here the Committee is not thinking of proposals for improving firms' internal processes. This is not the business of the Commission or any other official body. But the Committee feels that there is a lack of any constructive contribution to the creation of relevant conditions. Moreover, the search for new forms of labour organization - whether at national or EU level will not sufficiently exploit the available potential for creativity and productivity unless workers or their legally recognized representatives are involved. The vocational skills and motivation of workers are important resources in seeking a solution to this many-facetted problem. The Committee therefore supports the Commission's intention of intensifying the social dialogue with due consideration for national procedures and experience. This also applies to the participation of the social partners in initiatives which have an impact on employment.

3.3.3.5. The Commission's plan to seek to establish favourable legal conditions for industrial and intellectual property, above all in the field of patents, trademarks, plans, models and designations of origin, deserves support. The instruments for the protection of intellectual and commercial property almost all already exist: the Munich patent agreement, the patent cooperation treaty, the EC Regulation on trademarks, the EC Regulation on the Community design system (being prepared), various Directives on copyright (computer programs, leasing and lending rights, term of protection). It is regrettable however that the Directive on the legal protection of biotechnological inventions failed in the European Parliament. This was no doubt discouraging for the research industry. Anti-piracy Regulation 3295/94 () gives customs officials at external frontiers the right to act against imports which infringe patents, copyright or design regulations. But their success depends on the ability of customs officials actually to detect suspect consignments in sufficient quantity. Practical improvements needed by customs authorities should therefore be looked into. It is essential that international cooperation be stepped up, e.g. with the Eastern European partner states, to ensure that piracy is effectively combated in the countries in which it originates.

3.3.3.6. The Commission's intention of laying down a suitable framework for promoting the development of environment-friendly technologies and ensuring their rapid dissemination is to be welcomed. The range of possibilities is broad: from recycling technologies and the re-use of production residues and waste to microelectronics, which on the production and applications side can be regarded as the environment-friendly technology par excellence. The Committee feels that the development of new markets will be tangibly facilitated if environment-policy goals are set, but it is left up to firms to choose the best way of achieving them. This approach favours an innovative climate which will accelerate technological progress and at the same time create incentives for positive growth and employment effects. It is worth stressing the Commission's correct judgement that environmental protection is a cross-border challenge which cannot be met by individual countries acting alone. The European Union and its Member States should - with the participation of the social groups - define a desirable, necessary and economically acceptable level of environmental protection in order to adopt and implement on this basis effective measures for the attainment of ecological objectives. The Commission feels that a global approach which takes account of conditions dictated by international competition makes more sense than imposing a wide variety of new taxes on individual products ().

3.3.4.

Promotion of industrial cooperation

3.3.4.1. As the Commission rightly points out, the European Union is not responsible for setting up industrial cooperation schemes, which are, above all, the responsibility of the businesses and businessmen themselves. The Commission must nevertheless endeavour to promote such schemes, inter alia by establishing discussion rounds in the industry, of the kind conducted with Japan, the Baltic States and in various sectors. The Committee regrets that the Commission says nothing about the composition of these discussion rounds. Merely convening say the group of Directors-General to talk about industrial cooperation measures should at all costs be avoided. The Committee seriously doubts whether the Commission and the representatives of the governments of the Member States are able on their own to form a comprehensive judgement on such issues and to make practical proposals. The Commission's intention to remove legal and tax obstacles to industrial cooperation and to submit a Green Paper on the legal instruments of industrial cooperation at Community level is to be welcomed. The Committee also supports the Commission's objective of integrating the Eastern European countries into a pan-European economic area.

3.3.4.2. The Committee unreservedly shares the Commission's view that there are still no suitable legal instruments for cross-border organization and cooperation for EU firms. The Regulation on the European Economic Interest Grouping is confined to narrowly defined types of cooperation. After the great strides made in approximating internal market legislation, it is now time to offer firms European legal vehicles.

3.3.4.3. The European Company proposals are particularly relevant here. The Committee has already voiced its views on the subject on several occasions, most recently in its Opinion on the European Company Statute (), and it has pointed to the need to improve cross-border cooperation between companies and to promote economic integration in the Community. The Competitiveness Advisory Group has expressed a similar view: even more important than the potential cost savings is the opportunity for companies large and small to expand more easily throughout Europe, thus giving a lasting boost to integration. The proposals for the European cooperative society, European mutual society and European association statutes are suitable legal instruments for certain fields of activity and have been emphatically welcomed by the Committee (). The Committee calls on the Council to resume discussions on the European Company Statute, currently blocked for political reasons, and to adopt the proposed Regulation and Directive. The internal market, as the Competitiveness Advisory Group puts it, will be complete only when European firms can operate flexibly and efficiently throughout the Union.

3.3.4.4. The Commission's call for the development of a coherent legal approach towards a common and efficient support of European investment abroad is unclear. The Committee shares the Commission's view that it is extremely important for European firms to enjoy a high level of protection for their direct investments in non-Community countries. However, the OECD is already working on a comprehensive investment protection agreement. The Committee feels that on this basis an investment protection agreement should be drawn up at international (WTO) level too, including the developing and newly industrialized countries and the Central and Eastern European countries.

3.3.4.5. The industrial policy Communications of September 1994 and March 1995 () repeatedly refer to cooperation with the associated Central European states and the independent republics of the former Soviet Union. The Committee supports the initiatives listed. The Committee has already commented in detail in a number of Opinions on the Europe Agreements. The same is true of the Partnership and Cooperation Agreements with individual CIS republics (Russia, Ukraine and Belarus) (). However, the initiatives proposed by the Commission cover only a few aspects of industrial cooperation with the Central and Eastern European states.

3.3.4.6. Thus, the industrial cooperation laid down in the Partnership and Cooperation Agreement with Ukraine - to quote one example which can stand for the provisions of the other treaties - covers the following initiatives: the development of business links between economic operators of both sides (e.g. in view of the transfer of technologies and know-how); Community participation in (Ukraine's) efforts to restructure and technically upgrade its industry; the improvement of management; the development of appropriate commercial rules and practices (including product marketing); environmental protection; adaptation of the structure of industrial production to the standards of an advanced market economy; the conversion of the military-industrial complex.

3.3.4.7. Cooperation between small and medium-sized enterprises is also dealt with in detail: this includes technical assistance (in particular the development of a legislative framework for SMEs), the development of an appropriate infrastructure for SMEs and the development of technology parks. There are also comprehensive agreements on investment promotion and protection. The main focus is on better conditions for investment protection, the transfer of capital and the exchange of information on investment opportunities. The Committee has commented in detail on the content of the treaties. The Committee will not therefore comment again here on the initiatives for the Central and Eastern European countries contained in the two industrial policy Communications. In this context it would refer to its Opinions on the Europe Agreements and the Partnership and Cooperation Agreements.

3.3.5.

Guarantee of fair competition

3.3.5.1. In its industrial policy Communication of November 1990, the Commission states that an open trade policy is a necessary complement to the opening up of the internal market. This concept implies that 'the rules of the game be respected by all trading partners since the Community's economy will become more sensitive to such practices in line with its even greater openness' (). The Commission therefore attaches particular importance to 'fair' competition and trade. Both, it maintains, are the logical outcome of free trade. In order to achieve its objective the Commission intends to carry out external and internal market measures.

3.3.5.2. The Commission maintains that equal conditions of competition on foreign markets should be achieved, inter alia, via the complete adoption of the Uruguay Round agreements. The negotiations in the areas of steel, aviation and services and the work to harmonize non-preferential rules of origin must be continued and concluded in the foreseeable future. Multilateral solutions in the framework of the WTO are required. Connected with this is the Commission's plan to participate, in collaboration with the International Labour Organization, in the discussion of social questions, above all with a view to the promotion of social progress.

3.3.5.3. The Commission's intention of seeking multilateral competition rules and effective control mechanisms aimed at achieving greater openness of foreign markets deserves support. The Committee fears, however, that it is at present unrealistic. Effective competition laws already exist in the triad (the EU, the USA and Japan) where competition is fiercest, but enforcement varies widely. Instead of proposing new laws, the Commission should, as a first step, improve cooperation between the existing competition authorities of the main trading partners in order to achieve convergence of administrative practice. Furthermore, the authorities should reach agreement on their respective responsibilities in international cases. Parallel procedures and extraterritorial application of national competition rules should in future be avoided. Where global transactions are concerned, firms have a lively interest in short and foreseeable procedures. Multilateral competition rules with a binding arbitration procedure can be envisaged only as a long-term objective. The Member States' views on the subject still diverge too greatly.

3.3.5.4. The situation with regard to the Central and Eastern European states is different. In its Opinions on the Europe Agreements the Committee unreservedly endorsed the relevant treaty provisions on competition and state subsidies. The Community should work on the associated treaty partners to persuade them to align their national competition laws as closely as possible on those of the European Community. As the Commission rightly points out, this does not mean merely approximating legal texts, but at the same time setting up the administrative systems to ensure that the rules are enforced (). The Committee considered the competition provisions of the Partnership and Cooperation Agreements with the independent republics of the former Soviet Union to be a weak point. The signatory states are directly required to adopt and apply competition laws. But the provisions are - compared with the Europe Agreements - so weak and non-binding that no claims are likely to arise from them, either by the signatories or by European firms. The Committee hopes however that the Community will consider it to be in its interests to urge the Eastern European treaty partners in the Cooperation Council to adopt competition legislation closely aligned on EC principles.

3.3.5.5. In international (European) trade it is often the 'minor' rules which constitute the greatest barriers to market access, for example standards. The Committee has repeatedly stressed that harmonized standards are a key factor in the integration of markets. They remove technical trade barriers and have a deregulatory effect, facilitating cross-border industrial cooperation and permitting the potential for economies of scale to be exploited by firms. The Committee calls on the Commission to step up its efforts to harmonize standards - at Community level and internationally - and to work towards the establishment of efficient procedures for the application of standards. The Commission must tackle these problems as rapidly as possible in cooperation with its international trading partners. The Committee therefore welcomes the Commission's announcement that it will establish an Industrial Assessment Mechanism. This instrument has proved effective in promoting mutual understanding, particularly in connection with the efforts to open up the Japanese market.

3.3.5.6. The Committee feels that there is an urgent need for improved coordination between national and Community investment promotion. The purpose of such coordination must be to raise the efficiency, transparency and effectiveness of investment promotion and to prevent duplication of work and waste of resources. The Community's export promotion system also leaves room for improvement. Above all it lacks transparency. The Member States, private bodies and the Community have built up parallel structures. The resulting duplication of work also gives rise to considerable costs. The Committee feels that competition between national and Community export promotion measures should be prevented. The efficiency of existing structures should be assessed.

3.3.5.7. Although the Committee agrees with the Commission on most of the proposed measures, it would sound a warning against attempting to achieve 'fair' competition at international level by means of one-sided initiatives. The Commission's plan to 'improve, with the intention of making them more effective and operational, commercial policy instruments, taking account of the changes in production structures and trade trends, particularly of the consequences of the increasing internationalization of production' gives particular cause for concern. Similarly the Commission's intention of seeking 'ways in which commercial policy and defence instruments may contribute to the development of services associated with the growing move away from a purely production-based economy, and with a view to the smooth operation of markets' (). These statements place the Community's essential openness to the world in doubt. It would be far better for the Commission, together with trading partners, to solve specific problems via the bilateral and multilateral procedures of the proposed Industrial Assessment Mechanism.

3.3.5.8. With regard to the internal market, the Committee regrets that in the field of competition policy the Commission has concentrated purely on subsidies. Here it is doing insufficient justice to the role of competition policy as one of the pillars of European industrial policy. Where the Commission touches on the Treaty's competition rules and their operation at all, it restricts itself to the obvious, such as the role of strategic alliances. These are nothing other than cooperation between firms at world market level. They deserve neither preferential nor discriminatory treatment by the competition authorities. The Committee can see no acute dangers which would justify making a coherent and coordinated approach to strategic alliances a main activity.

3.3.5.9. EU competition policy has not kept pace with the internationalization of business activity. With the exception of merger control, the Community's procedures in matters of competition date from the early 1960s and were designed for six Member States. In a Community of Fifteen they are outmoded and unrepresentative of the current state of the law, in particular with regard to basic rights and the rights of hearing and defence. Firms also criticize excessively long procedures, the complexity of the law, the lack of transparency of the decision-making procedures and the Commission's failure to set priorities in dealing with cases.

3.3.5.10. The policy hitherto pursued by the Commission of invoking the prohibition provisions of Article 85 of the EU Treaty in relation to all vertical cooperation should be re-examined. As long as there is no restriction of competition a flexible procedure should be applied. The Commission's block-exemption Regulations for certain categories of contract have resulted in unclear, and in some cases mutually contradictory, laws. The Commission's imposition of uniform contracts on firms gives rise to a competition policy imbalance. The Committee points out that, in a European internal market, firms must in principle enjoy freedom to organize their sales. The Committee is pleased to note that the Commission will shortly be issuing a Green Paper on the future competition treatment of these cases. The Committee suggests that only cases of vertical cooperation be taken up which threaten to erect tangible barriers to market entry in the internal market. Only if this threshold is crossed, is it meaningful to speak of a restriction of competition within the meaning of Article 85(1) of the EC Treaty.

3.3.5.11. The Commission should take greater account of the international competition situation than hitherto. The Committee regrets that the Commission does not consistently apply economic criteria in its administrative practice. For example: in its recent administrative practice the Commission has become increasingly restrictive in delineating the relevant markets. This applies to European merger control, but also to the application of Article 85 of the EC Treaty. The Committee once again recommends that the Commission, in applying the competition rules, take greater account than hitherto of international competition. Markets are in a state of flux not only in Europe but worldwide (information society). Competition law must not hinder the necessary restructuring by firms.

3.3.5.12. The Committee unreservedly welcomes the Commission's announcement that it will reconsider its policy on monitoring national subsidies. However, the Committee has reservations on the suggestion by the Commission that the achievement of economic and social cohesion is always consistent with the proposition that fair competition should lead to the reduction of state aids. State subsidies (including those of regional and local authorities and other bodies) should be reduced across the board, with due consideration for regional imbalances. The approval criterion for subsidies need to be overhauled, coherence between structural policies and the monitoring of national subsidies improved and the existing rules simplified. The Committee stresses the importance and urgency of the measures announced. In a functioning internal market, firms feel competition-distorting effects of national support measures more strongly and directly, as well as those of Community support programmes.

3.3.5.13. The results of the Commission's most recent report on subsidies confirm the Committee's fears, in that the annual average of the Member States' subsidies to industry fell only slightly during the reporting period (1990/1992) (). Measured as a proportion of the gross value added by manufacturing industry, the average fall in state subsidies in the four largest economies () of the European Union was only from 4 % (1988/90) to 3,3 % (1990/92), whilst for countries in the process of 'catching up' (Greece, Ireland, Portugal and Spain) the same indicator showed a much sharper fall, from an average 6 % to just over 3 %. The trend in the proportional breakdown of total EU subsidies by country was similarly unsatisfactory: the share of the four smaller states fell from an average of 15 % (1988/90) to 8 % (1990/92), whilst the share of the four largest countries fell only from 82 % (1988/90) to a good 72 % (1990/92). There are thus still considerable differences between the Member States, and the relative trend during the reference period was to the detriment of the smaller Member States. The Commission rightly feels that the smaller average proportional fall in public subsidies in the four largest Member States runs counter to the objective of cohesion. It is true that the distortions of competition caused by public subsidies are to some extent counter-balanced by Structural Fund intervention, but this is by no means sufficient to realize this Community objective.

3.3.5.14. In its industrial policy Opinion of 1991 () the Committee already appealed to the Member States, and particularly the four largest, to cut national subsidies further. The Committee once again calls on the Member States finally to carry out a careful assessment of the need for any subsidies they grant. The volume of subsidies must be tangibly reduced throughout the Community. The same rules on subsidies should be applied to Community support as to national measures (Article 92, EU Treaty). Moreover, the Commission must do more to document and assess the distortions of competition caused by direct and indirect public subsidies. It should therefore do more in the way of consulting competitors; it should operate a positive system of priority management and consider whether it would be possible - without undue bureaucracy - for the Commission to set up a publicly accessible register of all subsidies granted. As the Commission puts it, 'a firm aid discipline is a prerequisite to the increased competition without which very little of the projected gains from the internal market will be realized'. In the light of global competition, the Commission must also consider subsidies applied by non-EU countries. The Commission should at all events refer any material subsidies applied by non-EU countries to the WTO's dispute settlement body.

3.3.6.

Modernization of the role of the public authorities

3.3.6.1. In its industrial policy Communication of November 1994 and March 1995 () the Commission has been right to stress repeatedly that the main responsibility for industrial competitiveness lies with firms themselves. As already indicated, the role of the public authorities should be mainly that of innovation pathbreaker and catalyst from which firms can expect clear and predictable conditions and the right prospects for their activities. But there is more: in their important capacity as both customer and investor the public authorities can contribute decisively to the dynamic development of markets. The Committee welcomes the Commission's initiative to redefine the responsibilities of the public authorities. This will include the further, targeted development of the instruments with which the state carries out its many policy tasks. Anyone expecting the Commission to put forward concrete proposals in the action programme, however, will be disappointed. Instead of this, there is merely the laconic statement that the responsibilities of the public authorities remain to be redefined.

3.3.6.2. The Committee also regrets that in its action programme the Commission deals only sporadically and partially with macroeconomic conditions. In its relevant Opinions the Committee has repeatedly stressed the importance of stable and foreseeable macroeconomic conditions for the strengthening of industrial competitiveness. Long-term investment presupposes the ability to calculate both costs and returns. The sooner macroeconomic conditions are improved for business activity, the more rapidly the scope will be broadened for all those involved in the economic process, and the incentives for taking economic and technological risks and the willingness to perform strengthened. Political conditions, the effect of which in shaping structures is usually neglected, are also important.

3.3.6.3. The importance of infrastructure, and in particular the Trans-European Networks, are also paid insufficient attention in the Commission's action programme. A highly developed industry requires efficient infrastructure. The European Union is still far from this objective. Even the traditional transport infrastructure is no longer satisfactory. Growing traffic jams and bottlenecks and the resulting tangible loss of welfare point to a need for urgent action. In the majority of Member States most ground needs to be made up in the field of future-orientated infrastructure, such as information technologies. There are also significant shortcomings in trans-European links. The Committee stresses once again that efficient infrastructure is a major source of added value for European industry. By cutting transaction and transport costs productivity is raised. Finally, the Committee is critical of the fact that, despite well phrased declarations, not even the organizational, technical and financial problems of projects assigned the highest priority by the European Council have been solved.

3.3.6.4. Furthermore, the Council and the Commission ought now to tackle far more thoroughly than hitherto the question of how all the interested parties can coordinate their action. Article 130(1) of the EC Treaty after all requires the Community and the Member States to ensure that the conditions necessary for the competitiveness of the Community's industry exist. Other priorities at macroeconomic level, as the Council stressed in its Resolution of 21 November 1994 (), are consistent alignment of Member States' policy on Community convergence targets, resolute pursuit of budgetary consolidation at all state levels, implementation of the Economic and Monetary Union and long-term reliability in all areas of government action. Of equal importance are limiting the financial and non-financial burdens on business to reinforce their investment capability and with it the capability of industry to create new jobs.

3.3.6.5. Other areas for joint state action are the promotion of socially significant growth sectors of the kind referred to by the Commission in its strategic objectives. Here too closer cooperation and more efficient coordination of measures are required. The Committee feels that the Community and its Member States have considerable scope for action in these growth areas, in particular the whole area of infrastructure (transport, energy, environment). There are many instruments available, ranging from public contracts to the various hybrid forms of financing (e.g. in the energy infrastructure area). The Community and the Member States have further scope for action in the setting of legal, public order, regulatory and political conditions. This can be seen for example in the areas of information, bio- and environmental technologies. The Committee feels that government should make specifically targeted use of its scope for action, creating conditions conducive to the release of innovative energies. Wherever possible and appropriate, the commitment of the private sector can be exploited to smooth the way.

3.3.6.6. For the Commission the continuation of the process of deregulation is an integral part of its action programme. This involves on the one hand the elimination of differences between national laws (Art. 101 and 102 of the EC Treaty) and on the other, the removal of regulatory and other obstacles. As early as 1990 the Commission wrote that the internal market should be made as unbureaucratic as possible. At the time the Committee, in its Opinion on industrial policy, also said that too many unduly complicated provisions, guided too little by economic criteria, would restrict firms' ability to act, weaken the market's self-regulatory forces and threaten corporate flexibility, especially in the small/medium business sector. At the same time the Committee stressed that the flexibility which firms needed to have should not jeopardize workers' social protection. The Commission also accepted that a suitable level of social protection offered a 'safety net' which reduced the risks inherent in (structural) change and thus improved mobility.

3.3.6.7. An independent group of experts submitted its report on legislative and administrative simplification to the European Council in Cannes (26/27 June 1995) (). The Council took note of it without comment and asked the Commission to submit concrete measures for the simplification of administrative regulations by the end of the year. The Committee agrees with the European Council that in order to stimulate employment, competitiveness and innovation, excessive regulation should be combatted where simplification is justified, without however calling the 'acquis communautaire' into question. In other words, what is needed is regulations which support social and economic change in the longer term and which restrain the striving for perfection in legislation and administration. The European Parliament expressed similar views in its report on the Commission's industrial policy Communication of September 1994 (). In the report the Parliament argues that what is needed is reasonable and innovative regulation, including, depending on the initial situation, the dismantling of superfluous rules, the simplification and acceleration of administrative procedures, the increased use of market economy incentives and, where appropriate, privatization.

3.3.6.8. The Committee is pleased to note that in a general part of the report the experts have made procedural proposals aimed at stemming the flood of regulatory measures. A significant proposal in this part of the report is that when draft legislation is being prepared those who are most concerned, particularly consumers, firms and workers, should be effectively, systematically and promptly consulted. Another is that the explanatory memorandum of all new proposals should indicate the expected positive or negative impact on employment and competitiveness, costs and innovation. And finally, the Committee supports the proposal that the Commission should monitor progress on legislative simplification at EU and national levels and report to the Council. The Committee assumes that it will also be informed, along with the European Parliament.

3.3.6.9. The Commission intends to support and accelerate industrial change with the help of structural policy financial instruments, in particular via improvements in the new programmes for Community initiatives (), forming partnerships between large firms and SMEs and setting up networks and clusters. The Committee appreciates these plans but points out that the building, for example, of partnership, i.e. structured cooperation between firms, is a matter for the participating firms. Official influence going beyond this catalytic function would be out of place. The Committee assumes that this is also the Commission's view. The Committee therefore recommends that such fields of activity be defined very carefully in order to preclude from the outset any false signals. On the other hand - not least as a result of radical structural change - the willingness of all concerned to engage in dialogue is growing. Government should encourage the various parties and the industrial operators to come together in a dialogue and to search for promising solutions. The outstanding problems are too difficult to be solved via outright confrontation and increasing polarization. The authorities (Member States and European Union) have an important mediating role to play here.

3.3.6.10. With regard to the financing of the various initiatives contained in the action programme, the Commission, repeatedly refers to the use of the Community's Structural Funds. For the Committee this is an obvious approach, but concerns are growing that constantly expanding the objectives of the Structural Funds will place an excessive burden on the system and lead to a loss of focus. So far the Structural Funds have a proven track record for fulfilling their core objectives. In order to ensure that this does not change in the future, the Commission should constantly review its list of measures qualifying for support and set more priorities. Financial appraisals and assessments of the effectiveness of support measures should also be improved. The European Court of Auditors' reports are a welcome step in the right direction. The Committee recommends that as a first step prompt evaluations be carried out to enable measures unlikely to be successful to be discontinued. With regard to the additional claims on financing, the Committee feels that the individual Funds should also be more closely coordinated than in the past.

3.3.7.

Timetable for the action programme

3.3.7.1. There is little point in commenting on the timetable, which is intended only as a rough guide. Many factors, of which only the Commission is aware, are involved here. It is however unfortunate that, in relation to certain important actions to strengthen industrial competitiveness, there appears to be no plan as yet as to the steps to be taken or the timetable. This applies to the urgently needed revision of the approval criteria for aid, to improved coherence between the structural policies and the monitoring of state aid and between the rules governing state aid and Community financing conditions in the framework of other non-structural policies. It remains to be hoped that the report on the progress of the measures which the Council asked be drawn up for 1996 and possible adjustments will be used to fill gaps in the multiannual action programme and the timetable in order to be able to set credible industrial policy priorities for the coming years.

4. Coordination of industrial policy activities

4.1. In its industrial policy Communication of September 1994 the Commission expresses concern that the public decision-making centres shaping industrial activity are growing in number and exercising their powers without any real overview or constant coordination (). The Committee shares these concerns and reminds the Commission that Article 130(2) of the EC Treaty stipulates that the Member States shall consult each other in liaison with the Commission and, where necessary, shall coordinate their action. The Commission may take any useful initiative to promote such coordination. The Committee believes that accumulated experience suggests that there is an urgent need for action. The Committee calls on the Commission to consider as soon as possible how the many bodies actively involved in industrial policy can be simplified and reorganized. Duplication of work and consequent loss of efficiency in the field of industrial policy should as far as possible be prevented.

4.2. The Committee feels that the Commission's coordinating task covers two main areas: first, coordination of national industrial policies with each other and with Community-level industrial policy initiatives; secondly, closer coordination of the numerous industrial policy activities between the Commission's departments:

- The Committee considers the first of these two areas to be imperative. The Council should therefore adopt the proposal for a Decision submitted by the Commission on implementation of a Community action programme to strengthen the competitiveness of European industry (). The priorities should be implemented without delay by the Commission and the Member States. The Committee is pleased to note that the Community-level discussion of the right approach to industrial policy and market orientation has set off a positive chain reaction in the Member States. Now a joint industrial policy path has to be mapped out and consistently followed.

- In order to improve coordination at Community level, the Commission has set up several high-level panels (e.g. for the maritime industry, the aerospace industry and the auto-oil programme). High-level groups covering the information society, and round tables for individual countries (Japan, Russia) and regions (Central and Eastern Europe, the Mediterranean and Asia) have either already been set up or are planned. Finally, task forces for selected areas have been set up or are planned, e.g. with a view to the joint definition of European research objectives and better coordination of research programmes (including the car of the future, multimedia learning programmes and aircraft construction).

4.3. The Committee emphasizes the importance of the social dialogue - it feels that it is an important component of the competitiveness of European industry.

4.4. Although the Committee fully supports the ongoing dialogue between government and the various groups, it is concerned at the number of advisory bodies and the speed with which they are multiplying. If the work of these bodies is to be properly coordinated and their work efficiently organized their number must be kept within reasonable limits. Moreover, any attempt to institutionalize the participation of these advisory bodies in the formation of government policy should be nipped in the bud. These bodies must have a purely advisory function; they cannot become makers of policy. The Committee urges that in setting up such bodies more attention be paid than hitherto to transparent selection criteria and the professional competence of their members; due consideration should be given to the social groups here (e.g. employers' and workers' representatives). Finally, the Commission should also make the results of these bodies' discussions public and ensure that there is an appropriate follow-up. The Committee calls on the Commission to take account of the Committee's call for the Commission's initiatives to be implemented without delay. In so doing of course, politically sensitive subjects such as the modernization of the role of the public authorities should be put off no longer.

Done at Brussels, 22 November 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() See COM(70) 100 final.

() An overview of the various industrial policy measures can be obtained from a study carried out by the US International Trade Commission: Foreign Industrial Targeting and its Effects on US Industries. Phase II: The European Community and Member States. Report to the Subcommittee on Ways and Means, US House of Representatives on Investigation, No 332-162, USITC Publication 1517, April 1984.

() COM(90) 556 final.

() OJ No C 40, 17. 2. 1992.

() SEC(95) 437 final.

() OJ No C 34, 2. 2. 1994, p. 83 and OJ No C 388, 31. 12. 1994, p. 41.

() Guidelines for the regulatory policy of the European Union (Report of the advisory committee of the Federal Economics Ministry, Tuebingen, 31 August 1994).

() OJ No C 343, 6. 12. 1994, p. 1.

() SEC(95) 437 final.

() COM(94) 523 final.

() OJ No C 295, 22. 10. 1994, p. 47.

() Enhancing European Competitiveness. First Report to the President of the Commission, the Prime Ministers and Heads of State (Competitiveness Advisory Group, June 1995).

() European Commission: Panorama of EU industry-1994.

() European Commission: Panorama of EU Industry-1994.

() K. Kleinfeld, Benchmarking fuer Prozesse, Produkte und Kaufteile. Ein Weg zu permanenter Verbesserung im Unternehmen. In: Marktforschung und Management, 38, 1st quarter 1994.

() European competitiveness. The road to growth and jobs. European Round Table of Industrialists, 15 November 1994.

() COM(95) 87 final.

() COM(94) 319 final.

() OJ No C 343, 6. 12. 1994.

() SEC(95) 437 final.

() COM(95) 87 final.

() COM(95) 87 final.

() COM(94) 319 final.

() OJ No C 393, 31. 12. 1994, p. 14.

() OJ No C 110, 2. 5. 1995, p. 37.

() IP(95) 150.

() COM(94) 347 final.

() COM(94) 207 final.

() OJ No C 393, 31. 12. 1994, p. 221.

() COM(95) 87 final.

() OJ No C 40, 17. 2. 1992, p. 31.

() OJ No C 52, 19. 2. 1994, p. 37.

() COM(94) 319 final.

() OJ No C 124, 21. 5. 1990, p. 34.

() OJ No C 223, 31. 8. 1992.

() COM(94) 319 final, COM(95) 87 final.

() OJ No C 339, 31. 12. 1991; OJ No C 19, 25. 1. 1993; OJ No C 129, 10. 5. 1993; OJ No C 102, 24. 4. 1995.

() COM(90) 556 final.

() COM(95) 163 final.

() COM(94) 319 final.

() COM(95) 365 final.

() Federal Republic of Germany in its October 1990 frontiers.

() OJ No C 40, 17. 2. 1992, p. 31.

() COM(94) 319 final; COM(95) 87 final.

() OJ No C 343, 6. 12. 1994.

() Report of the group of independent experts on legislative and administrative simplification, COM(95) 288 final/2.

() Report on the communication from the Commission on an industrial competitiveness policy for the European Union (COM(94) 319 final). Committee on Economic and Monetary Affairs and Industrial Policy. European Parliament 29 May 1995.

() In particular the SME, Adapt and Leonardo initiatives.

() COM(94) 319 final.

() COM(95) 87 final.

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