The New European Industrial Policy

Franco Mosconi

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317646129
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

The years since the global financial crisis have seen something of a renaissance in the manufacturing industry. The United States has launched its Advanced Manufacturing Partnership, and China owes much of its spectacular economic boom in the last decades to its being the 'world's factory'. Is there room for the EU in this landscape? This timely new book explores Europe's role in this evolving environment. It argues that on the one hand, in terms of sheer numbers, the role of the manufacturing industry in the EU is on a par with other major global economies. However, the book also states that Europe falls short of its global competitors (the USA in particular) in terms of its involvement in the most innovative manufacturing sectors. The volume therefore argues that this creates the opportunity for a new European industrial policy. Exploring the development of current EU policy, the book puts forward suggestions as to how the EU can improve in terms of the competitiveness of its technology policy. Placing the EU's position in the context of the industrial structures of the USA, Japan and the BRICs, the book blends theoretical models and practical examples in order to offer a the state of the art look at the current and future direction of Europe's industrial policy. This book will be of relevance to all those with an interest in European economics, industrial economics, public policy, European politics and European studies.

1 The new European industrial policy*

An overview

The primary richness of the most advanced nations was represented by its reserves of human capital, which is the same as saying by the relatively high number and quality of their entrepreneurs and craftsmen. This capital was at the same time the result of and a factor in development, and throughout the Medieval and Renaissance periods, authorities and administrators kept a (watchful) eye not only on the import and export of foodstuffs and precious metals, but also on the immigration and emigration of technicians and craftsmen.

(Cipolla 1967)

Introduction

What should the term industrial policy mean to us today?

The Prologue has already offered, we believe, useful indications about how to establish an intellectual methodology that takes into account both new directions in economic theory, and empirical evidence of what is actually taking place in the real world of policy decisions.

With Chapter 1 we begin our journey, one which will have Europe – from an international perspective, of course, for no man is an island – as its primary destination. This European focus – as we will see along the road – will prove itself to be highly apropos to our attempts to answer the question we posed at the very beginning. We know, in fact, that in determining the dynamics of economic growth, history counts as much as institutions: the EU of our days is the outcome of a solid process of integration that has lasted more than 60 years.

The purpose of this first chapter is to provide an overview; in so doing we will find that the concept of ‘knowledge-based investments’ will be our principle travelling companion.

It is thanks to certain distinguished contemporary economists, whom we will read in the pages of this book, that we recognize the full importance of these investments – an essential part of the new endogenous growth theory – to the evolution that industrial policy must undergo here and now. But there’s more. Looking backwards in time, we truly understand that ‘history is life’s teacher’ (Historia Magistra Vitae): the epigraph to this chapter, in which the great economic historian was referring to a Europe of many centuries ago, still today manifests extraordinary prescience, and can still offer great insights into the reforms Europe must undertake.

And so, let us return to the European Union (EU) of our times.

An extensive report by the Conseil d’Analyse Économique (CAE), commissioned by the French Prime Minister’s Office (Cohen and Lorenzì 2000), noted how industrial policy – in the European tradition – is the result of a triangle formed by competition policy, commercial (trade) policy and technology policy.¹ European competition policy has paved the way towards the so-called level playing field where firms may meet and compete on equal footing. Meanwhile, Europe’s commercial policy for international trade must continue to contribute to a growing openness of the global economy and inclusion of new players, thus overcoming forms of closure that are chiefly damaging to developing countries.

Today’s core issue, more than in the past, is how to envisage new policies for the competitiveness of European industry in this period of new technological revolutions (information and communication technologies (ICT), of course, but also biotechnologies and life sciences) and the expansion of international markets in which to compete (the ‘Asian miracle’ and an ‘enlarged Europe’); policies that here in Europe call into play R&D investment, innovation and human capital. In a word: the third side of the aforementioned ‘triangle’.

A suitable path to reform should be – to our mind – that the new industrial policy we are beginning to glimpse in the EU must lean towards a definite reinforcement of the triangle’s third side (‘technology policy’) at a pan-European level, without weakening the other two sides (‘competition’ and ‘commercial’ policies). The main purpose of this chapter is to shed light on this reinforcement through the lens of the recent manufacturing renaissance. In fact, the rebirth of manufacturing is one of the most distinctive characteristics of the twenty-first century; the Western world – Anglo-Saxon capitalism, above all – has rediscovered manufacturing’s fundamental role in promoting economic growth. The objective of this chapter is to chart a course for maximizing the economic and social potential of a new industrial policy in order to make the most of this renaissance.

After this Introduction, the first chapter will have the following structure. The second section goes back to the very beginning of the twenty-first century when in Brussels the European Commission (2002) unveiled its first new Communication on Industrial Policy. The third section sets the groundwork by providing an overview of the main EU industrial policy-related documents and studies which now cover the entire decade (2002–2012), splitting them into two groups with the aim of highlighting the ‘integrated approach’. Is this approach (and especially the proposed ‘vertical applications’) consistent with the technological revolution that is taking place worldwide? A look to the US and, within the EU, Germany provides some proofs, while – in the same vein – the fourth section provides a theoretical background to the debate by drawing from the insights of two prominent scholars, Alexis Jacquemin and Dani Rodrik, who both advocate a strategic industrial policy. The two sections following this, which respectively deal with the European manufacturing base and innovation landscape, describe what is happening on the ground, as an attempt to bridge the gap between theory and practice. The final section concludes by once again drawing attention to the fact that in the European context, industrial policy should be seen as the result of the ‘triangle’ formed by competition policy, trade policy and technology policy. The reasonable conclusion is that the new industrial policy in the EU must move towards a definite reinforcement – at the pan-European level – of the triangle’s third side, without weakening the other two. Today it is vital to attain this balance with a fully fledged European technology policy that fosters an industrial policy which focuses on ‘knowledge-based investments’ (i.e. R&D, human capital and ICT).

The re-launch of industrial policy in Brussels

During the 1990s European industrial policy did not have the same impact on the political agenda as it has over the last decade. At that time, the European Commission presented a Communication entitled ‘Industrial Policy in an Open and Competitive Environment: Guidelines for a Community Approach’ (European Commission 1990). However in December 2002 – here we are in the present days – the Commission issued a new paper entitled ‘Industrial Policy in an Enlarged Europe’ (European Commission 2002). This was the first of a long series of new Community reports that we will discuss further. The original ‘Bangemann’ Communication of 1990 – named after the Commissioner who was responsible for the dossier at that time – was followed by others throughout the decade.² Nevertheless, at least in the context of industrial policy, there was the distinct impression of unfinished business.

Europe was making headway in completing the two great, and ultimately successful, ideas of a Single Market (the ‘four freedoms’ of circulation) and the European Monetary Union (the convergence towards the ‘Maastricht criteria’). Despite the necessary integrations and improvements required, these achievements contributed to building the European economic structure we know today. In addition, it was at the turn of the twenty-first century that the fundamental steps were being taken for what was to become the third great historical success for the EU: its enlargement towards the east (the ‘unification of Europe’).

What remains to be understood, however, is what caused the sort of ‘suspension’ of industrial policy we referred to and which lasted at least ten years. Was it because in those years united Europe was busy completing the fulfilment of three of its great ideas, as we just described? Or did it depend more on the fact that for much of the 1990s, competition policy, liberalization and privatization were considered to be the best tools for public intervention in the economy?

If we take the first theory as valid, it is not surprising that we have to make a leap from 1990 – following our simple reconstruction – to 2002 to discover a decisive drive by Community institutions towards a (new) industrial policy: in the previous decade, united Europe had other priorities (‘one market, one currency’), and other achievements. On the other hand, if we are to evaluate the second theory, we need to undertake a patient investigation of how the European integration process came about: the ideas that influenced its progress, the institutions called upon to generate its growth. This chapter is an initial attempt in the latter direction.

Theories aside, there is in any case another key factor: the economic context was different, at least in the early 1990s. The revolution of information and communication technologies (ICT) and America’s new economic boom (The White House 2001) were just getting started. The affirmation of new major global economic players – China in particular, but more in general all of the ‘BRIC countries’ (Brazil, Russia, India, China) (Goldman Sachs 2003) – could certainly be glimpsed on the horizon but had not yet fully produced their explosive effects. We do know that all these phenomena completed their growth curve between the end of the 1990s and the beginning of the new century, thus fully revealing their effects. So, driven by this dual revolution (the New Economy and the Asian miracle), the European economy – starting with the manufacturing industry – found itself dealing with quite serious long-term challenges that it had not seen for some time.

As we mentioned, another big challenge was forming on home turf via the EU policy to embrace, between 2004 and 2007, ten Central-Eastern European countries, as well as Cyprus and Malta.³ By simplifying a great deal, we can narrow down eastward enlargement to its economic dimension alone, without neglecting the enormous importance it had in political, historical, cultural and institutional terms. Yet, if we consider the economic implications of enlargement – especially against a backdrop of literature that has become quite boundless (European Commission 2001) – we will see that above all, this has represented a further extension of the Single Market, which has ...