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Chapter 6

Chapter 6. European Industrial Policy. Competitiveness. EU share of global economy Ability to generate growth and sustainable employment Based on efficient, innovative businesses Competitiveness is not static – change is key Role of industrial policy is to aid this process.

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Chapter 6

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  1. Chapter 6 European Industrial Policy

  2. Competitiveness • EU share of global economy • Ability to generate growth and sustainable employment • Based on efficient, innovative businesses • Competitiveness is not static – change is key • Role of industrial policy is to aid this process

  3. What is industrial policy? • All those policies which impinge on the structural adjustment of industry with a view to promoting competitiveness • Provision of a horizontal framework in which industry can develop and prosper by remedying structural deficiencies and addressing areas where the market mechanism alone fails

  4. Approaches to industrial policy • National versus supranational policies • Interventionist versus liberal • Clash of cultures • France - national champions • Germany - state as a catalyst • UK - ultra-free marker

  5. Horizontal or generic - affects all sectors Negative - slows process of structural change Sectoral specific - steel, textiles, IT, etc Positive - accelerates process of change Types of industrial policy

  6. Evolution of EC policy - 1980s • Policy shift - emerging liberal consensus • Impact of SEM - integration as a cure • create environment for firms to compete and restructure • increase rule enforcement • re-commitment to free and fair trade • limits to national champions - rise of European champions

  7. Evolution of EC policy - 1980s • Supremacy of markets • collaboration and co-operation (consistency with market?) • greater horizontal emphasis • emergence of network economy • dilution of national policies - convergence of liberalism at state levels

  8. Industrial policy in the New Millenium • Policy more passive and based on: • promotion of permanent adaptation to industrial change within open, competitive markets • coherence with other measures • horizontal measures • Key theme: improved functioning of markets to stimulate private sector investment

  9. New themes • Industrial policy has become explicit industrial competitiveness strategy • investment in human capital • non-mobile factors of production • co-operation at pre-competitive stages of production • impact of globalisation

  10. Porter (1990) • Competitiveness is determined by intensity of competition • This is aided by clusters • EU policy has directly sought this • Put firm at centre of strategy • Policy addresses market failure

  11. Maastricht and industrial policy • Explicit EU competence for the first time • Industrial policy aims to: • accelerate the adjustment to structural change (i.e. positive industrial policy) • promote business development initiatives - SMEs • promote co-operation between enterprises • dissemination of outcomes of research and development policies

  12. Research and development policy Competition policy Trade policy Export promotion Education and training Inward investment schemes Fiscal policy Infrastructure development Environment Labour market policy Examples of industrial policy instruments

  13. Rationale for EU intervention • Will the market deliver? • High costs and risks of R&D • Avoids duplication • Europe falling behind • R&D per head in Europe - half that of Japan and 60% of US • Reduce problems arising from different standards

  14. Problems of EU and collaborative strategy • Competition problems? • Different working methods and cultures • Higher costs at early stages • Bureaucratic procedures • Role for SMEs • Marginalized by globalisation • Value of outcomes?

  15. Globalisation • Limits role of state to: • supporting scientific and technological infrastructure - e.g. dissemination • support competition and fair play • alleviate institutional failure - education and training • support for strategic technologies where state lags behind • negotiation of common trade rules

  16. Globalisation (cont.) • Requires policy which aims to develop locations in which industry can flourish rather than policy to develop national industry - i.e. ownership not important • national champions irrelevant • horizontal-generic policies dominant

  17. Evidence • In areas EU is emerging as success: • mobile phones (Nokia and Ericsson) • Pharmaceuticals (losing fragmentation) • Aerospace (Airbus is challenging Boeing) But more work needed in hi-technology and information industries

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