EUROPEAN THINK-TANK REVIEW – XXXV. (November 2014)

Written by | Friday, November 7th, 2014
European Values

Industrial Policy in the EU: A Guide to an Elusive Concept
Xavier Vanden Bosch (Egmont – The Royal Institute for International Relations)

Various strategic documents produced by the European Commission in recent years have reflected a renewed interest in active industrial policy, even though this concept lacks a universal definition.

In its broadest definition, ‘industrial policy’ is any type of intervention or government policy that attempts to improve the business environment or to alter the structure of economic activity toward sectors, technologies or tasks that are expected to offer better prospects for economic growth or societal welfare than would occur in the absence of such intervention. Unlike monetary policy, competition policy or trade policy, ‘industrial policy’ lacks a clearly identifiable set of goals, policy instruments and institutions, such as a legislative framework, to delineate the scope for industrial policy or designated agencies to execute it. The EU’s powers in this regard are relatively limited: most policies that are part of ‘EU industrial policy’ are actually not pursued at the EU level but at national and regional level. As a result, the current institutional governance of industrial policy is particularly complex and fragmented.

As part of the EU 2020 strategy, the Commission presented a set of initiatives which reflect its interest in active industrial policy in the era of globalisation. The objective of one of these documents is to restore the industry’s share of GDP to 20 percent by 2020. To achieve such a target, the EU should seek to coalesce the wide range of industrial policies at national, regional and European levels. It is also necessary to work towards a unity between EU countries concerning common interests and objectives, because a common EU industrial policy will only be efficient with the support of the member states. The EU semester process is the most obvious procedure for voicing policy recommendations ensuring coherence. Integrating these efforts at various levels and across policies as a coherent whole – a coherent industrial policy – should be the core objective when debating this concept at the EU level.
(The study can be downloaded here: http://www.egmontinstitute.be/wp-content/uploads/2014/09/egmont.papers.69.U2275_16x24.pdf)

The Juncker Commission: A New Start for EU Justice and Home Affairs Policy?
Sergio Carrera and Elspeth Guild (The Centre for European Policy Studies)

Every new European Commission determines the role and political leverage of its individual Commissioners according to the priorities it sets out. Juncker’s Commission is no exception. Some of the most interesting changes occurred in the Justice and Home Affairs [JHA] dimension, which was significantly strengthened. One of the most far-reaching changes is the appointment of a First Vice-President (Frans Timmermans) in charge of the rule of law and the EU Charter of Fundamental Rights. The First Vice-President will for the first time guide and coordinate all other JHA-related Commissioners, in particular those of the new DG Justice and the DG Home Affairs: Ve?ra Jourová, the Commissioner for Justice, Consumers and Gender Equality, and Dimitris Avramopoulos, the Commissioner for Migration and Home Affairs.

The new JHA could facilitate the strengthening of the protection of the rule of law and fundamental rights while bringing more transparency and intra-institutional policy supervision to relevant Commission services. However, stronger EU supervision on the rule of law and the EU Charter are expected to meet resistance from member states, to whom supranational supervision presents yet another incursion into their national sovereignty. To overcome this challenge, the First Vice-President should develop his own policy programming on JHA policies for the next five years, which should be driven by faithful and effective implementation of the Lisbon Treaty innovations and also by safeguarding the EU Charter of Fundamental Rights. This agenda should be complemented by the Commission’s effective use of the power to launch infringement proceedings against member states that fail to comply with their obligations.

The First Vice-President should also make the JHA more transparent to the European Parliament, which is expected to become stronger in relation to the Commission in the next five years. At the same time, Timmermans must continue the work of its predecessor in safeguarding free movement of people as one of the major and most symbolic achievements of European integration, and one that has come under attack in recent years.

Expectations abound for the specific portfolios as well. The appointment of Avramopoulos as the Migration and Home Affairs raises hopes of creating a more effective system to pool resources from member states, and of developing a new European policy on regular migration. Meanwhile Jourová is expected to cooperate with the Commissioners responsible for all things digital in creating a single European framework to safeguard personal information and whistleblowers on the one hand, and increase the powers of security agencies tackling terrorism and other criminal matters on the other. Jourová is also likely to contribute to the enhancement of copyright protection legislation.
(The study can be downloaded here: http://www.ceps.eu/book/juncker-commission-new-start-eu-justice-and-home-affairs-policy)

For the Recovery of Investment in Europe
Olivier Marty (Robert Schuman Foundation)

This report investigates the causes and consequences of falling investment in Europe. It also analyses the public measures in support of SMEs, innovation and infrastructures. Finally, it draws a set of recommendations to be met in order to improve the public financial actors’ sharing of harmonised financial goals and instruments, which will in turn enable an improved catalysis of private investment in the EU.

There are several causes behind the decline in investment in Europe. First, a “base effect” (or return to “normal”) in some peripheral countries that invested too much in certain sectors in the past plays a role. The drop in the projected rate of return also has a negative effect; this problem might be due, for example, to an over-consumption of capital. The decline in cross-border capital flows implies a return to original domestic investments, while bank related regulatory constraints (Basel III) reduced the exposure to riskier assets, particularly in SME’s, innovation and the peripheral countries. There is also the partitioning of the Internal Market which has restricted European business trade outlets and also private and public investment capacities. However, it seems that an overall economic uncertainty is probably the greatest reason behind both the collapse and the subsequent failed recovery of investment. At first, this was due to unfavourable developments in the world economy and then to the management of the euro zone crisis. At present, this economic uncertainty stems from the reduction of macro-economic divergence between the member states in combination – in several instances – with concerns about the credibility of the economic policy as well as the existing contradictory and unstable regulatory and fiscal frameworks.

The reduction in private investment is also worrying, as it can negatively affect the production chain, potential growth and employment rates. One of the features of the European economy is that the member countries face major public financial constraints whilst there is a wealth of private savings (16,000 billion € in the European Union) which is mainly invested (40 percent) for the short term and often outside of the Union. The efficacy of any investment recovery measure must therefore be assessed according to its capacity to provide incentives for the private investors to finance more long-term projects.

Public investment should be targeting three goals: SMEs for their significance concerning growth and employment, innovation to achieve better productivity, and strategic infrastructures. The amounts that have to be mobilised in the EU are estimated at one trillion euro up to 2020 for transport, energy and telecoms networks and 1.6 trillion euro if we add the management of waste, water and healthcare to this. Another one trillion might be devoted to energy efficiency. One of the proposals features the creation of a “federal” fund supplied by both public and private investment. Other solutions include strengthening of joint instrument sharing between national and European public investors, and encouraging the EIB to be more innovative and to be willing to take more risks.
(The study can be downloaded here: http://www.robert-schuman.eu/en/doc/questions-d-europe/qe-325-en.pdf)

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