Erkki Liikanen: "The Central role of the Competitiveness Council as engine for Economic growth and prosperity in Europe", Competitiveness Council, press conference Brussels, 27 November 2003

Brussels, November 2003

Introduction

Today's meeting of the Competitiveness Council is a good demonstration of the central role that this Council will play in the future.

This Council formation is important to ensure that the economic element of the sustainable development equation receives the proper attention in relation to the two others (environment and social protection).

This Council is a necessary vehicle to ensure that our policies represent the right balance within the sustainable development strategy so that our industrial sector receives the attention it deserves.

I am particularly grateful to the Italian Presidency for the attention it has given to the proper functioning and role of this Council.

This is the right way forward to ensure that competitiveness stays prominently on the political agenda of the EU

A competitive industrial sector is the engine for economic growth and prosperity that will ensure that our other goals can be attained.

The agenda today has been rich and has given rise to an interesting discussion on issues of concern to all of us.

Integrated approach to competitiveness

Last March, the European Council called the new Competitiveness Council to actively assume its horizontal role of enhancing competitiveness and growth, in the framework of an integrated strategy for competitiveness.

The Commission shares this concern with the Council. I believe we must place competitiveness at the top of the EU political agenda. It is important that competitiveness of industry is strengthened in our daily decision-making.

The October European Council reinforced the "pivotal role" of the Competitiveness Council in ensuring that this integrated approach is applied. This Competitiveness Council is an important forum to provide sound coordination of policies impacting on our industry's competitiveness.

Last week the Commission adopted a Communication (entitled "Some Key Issues in Europe's Competitiveness Towards an Integrated Approach").

It outlines ways to facilitate the work of this Competitiveness Council. It provides a working method that allows systematic analysis of competitiveness challenges. With analysis, we identify problems and the need for possible action. Then we need to make sure that measures proposed fully take into account their impact on competitiveness. Public consultation and impact assessment are crucial instruments.

These measures are either legislative (in accordance with better regulation principles) or aimed at fostering research, innovation and entrepreneurship.

One of the main messages of this Communication is that policies and measures to promote competitiveness are often interlinked. Exploiting synergies and complementarities of different policies - Industrial Policy, Internal Market Strategy, Research and Competition - will pay off in increased competitiveness. There is a need to exploit the synergies at EU and national level.

Another important element is that there are important pending legislative proposals impacting strongly on the business environment that need urgent attention. One of them, the Community patent, has been discussed here today.

The Council, the European Parliament, the Member States and the Commission all have a role to play in promoting competitiveness.

At the Commission we are committed to mobilising our legal and financial instruments to support competitiveness and to fully assess the impact of our proposals on competitiveness.

We will also streamline our analytical work and strengthen our assessment of industry sectors' performance.

Good examples of such sectorial work are textiles, aerospace, shipbuilding, pharmaceuticals and defence equipment. Industrial policy aims to improve framework conditions for all businesses but needs to take into account the specific factors that determine the competitiveness of each sector.

This is not the end of the story. The Commission will provide a more in-depth analysis of phenomenon of "de-industrialisation" next spring as a follow-up to our Industrial Policy Communication of December 2002.

Competitiveness Report 2003

Every year, we issue a report focusing on issues that touch upon the competitiveness of EU industry. Traditionally, these reports have been the analytical precursors of policy action by the Commission.

Past reports focused on, for example, pharmaceuticals or on biotechnology and gave us a good basis for policy action.

This year's report looks at issues such as:

 growth, productivity and employment,

 

 enterprise reorganisation and productivity growth,

 regional aspects of competitiveness, and

 enlargement and the competitiveness of manufacturing.

The key element of the report is the crucial role of productivity to improve standards of living.

 

Let me stress that it is not a simple black and white picture throughout the EU and amongst the EU's manufacturing and services sectors.

The report finds that productivity performance varies widely amongst EU Member States, regions and accession countries, but is nonetheless heavily influenced by innovation and take-up of ICT.

The report finds that firms that achieve high productivity growth are those that combine organisational improvements with investment in new technologies, and particularly in information and communication technologies (ICT).

ICTs have contributed to productivity growth more in the US than an in the EU, which relies more heavily on traditional types of capital.

Productivity growth disparities among EU regions are narrowing, but slowly.

Regions that show high productivity growth tend to have good transport and telecommunications links, a strong entrepreneurial culture with good industry-science relations and clusters that encourage networking and a common vision among regional stakeholders.

Policies that support innovation, that improve competitive conditions, that encourage high-tech entrepreneurship at the regional level, and that favours clustering of innovative firms are essential ingredients for raising productivity growth.

A recent study for the Commission has provided more detailed information on which sectors have contributed positively and negatively to the productivity gap of the EU against the US in recent years.

Sectors contributing to increase the gap are some key high-tech manufacturing sectors as well as the distributive trades and financial sectors.

On the contrary, the communications sector has helped narrowing the productivity gap.

Scoreboard of Enterprise Policy 2003

Another document that we have presented to the Member States today is the Scoreboard of Enterprise policy.

This provides a good overview of recent Member States' performance in securing a better environment for enterprises.

For the first time, this year's report presents developments in the acceding and candidate countries in a comparable manner.

It also presents the individual quantitative targets that Member states set themselves in various policy areas, in relation with the corresponding indicators. This is a concrete and visible application of the Open Method of Coordination in Enterprise policy.

The report shows many areas of progress:

 increased number of business angels' networks;

 

 more countries use regulatory impact assessment;

 increased part of tertiary graduates in the workforce;

 fast progress in e-government;

 increases in Internet and broadband penetration and its commercial use.

The areas of disappointing developments highlighted by the report are:

 Venture capital investments continued to decrease;

 

 Trans-border public procurement is still very low;

 no progress on lifelong learning;

 E-commerce remains a secondary channel for doing business.

The general message is that there is still work to be done, even in areas where we are doing well.

 

For instance, the fast growth of broadband in Europe should not lead us to forget that we are still behind South Korea.

Innovation Scoreboard 2003

Finally, a few words on the recent European Innovation Scoreboard that we have just published for the fourth time since the Lisbon Council asked us to do so in 2000.

This report predicts that, at the present rate of progress, we will not be catching up with the US by 2010.

But there are also signs of encouragement. Notably:

ICT expenditures: Europe is catching up (EU/US gap halved since 1996). Now European companies should accelerate and deepen organisational innovation in order to reap the benefits of ICT investment.

Science and technology graduates: The EU leads the US, even if there are signs that this lead might come under threat.

High-tech manufacturing value added: The EU is slowly catching up with the US.

R&D investment: Business investment in Research & Development shows some signs of recovery but a new gap with the US has appeared in public investment since 2001.

However, regarding patents: The US is patenting more actively in Europe than Europe itself, in particular in high-tech patents. This weakness could justify a concerted EU effort to support European inventors with patenting their inventions in Europe and, even more importantly, in the US.

Concerning the accession countries, the report shows that they are catching up with the current Member States. For example, Slovenia the Czech Republic and Hungary rank higher the EU average for high tech manufacturing employment. And the share of innovative SMEs in Estonia is higher than the EU average. However, this catch up process needs to be accelerated by pro-active innovation policies.

This year's scoreboard also confirms some trends that were identified in previous editions. For example, the innovation leaders among the Member States perform equally well or even better than the US. Out of the 33 countries analysed in the scoreboard, Sweden and Finland are as innovative as the US and Japan. Greece, Portugal and Spain are catching up. And innovation excellence tends to concentrate in certain regions. Highly innovative regions in Sweden, Finland, Germany and the Netherlands are among the best innovation performers in Europe.

Conclusion

To sum up, I think that today we have demonstrated the importance of the Competitiveness Council. We have also achieved to place the issues of competitiveness and productivity highly on the EU agenda.

We need to get the analytical framework right. We need to ensure that we coordinate properly when we make policy and legislate so that industry is not left out.

Our discussions regarding the chemical legislation is a good example of the importance of such coordination.

We need a competitive industry to finance the achieving of other goals such as environment and social protection.

We much ensure that our industrial policy provides the best possible environment for our industry to grow and remain competitive and we should also take into account the specific situation of individual key sectors.

The Competitiveness Council is a good vehicle to bring this discussion forward.

Thank you. DN: SPEECH/03/578 Date: 28/11/2003