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DG Enterprise bridges the different perspectives on industrial policy and endeavours to take into account input from other DGs, for example DG Regio in terms of smart specialisation, for which there is room in the notion of industrial system.

“An industrial policy which focuses on costs abatement is a fragile, not committed and short term one: once others realise lower costs than Europe then we have lost our position.

Flexibility is more important than costs, and scalability with it. The innovative thought in industrial policy is the need to develop a business-conducive environment, to think about all the actors in the value chain: customers, suppliers, business services, logistics… Europe has to put in place a real industrial system where all players nicely coordinate with each other, feeding their own needs. It is this network of relations that allow an industry to thrive and root it in a specific environment. This is the opportunity; the creation of clusters is the way in which you keep industries in a territory since you create a network you can’t disentangle. The coordination element is an argument for industries to stay where they are.” (DG ENT).

DG Regional and Urban Policy takes the perspective of local/regional development and formulates a very sui generis approach to forging an EU industrial policy. For DG Regio industrial policy is seen through the lens of the so-called place-based approach; it is crosssectoral, based on generic technologies, and operationalised through clusters. The placebased approach, which lies at the basis of the smart specialisation strategy, promotes bottom-up dynamics and rests on initiatives developed at the regional level. The role of proximity is underlined around the notion of clusters, bringing together different stakeholders (finance for technological development, companies and MNCs, the public sector, incubators, universities, etc.). DG Regio proposes moving away from an approach where single SMEs are supported to an approach where the objective is to generate and maintain an innovation “ecosystem” – building on proximity. DG Regio particularly stresses the need for a new relationship between public and private actors, sharing and exchanging knowledge, which facilitates technological take-up and develops know-how about how markets operate.

DG Research and Innovation focuses on research and its link to business. The current European research programme, H2020, raises high expectations in terms of procedural improvements with better involvement of business, and because of a stronger focus on companies’ needs. As such, it is about industrial competitiveness and technological development.

“Europe is very good in research, but not in bringing the products of research to market.

Industries and SMEs should be much more involved, since they have the incentive of commercialising the products of research. There has to be a real cooperation with universities and not just a façade to justify research funds by having industries in the consortia. The SME instrument is promising in this sense: technologies already have to be at a certain stage of development in order to receive funding, a business model has to be prepared to have business angel models and go for venture capital, in a logic of long-term sustainability, products on the market and profitability.” (G. Huemer)

56 PE 536.320Policy Department A: Economic and Scientific Policy

The SME instrument is generally positively valued, but a dissenting view considers that in the face of considerable expectations, it might produce deceptions and frustration. True, the instrument was designed to reward excellence. Perhaps, this is telling of the fact that the real needs of SMEs are not sufficiently grasped (ERRIN).

Overall, there is some convergence among policymakers at the EC level around notions such as smart specialisation, industrial system, eco-system and proximity. These are considered ways of embedding businesses in networks of stakeholders, which are part of the value chain – or eco-system – and thus of anchoring companies and avoiding their relocation. This level is also thought to be best for dealing with the coordination of different existing instruments and funds and for synergies to be obtained.

4.1.6. Who’s in charge? Governance and horizontal coordination There is broad agreement about the lack of a clear mandate in the field of industrial policy.

DG Enterprise (now DG Growth) is a natural candidate for such a role, but industrial policy instruments have been developed by other DGs who have a vision of the matter, such as DG Regio (with its Smart Specialisation Strategy), DG Research and Innovation, as well as many other DGs or agencies (DG CNECT etc.).

Despite some timid examples73, there is clearly a lack of leadership and coordination. This leads to fragmentation, which is detrimental to coherence and impedes reaping synergies between policies, programmes and instruments.

“ERDF and H2020 are a bit disconnected with each other, they are built on different visions and do not have the same beneficiaries. Research programmes are interesting for foresighting the dematerialised industries of the future maybe, but in the meantime things happen in the regions. There is a need for a leverage effect on the basis of these two large funding programmes; otherwise we will never reach the re-industrialisation objective.

These programmes are just catalysts for other administrative levels and private actors to invest in. Some regions link them in a fruitful and effective way, but it is only on the basis of their local capacity. The optimum ecosystem is one in which all funds are used in a coordinated manner, the EC should push for regional authorities to integrate policies.

Management authorities are sometimes disconnected with some people dealing with economic development and others dealing with research” (EBN).

Achieving a critical mass requires the strategic coordination of different interventions to overcome fragmentation. Many underline how the proliferation of many small initiatives is not sufficient and a more strategic approach should be adopted. It is important to scale up the importance of interventions (EBN) and ensure the critical size of support. The SME instrument and Knowledge Alliance (DG EAC), for example, are deemed by different interlocutors to be examples of underfunded initiatives.

However, such alignment and scaling up should not happen at the expense of flexibility, i.e.

it should take place without leading to excessive centralisation. Examples are: EASME was identified as not so effective because it centralises too much control of funds without specific knowledge of the sectors of application; and the EEN was criticised on similar grounds. Nor should it be at the expense of transparency: on the contrary, information should be made more visible and available to citizens and companies (CoR).

From an operational viewpoint, “on the ground”, this translates into a lack of harmonisation of procedures, which should be imposed as a minimum.

For example, a steering committee on Smart Specialisation is at work that involves all the DGs. Also on H2020, a Formal Programme Committee groups together all the stakeholders from other DGs allowing for wide consultation.

–  –  –

Overall, a common request from the concerned actors was for clarity of responsibilities across the different DGs at the European level, which should function in a more coordinated and transparent way.

Evaluation and policy competence In general, the issue of the (policy) competence needed to carry out an effective industrial policy is often mentioned. First, it is necessary to learn from mistakes (e.g. Youth guarantee, SBA). For example, more assertiveness for Europe is advocated in terms of quality of spending of available funds, something which may have been learnt via the Structural Funds, and that may be leveraged for other funds, for example in relation to research and SMEs.

It is also necessary to acquire and master the necessary knowledge (of local conditions, of relevant markets, etc.) at EU, national and especially regional/local levels. Importantly, this does not only concern public policymakers, but also private entrepreneurs. The capacity of entrepreneurs to undertake organisational change and carry out innovation management is fundamental in this respect (EBN on entrepreneurship).

Finally, speed is called for (CoR): policy should be reactive and adapt rapidly to new challenges. There is too much planning and too little experimenting. This should correspond in the public sphere to the imperative of “speed to market” that companies face.

4.1.7. Concluding remarks Overall, there is some consensus about the need for a long-term EU industrial policy, beyond a mere response to the crisis. It is also seen as a necessity in the face of heightened worldwide competition and the policy practices of major competitors (USA, Japan, China, etc.).

There are some converging views about the main weaknesses of the current arrangements, namely a lack of clear mandate and of coordination between DGs resulting in fragmentation and missed opportunities for synergy. Interestingly, business representatives join EU policymakers in considering the Member States level as a source of potential difficulties for carrying out an EU industrial policy, while the regional level is unevenly acknowledged as an appropriate level of action. Finally, there is some uncertainty concerning the thrust guiding the development of the EU industrial policy. While there is a clear and shared aversion for anything that could resemble a sectoral approach across the different stakeholders reviewed, business representatives seem to be particularly interested in keeping a level playing field, whereas unsurprisingly, policymakers have a more active vision of their role in promoting a favourable business environment, as a knowledge-broker for example. It is also worth noting that the notion of Smart Specialisation put forward by DG Regio is often endorsed or taken over by other policy stakeholders as a potentially pertinent model to underpin the development of an EU industrial policy.

4.2. The perspective of Member States This sections draws lessons from an analysis of industrial policy carried out in six Member States (UK, France, Italy, Greece, Poland and Germany – see Annex for a full account) chosen for their representativeness74. It describes the main characteristics, similarities and The countries chosen for the country fiches are representative of the diversity or ‘policy space’ in terms of geography and institutional makeup of the current EU Member States. Represented are the North (Germany, Poland and the UK)-South (Greece and Italy) and East (East Germany and Poland)-West (France, Italy, Greece, West Germany and the UK) differences; differences between the continent and the British Isles; and, last but not least, differences in economic systems ranging from the mixed economies of Poland and France, to

58 PE 536.320Policy Department A: Economic and Scientific Policy

differences in industrial policy in the selected countries and underlines determinants of policy preference and policy spillovers in each Member State. The purpose is to indirectly reveal the preferences of Member States for strengthened collaboration in the area of EU industrial policy, also captured through interviews with stakeholders, such as industrial confederations and ministries.

4.2.1. Different approaches to industrial policy and the main drivers Even though the collected data is qualitative in character, what emerged was the following

ranking of countries on the relative weight of using a horizontal or sectoral approach:

Figure 10: Dominant objective of industrial policy in the six countries studied Horizontal ------------------------------------------------ Sectoral

–  –  –

This was revealed through studying a combination of factors, such as the budget assigned for different areas (when available), emphasis on direct support to sectors (here support to the energy sector in Germany is seen as a horizontal policy since it feeds into overall energy sustainability and actually hampers industry in terms of cost competitiveness), the underlying motives for attracting investors to clusters or via economic zone type policies, and also official communications and statements made by governments on their web pages and in government documents.

It is also important here to add that the sector emphasis in both Poland and France comes mostly from a combination of how they have used their place-based policies and the fact that state ownership is most prevalent in these two Member States at present.

It can be seen then that there is no direct relationship between the relative preference or dominant approach to industrial policy and the competitiveness ranking of the countries studied (see below)75.

Figure 11: Relative competitiveness ranking of the six countries studied Germany---- UK-------- France----- Poland------ Italy----- Greece

–  –  –

Source: Country fiches.

At present there are a number of other major influences on industrial policy-making in the EU. One is the fundamental economic system of each country (including federal arrangements) which, not surprisingly, has a rather strong bearing on how economic policy, including industrial policy, is carried out. This is especially true for the relative preference for using the horizontal or sectoral approach. The mixed economies are more likely to have a sectoral approach. Germany, as a social federation of Lander, has an administrative setup that appeals more to horizontal policies overall. Northern Italy seems much more similar in its economic system to Germany, whereas Southern Italy has an entirely different economic system. The large spread in economic systems and economic development across the EU (also related to innovation, see below) should be considered as one of the main the social economic model of Germany, the entrepreneur-based system of Northern Italy, the Anglo-Saxon model of the UK, and the Mediterranean economies of Greece and Southern Italy.

In this relative competitiveness ranking Italy in reality is situated at either end if separated into North and South, and East Germany is closer to Poland.

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