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The current support instruments are conceived in response to perceived specific market failures and therefore cannot (or should not according to others) address systemic challenges. Moreover, the various aids to enterprises tend to have different effects depending on the sectors they are applied to and it can therefore be difficult to make generalisations. While much stronger evidence from evaluations than is currently available would be needed to draw solid conclusions, it appears that the effectiveness of access to finance and of policies to support apprenticeships and support to labour mobility is believed to be greater than that of cluster policies or innovative procurement, particularly as far as SMEs are concerned. In contrast, support to exporting companies is generally deemed the least effective of all possible instruments.

In one notable dissenting opinion, support to exporting companies is deemed by far the most effective at the firm level, because it encompasses all the others. Getting firms into exporting indirectly supports a wide-ranging set of actions that improve innovation and productivity, as there are significant barriers to entry into exporting. Radically diverging views were recorded on matters such as the potential effectiveness of social and ecoinnovation and indirect support measures such as the establishment of marketplaces to attract venture capital or publicity for inventors and creative firms. According to some, these measures simply do not address the fundamental problem that public support is needed until the risk/return metrics of a given activity are sufficiently clear to the private sector and deemed financially affordable. So any support provided at the margin of this threshold is irrelevant.

Although with small variations, most respondents agree that mainstream support instruments such as support to access to finance, support to innovative SMEs, innovative procurement and support to exporting companies, are broadly provided in line with needs and justified by available evidence of their effectiveness or, in the worst of cases, slightly underfunded in the light of the peculiar current crisis conditions. In any case, nobody feels that there is any need for a substantial strengthening of purely horizontal and untargeted measures.

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There are more radically diverging views as to the appropriateness of the financial effort devoted to cluster policies and support to apprenticeships and labour mobility. While also in these cases the majority agrees that the right level of effort has been broadly reached in the light of available evidence, there remain radically diverging opinions as to whether these policies are substantially underfunded or, conversely, substantially overfunded compared to perceived needs.

4.3.4. Framework conditions There is a general, but not unanimous, consensus that the greatest potential for a transformative strategy today probably lies in making EU energy and climate policies more competitive-oriented, although this does not mean there is underlying agreement on the direction these should take. Another area of substantial agreement can be found in assessing the potential for industrial growth provided by a deepening of the European Single Market as lower than the potential possibly offered by opening up foreign markets and removing existing barriers to trade.

There remains a minority of respondents who maintain that the impact on manufacturing of any trade-related policy – both internal and external to the EU - would, at this stage, be almost negligible. Needless to say, radically diverging judgments are given to the potential for industrial growth hidden in a reformed state aid and competition policy. While this is deemed almost non-existent by those aligned with the current EU practice, the others see the need for a more radical reform in this area. Again in an oversimplified form, state aid regulation should be much lighter on strategic industries with potential for growth and substantial investment risk and, unlike in the past, based on European rather than national champions. The difficulties that the current EU definition of SME would create in fine-tuning policies are generally deemed as slightly overstated and a political argument rather than a real policy concern. However, also in this case, there is a radically diverging opinion maintaining that a change in the definition of SME would be one of the key and more urgent reforms to put in place as soon as possible as a precondition for improving the effectiveness of industrial policy in Europe.

4.3.5. Multi-level governance It is often noted that it is not so much the balance between the different levels of policymaking per se that matters, but rather the existence of conflicting or contradictory goals between them. However, most respondents believe that too much is left to Member States’ interventions and some failures in using available instruments – for instance in the field of Structural Funds or support to labour market mobility – are not really addressed.

This creates a very unbalanced condition where certain States or Regions can silently manage quite effective industrial policies and have developed good capacities to do so, while others are increasingly lagging behind. The conundrum here, however, is that without local involvement industrial policies have little chance of success, but many local or even national governments appear simply not up to the task.

As already noted above, a minority of respondents object to any European intervention on subsidiarity grounds and would like to reduce EU competencies in this area. This is even more so after the 2008 economic crisis showed the ineffectiveness and slowness of European interventions and related decision-making process and led some to regret that Member States had been left more sovereignty on matters such as industrial policy.

–  –  –

4.3.6. Specific issues Realism and feasibility of the Europe 2020 objectives Most respondents agree that the Europe 2020 objective of getting back to a 20% share of manufacturing in GDP is hardly realistic or feasible in current conditions. Both increases in labour productivity and shifts in demand towards services are generally assumed to continue as a structural trend over the next few years, which would make the achievement of the target extremely unlikely or eventually possible, in the best of cases, only under a very broad definition of manufacturing also inclusive of business services downstream and product development upstream. To this end, the identification of the target itself appears exceedingly driven by the need to convey the message politically, but not adequately supported by a rigorous underlying analysis and quantification of a suitable set of measures to reach this aim. A clearer and more elaborate assessment would be needed of the impact of the share of manufacturing on the economy, as well as of the extent of the interventions required to reach the 20% target (a real Copernican revolution in the words of one commentator), as it would allow for better strategic understanding and overall steering of the process.

Moreover, it is also noted that capacity constraints in implementing such a Copernican revolution are poorly appreciated and taken into consideration when setting targets. For instance, so far no EU industrial policy document has tackled the issue of governance capabilities and of the highly diversified and sometimes limited range of skills and tools available within industrial policy agencies to manage such a daunting effort across Europe.

While the majority of respondents seem to agree that a set of European Industrial Policies to achieve that target would ideally be highly desirable and they therefore endorse the underlying political message, a minority either casts serious doubts on the very need to have a target for manufacturing alone, or challenges the policy on subsidiarity grounds and maintains that an EU goal does not make much sense as it would depend on a number of very heterogeneous situations at the national and local levels, which an EU strategy can hardly cover.

Need for a specific EU policy initiative aimed at reshoring industrial activities Most respondents share the opinion that specific programmes aimed at attracting back manufacturing activities lost to China and other emerging countries in the last decade (socalled reshoring) and broadly mirroring the contents of the US Make it in America programme would not be desirable or feasible in Europe. The prevailing view is that such an approach would be backward-looking or even counterproductive, since it would distract the policymakers’ attention from the need to invest in industries with a high potential for growth and in more promising technologies, irrespective of whether reshored or not.

Moreover, some maintain there is no proof that this type of programme meets a concrete and actual demand and nor that it would not end up subsidizing businesses that would in any case reshore their activities, as this would require a much deeper analysis and understanding of current competitive dynamics and the incentives available elsewhere (rarely disclosed) than presently available.

There is a minority view strongly supportive of replicating something similar to the Make it in America programme in the EU, because this would provide a common framework of action for Member States who are allegedly trying to achieve the same objective through various fiscal measures and are driven to fiscal competition to achieve this aim. Hence,

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some kind of coordination could help in mobilizing all European countries towards the same goal by providing a common reference framework and a development path. In the dissenters’ view such a programme could be justified in terms of market failure by addressing and somehow balancing the growing IPR management and security concerns Europe faces in off-shoring too much of its technological base.

The merits of technological foresight and randomised experiments.

The vast majority of respondents continue to see the merits of basing policies on foresight exercises, following trends in research and spotting key emerging technologies as a basis for identifying strategic sectors or segments of the economy, although one radically dissenting opinion was recorded.

The recently proposed new industrial policy approach based on randomized trial and error experiments (see Chapter 1) not supported by any other preliminary consideration aimed at identifying strategic priorities, remains deeply divisive among respondents and elicits either strong support, or deep scepticism.

4.3.7. Concluding remarks Participants in the exercise emphasised different key messages, which were not always

compatible. These can be broadly summarised and highlighted in the following terms:

 There is little point in discussing EU industrial policy, unless the Treaty is changed.

 There is a widely unrecognised capacity problem in devising industrial policy based on smart specialisation, and there is little the EU can do to redress this, as it depends on uneven Government skills at the local level.

 Industrial policy is wrongly conceptualized in terms of market failures, while it should be understood in terms of the risk/return metrics the public or the private sector can bear.

 Competition rules at the EU level should be eased and conceived in EU strategic terms.

 Industrial policy should not be seen as a substitute for a GDP growth strategy, but as a tool to orient the economy towards desirable socio-environmental goals.

 Discuss industrial strategy with industrialists, and improve knowledge of their working conditions and competitive dynamics worldwide.

 Experiment new industrial policy tools including sector-specific education policies;

 The paramount importance of education, R&D support and finance of innovation strategies better declined at the sectoral level.

 Improve evaluation and knowledge of what is working.

 Increase complementarity between industrial policy and other policies.

The overall vision ahead is that the EU has rightly moved away from its previous exceedingly horizontal approach towards the current smart specialisation strategy, although there can be serious – and still poorly recognised - capacity constraints in its implementation. To a notable share of respondents this recent move is, however, far from being enough unless the key aspect of managing state aid and competition policy in a more proactive and strategic-oriented way is tackled. Interestingly, the so-called new industrial policy approach elicits some consensus across the different schools of thought and ideological orientations, while programmes specifically aimed at facilitating reshoring of manufacturing activities do not. Few indications emerge from the exercise of the need to reorient the effort devoted to the various industrial policy tools so far, but there was a request to focus even more on the human capital component by investing in apprenticeship

–  –  –

and support to labour mobility instruments. All in all, this appears – in spite of the recent financial crisis - a more important strategic tool than improving access to finance.

4.4. Conclusion One main message emerging from this chapter is the seemingly scant room for manoeuvre left to policymakers at EU level to develop an EU industrial policy in the traditional sense.

Caught between competition policy seriously constraining state aid, on the one hand, and Member States’ prerogatives and heterogeneous conditions and challenges, on the other, the development of an industrial policy at EU level in a top down and centralised fashion seems to be difficult. In addition, the lack of a clear mandate and of coordination is noted, together with the absence of a shared strategic vision. Yet, there is an emerging agreement around a set of principles and notions such as Smart Specialisation or (eco-)systems which could contribute to the formulation of a prevailing paradigm guiding the development of a decentralised EU industrial policy.

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