Industrial policy: time for the EU to do more than fix market failures, the EESC hears

Industrial policy: time for the EU to do more than fix market failures, the EESC hears

How to best ensure the strategic autonomy of Europe’s industry was the focus of a debate on industrial policy at the EESC October plenary.

The EESC plenary on 21 October hosted a debate with Padmashree GEHL SAMPATH, Berkman Klein Fellow at Harvard University, on how industrial strategy can support the twin transition to a green and digital economy, contribute to Europe’s recovery and increase its strategic autonomy and resilience.

Opening the debate, EESC President Christa Schweng stressed that industry was key to achieving “a European Union that is economically prosperous, socially inclusive and environmentally sustainable”- the overarching goal of her presidency.

For industry to work for the good of all, “we need an industrial strategy where competitiveness goes hand in hand with sustainability and social justice, boosting Europe’s strategic autonomy and resilience”, said Ms Schweng.

She stressed that the lessons learned from the COVID-19 crisis, with its disruptions to global supply chains and consequent shortages of critical products in Europe, pointed to the need to improve the EU’s strategic autonomy. In the EESC’s view, this would best be done by:

  • making considered use of trade defence instruments to address the distorting effects of foreign subsidies in the single market on both companies and workers;
  • encouraging industrial alliances in strategic sectors along the lines of the battery and hydrogen alliances, which have proven successful in easing dependence in key areas;
  • supporting a strong and coordinated European healthcare ecosystem so as to ensure not only strategic autonomy and technological sovereignty, but also better quality of life for Europeans.

TIME TO THINK OUTSIDE THE BOX

Padmashree Gehl Sampath, leading expert on technology, development and the global political economy, made the case for a new type of public intervention in industrial policy that does not just focus on fixing market failures, but directs technological change in socially productive directions.

“It is time to rethink industrial policy bold and out of the box”, she said. “We should not repeat what did not work in the past.”

The first step in designing this new industrial policy should be to recognise that the decline in entrepreneurship, innovation and competitiveness witnessed in advanced economies is constantly reinforced by new technological paradigms and trends across a multitude of sectors and processes.

Uncertainty in the post-COVID world is not just a result of the pandemic.  It also ricochets the multiple effects of data-driven networks, the unfair spread of digitalisation dividends over the last 15 years, the pressure of climate change and the energy transition on countries, and the slowdown – even breakdown at times – of global trade and supply chains that have been carefully built since the onset of globalisation in the 1980s.

The second step would be to build a new strategy based on three bold propositions:

1) Acknowledging that there is a greater interconnectedness between the three megatrends of the future – health care/pandemic preparedness, energy transition/climate action and the data economy – and leveraging it. This is essential for harnessing industrialisation for a better future. We do not need an industrial policy that prioritises these megatrends simultaneously on different tracks, but one that considers these transformations in a circular model of change.

2) Favouring dynamism in the technology sector by focusing on market retention and market performance, which is a more crucial issue than market entry in all these key sectors, especially in the pharmaceuticals and vaccine sector, where there are currently strong oligopolistic trends.
 
3) Adopting a real sectoral approach to industrial policy, moving beyond common goalposts such as competition policy because, although all these sectors are high-tech, R&D intensive and depend on innovation and rewards, they have completely different characteristics.

For instance, asked Ms. GEHL SAMPATH, if we really want to promote a healthcare market in Europe based on existing strengths, can the EU support a public purpose programme for a health industry ecosystem of the kind Operation Warp Speed created in the US in the immediate aftermath of COVID? Can Europe facilitate the scale-up of the strengths of its existing biotech firms in similar kinds of public investment programmes that facilitate product development?

INDUSTRIAL POLICY AT THE HEART OF THE EESC’S WORK

Industrial strategy has been a major focus of the EESC’s work in recent times. As early as July 2020, the Committee flagged up the need to review the Commission’s first attempt at revamping the strategy put forward just before COVID struck Europe and which proved inadequate in responding to the dramatic impact of the pandemic.

Now, two reports adopted at the October plenary assess the Commission’s newly revised strategy.

One of the new opinions deals with industry as a whole, while the other one specifically addresses the issues facing the health industry, suggesting ways to deal with some of the critical weaknesses brought to light by the COVID-19 crisis.

A series of webinars is also underway to look at the stress points for today’s industry. The series, entitled The path to our industrial future, will wind up in a major conference in March 2022 where the EESC will debate its findings with the French presidency of the EU and the European Commission.

Source: Industrial policy: time for the EU to do more than fix market failures, the EESC hears | European Economic and Social Committee (europa.eu)

Photo Credit : https://pixabay.com/nl/illustrations/succes-strategie-bedrijf-oplossing-2081167/

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