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Nov 15

Industrial Strategy 2021: navigating the perfect storm

Talk about bad timing: one day before Covid19 was declared a global pandemic i n  2020, the EU Commission had published its “New Industrial Strategy for Europe“. The document naturally made no mention of closed borders, disrupted supply chains or anything related to health concerns. Maybe a problem in itself – a strategy without any considerations beyond the blindingly obvious is probably not very fit  for purpose.

So an update became necessary that took into account the implications of a slump in economic growth (6.4%), massive turnover losses by SMEs (60%) and an unprecedented fall in intra-EU trade (24%) – a perfect storm, in other words, for Europe’s economies.  They were already facing the need for a transition towards much more sustainability, including production processes and consumption patterns and vast investments in better (IT) infrastructure and in new skills for workers young and old.

In addition, unfair competition from third countries and market distortions were not tackled because of a lack of trade governance at the global level. When it rains it pours: and so a health pandemic mercilessly laid bare shortcomings and accelerated demands and trends from digitalisation to online work to the need for more diverse and resilient supply chains and production capacities

The EU’s ambition now should not only be to recover from the knocks of the pandemic but to pursue a horizontal industrial policy that again puts Europe in a global leadership position.  Our draft opinion on INT/935 Updating the new industrial strategy therefore starts with the observation that a coherent industrial strategy should be focused on two dimensions: recovery from the pandemic and reconstruction and resilience.

It was noted as a positive feature that the EU still believes industry and manufacturing to be of high importance for the prosperity of its citizens. Shortages in strategic value chains, however, as well as shortages of skilled workers, are undermining European industries’ ability to recover rapidly from the pandemic.

It is crucial that  Member States  and the EU tackle strategic dependencies, including  through reindustrialisation, the  circular economy, trade policy and skills-related measures. They need to do this by involving workers and companies – i.e. the social partners – in creating a shared understanding and a pathway towards the common goal: a far more sustainable and digital economy and society. Skill will be crucial in enabling not only the transition itself but people across Europe to drive and benefit from it and allow people to earn their living wherever they are in the EU.

The European Commission has outlined in its industrial strategy Key Performance Indicators, industrial ecosystems, Scoreboards and Dashboards that it aims to put together, monitor and map to provide useful data for evidence-based decision making. These overviews, such as the Annual Single Market Report  or  the monitoring  of  critical  raw  materials,  are  important  elements in assessing the EU’s industrial strengths and weaknesses.

Nonetheless, all the data in the world will not replace decisive political action or, on their own, re-assert Europe’s global role. Policies must not only be developed but also implemented. SMEs, who are the backbone of our economy, drivers of innovation and represent the bulk of employers, have to be given a favourable framework for growth, which includes a real and functioning single market.

Some of the European Commission’s instruments, such as IPCEIs (Important Project of Common European  Interest)  or  industrial alliances, are very good focal points for joint industrial action and can  provide  the  necessary framework  conditions  for  economic actors  across Europe. To maximise the impact, Europe needs to remain open for investment and trade but simultaneously address unfair competition and market distortions. A seemingly small but nevertheless key element of industrial global  leadership  are European standards: developed by European companies, they offer a crucial gateway for European leadership in manufacturing and should therefore receive greater support and attention.

The update of the Industrial Strategy includes good analyses and assessments as well as good plans and policies. But a strategy without execution is useless. The EESC’s main message therefore remains: sail the course, don’t just chart it!

 

Sandra Parthie
Member at the European Economic & Social Committee
Rapporteur of the Opinion “Updating the new industrial strategy”
German Economic Institute

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