Brussels, 5 October 2005

In the context of the Lisbon “Partnership for Growth and Jobs” the European Commission and Member States made a commitment to focus on economic growth and employment. To do this the EU’s priorities were declared to be:

• Making Europe a more attractive place to invest and work
• Putting knowledge and innovation at the heart of European growth
• Shaping policies to allow businesses to create more and better jobs

As an important step in the delivery, today the Commission has set out a new integrated approach for industrial policy aimed at improving the coherence between different policy dimensions and increasing their relevance to individual sectors. Whilst the manufacturing industry is currently undergoing important changes and facing major challenges, it needs a favourable business environment to continue to develop and prosper.

Today’s new industry policy sets out an outline of work for manufacturing industries for the coming years. It includes new horizontal initiatives and tailor-made initiatives for specific sectors. They shall complement work at Member State level to help address the key challenges faced by the various sectors of manufacturing industry.

The full text of the new industry policy is available at:

index_en.htm

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This MEMO provides the following information:

• Seven major cross-sectoral policy initiatives
• Sector-specific initiatives
• The EU industry – some key figures
• separate sectors grouped in four categories

Seven major cross-sectoral policy initiatives

Seven major policy initiatives are announced to address the common challenges across groupings of different industries in the light of competitiveness considerations.

• An intellectual property rights (IPR) and counterfeiting initiative (2006)

Given the importance of IPR in for the competitiveness of many industrial sectors, the Commission plans to launch a dialogue with industry and other interested parties to determine what more might usefully be done to provide European industry with a sound IPR framework.

Taking account existing and planned anti-counterfeiting and anti-piracy instruments and measures, including those in the enforcement [1] and customs fields, the Commission will review the state of progress in the whole area of IPR with a focus on competitiveness issues and come up with suggestions on how to improve the situation in 2006.

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• A high level group on competitiveness, energy, and the environment (end2005)

Competitiveness, energy and environmental policies are closely interrelated in their objectives and impacts, in particular on many basic and intermediate product industries. Given the need for consistency of policy and legislative initiatives in these areas and, in order to exploit fully the synergy between them, closer coordination and the development of an integrated approach is of the essence. For this purpose a High Level Group on Competitiveness, Energy and the Environment will be set up. It will function as a an advisory platform bringing together the Members of the Commission for Enterprise and Industry, Competition, Energy and the Environment as well as all relevant stakeholders. It is designed to examine the links between industrial, energy and environmental legislation and to ensure the coherence of individual initiatives, whilst improving both sustainability and competitiveness.

• External aspects of competitiveness and market access (Spring 2006)

Access to international markets is a priority issue for most of the sectors. The Commission is currently working on a possible Communication on the revision of Market Access Strategy, reviewing the existing strategy and instruments to focus on those sectors and markets with greatest potential gains for competitiveness. Market access objectives will be regularly prioritised in combination with a more effective use of the Trade Barriers Regulation. In cooperation with stakeholders, a detailed strategy will be developed and implemented to tackle barriers in the selected sectors and countries.

• New legislative simplification programme (October 2005)

Better regulation at various levels has been identified as a key challenge for several sectors, including construction, motor vehicles, ICT industries, and the food and life sciences industries. The Commission has already announced [2] that it intends to re-launch its work on the simplification of existing legislation. Following consultation with stakeholders, a Communication will be published in October setting out a Simplification work programme including the three priorities that have already been identified for this approach: the automotive sector, the construction sector, and waste legislation.

• Improving sectoral skills (2006)

Skill shortages were identified as a key challenge in a wide range of different industries, including the ICT and engineering industries, the textile and leather industries, and a number of basic and intermediate goods industries. Moreover there is some evidence that relocation of industrial activity is in some cases motivated more by skill shortages than by cost factors. The Commission has already begun to address skill shortage issues through a number of policies, such as the Education and Training 2010 work programme, including the European Qualification Framework (EQF). To supplement these existing initiatives, it is proposed to make assessments of the nature of the skill problems in particular industries.

These assessments would include the identification of current sectoral skill requirements and skill gaps, and would examine likely developments in sector-specific competences, including where possible effects on SMEs.

• Managing structural change in manufacturing (end 2005)

The following industries need to manage structural adjustment: the textiles, leather, furniture, footwear, and ceramics industries, printing, motor vehicles, shipbuilding, steel, and parts of the food industries. The Commission intends to ensure that better anticipation of economic restructuring are included in the new Structural Funds programmes. In line with the Community Strategic Guidelines for Cohesion, 2007-2013, support for programmes aimed at modernisation of labour markets and anticipation of gradual changes throughout the Union in sectors for which structural change has been identified as an issue needs to be included in the new Structural Funds programmes. The Commission will also further explore the issue of enhancing the cooperation across regions faced with similar problems and challenges.

• An integrated European approach to industrial research and innovation (2005)

The forthcoming Communication on Research and Innovation will set out a new, integrated approach to policies and actions in support of research and innovation, including a number of initiatives highly relevant for industrial sectors. As part of the follow up to the above Communication, a European Industrial Research and Innovation Monitoring System will be established in 2006 to provide a consolidated analysis of developments relevant to industrial research and innovation, and a conduit for stakeholder views. This will help to anticipate both barriers and opportunities to improving research and innovation investment, and the commercialisation of new technologies in Europe. A High-level Stakeholders Group, including policy-maker representatives, will be set up to provide guidance and feedback on the focus and relevance of this activity for competitiveness.

Seven new sector-specific initiatives

In addition, a number of new sector-specific initiatives will be implemented:

• Setting up of a new pharmaceuticals forum (first meeting in 2006) Pharmaceuticals: a new forum with government ministers, senior industry representatives and other stakeholders will concentrate on R&D, national regulations and the development of a single market.
• Mid-term review of life sciences and biotechnology strategy (2006-2007): it will involve closer cooperation with industry through the Competitiveness in Biotechnology Advisory Group and a regular annual triangular dialogue with industry and Member states in order to help identify problems, propose priorities, and make recommendations for actions.
• New High-Level Groups on the chemicals and the defence industry (2007): new high level groups will be established to focus on the impact of the REACH directive on the competitiveness of the chemical sector and to consider procurement and standardisation in the defence area.
• European Space Programme: common, inclusive and flexible programmatic basis for the activities of European Space Agency, EU and their respective Member states.
• Taskforce on information and communication technologies (ICT) competitiveness (2005/2006): a taskforce with stakeholders representatives will be set up that will focus on identifying and removing the obstacles that inhibit ICT take-up. It will also draw attention of Member states to the barriers to the competitiveness of ICT manufacturing in Europe and the obstacles to wide and effective take-up.
• Mechanical engineering policy dialogue (2005/2006): separate forums will examine the sectors’ strengths and weaknesses and propose remedies.
• A series of competitiveness studies, including for the ICT, food, and fashion and design industries analyzing the trends affecting the competitiveness of industrial sectors with a view to deriving further proposals for concrete policies and actions where necessary.

The EU industry – some key figures
A strong and healthy industry is essential to fully exploit the EU’s potential for growth and to enhance and sustain the EU’s economic and technological leadership. EU manufacturing industry is important in its own right - it provides around a fifth of EU output and employs some 34 million people in the EU. Beyond this:

• Manufacturing is the key to exploiting the new knowledge economy - over 80% of EU private sector R&D expenditures are spent in manufacturing [3] .
• Manufacturing generates the new and innovative products that provide some three-quarters of EU exports
• Manufacturing creates growth and jobs in the wider EU economy: it is closely inter-linked with the service industries, providing demand for business services and supplying key inputs to the services industries
• EU manufacturing industry consists of a large majority of SMEs: over 99% of companies and 58% of manufacturing employment are SMEs

separate sectors grouped in four categories

The range and diversity of the sectoral policy challenges has thus been examined in some detail, based upon a systematic screening of opportunities and challenges for separate sectors of EU manufacturing industry and construction. On this basis, an on-going outline of work for industrial policy over the coming years has been constructed.

Individual sectors have been grouped into four broad categories:

1. Food and Life sciences industries

The food and life sciences industries (e.g. food and drink, pharmaceuticals, biotech) make up one fifth of EU manufacturing and are characterized by medium to high growth rates. As highly innovative industries, key knowledge challenges are:

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• Research & development,
• protection of intellectual property rights, and
• the financing innovation for highly innovative SMEs.

International regulatory convergence is hence also an issue for many sectors. Key sector-specific challenges include the need to make more progress towards creating a fully competitive single market for pharmaceuticals products, and environmental and market access issues relating to the food and drink industries, pharmaceuticals, and cosmetics.

2. Machine and systems industries

The machine and systems industries (e.g. ICT, mechanical engineering etc.) account for about one third of EU manufacturing value added and are characterized by medium to high growth rates with high rates of R&D spending. The challenges for these sectors therefore mainly relate to innovation, intellectual property protection, and ensuring the availability of high skilled personnel. The Single Market for many of these industries depends upon technical standards that need continual updating. Better access to international markets is also essential for some industries, notably ICT, electrical and mechanical engineering, and motor vehicles. The transport industries also face a number of environmental challenges, particularly the need to continually improve the environmental performance of their vehicles, planes, and ships.

3. Fashion and design industries

The fashion and design industries (e.g. textiles and footwear) make up just 8% of manufacturing value added, but have experienced low or negative output growth and relatively low R&D spending over recent years. Successful structural adjustment is the key challenge for these industries. Improving innovation, IPR protection, and skills are essential to be able to continue to improve the quality and product-diversity of their output. Obtaining better access to currently heavily protected world markets is also a key policy requirement for these industries.

4. Basic and intermediate industries

The basic and intermediate industries (e.g. chemicals, steel, and pulp and paper) account for some 40% of EU manufacturing value added. As suppliers of key inputs for the rest of EU industry, these industries can be an important source of innovation for other sectors. Growth rates in this sector have been medium to low, with the exception of the strongly performing chemicals and rubber industries. These industries are largely energy-intensive and hence the main cluster of challenges relates to energy and the environment. Important sector-specific challenges include the REACH legislation for the chemicals industry and legislative simplification issues for the construction sector. Structural adjustment is an important issue for the ceramics, printing, and steel industries.

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Share of Value-added in manufacturing in 2004 (% points) Average annual growth rate 1993-2004 (%) Food and life science 18.1 2.4 Machine and systems 33.1 3.5 Fashion and design 7.5 -2.0 Basic and intermediate 41.3 2.1 Total Manufacturing 100.0 2.3

Source: Eurostat

[1] Including the Commission proposals for a directive on “EU criminal law provisions to combat infringements of intellectual property rights”, July 2005.

[2] In the Communication on Better Regulation for Growth and Jobs

[3] Sources: Eurostat Business Statistics.

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