Brussels, 12 Sep 2002

COMMUNICATION FROM THE COMMISSION
MORE RESEARCH FOR EUROPE Towards 3% of GDP Table of Contents

EXECUTIVE SUMMARY

In March 2000, at the Lisbon European Council, Heads of State and Government set the Union the goal of becoming "the most competitive and dynamic knowledge- based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion" by 2010. Two years later at the Barcelona European Council, which reviewed progress towards the Lisbon goal, they agreed that research and technological development (R&D) investment in the EU must be increased with the aim of approaching 3 % of GDP by 2010, up from 1.9 % in 2000. They also called for an increase of the level of business funding, which should rise from its current level of 56 % to two-thirds of total R&D investment, a proportion already achieved in the US and in some European countries. This twin objective is ambitious but realistic: today, several European countries are close to or beyond these levels. The 2002 Broad Economic Policy Guidelines of the Member States and the Community acknowledge the importance of this goal and recommend to improve incentives for firms to invest in R&D while preserving sound fiscal policies.

These R&D investment objectives set at Barcelona arise from the recognition that strengthening our R&D and innovation systems is essential in realising the Lisbon strategic goal. Its achievement is put at risk by the large and growing gap in R&D investment between the EU and the US. This gap reached more than *120 billion in 2000, 80 % of which was due to lower R&D investment by business in Europe.

The role of R&D as a driving force for a competitive and dynamic knowledge-based economy is linked to the economy's capacity to turn new knowledge into technological innovation1. Although many enterprises recognise the increased importance of investing in R&D, they will do so only to the extent that they can exploit results effectively and expect sufficient returns to balance the risk inherent in such investment.

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The present Communication aims at launching a debate on the ways and means of reaching the objectives for R&D investment. It identifies the wide range of policy areas which must be mobilised in a coherent manner. It sets out in each area the main objectives to be pursued either by intensifying actions already underway in the context of the Lisbon strategy and the European Knowledge Area or by undertaking new initiatives. Even where action has been launched and agreed at European level, more needs to be done to ensure that it is delivering results at national and local levels. At the same time, it is recognised that the diversity of situations in Member States and Candidate Countries must allow for a differentiated policy response.

More attractive framework conditions are essential if Europe is to achieve the R&D investment objectives it has set. Among the most important in this regard are a sufficient supply of highly qualified human resources, a strong public research base, a dynamic entrepreneurship culture, adequate systems of intellectual property rights, a competitive environment with research and innovation-friendly regulations and competition rules, supportive financial markets, macro-economic stability and favourable fiscal conditions.

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There is also a case for a more effective and focused use of public financial incentives to private R&D and technology-based innovation, within the context of State aid rules and of the Stability and Growth Pact, which imply that efforts to enhance public support for R&D must to a large extent come through restructuring of public expenditure. In this regard, public authorities have a range of financing instruments at their disposal, in particular direct support measures, fiscal incentives, guarantee schemes and public support for risk capital. A mix of these instruments is required, as no single instrument is able to provide the full range of incentives.

Lastly, the place of R&D in the overall business strategy of companies as well as the effectiveness and efficiency of their R&D activities are important factors to consider.

The commitment of all actors at Member State and European levels is required to create a joint upward momentum for R&D investment throughout Europe.

On the basis of the debate initiated by this Communication, the Commission will consider proposing a focused set of prioritised actions in Spring 2003.

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4. CONCLUSION: TOWARDS A CONCERTED EUROPEAN WAY

The analyses contained in this communication confirm that it is necessary not only to improve the effectiveness of the European R&D and innovation system, but also to address the EU's under-investment in R&D. The current trends in R&D investment must be reversed urgently in order to approach 3 % of GDP by 2010, with an increased share of business funding that should reach two thirds of total R&D expenditure. Such a change is essential to reach the Lisbon objective of making Europe the leading knowledge economy in the world. It will require joint efforts involving the European institutions, all Member States and the Candidate Countries, as well as the enterprise sector.

A wide array of public policies must be mobilised in a coherent way to address both framework conditions and the public financing mechanisms for R&D and innovation.

As a first step, the Commission will engage in discussions on the basis of the present Communication with European institutions, Member States, regions and interested parties, including notably industry. These discussions will be conducted with a view to identify actions that should be introduced or strengthened at the various levels to encourage in more effective, systematic and coherent ways R&D investment in Europe. Inputs from these discussions will allow the Commission to propose orientations in the context of its synthesis report to the 2003 Spring European Council. After the European Council and depending on its results, the Commission will consider proposing a focused set of prioritised actions supported by a process of open co-ordination.

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Brussels, 11.9.2002 COM(2002) 499 final