Competitiveness Review Dinner Debate 2012 - "Trade, Innovate, Compete"

EUnited Dinner Debate 2012

Trade, Innovate, Compete - how are the European Commission and elected MEPs driving European manufacturing globally?

Key points from the debate

The latest EUnited debate, held in Brussels' magnificent Bibliothèque Solvay, took place on November 6^th, coinciding with the US presidential elections. Both events had similar results in that they showed an overwhelming need for partnership. In Brussels, that essential collaboration was defined as being between EU policymakers and Europe's industry; everyone on the platform did indeed support the requirement for a revitalised industry policy.

Not only the US but also China was ‘choosing' a new leader at the time of the debate and Europe has to plan for a new world order. Innovation was therefore high on the agenda with the Commission's Herbert von Bose seeing this as the way Europe could be better than the competition. The EU's flagship initiative ‘Horizon 2020' featured heavily in the debate as one of its three main objectives is to build industry leadership in Europe. That was seen to be essential as von Bose's Commission colleague, from DG Trade, Signe Ratso, warned that future GDP growth would not be in Europe but in the emerging markets and that meant exports would be the order of the day.

One of those export markets was China and Sir Graham Watson called for the EU to be tougher on IP infringements in that country. Electrostar's Roman Gorovoy raised other barriers besides IP theft; these included diverse technical standards, tax barriers and a lack of transparency in many countries. Better access to international markets had been signposted in the latest communication from the Commission (Industrial revolution brings industry back to Europe) and Horizon 2020, was seen to be the way forward as it would give much more responsibility to industry to really make things happen. EUnited President Markus Asch welcomed that but demanded that policymakers give an early warning to industry in general - and EUnited in particular - when new regulations were being discussed and strategic moves being planned.

Scene setting

EUnited's 2012 Competitiveness Review took place in Brussels - a perfect location in which to ask what the EU would be doing to keep Europe's manufacturing on track. This year's debate was moderated by Speakeasy's Cathy Smith. On the panel were EUnited President Markus Asch, Electrostar's Roman Gorovoy, the European Commission Director Trade Strategy, DG Trade, Signe Ratso, MEP Sir Graham Watson and European Commission Director DG Innovation & Research, Herbert von Bose.

Markus Asch,  President EUnited and EUnited Cleaning and Deputy CEO Alfred Kärcher, welcomed the panellists and attendees and looked forward to a healthy debate about European industry and how it could be boosted by increased trade, greater innovation and enhanced competitiveness.   

The debate

Industrial policy

Moderator Cathy Smith launched the debate by referring to the European Commission's recent communication[1] that had called for "a strategic partnership between the EU, member states and industry". She asked Markus Asch if this signified a mood change and the new EUnited President thought that this was certainly the case. There was now a common understanding of the importance of industry and it was vital to have a common industry policy for Europe. With a new world order on the horizon and with new technologies arriving on a regular basis, Asch said it was imperative that companies looked beyond Europe and had a global perspective.

He foresaw a future that would bring many challenges: water and energy shortages, ageing populations, people moving back to the cities, etc. For Asch, energy was an enabler and all of these issues could be seen as opportunities for industry. He called for all stakeholders to "combine forces", as industry could not succeed on its own - politicians were needed and so was the EU. Asch wanted joint objectives and targets to be agreed as soon as possible.  

Innovation - the name of the game

For Herbert von Bose, the Commission's Director DG Innovation & Research, the fundamental message was "growth and jobs". He reasoned that policymakers wanted results, rather than just knowledge[2], and that innovation was vital so that Europe's industries could be "better than the competition". Von Bose acknowledged that there had been difficulties to interact sufficiently with industry in the past and that the emphasis had now to be on public-private partnerships (PPPs[3]). This would be achieved within the EU's flagship initiative ‘Horizon 2020[4]', where one of the three main objectives was to build industry leadership in Europe. He called on industry leaders to say what needed to be done in the research arena in order to make EU industries more competitive[5]. He added that in future, industry would have much more influence as it would have the responsibility to make things happen. Von Bose stressed the need for associations like EUnited, who could represent SMEs and industry players, to present their requirements and opinions to policymakers.

Another objective of Horizon 2020 is to support Europe's excellent science base and that means providing the right training and career development opportunities. Von Bose bemoaned the fact that the EU was not using its strengths in that area as an insufficient number of young women were not looking at a future in science and technology; that situation had to be changed. He also added that another goal for Horizon 2020 was to have 40% of young people with a higher educational degree; in Finland the current figure was 46% and in Germany 35%.

Sir Graham Watson (MEP) welcomed the new focus on an EU industrial policy as he thought it had been crazy to think that EU member states could exist on the provision of services at the neglect of manufacturing. He too saw innovation as a vital part of the framework and that meant that any talk of the future EU budget being decreased should be ignored. Warming to his theme, Watson said he knew of an SME in his UK constituency that had designed a product that used wind power to desalinate sea water - he felt that was a perfect example of how EU companies could innovate and help Europe to become a future world leader.

Although Watson welcomed Horizon 2020, he acknowledged that it had been launched because the Lisbon Strategy's results had not been achieved - so the EU had to start winning and it had to start winning now - by investing in research and innovation. Finally, Watson said it should not be forgotten that another of Europe's strengths was its political and social freedoms. That made the continent an attractive place to live and work as not all countries could offer the same thing.

In terms of innovation, Asch felt that Europe had underestimated the competition - primarily China and India - and now it was necessary for Europe to play to its strengths, solar industries for example. Moving on to how Europe failed to benefit from its expertise, Asch used the example of a German innovation the MP3 Player that was led to success by an American company - Apple.   

Exports - the way forward in the future 

Looking at the EU's performance in trade, Signe Ratso, the Commission's Director Trade Strategy, argued that Europe was in good shape in regard to its competitors. She focused on the EU's strengths in quality and speciality products but warned that future GDP growth would not be in Europe but in the emerging markets, primarily in Asia. Ratso stated that by 2015, 95% of growth would be outside of Europe so export trade was the only way forward.

As for trade agreements, Ratso looked back at the multilateral negotiations which used to be the main priority but with the impasse of the Doha Development Round,  the  main  focus has diverted to the EU's bilateral agreements. Taking South Korea as a positive example, Ratso pointed out that the trade results with that country were beneficial just one year after the completion of negotiations[6]. She added that trade negotiations with India could be completed in 2013 whereas negotiations with Canada and Singapore were at the final stages.

Barriers to progress

Electrostar's Roman Gorovoy agreed that exports were important but his company had encountered many barriers. There were differing technical standards across the world and it was difficult for EU-based businesses to understand the varying product specifications needed, for example, in Asia and South America. Furthermore it was a complex task to set up distribution channels in countries like Brazil and his company had suffered from tax barriers and a lack of transparency in that same country. 

On the issue of constraints, Asch named intellectual policy (IP) as a major issue, together with trade barriers and diverse standards. He later referred to directives from DG Environment that made it virtually impossible for products to be sufficiently "energy efficient". As part of the partnership with the EU and the member states, Asch called for all roadblocks to be removed.

From the floor, the European Commission's Anne Burrill commented that in the US, companies felt that building sustainability into products was popular as it was seen to go hand-in-hand with innovation. She asked the panel members if they agreed and asked how policymakers could make it happen.

Responding, Asch stated that sustainability had long been seen as an essential factor to be built-in to products, as it could be backed by a "true business case". He wanted the emphasis to be placed not on price but on total cost of ownership (TCO) so that the cost of building in sustainability would be recognised. Asch requested that future government - and EU - tenders be based on TCO and not on today's price; i.e. it was necessary to think about tomorrow and not just about today.

Gorovoy stated that when he moved to Germany he had welcomed the lack of regulation compared to Russia, but now he saw that changing. He wanted less ‘red tape' as there was no added value there. And if new regulations were to be introduced, there had to be a method of introducing them so that they applied to all countries, including China. For the Commission, Ratso said there were EU advice centres in China, for example, that could help SMEs and also provide legal advice when required.    

China - hopes and fears

Mentions of China were numerous during the debate. Watson observed that many Chinese delegations were showing a major interest in Europe but that this contrasted sharply with India.  He also picked up on the issue of IP rights in regard to China. Watson gave a nuanced view, arguing that the Chinese had a great deal of respect for Europe but perhaps thought that Europeans were naive in being surprised that the Chinese would do anything - i.e. not respect intellectual property rights - in a bid to improve their economic situation in today's world. After all, Chinese ceramics - that dated as far back as the 5^th century - had been widely copied and imitated by the Europeans in the 17^th century and onwards. However, coming down on Europe's side, Watson called on the EU to be tougher with China on this thorny issue.

From the floor, Güdel Robotics founder Rudolf Güdel reasoned that although China was currently focusing on producing cheap products, the danger lay in the Chinese becoming more skilled than Europeans; Güdel referred to this as a future need to match their "brain power". Von Bose didn't think that was so much a problem as a challenge. The EU had plans in place to improve its educational programmes[7] and that included improving the mobility of young people.

Ratso also warned that although China was currently focusing on assembling products[8], it had made it clear that it wanted to move up the value-added ladder. She stated that China wanted to work with the EU on joint projects so that they could move into the value-added sector: earning profits in the design, research, marketing and services areas. Ratso felt that it was in these areas that the EU excelled.

Priorities for the panel

Wrapping up, Smith asked each panellist to state their priorities for the future.

• Gorovoy suggested that Germany should be used as a model for industry policy.
• Von Bose felt it was great that manufacturing was finally high up on the political agenda and he saw opportunities in the increased focus on PPPs.
• Ratso underlined that negotiating agreements was not enough and the focus needed to be on implementation of the agreements in order to bring clear benefits to trade.
• Watson welcomed the recognition that business was important and implored its representatives to talk to policymakers so that the right paths were followed.
• Asch agreed on an industry policy based on partnership but he asked policymakers to approach EUnited upfront, when new legislation was being planned for example.

Asch closed the debate saying that business people in general - and EUnited members in particular - knew how to reach those common goals that would be set in the coming months and years.   Date of next Dinner Debate: 5 November 2013

[1] See http://europa.eu/rapid/press-release_IP-12-1085_en.htm?locale=en for a European Commission press release and http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0582:FIN:EN:PDF for the full communication.

[2] This was a reference to the Lisbon Strategy that had aimed to make the EU "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.

[3] Public-private partnerships (PPPs) describe an EU/government service or private business venture which is funded and operated through a partnership of EU/government and private sector companies.

[4] Horizon 2020 is the financial instrument implementing the Innovation Union, a Europe 2020 flagship initiative aimed at securing Europe's global competitiveness. See http://ec.europa.eu/research/horizon2020/index_en.cfm?pg=h2020.

[5] Horizon 2020 runs from 2014 to 2020 with a ‘proposed' €80 billion budget, von Bose wants industry to say what needs to be done to prepare for the next call for proposals.

[6] Ratso said that trade with South Korea's liberalised sectors had increased by 46% while that with non-liberalised sectors had only increased by 23%.

[7] One of the Horizon 2020 pillars is Excellent Science (Marie Curie programme, future & enabling technologies, etc.).

[8] Ratso said that assembling products only accounted for approximately 3% of profits.