On 5th May 2021, the Commission presented its updated Industrial Strategy. The strategy not only affirms the current priorities, which were stipulated the year before, but also specifies new proposals to support SMEs. Together with the Industrial Strategy, the Commission has presented a proposal for a regulation on subsidies for third-countries, which distort the Internal Market.
Big challenges – but also opportunities
The start of the new decade has confronted Europe with big challenges. The Covid-19 pandemic, however, is only an overture to the big structural challenges, which will have a huge impact on the European economy in years to come. Apart from the necessary response to the climate crisis, Europe will also have to face the rapidly advancing digitalisation as well as a changing geopolitical environment, such as China’s interventionistic policy or the re-emerging protectionism in the United States. Following these developments, calls for a strategic European industrial policy grew increasingly louder. The EU reacted to these calls by presenting its Industrial Strategy in March 2020, which, a year later, has now been updated.
The European Union adapts its strategy
The new EU Industrial Strategy indicates a partial reorientation of the European Industrial policy. By presenting the European Digital Decade, the Industrial and SME strategy and the European Green Deal, the EU positions itself anew in industrial policy terms. They are to be funded by the EU budget (30 % have been earmarked for climate action) and the Recovery and Resilience Facility. The latter also includes quota for digital (20 %) and climate policy measures (37 %). Building on the idea of the Juncker Plan, the InvestEU Programme and the realignment of the European Investment Bank towards a stronger focus on financing the energy transition and the green structural transformation, these strategies may be regarded as a comprehensive industrial and economic programme, which, in contrast to earlier, indicate a much stronger emphasis on the public sector and the public management of the strategy to achieve the goal of sustainable growth as well as digital and climate relevant investments.
Hence, industrial policy is not limited to one specific area; it defines new priorities with regard to competition law and digitalisation and now presents itself – in view of the climate crisis - as an economic strategy, which also includes the environment for the generation of renewable energies, the handling of resources in a circular economy and the issue of green financing (e.g., green bonds, green loans etc.). The initiative of supporting new industrial alliances and the aid instrument of Important Projects for Common European Interest (IPCEI) has to be viewed against this background. However, the paramount goal of all these initiatives is not the social and environmental transformation, but further development of “green” growth potentials and achieving international competitiveness. Apart from that and in addition to the Covid-19 pandemic, the issue of Europe’s strategic autonomy concerning pharmaceuticals and medical products has moved squarely into the centre of political efforts.
Industrial policy 5.0: Additional regional and employment policy strategies urgently required
However, the structural transition of industry and economy, which the EU will have to deal with over the next ten years, will lead to having both winners and losers. After all, about 24 % of employees in the EU are currently working in the industrial sector. Depending on the branch, the way they will be affected by the challenges and decarbonisation will greatly vary. Hence, the issue of the distributional policy dimension together with employment policy will have to be moved to the centre of political initiatives. Given the promise of the European Commission to leave no one behind, this initiative too is required to instigate cross-country governance processes, which enable keeping this promise in all EU countries.
Comprehensive regional and employment policy strategies are required to find a way out of record unemployment as well as dealing with medium to long-term structural changes towards a digital and climate neutral industry. In view of the magnitude of the challenges, the currently provided capital from the Just Transition Fund will not be sufficient. Looking at the challenges associated with structural change it becomes clear that a just structural change can only succeed when a coordinated monetary and fiscal policy, as well as environmental, social and distribution issues have been placed at the centre. With its initiatives, the European Digital Decade, the Industrial Strategy and the European Green Deal, European policy is taking the appropriate initial steps. However, due to their focus on private capital, market-based solutions and (material) growth, they are not able to take advantage of their fundamental industrial and regional potentials.
A&W Blog: EU industrial policy (german only)