Industrial policy responses today to write the rules of a new society tomorrow
European industry faces challenges on several fronts that will require bold actions. Increased global competition, weaknesses in industrial structures and problems in access to raw materials put our industry to the test. Threats also arise from changing consumer demand, population aging and a shortage of digital skills. The long-standing worry of Europe to close the productivity gap especially with the US in areas such as ICT or biotech still prevails. According to the latest results of the 2017 European Innovation Scoreboard,1 while the EU is catching up with Canada or the US, other countries pose a new threat such as South Korea, China and Japan. Europe is desperately longing for nurturing European Silicon Valleys with a vision to create European champions as powerful as Google or Apple. But instead of running after American examples or living in fear of Asian competition, European industrial policy is rather to choose its own way and write its destiny with out of box solutions.
European industry must lead the way in the new industrial revolution driven by digital technologies. The most significant current drivers such as automation, artificial intelligence, connectivity, blockchain, cloud computing or big data are reshaping our economy. The question today is how European industry can lead digital entrepreneurship in an equitable and strategic manner in order to ensure that all businesses and citizens can take advantage of the benefits of digitalisation. It is of utmost importance that curriculums of the young are adapted to equip them with the necessary digital skills not just to harness the advantages of advanced technologies but to increase human talent that can judge and optimise new information outputs generated by machines. Instead of hopping blindly on the digital hype train there is a need to understand the impact of digitalization on society and unleash digital initiatives that deliver added value while mitigating the risks. Investments should be made rather in society-centred solutions where digital technology is just one component next to new organizational models, liability considerations, safety measures and human skills of judgement. Europe will need to excel in cybersecurity which is a key safety concern in terms of data infrastructure as there is a historic lack of investment in cybersecurity and vulnerabilities in existing technology and staff behaviour.2
Our future will strongly depend on whether our industries will be able to take up circular economy business models that aim at reducing the input of raw materials and maximizing the reuse of waste. Nevertheless, European policy initiatives that promote sustainable industrial practices are sometimes overshadowed by fears of the relocation of firms to places with cheaper energy resources or less stringent environmental regulations.3 Europe, however, should keep on leading the torch in greening industry, adopting resource-efficient industrial processes and promoting responsible consumer behaviours. EU countries should also make stronger efforts in fostering the export of clean-tech solutions to other countries exploiting their experience as test-beds of environmental-friendly solutions. Europe has been traditionally strong in eco-industries with the highest turnovers and exports of February 2019 – N° 19 3 environmental technologies. Circular economy solutions need to start from the design of the products or services: incorporating feedback loops into industrial processes from the beginning, preventing waste generation and promoting regenerative products. This requires political leaders and business leaders to re-think how to manufacture products and the relationship of businesses with nature. Businesses can move from not only extracting resources from the natural world but to giving back for instance through operating in industrial symbiosis that is leveraging underutilised resources. Industrial symbiosis initiatives have a large potential in the EU, but will need adequate framework conditions such as well as functioning secondary markets or harmonized criteria for the ‘end of waste’ status.4
Securing access to raw materials and natural resources is of pivotal interest for many European industries that are dependent and sensitive to price changes. Maintaining a sustainable raw material supply chain and fair pricing is vital for European industry to be able to compete globally. Several key companies have already joined forces together with industrial associations with the goal to secure certifiable standards, safe origins and transparency in the procurement of high-risk raw materials. Access to raw materials is especially crucial for industries active in technology areas such as energy storage, wind turbines, microelectronics, electric engines or solar cells. The opportunity of Europe lies in gaining more independence from foreign supplier by investing in effective recycling processes, material efficiency and substitution. Scrapping products that contain materials relevant for our industries, such as batteries, lighting or consumer electronics, should be collected more sufficiently also for reducing the ecological footprint and help our society to live a more sustainable manner through waste sorting and correct waste disposal of relevant consumer products. The automotive industry could, for instance, benefit a lot by recollecting the old batteries for recycling. implies often substitutions and more material efficiency. The vision of an infinite cycle of metal use5 would need the European public authorities and private companies to act.
Another important criterion for the modernisation of the industrial tissue is the local knowledge infrastructure. This includes the presence of higher education and research institutions in fields specific to the industry, technology transfer organisations, shared technology platforms, and sector-specific courses or training. In addition, a critical factor of adoption is the access to a highly-skilled workforce. Adopting radical innovations require specific skills and learning, which needs the capacity to attract highly skilled human capital to ensure the integrations of new technologies within existing production processes. The lack of skills and recruiting people with the right skills is often considered as the main barrier for developing new business models. Skills are especially important for micro, small and medium-sized companies in a broad range of sectors.
The completion of the single European market and the single currency presents businesses with an opportunity to benefit from economies of scale, to cut administrative costs, to gain easier access to public procurement in other Member States and to cooperate more closely with each other. Nevertheless, there is still a lot to do to address current industrial challenges. For instance, innovative small digital-services companies cannot access the single market and therefore have great difficulties in growing. They usually introduce their innovations in their national market first and then move to the US because the cost of accessing the US market is no more than the cost of accessing other national markets in Europe. This is creating large costs for Europe. Insufficient European harmonisation of ecolabels, safety and quality standards, and technical standards of components, equipment and systems are still an issue for SMEs.6 The absence of a unitary patent in Europe increases the cost of protecting intellectual property compared to the US. The Unitary Patent Court and the Unitary Patent would, however, come into operation soon, as 16 Member States have already ratified the agreement so far. would however come into operation soon, as 16 Member States have already ratified the agreement so far.
The above-mentioned topics are just some to highlight from the multifaceted nature of the industrial policy that is further discussed in the articles below. Definitely, Europe’s success will strongly depend on institutional capacities such as public-private collaboration in the future. The European way for a ‘new industrial policy’ should be systemic and work in alignment with other policy strands supporting social, digital and environmental goals.
1 – https://ec.europa.eu/growth/industry/innovation/facts-figures/scoreboards_en
2 – Coventry and Branley (2018). Cybersecurity in healthcare: A narrative review of trends, threats and ways forward
3 – Aiginger K (2014). Industrial Policy for a sustainable growth path
5 – Hagelüken, C. (2014). Recycling of (critical) metals. Critical metals handbook, 41-69. Gunn, G. (Ed.). (2014). Critical metals handbook. John Wiley & Sons., p.47
