Erkki Liikanen: "How can we establish clear policy objectives for European competitiveness" Informal Council (Competitiveness) Nyborg, 11 October 2002

Nyborg, 11 October 2002

The new Competitiveness Council

The creation of the Competitiveness Council sends a good signal because it promises a stronger voice advocating the competitiveness of European enterprises. It is good for morale. And in times like these, that counts.

It is also a recognition that the strategy of sustainable development relies heavily on one pillar, competitiveness . If this engine fails, the whole strategy stalls because we also fail in the other objectives environment, jobs, social inclusion.

The current situation

Two and a half years after Lisbon, we have understood that Europe itself holds the key; that the best are often among ourselves and that we can learn from each other.

The Commission has provided a lot of analysis in its European Competitiveness Reports.

• Measured by GDP per head, the EU reaches less than 70 per cent of the US level.

• The main reason is lower employment. This explains two thirds.

• One third is due to lower productivity. In the long run, it is the most crucial.

Our task ahead

Our task is to reverse this trend. Because only higher productivity can deliver:

• higher real incomes

• more competitive enterprises that create new jobs and

• financing of public services.

We know the main factors that determine productivity growth:

• investment in Information and Communication Technologies (ICT) and skills, and at the same time the more efficient organisation of the enterprises that they permit

• entrepreneurial dynamism

• well developed Research & Development infrastructure and innovation systems

• well functioning and competitive markets, with particular emphasis on the services sector.

They can all be influenced by the policies entrusted to the new Competitiveness Council. This is an opportunity and a responsibility.

What should be our method?

A sound analysis and debate should be followed by well-targeted action. I give you a few examples.

Pharmaceuticals. In the year 2000, an analysis carried out by independent experts identified the main disadvantages of the EU pharmaceutical industry. These were: lower investment in innovative medicines, fragmented research systems and lack of competitive national markets.

In response to this analysis the Commission took its main findings into account in our comprehensive review of the legal framework for pharmaceuticals. This review was tabled last summer and is now before the Council and the European Parliament.

We also created the so-called G10 Medicines Group comprised by members from the Commission, the Member States and the industry. This Group just proposed detailed actions to combine the competitiveness of the pharmaceutical industry in Europe with improved public health service.

Biotechnology. The Competitiveness Report of the following year - 2001 contained a thorough analysis of the competitive disadvantages of the European biotech sector. The main findings showed that the sector is suffering from:

• Fragmented EU research, with lower funding than in the US, and a tendency to move research to the US;

• lower access to risk capital;

• a skills shortage; and

• a fragmented system of intellectual property, with higher costs and legal uncertainty.

As a result of this analysis, we launched a Biotechnology Action Plan. This is now being discussed with Member States and the European Parliament. The Action Plan foresees, for example,

• a more focused use of the 6th Research Framework Programme which was just adopted. This programme provides for a total of 4 billion euros for research in biotechnology of which 2.2 billion euros are earmarked for genetics and health biotechnology.

• the identification of concrete measures to facilitate access to capital. This will be done by the end of next year by the Biotech Financial Forum of stakeholders

• progress on the legal side. However, progress here has been slow (notably on the Community patent and the biotech patent directive) as outlined by Commissioner Bolkestein.

In the field of Aerospace, we conducted a detailed analysis of the competitive situation of the European aerospace industry. This summer the Advisory Group called STAR 21 published its initial findings. These are:

• the EU aerospace industry is consolidated - but the EU policy framework for the industry is not;

• while the US industry benefits from a highly supportive operating framework, the EU industry does not.

As a result of these findings, STAR 21 recommended:

• securing a level playing field in world markets

• better co-ordination and funding of EU Research

• implementation of the European Aviation Safety Agency

• developing a European armaments policy

• consolidating the European space policy

We are now working on the follow-up of these recommendations.

These examples present a method of we approach the issue of competitiveness - but also the diversity of competitiveness issues. They illustrate the potential added value of the new Council formation. For the first time, ministers can sit together and decide strategy, taking into account all the relevant aspects of the competitiveness of the sector.

We also need a competitiveness strategy at a more general level. We need to improve the framework conditions that make up the business environment in Europe, by:

• bringing down the barriers to entrepreneurship and innovation and

• reducing the regulatory burdens and the remaining obstacles to the Internal market.

Quantitative targets project

The European Council in Lisbon has opened up the doors to the benchmarking of policies and to the use of indicators. More and more policies take a quantitative approach to the issues, in the preparatory analysis but also in policy design.

Mr. President, in the November Council we will table a paper on quantitative targets in Enterprise policy. It will contain a set of commitments to achieve explicit and measurable objectives in the areas of entrepreneurship, of better administrative environment, of human capital, of innovation and research and of access to ICT.

This was achieved on a voluntary basis. In most Member States it was a novelty, a first in their administrative tradition. A small number of Member States have yet to set their targets. Others have tabled one or two. But this is a good beginning. We have there an instrument that can make our strategy for Europe and Competitiveness more effective. It can back up the decisions of the new Council.

Conclusion

The "building blocks" for such strategy are on their way. In the coming months, we will provide communications on Industrial policy and Innovation and a Green Paper on Entrepreneurship. These documents offer the Competitiveness Council material for a rich debate and for weighty conclusions that will help us get the competitiveness of the European economy firmly on track.

Thank you very much.

DN: SPEECH/02/476 Date: 11/10/2002