European industrial policy: implementing reforms in the member states (II)

Progress in the EU member states is mainly based on industrial sectors’ development: “industry” presently includes several sectors: from manufacturing and agriculture, to ICT, tourism, retail trade and public health, etc. However, the EU’s Treaties depict “industry” as just a “supporting Union competence”: which means that this vital sphere of national growth rests solely in the hands of national governance, the fact that makes industrial strategy’ implementation rather complicated… 

European industrial strategy is, in fact, addressed to the basic elements of member states socio-economic development. Therefore, presently even the so-called “EU’s industries” are situated in the states, although some of them may be even called “European”. Notably enough, historically, industrial development was not regarded as a special sector in European integration, which in the EEC Treaty (1957) included ten main sectors. Presently, the EU’s legislative backlog includes a chapter-13 on “industrial policy and internal market”, which accounts for the fourth biggest share of legal acts (with over 2 thousand acts), followed by the “external relations” (with over 5 thousand acts), “agriculture” (about 3,5 thousand) and “environment, consumers and health” (over 3 thousand acts). In the previous Commission’s team the sector was in the competence of the Commissioner for Internal Market, Industry, Entrepreneurship and SMEs.
See Directory of legal acts by subject; totally 20 chapters/sectors of directives, regulations and decisions related to industry and internal market, in the Commission website at: https://eur-lex.europa.eu/browse/pdf/directories/legislation.html?file=chapter%2013.pdf&classification=in-force
Lately, there has been another and more specific industrial development approach for the states governance “strategy” called smart specialisation strategy, 3S. The 3S idea seemed quite perspective and resolute in approaches to resolving the EU’s socio-economic integration problems: the EU institutions (through cohesion policy) even suggested a better “design” of national policies for boosting innovation-driven growth in the member states.
More in: https://www.integrin.dk/2021/11/22/modern-trends-in-european-integration-smart-specialization-in-the-baltic-states/.

Industry in managing twin-transition
Industry is central to Europe’s future progress and prosperity: e.g. it makes up more than 20 percent of the EU-27 economy and employs around 35 million people, with many millions more jobs linked to industrial production sectors (with presently about 14 million unemployed, however). It accounts for 80 percent of goods exports and is a major contributor to the EU’s position as a top global player and provider of foreign direct investment. However, industrial sector is presently not the major source of national GDP; it is rather various services that dominate in the growth pattern.
Small and medium sized businesses (SMEs) represent the member states’ socio-economic background on which the national prosperity rests: over 90 percent of all companies and firms are actually family-run companies and/or single-person firms.
In the new strategy the Commission suggests the following directions in order to facilitate the national industrial sectors’ efficiency:
= Multi-country projects: aimed at supporting recovery-resilience efforts and develop digital and green capacities; the Commission will support cooperation among states in joint projects to maximize public-private investments under the existing European Recovery and Resilience Facility.
= Horizon Europe partnerships: aimed at bringing together private and public funding to finance research and innovation on low-carbon technology and climate change processes.
= Transition pathways: aimed at co-creating by numerous stakeholders (and jointly with industrial sectors) so-called “transition pathways” to identify the actions needed to achieve the twin transitions, giving a better understanding of the scale, benefits and conditions required.
= Abundant, accessible and affordable decarbonised energy: the Commission together with the member states will accelerate investments into renewables, efficient energy grids and increased energy efficiency by braking existing barriers.
Another aspect of EU’s industrial-coordination spheres is a so-called “strategic autonomy” to eliminate and monitor national strategic dependencies in materials and resources. First report on such strategic issues (see info below) has already identified 137 products in sensitive industrial sectors in which the states are highly dependent on foreign sources.
Commission’s strategic dependencies analysis has shown that:
a) there are over a hundred items in sensitive industrial sectors, for which the states are dependent on foreign suppliers; besides, there are among them about 5200 products, which represent 6 percent of the value of all imported products in Europe;
b) over half of these “dependencies” originate in China, Vietnam and Brazil; and
c) about 34 products are being more vulnerable, with low potential for diversification and substitution with EU production; they include various raw materials and chemicals used in energy-intensive industries and public health sectors. These products represent 0.6% of the value of all imported products in Europe.
Reference to the legal text at: https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1593086905382&uri=CELEX%3A52020DC0102

Commission suggests six strategic areas where the EU can reduce dependencies: – raw materials, – batteries, – active pharmaceutical ingredients, – hydrogen, – semiconductors, – cloud and edge technologies.
It means that the member states’ governance would have to develop national strategies to eliminate these dependencies. A vivid recent example from Hungary is showing the country’s priority along the EU’s industrial strategy priorities: Hungary invested €24 million into the “Volta Energy Solutions” for the extension of a battery copper foil plant in the Central Transdanubia region of Közép-Dunántúl. The €24 million Hungarian investment aid will support Volta Energy Solutions’ €206 million investment in the extension of its battery copper foil manufacturing plant.

Source: https://ec.europa.eu/commission/presscorner/detail/en/IP_22_182

Reinventing business through science, research and innovation
Traditionally, the “industrial sectors” are covering the whole spectrum of national development. Thus according to a recent EU’s account “industry” includes about fourteen different sectors: from agriculture and food processing, ICT and digital sectors, to public health and transport mobility, renewables and energy structures, to civil security, tourism industry, retail trade, and textile industry, etc.
However, without science, research and innovation (S-R-I) the EU’s industrial strategy would hardly survive: the EU institutions are well aware about it; thus, the updated European industrial strategy orients businesses towards green, digitally-leading and resilient industry sectors where S-R-I could be a key enabler. Therefore, SMEs in the states have to actively work within a renewed partnership with industry.
The EU institutions and bodies are going to support industrial research and innovation with the SMEs: e.g. the renewed European Research Area’s (ERA) is going to strengthen the translation of S-R-I results into the economy and enhance the competitiveness of European industry through the “Common Industrial Technology” by linking EU and national S-R-I investment agendas. Suffice it to say, the European industrial “block” still accounts for 20 percent of the EU’s greenhouse gas emissions, while only 12 percent of the used materials is coming from recycling. See more on the roadmap in: https://ec.europa.eu/info/research-and-innovation/research-area/industrial-research-and-innovation/industrial-policy_en#industry-and-the-new-european-research-area.
Besides, adequate with the “twin-transition” ideas, the EU also revealed a first “Low-Carbon Industrial Technologies Roadmap” linking the EU’s strategic research and innovation agendas (developed together with industry participants by the Horizon Europe partnerships), with the main EU and national support programs. See: https://op.europa.eu/en/publication-detail/-/publication/8d41b32e-fa51-11eb-b520-01aa75ed71a1/language-en/format-PDF/source-222700787
These efforts provide enough scientific evidence and guidance to strengthen the EU industrial system (particularly, the energy-intensive industries) and facilitate scoping and development of potential industrial alliances and “projects of common European interest”. Source: https://ec.europa.eu/info/news/research-and-innovation-heart-new-industrial-strategy-europe-2021-may-05_en

Universities and business schools can assist the industrial sectors and the EU strategy in tackling the most urgent twin-transition, circular and sustainability issues; however, the universities’ priorities are not fully up to modern challenges. Thus, an interesting experiment with a so-called “alternative research assessment-tool” evaluated the effect of business school research concerning sustainability; the tool was using Leximancer, an on-line cloud-based text analytic software that identified core themes within the SDGs framework.
Thus, eight core themes defined the “SDGs spirit”: sustainable growth, governance, vulnerable populations, water, GDP, food security, restoration, and public health. These themes were compared with the core themes in over 4,5 thousand academic articles (published during 2019) in the “Financial Times-50” list. Only a little bit over 10,5 percent of themes in the FT-50 journal articles had an explicit relationship to the SDG themes while about 25 percent were just “implied”.
Although there are compelling reasons for business schools to focus research on SDGs, the study highlights that there are opportunities for improvement. Hence, recommendations have been made to better align academic research with the SDGs, influencing the process the business schools can prioritize research and its role in the industrial transition.
Source: Sustainability 2021, 13(24), 14019, in: https://www.mdpi.com/2071-1050/13/24/14019

Investments in S-R-I, as well as in digitalisation, decarbonisation and modernisation are framed within the strategic research-support plan launched for the period 2021-25 through the EIB loans backed by the European Fund for Strategic Investments (EFSI), the main pillar of the Investment Plan for Europe.

Strategy implementation: legal issues…
As is well-known, the EU’s industrial policy has been at the center of the European integration through decades: all the time in the main executive institution there was a Commissioner for industrial issues (though cope with other vital spheres). In the present Commission the industry’s sectoral issues are dispersed among commissioners for internal market, agriculture, economy, cohesion and reforms, as well as research and innovation; in the Commission’s nomenclature there is a “topic” called “business and industry”. See more in: https://ec.europa.eu/info/business-economy-euro_en
However, some industrial sectors do have importance for the states’ economic growth and sustainability: e.g. present Commissioner for transport revealed the following main objectives in transport policy: e.g. 60 percent cut in transport-related GHG emissions by 2050, including such goals as reducing petrol-fueled cars in cities; 50 percent shift in freight from road to rail and to inland waters; completing EU-wide high-speed rail network and transport security through progress towards zero road fatalities, etc.

Source: https://ec.europa.eu/info/policies/transport_en

As to corporate strategies, the so-called “SME to SME approach” will be essential in recovery-resilience efforts in the states. The growing number of young, new-technology-oriented SMEs can help more in establishing industrial-affiliated firms to adapt their business models and develop new forms of work for the digital age. This has already created new opportunities in a business world; several new start-ups should be supported to help build the SDG-platform in circular economy. The Commission website on “doing business in Europe” is probably the closest to industrial reforms reference tool.
See: https://ec.europa.eu/info/business-economy-euro/doing-business-eu_en

But new forms of work and living are coming with modern challenges and needed improved forms of protections, including for those working on online platforms. More in: https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1593086905382&uri=CELEX%3A52020DC0102

The industry’s strategy implementation process in the states is “restricted” by the Union’s Treaties. Thus, they postulate that it is the Union that “shall have competence to carry out actions to support, coordinate or supplement the actions of the states”. The areas of such action shall include the following states’ activities: industry, culture, tourism, as well as education, vocational training, youth and sport, etc. (art. 6, TFEU).
The Treaty is specific on the EU efforts to “coordinate the states’ economic policies within the Union”. To this end, “the Council shall adopt measures, in particular broad guidelines for these policies. Specific provisions shall apply to those states whose currency is the euro; the Union shall take measures to ensure coordination of the employment policies of the member states, in particular by defining guidelines for these policies” (art. 5, TFEU).
Thus, really dramatic situation with the industrial strategy’s implementation is that the EU institutions are having three quite lousy defined legal means to “affect” the member states industrial development, i.e. supporting, coordinating and/or supplementing efforts. Though it is not clear, whether these three measures are enough for implementing such an ambitious new industrial strategy…
Of course, the EU is ensuring “closer coordination of economic policies and sustained convergence of the economic performances of the member states”, and monitoring economic developments in each state, as well as the consistency of economic policies with the EU’s broad economic/political guidelines followed by regular overall assessment, mainly through the European Semester (art. 121, 3; TFEU). The EU has set up a yearly cycle of economic policy coordination called the European Semester: each year, the Commission undertakes a detailed analysis of the states’ plans of budgetary, macroeconomic and structural reforms and provides them with country-specific recommendations for the next 12-18 months. These recommendations also contribute to the objectives of the EU’s long-term political guidelines to be implemented and monitored in the context of the European Semester. Reference to:
http://ec.europa.eu/europe2020/making-it-happen/index_en.htm
New “EU unions” are the sign of more active national economic policies towards closer integration; main “unions” are in the most progressive economy fields: Digital Single Market, Energy Union, Capital Markets Union, Innovation Union, and Circular economy union, etc.

Besides, there is a special Title XVII in the Treaties called “Industry”, which prescribes that both the EU institutions and the member states “shall ensure” necessary conditions for the competitiveness of the Union’s industry. For that purpose, in accordance with a system of open and competitive markets, the “cooperative actions” shall be aimed at: speeding up the adjustment of industry to structural changes; encouraging an environment favourable to initiative and to the development of undertakings in the states, particularly SMEs; encouraging an environment favourable to cooperation between undertakings; and fostering better exploitation of the industrial potential of policies of innovation, research and technological development (art. 173, TFEU). At the same time, the member states have to avoid temptations to protectionism, market distortions and unfair competition.
Being a primary vehicle of innovation in various industrial sectors, the SMEs are being a major part in all actions under the new industrial strategy. This is reflected in a horizontal manner by increased attention to reducing regulatory burdens for SMEs. New actions will strongly benefit SMEs and start-ups, including a strengthened single market, reduced supply dependencies or the accelerated green and digital transitions. The industrial strategy also includes some measures dedicated to SMEs: e.g. actions on increased resilience, combating late payments, and supporting solvency. In the states’ strategic autonomy, the Commission suggests “industrial alliances, IAs” to accelerate new business partnerships and entrepreneurship models with high-value job creation. IAs will provide broad and open platform for start-ups and SMEs from various EU states, e.g. in such spheres as creating processors and semiconductors’ technologies, as well as IAs in industrial data and cloud, space launchers and zero-emission aviation.
More in the report at: https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/european-industrial-strategy/depth-reviews-strategic-areas-europes-interests_en

According to the Commission’s account, there are totally about 14 industrial “systems”, including such sectors as, e.g. aerospace and defence, agro-food and construction, cultural and creative industries, digital society and electronics, energy intensive industries and energy-renewables, health and transport mobility (with transport automotive and proximity) as well as social economy, civil security, retail trade, textile and tourism. That means SMEs have enormous facilities and opportunities for playing an active role in industrial transformation.
Source:https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/european-industrial-strategy_en

Some notes in the conclusion: presently, member states’ industrial growth is to take into consideration a number of modern challenges; the latter are reflected in the Commission’s guidelines and working plans. Thus, the following main aspects of national growth are under coordination by several “sectoral” Commissioners in such spheres as: digital economy and society, the so-called “green deal” with circularity and sustainability, innovation and research; employment, jobs and social rights; economic issues in general, agriculture, cohesion and reforms, health and food safety, transport and energy, environment and fisheries, and finally, financial services and capital markets union. In total, there are over 30 different aspects of national development that are under coordination and control among the EU-27, a dramatic increase compared to just about ten in the first years of European integration.

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