by Donagh Cagney
A lack of Brussels-level powers has made EU clean industrial policies disjointed and less effective in practice, but the European Commission wants to change that in its quest to boost Europe’s competitiveness.
The ‘Competitiveness Compass’ document, seen by Euractiv before its release this week, is the European Commission’s latest effort to reshape Europe’s economy to deliver prosperity and climate action.
But this time, the Commission says that Brussels needs more oversight over what national capitals are doing.
The Compass calls for the European Commission to “coordinate” national policies, says that industrial targets should be for national capitals rather than EU-wide, and wants to tighten how member states spend their EU cash.
While the language is conciliatory – the new governance arrangements would “encourage” member states to work on common priorities – the move may be seen as a power grab and is likely to trigger scepticism and outright opposition in some national capitals.
Fragmented policies
The Commission is clear on what it sees as the problem, saying that “each member state deploys its own industrial and support policies to boost national competitiveness, with little consideration of what happens in other member states.”
The Commission says this reduces the impact of these policies and limits the EU-wide benefits.
To address this, the Commission proposes a ‘Competitiveness Coordination Tool.’ Focusing on EU-level competitiveness needs, the instrument would identify "joint competitiveness priorities” between member states and establish action plans for capitals to work towards these priorities.
The Commission would use the EU budget and EIB funding to “incentivise” member states to deliver on the action plans and wants cohesion funding, currently for regional development, to play a bigger role in supporting industrial projects.
The approach is explicitly based upon the ‘European semester’ process, a post-2008 financial crisis policy to more tightly control the national government’s spending and economic policies.
Like the European Semester, industrial targets would be for individual countries rather than the entire EU.
As a first test, the Commission wants to coordinate EU and national policies “in a few selected areas with clear added value to EU competitiveness,” such as cross-border energy links.
The Commission also wants to tackle the infamous Brussels Christmas tree, in which lawmakers attach extra elements to proposed EU laws, to secure the consensus to pass Parliament and the Council.
This is a particular problem for industrial strategy, which is meant to focus tightly on important sectors and disregard less critical industries.
The EU’s main industrial strategy law, the ‘Net Zero Industry Act’, contains a list of “strategic” economic sectors. This list grew as lawmakers debated the text, now encompassing a broad swath of the European economy.
To prevent this from happening again, the Commission wants to develop a methodology “to identify and define other strategic sectors or activities.”
US and Chinese competition
Industrial strategy entails more government intervention in the direction of economies, and has re-entered the mainstream as policymakers grapple with deindustrialisation and supply chain vulnerabilities. Leaders also hope that a ‘green industrial strategy’ can deliver the structural change needed to limit climate change and create new jobs and economic growth.
The EU has been exposed to intense competition from the US and China, which have their own industrial policies but has not yet managed to turn its various plans into clear progress.
The Commission will release a much-anticipated ‘Clean Industrial Deal’ in February in an attempt to reignite its industrial policy ambitions.
According to the leaked draft, this week’s Competitiveness Compass document aims to create “a Europe where tomorrow’s tech and clean products are invented, manufactured and marketed”.
*first published in: Euractiv.com
By: N. Peter Kramer
