INT/935

Updating the new industrial strategy

OPINION

Section for the Single Market, Production and Consumption

Communication from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions
Updating the 2020 New Industrial Strategy:
Building a stronger Single Market for Europe's recovery

[COM(2021) 350 final]

Rapporteur: Sandra PARTHIE

Co-rapporteur: Dirk BERGRATH

1.Conclusions and recommendations

1.1A coherent industrial strategy should be focused on two dimensions: recovery from the pandemic and reconstruction and resilience. The European Economic and Social Committee (EESC) welcomes the call for the co-creation of transition pathways for the green and digital future and underlines that this has to be done in partnership with industry, public authorities, social partners and other stakeholders. For the EESC, the first step for a successful and coherent implementation of the industrial strategy is to shape the right framework with a focus on competitiveness and innovation, which should be addressed in each ecosystem, with clear goals and targets.

1.2In this context the EESC calls for dedicated Key Performance Indicators that measure not only the ecosystem's competitivity, but also horizontal issues, and underlines the need for regular assessments of the chosen indicators and for adapting or changing them over time.

1.3The EESC welcomes the commitment by the European Commission to retain and grow Europe’s the industrial and manufacturing base and underlines that social partners and civil society organisations have a key role and need to be included in designing the future of European industry. The EESC also calls for an alignment of the measures envisaged to achieve climate neutrality and the digital transition with the objective of social wellbeing and sustainable growth.

1.4The Committee agrees that value chain resilience has gained in importance and supports the Commission's efforts to secure supply chains and to strengthen the resilience of businesses, as this is important for the EU economy, with the COVID-19 pandemic highlighting unexpected shortcomings, including in the Single Market.

1.5The pandemic has in some areas unfortunately contributed to widening the gap between prosperous and less prosperous EU Member States. This further endangers social and economic cohesion. Next Generation EU is an unprecedented instrument for the EU to mitigate this impact, and must be used to achieve better convergence between European Member states and regions, also with regard to the twin transition towards a sustainable and digital Europe.

1.6Industrial alliances are proving a successful method for developing large-scale and cross-border industrial projects in strategic fields. These industrial alliances, together with Important Projects of Common European Interest (IPCEIs), are crucial for the recovery and promoting European standards and key technologies, in particular in areas where the market alone cannot deliver or is being distorted.

1.7In our view, the successful implementation of such projects requires close dialogue with worker representatives and trade unions as well as with company representatives and employers federations in order to include their know-how and to reduce uncertainties in the conversion as well as possible. They must be flanked with an impact assessment regarding the effects of the decarbonisation processes on value creation, employment and the skills required for decarbonised industrial production and the circular economy. 

1.8Identifying clear and appropriate measures to support Europe's MSMEs 1 is of paramount importance and the EESC endorses the intention to provide companies of all sizes with accessible support to innovate and fully embrace digitalisation. A revision of policies to address hiring challenges faced by companies and attract a qualified workforce is also necessary, as is a business-friendly environment and investments in social infrastructure, workers' skills and training, as well as decent working conditions.

1.9Shortages in strategic value chains, as well as shortages of skilled workers, are undermining European industries' abilities to recover rapidly from the pandemic. It is crucial that Member States and the EU act decisively to tackle strategic dependencies 2 , including through reindustrialisation, the circular economy, trade policy and through skills-related measures. In general, businesses are best placed to review and revise their supply chains and should be supported in this endeavour.

1.10The EU needs to remain open, fair and values-based in order to attract investors and support economic activity. Nevertheless, the EESC supports an open and fair single market where European companies can compete on foreign markets, and therefore calls on the Commission and Member States to ensure that the investments are made in digital solutions that add value to European economies. Digitalisation of the economy should be promoted in an inclusive manner, preventing any type of digital discrimination.

1.11The EESC believes that the set of measures announced by the Commission to tackle unfair competition due to foreign subsidies should also be used as a tool to reindustrialise Europe and support its industrial value chains. The EESC also supports the mapping of European production chains, with industry at the forefront of this reconstruction, and calls for a better promotion of European standards at the global level.

2.The Commission Communication

2.1The Communication is the update of A New Industrial Strategy for Europe, published on 10 March 2020. The update aims to capture the impact of the pandemic crisis on Europe's economy and industry, sets out the lessons learned from the crisis and lays out the policy priorities under three main strands:

-Strengthening single market resilience;

-Dealing with Europe's strategic dependencies;

-Accelerating the green and digital transitions of EU industry.

2.2The update also assesses the resilience and functioning of the single market, evaluates the needs of each industrial ecosystem, identifies strategic dependencies in key vulnerable ecosystems and proposes Key Performance Indicators (KPIs) to monitor the implementation of the strategy. It includes an SME dimension with tailored financial support and measures to enable SMEs and start-ups to embrace the twin transitions.

3.General comments

3.1The EESC welcomes the update of the industrial strategy. It is needed to be revised as the COVID‑19 crisis has put Europe's economy and industrial value chains, micro, small and medium sized-enterprises as well as citizens – in particular young people, people who have lost their jobs low-income earners, vulnerable groups such as persons with disabilities and women – under stress. Additional weaknesses, dependencies and gaps in supply chains have been revealed and need evidence-based assessment to be addressed successfully. The EESC welcomes the commitment by the Commission to retain and grow its industrial and manufacturing base and underlines that social partners and civil society organisations have a key role and need to be included in designing the future of European industry. In particular, the EESC underlines the crucial role of social dialogue, the social partners, collective bargaining and workers' involvement, as well as civil society engagement, to achieve competitive industrial policy.

3.2Nevertheless, as the pre-COVID-19 challenges have not disappeared, consistency with the measures proposed in the 2020 Industrial strategy for Europe is appropriate. The recovery will take time, and continued support to European industry, companies and workers is necessary in the process. The twin transition challenge, dealing with climate change and advancing digitisation, requires efforts by companies and public authorities and must play a central role in a modern industrial strategy for Europe. The EESC underlines that the measures envisaged for climate neutrality and the digital transition must align with the objective of social wellbeing and sustainable growth, to achieve a just transition where no one is left behind. In addition to focusing on the recovery from the COVID-19 crisis, a longer-term perspective on a green and digital transition but also on productivity and competitiveness in general is essential.

3.3The Committee agrees that value chain resilience has gained in importance and supports the Commission's efforts to secure supply chains and strengthen the resilience of businesses, as this is important for the EU economy and the COVID-19 pandemic has highlighted unexpected shortcomings, including in the Single Market. A strong horizontal industrial policy should support the European industrial base without discretionary interventions in market results. The EESC points to the importance of innovation. Exploring ways to find an appropriate level of security of supply and strengthening the capacities to cope with disruption should be on the political, but above all on the corporate, agenda.

3.4Skills are crucial in supporting the twin transition and to contribute to the recovery. The EU can only be a geopolitical power if it has a very competitive industrial base, with strong companies and highly skilled workers, production facilities on EU soil and clear and fair rules for the internal market. The EESC supports the Pact for Skills initiative that is designed to foster actions for the up- and re-skilling of adult workers. Actions under the pact, such as the development of skills partnerships per ecosystem, including public-private partnerships, are best developed at the sectoral level with the involvement of sectoral social partners and relevant civil society organisations. It is also important that national skills initiatives incentivise employers to offer training opportunities. In this respect, the territorial dimension is of the utmost importance; labour markets should be properly assessed with a view to creating new jobs in all regions. The EESC will monitor these aspects and calls on the Commission and the Member States to involve the social partners and civil society in the monitoring and implementation of the Recovery and Resilience Facility (RRF) plans, which need to be coherent with the European Green Deal and the Industrial Strategy. Europe needs a highly qualified labour force, adapted to the changes that the economy is facing. Succeeding in upskilling and re-skilling is a huge challenge 3 .

3.5The EESC salutes the thorough analysis of the impact of the COVID-19 pandemic conducted in the context of the strategy. The proposed constant monitoring and observation activities and instruments, such as the Annual Single Market Report or the monitoring of critical raw materials, can create very useful data sets for assessing the state of Europe's industrial strength and inform a horizontal industrial policy that puts Europe again in a global leadership position.

3.6However, a set of strategies or plans, e.g. on the Green Deal or NextGenerationEU, is not sufficient, as long as they lack implementation. The EESC calls on the Commission and the Member States to ensure that the various plans for Europe's recovery are aligned, with the necessary regulatory framework and incentives so that the industrial sector, its companies and workers are enabled to transition into a sustainable and digital future.

3.7In coherence with the European Pillar of Social Rights, this considerable use of public funds should be oriented towards the principle of social sustainability and solidarity. This should be a guiding principle in the implementation of the updated strategy. Given the scale of the challenges, the resources currently made available through the Just Transition Fund are not enough to create sufficient prospects for affected regions and employees in the process of structural change. A just transition in the industrial sector can only succeed if carried out in a coordinated manner. The EESC believes that public investment should be done through broad and open research programmes such as Horizon Europe to avoid subsidising activities which are closer to markets.

3.8Industrial and trade policies are interlinked, must be mutually reinforcing and address market distortions. Ensuring that the EU remains open to trade and investment is a prerequisite for achieving resilience. Trade can help diversify supply chains and allow the EU to have unobstructed access to inputs critical for our capacity to innovate and scale up production 4 . The EU's trade policy can help increase our global competitiveness i.a. by raising the climate ambition of trading partners, e.g. through liberalising trade in environmental goods and services. The ESSC underlines that all EU policies should promote sustainable development at both European and international level, and ensure that economic development goes hand in hand with social justice, respect for human rights, high labour standards and high environmental standards. The EU needs to remain open, fair and values-based in order to attract investors and support its economic activities.

3.9The single market is Europe's biggest asset and its success will be key to enabling the transition. The Commission should continue the focus on implementation and enforcement of rules, and on removing the barriers in the single market that were present even before the crisis.

3.10The pandemic has, in some areas, widened the gap between prospering and less prosperous EU Member States. This further endangers social and economic cohesion. Next Generation EU is an unprecedented instrument to mitigate this impact, but the EESC regrets that the regional aspect as well as peripherality or geographical location are missing from the Update of the Industrial Strategy. An ecosystem approach alone will not rectify the situation or reduce divergences. One of the main objectives of the strategy should be to reduce divergences between Member States and regions, while striving for upward convergence.

4.Monitoring industrial trends, value chains and competitiveness

4.1Manufacturing is a driver for innovation, a focal point for value chains including services, and a home of high productivity and high-income jobs. Securing the future of manufacturing, strengthening industrial production and providing an enabling business and regulatory environment should be the cornerstones of a resilient and modern European economic and industrial policy that preserves and creates jobs.

4.2Shortages in strategic value chains, as well as shortages of skilled workers, are undermining European industries' abilities to recover rapidly from the pandemic. Member States and the EU must tackle strategic dependencies, including through attracting strategic production on EU territory, the circular economy and trade policy measures. In general, it is businesses that are best placed to review and revise their supply chains. The EESC believes that the set of measures announced by the Commission to tackle unfair competition due to foreign subsidies should also be used as a tool to reindustrialise Europe and support its industrial value chains. Increasing Europe's strategic capacities through new industrial alliances that would not develop otherwise can create jobs and growth by redeveloping certain strategic production facilities.

4.3Europe's manufacturing sector is facing growing competition from the United States and China. Europe is competing for investments that can be made in many parts of the world. Favourable investment conditions are crucial prerequisites for Europe's future prosperity. Domestic, European and international investors need to find attractive conditions in order to maintain and increase the capital stock that facilitates future growth. Existing companies must meet the conditions for development, while founders must be convinced that their business projects can grow successfully in Europe. The EESC recommends strengthening the horizontal approach in the industrial strategy, supplemented by vertical approaches.

4.4Taxation can play a key role in providing the necessary incentives, but not while Member States are still competing with one another in an unfair and damaging manner, thereby enabling some large corporations to avoid paying their fair share of taxes. The EESC supports the preparations for the legislative proposal on BEFIT (Business in Europe: Framework for Income Taxation) and appreciates the recent agreements within the OECD on the taxation of companies.

4.5The Annual Single Market report defines a set of KPIs with which to analyse economic developments and monitor the progress achieved in the different areas identified as priorities for European industry. The EESC supports KPIs as a monitoring tool and welcomes the aim of providing an overview of the performance of the EU economy, comparing it to international partners and analysing the specificity of industrial ecosystems. We call on the Commission to produce an annual assessment detailing how KPIs have achieved the proposed targets and to put in place corrective measures, if needed. The EESC also considers that if KPIs are a key instrument for the implementation of the Industry Strategy, quantifiable objectives, a clear timeline and governance are needed.

4.6However, in our view, we need indicators that do not just provide another set of data but depict what is important for the EU's competitiveness. The proposed KPIs overlook important indicators such as the age, the gender or the skills profile of the workforce among the various ecosystems. Those aspects are crucial to anticipate the change ahead and avoid bottlenecks and hurdles while transforming European industry. But they are also key to building an inclusive recovery, given that young people, women and precarious workers have been the hardest hit by the crisis. The EESC recommends complementing the proposed KPIs with indicators measuring the social performance of the Industrial Strategy and its 14 ecosystems, with the aim of ensuring good working and production conditions and quality jobs. It calls for dedicated indicators that measure not only ecosystems, but horizontal issues as well, and for an option to adapt, change or evolve these over time, if necessary. The KPIs should, for example, take into consideration consumer preferences, and especially the shift to sustainable products.

5.Strengthening single market resilience

5.1The EESC welcomes that the single market is at the very centre of the update. A strong home market is a precondition for European companies to set up, develop and continue to thrive. The EESC reminds that the objective is to ensure high labour, social and environmental standards and the smooth operation of supply chains and value creating networks within Europe. Social cohesion, affordable health care systems, efficient public services, good infrastructures, successful education systems and well-functioning industrial relations are key conditions for attracting investment and creating prosperity.

5.2The EESC supports the Commission's proposal for a Single Market Emergency Instrument for greater transparency and coordination. It also welcomes the detailed analysis of industrial ecosystems, which will need to be accompanied by sectoral analyses and roadmaps, highlighting not just interdependencies and connections but also gaps in many sectors in the EU, including the assessment of labour market developments and the corresponding skills needs. There should also be room for revising how ecosystems 5 are defined and used, but also which sectors are examined, so that the tool does not become overly selective.

5.3The EESC welcomes the recognition of the role of Europe's MSMEs and endorses the intention to help them scale up and attract a qualified workforce. This requires a business-friendly environment and investments in workers' skills and training, as well as decent working conditions and good social infrastructure. The EESC appreciates the extra attention paid by the Commission to late payments. Tackling the issue of late payment is of particular importance for SMEs. Alternative dispute resolution systems in which disputes can be confidential can be an important step in this direction.

5.4Industrial alliances are proving a successful method for developing large-scale and cross-border industrial projects in strategic fields. These industrial alliances, together with Important Projects of Common European Interest (IPCEIs), are crucial for the recovery and for promoting European standards and key technologies, in particular in areas where the market alone cannot deliver or is being distorted.

5.5The EESC calls for a reform of the state aid rules. The current set-up is no longer fit for purpose. We need a system that reduces administrative burdens, speeds up decision-making and makes it easier to meet the requirements of the matching clause. State aid rules can also make or break IPCEIs, which are key to encouraging public and private investment.

5.6The EESC regrets the lack of recognition, in the Communication, of the critical role played by social economy enterprises during the pandemic and their relevance in the construction of a resilient Europe moving forward. On this front, the EESC points to the forthcoming Action Plan to Promote Social Economy.

5.7Research, Development and Innovation are very important for the future of European industry. The EESC regrets that the target of 3% GDP investments in R&D&I is still far from being met. While some Member States achieve that level, others are below 1%. These differences are hampering the EU's global capacity as a block, keeping it behind the US, Japan and China.

5.8Strengthening single market resilience requires fostering the market's integration. To this end, fiscal dimension and integration and measures to avoid unfair tax competition should be taken into consideration at both European and international level. Competition rules also need to be adapted to the new realities we are facing today, separately from the industrial policy.

6.Dealing with dependencies: open strategic autonomy in practice

6.1The EU needs to remain open, fair and value based in order to attract investors and support its economic activities. Its geopolitical power is linked to having a competitive industrial base, with strong companies and highly skilled workers, production facilities within the EU, and clear and fair rules for the internal market, which can serve as an example internationally 6 . It is important, however, that it makes considered use of trade defence instruments to maintain fair competition in EU.

6.2The EESC is convinced that an autonomy-focused policy is not fit for purpose. Instead, the EU's trade policy needs to recognise the fact that openness is a key ingredient in achieving resilience. It is important to find the right balance between openness and the planned legal instrument to address the potentially distorting effects, on both companies and workers, of foreign subsidies in the single market. The EESC supports an open and fair Single Market and level playing field where European companies can compete on foreign markets.

6.3On the other hand, introducing new terminologies such as "competitive sustainability", without further explanation, should be avoided. Companies will face an uphill battle during the recovery phase and need an easy-to-negotiate legislative framework to do so.

6.4The approach of forming and supporting industrial alliances has proven successful in the current examples of batteries and hydrogen. The EESC believes that this is a very good instrument and supports the launch of further alliances in the chosen sectors, e.g. processors and semiconductor technologies, Industrial Data, Edge and Cloud, Space Launchers and Zero Emission Aviation. We urge, however, that the alliances should be set up in a transparent and inclusive way, paying particular attention to MSMEs.

7.Accelerating the twin transitions

7.1As recognised in the Green Deal, digitalisation plays a key role in all ecosystems. Investments should thus be increased across the EU to boost the growth power of new ICT sectors, such as the data economy, the Internet of Things, cloud computing, robotics, artificial intelligence and advanced manufacturing, as well as the use of European-developed industrial standards. The EESC calls on the Commission and Member States to ensure that the investments are made in digital solutions that add value to European economies.

7.2Making Europe competitive in the digital field has the highest priority. The strategy rightly notes the need for the co-legislators to rapidly adopt the Digital Services Act and Digital Markets Act and the paramount role of harmonised standards in strengthening the single market for goods and enabling European global leadership in technologies, including by using digitalisation to achieve higher energy efficiency. A well-functioning European standardisation system is key for reaching the goals of the twin transition and strengthening the competitiveness and resilience of EU industries. The EESC calls on the Commission to increase its efforts to achieve leadership through and in standard-setting, by promoting and developing existing European industry standards jointly with companies. The EESC therefore welcomes the Commission's holistic approach, considering also the importance of the services sector for a well-functioning single market and tackling the twin transitions.

7.3Equipping the European labour force with digital skills for this new phase of industrialisation is key. Embracing the digital era can only be achieved with a skilled and well-prepared workforce. Skills are an important catalyst for the innovation and creation of added value. Increasing employability requires comprehensive labour market strategies involving all relevant stakeholders (social partners, labour market institutions, civil society organisations, training providers). Digital skills and competences must be integrated into all levels of education, training and sectoral social partners. Local companies should be involved in the governance of education and vocational training systems, as they have extensive knowledge of companies' systems and local market needs. The digitalisation of the economy should be promoted in an inclusive manner, preventing any type of digital discrimination, especially against older people, people with disabilities and those living in rural and remote regions.

7.4The EESC stresses that a strong European manufacturing sector based on low- or no-emissions technologies and energy efficiency is best for economic prosperity and the climate. Reducing production capacities and risking both carbon and investment leakage to countries with less ambitious emission standards would be a fundamental failure. Developing affordable low- or no-carbon – as well as energy efficient – technologies and bringing them to global markets is the most important lever for global emission reduction. Europe's responsibility is to demonstrate that ambitious emission reduction is possible without endangering economic prosperity.

7.5The circular economy 7 and creating secondary raw materials markets is vital. Waste management policies, mandatory recycled contents in packaging and other products are vital to set in motion investments along the recycling chains.

7.6To achieve the level of investment needed to finance the Green Deal, a review of state aid rules for investment in low-carbon products and processes should also be envisaged. Furthermore, the newly created Innovation and Modernisation Funds, as well as the ETS auctioning revenues and the proposed carbon contracts for difference, should provide additional resources to support climate and energy-related projects, and deal with the social impact of a transition that aims to leave no one behind. Also, a link of the industrial strategy to the European Green Deal and the EU Action Plan: "Towards Zero Pollution for Air, Water and Soil" should be introduced.

7.7The EESC supports the line taken in the Update of the Industrial Strategy on Carbon Border Adjustment Mechanism (CBAM). We want to underline that a CBAM, introduced for selected sectors, has to be in full compliance with WTO rules in order to avoid retaliatory measures from trading partners. In the pursuit of carbon neutrality, setting similar carbon price levels internationally should be the priority target in future multilateral negotiations.

7.8Data analytics will play a crucial role in the short and medium term. The EU needs advanced data analysis programmes that can assess Europe's competitiveness level compared with our global competitors. The EESC thus welcomes efforts to create industrial alliances on Industrial Data, Edge and Cloud.

Brussels, 30 September 2021.

Alain COHEUR
The president of the Section for the Single Market, Production and Consumption

_____________

(1)    Micro, small and medium-sized companies (MSMEs).

(2)    The EESC wants to point out that, logically, it should be strategic "independencies", not "dependencies" but will, for the sake of coherence, continue to follow the terminology introduced by the Commission.

(3)       https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/adult-learning-0

(4)      See OJ C 429, 11.12.2020, p. 197 and OJ C 364, 28.10.2020, p. 53

(5)      The use of the term "ecosystems" wrongly implies a sustainable equilibrium. There is no coherent usage of the term "ecosystems" in EC communications. In the EGD Communication of December 2019, "ecosystem" is used for natural systems and not those created by humans. In the updated Industrial Strategy Communication, the term is used only for industrial systems.

(6)      See OJ C 364, 28.10.2020, p. 108 .

(7)      See OJ C 364, 28.10.2020, p. 94 and OJ C 14, 15.1.2020, p. 29 .