European industrial policy – let’s choose our way based on European values

16th April 2019

European industry is being tested by increased global competition, weaknesses in industrial structures and problems accessing raw materials These require bold action. Threats also arise from changing consumer demand, an ageing population and a shortage of digital skills.  Europe’s long-standing challenge to close the productivity gap, especially with the US in areas such as ICT and biotech, still prevails.

According to the latest results of the 2017 European Innovation Scoreboard, the EU is catching up with Canada and the US, but other countries — South Korea, China and Japan — pose an economic threat. Europe seems desperate to create European Silicon Valleys with the potential to build European champions as powerful as Google or Apple. Rather than following US examples, or living in fear of Asian competition, European industrial policy should find its own way, based on European values, and write its own destiny.

How the EU can lead the new industrial revolution?
Today, new drivers such as automation, artificial intelligence, connectivity, blockchain, cloud computing and big data are reshaping our economy. Europe can use advanced technologies not just to lead the way in a new industrial revolution but also to lead in putting advanced technologies at the core of solving societal challenges. The question is how European industrial policy can embrace digital entrepreneurship in an equitable and strategic manner, to ensure that all businesses and citizens can take advantage of digitalisation.  

It is of the utmost importance that school curricula are updated to equip young people with digital skills, not just to harness the advantages of advanced technologies but to ensure they can evaluate, and optimise, the constantly evolving outputs generated by machines. Instead of jumping on the digital bandwagon we need to understand the impact of digitalisation on our lives, and the lives of our children, and aim to develop digital initiatives that add real value while mitigating the risks.

Let’s develop digital and human skills in parallel
Investments should be made in society-centred solutions where digital technology is just one component alongside new organisational models, liability considerations, safety measures and human skills. Europe should aim to excel in cybersecurity, which is a key concern in terms of data infrastructure. There is still a lack of awareness and investment in cybersecurity that can fix the vulnerabilities that come with digital technologies.

Our future economic well-being also depends on our industries adopting circular economy business models that aim to reduce raw materials inputs and maximise the reuse of waste. Unfortunately, European policy initiatives that promote sustainable industrial practices are sometimes overshadowed by fears of firms relocating to places with less stringent environmental regulations or cheaper energy sources.  Europe should continue to lead the way in greening industry, adopting resource-efficient industrial processes and promoting responsible consumer behaviour.

Exporting clean-tech
The EU Member States should make more effort to export clean-tech solutions to other countries, using their experience as test-beds of environmental-friendly solutions. Europe has traditionally been strong in eco-industries with high levels of environmental technology exports.

Circular economy solutions must start from the design of the product or service; incorporating feedback loops into industrial processes at the design stage, preventing waste generation and developing regenerative products.  This requires political and business leaders to re-thinking how to manufacture products and the relationship of industry with nature. Industry can move from extracting resources from the natural world to giving back. For instance, by operating in industrial symbiosis — the leveraging of underutilised resources.  Industrial symbiosis initiatives have great potential in the EU but need a supporting framework such as well functioning secondary markets or harmonised criteria for the ‘end of waste’ status.

Effective recycling is Europe’s opportunity
Europe’s opportunity lies in gaining more independence from foreign suppliers by investing in effective recycling processes, material efficiency and substitution. Products that contain useful industrial materials, such as batteries, lighting or consumer electronics, should be collected more efficiently. The correct sorting and disposal of consumer products would reduce our ecological footprint and help us live in a more sustainable manner. The car industry could, for instance, benefit by collecting old batteries for recycling.

The vision of an infinite cycle of metal use would need the European public authorities, and private companies, to act.  

Raw materials and natural resources
Securing access to raw materials and natural resources is key for many European industries. Maintaining sustainable raw material supply chains and fair pricing is vital for European industry to be able to compete globally. Several major companies have already joined forces with industrial associations, aiming to establish certifiable standards, safe origin certifications and transparency in the procurement of high-risk raw materials. Access to raw materials is especially crucial for those industries which are active in high-technology areas such as energy storage, wind turbines, microelectronics, electrical engines and solar cells.

Another critical factor is access to an appropriately skilled workforce
Another important precondition for the modernisation of industry is the local knowledge infrastructure. This includes higher education and research institutions in fields specific to the industry, technology transfer organisations, shared technology platforms and sector specific courses or training. A critical factor in the adoption of new technology is access to a highly skilled workforce. Lack of skills, and the capacity to recruit people with the right skills, is often a major barrier for developing new business models. Access to skills for micro, small and medium-sized companies, in a broad range of sectors, will be crucial for future industrial policies.

Strengthening the single market for digital and service companies
The completion of the single European market presents businesses with an opportunity to benefit from economies of scale, cut administrative costs, gain easier access to public procurement in the other EU Member States and cooperate more closely with each other. Nevertheless, there is still much to do to address current industrial challenges. For instance, innovative, small digital services companies struggle to access the EU single market and therefore have great difficulties in growing. Often they introduce their innovations to their national market but then move to the US to benefit from a more accessible market with better outreach to customers willing to embrace those innovations.

Inadequate European harmonisation of ecolabels, safety and quality standards, and technical standards of components, equipment and systems are also still problems for many SMEs. Europe’s future economic success will depend on institutional capacities such as public-private collaboration. The European path to a new industrial policy should be systematic and work in alignment with other policies supporting social, digital and environmental goals.
Kincsö Izsak is a principal consultant in innovation and industrial policies at Technopolis Group and has broad expertise both in the public sector and in business.