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Franco MosconiFranco Mosconi

Università di Parma, Jean Monnet Chair in The Economics Università di Parma, Jean Monnet Chair in The Economics of European Industry, of European Industry,

EU POLICY-MAKING, THE SINGLE MARKET EU POLICY-MAKING, THE SINGLE MARKET AND EUROPEAN CHAMPIONS:AND EUROPEAN CHAMPIONS:

TOWARDS A TAXONOMYTOWARDS A TAXONOMY

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•Seabright [2005] and his assessment of the «Airbus experience»: that it has been «a rather special case whose applicability to other project and sectors is fairly limited» due to the technological characteristics of the aerospace sector.

•Sutton (1998, 2006) in some cases and sectors too low a concentration level cannot be an equilibrium or optimal solution and, despite an increase in the size of the market, the degree of concentration may remain far from zero

•Gordon (1999) focuses on ICT as the engine for the growth of productivity in the US in early and mid 90s, where large shares of GDP are invested in R&D

•Pisani-Ferry and Sapir (2006) The “Lisbon Strategy” aims at replicating this phenomenon to the EU

Related literature:the rationale for Supranational champions

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•Jacquemin (1987): «there is a whole tide of research questioning whether the market alone can efficiently accomplish selections leading to new industrial organisations»

•Rodrik (2004): «strategic cooperation between the private and the public sectors» …

•Labory and Bianchi (2006): «Old-style industrial policies whereby the government directly intervened in markets, and was often the producer itself are no longer relevant. Structural changes occurring in economies – summarized in the term “globalization” – are triggering the definition and implementation of new industrial policies».

•Krugman (1986) and his New Trade Theory suggest that for:Strategic sectors

•Sectors with increasing returns to scale•Policies can help in building a competitive advantage

Related literature: the rationale for industrial policies

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The problem at issue

European Champions vs. National Champions

type I: the Airbus model

supranational cooperation and concerted public policy support for the development of technology in “strategic sectors”.

Can the Airbus experience be replicated?

type II: the “single market” model

result of consecutives mergers and acquisitions waves driven by the market

How to enhance the emergence of this type of European Champions?

products of a competitive market products of Goverments’ “picking the winners” policy

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The European industrial policy: a bit of history

1970s and 1980s: political and social goals • direct aid to certain industrial sector (e.g., the steel industry)

or specific firms • “picking the winners” policy

1990s: new industrial policy approach (Bangemann Comm.)• to create condition to thrive and develop, for all business• “level playing fields” approach

2002 - 2005: re-emphasis to specific sectoral applications • joint consolidation of horizontal basis and vertical

applications

70s / 80s 90s 2002 parading shift partially back

why ?

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Concerns about productivity and growth

• not only US ahead in sectors that have the highest value added per head (especially, computers, semiconductors and the telecommunication equipment sectors)

• but also deterioration in the EU relative position compared to the early 80s

because of• insufficient innovative activity• insufficient R&D activity• weak diffusion of ICT

weakness in the elements that foster economic growth and productivity growth

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A new integrated industrial policy

Source: EC, “Implementing the Community Lisbon Programme: A Policy Framework to Strengthen EU Manufacturing – Towards a More Integrated Approach for Industrial Policy”, COM(2005)474 final

Cross-sectoral initiatives New sector-specific initiatives

(1)    An Intellectual Property Rights and Counterfeiting Initiative (2006)

(1)   The Pharmaceuticals Forum (2006)

(2) High Level Group on Competitiveness, Energy, and the Environment (2005)

(2) Mid-Term Review of Life Sciences and Biotechnology Strategy (2006-2007)

(3)   External Aspects of Competitiveness and Market Access (2006)

(3)   New High Level Group on the Chemicals Industry (2007) and the Defence Industry

(4) New Legislative Simplification Programme (2005)

(4)   European Space Programme

(5) Improving Sectoral Skills (2006) (5)   Taskforce on ICT Competitiveness (2005/2006)

(6) Managing Structural Change in Manufacturing (2005)

(6)   Mechanical Engineering Policy Dialogue (2005/2006)

(7)   An Integrated European Approach to Industrial Research and Innovation (2005)

(7)   A series of competitiveness studies, including studies on ICT, food, fashion and design industries

Whilst all policies are important, some have greater importance for some sectors than others (COM(2005)474, final, pp. 3-4)

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The European Industrial Policy “Triangle”

European Champions in the high technology sectors

from to

Subject to: • supranational public and private cooperation in research and

innovation• respect of the single market regime

bearing in mind: • consistency between industrial policy and competition policy

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technology policytechnology policy

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What is required?

Tools (two categories that overlap):

• tools that facilitate communication and cooperation among stakeholders, and that provide general institutional support– European Technology Platforms (ETPs)– European Research Area (ERA)

• tools that provide financial support and incentives for technology and innovation– 7th Framework Programme for Research, Technological Development

and Demonstration Activities (FP7); around 52,2 bls for the period 2007-2013

– Joint Technology Initiatives (JTIs)

Can these policy and tools help to replicate the Airbus experience?

a European “technology policy”

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How to proceed?

Step 1: concentrate efforts on those sectors where:

• “strategic cooperation between the private and the public sectors” is likely to emerge

• mergers and clusters can lead to a better exploitation of economies of scale without limiting competition (“productive efficiency argument”)

Refocus the European technology policy

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How to proceed?

Step 2: care of the level playing field (i.e., the single market)

• Europe has 27,4% of the world leading 500 companies, and dominates in the banking sector, but …

• It trails badly in two key sectors: high-tech and life sciences• Its share in the “triad” GDP is 44%

Refocus the European technology policy

There are margins for the growth of a more market-oriented variety of capitalism

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The reshaping of the European market structure

EC type II: mergers and acquisitions of a cross-border nature

– In 2006, EU M&As worth $1,59 trillion, and since 2004 the value has almost tripled

– Deals are getting bigger: in the first quarter of 2006 nine deals valued at more that $10 billion (as many as during 2002-2004)

– Sector concerned: utilities and energy; telecommunications, defence; banks and other financial firms; pharmaceuticals and biotech …

– … consistent with the sectors qualified as crucial by the Commission, and with those appearing from different rankings of top companies (e.g., FT, Fortune)

– “Horizontal integrations” in order to exploit synergies– Transatlantic alliances are also in place – Role of the “Enlarged Europe”– Banks as European Champions type III ?

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Summing up …..

European Champions type I

European Champions type II

European Champions type III ?

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Thank you for your attention !Thank you for your attention !

E-mail: franco.mosconi@unipr.itE-mail: franco.mosconi@unipr.it