1 COMPETITION LAW FORUM Paris 21 June 2006 Competitiveness versus Competition Presentation by Humbert DRABBE Director for Cohesion and Competitiveness, DG Competition, European Commission

2 Competitiveness Europe is now undergoing a period of rapid and wide changes. Productivity is growing slowly, unemployment is still high, and we lag behind our international competitors in innovation and labour productivity. Globalisation, environmental issues and demography are putting pressure on each and every Member State. Why? Globalisation redistributes the playing cards at world level. Emerging economies are now challenging us at the very core of our business – such as state of the art research and information technology. Capital is flowing to those areas where the return is best because the growth rate is highest – and that increasingly means India, China and Far East Asia.

3 Increasing international integration Offers opportunities For firms: - access to new and expanding markets - provides potential for development and cost savings cost savings For MS: - lower prices for consumers and firms - greater volumes of international trade - potential for higher productivity, real wages, growth But is also perceived as a threat - entails adjustment of firms towards further specialisation, innovation and diversification innovation and diversification - generates frictions in labour markets: workers to acquire new skills and become more mobile between jobs, sectors, regions skills and become more mobile between jobs, sectors, regions

4 Lisbon agenda To exploit opportunities and handle adjustment implications: measures to improve overall business environment and promoting competitiveness of firms and economies, a.o.: investment in R+D and education better regulation, red tape more flexible labour markets etc. more focus in structural fund policies

5 The role of competition policy Competition policy and enforcement of the EC competition rules play an essential role in delivering the Lisbon Agenda. They contribute to competitiveness by ensuring a fair playing field where efficiency and innovation are encouraged, because competition is solely on merit. Policies on state aid, merger control and anti-trust ensure that everyone is playing by the same rules. In turn, enforcement of competition rules ensures those rules are observed. But Competition policy cannot replace structural adjustment policies.

6 Objectives for competition policy Ensure that markets within the EU are competitive Protect EU business and consumers from harmful effects of global cartels, monopolies and restrictive agreements (  Microsoft, Honeywell) Export the EU model of competition policy to other jurisdictions Promote the convergence of approaches to competition policy (substantive rules, fair procedures, non-discrimination) Strengthen co-operation with other jurisdictions

7 Role of State aid control How to ensure that State aid control contributes to EU competitiveness and growth: less and better targeted state aid, based on: –a refined economic approach to ensure that public intervention tackles real market failures; –more effective procedures, better enforcement, higher predictability and enhanced transparency.

8 State aids and competitiveness Lisbon: more focus on achieving common interest objectives Delocalisation: resistance against mobile investments moving to new MS FDI: can/should state aids be used to attract foreign investments ?

9 Role of merger control First wave: Since the creation of the Single Market, mergers have taken place in the manufacturing sector Second wave: cross-border mergers are increasingly in sectors which have recently been liberalised or are going through the process of liberalisation: telecoms, transport, energy and banking industries. Merger control has accompanied the first wave allowing a large reorganisation of EU industry Merger control has to accompany the second wave, which takes place in different conditions: markets are more fragmented, more incumbents, more politics involved

10 Conclusion The best way to become competitive, is to compete Competition policy can help turn the threat of globalisation into an opportunity by providing a meaningful, collective answer to the challenges of globalisation, when no Member State alone would be able to do so.