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Published byBuddy Warren Modified over 9 years ago
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Chapter 6 European Industrial Policy
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Competitiveness EU share of global economy Ability to generate growth and sustainable employment Based on efficient, innovative businesses Competitiveness is not static – change is key Role of industrial policy is to aid this process
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What is industrial policy? All those policies which impinge on the structural adjustment of industry with a view to promoting competitiveness Provision of a horizontal framework in which industry can develop and prosper by remedying structural deficiencies and addressing areas where the market mechanism alone fails
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Approaches to industrial policy National versus supranational policies Interventionist versus liberal Clash of cultures –France - national champions –Germany - state as a catalyst –UK - ultra-free marker
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Types of industrial policy Horizontal or generic - affects all sectors Negative - slows process of structural change Sectoral specific - steel, textiles, IT, etc Positive - accelerates process of change
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Evolution of EC policy - 1980s Policy shift - emerging liberal consensus Impact of SEM - integration as a cure –create environment for firms to compete and restructure –increase rule enforcement –re-commitment to free and fair trade –limits to national champions - rise of European champions
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Evolution of EC policy - 1980s Supremacy of markets collaboration and co-operation (consistency with market?) greater horizontal emphasis emergence of network economy dilution of national policies - convergence of liberalism at state levels
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Industrial policy in the New Millenium Policy more passive and based on: –promotion of permanent adaptation to industrial change within open, competitive markets –coherence with other measures –horizontal measures Key theme: improved functioning of markets to stimulate private sector investment
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New themes Industrial policy has become explicit industrial competitiveness strategy investment in human capital non-mobile factors of production co-operation at pre-competitive stages of production impact of globalisation
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Porter (1990) Competitiveness is determined by intensity of competition This is aided by clusters EU policy has directly sought this Put firm at centre of strategy Policy addresses market failure
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Maastricht and industrial policy Explicit EU competence for the first time Industrial policy aims to: –accelerate the adjustment to structural change (i.e. positive industrial policy) –promote business development initiatives - SMEs –promote co-operation between enterprises –dissemination of outcomes of research and development policies
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Examples of industrial policy instruments Research and development policy Competition policy Trade policy Export promotion Education and training Inward investment schemes Fiscal policy Infrastructure development Environment Labour market policy
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Rationale for EU intervention Will the market deliver? High costs and risks of R&D Avoids duplication Europe falling behind R&D per head in Europe - half that of Japan and 60% of US Reduce problems arising from different standards
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Problems of EU and collaborative strategy Competition problems? Different working methods and cultures Higher costs at early stages Bureaucratic procedures Role for SMEs Marginalized by globalisation Value of outcomes?
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Globalisation Limits role of state to: –supporting scientific and technological infrastructure - e.g. dissemination –support competition and fair play –alleviate institutional failure - education and training –support for strategic technologies where state lags behind –negotiation of common trade rules
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Globalisation (cont.) Requires policy which aims to develop locations in which industry can flourish rather than policy to develop national industry - i.e. ownership not important national champions irrelevant horizontal-generic policies dominant
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Evidence In areas EU is emerging as success: -mobile phones (Nokia and Ericsson) -Pharmaceuticals (losing fragmentation) -Aerospace (Airbus is challenging Boeing) But more work needed in hi-technology and information industries
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