FinUnions emphasizes the following issues in its position on Industrial Policy:

– The EU needs a competitiveness fund
– Public aid requires sustainable criteria
– Accelerating towards a just transition
– More RDI cooperation needed
– The EU needs a genuine banking and capital markets union
– Regulatory harmonisation, but not at any cost

FinUnions’ position on Industrial Policy

International competition has intensified dramatically in recent years. State aid policies in the US and China and rising trade barriers are causing problems for European industry. Some EU Member States have also engaged in aggressive state aid competition. To prevent harmful competition between Member States and to safeguard the internal market, action is needed primarily at EU level, rather than at national level.

The role of European industrial policy is to support growth and employment objectives. Equally important, it improves welfare for Europeans, strengthens the quality of working life and supports the implementation of the EU’s pillar of social rights. A just green and digital transition, an ageing population, ageing infrastructure and the promotion of stability and security in Europe require a coordinated industrial policy.

The EU needs a competitiveness fund

Accelerating the green transition, upgrading infrastructure, strengthening security, promoting digitalisation and improving education and skills will require huge investments. According to expert estimates, the EU needs at least hundreds of billions of euros of additional investment per year. The vast majority of these investments should be made at supranational level and coordinated by the EU.  

Individual EU countries cannot make the necessary investments on their own. Investment is also constrained by new fiscal policy rules. For these reasons, the EU needs a competitiveness fund to finance investment. Such a fund is also a means of curbing harmful competition between Member States, protecting the functioning of the internal market and channelling money into common EU strategic projects.

Investments can be financed through various means. Options include increasing the EU’s own resources, increasing membership contributions, internal budgetary restructuring and the use of Eurobonds. The scale and urgency of the investment needs are such that Eurobonds cannot be ruled out. The use of funds or own resources would be the most effective way to achieve fiscal and strategic reallocation.

• A common EU fund must be set up to strengthen competitiveness, strategic independence and the EU’s global role.
• The fund should be implemented in such a way as to coordinate EU action, curb harmful competition for aid between Member States and prevent duplication of national efforts.
• Resources allocated from the Competitiveness Fund should not be subordinate to cohesion and regional policy. Funds should be targeted at projects with the best potential.

Public aid requires sustainable criteria

When increasing public funding, the importance of sensible principles is emphasised in the allocation of funds. Funding should be channelled in a market-neutral way, based on excellence and the promotion of economic renewal and sustainable development. Moreover, public funding must promote social justice, as this is vital to an ambitious EU climate and industrial policy.

For example, the receipt of funding can be subjected to minimum social conditions. The experience with these globally has been good. Criteria such as respect for workers’ rights and a commitment to corporate responsibility should be included. Europe’s various financial instruments should be reduced in number but increased in size. In addition, the distribution of aid should:

• promote the EU’s common strategic objectives and the recipients’ commitment to EU values.
• invest in areas such as shared infrastructure, training and research across sectors. This aid should be technology-neutral.
• target aid to sustainable economic renewal, such as disruptive technologies and projects that generate positive externalities.
• when supporting individual companies, choices should be based on the “excellence principle”, i.e. on potential and quality.
• regional and cohesion policy will continue to be important to ensure the territorial prosperity of the Union as a whole as the internal market develops. However, competitiveness fund investments should not be allocated based on cohesion.
• Support must be subject to social conditions, such as a commitment to respect collective agreements and freedom of association, corporate responsibility, upgrading the skills of company employees and creating quality jobs.

Accelerating towards a just transition

A just green and digital transition is a necessity. The green transition will increasingly mean competition for huge and rapidly growing markets for products and services. The EU is a major net importer of fossil energy, unlike the US or Russia, for example. This undermines Europe’s energy self-sufficiency.

The EU has been a pioneer in areas such as emissions trading. The carbon border adjustment mechanism must be implemented swiftly. In addition, the range of products covered must be extended. However, sanctions alone are not enough: regulatory legislation and incentives in the form of aid must also be used.

• Green transition projects need sufficient earmarked aid. For example, aid should be targeted at promoting low-carbon industrial processes and services, clean energy production and building zero-emission transport infrastructure.
• The potential and possible benefits of energy storage and small nuclear power plants should be explored and promoted.
• Workers must be guaranteed adequate social protection at national level and training opportunities, especially in the event of change.
• Legislation to improve the conditions for the circular economy must be prepared quickly. Mandatory legislation is needed, for example, to increase the repairability and recyclability of products and consumer information.
• The public sector must do more to promote sustainable development in its procurement. Price cannot be the main criterion for procurement.   

More RDI cooperation needed

Research, development and innovation address common challenges. RDI requires large investments, but the resulting technologies and knowledge can often be exploited without limits. In many areas, transnational efforts are also needed to produce research data and test materials. For these reasons, there is a case for investing in RDI at EU level, which would help to stem the brain drain abroad. Existing agencies could be responsible for the collection, quality control, updating and control of the use of transnational research data in their respective fields. There is also a case for more shared research infrastructures in the EU. Even small countries have something to gain from RDI cooperation if the framework conditions are set correctly.

• The outputs of publicly funded RDI activities must be openly available. The dissemination of best practices should be actively promoted.
• Public aid should encourage RDI cooperation, for example between research communities and businesses.
• All Member States participating in co-financing should have access to shared research infrastructure and the possibility of placing their researchers in research consortia.
• Investment must be made in training and skills. For example, funding for student and researcher exchanges and cooperation between universities should be increased.
• The EU should follow the example of the US Advanced Research Projects Agency (ARPA) and set up similar organisations in the fields of green technologies and defence technologies.

The EU needs a genuine banking and capital markets union

The EU’s problem is not a lack of funds, rather the poor channeling of funds into investment. Promoting a banking and capital union is essential to ensure that companies have access to sufficient funds in financial markets to make investments. Investment needs are particularly acute for companies that are upgrading their production to be more sustainable. Public assistance alone cannot cover all the investment needs of companies and using them to do so would not be appropriate. However, public funds have the potential to stimulate private investment.

• The regulation of collateral, loan terms, market information and insolvency situations needs to be harmonised across the EU.
• A banking and capital union requires common supranational market supervisors and institutions.
• The digital euro and a single European payment system need to be introduced.

Regulatory harmonisation, but not at any cost

Every year, the EU produces a significant number of new legislative projects. The vast majority of these are technical regulations for the internal market, such as requirements on product features, which Member States supplement with national regulations. Excessive and fragmented regulation can undermine the functioning of the internal market. The need for regulation must always be carefully assessed. For its part, regulation contributes to creating the conditions for the existence of the internal market. Reducing regulation should not be an end in itself, nor should it be done on the basis of a percentage target.  

• When assessing the appropriateness of regulation, the main considerations are to improve the position of consumers and to promote fair competition. The powers of the consumer and competition authorities must be strengthened.
• Regulation on social rights, workers’ rights or the environment should not be cut back, but the level of regulation and protection of rights should be strengthened through changes to regulation.

Additional information:

Ms Susanna Salovaara, Director at FinUnions, tel. +32 488 47 95 08, susanna.salovaara@finunions.org  

Mr Patrizio Lainà, Chief Economist, STTK, tel. +358 40 583 4432, patrizio.laina@sttk.fi

Mr Tatu Knuutila, Economist, SAK, tel. +358 50 075 3999, tatu.knuutila@sak.fi