The new European Commission must keep industrial competitiveness at the heart of its agenda and translate political rhetoric into policy action, writes Karl-H. Foerster.
As a new European Commission takes office this week, it faces no shortage of challenges in putting Europe on the road to growth in the short-term, while at the same time charting a course for the long-term competitiveness of the European economy in a fast changing world.
The potential of the digital economy has been one of the recurring themes in statements to date by President Juncker and his team. But as they look to new ways of fuelling investment and creating jobs, is there any future for traditional manufacturing industries in Europe?
On paper, at least, European leaders have committed to reversing the ongoing decline in manufacturing in the EU. Earlier this year, the outgoing Commission set an ambitious target of increasing the share of manufacturing in EU GDP from c.15% to 20% by 2020 as part of an overall drive towards an industrial renaissance in Europe.
As an important pillar of the manufacturing sector, contributing to 1.4 million jobs in Europe in more than 63,000 companies, the plastics industry welcomes these objectives. However, we are also acutely aware of the obstacles in the way of achieving them.
The European plastics industry are not alone in finding themselves under significant competitive pressure vis-à-vis lower cost economies, and facing critical challenges unique to doing business in Europe. High energy costs and reduced access to competitive raw materials have a major impact on the profitability of an industry like ours. Here we are at significant disadvantage in Europe compared to other parts of the world. The rapid exploitation of shale gas in the US has given a huge boost to the competitive position of its plastics sector. Meanwhile, the availability of low-cost raw materials in the Middle-East is causing a migration of production from the EU to the Gulf.
As an engineering based industry, the decline in the number of science and technology graduates is also a concern. In Germany alone, for instance, it is estimated that by 2030 there will be a shortage of one million technical experts in industry and workshops.
Finally, the lack of coherent regulation is a major challenge for chemicals sectors as a whole. The inconsistent and unpredictable use of the precautionary principle can lead to contradictory legal frameworks from one market to another. This in turn creates an uncertain climate for investment.
At the same time, there are many reasons for optimism if Europe focuses its efforts in the right direction. A starting point should be a general recognition that “industrial renaissance” is not an end in itself or a temporary life support machine for the “old economy” while we wait for the “new economy” to deliver on its potential.
Instead, European leaders need to acknowledge and incentivise the role of the manufacturing sector in boosting innovation and contributing to solutions to major societal challenges.
Plastics is a good example of an industry whose competitiveness has a significant knock-on effect for other areas of the economy. For example, in Italy, recent research shows that every job created in the plastics industry leads to almost three more jobs in the wider economy.
Plastics also help boost the environmental performance of other sectors. Lightweight, versatile and durable plastics contribute to energy and resource savings in strategic sectors like retail, construction, healthcare, automotive or renewable energy.
Our “traditional” industry is an important enabler of innovation – responsible for c.4% of all patents submitted in Europe from 2003-2012. Plastics are at the heart of some of the most exciting technological advances in recent years from the latest smart phones to 3D printing – the “poster child” of the new digital manufacturing era, which is already being used to create customised medical prosthetics with incredible results.
Making the most of Europe’s inherent capacity for innovation is key to maintaining its position in the global economy in the face of increasing competition from emerging markets.
To achieve this we need to create the right conditions for investment in innovation. This involves not only promoting science education and supporting entrepreneurship. It also implies real investment into ensuring that exciting inventions or discoveries are translated into practical solutions that bring genuine benefits to society.
It means taking steps to help reduce the costs of production, even if we may not be able to compete on an entirely level playing field with other parts of the world. It also requires a joined-up approach to policy making that incentivises innovation and fosters genuinely sustainable growth.
The call by EU leaders at the March 2014 European Summit to mainstream industrial competitiveness into all EU policies and impact assessments is a positive step in this regard. The key now is for the new Commission, European Parliament and national governments to put this rhetoric into practice in the coming years.
If this happens, then it is up to us as industry to deliver on our potential and commitments, and contribute to both short term economic recovery and long-term sustainable growth in Europe.
Karl Foerster is the Executive Director of PlasticsEurope. His comments are a summary of a “Manifesto for the Competitiveness of the European Plastics Industry” launched this week at PolyTalk2014 in Brussels to coincide with the start of the new European Commission mandate.
