Strengthening Europe’s industry as an engine for growth and a catalyst for the green and digital transformation

The European Commission has presented its European Industrial Strategy at the beginning of May this year. While at the time the strategy was very much to the point and included many positive measures to go hand in hand with the green and digital transformation ambitions, we will have now to adapt it to the new and different situation compared with May of this year. Our economy has been hit hard by the Corona crisis. Supply chains were interrupted due to border closures, not only globally, but regretfully also within in the European Union. The Corona crisis has shown us the shortcomings of our current system and the lessons learned from the Corona crisis need to find their way into the Industrial Strategy that the European Commission is proposing.

Firstly, we need a resilience plan for essential products and services. Through the Corona crisis, the shortcomings of global supply chains became visible. In many countries, urgently needed medical equipment such as masks, protective gear and respirators were not available anymore although all components were produced. Industrial production was disrupted and cross-border supplies of these products were cut off. This was unfortunately also the case within the Single European Market, where Member States closed borders.

In critical areas such as pharmaceuticals, medicine or essential food supply, we need to establish European resilience and think about assuring essential supply in Europe.

In critical sectors we do not want to be dependent on third countries, but just on our European Member States. In critical sectors we should be able to guarantee a large availability of products all over Europe at all times. In other production areas, companies will most likely reassess risks and reduce dependencies as a consequence of the Corona crisis themselves.

Internationally operating companies will not have to sacrifice the efficiency benefits of cross-border supply relationships, but they will take more precautions against crisis-related production disruptions in the future. The risks for them are not the international value chains as such, but dependencies on individual suppliers, customers or locations. In order to better protect themselves against disruptions, companies might for example integrate suppliers from several countries whose services can replace each other in the value chains or they will have to invest to stock essential material. This should be sup- ported by the European Industrial strategy as we want critical sectors to be able to supply European citizens at any time, but we should not put into question globalisation as a whole.

Second, we have to keep in mind that the EU’s industrial competitiveness relies not only on well-functioning supply chains and the free movement of goods, but also on a fully functioning single market in services. We have to be aware that even before the Corona crisis, unjustified regulatory and non- regulatory internal market barriers existed. Strengthening industrial production in Europe also means strengthening the free movement of services. This is a lesson we should have learned already before the crisis, but through the Corona crisis the problems became even more apparent.

Third, while we should ensure an ambitious strategy for the green and digital transformation, we should not undermine our market economy and we should be careful not to overburden our companies. This holds true especially now in times of economic crisis.

We are dependent on our European industry to counter the effects of the economic crisis.

While of course it is important to keep the green and digital transformation in mind when thinking about ways to boost the European economy, we should be careful not to be short-sighted.

In the long run, we need digital and green solutions that work also beyond 2030 and this will only be possible if political ambition and economic reality go hand in hand.

Last but not least, especially in the digital transformation we have to underline the importance of the European Single Market, online as well as offline. A better functioning of the Single Market could generate further growth, in the area of industrial products an additional EUR 183 to 269 billion per year could be generated and in the area of services 338 billion euro extra per year according to the European Commission. A better functioning of the Single Market as well as better enforcement of Single Market rules should be our priority to strengthen our industry and help to make it strong enough to shoulder the digital transition and green transformation.