THE LISBON STRATEGY PAST, PRESENT AND FUTURE

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THE LISBON STRATEGY PAST, PRESENT AND FUTURE
IAPSS, LUISS Rome 5 May 2006

• Franco Mosconi
• Jean Monnet Professor
• The Economics of European Industry
• University of Parma

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Summary

• Prologue
• The Lisbon Strategy 2000
• The problems of the Lisbon Strategy
• Why has the Lisbon Strategy failed to fulfil our
  hopes so far?
• The Lisbon Strategy four years to the deadline
  (2006)
• The insight of Professor Alexis Jacquemin
• The European Industrial Policy Triangle
• References

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I. Prologue

• For much of the 1990s, the intellectual and
  practical energy of EU was directed towards three
  goals

• The completion of the Single Market
• The launch of the single currency (EMU)
• The enlargement towards East Europe

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• However, in spite of fulfilling these
  institutional aspirations, at the same time the
  EU has exhibited unsatisfactory growth rates, as
  the Sapir Report 2003a made clear.

Table 1. Europes Growth Problem
Source A. Sapir 2003b.
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Table 2. Labour productivity in EU-14
manufacturing industries relative to the US
(US100)
Source European Commission 2003.
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II. The Lisbon Strategy 2000

• Thus, launched in 2000, the Lisbon Strategy was
  intended to solve the European growth problem
  through

• Improving EUs competitiveness
• For example, by increasing RD spending up to 3
  of GDP by 2010.
• Reforming the European social models.
• For example, by increasing the employment rate up
  to 70 by 2010.

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III. The problems of the Lisbon Strategy

• But, the Lisbon Strategy has delivered much less
  than had been hoped for or that is necessary for
  renewing the European economy.

• All in all, by way of illustration, consider that
  by 2003
• RD spending was only around 2,
• The employment rate was only 63.

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• Of course, as the Lisbon Scorecard 2006 of
  the London-based think-tank, CER, points out,
  there are great differences in implementation
  among Member States

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IV. Why has the Lisbon Strategy failed to fulfil
our hopes so far?

• Complexity and faulty implementation, i.e.
  methodological problems?
• OR
• Fundamental substantive problems?

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• Food for thought
• The problem with the Lisbon Strategy has to
  do with the lack of incentives to behave in
  accordance with its prescriptions that is, the
  lack of incentives to coordinate reforms within
  the EU.
• Jean Pisani-Ferry, Director of Bruegel 2005.

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V. The Lisbon Strategy four years to the deadline
(2006)

• What can Europe do to improve its economic
  performance?

• Complete the Single Market
• Increase investment in RD and innovation

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• 1. Complete the Single Market

• The Single Market is the most potent European
  instrument to address the challenge of
  globalisation.
• André Sapir, Professor of Economics, Université
  Libre de Bruxelles 2005.
• Product and capital market reform at the EU
  level.
• Integration of the market for services a sector
  that today accounts for about 70 of EUs
  economic activity.
• The Bolkenstein Directive was rejected in March
  2005.
• Is the subsequent Service Directive, approved by
  the European Parliament in January 2006, a
  satisfactory compromise?

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• 2. Increase investment in RD and innovation

• Within this context, and among many other
  important issues (such as, creating centres of
  excellence), improving the competitiveness of
  manufacturing industries has emerged as a key
  requirement.
• During 1990s, there was a suspension of
  Industrial policy in Europe.
• Europe was making headway in completing the
  Single Market, launching the EMU and enlarging to
  the East.

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VI. The insight of Professor Alexis Jacquemin

• In the 1980s, Professor Jacquemin published a
  well-known book entitled The New Industrial
  Organization Market Forces and Strategic
  Behavior, MIT Press1987.
• Part of the book was an extensive chapter on the
  Industrial Policy and Models of Society.

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• One of the most noteworthy arguments in this book
  was his criticism of the domestic policies of
  Member States, which sought to create national
  champions
• e.g. in semiconductors industry.
• His main objection was that national champion
  policies create barriers that prevent genuine
  specialization at the European level
• that allow US and Japanese companies to take
  the lead in such industrial fields.

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• As a result, Jacquemin recommended to formulate a
  concerted European industrial policy that will
  help overcome industry strategies along national
  lines.
• Examples of successful collaborations in the past
  include Airbus, but also STMicroelectronics.
• Today, the appropriate fields for the creation of
  (new) European champions lie in the sectors of
  biotechnology, ICT, renewable energy, defence
  industry, space industry
• i.e. in sectors where RD effort is more intense.

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• Jacquemins insight on the need for EU-level
  industrial policy is particularly valuable today,
  in light of

• the enlarged Union of 27 members, which provides
  new opportunities for pan-European industrial
  reorganisation
• and
• the resurging economic nationalism among the
  elites of some Member States.

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• Luckily, the Single Market has a strong guardian
  European companies themselves.

• The cross-border MAs that have spurred
  governments to protect their strategic
  industries or national championsare a result
  of companies restructuring strategies in light
  of changes in the Single Market.
• Europes nationalists cannot reverse or
  perhaps even much affect the market-opening
  actions of their companies. But they may increase
  its costs.
• The Economist, 2 March 2006

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VII. The European Industrial Policy Triangle
1. Competition policy
2. Commercial policy
3. Technology policy
Source Conseil dAnalyse économique 2000.
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• The Industrial Policy Triangle
• Investment in knowledge and innovation is crucial
  in the modern knowledge-based economy.
• Thus, it is paramount that the EU reinforces its
  Technology Policy, to match the strength and the
  reach of its Competition and Commercial Policies.

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• The combination of a true Single Market (and the
  industry consolidation measures it brings about)
  with an EU industrial policy, concentrated in
  promoting research, innovation and
  knowledge-creation, sets the foundation for the
  creation of truly European Champions the
  future pillars of the EU economy in the modern
  globalised world.
• I have tried to elaborate these ideas in greater
  detail in my latest paper, The Age of European
  Champions A New Chance for EU Industrial
  Policy, published in The European Union Review
  2006.

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VII. References

• CER-Centre for European Reform 2006, The Lisbon
  Scorecard VI - Will Europe's Economy Rise Again?,
  by A. Wanlin, London. 
• Cohen E., Lorenzi J-H. (Eds.) 2000, Politiques
  industrielles pour lEurope, Conseil dAnalyse
  économique, Rapport 26, Paris, La documentation
  Française.
• European Commission 2003, EU productivity and
  competitiveness An industry perspective Can
  Europe resume the catching-up process?, Edited by
  OMahony M. and van Ark B., Brussels.
• Jacquemin A. 1987, The New Industrial
  Organization Market Forces and Strategic
  Behaviour, Cambridge, Mass., MIT Press.
• Mosconi F. 2006, The Age of European
  Champions A New Chance for EU Industrial
  Policy, forthcoming in The European Union
  Review, N. 1/2006.

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• Pisani-Ferry J. 2005, Speeding up European
  Reform A Master Plan for the Lisbon Process,
  Munich Economic Summit (June), CESifo Forum,
  2/2005 Whats Wrong With Lisbon?
• Sapir A. (ed.) 2003a, An Agenda for a Growing
  Europe Making the EU Economic System Deliver,
  Report of an Independent High-Level Study Group
  established on the initiative of the President of
  the European Commission, Brussels.
• Sapir A. 2003b, Enlargement and the
  Competitiveness of European Industry, Paper
  presented at the 27th Italian National Conference
  on Industrial Policy and Economics, organised by
  Lindustria and the Faculty of Economics,
  University of Parma, 26-27 September.
• Sapir A. 2005, Globalisation and the Reform of
  European Social Models, Background document for
  the presentation at ECOFIN Informal Meeting in
  Manchester, 9 September.

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• Thank you for your attention!
• Homepage
• www.cattedramonnet-mosconi.org
• E-mail
• franco.mosconi_at_unipr.it