One can raise the question to what extent the sum of 43 billion euros brought into play by the EU Commission actually contributes to closing the gap to the Asian and US competition. After all, the leading companies there invest in the capital-intensive chip sector as much in one year as Europe intends to bring together by the end of the decade. Nevertheless, the Chips Act is a welcome reversal in European industrial policy, which has rarely progressed beyond strategy papers.
The Commission should maintain its new industrial policy courage, because there is also a comparable need for action in other sectors. In many sectors, especially infrastructure, European companies are lagging behind their international competitors.
When it comes to telecommunications, long-distance rail transport and electricity and gas supply, European companies are hardly among the world leaders. The main reason: They often cannot take advantage of the opportunities offered by a single market with 450 million consumers – because of national egotism and an antiquated framework of competition law.
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The result is that companies in these areas are often not as profitable as their international competitors. This in turn inhibits the ability to initiate necessary investments in the infrastructure of the future. Per capita investment in digital infrastructure by US telcos is twice as high as in the EU. The result: the European infrastructure is steadily falling behind in an international comparison.
Market consolidation is required
However, digitization, long-distance rail transport and energy infrastructure are precisely the sectors in which we must invest in order to achieve our ambitious climate and environmental goals. How to counter the problem? The first major regulatory barrier that needs to be removed is European competition law. Above all, what is needed here is a rethinking of the concept of the relevant market, which makes meaningful mergers possible.
In an integrated internal market, there need not be three or four competing telecoms or energy providers in every Member State. Real competition that benefits the customer would also be possible in many sectors with a handful of companies operating across Europe. However, unlike at present, European competition law must also enable such market consolidation.
In some cases, the world market is even the relevant reference value: in the long-discussed merger of the train divisions of Siemens and Alstom, for example, the EU Commission successfully prevented the emergence of a European world market leader. Their competition policy assessment was aimed solely at competition in the domestic market and completely ignored the situation on the world market, where Chinese competition is becoming ever stronger. That seems anachronistic.
Overcome national egoism
The second major obstacle is national selfishness, which prevents genuine integration of important markets. Even where the technical prerequisites for deeper market integration already exist, far too little is happening. The responsible national regulatory authorities often put the brakes on – usually with implicit or even explicit approval of the policy that seals off national markets in favor of domestic industry.
That is also the reason why, despite several gas, energy and rail packages, all aimed at creating a genuine European market, we have made little progress for years. It will also not help if we make the Federal Network Agency more politically independent in Germany thanks to the case law of the European Court of Justice, but continue to hang the sister authorities in France and Italy on a short political leash and pursue market fragmentation.
If you really want to make progress with gradual market integration, we need European regulatory authorities with real rights to intervene right down to individual companies. The European Parliament has long been fighting for such a European approach, but the Member States have always been on the brakes. It is time that the European Commission also recognized the signs of the times and set the course for a better integrated internal market with more competitive companies in the interests of an active industrial policy.
Investment volumes in the hundreds of billions
For all its shortcomings, the Chips Act proposal shows what is possible given the right political will. In addition to a lack of political will, there is still no overarching industrial policy strategy whose elements interlock. The Commission cannot, on the one hand, philosophize about competitiveness and strategic autonomy in its strategy papers and, on the other hand, threw a new hand in the European economy’s legs every week.
One thing is clear: If the lofty goals from the “Green Deal” to the “digital decade” are to become reality, investment volumes in the three-digit billion range will be necessary in the coming years. In view of the poor budgetary situation in most EU member states in the wake of Corona, it is clear that the noble goals cannot be achieved primarily with public funds. Rather, the private sector has to shoulder the lion’s share. In order for this to succeed, we must no longer leave our companies out in the rain.
If you look at the Commission’s proposals over the past few months, you get the impression that the “Fit for 55” climate policy package, the tightened state aid rules for energy-intensive companies and new reporting obligations are nothing more than a stressful marathon from the business perspective. This is particularly true with regard to the competitiveness of European companies in international competition, because even a well-intentioned CO2 border adjustment mechanism will not be able to solve this problem – provided that it can be brought into line with the rules of the World Trade Organization at all.
This will certainly not put European industry in a position to master the challenges of the future. In European industrial policy we need a rethink and a clear master plan. As was the case with the Chips Act, it must be ensured that regulation and competition law mesh.
The author: Markus Ferber is economic policy spokesman for the EPP Group in the European Parliament.
More: How the EU wants to bring modern semiconductor factories to Europe.