Innovation is the backbone of Europe’s capacity to export products and hence to support its economy. This is why any policy adopted by our decision makers should always take account of its impact on the ability to innovate, says Brian Ager, Secretary General at the European Round Table of Industrialists (ERT).
The Digital Post: How the global rise of protectionism with increasing adoption of trade restrictive measures, is playing out in Europe? How could it impact on Europe’s competitiveness in the innovation and digital sectors?
Brian Ager: Although protectionism is on the rise worldwide, it is not the silver bullet to address imbalances, as some argue. On the contrary, protectionism is likely to damage European economies.
The EU is a very open economy. While global markets have overall expanded over the last ten years, the EU remains the most important exporting region (in terms of goods and services combined). More than 30 million jobs in the EU depend on trade. Therefore market access, the elimination of trade and investment barriers and adherence to a rules-based global trading system are crucial to the competitiveness of the EU economy and to safeguard employment.
Protectionism may hamper international competition by limiting opportunities to invest abroad. Competition is however essential for economic and technological development, not only in manufacturing, but in particular in the services sector. The EU remains the biggest foreign investor globally and the biggest destination of FDI (although with a sharp decline over the last decade).
We also look forward to positive signals from the US, the most important trade partner for the EU, especially after the protectionist opinions expressed by President Trump. The transatlantic partnership should also include the digital arena. For example, the international free flow of data is a prerequisite for European industry to optimise global business operations through digital technologies.
Existing direct and indirect restrictions to the free flow of data, introduced by countries around the world, however tend to be unnecessarily protectionist and undermine the competitiveness and growth of European companies.
The digital economy is rapidly developing worldwide thanks to the many innovations made. However, we should remain aware that these innovations heavily rely on easy access to market, knowledge and capital – and are characterised by global value chains.
Take for instance micromechanical sensors invented and produced in Germany to equip cell-phones assembled in Asia and then distributed worldwide. From this perspective, the temptation of protectionism seems to go against the tide and put at risk countries that would take this route.
TDP: What are the main findings of your latest Benchmarking Report regarding Europe’s performance in innovation?
Brian Ager: The merits of this report is that it points out where the big key issues are, like the relatively slow pace of digitisation in Europe or the tough global competition in the innovation area. It also recognises that innovation is becoming a critical factor for competitiveness.
In addition, the Benchmarking Report emphasises the strengths of Europe and the EU in particular. For instance, the innovation performance is overall good, with some countries obviously more advanced than others.
Innovation is the backbone of our capacity to export products and hence to support our economy. This is why the report also highlights that policies should take account of their impact on the ability to innovate.
TDP: What are your main recommendations to Europe’s decision-makers as regards supporting Europe’s innovation and digital sectors?
Stimulating innovation and adoption of new technologies as the main driver of sustained economic growth in Europe. Evaluation of every legislation and policy measure with respect to its impact on innovation throughout the policymaking process. (Innovation Principle).
Strengthening of the internal market, in particular by completing the Digital Single Market.
Unleashing the benefits of digitisation by investing in digital infrastructure, key technologies and skills development; supported by a robust regulatory framework, covering security in cyberspace.
Enabling start-ups to scale up by boosting entrepreneurship, access to funding and cutting red tape.
Last but not least, ensuring access to foreign markets while maintaining a level playing field.
TDP: Is the Digital Single Market strategy delivering on its promises to boost Europe’s competitiveness in the digital sector?
Brian Ager: The construction of the Digital Single Market is a key example showing how European cooperation can bring benefits to all.
Europe should strive to achieve a global leadership role in the digital revolution by swiftly implementing an EU-wide harmonised framework, and by setting up standards for the Digital Single Market. This will boost the European economy, make it more competitive and create new jobs across all sectors.
Digitisation brings new opportunities for innovation and for the deployment of new technologies. Europe – as an innovation-driven economy – should grasp these opportunities and turn them into a real competitive advantage for its companies.
Progress made by the European Commission in delivering its Digital Single Market Strategy is a step in the right direction.
Picture credit: Andrew Stawarz
The Digital Single Market strategy is a step in the right direction but the Commission must speed up its implementation, says Brian Ager, secretary-general of the European Roundtable of Industrialists.
The Digital Post: What is your general opinion about the Digital Single Market Strategy?
Brian Ager: We thought that it was an important first step to get everybody behind a common approach, and I believe it was a good move. I think it’s important to get an orientation, to get it out there and see what the reactions are.
TDP: Do you think this strategy is enough business-friendly? Can it provide a sufficient conducive investment climate that will help Europe catch up with other markets in the digital sector?
BA: Only time will tell. To be fair, a few legislative proposals have been already presented. But for the rest, the Strategy is only a piece of paper that in itself is worthless: it’s what flows from that that will matter. It is now important that the Strategy is translated into a series of policy measures that are the right ones. Are they going to be implemented effectively? And are they going to be implemented in a coherent way across the whole of the Union? If you can tick those boxes, then you’re likely to see investment flow. But the Strategy in itself it doesn’t. Well, it is better to say that it will not automatically lead to investment.
TDP: Do you think that the Strategy may lead to over-regulation?
BA: I think it’s a possibility. But this must not happen, if we’re serious about digital economy, because if it does, then you strangle the digital potential of the whole continent. Another matter of concern is that the implementation is too slow.
TDP: A number of observers from outside Europe pointed out that Europe is using a punitive approach towards US internet success stories or internet companies. Some are even talking about “digital protectionism”.
BA: The Internet economy is global by definition: if you want to seize its opportunities you need to take a global approach for a global market. I can’t see how Europe could be protectionist, it wouldn’t work anyway.
TDP: What do you think of the European Commission’s plan on Industry 4.0?
BA: Our first reaction is that overall the plan is a good step in the right direction. But I can’t help but notice that it was presented almost one year since the digital single market strategy was unveiled. We need to speed up the entire process.
TDP: Many fear that Industry 4.0 will be a huge job killer.
BA: I don’t think it’s so much doom and gloom. We feel clearly it will lead to some job losses, but it should also lead to the creation of other jobs, because you’re switching the economy from one type of activity to another. To be sure, the development of Industry 4.0 will lead to a switch from more low-skilled jobs to more high-skilled jobs. This change brings us to another crucial point, that is the responsiveness of the education systems. An extra effort is needed to drive our students towards math, technology and science-related studies, including math, physics, engineering and computer science. Today the industry complains that it’s missing half a million ICT engineers, software engineers, even mainstream engineering. The problem can be addressed only if we start working from the basic education. As far as the exiting work employment is concerned, we need to think very hard about vocational training, lifelong learning, re-skilling, because things are going to come along faster and faster.
This is part of a series of interviews held during the conference "Digital Single Market: Bridging the Gap" organized by the British Chamber of Commerce in Belgium. The event featured keynote speeches from Commissioner Oettinger Juhan Lepassaar and Robert Madelin (EPSC). Other speakers included senior EU officials, parliamentarians, trade bodies and business leaders who discussed the future challenges for business in the areas of fintech, e-health and industry 4.0.
Picture credits: Matt