European Union Can be Masters of own Destiny

“Outsourcing Not the Issue” - Harney

The European Union needs “lighter regulation” of industry and business, and speedier decision-making “for those operating in a global market-place which is intensely competitive”, according to the Tánaiste and Minister for Enterprise, Trade and Employment, Mary Harney TD.

The Tánaiste was addressing a lunchtime press conference at Dromoland Castle, Co Clare, following a round table discussion between the EU Competitiveness Council and leading US and European business leaders. The agenda for the meeting included a discussion of the challenges facing European industry, particularly from lower-cost economies in the Far East, and the continuing productivity gap with the US.

The Tánaiste said the message from business leaders to the EU was that “outsourcing” to the Far East “is not the issue”. She added “We have got to concentrate on productivity growth and we have got to do business differently. Investment decisions will be influenced by the climate that exists in the European Union and particularly in the different member states. We have been urged this morning to be light on regulation and supportive of innovation. We can be masters of our own destiny.”

She added that the EU needed to agree issues such as the Community patent so that inventors can have, on a European basis, a single patent that protects their inventions. “The message very clearly this morning was that Europe has the potential to grow very successfully but only if we make the right decisions in terms of legislation. It’s within our own grasp. It’s not outside influences that are keeping Europe down; it is matters to do with the EU itself and the way decisions are made.

“We need much more speedy decision-making for those operating in a market place which is intensely competitive. Reference was made for example to what happened in California where well-meaning legislation over a period of 10 years transformed California from being the most successful state in the US to becoming number 49 out of 50. We were urged not to follow the Californian example, to legislate for the floor not the ceiling; in other words to legislate for minimum standards but not to seek to create a panacea for all our problems through legislation and regulation that can destroy investment and send jobs elsewhere”.

The Tánaiste said the number one priority for the EU had to be the issue of competitiveness. “We cannot enhance the living standards of people in Europe and reduce unemployment unless we are competitive. That means we have to be very mindful of legislation and regulation. For instance we have to complete the single market. There are so many barriers in Europe to doing business, particularly in the services sector, which accounts for 70% of the jobs and 70% of GDP. There is a directive on the table. We have to agree that very quickly.

“Likewise we need a Europe of innovation. The old model of comparative advantage based on factor productivity is inadequate to sustain Europe’s competitive position. Comparative advantage must come increasingly from our creativity and our ability to commercialise that creativity.

“The decision making processes make that very difficult. We were encouraged this morning to quickly agree the IGC and the new streamlined way of doing business. Particularly now, in an enlarged European Union of 25 members, it’s going to become increasingly difficult to get decisions in a speedy fashion.”

The Tánaiste said that the chief executive of Hewlett-Packard, Carly Fiorina, had made the point that companies and countries have to operate on a similar basis. “That means that they have to be mindful of competitiveness and able to make quick decisions, and they have to be able to operate in a flexible manner. We need to bring that flexibility and speed to the business of the European Union” she said.

Earlier, during the working session, the President and General Manager of GlaxoSmithKline Biologicals, Mr Jean Stephenne, said that from a business perspective the EU was regarded as “a hostile and turbulent environment”. There was little reward for innovation, little incentive for risk-taking, and over-complex legal procedures and regulatory processes. In addition there was a lack of widespread research and development collaboration, and fewer options for investment capital.

Mr Stephenne said the EU environment for the pharmaceutical industry included lengthy delays in market access for new products, a great disparity between the healthcare systems in different member states which would widen further after enlargement, and a negative public attitude to the industry.

Improving the R&D environment would require a new approach to the fragmented nature of European research systems and strengthened partnerships between the public and private sectors, he said. Apart from greater public sector investment in R&D, increased private sector involvement was required; public policy could help through investments such as targeted subsidies and tax incentives.

The EU also needed to simplify legal and regulatory procedures, creating “a common regulatory system that allows fast approval of new products”, and to ensure strong intellectual property rights and data exclusivity protection. Europe must create “an entrepreneurial, risk-taking environment” and health technology assessments that are “independent, transparent and scientifically robust”.

Mr Henri Thome of the French Bouygues Group, which employs 130,000 staff in 90 countries, said that without competition there was no incentive for companies to deliver best quality products and services at the lowest price. “Europe and its companies need an acknowledged competition regulatory legal framework, which is not always the case at national level, since competition law is not always implemented in all its dimensions”.

The liberalisation within the EU of some previously publicly-owned monopolies proved that competition law resulting from the European treaties was able to adapt and to supersede national regulations. “Nevertheless competition with historical public companies remains difficult in the liberalised sectors and the opening of new markets to private companies remains fragmentary and is biased by public aids. Competition law must apply, as a whole, in each member state” he said.

Dr Max Dietrich Kley, chairman and chief executive of Infineon (Germany), said the accelerated introduction of the EU patent was essential. “Every day lost to the ongoing disputes and arguments on this subject constitutes a further threat to valuable jobs. Europe also needs to assume a much more prominent role in the World Trade Organisation. Anti-dumping and anti-subsidy measures are important tools in maintaining the innovative gap, especially with respect to the Asian markets” he said.

The Tánaiste described the day’s proceedings as “an extremely useful and beneficial exchange of views and interaction between the business community and EU policy makers. The work of today’s sessions will help to inform and prioritise our future work in Brussels within the Competitiveness Council,” she said.

ENDS/ETE 1210a

Issued 26^th April, 2004.