Franco Mosconi

1. EU POLICY-MAKING, THE SINGLE MARKET AND EUROPEAN CHAMPIONS: TOWARDS A TAXONOMY Franco Mosconi • Università di Parma, Jean Monnet Chair in The Economics of European Industry,

2. Related literature: the rationale for Supranational champions • Seabright [2005] and his assessment of the «Airbus experience»: that it has been «a rather special case whose applicability to other project and sectors is fairly limited» due to the technological characteristics of the aerospace sector. • Sutton (1998, 2006) in some cases and sectors too low a concentration level cannot be an equilibrium or optimal solution and, despite an increase in the size of the market, the degree of concentration may remain far from zero • Gordon (1999) focuses on ICT as the engine for the growth of productivity in the US in early and mid 90s, where large shares of GDP are invested in R&D • Pisani-Ferry and Sapir (2006) The “Lisbon Strategy” aims at replicating this phenomenon to the EU

3. Related literature: the rationale for industrial policies • Jacquemin (1987): «there is a whole tide of research questioning whether the market alone can efficiently accomplish selections leading to new industrial organisations» • Rodrik (2004): «strategic cooperation between the private and the public sectors» … • Labory and Bianchi (2006): «Old-style industrial policies whereby the government directly intervened in markets, and was often the producer itself are no longer relevant. Structural changes occurring in economies – summarized in the term “globalization” – are triggering the definition and implementation of new industrial policies». • Krugman (1986) and his New Trade Theory suggest that for: • Strategic sectors • Sectors with increasing returns to scale • Policies can help in building a competitive advantage

4. The problem at issue European Champions vs. National Champions type I: the Airbus model supranational cooperation and concerted public policy support for the development of technology in “strategic sectors”. Can the Airbus experience be replicated? type II: the “single market” model result of consecutives mergers and acquisitions waves driven by the market How to enhance the emergence of this type of European Champions? products of a competitive market products of Goverments’ “picking the winners” policy

5. The European industrial policy: a bit of history 1970s and 1980s: political and social goals • direct aid to certain industrial sector (e.g., the steel industry) or specific firms • “picking the winners” policy 1990s: new industrial policy approach (Bangemann Comm.) • to create condition to thrive and develop, for all business • “level playing fields” approach 2002 - 2005: re-emphasis to specific sectoral applications • joint consolidation of horizontal basis and vertical applications 70s / 80s 90s 2002 parading shift partially back why ?

6. Concerns about productivity and growth • not only US ahead in sectors that have the highest value added per head (especially, computers, semiconductors and the telecommunication equipment sectors) • but also deterioration in the EU relative position compared to the early 80s because of • insufficient innovative activity • insufficient R&D activity • weak diffusion of ICT weakness in the elements that foster economic growth and productivity growth

7. A new integrated industrial policy Whilst all policies are important, some have greater importance for some sectors than others (COM(2005)474, final, pp. 3-4) Source: EC, “Implementing the Community Lisbon Programme: A Policy Framework to Strengthen EU Manufacturing – Towards a More Integrated Approach for Industrial Policy”, COM(2005)474 final

8. competition policy commercial policy commercial policy technology policy technology policy The European Industrial Policy “Triangle” European Champions in the high technology sectors  from to Subject to: • supranational public and private cooperation in research and innovation • respect of the single market regime bearing in mind: • consistency between industrial policy and competition policy competition policy

9. a European “technology policy” What is required? Tools (two categories that overlap): • tools that facilitate communication and cooperation among stakeholders, and that provide general institutional support • European Technology Platforms (ETPs) • European Research Area (ERA) • tools that provide financial support and incentives for technology and innovation • 7th Framework Programme for Research, Technological Development and Demonstration Activities (FP7); around 52,2 bls for the period 2007-2013 • Joint Technology Initiatives (JTIs) Can these policy and tools help to replicate the Airbus experience?

10. How to proceed? Refocus the European technology policy Step 1: concentrate efforts on those sectors where: • “strategic cooperation between the private and the public sectors” is likely to emerge • mergers and clusters can lead to a better exploitation of economies of scale without limiting competition (“productive efficiency argument”)

11. Refocus the European technology policy How to proceed? Step 2: care of the level playing field (i.e., the single market) • Europe has 27,4% of the world leading 500 companies, and dominates in the banking sector, but … • It trails badly in two key sectors: high-tech and life sciences • Its share in the “triad” GDP is 44% There are margins for the growth of a more market-oriented variety of capitalism

12. The reshaping of the European market structure EC type II: mergers and acquisitions of a cross-border nature • In 2006, EU M&As worth $1,59 trillion, and since 2004 the value has almost tripled • Deals are getting bigger: in the first quarter of 2006 nine deals valued at more that $10 billion (as many as during 2002-2004) • Sector concerned: utilities and energy; telecommunications, defence; banks and other financial firms; pharmaceuticals and biotech … • … consistent with the sectors qualified as crucial by the Commission, and with those appearing from different rankings of top companies (e.g., FT, Fortune) • “Horizontal integrations” in order to exploit synergies • Transatlantic alliances are also in place • Role of the “Enlarged Europe” • Banks as European Champions type III ?

13. Summing up ….. European Champions type I European Champions type II European Champions type III ?

14. Thank you for your attention ! E-mail: franco.mosconi@unipr.it