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Vulcan Insight | A new industrial strategy to make the EU more crisis-proof

On Wednesday, European Commission Vice-Presidents Valdis Dombrovskis and Margrethe Vestager, joined by Internal Market Commissioner Thierry Breton presented an update to the Commission’s Industrial Strategy which had been adopted shortly before the coronavirus crisis hit the continent. It is intended to boost the EU’s economic recovery and counteract various technological and industrial dependencies towards Asia and North America, which had proved to be a significant problem during the health crisis.   

With this strategy, the Commission aims to continue developing a more effective industrial policy and intervene more actively in the market. This involves targeted state support for specific industries to keep or re-shore production to the EU. Breton announced that the real industrial revolution is starting nowprovided we make the right investments in key technologies and set the right framework conditions.

In its preparation, the Commission reviewed 5,200 imported products, ranging from intermediate products to raw materials, considering the 27-bloc’s dependency. According to the assessment, it found dependencies with 137, almost half of which originating in China, followed by Vietnam and Brazil. However, the over-dependence appears to only be “problematic” for 34 products (0.6% of the EU’s total import value of goods), as they offer little opportunity for diversification or substitution. According to the Commission, the task of reducing these dependencies is, in most cases, best left to the market, while for strategically important areas, the Commission will consider proposing adequate legislation. 

After the detailed analysis, concrete measures will follow, which could include securing and diversifying supply chains through additional trade partners, increasing strategic stockpiles or producing more domestically. In some areas, such as battery cells, hydrogen or cloud services, EU Member States are already joining forces through cross-border industrial alliances, subject to less stringent caps on EU state aid rules.

In addition, the Commission commits to proposing an emergency instrument for the SingleMarket as a structural solution to ensure the free movement of goods and services in the event of future crises to ensure greater transparency and solidarity, while helping address critical product shortages by speeding up availability and strengthening cooperation on public procurement.

The Commission’s new Industrial Strategy also responds to calls to identify and monitor key indicators of the EU’s economic competitiveness as a whole, with it addressing marketintegration, productivity growth, international competitiveness, public and private investment and investment in research and development. The SME dimension is at the heart of the updated strategy, including tailored financial support and measures to enable SMEs and start-ups to engage in the double transition towards a green and digital economy.

Compliments of Vulcan Consulting – a member of the EACCNY.