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COMPETITIVENESS AND SUSTAINABILITY By Maria da Graça Carvalho Bureau of European Policy Advisors 1-Europe in a Globalised World The past 50 years have seen extraordinary progress for Europe. However challenges of globalisation and the competitive challenge from the United States and from the emerging economies such China and India has placed new threats to Europe. Five years ago the European Union launched an ambitious agenda for reform leading Europe to the most dynamic and competitive knowledge based economy in the world capable of sustainable economic growth with more and better jobs and great social cohesion, and respect the environment. Over the last year the Commission has been reviewing the progress made in the Lisbon Process. There is a general consensus that Europe is far from achieving the potential for change that the Lisbon strategy offers. Europe’s performance has diverged from our competitors in other parts of the world. Europe must reform and modernise its policies to preserve its values. European Union has almost 20 million unemployed people, an ageing population and youth social exclusion. Europe’s performance has diverged from that of our competitors in other parts of the world. Their productivity has grown faster and they have invested more in research and development. Global competition, particularly from Asia, has intensified with the fast economic growth of China, the research investments in China and the strong rise of the number of researchers in Science and Technologies in India and China. The EU is not closing the gap with the United States. R&D expenditure in the EU amounts only to 1.9% of GDP, compared to 2.7% in the US and 3.2% in Japan. In Europe only 21% of the working-age population has achieved tertiary education, significantly lower than in the US (38%), Canada (43%) or Japan (36%), as well as South Korea (26%). On higher education, EU countries spend on average just 1.1% of GDP, the same of Japan but far below Canada (2.5%), the US (2.7%) and South Korea (2.7%). This is almost entirely due to much lower investment levels from the private sector in Europe. Modernisation is essential to continue keep Europe’s historically high levels of prosperity, social cohesion, environmental protection and quality of life. This is why the Commission has proposed a new start for the Lisbon Strategy, focusing efforts in 1 lasting growth and creating more and better jobs setting priorities which will help the Union and the Member States to focus, such as: i) Making Europe a more attractive place to invest and work, ii) Knowledge and Innovation for growth, iii) Creating more and better jobs. In order to face the challenges of Globalisation, actions are urgent both at EU and Member States level such as: – Complete the internal market, including for services, telecoms, energy, and financial services. – Deliver more open and fairer markets. – Improve the regulatory environment at the EU level. – Open third country markets for European producers. – Agree the Financial Perspectives by the end of the year. – Improve European economic governance and strengthen the co-ordination of economic and social policies. – Implement the agreed structural reforms and policies within the renewed Lisbon Strategy for growth and jobs. – Raise employment rates and reduce unemployment. – Adapting pension, health and long-term care to meet changing needs. – Develop a long-term and coherent energy policy. – Direct more resources (both public and private) to education, training and skills. – Increase the public investment in R&D and Innovation and create the appropriate framework for the investment of the private sector in R&D and Innovation. 2-A Sustainable Road to Lisbon – the Environmental Policy Environmental protection and sustainable development are at the heart of the Commission's strategic programme. The renewed Lisbon Strategy aims to restore dynamic growth and jobs while respecting the environment emphasising actions that promote competitiveness, growth and jobs which mutually re-enforce the social cohesion and a healthy environment. This is embodied in the concept of Sustainable Development. The Commission’s Communication on the Lisbon Review confirms this commitment to sustainable development. The importance of eco-innovations is given particular attention, with recommendations for the promotion of clean technologies, energy efficiency and new and renewable energy. A strong environment policy contributes to EU competitiveness. Environment and environmental technologies contributes for growth. The EU has tremendous potential for clean technologies. The Commission’s priorities on the Environment are expressed in the 6th Environmental Action Programme which contains four priority areas: climate change, biodiversity, environment and health, and resource use. Seven thematic strategies on: sustainable resource use, waste pesticides, air quality, the marine environment, soil and the urban environment are complete or near completion. The thematic strategies represent a new integrated approach to environmental policy making. The Strategies work with themes, rather than single pollutants or specific economic activities with a 20-year perspective to ensure a predictable, stable framework. They are based on the review of existing environment policy, research and science, and stakeholder consultation. They simplify legislation and are a good example of Better Regulation. 2 The up-coming review of the Sustainable Development Strategy sets sustainable development at the core of EU policies. The renewed Lisbon strategy and the Sustainable Development Strategy integrate the economic, social and environmental dimensions of the Union. Both Strategies contribute to the sustainable growth and better living conditions of the present and future generations in Europe. 3-Climate Change European Commission has launched the Second European Climate Change Programme. The European Climate Change Programme-I was launched in 2000 and set out 42 measures to reduce greenhouse gas emissions. The result of these actions is an estimated reduction in the EU’s emissions of greenhouse gases by at least 350 million tonnes which corresponds to the EU-15's Kyoto reduction target of minus 8%. With the Emissions Trading Scheme, the EU has created a new currency based on tonnes of CO2 and a new market - in emission allowances. The first experiences with emission trading are very successful and show the potential of other market-based mechanisms. The greenhouse gas emissions from the EU-25 are 5.5% below their level in 1990. But between 2002 and 2003 emissions increased by 1.5% .With current measures, the EU is estimated to achieve an overall reduction of 4.1% by 2008-2012, which is not enough. More effort will be required by all. The Second Programme will provide a new policy framework for EU climate change policy, with a scope and perspective beyond 2012. One of the first goals of the programme is to review the progress of the implementation of EU policies in the Member States. The Transport sector will have a special attention in the Second Programme. Transport emissions are 20% above their 1990 level. For example, the Commission has proposed that aviation should be incorporated into the EU Emissions Trading Scheme. The role of EU and its commitment to Climate Change issues has been fundamental to the world. Without the active commitment of Europe, the Kyoto Protocol would not have entered into force. The on-going conference of the Parties to the UN Convention on Climate Change in Montreal, bringing together 189 governments, will be an important event for the sustainable future of our planet. The EU’s objective is to achieve reductions to limit the global temperature increase to 2°C above the preindustrial level. Climate change is intimately related with Energy. Following the Hampton-Court meeting, the Commission is preparing a European Energy Policy. More energy efficiency, diversifying the energy sources, increasing renewable energy, measures to cut greenhouse gas emissions and reduce air pollution more investment on research, development and demonstration of Clean Energy Technologies are priorities for the Commission. 6-The Role of Research and Technology Development Europe is leader in several Clean Technologies. In order to keep this position a strong commitment to research and development is required both from the private and public sectors. Without technological development, Europe will not be able to fulfil the climate change and environmental targets. 3 Europe has faced in the last years, under funding of the research and higher education, outdated system of governance of the Universities and over bureaucratic administration of the research and education. The combination of these facts has led to the Brain drain phenomenon and the drain of research investments from Europe. The Commission and the Member States should, urgently promote an environment facilitating private investment in R&D, increase public investment in R&D, increase qualified human resources in Sciences and Technology, promote scientific employment and promote the reform of the Universities and the High Education system. Community funding to promote innovation and research activities represents only a small fraction of the overall European public effort. To compensate the lack of critical mass, national programmes need to increase their efficiency and complementarities, contributing to a fully integrated European Research and Innovation Area and consistently mobilising national funding in support of European research and innovation activities. Member States should be encouraged to increase the national investment in R&D and innovation. At Community level, the Research Framework Programme-FP7 and Competitiveness and Innovation Framework Programme-CIP are the main financial means and instruments to address the R&D and inovation. Member States should be invited to take full advantage of the Structural Funds and the European Agricultural Fund for Rural Development to strengthen and build strong research and innovation systems. Research, technological development, higher education, vocational training, and measures to create the appropriate framework for the private sector to invest in new and clean technologies have to be in the core of the public policies of the European Commission and Member States. Only with appropriate public policies and adequate investments in these areas, Europe will achieve growth and prosperity while ensuring a sustainable future. Maria da Graça Carvalho 4