Download Lecture 8: EU Competitiveness (1)

EU Competitiveness
(1)
The concept of competitiveness
• Controversies surrounding the concept of
regional, national or supranational economies
• Microeconomic definition of competitiveness
of enterprises
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–
–
–
–
–
Reduction of costs
Higher quality
Higher market share
Capacity to improve profits
Efficiency
POSITION RELATIVE TO COMPETITORS
The concept of competitiveness
• But:
– Trade is NOT a zero sum game!!!
• At macroeconomic level we look at the
presence of determinants to growth,
and ability to increase welfare
Definition
• D’Andrea Tyson (1984)
‘A nation’s competitiveness is the
degree to which it can, under free
and fair market conditions, produce
goods and services that meet the test
of international markets while
simultaneously expanding the real
income of its citizens’.
Definition
• D’Andrea Tyson (1984)
– Competitiveness at national level based on
superior productivity performance
– Competitiveness associated with higher
standards of living, employment
opportunities
– Competitiveness NOT about
maintaining trade equilibrium!
The 1990s
White Paper 1993
• White Paper on growth, competitiveness, and
employment
• Part A: The challenges and ways forward into the
21st century.
• Why this paper?
• © European Communities, 1995-2000
Why this White Paper ?
• “The one and only reason is unemployment.”
• “The difficult thing is knowing how to tackle it.”
Unemployment
• Unemployment in the EU averaged 10.6% of the
labour force in 1997
• = twice the rate in the US (4.9%) and three times
the rate in Japan (3.4%).
• the rate in the Union had shown an upward trend
since the mid-1970s.
Latest unemployment statistics
Source:
Eurostat,
2009
Source: Eurostat, 2009
The employment rate
• The employment rate in the Union in 1997 was
60.5%
• much the same as in the 15 years before
• rate in the US was 74% and in Japan, 74.6%, both
higher than at any time in the past
Latest employment rates
Source:
Eurostat,
2009
Source: Eurostat, 2009
No miracle cure available!
Neither:
– protectionism
– turning on the tap of government spending
– a generalized reduction in working hours
and job-sharing
– a drastic cut in wages and a pruning of
social protection
Over decades
• rate of growth had shrunk from
around 4% to around 2.5% a year
• unemployment had been steadily
rising
• investment ratio had fallen by five
percentage points
Over decades
• EU competitive position in relation to
the US and Japan had worsened as
regards:
–employment
–shares of export markets
–R&D and innovation and its
incorporation into new goods
–the development of new products.
Over recent periods
• While it is true that Europe has
changed, the world has changed too.
Europe’s problems
• the high level of unemployment
• Europe's poor record for job creation,
• investment,
• trade growth,
• product development,
• labour costs, and
• less tangible measures of
competitiveness.
Causes
• product and labour market
fragmentation,
• disruption caused by the necessary
restructuring of mature industries,
• *low competitiveness (relative to lowwage regions) in many sectors,
• *the relatively low levels of innovation
and entrepreneurial activity.
Advantages
• Europe's educated population,
• relative political and social stability,
• cultural and creative resources and,
• well-developed physical infra-structure,
• should provide an effective platform for
competitiveness and growth.
Ways forward
• A more competitive economy
–Drawing maximum benefit from the
single market
–The trans-European infrastructure
–Stepping up the research effort and
cooperation
2000
Why the Lisbon Agenda initiative?
EU growth still lagging behind US
Average annual growth 1994-99
4,00
3,50
3,00
%
2,50
2,00
1,50
1,00
0,50
0,00
Source:
EU -15
US
Labour productivity
European Commission
US
EU -15
GDP per capita
The Lisbon Agenda
The Lisbon European Council set an ambitious
goal to become
the world’s most competitive and
dynamic knowledge-based economy by
2010
Recent EU growth in comparative terms
Source:
Eurostat,
2009
The single market vs. The Lisbon Agenda
Sapir, 2003 (c)
EU Benchmarking
’Improving the competitiveness
of European industry depends
critically on identifying and
promoting examples of best
practice from around the globe.
We believe that benchmarking
offers a highly valuable and
effective means of doing this.'
Commissioner in charge of industry
What is Benchmarking?
Benchmarking has been defined as a
continuous, systematic process for
comparing performances of:
– organisations,
– functions,
– processes or economies,
– policies or sectors of business
What is Benchmarking?
• against the "best in the world",
• aiming not only to match those performance
levels, but to exceed them.
What is Benchmarking?
Benchmarking allows us to:
• analyse and improve key business processes,
• eliminate waste,
• improve performance, profitability and
market share.
What is Benchmarking?
The basic idea:
• Assess your own performance (using
performance indicators);
• Identify related best performances worldwide;
• Compare with your own practice;
What is Benchmarking?
• Make improvement plans to address the
gap;
• Implement the plans; and
• Monitor and evaluate the results.
What is Benchmarking?
In other words:
• benchmarking is a learning process to
identify and implement best practice.
Benchmarking levels
• With the ultimate objective of increasing
European competitiveness, the
Commission has been drawing attention
to benchmarking as a tool for
addressing the underlying reasons,
which impede the enhancement of
Europe's performance levels.
Benchmarking levels
• Three "levels" of application have been
identified:
– Company Benchmarking,
– Benchmarking of industrial sectors,
– Benchmarking of framework conditions or
systems.
Benchmarking levels
• It is industry driven and
competitiveness oriented, i.e. it serves
to improve the competitive performance
of enterprises, of industrial sectors, as
well as the environment in which
enterprises operate.
Company benchmarking
• A quality tool directed at continuous
improvement of management processes
in companies.
• At this level of application,
benchmarking is the prime responsibility
of firms themselves.
Benchmarking of industrial sectors
• A natural extension of company
benchmarking in that many of the same
principles can be applied to that set of
enterprises that make up an industry
and for which similar types of best
management practices are fundamental
for competitiveness.
Benchmarking of framework
conditions
• Applies to key elements of conditions
which affect the attractiveness of the
regions, the Member States and the EU
as places to do business, and which
affect the business environment in
which companies have to operate.
Framework conditions
• They relate to the environment in
which people work and enterprises
operate such as:
– factor costs,
– telecommunications and transport
structures,
– labour market regulations and costs,
– innovation and R&D,
– i.e. the environment, which directly
affects industrial competitiveness.
Framework conditions
• Benchmarking these framework conditions
enables the efficiency of public policies to be
evaluated and to identify the steps required
to improve them.
EU Initiatives
• In order to increase the contribution of
research and innovation policies to
sustainable growth and creation of
employment, benchmarking should
cover the areas of
•human capital,
•education,
•science,
•technology, and
•innovation.
BBC, Panorama: The
Battle for Europe