The Coherence of EC Policies on Trade, Competition and Industry

This paper assesses the coherence between industrial policy, competition policy and trade policy in the European Union (EU). This assessment is undertaken from the perspective of the optimal deployment of economic policies as prescribed by economic analysis and takes into consideration the legal mandate and the institutional constraints imposed by EU treaties and regulations. The analysis shows that as a result of the limited policy tools available to the Union, trade and competition policies have to fulfil several competing goals. This multiplicity of objectives leads to non-optimal interventions. Policy inconsistencies arise also between trade/competition policies and the industrial policy of Member States. Current policy practice leads to inefficient outcomes both in mature and sunrise industries. These inefficiencies could be reduced with a reinforcement of integration policies (notably, state aid control). The paper argues that the current institutional arrangements allow for a strengthening of centralized industrial policy, however, which could be usefully utilized to achieve more efficient outcomes. Other policy conflicts, mostly between trade and competition policies, are also discussed.