Manufacturing Europeâ??s future
edited by Reinhilde Veugelers Publication Launch 'Manufacturing Europe's Future' 'Industrial policy is back!â?? This is the message given in the European Commissionâ??s October 2012 communication on industrial policy (COM(2012) 582 final), which seeks to reverse the declining role of the manufacturing industry, and increase its share of European Union GDP from about 16 percent currently to above 20 percent. Historical evidence suggests that the goal is unlikely to be achieved. Manufacturingâ??s share of GDP has decreased around the world over the last 30 years. Paradoxically, this relative decline has been a reflection of manufacturingâ??s strength. Higher productivity growth in manufacturing than in the economy overall resulted in relative decline. A strategy to reverse this trend and move to an industrial share of above 20 percent might therefore risk undermining the original strength of industry â?? higher productivity growth. This Blueprint therefore takes a different approach. It starts by looking in depth into the manufacturing sector and how it is developing. It emphasises the extent to which European industry has become integrated with other parts of the economy, in particular with the increasingly specialised services sector, and how both sectors depend on each other. It convincingly argues that industrial activity is increasingly spread through global value chains. As a result, employment in the sector has increasingly become highly skilled, while those parts of production for which high skill levels are not needed have been shifted to regions with lower labour costs. But this splitting up of production is not driving the apparent manufacturing decline.Participation in global value chains within Europe is strongly EU-oriented with a central position for the EU15 and in particular Germany in EU manufacturing. This internationalisationof production has resulted in deeper integration of EU manufacturing,withmember states specialising in sectors according to their comparative advantage.It has therefore helped to raise productivity and growth. As a result, the foreign content of countriesâ?? exports has increased. Germany, in particular, has been able to benefit from the greater possibilities to outsource parts of production to central and eastern Europe and to emerging markets, and is in fact one of the countries with the smallest manufacturing share declines in the last 15 years. The Blueprint also highlights the importance of energy for the structure and specialisation of manufacturing. Capital-intensive manufacturing faces both urgent challenges and medium-term challenges. In the short-term, one of the most pressing problems is the fragmentation of financial markets in Europe,which undermines access to finance. This affects small to medium-sized firms in particular because they are the most dependent on bank credit. In some southern European countries, even the financing of working capital is endangered. It should therefore be a high priority for policymakers to fix Europeâ??s banking problems and create better functioning capital markets, including for venture capital. A second important conclusion is that, given the strong links between innovation,internationalisation and firm productivity, it is important to erase the dividing lines between industrial policy, single market policy, ICT policy and service sector policy. A highly integrated economic system needs a coherent set of policies that aim at improving business conditions everywhere. Attempts to promote one sector at the expense of another one are likely to result in significant inefficiencies and weaker overall growth. Governments are notoriously bad at picking winners. Instead, Europe needs policies that are conducive to a better business climate, less-burdensome regulations and the right framework conditions. Third, public policies need to be more supportive of industry and other parts of the economy. For example, the education system is of central importance for the economy and needs to be adapted to the needs of modern economies. The single market is important for both manufacturing and services and progress is needed to unleash its potential for growth. Reducing trade barriers is particularly important for industrial firms that increasingly rely in global value chains. Distortions in energy prices are also detrimental to industrial activity and should be avoided. â??Manufacturing Europeâ??s futureâ?? therefore means getting the policies right for firms to grow and prosper. It is not about picking one sector over another, but primarily about setting the right framework conditions for growth, innovation and jobs. Guntram Wolff, Director of Bruegel Brussels, September 2013
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004.
"Export versus FDI with Heterogeneous Firms,"
3229098, Harvard University Department of Economics.
- Michele Cincera & Reinhilde Veugelers, 2013.
"Young leading innovators and the EU's R&D intensity gap,"
Economics of Innovation and New Technology,
Taylor & Francis Journals, vol. 22(2), pages 177-198, March.
- Michele Cincera & Reinhilde Veugelers, 2013. "Young Leading Innovators and the EU’s R&D intensity gap," ULB Institutional Repository 2013/147096, ULB -- Universite Libre de Bruxelles.
- Barry Eichengreen., 1987.
"Real Exchange Rate Behavior under Alternative International Monetary Regimes: Interwar Evidence,"
Economics Working Papers
8755, University of California at Berkeley.
- Eichengreen, Barry, 1988. "Real exchange rate behavior under alternative international monetary regimes : Interwar evidence," European Economic Review, Elsevier, vol. 32(2-3), pages 363-371, March.
- Eichengreen, Barry, 1987. "Real Exchange Rate Behavior Under Alternative International Monetary Regimes: Interwar Evidence," Department of Economics, Working Paper Series qt0nh766xh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Nordås, Hildegunn Kyvik, 2010. "Trade in goods and services: Two sides of the same coin?," Economic Modelling, Elsevier, vol. 27(2), pages 496-506, March.
- Carlo Altomonte & Tommaso Aquilante, 2012. "The EU-EFIGE/Bruegel-Unicredit dataset," Working Papers 753, Bruegel.
- Haskel, J & Corrado, C & Jona-Lasinio, C & Iommi, M, 2012.
"Intangible capital and growth in advanced economies: measurement methods and comparative results,"
9913, Imperial College, London, Imperial College Business School.
- Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio & Massimiliano Iommi, 2012. "Intangible Capital and Growth in Advanced Economies: Measurement Methods and Comparative Results," Economics Program Working Papers 12-03, The Conference Board, Economics Program.
- Corrado, Carol & Haskel, Jonathan & Jona-Lasinio, Cecilia & Iommi, Massimiliano, 2012. "Intangible Capital and Growth in Advanced Economies: Measurement Methods and Comparative Results," IZA Discussion Papers 6733, Institute for the Study of Labor (IZA).
- Marc J. Melitz, 2003.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
Econometric Society, vol. 71(6), pages 1695-1725, November.
- Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
- Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
- Uppenberg, Kristian, 2011. "Economic growth in the US and the EU: a sectoral decomposition," EIB Papers 2/2011, European Investment Bank, Economics Department.
- Hans-Werner Sinn, 2006.
"The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle,"
The World Economy,
Wiley Blackwell, vol. 29(9), pages 1157-1175, 09.
- Hans-Werner Sinn, 2006. "The Pathological Export Boom and the Bazaar Effect - How to Solve the German Puzzle," CESifo Working Paper Series 1708, CESifo Group Munich.
- Sinn, Hans-Werner, 2006. "The pathological export boom and the bazaar effect: How to solve the German puzzle," Munich Reprints in Economics 19602, University of Munich, Department of Economics.
- Thierry Mayer & Gianmarco Ottaviano, 2008.
"The Happy Few: The Internationalisation of European Firms,"
Intereconomics: Review of European Economic Policy,
Springer, vol. 43(3), pages 135-148, May.
- Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12.
- Dirk Pilat & Agnès Cimper & Karsten Bjerring Olsen & Colin Webb, 2006. "The Changing Nature of Manufacturing in OECD Economies," OECD Science, Technology and Industry Working Papers 2006/9, OECD Publishing.
- Bagoulla, Corinne & Péridy, Nicolas, 2011. "Market access and the other determinants of North–South manufacturing location choice: An application to the Euro-Mediterranean area," Economic Systems, Elsevier, vol. 35(4), pages 537-561.
- Leo Sleuwaegen & Koen Backer, 2001. "Multinational firms, market integration, and trade structure: What remains of the standard-goods hypothesis?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(3), pages 379-403, September.
- David Hummels & Georg Schaur, 2012.
"Time as a Trade Barrier,"
NBER Working Papers
17758, National Bureau of Economic Research, Inc.
- Karina Fernandez-Stark & Penny Bamber & Gary Gereffi, 2011. "The offshore services value chain: upgrading trajectories in developing countries," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 4(1/2/3), pages 206-234.
- Lawrence Edwards & Robert Z. Lawrence, 2013. "Rising Tide: Is Growth in Emerging Economies Good for the United States?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5003, March.
- Bent Dalum & Keld Laursen & Gert Villumsen, 1998. "Structural Change in OECD Export Specialisation Patterns: de-specialisation and 'stickiness'," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(3), pages 423-443.
- Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1.
- Brülhart, Marius & Traeger, Rolf, 2003.
"An Account of Geographic Concentration Patterns in Europe,"
HWWA Discussion Papers
226, Hamburg Institute of International Economics (HWWA).
- Brulhart, Marius & Traeger, Rolf, 2005. "An account of geographic concentration patterns in Europe," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 597-624, November.
- Marius Brülhart, & Rolf Traeger, 2003. "An Account of Geographic Concentration Patterns in Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp02, IIIS.
- Marius Brülhart & Rolf Traeger, 2003. "An Account of Geographic Concentration Patterns in Europe," ERSA conference papers ersa03p473, European Regional Science Association.
- Marius BRÜLHART & Rolf TRAEGER, 2003. "An Account of Geographic Concentration Patterns in Europe," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 03.06, Université de Lausanne, Faculté des HEC, DEEP.
- Sébastien Miroudot & Rainer Lanz & Alexandros Ragoussis, 2009. "Trade in Intermediate Goods and Services," OECD Trade Policy Papers 93, OECD Publishing.
- Paul Krugman, 2009. "The Increasing Returns Revolution in Trade and Geography," American Economic Review, American Economic Association, vol. 99(3), pages 561-71, June.
- Facundo Piguillem & Loris Rubini, 2013.
"Barriers to Firm Growth in Open Economies,"
EIEF Working Papers Series
1304, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2013.
- Harrigan, James & Venables, Anthony J., 2006. "Timeliness and agglomeration," Journal of Urban Economics, Elsevier, vol. 59(2), pages 300-316, March.
- Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
- Koen De Backer & Norihiko Yamano, 2012. "International Comparative Evidence on Global Value Chains," OECD Science, Technology and Industry Working Papers 2012/3, OECD Publishing.
- Altomonte, C. & Di Mauro, F. & Ottaviano, G. & Rungi, A. & Vicard, V., 2012.
"Global Value Chains during the Great Trade Collapse: A Bullwhip Effect?,"
364, Banque de France.
- Carlo Altomonte & Filippo Di Mauro & Gianmarco I. P. Ottaviano & Armando Rungi & Vincent Vicard, 2012. "Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?," CEP Discussion Papers dp1131, Centre for Economic Performance, LSE.
- Altomonte, Carlo & di Mauro, Filippo & Ottaviano, Gianmarco & Rungi, Armando & Vicard, Vincent, 2012. "Global value chains during the great trade collapse: a bullwhip effect?," Working Paper Series 1412, European Central Bank.
- Carol Corrado & John Haltiwanger & Daniel Sichel, 2005. "Introduction to "Measuring Capital in the New Economy"," NBER Chapters, in: Measuring Capital in the New Economy, pages 1-10 National Bureau of Economic Research, Inc.
- De Backer, Koen & Miroudot, Sébastien, 2014.
"Mapping global value chains,"
Working Paper Series
1677, European Central Bank.
- Oecd, 2006. "Potential Impacts of International Sourcing on Different Occupation," OECD Digital Economy Papers 122, OECD Publishing.
- Sturgeon, Timothy J. & Van Biesebroeck, Johannes, 2010. "Effects of the crisis on the automotive industry in developing countries : a global value chain perspective," Policy Research Working Paper Series 5330, The World Bank.
- John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
- Krugman, Paul & Venables, Anthony J., 1996.
"Integration, specialization, and adjustment,"
European Economic Review,
Elsevier, vol. 40(3-5), pages 959-967, April.
- Carlo Altomonte & Tommaso Aquilante & Gianmarco Ottaviano, . "The triggers of competitiveness: The EFIGE cross-country report," Blueprints, Bruegel, number 738.
- Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536, March.
- GÃ¡bor BÃ©kÃ©s & LÃ¡szlÃ³ Halpern & MiklÃ³s Koren & BalÃ¡zs MurakÃ¶zy, . "Still standing: how European firms weathered the crisis - The third EFIGE policy report," Blueprints, Bruegel, number 661.
- Holton, Sarah & Lawless, Martina & McCann, Fergal, 2012. "Firm Credit in Europe: A Tale of Three Crises," Research Technical Papers 04/RT/12, Central Bank of Ireland.
- David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
- Harrigan, James, 2010.
"Airplanes and comparative advantage,"
Journal of International Economics,
Elsevier, vol. 82(2), pages 181-194, November.
- Paul Krugman, 2011. "The New Economic Geography, Now Middle-aged," Regional Studies, Taylor & Francis Journals, vol. 45(1), pages 1-7.
- Georg Zachmann, . "Electricity without borders: a plan to make the internal market work," Blueprints, Bruegel, number 791.
When requesting a correction, please mention this item's handle: RePEc:bre:bluprt:795. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruegel)
If references are entirely missing, you can add them using this form.