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  /  Event Reports   /  DG Calleja discusses European strategy for growth and jobs

DG Calleja discusses European strategy for growth and jobs

On 5 June, the ECCT arranged a Premium Event lunch featuring guest of honour and keynote speaker Daniel Calleja, Director-General of the European Commission's Directorate-General of Internal Market, Industry, Entrepreneurship and SMEs (DG Grow). In his address to ECCT members, DG Calleja spoke on the subject of the EU's agenda and strategy for growth, covering various trade aspects, internationalisation and the digital union, among other subjects. After his presentation he answered a number of questions raised by members. Calleja was in Taiwan as the leader of DG Grow's Mission for Growth to Taiwan from 3-5 June. The missions, several of which have already been completed in other countries prior to the Taiwan mission, are part of the European Commission's efforts to foster entrepreneurship and growth and support access to global markets for EU companies.

In his speech, Calleja began by saying that the Taiwan mission had been extremely successful given excellent meetings with senior government officials and discussions with organisations such as TAITRA, which is joining the Enterprise Europe Network (EEN). There were also important business to business exchanges that received favourable feedback from members of the delegation.

As a background introduction to his presentation Calleja noted that the global financial crisis has had a very negative effect in Europe. Not only were many jobs lost and many small and medium-sized enterprises (SMEs) failed but manufacturing output has not yet recovered to pre-crisis levels. Investment is not recovering in key sectors including transport equipment, machinery and construction. There has been some recovery in ICT but this has not been enough to address the serious problems of unemployment and the large imbalances in the macro-economic conditions in many countries.

Two of the major challenges facing the EU include weak demand and a lack of investment. Finance has not been sufficient in the real economy and there is not enough capital, particularly for innovative projects. In addition there are still a number of rigidities of a structural nature both in the labour markets and the services markets. These problems have slowed down investment and innovation. In order to change the situation, the Commission's conclusion is that the EU needs a policy for economic transformation that builds on its assets: technological know-how, an educated population and a single market of 500 million consumers. Business as usual will not deliver Europe from the crisis and a radical new way of doing things is needed.

In meeting the challenges facing Europe, industry will have a significant role to play given that 80% of the EU's exports are from the manufacturing sector and 80% of research and development in the private sector comes from industry while every job in industry has a knock-on effect of creating two to three other jobs. But there are three important issues to face if the EU is to increase its competitiveness: the EU has to facilitate its companies' integration in global value chains, modernize industry, both traditional and emerging sectors (such as creative industries), and create a business-friendly environment. Regulations in the past have been a source of a lot of red tape and the single market needs to enable innovative businesses. The EU does not yet have the right eco-system to nurture business.

The message of the new Commission, which took office on 1 November, has been clear that the Commission cannot do everything. For this reason President Juncker has decided on a set of 10 clear priorities. In order to focus on the priorities, 83 legislative proposals that had been under discussion were withdrawn.

The first priority is an investment plan for Europe to address the low level of investment compared to before the crisis. The second priority is to build a single digital market. The strategy to achieve this was unveiled in May this year. The plan does not just cover digital in the ICT sector but also the linkage between the digital and the physical world and the opportunities this can bring. All companies in Europe have embraced Industry 4.0 in order to improve efficiency.

The third priority is to create an energy union. 28 member states have overlapping and sometimes conflicting energy environments. There needs to be a consistent energy policy throughout the EU, increased competitiveness, secure supply and sustainability. This will require more coordination within the EU, more transparency in prices, fewer distortions from subsidies and a more integrated energy union.

The fourth priority is to improve the internal market for goods and services with a solid industrial base. There are still many barriers and obstacles while improvements are needed in market surveillance and research. DG Grow will be making some important proposals in this regard in the second half of the year. The Commission has set the objective of increasing the contribution of industry to GDP from 15% to 20% by the year 2020.

Other priorities affecting DG Grow are strengthening the monetary union and the euro, pursuing the Transatlantic Trade and Investment Partnership (TTIP) with the United States and trade deals other countries. The Commission also has four other priorities, not within the scope of DG Grow's remit: improving fundamental rights, migration policy, the EU's global presence, transparency and democratic dialogue.

Regarding the first priority, investment, President Juncker has initiated an investment fund for strategic investments which aims to mobilize €315 billion for investments by leveraging funds from the European Investment Bank (EIB) and the European Commission. While the plan initially received a skeptical response, given that Commission only pledged €26 billion of its own funds and would need a lot of additional funds from other parties, several countries have since supported the plan. Germany, France and Italy have each pledged €8 billion while Spain has pledged €5 billion. In addition, the European Parliament and Council have agreed to put in place a strategic fund, which will be managed professionally by the EIB, not politically driven. Funds will invest in infrastructure essential for modernisation (such as energy, broadband and transport). Besides mobilizing funds in Europe, the Commission is soliciting investments overseas to invest in areas such as transport, education, health and infrastructure or any other project that has an innovative element. Of the total funds, €75 billion will be set aside for SMEs.

Regarding progress on the other priority areas, proposals for the Capital Markets Union and Energy Union were released in February 2015, the proposal for the Digital Single Market in May 2015 while the Single Market for Goods and Services is pending later in the year.

Regarding capital markets, the problem is that 80% of financing in the EU comes from banks whereas in the US, a similar percentage comes from venture capital. The EU needs to diversity the sources of capital to get credit flowing to SMEs. As part of efforts to address this, the Commission has put in place a special programme for SMEs, the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) programme, which will run from 2014 to 2020 with a planned budget of €2.3bn.

Regarding the single digital market, Calleja said that unified standards can play an important role in reducing costs and barriers. The European system is consensus-driven and international and more and more countries are following European standards.

On the subject of data, Calleja referred to big data as new kind of raw material that is never depleted and gains in value the more it is recycled. He expressed the view that Europe needs to do more to make its policies towards big data more business-oriented because the potential of the Internet of Things depends on data to improve productivity and generate more business.

On the subject of regulatory reform, the Commission recognizes that regulations are needed but that they should not be an excessive burden. The Commission's objective therefore is not to eliminate regulation but to simplify it with a view towards reducing administrative burdens.

On the issue of trade deals, besides the TTIP, trade negotiations are ongoing with Japan and India.

In his closing remarks, Calleja said that Europe is perceived by much of the world as a rich region but this not so much because of material wealth but mostly because of its people, its knowledge and the solid democratic institutions it has developed. In the second half of the 20th century Europe overcame one of its most difficult periods and flourished. In Calleja's view, there is only one way for the future and that is more Europe – more Europe in terms of energy, digital, markets, a better Europe in terms of regulations and providing better opportunities for young people, SMEs and also a more open Europe for the rest of the world. "Europe will only survive if it is global and innovative and if it continues to protect its values, which remain the most important thing", he said. Europe needs to reform to maintain its position but the world also needs European leadership. This is possible with cooperation between member states and business, which together can bring more prosperity not only for EU citizens but also for the rest of the world, he concluded.

About the Missions for Growth
The Mission for Growth to Taiwan is the latest in a series of missions to various countries. The missions feature a series of high-level political and business meetings to discuss areas of mutual interest between the countries involved and the policies of DG Grow. The intention of the mission to Taiwan was to meet with key industry leaders, policymakers and local entrepreneurs with a view towards helping European companies, particularly SMEs, to operate internationally by exploiting business opportunities in Taiwan. In the mission to Taiwan DG Calleja was accompanied by a delegation of 60 representatives of business associations and entrepreneurs to discuss with Taiwanese entrepreneurs how to foster industrial cooperation and identify business opportunities in industry sectors including ICT and related services, electronics, green technology, environmental protection, energy and biotechnology.

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