Industrial policy Why How Examples EU Industrial Policy

Industrial policy Why? How? Examples: EU Industrial Policy and Swedish Industrial Policy Sources www. europa. eu. int/pol/index-en. htm www. naring. regeringen. se/inenglish www. isa. se Ari Kokko

Why now? u GATT and regional integration mean that trade policy instruments cannot be used to promote domestic industry u Changes in the international monetary system limit the scope for active foreign exchange policy u Industry localization more variable than ever before u When market outcomes are not satisfactory, industrial policy is what remains Ari Kokko

What is industrial policy? u Broad definition - targetted taxes and subsidies - competition policy - R&D and innovation policy - education - infrastructure - and much else Ari Kokko

European industrial policy u Challenges – tougher international competition: USA/Japan and Eastern Europe/Asia providing double squeeze – new technologies and faster technical progress – lingering unemployment – need for structural change – fragmented infrastructure in the Single Market – inappropriate institutional infrastructure: innovations, patents, entrepreneurship Ari Kokko

European industrial policy u General objectives – strengthening of the competitiveness of Community industry – generating new jobs u Specifically – retain technological leadership – achive economies of scale, technical efficiency, and competitive business climate Ari Kokko

European industrial policy u Framework – industrial policy decision to be taken at the national and regional level – common competition policy – coordination and horizontal measures in areas such as R&D, vocational training, social policy, networks, and foreign trade Ari Kokko

European industrial policy u Priorities – to promote intangible investment – to develop industrial cooperation – to ensure fair competition – to modernize public authorities Ari Kokko

European industrial policy u To promote intangible investment – tax incentives for training and learning – research collaboration schemes – harmonization and standards for new technologies – protection of intellectual and industrial property – provision of accurate economic data Ari Kokko

European industrial policy u To develop industrial cooperation – remove legal and fiscal obstacles – facilitate international information flows – reinforce favorable investment climate in partner countries (including investment guarantees) – support Eastern European industrial development – regional programs in Asia and Latin America Ari Kokko

European industrial policy u To ensure fair competition Externally – promote strengthening of GATT framework – establish international competition policy – develop preferential relations with trade partners Internally – common competition policy – reduce public subsidies – reduce physical investment bias in state aid – strengthen internal market infrastructure Ari Kokko

European industrial policy u To modernize public authorities – deregulation and administrative simplification – continued harmonization of national legislation – increased support for the establishment of industrial networks and clusters – promote diffusion of information and new technologies – establish trans-European networks for data interchange Ari Kokko

Swedish industrial policy u Activities in several overlapping fields – openness and deregulation – corporate governance, state ownership, and SMEs – education, training, and R&D – foreign direct investment – regional development – tourism, environment, social security Ari Kokko

Swedish industrial policy u Openness – reduce EU protection levels u Deregulation – horizontal programs to replace firm and sectorspecific intervention in manufacturing – deregulation of energy market – simplification of regulatory framework for business Ari Kokko

Swedish industrial policy u Corporate governance and state ownership – review of institutional ownership – privatization u Small business sector – provision of venture capital – review of tax rules for small business – access to information and marketing facilities – upgrading of skills and competence Ari Kokko

Swedish industrial policy u Innovation policy – emphasis on measures to facilitate technology diffusion – special IT programs – participation in EU programs u Education and training – higher output of science and technology graduates – appropriate incentives for investment in human capital and continuous upgrading of skills Ari Kokko

Swedish industrial policy u Foreign direct investment – investment promotion (Invest in Sweden Agency) u Regional development – approx. SEK 13 billion in EU funds for remote and sparsely populated areas 1995 -1999 – infrastructure and IT Ari Kokko

Swedish industrial policy u Tourism promotion u Environmental protection – green policies in legislation and public procurement – market opportunity for private sector? u Social security – strengthen work incentives u Baltic Sea region – Sweden as a bridge to the Baltic region? – promotion of regional cooperation and investment Ari Kokko