Manufacturing or Servicing Europe s Future?

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Marilynn Matilda Gallagher
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1 Manufacturing r Servicing Eurpe s Future? Reinhilde Veugelers KULeuven, Senir Bruegel) See als Bruegel Blueprint n

2 Manufacturing r Servicing Eurpe s future The scene Industrial plicy is back n the table in Eurpe: DG ENTR Industrial Plicy (2012) starts frm the premise that Eurpe needs industry and sets ut a radmap fr reindustrializing Eurpe, with the aim t.. raising the share f industry in GDP frm the current level f arund 16% t as much as 20% in 2020 fllwing up with actin plans fr specific sectrs (Steel ). An assessment f what kind f EU industrial plicy is needed requires an understanding f the changing rle f manufacturing and services fr Eurpe s grwth

3 1) Manufacturing s cntributin in Eurpe is changing Trends and evidence Manufacturing cntributin t... Value added (2012) 15% Emplyment (2012) 14% Prductivity grwth* ( ) 60% Business R&D (2009) 65% Exprts (2009) 67% *Manufacturing cntributin t prductivity grwth in the ttal ecnmy, ex. agriculture. Surce: Bruegel based n Eurstat and OECD.

4 1) Manufacturing s cntributin t Eurpean ecnmy is changing Trends and evidence EU manufacturing represent currently abut 15% f Value Added, 14% f Emplyment A cntinued decline f manufacturing share in value added and emplyment in Eurpe, caused by: Decline in demand fr manufactured gds relative t services Labur saving technlgical prgress Trade effects, shifting t Asia The decline hlds acrss almst all manufacturing sectrs (crssing the high-tech/lw-tech divide) and all EU cuntries.

5 1) Manufacturing s cntributin t Eurpean ecnmy is changing Trends and evidence Manufacturing majr cntributin t Eurpean ecnmies is thrugh prductivity grwth and external cmpetitiveness: Manufacturing represents with its 15% f VA: 60% f prductivity grwth; 65% f R&D; 67% f exprts; A shift twards high value added activities A greater imprtance f innvative capacity, requiring a high quality human capital base with a well educated and trained wrkfrce. Grwing servitisatin f manufacturing activities This shift twards mre skill-, value- and service-intensive jbs hlds acrss all manufacturing sectrs, nt nly fr the high-tech sectrs.

6 1) Manufacturing s cntributin in Eurpe is changing Trends and evidence Manufacturing cntributin t... Value added (2012) 15% Emplyment (2012) 14% Prductivity grwth* ( ) 60% Business R&D (2009) 65% Exprts (2009) 67% *Manufacturing cntributin t prductivity grwth in the ttal ecnmy, ex. agriculture. Surce: Bruegel based n Eurstat and OECD.

7 1) Manufacturing s cntributin t Eurpean ecnmy is changing Trends and evidence Grwing servitisatin f manufacturing activities : why? And hw? Smiley curve The activities in the value chain fr prducing gds which are creating the value and allw fr value capture is shifting frm the manufacturing/assembly t the pre- and pst-prductin activities: pre=research, develp, design, prttyping; pst=custmer supprt, marketing; these are all service type f activities; Manufacturing firms are increasingly engaged in service activities In 2012, the share f service-related jbs in the manufacturing sectr was 42% fr the EU as a whle, and abve 30-40% fr mst f the Eurpean cuntries. In UK and France >50% Manufacturing firms are increasingly buying services as inputs On average, services make up abut 25% f all inputs bught by the EU manufacturing sectr. This share f services purchases by manufacturing is grwing in mst cuntries. It is highest in the UK at mre than 40 percent, similar t the US.

8 The bundaries between manufacturing and services are blurring Manufacturing s servitisatin : the Smile curve Surce: Bruegel based n OECD

9 2) GVCs Trends and evidence Manufacturing prductin cntinues t becme mre integrated within Glbal and Eurpean value chains : Participatin in Glbal Value Chains (GVCs) allws firms and cuntries t specialize in specific activities within the value chain; rather than t have t build sustainable cmpetitive psitins alng the whle line f activities needed t prduce gds Als firms that take an intermediate psitin in glbal value chain prducing specific cmpnents fr ther firms in the chain, cmmand higher prductivity premia, particularly when they can explit unique innvative capacities Eurpean firms participatin in GVCs is strngly EU riented: These Eurpean Value Chains (EVC) have resulted in a deeper integratin f EU manufacturing and has significantly benefitted the cmpetitiveness f the EU and individual member states in a glbal perspective. Firms invlved in EVC are nt disadvantaged relative t firms that develp mre glbal value chains.

10 Prviding the framewrk cnditins Plicies fr Eurpe s grwth The target shuld be making Eurpe an attractive place fr thse firm that d the high value added, high prductivity activities in the value chain fr prducing gds, based n unique innvative capabilities, and rganised in efficient GVCs. When put like this: manufacturing/services is an irrelevant distinctin Industrial plicy/enterprise plicy/innvatin plicy These firms can be fund in all sectrs and activities within the value chain fr prducts These activities are rich n value creatin and with the best scpe fr value capture, based n innvative capabilities; As these firms can be fund in all sectrs and activities, plicies shuld be hrizntal. This is a shared plicy agenda: EU instruments tgether with natinal/reginal specific plicy agenda Single market are majr EU instruments

11 The EU plicy agenda Plicies fr Eurpe s grwth Access t large, pen and intercnnected prduct markets Access t efficient supprting-services (transprt, telecm, finance, Access t specific skills and innvative capacity Furthering the Eurpean Research and Innvatin Area, eliminating barriers t the crss-brder and crsssectr transfer f skills, knwledge and ideas. Furthering the Eurpean Higher Educatin Area fr (pst-)graduate educatin Access t (cheap) energy by a fully efficient internal market fr energy Access t finance fr small and new firms that want t develp n wrld markets their ideas fr new innvative prducts. Addressing the fragility and the fragmentatin f the financial sectr in Eurpe, especially the risk-capital segments

12 New Industrial Plicy: Beynd Manufacturing Sectrs; A hrizntal plicy agenda Nevertheless needed: Market mnitring t assess (ptential) barriers Markets rather than classic sectrs r technlgies Including new emerging markets: prspective analysis Esp pivtal markets fr grwth: digital, finance, energy, bipharma 4/1/2014 Bruegel

Towards an EIT KIC on Added Value Manufacturing

Towards an EIT KIC on Added Value Manufacturing Twards an EIT KIC n Added Value Manufacturing Prf. Gerge Chryssluris Labratry fr Manufacturing Systems and Autmatin Department f Mechanical Engineering and Aernautics University f Patras, Greece Manufacturing