Opublikowano: 11/12/2024

The new European Commission, which began its 2024-2029 term on December 1, 2024, must address a range of challenges, such as restoring EU competitiveness and ensuring security. This requires a comprehensive approach that touches upon the foundations of the EU's economic and social policies. Industrial policy needs modern financial solutions, protection from disruptions to the single market, and support for production capacities. This calls for an active trade policy that expands market access, diversifies sources of raw materials, and simultaneously protects the domestic market from unfair competition. On the internal market, efforts to eliminate barriers in services must be accelerated, and regulatory harmonization between countries must be ensured—this is particularly crucial for the telecommunications sector. These and other policies require adequate funding, which means a bold EU budget that can support diverse directions to safeguard the European economic model. The Polish Economic Institute's report, "What Policies for a Secure and Competitive Europe? 10 Ideas for the European Commission," identifies 10 priority areas for the new European Commission along with recommended actions.

The European Union must increase higher financing in order to strengthen industrial competitiveness and adopt twin industrial approach – high-tech and strategic manufacturing capacity. The EU should compete with the US, China, and other global players in high-tech development while securing its share of world trade in goods. Although many innovative developments are occurring in services, industrial innovation boosts productivity (e.g., by reducing energy consumption) and reveals new frontiers and possibilities. Despite China’s rise as an industrial powerhouse, the EU’s exports of goods still account for more than 30% of its economy. However, manufacturing value added has declined to around 15% of GDP, while countries like South Korea and Japan maintain levels of 20% or higher, comments Marek Wąsiński, head of the world economy team at PEI.

The EU must continue to invest in 5G networks        

European telecom operators have lost their role as leaders of technological change to technology companies, platforms, and equipment manufacturers, almost all of which are based in the United States. The largest telecom companies worldwide (29 in total) spent a combined total of EUR 18 billion on R&D in 2022. In comparison, Google invested EUR 37 billion, Meta EUR 31 billion, Microsoft EUR 25.4 billion, and Apple EUR 24.6 billion in the same year. There are no European digital companies of that scale, or even close. Thus Europe is perceived as lacking innovation and falling behind in technological advancements.

In this context, the development of industrial 5G networks is particularly significant. Accelerating such solutions not only has the potential to strengthen the position of telecoms but also offers an opportunity for the advancement of European industry, enhancing competitiveness, and serving as a launchpad for the development of platforms operating on industrial (non-personal) data. This sector is not yet dominated and presents substantial opportunities for economic value.

Industrial policy actions in the telecommunications sector should aim to create new sources of revenue for traditional telecom operators while ensuring that the situation for consumers does not worsen. One effective strategy could be to support the development of industrial or campus 5G networks through demonstration activities, building awareness, promotional support, and grants. It’s important to note that today’s breakthrough innovations are increasingly emerging outside the traditional telecoms sector, where Europe significantly lags behind other regions. Thus, our focus should shift towards these areas to seek innovative solutions – points out Ignacy Święcicki, head of the digital economy team at PEI.

European Union must strengthen competitiveness of its industry

The EU once benefited significantly from free trade, but the peace dividend effect has come to an end. Although the EU was not the most innovative, it became a trade hegemon through its open and competitive single market. Consumers enjoyed lower prices, while businesses focused on their comparative advantages, particularly in the automotive sector and clean technologies. However, times have changed. Photovoltaic manufacturing has been almost entirely offshored to cheaper production in China, and the European automotive industry is struggling to survive the transition to post-fuel injection cars.

The EU’s dependency on fossil fuels, the need to replace Russian energy supplies, and its high regulatory standards have made European industries less competitive. In 2023, wholesale natural gas prices in the US were, on average, 79% lower than in the EU, electricity prices were over 59% lower, and oil prices were 6% lower. Additionally, a lack of cohesion in EU policies has led to a disorderly transition, neglecting the provision of a strong industrial foundation.

Diversification of trade relations is essential for economic security. It must remain a top priority for the European Union to reduce dependence on specific goods or raw materials, particularly those sourced from countries that do not prioritize stable relations with the EU. The EU also requires a reciprocity of concessions (and barriers), which stands out as the most effective solution. Thus a new approach to tariffs seems to be necessary. As emphasized by Mr. Draghi, the EU is strategically reshaping its trade policy to align with the evolving global landscape, where the once-dominant era of open world trade led by multilateral institutions is rapidly fading, says dr Bartosz Michalski, senior advisor in the world economy team at PEI.

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The Polish Economic Institute is a public economic think tank dating back to 1928. Its research primarily spans macroeconomics, energy and climate, foreign trade, economic foresight, the digital economy and behavioural economics. The Institute provides reports, analyses, and recommendations for key areas of the economy and social life in Poland, taking into account the international situation.

 Media contact:
Ewa Balicka-Sawiak
Press Officer
M: +48 727 427 918
E: ewa.balicka@pie.net.pl