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24.09.2019

THE EU IS ALIVE - NOW IT IS TIME TO DELIVER

The next European Commission will focus on topics such as the climate and a strong economic policy. This is an opportunity for mechanical engineering, but the industry must ensure that its views are taken into account by lawmakers.

By Holger Kunze

A solid EU single market with less bureaucracy, well-balanced climate and environmental policies, a trade agenda that creates access to new markets for European companies: There is a long list of requirements that the mechanical engineering industry expects the new European Commission to meet over the next five years. With Ursula von der Leyen and her team, the Commission will gain a new leadership widely backed by Member States and therefore powerful enough to push forward an ambitious political agenda. However, it is questionable at the very least as to whether the results will always match the ideas of industry.

To start with the positive aspect: the European project is much more alive today than many people suspected just a few months ago. After the election in May, it looked like the EU would run into a severe institutional crisis, particularly in light of the struggles Parliament and Member States faced when finding a compromise on a nominee for the Commission’s top job.

The power struggle had the potential to interrupt European politics for many months, a scenario which was able to be avoided, however.  When von der Leyen takes over her new post on 1 November, it will be yet more proof that when subjected to sufficient pressure, the European Union is still able to find solutions. After years in crisis mode, and despite the strong results of EU-sceptic parties in this year's European election, this in itself is a ray of hope.

Our export-driven industry, one which increasingly relies on decisions made on a European rather than on a national level, needs an EU capable of action. Trade is just one example for that; here the EU is responsible for both the exchange of goods within the single market, as well as for the upkeep of trade relations with difficult partners such as the US or China. Another field is the increased importance placed on climate protection, which itself is an area where finding international solutions to prevent market distortion is crucial.

A very green agenda

It has already become clear that von der Leyen has the ambition to use her political credit to shape the future of Europe according to her own ideas. One of the first things the 60-year-old announced was her desire to form a gender-balanced group of Commissioners, and on 10 September, she presented her new team to the public. Consisting of 14 men and 12 women, her selection shows that even though this is just a small detail at the beginning of her tenure, von der Leyen is indeed able to keep her promises.

And she has made quite a few promises. A core component of her agenda is labelled the "Green Deal", a plan which contains targets including climate neutrality by 2050 and a new circular economy action plan. That Frans Timmermans, arguably the most powerful Commissioner in von der Leyen's team, will be in charge of implementing the Green Deal, simply underlines the Commission's stance on this issue and its determination to act on its promises.

For mechanical engineering companies, this plan may represent an opportunity, with companies which develop efficient technologies potentially benefitting from the course set out by the EU. For many years, VDMA has argued that mechanical engineering and its innovations are the key to a modern production in Europe. If policymakers are able to understand this connection and are willing to work together constructively with industry, von der Leyen's Green Deal may actually result in benefitting both to society and the economy.

However, it is foreseeable that not everything on the climate and environmental agenda will be to the liking of all European companies. In particular, the idea of using trade agreements determined by the EU which obligate third countries to comply with higher standards concerning the climate, environment or the protection of the workforce, may not be met with resounding support. In certain cases, this may even jeopardize the trade agenda which European companies rely on - a very real risk which can clearly be seen in the current debate on the suspension of the Mercosur agreement.

More intervention expected

Another trend that may become ever more apparent over the next five years is the development of an industry strategy in which politics play a crucial, determinating role, instead of just the will of the free market. For several months, the EU has been discussing whether the Union should support the creation of European champions to counter competition, particularly that emerging from China. The discussions were triggered by the proposed merger of Siemens and Alstom to form a huge European train supplier, a merger which was eventually blocked by the Commission due to conflicts regarding the current European competition legislation.

And the proposal of European champions is not closed as it will return to the table in the foreseeable future. Commissioner Margrethe Vestager, the other heavyweight in von der Leyen's team alongside Timmermans, will keep the Competition portfolio, while also becoming responsible for the digital agenda of the Commission. A debate on whether EU competition law needs reviewing in light of the goal to support Europe's strategic interests is likely to come.

Another issue is how Europe will handle Chinese companies which are forcing their way onto the European market. The previous Commission had already taken initial steps towards a stronger control of foreign investments on a European level. This first step may be supported under von der Leyen's lead by limiting access to public procurement markets for foreign companies. The buzzword "reciprocity" will be a key part of the political discussions to come.

The issue once again is that the course laid out by the Commission may not be in line with the industry’s preferences. On the one hand, it is commendable that Europe wants to promote its industry. On the other hand, the creation of European champions, for example, may come at the expense of smaller companies that may face disadvantages in the single market, while critics argue that a protectionist response to China's state-driven economy is not a path Europe should pursue.

Industry must take action

So how should the industrial sector deal with a strong Commission, and one which has a clear political agenda? There are two key factors which will help to ensure that the next legislative period benefits both society and economy on a European level. The industrial sector must be more active and committed in explaining its views and needs to both policymakers s and the public in general. In addition, companies must be aware of the bigger picture, namely that industry needs a strong EU and a Commission able to act and to address the challenges of our times, even in light of different interests.

By being in constant contact with politicians and institutions on both national and European level, VDMA has already begun working on the former issue. In addition to this, efforts by the industry and individual companies to get engaged in European politics is always helpful. The EU is becoming ever more important for our sector, and the Commission has the desire and power to shape the industrial landscape - if industry does not make its views heard, the landscape will be created without consideration for them.

The second issue means that industry needs to find and maintain a constructive way to collaborate with lawmakers on a European level. In order to protect and strengthen the single market and to succeed with a balanced climate action and an ambitious trade agenda, the way forward is not to say 'no' to Europe and its next Commission. It should rather be 'yes, but…'. Even if some European initiatives might not be to the taste of industry - a strong and forward-looking EU certainly is.

Further Information

VDMA European Office

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Contact
Holger Kunze, VDMA European Office.