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8 March 1993
Doc. 6791
1403-5/3/93-1-E
REPORT
on European industrial competitiveness
in a global context
(Rapporteur: Mr REHN,
Finland, Centre Party)
Summary
Improving industrial competitiveness - that is, the ability to produce goods and services that meet the requirements of international markets - will be one of the primary challenges facing Europe as it prepares to enter a new century characterised by intensive "competitive interdependence" among world regions. The degree to which Europe faces that task will go far to determine the prosperity of its people and nations, and the world role, economic as well as political, that it will be able to assume.
In order to preserve a strong industrial base ensuring prosperity across the different regions of Europe, it becomes essential to outline a coherent, comprehensive and long-term strategy for a "European policy for industry", which is general and neutral with regard to economic sectors and the nationality of companies. A particular priority will be to integrate as rapidly as possible central and eastern Europe into the European and world economic mainstream. Every effort must be made to open western markets to these countries and to assist them in their economic restructuring.
I. Draft resolution
1. Improving industrial competitiveness - that is, the ability to produce goods and services that meet the requirements of international markets - will be one of the primary challenges facing Europe as it prepares to enter a new century, to be characterised by intensive "competitive interdependence" among world regions. The degree to which Europe faces that task will go far to determine the prosperity of its people and nations, and the world role, economic as well as political, that it will be able to assume.
2. To preserve a strong industrial base ensuring prosperity across the different regions of Europe, it becomes essential to outline a coherent, comprehensive and long-term strategy for a "European policy for industry", which is general and neutral with regard to economic sectors and the nationality of companies.
3. The Assembly therefore calls on the governments of Council of Europe member states and on the European Community to bear the following priority areas in mind when shaping, jointly or individually, their policies for industry:
i. providing the best possible general environment for industry, in order to permit the most viable companies to prosper and compete on fair and equal terms both within individual countries, groups of countries, or worldwide;
ii. encouraging the permanent adaptation by all companies, big and small, to constantly changing economic, technological and market circumstances, rather than favouring a few selected major ones. Small and medium-sized companies are particularly important, since they are often highly dynamic, innovative and responsive as well as being a major source of new employment. This includes a legislative framework designed to promote good "corporate governance" providing both for efficiency and for high ethical standards in management vis-ā-vis employees, society and the environment;
iii. improving the efficiency of firms will increase productivity and competitiveness, but rationalisation can also result in more unemployment and higher social costs. All measures to increase efficiency should take this into consideration;
iv. continuously enhancing the quality of the workforce, since education and human resource development constitute the most critical components of long-term economic competitiveness. A good general education in schools (basic skills) and universities is of vital importance. Training programmes should focus on giving comprehensive assistance to workers' adjustment. These programmes should comprise retraining, job-search assistance and temporary income support. Co-operation between management and labour can play an important role in increasing the company's capacity to sustain profitability and higher real wages;
v. fighting the threatening anarchy in world trade through a strong GATT capable of setting, and having members respect, universal rules of competition in trade and investment. Such rules should also contribute to the protection of the environment, and defend more resolutely the trade and investment interests of developing nations and the countries of central and eastern Europe;
vi. integrating central and eastern Europe as rapidly as possible into the European and world economic mainstream considering the region's massive economic problems and rapidly increasing unemployment - not least because west European prosperity and stability otherwise risk foundering. Every effort must be made to open western markets to these countries and to assist them in their economic restructuring - even at the risk of domestic disadvantages, and a certain transitory protection of industry in central and wastern Europe;
vii. encouraging companies, by legislative and other measures, to engage more readily in the protection of the environment, and press for higher worldwide standards in this domain, thus ensuring that certain companies, countries or groups of countries are not placed at a competitive disadvantage internationally;
viii. refraining from increasing the overall burdens on European industry through legislation and regulations which put it at a competitive disadvantage vis-ā-vis other parts of the world.
II. Explanatory memorandum
by Mr REHN
Contents
Page
I. Introduction. A new economic world 4
II. What is competitiveness? 6
III. Towards a new concept of the competitiveness
of nations - and of Europe 9
IV. A "European industrial policy" or a
"European policy for industry"? 11
V. The case against protectionism 12
VI. The need to involve central and eastern Europe 12
VII. Environment protection 13
VIII. Concluding remarks
I. Introduction. A new economic world
1. The world is indeed becoming one - if not always politically (wars and friction among nations are alas still frequent), then at least economically. For decades now, world trade has grown by a steady 7% to 10% per year, considerably faster than world economic output as such. And foreign direct worldwide investment - sometimes referred to as the "neglected (but equally important) twin of trade" - increased by 30% annually between 1983 and 1989. The global stock of foreign direct investment is presently estimated to amount to around 1,7 trillion US dollars. In 1990, there were roughly 35 000 transnational corporations, with 147 000 affiliates.
2. During the 1980s, companies from the five major industrialised countries - France, Germany, Japan, the United Kingdom and the United States - spent more than 650 thousand million dollars on direct investment abroad, three-quarters of which stayed within the five themselves. By the end of 1989, companies from these countries owned nearly 1 trillion of direct investment assets abroad, 70% of which were acquired during the 1980s.
3. The 1980s also witnessed a large-scale financial revolution. During that decade the national boundaries of capital markets dissolved, and a truly global capital market started to emerge. For instance, during the past decade, the stock of international bank lending increased from 4% of the combined GNP in the OECD area to 44%.
4. Parallel to this the world is definitely shedding the vestiges of communism, both in its political and economic appearance. State ownership of the means of production is being hastily abandoned, not only in the former Soviet Union and in central Europe, but in the industrialised countries as well, with privatisation programmes that would have been unthinkable in, say, the 1970s. The "welfare state", constructed with such enthusiasm and patience in the 1960s and 1970s, not least in the Rapporteur's own country Finland, is now coming under increasing attack under the strain of tight state finances.
5. Finally, the end of the cold war has generated profound changes in the international system, rendering the economic underpinnings of (national) strength more relevant than before. Economic competition has become increasingly merciless, not only among countries, but also inside and between "country groupings" now taking shape in the world, in particular the famous "triad". The three parts of the "triad" are:
- Europe, that is, the Twelve of the European Community, the Seven of the European Free Trade Association and the rest of the continent which we hope will rapidly become integrated into the EC + EFTA European Economic Area;
- The United States, closely associated with Canada through a bilateral free trade agreement, and soon also with Mexico in the forthcoming North American Free Trade Association (NAFTA). (The treaty has been agreed to by, and will include, all three countries.)
- Japan, in close economic symbiosis with other countries in South-East Asia.
6. This economic struggle is not for territories, but rather for a lead in the key industries of the future, for market shares, for wealth. However, the battle is not clear-cut, because trade and the spread of multinational enterprise are such that no country, and none of the members of the "triad", can sever its links with the others without causing itself considerable damage.
7. In an era of "competitive interdependence", it therefore becomes important to recognise that Europe's and Japan's ascendance to global economic power status will require new forms of collective leadership (with the United States), so as to maintain a world economy that continues to be open and globally oriented - rather than divided into restrictive (and potentially hostile) blocs.
II. What is competitiveness?
8. Competitiveness at the company level may be defined as the ability to increase your share of the market for a given product or service, and still be able to exact a remunerative price for it; or, alternatively, to increase the price further without losing market share. Just as companies would wish to overcome competition by gaining a commanding market share where they can set the price at will (monopoly), so countries or groups of countries are engaged in a constant battle for economic leadership.
9. Turning for a moment to company strategy, there are four basic situations, from the "strong" to the "critically weak" set out in the following matrix. (Here the Rapporteur wishes warmly to thank OECD for the valuable stimulus it gave for the preparation of the present report during a visit he paid to its headquarters in Paris in March 1992):
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The "strong" market position The company can: 1. increase price while still 2. increasing market share (dominant market position) |
Vulnerable market position II The company can: 1. increase market share, but only if 2. price decreases |
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Vulnerable market position I The company can: 1. increase price, but only at the cost of 2. reduced market share |
The "critically weak" market position The company: 1. lowers price, yet 2. loses market share |
10. The "strong" market position would be the one that eg Japanese manufacturers of semi-conductors enjoy, for they have such a dominant role that they would be able, if they liked, to increase prices and at the same time reinforce their hold over the market. On the other hand, one is reminded of the "critically weak" position when one considers certain car manufacturers, who in spite of price cuts continuously lose market share due to a lack of confidence on the part of consumers. The "strong" position is normally due not only to technological superiority, but also to things like high quality of the product.
III. Towards a new concept of the competitiveness of nations - and of Europe
11. What is valid for companies is also valid, at aggregate level, for countries. In this respect, economic competitiveness can be defined as a nation's ability to produce goods and services that meet the test of international markets, while its citizens earn a standard of living that is both rising and sustainable over the longer run. There is, however, a functional difference between companies and nations that is significant here; namely, that "firms compete in industries, not nations", as the Harvard academic Michael Porter puts it.
12. Consequently, the concept of national competitiveness should be distinguished from the competitiveness of nations, implying that the nation as an entity cannot - and should not - compete in the world markets. Instead, the nation-state should take a good care of its "enabling functions", such as education and training, research and technology in order to provide the best possible economic environment for its companies and industries.
13. Countries which see their economy in crisis may try to correct the situation by short-term measures, such as restraining wage increases (thereby improving price competitiveness), modifying exchange rates through devaluation (thereby lowering the prices of exports, but raising those of imports), or fighting inflation through various means. Or, countries may take more long-term, strategic action by creating a more competitive climate in its industry, improving the quality of the workforce through education and professional training, or by stimulating science and research. This can be described as structural competitiveness.
14. On the basis of the preceding, one is tempted to conclude that competitiveness in today's world depends less on factor endowments (such as oil or natural resources) than on such things as the quality of education (both specialised and general), the creation and diffusion of new technology, resources reserved for investment (as opposed to consumption) and, not least, long-term company planning.
15. The previously mentioned Michael Porter maintains that : "The central goal of government policy toward the economy is to deploy a nation's resources (labour and capital) with high and rising levels of productivity. Productivity is the root cause of a nation's standard of living. To achieve productivity growth, an economy must be continually upgrading. This requires relentless improvement and innovation in existing industries, and the capacity to compete successfully in new industries." (From "Competitive Advantage of Nations", page 617).
16. However, the virtue of the permanent raising of productivity in present-day society has not gone unchallenged. One expert consulted during the elaboration of the present report, Professor Detlev Karsten of the University of Bonn, draws a distinction between the gains to be derived from productivity increases on the part of the individual company, and the consequences for society as a whole. If, for instance, productivity means greater output per man-hour, then more and more people risk becoming unemployed through rationalisation measures, at least if the overall national (or world) economy grows at a slower pace.
17. In a saturated world economy, such as the one we seem to have at present, those that still have a job will have to finance the social cost of providing for those who do not. If a country in this situation tries to export more through artificial measures (devaluation, subsidies) (often referred to as a "beggar-thy-neighbour" policy), the problem risks being exacerbated for other countries.
18. Professor Karsten therefore advocates a wider definition of productivity, so as to include both the employed and the unemployed. Otherwise the fewer and fewer companies that survive (and their employees) will have to pay more and more for the total cost to society of the ever larger number of the unemployed. He calls this a "rationality trap": what is logical at company level comes into conflict with the interests of society. And the conclusion is that the state may have to intervene in order to reduce or eliminate this conflict; for example by redistributing wealth at the expense of those with work by reducing the work week so as to spread out existing employment to more people (possibly with a corresponding reduction in pay), or stimulating exports (with the risks just mentioned). Several members of the Committee on Economic Affairs and Development coming from central and east European countries have highlighted the special relevance of the above to their region. The unemployment situation there, they maintain, is reaching proportions that could lead to a politically catastrophic situation.
19. Economic theory used to concentrate solely on comparative advantage, which was thought of as depending on "relative factor proportions or availabilities, under the assumption that all countries have access to the same production technology and differ only in their endowments of factors of production". However, present economic and business theories put much more weight on competitive advantage; in other words, they strongly emphasise the possibility of "creating comparative advantages" through continuous upgrading of the productivity of their economies, and relentless improvement and innovation of their industries.
20. Economic competitiveness is largely determined by national productivity. Productivity in turn depends on the stock and growth of physical capital, investment, human capital, relating directly to educational attainment and training, and technology which is driven critically by the ability of a society to innovate and respond dynamically to market opportunities.
21. Hence national investment is central. In turn, it is ultimately financed by national savings. Capital can be borrowed from abroad but only for a time and only at significant cost. National investment and savings are thus crucial for competitiveness. ( For instance, the United States has the lowest rates of saving and investment among the leading industrial nations. To compensate this, the United States has borrowed massively from the rest of the world - about $ 1 trillion over the past ten years. This borrowing converted the United States from the world's largest creditor to its largest debtor - with serious consequences for the American competitiveness.)
22. The Rapporteur believes that education is another critical ingredient of any national competitiveness strategy. A country is only as competitive as its human resources. (Japan, Korea and other East Asian countries that have created the most dramatic of the "economic miracles" in the post-war period have been able to do so, to an important degree, on the strength of rapid improvement in the education of their workforces. To enhance the quality of the workforce inter alia means to equip it with knowledge that is so general that it can be used in a variety of contexts. However, other types of education, in particular professional training, will increasingly have to be matched to actual requirements in the labour market, and be increasingly managerial in nature.
23. Human resource development, through greater cooperation between management and labour, can also play an important role in increasing the ability (at company level) to sustain profitability and higher real wages in the global market. Japanese and some European firms, and a growing number of United States companies, have demonstrated that "synergistic" labour-management relations can be an important source of productivity improvement and thus a significant ingredient for increased competitiveness.
24. Another priority area is "corporate governance". A nation's competitiveness ultimately rests on the quality, performance and cost of goods and services produced within its borders. This in turn places heavy emphasis on the nature and performance of companies there - whatever the mix of domestic and foreign ownership. The environment set for them by government policy is of critical importance to the above outcomes. The "governance" issue also relates eminently to the structure of corporate management: the role of board of directors, the relationship between them and management, the role of employees in management, the incentive systems on which compensation is based and the like..."Work ethic," for long a nearly banished term in our societies since it has evoked notions of discipline and "regimentation", may well be on its way back, and it is (still) strongly emphasised in the dynamic economies of South-East Asia. Various members of the Committee on Economic Affairs and Development have highlighted the need for a closer look at such "inner organisation" of companies, at least as far as the latter can be fostered through legislation.
25. Finally, another priority issue is trade policy. Trade is different from the previous issues because it relates indirectly rather than directly to productivity and the cost structure of the economy. It can nevertheless be extremely important. Some observers in fact view the trade balance as the best single proxy for a nation's international competitive position. The Rapporteur does not share that view because he believes that the ultimate test of a nation's competitiveness is the standard of living of its own population, to which external trade is a very crucial but only one contributing factor. In today's global economy, however, the trade balance provides an extremely valuable barometer of how a country is doing competitively - and whether it is earning its current standard of living.
26. What goes for an individual state is valid for Europe as well. The competitive advantage of Europe depends on its capacity to improve its "enabling functions" related to productivity, such as education, technology, investment and company planning. Moreover, it depends on the will of European nations to cooperate to achieve this objective.
27. A British member of the committee also sees countries' burden of social expenditure as significant in determining competitiveness. Europe, with its comparatively generous welfare systems, would by this reasoning lose out in industrial competitiveness to, say, South East Asia with its much less developed social security - just as the United States and Canada might risk losing employment to Mexico under the North American Free Trade Agreement (NAFTA). Your Rapporteur mentions this interesting observation without, however, wishing to go into the complicated and politically sensitive discussion as to how or by how much the present-day welfare society might have to be trimmed to permit better state finances or industrial competitiveness. This is especially so since other members of the committee believe that society should not be concerned only with competitiveness per se, but also with ensuring its social obligations, even if competitiveness were thereby to suffer. Indeed, your Rapporteur wishes to emphasise that competitive and efficient national systems of education, training, health care and other elements of the welfare infrastructure should not be regarded as a burden, but also as an asset in maintaining and upgrading industrial competitiveness. Moreover, as several members of the committee have observed, the political stability and social peace of countries depend not only on economic wealth (brought about by competitiveness), but also on social solidarity and cohesion.
IV. A "European industrial policy" or a "European policy for industry"?
28. If the ultimate goal for Europe is to preserve a strong industrial base ensuring prosperity across its regions, how can it best be realised? The main alternatives open to governments seem to be either to:
- provide the best possible general environment for industry, in order to allow the best parts of it to prosper and compete on fair and equal terms both inside a country or a group of countries or internationally, or;
- offer a mixture of subsidies and protection, especially in favour of big European (or national) companies in sectors considered "vital".
29. The reader will not be surprised to learn that this Rapporteur - coming as he does from a small country, Finland, which trades intensively with the rest of Europe and the world - is more in favour of the first of the above approaches. Such a policy believes in the permanent adaptation by all companies, big and small, to constantly changing economic, technological and market circumstances -rather than favouring a few big corporations which may then go "lazy" and prevent smaller companies from growing and taking their place. In other words, governments "should not pick industry winners, but should call the odds".
30. The approach also implies that small and medium-sized companies are particularly important, since they are often more dynamic, innovative and responsive than larger corporations, apart from being a major source of job creation. They should be encouraged, as should co-operation between them, to adapt to changes in the business environment through the previously mentioned "customisation", and to improve the quality of their management.
31. The approach believes in free trade observed and respected by all countries, hence the importance of successfully concluding the current GATT Uruguay Round. However, the question then becomes: how should Europe act if another partner of the "triad", such as Japan, engages in protectionism which favours its own producers in, say, cars or semi-conductors? Surely, the "playing field must be level", if the approach is to work.
32. The approach also sees Research and Development (R&D) as playing a vital role in anticipating and responding to change. But rather than give R&D funds to a few large individual companies, the approach favours support to what is known as "pre-competitive research", ie that which lies before commercialisation and which companies (especially small ones) would not otherwise have been able to engage in. Companies can then use the results of this more basic research and incorporate them in new products.
33. The discussion at present underway in the European Community is whether research aid should be wholly "horizontal", ie spread across all industries, or if it should be directed toward a few sectors where Europe is seen as "losing out" to Americans or the Japanese, such as cars and electronics. It will be recalled that research programmes such as ESPRIT (European Strategic Programme for Research in Information Technology) or Eureka have largely been success stories, involving a wide variety of companies from inside and outside the European Community.
34. The whole debate of European industrial competitiveness takes on special significance as the "Twelve" embark on the "1992" project of completing the European Community's internal market, and as the EC + EFTA (minus Switzerland which rejected the EEA agreement in a referendum) European Economic Area has cleared most legal hurdles towards its realisation. Surely therefore, no industrial policy based on protectionism is possible between the "Twelve" and the countries of EFTA. Nor is it possible between EEA members and the rest of Europe, for that would frustrate the economic growth of the latter and invite further threats to international stability. In fact, the EEA for the EFTA countries participating amounts almost to de facto European Community membership from the economic point of view. And the European Monetary Union (EMU), foreseen as part of the Maastricht draft Treaty on European Union, is likely to contribute to creating even more stable conditions for economic growth, trade and investment, whenever it may become a reality.
35. Finally, as regards technology policies, there appear to be three main types: (1) the "mission-oriented" or "top-down" approach, where the United States of America (for example NASA) or France have been among the most active; (2) the "diffusion-oriented" or "bottom-up" approach, mainly favoured by countries like Germany, Switzerland and Sweden; and (3) a mixture of the two approaches, where Japan springs to mind (the guiding role of the Ministry for International Trade and Investment (MITI) coupled with the contributions of individual companies).
36. In sum, what is advocated in this report is neither state planning ā la Colbert (the financial strategist under Louis XIV and the "father of French state capitalism"), nor laissez faire in its purest form, that is without any incitement efforts at all on the part of the State. Other countries in the world, for example Japan, do engage in rather strict "state capitalism", often coupled with protectionism, and it would be naive to believe that Europe could remain prosperous or competitive if it deprived itself of any stimulating role by governments. However, stimulation should in principle be neutral vis-ā-vis individual companies, and be directed at creating a general climate conducive to entrepreneurship, a skilled workforce and healthy competition. The present cracks in the economic facade of Japan (despite its large current account surplus) - such as the losses suffered by some of its major corporations or the suddenly not so commanding lead in the semi-conductor industry - may point to an inherent weakness in excessive state planning for industry.
V. The case against protectionism
37. Is, then, a protectionist industrial policy possible with regard to North America and South East Asia, especially Japan? Well, to the extent that flagrant protectionism is engaged in by countries in those regions, counter-measures may have to be contemplated. However, the effort should be to use the GATT multilateral trading system to the fullest, pressing for universal rules of competition in trade and investment. And the next GATT round should concentrate on giving real body to the concept of free trade, eg by doing away with various "voluntary export restraints", currently amounting to some 20% of world trade. Other efforts should be directed at having world trade contribute to, not detract from, environmental protection, and to defend more resolutely the trade interests of developing nations and countries of central and eastern Europe, in particular the access to the markets of industrialised countries. The "European policy for industry" advocated throughout this report - one that also shuns protectionism - is clearly that which best serves the interests of these groups of countries.
38. If Europe restricts imports of Japanese cars, it will find that Japanese producers set up plants in Europe in order to qualify as local producers. If some European countries then wish to include cars produced by Japanese subsidiaries in Europe within the so-called "Japanese quota", then countries which harbour these Japanese subsidiaries will object, since it would hurt employment not only in the plants themselves but also among numerous "local content" suppliers. Furthermore, how will European car makers react to the "quotas" on foreign imports? Will they use the "grace time" to improve their models, or will they rest on their laurels and try to raise prices instead, as happened in the United States? And are our ideas about Japanese car implants disturbed when we learn that for example Nissan-UK uses 80% "local content", as opposed to Ford and Vauxhall's 25% to 40%?
39. Finally, how will a Japanese car-making subsidiary develop over the years? Will it remain as "Japanese" as at the beginning, or will it become more "European", more loyal to its new "home country"? Will profits be repatriated or reinvested in Europe? If so, what is the real nationality of the company and will it differ in any meaningful way from, say, a Finnish company opening a subsidiary in France, or a British one in Spain? Are we in fact nearing a truly "global economy", where the access to technology on the part of a country or group of countries is more important than actual ownership of companies per se; where multinationals become "citizens of the world" with multiple allegiances, rather than subjected to a particular national political or commercial strategy?
VI. The need to involve central and eastern Europe
40. As the Committee on Economic Affairs and Development has pointed out on numerous occasions, west European prosperity will not last unless central and eastern Europe are able to join in it. Every effort must therefore be made to open western markets to them, and to assist them in their economic restructuring. Since this subject has been dealt with in numerous previous reports, such as Resolution 955 (1991) on "Economic reform in central and eastern Europe: A challenge for all Europe", it need not be dealt with at length in this context (but see paragraphs 16-18). Suffice it to say that the committee will organise, in Helsinki from 2 to 4 June 1993, a follow-up conference (to the one held in Budapest in 1990) on the theme "Progress of economic reform in central and eastern Europe: lessons and prospects", where the issue of industrial competitiveness will receive due attention.
VII. Environment protection
41. Economic development cannot be achieved any longer by ignoring ecologically sustainable development. Consequently, economic and environmental policies must be clearly integrated in the future. As our environment becomes increasingly threatened, society's demand that companies take environmental concerns into account will grow stronger. Indeed, companies that do so will not only have a competitive advantage as they will be better able to meet stringent environmental laws, but they will also profit from an expanding market due to changing consumer preferences and new legislation. European industry could occupy a vanguard position in ecological production, and thus economically benefit from its farsightedness, if the challenge is taken seriously by companies.
42. Sustainable development does not mean zero economic growth. It represents growth within the bounds set by the need to maintain the "environmental capital", which requires changing the signals given to economic decision-makers. Changing these signals means changing prices and using the market. This has been documented in Article 16 of the Rio Declaration on Environment and Development, to which all the European nations have subscribed. The article reads: "National authorities should endeavour to promote the internalisation of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment".
43. Europe has to transform its social market economies into ecological market economies as well. For instance, European governments should speed up their work to enforce energy and carbon dioxide taxation, in which the European Community has a central role. The GATT mechanism should be made more active as regards environmental policy, in order to enforce internationally binding environmental regulations and avoid distortion of international trade and investment.
44. Moreover, research and development on a more ecologically sustainable technology and renewable energy should be encouraged through subsidies and grants. European technology policy, including such programmes as ESPRIT and Eureka, should be redirected according to these principles. Also, recycling should be encouraged through economic incentives.
45. However, the European Community and other European institutions should approach the issue on the basis of existing facts, and not on some imaginary considerations only for the sake of satisfying one's conscience. For instance, many countries face difficulties in their paper and pulp industries because of less than solidly founded recycling regulations, even though they have already invested a lot on behalf of the environment. The Rapporteur's own country, Finland, for example, cuts only 60% of the annual growth of its forests. It therefore, in this respect, contributes neither to global deforestation nor to global warming - quite the contrary. Still it may be severely punished because of the 50% to 60% minimum requirements of recycled paper in production, which Finnish companies will never be able to achieve, because the country exports 80% of its production. (Finnish companies ship recycled paper from central Europe - which might be economically possible but ecologically totally unreasonable.) Hence it should be ensured that national legislation or European Community Directives are not used as de facto barriers to trade against countries in similar situations, in the name of environmental protection.
VIII. Concluding remarks
46. Some people maintain that countries or continents, at least some of them, do regard industrial domination as a principal means for achieving political domination. According to this "neo-mercantilist"' approach, economic and business strategy is considered as a prolongation of diplomacy, just as war is considered as "diplomacy by other means". Consequently, it is argued, if Europe wants to retain its independence and pursue its own political destiny, it must be aware of this risk, and counteract by following a "European industrial policy" ensuring a certain European presence at home and in the world, at least in strategic sectors.
47. Others, however, see business as increasingly global and therefore "stateless", and managers as independent of national governments. Indeed, they consider that a new era has begun in which nations themselves do not seek domination over others but merely co-operation among equals ensuring prosperity at home and abroad. In this situation, they argue, a "European policy for industry" - general and neutral with regard to the nationality of companies - will do.
48. The present report advocates a "third approach": a "European policy for industry", which realises Europe's interest in maintaining and enhancing its importance on the world economic scene, but which is also in line with new realities: in particular the internationalisation of companies, the more and more rapid movement of capital, and the swift spread of new knowledge. It is the Rapporteur's hope that the Assembly will be able to adopt the draft resolution flowing from this belief. Such a policy would be very much in line with the proposals President Clinton is now making in order to revive the United States economy and enhance its competitiveness in the world.
Reporting committee: Committee on Economic Affairs and Development.
Budgetary implications for the Assembly: None.
Reference to committee: Doc. 6511 and Reference No. 1756 of 25 November 1991.
Draft resolution: Unanimously adopted by the committee on 2 March 1993.
Members of the committee: Mr Holtz (Chairman), Dame Peggy Fenner (Alternate: Lord Kirkhill), Mr Lotz (Vice-Chairmen), MM. Aarts, Auken, Becker, Gudmundur Bjarnason, Bloetzer, Bonnici, Brach, Brennan, Colombo, Davis, Demiralp, Mrs Durrieu, MM. Efraimoglou, Fabra, Flückiger, Garcia Sanchez, Gasperoni, Gassner, Goerens, Mrs Haglund, MM. Hellström (Alternate: Tarschys), Kempinaire, Kiliį, Kittelmann, Albrecht Konecny (Alternate: Gusenbauer), Koritzinsky, Le Grand, Lewandowski (Alternate: Wielowieyski), Mesoraca, Paire, Pinto, Pirinski, Rehn, Rodrigues, Rokofyllos, Schwimmer, Mrs von Teichman, MM. Townend, Valleix, Mrs Verspaget, Mr Wintgens.
NB: The names of those members who were present at the meeting are printed in italics.
Secretaries to the committee: Mr Torbiörn and Mr Mezei.