Protectionism is the wrong direction

The European Parliament has adopted a report on the European Commission”s proposed industrial strategy. We asked MEP Sara Skyttedal (EPP), who is a member of ITRE (Committee on Industry, Energy and Research), a few questions about how she views the report.

What do you think is particularly important in the European Parliament”s report, from a positive and negative perspective?

The texts concerning State Aid rules in the report were significantly better than I had expected. They emphasised that a review of State Aid rules must be based on an impact assessment on competitiveness and should take into account the effect of potential distortions and be compatible with the EU’s climate objectives. Unfortunately, there are other less positive issues with the report. There is a focus on moving value chains home that is too one-sided. Given the fragile state of world trade, such an approach could easily go wrong, weakening European competitiveness as a result.

How do you think the planned updated EU Industrial Strategy might affect Swedish companies?

It remains to be seen. Next year, the Commission will provide an updated version of the EU Industrial Strategy it presented in March of this year. The level of input that the Commission chooses to include from Parliament”s own-initiative report will, of course, be decisive. The Commission”s previously announced desire to ease State Aid rules permanently could - in a worst-case scenario – give the continent”s large companies an advantage, at the expense of Swedish competitiveness. We hope and believe that the Commission will not go that far.

Business in Europe, as in the rest of the world, has been hit hard by the Coronavirus pandemic. The European Commission has therefore announced that, in the spring of 2021, it will update the industrial strategy it presented in March 2020. What would you like to see more of in this updated strategy?

I would like to see an ongoing strengthening of the EU Single Market, and the removal of the barriers to trade that arose during the pandemic. These are the most important items. Then, of course, the question of production, notably for MedTech and healthcare, in times of crisis needs to be addressed, particularly given the ongoing tensions affecting world trade.

The pandemic has led to increased protectionist tendencies, with increasingly frequent talk of ‘taking home’ production from outside the EU. How do you view that? What would you like to see in terms of reforms for strengthening the business climate and competitiveness within EU Member States?

I think the tone reflects a general frustration over the expose of how vulnerable our societies have proved to be during the pandemic. Everything, from a lack of respirators and protective equipment to blocked transport and closed borders, was the result of society being unprepared for such a crisis. My message to my continental colleagues in the Committee on Industry, Energy and Research has been, and will continue to be, that it is possible to prepare our societies for crisis by other means than protectionist measures aimed at ‘taking home’ entire value chains.

A functioning internal market is one of the most important components of the EU, and in part the report focuses on increased support and grants and less on removing obstacles. How do you see the role of the EU Single Market in the Industrial Strategy and is the will to reform and deepen it sufficient?

Unfortunately, the report”s concerns over the nature of global value chains are not married with a sufficient willingness to address the barriers that have arisen in the EU Single Market. To focus unilaterally on external factors at a time when we know that products - such as personal protective equipment - did not emerge this spring as a result of a poorly functioning EU Single Market is peculiar to say the least. It is basically turning a blind eye to the EU”s own problems.

Trying to create more ”European champions”, i.e. more large European companies, by changing the EU”s competition rules is an approach that is often advocated by countries like France and Germany. Do you believe that EU competition rules need to be revised? If so, what risks and opportunities do you see in so doing?

Of course, there are major risks associated with revising EU competition rules, not least for smaller countries such as Sweden. France is pushing for an arrangement where some major continental corporations are allowed to benefit from State Aid. It would, for many reasons, represent an approach that would be highly negative for Sweden. We have benefited from the fact that our companies have been able to establish themselves and play on reasonable terms in other EU countries. This is something that risks being overcome through subsidised large companies. In addition, it will have negative consequences in the longer term, if the basic market mechanisms that drive and promote innovation and efficiency are undermined by the market becoming more concentrated in a few State-subsidised players.

How do you think the free trade issues are handled in this work? Something you want to see more or less of, or maybe something completely different?

I think the tone reflects a general frustration over how vulnerable our societies were shown to be during the pandemic. This has spilled over into protectionist stances enjoying a wider acceptance. This is unfortunate, and risks damaging Europe in the long term.