From Windmills to Semiconductors: A Dutch-led Debate on Industrial Policy

Ludovic Suttor-Sorel

Two weeks ago we met in The Hague for our third European Macro Policy Network (EMPN) conference, bringing together over 120 participants to address some of Europe’s most pressing challenges. The event, hosted by the Netherlands’ Ministry of Finance, looked at Europe’s investment needs, the threats facing its industries – and the quality jobs they bring – and how better European coordination of the industrial and energy transition could promote a more resilient economy. This newsletter captures the most important discussions.

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Founded in 2021 by the Future Department, the European Macro Policy Network (EMPN) aims to promote dialogue on fiscal, monetary and economic policies across Europe. The EMPN connects think tanks and research institutions from Germany, Sweden, France, the Netherlands, Austria, Italy and Finland. Led by experts with academic and ministerial experience, the EMPN serves as a platform to link national debates to broader European challenges and develop common proposals to improve Europe’s macro-financial framework for a more sustainable, prosperous and sovereign Europe.

As with our previous conferences in Rome and Vienna, the first day in The Hague was only open to EMPN members. It provided an opportunity to deepen relationships, share work updates, develop collaborative projects and strategize next steps for the network’s growth and impact. We would like to warmly thank our Dutch partners at the Instituut voor Publieke Economie (IPE), especially Jasper van Dijk, for their warm hospitality and facilitating productive discussions.

The second day focused on the resurgence of industrial policy amid geopolitical turmoil. Special thanks to the Ministry of Finance of the Netherlands for co-organizing and hosting this public conference. After welcoming speeches by Gijs van der Vlugt, Director of General Financial and Economic Policy at the Dutch Ministry of Finance, and Philippa Sigl-Glöckner, Managing Director of Dezernat Zukunft, the day began with a keynote by Daniel Gros, Director of the Institute for European Policymaking at Bocconi. University and CEPS director for decades. Slides can be found here.

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“Europe is caught between giants”

Daniel Gros emphasized that Europe’s focus on traditional industries such as mechanical engineering and the automotive industry has been lost trapped in a “mid-tech” position, where competition is getting tougher. While China uses subsidies and its huge domestic market to grow these mid-tech industries, the US dominates both raw materials (grains, shale gas and oil) and high-research and development-intensive sectors such as software and artificial intelligence, which generate high margins . Europe’s future, Gros argued, depends on the development of its industrial base – and the jobs that come with it – towards high-tech niche sectors.

Instead of subsidizing large, capital-intensive projects such as semiconductor factories, where China has a clear advantage due to its size and resources, Gros advised Europe to use its technical expertise High-tech products in small quantities. A prime example is the success of the Dutch company ASML, which holds a monopoly position in the semiconductor value chain by producing the world’s most advanced semiconductor manufacturing machines. ASML’s growth has been supported by decades of Dutch industrial policy, showing how strategic government support can strengthen global leadership.

To achieve this, Gros demanded improved EU innovation policyincluding strengthening the European Innovation Council and increasing the EU’s R&D&I budget. He also emphasized the need to reduce the costs of failure of high-tech companies, to facilitate access to and provision of high-risk capital, and to ensure that state aid supports both research and development and human capital development – ​​and not only the hardware. By focusing on high-tech sectors, Europe can move up the value chain and reduce its vulnerability to global pressures from China and the US.

“Europe lacks a long-term vision”

The subsequent panel discussion highlighted the need to increase European productivity – including through the development of new high-tech sectors -, promote innovation, reduce CO2 emissions and bring industrial policy back to the forefront of EU policy after years of neglect. to move the agenda. However, opinions differed about the best way forward. Addressing the decline of older industries was seen as crucial to maintaining public support for new innovation-oriented policies. A major criticism was Europe’s lack of long-term vision. While the EU’s economic security strategy focuses on “protection, promotion and partnership”, some panellists called for the addition of a fourth pillar – “planning”. This would mean Strategic support for industries with high potential such as digital and clean technology and high-tech manufacturing to drive sustainable growth.

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After lunch, Jasper Wesseling, Treasurer General at the Dutch Ministry of Finance, gave a keynote speech on the new Dutch approach to European industrial policy in response to global changes.

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“More state capacity is needed”

The second panel, chaired by Heleen Uijt De Haag from the Dutch Ministry of Finance, highlighted the need for coordinated European action to remain globally competitive in the transition to a low-carbon economy. The discussion highlighted the lack of state capacity and the meaning of Attach clearly Conditions for state support. Building on the success of the US Inflation Reduction Act, which attracted five US dollars of private investment for every US dollar of public funding, the panel suggested that Europe should aim for similar crowding-in results, using tools that correspond to its legal framework. Demand-side measures, such as strategic public procurementwere also seen as essential for the energy and industrial transition.

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“European coordination is the key”

The day ended with two insightful sessions. In the first, Robin Schindowski (Bruegel) examined the strengths and weaknesses of China’s industrial policy and found that despite its impressive success, China’s high levels of public investment are being undermined by clientelism and regional protectionism. Although the EU’s strong institutional framework avoids these pitfalls, Schindowski warned Choosing the right sectors is both crucial and difficult, and that it would be a mistake to channel support into sectors that have already been prioritized by China.

In the second session, Reinhilde Veugelers (KU Leuven, Bruegel) emphasized how better European coordination could increase competitiveness. She identified two key disadvantages compared to the US: higher energy costs and a fragmented domestic market. To address these problems, Veugelers called for deeper integration of the internal market and sector-specific cooperation, supported by EU funds. She pointed to improved energy policy coordination to reduce costs and volatility and outlined key design elements for an effective EU Advanced Research Projects Agency (ARPA) to drive innovation.

The debate continues in the EMPN

The third EMPN conference was a timely and impactful event that directly addressed Europe’s industrial policy challenges. The discussions highlighted the urgent need for Europe to rethink its sectoral specialization, embrace innovation and coordination and adopt a long-term vision to remain competitive on the global stage.

In the coming months, EMPN will continue to connect Europe’s economic challenges with national political realities. Since our first meeting in Rome 18 months ago, the network has expanded, with new research initiatives led by our partners and increased coordination under Ludovic Suttor-Sorel since March.

Looking to the future, EMPN is preparing its next steps on European fiscal, monetary, industrial and innovation policy – stay tuned for further developments.

Our reading recommendations:

Media and event report 10/24/24

• Mentions and appearances in the media

  • On the 14th^Th from October 2024, the Tagesspiegel mentioned the money letter of the 10th^Th October on the topic of the CO2 price and a lack of funds for climate protection spending in the federal budget.
  • On the 14th^Th In October 2024, Philippa Sigl-Glöckner took part in a panel discussion at 108^Th International Economic Forum of the IfW Kiel. The panel discussed the effects of protectionism, resilience and global changes on the German and global economy.
  • On the 17th^Th In October 2024, the International Monetary Fund (IMF) Fiscal Monitor mentioned a paper by Florian Schuster-Johnson on the drivers of the ongoing rise in debt in developing countries.
  • On the 18th^Th In October 2024, INFO published an interview with Janek Steitz on the topic of affordable European energy prices and their promotion at the European level.
  • On the 20th^Th In October 2024, Philippa Sigl-Glöckner, Paul Ronzheimer (journalist at Bild) and Franziska Brandmann (chairwoman of the Young Liberals) discussed the debt brake in the RONZHEIMER podcast.
  • On the 21st^st In October 2024, Capital published an interview with Philippa Sigl-Glöckner on proposals to reform the debt brake and the current recession in Germany.

• Events
  

  • On the 7th^Th In November 2024, Florian Schuster-Johnson will speak as a panelist on public finance at the conference “New Economies: Tipping Points in a Shifting Political Landscape”. The following people will also discuss on the panel: Karim Harris (Chair of the Open Society Foundation), Daniela Gabor (University of the West of England), Danny Sriskandarajah (New Economics Foundation) and Kate Mackenzie (GSCC). The panel will take place from 11:15 a.m. to 12:15 p.m. (CEST) and will be streamed live via Zoom.
  • On the 14th^Th In November 2024, Philippa Sigl-Glöckner will take part in a panel discussion on the topic of the debt brake. One year after the budget ruling of the Federal Constitutional Court on 15^Th In November 2023, Lars P. Feld (Walter Eucken Institute Freiburg), Christian Waldhoff (HU Berlin), Philippa Sigl-Glöckner (Future Department) and Alexander Thiele (BSP Berlin) will be discussing. Click here to register.

The Money letter is our newsletter on current developments in economic, fiscal and monetary policy. We welcome your feedback and suggestions. Send it to ludovic.suttor-sorel[at]dezernatzukunft.org