Innovation in the EU

Innovation is one of the cornerstones of the European Union's strategy for growth and jobs, more commonly referred to as the Lisbon Strategy. Innovation is also increasingly becoming a central element within the EU's regional policy, for the achievement of its cohesion objectives.

This was highlighted last week in the publication, by the Commission, of a very interesting working document on the subject of 'Innovative Strategies and Actions', which was launched by Danita Hubner, Commissioner for Regional Policy.

The document is in the form of a guide and its sub-title, 'Results from 15 Years of Regional Experimentation', underscores the fact that the guide is not derived from theory but from practical experience. In the words of the Commission:

"Regional Policy has financed many innovative programmes and projects over many years in all areas of activity: economic, social, cultural, technological. It has supported pilot projects, which were later replicated on a larger scale and brought real change to cities and regions.

"It has thus encouraged new partners and methods of work involving all actors in innovation - above all enterprises, universities and research bodies and public authorities."

The reason why innovation has become so central can easily be explained. The move towards greater and faster globalisation has altered traditional comparative advantages and brought about an international redistribution of productive activities.

In other words, globalisation and, in particular, the emergence of China as a world trade power has resulted in a relocation away from Europe of many low value added but high labour force intensive activities. Textiles being the prime example but certainly not the only one.

This is not a one-off shift but an ongoing process. It is realistic to expect that conditions will remain such that it will make sense to relocate even more activities to lower wage countries.

The relevant question is not whether such a process can be reversed, because it cannot. That is, not unless we are ready to envisage a situation where we are ready to accept to see wages in Europe decline, such that the gap with the developing world is closed.

But this would negate the very essence of economic policy, which is to see standards of living improve. Hence, the only viable solution is to generate new activities and jobs, which can replace those that are lost. This is where innovation is of critical importance.

In a globalised world economy, long-term competitiveness does not reside in a static conception of cost advantage, which is likely to be eroded over time, but in the capacity of enterprises to create new value-added goods and services responding to market needs.

These enterprises must be able to make changes not only in the design and development of these goods and services but also in their market research and in their organisation of production, distribution and sales. Within this scenario, training and the development of human resources in general acquires a particularly important role.

Quoting Commission Vice-President Gunter Verheugen, responsible for enterprise and industry policy: "Structural change must not be seen as a threat, but as an opportunity to become more competitive.

"Europe needs to become a truly knowledge-based and innovation-friendly society, where innovation is not feared but welcomed; where it is not hindered but encouraged; where it is part of our society's core values and seen to work for the benefit of all citizens."

Just a month ago, the Commission also published a 10-point programme for action, to be implemented at the national and EU levels, to foster innovation as a principal factor in the growth of the EU economic area.

This document will be discussed later this month in an informal summit for EU Heads of State or Government, to be held in Lahti, Finland, under the Finnish Presidency of the Union.

The main themes of the meeting will be the EU's innovation policy and external energy relations, although the EU's immigration policy will also be part of the agenda. The meeting will be chaired by the Prime Minister of Finland, Matti Vanhanen.

It is interesting and very relevant for Malta to list the 10 points, which have been elaborated by the Commission:

1) Encourage and facilitate the emergence of innovation-friendly education systems that promote creativity and entrepreneurship.

2) Establish a European Institute of Technology, which can bring together some of the best European researchers and students, and become a prime centre of excellence, thereby providing an example to others.

3) Develop and implement an EU-wide strategy to create a single European labour market for researchers; one that is open and competitive and can offer attractive career prospects, thereby reversing the trend that currently sees many of the most highly qualified European researchers moving to the United States.

4) Strengthen research-industry links to promote greater knowledge transfer between universities and other research organisations with industry.

5) Foster innovation at the regional level through the new cohesion policy programmes, as was mentioned above. In particular, the objective is to strengthen further regional efforts for transnational co-operation in the field of innovation by developing new partnerships and alliances with the participation of both public and private entities.

6) Reform state-aid rules concerning R&D and innovation, and provide better guidance for the design of tax incentives for R&D activities. Such measures should enhance the legal certainty for entities operating in the research and innovation fields by clarifying the rules for state aids and tax incentives. This development should also provide member states with a greater scope for the design of more focused and better targeted aid to enterprises.

7) Enhance intellectual property rights (IPR) protection. This is a critical issue for R&D activity since it is important that inventions and innovations are suitably protected from those who want to partake in the benefits without having shared in the costs. One of the issues on the Commission's agenda is how to secure more effective enforcement for companies' IPR in foreign markets.

8) Review and update copyright provisions such that they can be meaningfully applied in the domain of digital products and services. An improved copyright regime should assist and encourage ICT companies to bring new and innovative products and services to market and should be particularly relevant in situations where such products are being launched for application across national borders.

9) Develop a strategy for innovation friendly 'lead markets'. The overall focus must not only dwell on innovative products and services but also seek to identify emerging or potential 'markets', which could spawn new families of products. In particular, it is important to build on the identification and analysis of those technology areas from which new knowledge-intensive markets could emerge, with a high growth potential.

10) Stimulate innovation through procurement. Without distorting the latter process, which must respond to criteria that guarantee fair competition, it should still be possible to exploit better the potential inherent in the significant amounts of public money spent on procurement in support of innovative products and services, thereby providing an additional incentive to innovation.

Many of the points listed will sound very technical and the impact of some of them would appear to suggest it is likely to be in the longer term. However, they are all intended to address one overall and immediate concern, namely how to engender new confidence in the perception of EU citizens as concerns their future prospects.

In the face of globalisation and as traditional economic activities decline, this is a time when fear of the future has crept in and this causes resistance to change. In such circumstances the objective of public authorities in the European countries must be to inspire and facilitate a common dynamic, which demonstrates that it is possible to adapt pro-actively to globalisation.

It is therefore essential to restore confidence and this can be achieved by mobilising citizens around a common vision of a revitalised Europe that can be successful through innovation.