Eurocommissaris Kroes voor competitie in plaats van bescherming(en)
SPEECH/08/207
Neelie Kroes
European Commissioner for Competition Policy
Competitiveness – the common goal of competition and industrial policies
Address at the Aspen Institute
Paris, 18th April 2008
If it was ever the case that the Commission or national governments faced a black and white choice between competition and protection – those days are over. That sort of binary choice overlooks reality.
I'm not naïve – we will never please everybody. But modern competition policy is not ideological – it is responsive to its environment and to market failures. It works best when it is pragmatic, such as with our cartel leniency programme.
Likewise, modern industrial policy should not be about politicians gambling with taxpayers' money on favourite companies and structurally uncompetitive industries. Modern industrial policy, as we know from the Lisbon Agenda for growth and jobs, is inter-twined with competition policy. It is about long-term investments like re-orienting an economy to benefit more from globalisation, improving R&D, or upgrading technological and other infrastructure. Blank cheques to friends and favourites are not part of the equation.
Instead of paying through taxes for an economy to improve in one sector, today our challenge is lift the speed limit for growth across the entire economy, and then find efficient ways to put the foot on the accelerator.
We have to meet that challenge because the global economy is a race. And can either train for that race, so as to be ready to compete, or we can fool ourselves by bribing the referees and fiddling with the rules.
There isn't an easy answer and we have to remember the non-economic aspects of life – but I know what is more likely to win us prizes at the end of the day - and I think you do too. We can't achieve any of our social objectives without a strong economic base, and competitive markets are what give us that economic base.
Creating a positive competitive framework for business works – smaller member states such as Finland and Ireland have demonstrated this.
The thousands of SMEs clustered around Nokia in the Helsinki region are a direct example of my point. Nokia succeeded because Finland (according to the World Economic Forum's index) has an exceptionally competitive business environment. Nokia didn't wait for a Government subsidy and the result is Finland has its foot on the economic accelerator.
The lesson is that bigger countries have even more opportunities to use our Single Market as a springboard for global success. As the Ernst & Young survey of Europe's Attractiveness reminds us – the Single Market is our biggest asset, and we must not forget we are also the world's largest exporter. This vivid relationship between Europe and Globalisation is one that we can be proud, rather than afraid of. Imagine it like a great painting: alive, detailed, popular – a creative work that draws you into it, that makes you want to be a part of it.
We don’t just look at this scene – we make it. We are the painters, not the subjects.
In that environment there is no need to resort to a game of governments picking winners. Our vibrant competitive markets are already full of winners, picked by consumers, from level playing field. Winners matching with each other to create new dynamics – as in venture capital networks - that governments cannot hope to predict, let alone fund. [Winners like EADS, Total-Final-Elf, BNP Paribas, Suez, Vivendi Universal, DaimlerChrysler, Vodafone or Sanofi-Aventis.]
So, while I value the chance to discuss these important and sometimes difficult issues, I cannot accept that we need to somehow try to mix competition and protection. We don't need protection to be winners, we already are winners.
But if a criticism of our approach exists, I want to hear it – my only request is that it be precise.
Vague assertions aren't enough to cause to abandon complex policies that we know are working, or turn our back on a path that has delivered prosperity to Europe for 50 years. I think this is reasonable - we set high standards for ourselves, and we simply want to apply them externally as well. While it's easy to mix up a complaint about competition with an issue that is really a trade or regulation one, I am wary also of those in the competition community who take credit for things that are the work of others. We can do a lot with competition policy, but it is not us that create competition, or jobs, or the growth that comes from both. Businesses do that – and I want us to take credit only where it is due.
Likewise I think we must recognise that competition authorities work best in concert with the courts and governments. Competition authorities cannot be everywhere at once, and they cannot solve all problems on their own.
This isn't just rhetoric. The decentralising of competition policy is a legacy of Professor Monti's time as Competition Commissioner that I am proud to inherit and carry on. All 27 national competition authorities in the EU are now able to apply EU rules at their local level rather than directing cases to the Commission. You also see the logic of decentralisation in our recent White Paper proposing a private system for antitrust damages actions, and in my service's close relationship with other Commission departments such as Consumer Protection.
I also recognise that regulation will always be needed. Not tiresome red tape, but sensible regulation that does not result in a disproportionate restriction of the competitive process. Fair pricing for international mobile phone calls and text messages is a great example of an effort we are happy to support.
And we are just as happy to assist other competition authorities. International networking is a fast-developing priority, as the anti-cartel fight shows. Cartels are happy to work across national borders, and so must we be.
Developing a competition culture is a process, not a transaction. It's about the long-term and not just tomorrow. We cannot just ask ' 'what did competition do for me?' That is selfish – we are much better to ask what will things look like in ten years or whether we are better off because of the last ten years. If we had spent the last 50 years wondering what 'I' am going to get out of competition, we would have stood still. It was only by stepping back and looking at the bigger picture that we have moved forward.
It is time to learn the lessons competition has taught us. To be concrete about it: citizens get better goods and services, and businesses have more opportunities to sell them. Citizen welfare is enhanced by competition and so is European competitiveness.
And we have many figures to prove it. The royalty rate for accessing Microsoft's interoperability information is more than halved. Telefonica and Mastercard customers also know that price drops help the hip pocket. The direct future customer savings resulting from our cartel, antitrust, liberalisation and merger cases in 2007 alone, amount to at least 13.8 billion euros. About 30 euros for each of Europe's 500 million citizens. Then there are obvious deterrent effects we cannot put a price on.
Or we can flip the coin and ask - what happens when we do not have competitive markets? Statistics can't give us the full picture there. A much better way to remember is talking to our friends from the new members of the EU family. Many of them have 40 years experience of life without competitive markets, where civil servants and their leaders thought they knew what citizens wanted. Those citizens aren't asking to re-join the old bread queues. You wouldn't want to join a bread queue.
Admittedly, not all businesses can win all the time in a market – that is not news: it's just a basic fact of life. The bigger point is that overall competition and globalisation creates jobs - more jobs than it outsources or ends, as recent reports from John Hopkins University make clear.
Mergers
Our merger system shows the world just how supportive Europe can be to businesses wanting to compete on a new scale. We do not apply dogma to mergers; in fact we stop less than 1 per cent of proposed mergers.
Why? Because mergers often facilitate the development of new products or the lowering of costs. Our world's best practice economic analysis gives us straight answers on such issues. And it tells us if a proposed merger will hurt consumers, in which case we step in. This is what happened in 2007 with the merger between Ryanair and Aer Lingus. Stopping that merger protected passengers on more than 14 million journeys. But usually consumers won't be hurt so with cases such as Air France and KLM or Carrefour and Promodes we are happy to approve new plans for expansion.
Flexibility is built into our guidelines. Article 21 of the Merger Regulation offers room for the protection of genuinely strategic sectors – whether we need to protect the plurality of the media or the stability of the financial system.
We also understand the interdependencies in competition policy.
The EU's external energy policy recognises that energy markets are full of double standards. Of course we want to end those double standards and have level playing fields. But we are not naïve – so that's why the EU’s Market Access Strategy says that if external players want to play on our pitch, and sell to our consumers, then they play by our rules.
State aid
Our state aid framework addresses market failure instead of picking winners. Rather than being rooted in dogma, State Aid rules are flexible like our merger guidelines.
We've recently doubled the De Minimis ceiling and the General Block Exemption will significantly increase the possibilities for exempting aid from prior notification to the Commission. Indeed the efficiency of our approach is under constant examination. You could say our State Aid is State of the Art.
We run it this way because it builds competition and so helps close the productivity gap between the EU and the US. The gap is now closing, after a decade of widening up until 2006.
Efforts like the Commission’s Lead Market Initiative (in fields like textiles and bio-products) supports growth in R&D intensive areas, and is at the heart of this turnaround. About 85% of the overall aid granted by Member States is now granted for such horizontal objectives as R&D&I, training, SMEs or environmental protection. We hope this will lead to more leaders in high-tech[1] sectors such as ICT and biotech. And we know that this focus for state aid helps mesh it with industrial policies and other competition rules that boost efforts for more jobs and growth: simpler and better regulation, improving skills and so on.
As a matter of principle, all aid measures available to all companies benefit from a bonus of 10 % in favour of medium companies and of a bonus of 20 % in favour of small companies. In fact, all 20 measures included in the General Block Exemption Regulation (GBER) due to be adopted in June are available to SMEs. That means SMEs can gain access to more types of aid more quickly than large companies – recognition of their greater growth potential and their role as the lifeblood of any economy.
We are efficient too. Large R&D&I cases, subject to in-depth economic assessment, are decided in an average of 5 months now – less in the case of French Neoval and TVMSL cases. And the more cooperation and complete information we get from Member States, the more efficient we are.
It is essential to see these sorts of points against the wider tide of competition that is rising around the globe.
It is not just the European Commission on a crusade – we are part of a movement and as a matter of some pride we are at the forefront of that movement. Our support for the European Competition Network, our involvement in the International Competition Network and the OECD demonstrate our commitment to a global competition culture.
With more than 100 competition authorities across the globe momentum is with us.
Even China is coming on board in August with its Anti-Monopoly Act. So you can see that competition is not an ideology or a niche – it is the common language of the increasingly integrated global economy.
Competition will never be the favourite topic of conversation in Europe, but as the common language of the global economy it must be understood and shared with all European citizens. We know the effects of competition are certainly noticed by citizens and business. Eurobarometer finds 82% of business leaders in the EU consider it important that fair competition is ensured in the single market. But you may be surprised to learn that 67% of EU citizens consider that increased competition in markets, such as transportation and telecommunications, is a good thing. As a former politician I can tell you how happy any politician would be with approval levels of 67 per cent! So to achieve such support in a in a specialist area, often based on complex figures and cases, is no small feat.
I am convinced that if we took the benefits of competition away, you would hear anger from citizens. Indeed, we have every reason to believe we are heading in the right direction: our rules are working, and our European approach is setting the new global standards.
We are keenly aware that there is no benefit in encouraging an artificial divide between competition and industrial policies. Instead we will continue to smooth the roads connecting European policies and different competition regimes. And with these smoother roads we will play our part in lifting the speed limit on the European economy – so that our competitive markets deliver the growth and jobs we need. There will be no rest for me or my services until the last day of this Commission's mandate.
As with all our work, our priority is to create practical solutions to competition problems. And I welcome your contribution to those efforts.
Thank you.
[1] According to a McKinsey in 2006 the only exceptions in terms of new European champions in the high-tech area are SAP and Nokia.