The business community is hoping that, notwithstanding the challenges of enlargement, Ireland will breathe new life into the Lisbon process, writes Maria Cronin, director EU affairs IBEC
Why would 600 of Europe's business leaders get together under a vast backdrop of Gulliver being pinned down in Lilliput by tiny people? In November, all of these people came together in Brussels for the first EU Competitiveness Day, organised by UNICE, the umbrella organisation for business and industry at EU level. The message was "Free Gulliver - release companies' potential", that is to release the potential of companies from unnecessary and unproductive regulation so that the European economy could grow and jobs could be created. The excess of red tape seems to be a particularly European problem.
The Lisbon process, which we hear so much about, started back in 2000 when all of the EU governments agreed on the single objective of making the EU "the most competitive knowledge-based economy in the world by 2010". Back in 2000 business warmly welcomed this agreement across the 15 EU member-states on such an important objective and we waited in anticipation of progress. Now four years on where are we? Pinned down.
The truth is that while there is a lot of talk about competitiveness and apparent commitment to the Lisbon process, this has not translated itself into the reality of stimulating growth in the EU economy. The European economy is not growing and we could continue talking about this forever, everyone saying the right thing but still making no progress whatsoever.
The actions of the EU institutions themselves show that there has not been a coherent approach to the Lisbon objective. Every business knows that if you have an overall strategic objective, it is against this very objective that all of our planned actions must be measured. If they do not contribute to the objective or if they mitigate against it then the plans must be either reworked or scrapped altogether.
What has been missing is a consistency between the Council (made up of the governments which decided on the Lisbon objective in the first place); the Commission, which has continued to propose regulation that does not always take the competitiveness imperative into account; and the Parliament which works with the Council in making decisions but does not always appear to be clear in applying the Lisbon competitiveness criteria.
The example of the current Commission proposals for the Registration, Evaluation and Authorisation of Chemicals (REACH), against which the business community and many EU governments are fundamentally opposed, comes to mind immediately. It is an example of costly, overly complicated legislation that will hinder innovation and investment in Europe, lead to job losses and as a result make Europe the least competitive and least knowledge-based economy in the world.
The business community is not concerned without good reason; there is a number of areas where Europe's performance is poor when compared to the US or to many Asian countries, and where progress has not been made.
For example, entrepreneurs, who can drive our economy, are much scarcer in Europe than in the US or many Asian countries. Only five in 1,000 Europeans earn their living with their own business, whereas in the US the figure is 10 and in China it is 12. It takes a staggering 45 days on average to start a business in the EU while it takes only two days in Australia, three days in Canada and four in the US.
We need to urgently promote entrepreneurship in the EU through our schools and universities. There is also an urgent need to change attitudes to business risks to encourage people with ideas and ambition to give it a go. A recent Eurobarometer poll indicated that only 45 per cent of Europeans had a preference for self-employment, while the figure for Americans was 67 per cent.
The EU aims to be a knowledge-based economy yet we are floundering in achieving the Lisbon target of spending 3 per cent of GDP on research and development. Japan spent 2.98 per cent of GDP on research and development in 2000, the US spent 2.8 per cent, while the figure for the EU was a mere 1.98 per cent in 2001. The Irish figure was even lower than the EU average, with only 1.17 per cent of GDP spent on research and development.
Fundamental to our ability to boost the knowledge-based European economy is a successful patent system. This will create an environment that supports innovation. We must, however, consider the costs of such patents if Europe is to be attractive for the registering of ideas or inventions. Currently a 10-year patent in the US is less than half the price of an EU community patent. The difference for a 20-year patent is even more stark, with the US patent costing about a quarter of the community patent.
Another area of concern as we try to boost our economy is the total employment rate. Looking at employment as a percentage of working population, the EU lags behind the US and Japan at 64.2 per cent. This will drop to 62.8 per cent when the EU enlarges next May. The figures for the US and for Japan are much healthier, at 71.9 and 68.2 per cent respectively.
Unemployment is equally a challenge for the EU with an average rate of 7.7 per cent in the 15 member-states. This will rise to 8.9 per cent with enlargement. The figure in Japan is 5.4 per cent and the US 5.8 per cent.
Labour market regulation is also an issue to consider in terms of boosting employment and attracting foreign investment. Using the World Bank index of employment laws, which looks at labour flexibility, the EU registers 51 against Japan at 37 and the US at 22. Indicating that labour in the US is more than twice as flexible as labour in the EU.
Our attention is now fixed on the Irish presidency of the EU. It is a wonderful opportunity for the Government to make a mark on EU development at this crucial time in Europe's development. The business community is hoping that, notwithstanding the challenges of enlargement on May 1st and the political implications of trying to complete the Inter-Governmental Conference, and thus reaching final agreement on a constitution for the EU, Ireland will breathe new life into the Lisbon process and meet the challenge head on.
Success will be the translation of well-worn commitment into real deliverable actions. It is appropriate now to identify clear priorities and to focus our attention on achieving real and measurable progress on the issues that will contribute to economic growth in the Union.