Industrial policy

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					                 Industrial policy
            Examples: EU Industrial Policy and
               Swedish Industrial Policy

Ari Kokko
                     Why now?
       GATT   and regional integration mean that
        trade policy instruments cannot be used to
        promote domestic industry
       Changes in the international monetary
        system limit the scope for active foreign
        exchange policy
       Industry localization more variable than
        ever before
       When market outcomes are not satisfactory,
        industrial policy is what remains
Ari Kokko
              What is industrial policy?
       Broad       definition
            - targetted taxes and subsidies
            - competition policy
            - R&D and innovation policy
            - education
            - infrastructure
            - and much else
Ari Kokko
            European industrial policy
    Challenges
        – tougher international competition: USA/Japan and
          Eastern Europe/Asia providing double squeeze
        – new technologies and faster technical progress
        – lingering unemployment
        – need for structural change
        – fragmented infrastructure in the Single Market
        – inappropriate institutional infrastructure:
          innovations, patents, entrepreneurship

Ari Kokko
            European industrial policy
        General     objectives
            – strengthening of the competitiveness of
              Community industry
            – generating new jobs

        Specifically
            – retain technological leadership
            – achive economies of scale, technical efficiency,
              and competitive business climate

Ari Kokko
            European industrial policy
       Framework
            – industrial policy decision to be taken at the
              national and regional level
            – common competition policy
            – coordination and horizontal measures in areas
              such as R&D, vocational training, social policy,
              networks, and foreign trade

Ari Kokko
            European industrial policy
       Priorities
            –   to promote intangible investment
            –   to develop industrial cooperation
            –   to ensure fair competition
            –   to modernize public authorities

Ari Kokko
            European industrial policy
        To    promote intangible investment
            – tax incentives for training and learning
            – research collaboration schemes
            – harmonization and standards for new
            – protection of intellectual and industrial property
            – provision of accurate economic data

Ari Kokko
            European industrial policy
       To     develop industrial cooperation
            – remove legal and fiscal obstacles
            – facilitate international information flows
            – reinforce favorable investment climate in partner
              countries (including investment guarantees)
            – support Eastern European industrial development
            – regional programs in Asia and Latin America

Ari Kokko
            European industrial policy
       To       ensure fair competition
            –   promote strengthening of GATT framework
            –   establish international competition policy
            –   develop preferential relations with trade partners
            –   common competition policy
            –   reduce public subsidies
            –   reduce physical investment bias in state aid
            –   strengthen internal market infrastructure
Ari Kokko
             European industrial policy
       To     modernize public authorities
            – deregulation and administrative simplification
            – continued harmonization of national legislation
            – increased support for the establishment of
              industrial networks and clusters
            – promote diffusion of information and new
            – establish trans-European networks for data

Ari Kokko
            Swedish industrial policy
        Activities   in several overlapping fields
            – openness and deregulation
            – corporate governance, state ownership, and
            – education, training, and R&D
            – foreign direct investment
            – regional development
            – tourism, environment, social security

Ari Kokko
              Swedish industrial policy
       Openness
            – reduce EU protection levels
       Deregulation
            – horizontal programs to replace firm and sector-
              specific intervention in manufacturing
            – deregulation of energy market
            – simplification of regulatory framework for

Ari Kokko
                Swedish industrial policy
       Corporate        governance and state ownership
            – review of institutional ownership
            – privatization
       Small       business sector
            –   provision of venture capital
            –   review of tax rules for small business
            –   access to information and marketing facilities
            –   upgrading of skills and competence
Ari Kokko
              Swedish industrial policy
       Innovation      policy
            – emphasis on measures to facilitate technology
            – special IT programs
            – participation in EU programs
       Education      and training
            – higher output of science and technology
            – appropriate incentives for investment in human
              capital and continuous upgrading of skills
Ari Kokko
             Swedish industrial policy
       Foreign     direct investment
            – investment promotion (Invest in Sweden
       Regional     development
            – approx. SEK 13 billion in EU funds for remote
              and sparsely populated areas 1995-1999
            – infrastructure and IT

Ari Kokko
            Swedish industrial policy
    Tourism promotion
    Environmental protection
        – green policies in legislation and public procurement
        – market opportunity for private sector?
    Social    security
        – strengthen work incentives
    Baltic   Sea region
        – Sweden as a bridge to the Baltic region?
        – promotion of regional cooperation and investment
Ari Kokko

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