Czech Business Today

On 10^th March, The European Commission presented a package of communications covering a new industrial stra­tegy, a long-term action plan to better implement and stren­gthen Single Market rules and a strategy to support SMEs in the area of digitization and sustainability. The Commission’s communication on the new industrial strategy can be seen as a summary of the areas where the Commission intends to encourage European industry to excel, with legislative follow-up initiatives to be crucial.

Undoubtedly, it is positive that the summary is complemented by planned actions in the area of support for SMEs and the internal market, which are by no means revolutionary, but focus on what is essential – better implementation and enforcement of the rules. Companies do not need new rules, most important is the effective implementation of the already adopted rules and the removal of barriers to the internal market. The aim of the new industrial strategy is to turn Europe into a car­bon-neutral economy and a global digital leader. The twin transformation of the economy is a long-term process that won’t be completed overnight, and European companies need a guarantee that EU plans will not change drastically over the years and will be coherent on all fronts.

Therefore, it will be important to set technologically feasible targets supported by individual initiatives. This will help businesses to see the EU‘s digital and climate objectives as an oppor­tunity and a competitive advantage. The Commission’s guarantee that it will ensure a competitive position on a global scale for companies is important. European firms must not feel alone in meeting ambitious climate targets. Furthermore, the EU must address the risk of carbon and investment leakage so that it stays attractive for investors in the future, and therefore must put in place instruments that will so ensure.

The introduction of a so-called carbon border adjustment mechanism could work for several se­ctors, but industry cannot fully rely on it. The EU will have to take measures to alleviate market distortions caused by heavily subsidised companies in third countries and/or by their noncompliance with EU sanitary and safety stan­dards. Setting a level playing field will be crucial to ensure that European producers, as well as traders, are not in a disadvantageous position compared to third-country com­panies. The transformation in heavily industrialised areas and the move away from coal will require a special approach so that this process does not significantly affect jobs.

In this respect, Czech enterprises welcomed the Just Transition Fund. However, the question is how the aid will be set up and how the state aid rules will be flexible. At the same time the Commission shouldn´t underestimate the further development of the transport and energy infrastructure as a precondition of a successful industry transition. In the light of COVID-19 strongly impacting the world economy, the Commission has launched assistance to SMEs and the labour market by setting up a special fund. It is quite likely that a number of firms will be forced to postpone the planned investments and the transition of industry will not be as rapid as the Commission envisaged at the time it was preparing the industrial strategy.