EU competitiveness vision as far away as ever

2006

In 2000, EU leaders committed to the objective of making Europe 'the most dynamic and competitive knowledge-based economy in the world, capable of sustainable economic growth, with more and better jobs, greater social cohesion and respect for the environment.'

They drew up the 'Lisbon agenda' to achieve this goal by 2010. The central strategy was based on policies to encourage investment in knowledge.

But six years on, as a new report by the Centre for Economic Performance at the London School of Economics highlights, progress has been poor.

"The reality is that Europe will not achieve the objectives for 2010, if at all. The creation of a single EU financial services sector and more generally of a single market for services has failed to materialise."

The main conclusions of the report, Boosting Innovation and Productivity Growth in Europe: The hope and the realities of the EU's 'Lisbon agenda, make for pretty sorry reading.

The United States has significantly higher productivity than the European average. US GDP per hour is over 15% higher than Europe's; and US GDP per capita is over 30% higher.

From the end of the Second World War until the mid-1990s, Europe was catching up with US levels of productivity. But since then, US productivity growth has been faster than in Europe.

In 2000, the European Union (EU) launched the 'Lisbon agenda'. This had the aim of making Europe 'the most dynamic and competitive knowledge-based economy in the world, capable of sustainable economic growth, with more and better jobs, greater social cohesion and respect for the environment'.

Stimulating innovation was seen as a major route to reaching this goal. In particular, the EU set the 'Barcelona target' of increasing research and development (R&D) to 3% of GDP by 2010.

The Lisbon agenda has not realised its objectives. A major reason for this is the failure of EU members to liberalise their product and labour markets.

Although the numerical target for R&D makes little economic sense, the emphasis on innovation as a route to growth is sensible.

The cost of patenting in Europe is about five times the cost of patenting in the United States. The suggested introduction of a 'Community patent' would lower this cost and make it easier for European firms to patent their innovations.

The 'brain drain' from the EU to the United States – because of better research opportunities and higher wages – is still a significant phenomenon. The Lisbon agenda's aim of reversing this trend has not materialised.