Europe is no longer attractive for investment. What should lawmakers do?

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By Dr. Hariolf Kottmann, President, Cefic – the EU chemical industry council, CEO, Clariant

The European Union is on the cusp of losing its hold as a major world industrial power, with other global regions growing faster, offering industries cheaper raw materials and feedstock and aggressively promoting their own chemical manufacturing. Europe’s industries urgently need a clear signal from EU lawmakers, with favourable conditions to repatriate investment now flowing through Europe’s CEOs to other world regions.

America is gearing up to bring manufacturing home on the wave of the shale gas boom that offers chemical companies raw materials at half the cost as for European companies. The UK launched a new industry strategy in January, and with Brexit, adds one more to the list of Europe’s competitors. India has its ‘Make in India’ strategy, China’s has an ambitious five-year plan to turn its chemical industry into a global leader and the Middle East aims to extend its petrochemical industry down the value chain. Europe, it seems, has no grand vision for its industry but instead a patchwork of fragmented initiatives woven into other policy frameworks.

It’s simplistic to look at the healthy balance sheets of European industries and assume that Europe, economically speaking, is trundling along just fine in the face of globalisation. The reality is that investments in the chemical industry go everywhere but Europe, and the Commission’s ‘business as usual’ approach won’t change that.

For the last decade, European chemical sales have indeed increased in absolute terms, but this is deceptive, since its world market share has halved. The latest figures show China’s capital spending in chemicals jumped from 14 to over 95 billion Euros in a decade while Europe only moved the needle from 17 to 20 billion Euros, mainly to maintain existing assets. Companies are simply not looking at Europe for long term investment.

Can Europe hold fast against globalisation?

The problem is complex. And yet European industry is committed to Europe. The solution must be a European one – no a la carte subsidies or state aid. No putting up walls – real or imagined. And Europe’s high sustainability values must be upheld. Europe’s industry’s key asset is its innovative power. A European vision for industry for the next decades therefore has to prioritise innovation, skills and greater investment in research and development. The chemical industry will help develop solutions for major societal challenges. The big question is where these will be developed and produced. Do we want to see these being imported into Europe or produced here?

Only when advances discovered in Europe are also manufactured here and sold back to the rest of the world, will Europe have succeeded in holding its footing against a changing world.

By Dr. Hariolf Kottmann, President, Cefic – the EU chemical industry council, CEO, Clariant

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