SPEECH/06/264
Günter Verheugen
Vice-President of the European Commission responsible for Enterprise and Industry European Brands – A Success Story
European Brands Association – «BrandExpo» Brussels, 26 April 2006
Dear Mr. Oloffson,
Members of the European Brands Association,
Ladies and Gentlemen,
Thank you for the invitation to the opening of the exhibition on “benefits of brands” as well as for the memorandum, which I and my Services are going to study with much interest.
The Commission strongly welcomes this initiative. It will be an important contribution to the Commission’s major policy initiative on a “new industrial policy”. Indeed the “new industrial policy” which was launched by the Commission last year is one of our major “Community-brand”.
European brands – a success story
European brands are a success story: They stand worldwide for quality, know-how and innovativeness. I am responsible for many industrial sectors – ranging from cars to toys and from medicines to textiles – and I cannot think of any of these sectors where there are not several European world-leading brands.
There are many indicators confirming Europe’s strength in brands: The most impressive example is how emerging economies are trying to buy European brands to profit from their reputation. Indeed, while today Chinese brands are still the exception on the EU market, many European brands are very successful in China.
However, we have to ensure that this success story does not come to an end. Seen from a global perspective, European brands are under threat: A recent study[1] establishing a “ranking” of the most valuable brands worldwide gives evidence: The first “European” brand (Nokia), appears on place 14. And only three European brands (two from the telecommunication sector and one of the automotive sector) are ranked amongst the top 20.
European brands matter
There are several reasons why the success of European brands is crucial for Europe.
First of all, it is a common misperception that brands are based on tradition and established methods. Rather, I would like to argue that brands are inextricably linked with innovation, which is essential to meet the challenges of globalisation and in order to re-gain competitiveness and economic growth in Europe.
Indeed, as Europe cannot and does not want to compete on labour costs with new and emerging economies, such as China and India, we have to ensure innovation. Innovation allows EU companies to move up the value-added chain and thereby remain competitive in a global economy. This holds even more true these days, as there is a constant rise in the value chain of the Asian, and notably Chinese, production. Even in the sector of upmarket products, Europe has to work hard to ensure its competitiveness through innovation.
Brands are the “tool” to transform this innovation, research and higher value-added into business opportunities and benefits. Without successful branding, investment and innovation very often do not pay off: Indeed, it has been established that the value-added from innovation in branded markets is twice as high as in non-branded markets.
There is another important benefit from branding: accountability. Brands are a crucial tool to hold industry accountable and to create, maintain and enhance trust in its products.
This holds particularly true for the consumer goods industry and for the consumer’s trust in the safety of products placed on the EU market: A brand is an important incentive for companies to maintain high standards of quality and safety which is of direct benefit for European consumers.
This accountability does not only relate to the safety and quality of products, but extends also to other areas. Examples include environmental aspects, animal welfare and corporate social responsibility. I therefore believe that brands will continue to be a crucial tool to enhance and strengthen industry accountability.
Past action
Ladies and gentlemen,
As outlined, the Commission is aware of the many different reasons why brands matter for Europe. In fact, the Commission has always pursued a policy of strengthening brands and making them easily operational in the entire internal market.
One of the big breakthroughs in this respect was the creation of the Community trade mark. Since its creation, the number of registered trade marks per year has increased from 23.000 in 1998 to 59.000 in 2005. Today, almost 70% of the Community trademarks come from within the EU. This success shows clearly the importance of the Community trade mark for the European branding industry.
Dialogue in the framework of the renewed industrial policy
However, we need to continue our efforts to strengthen European brands. To this end, the Commission acknowledges a need to foster the dialogue between the European branding industry and policy makers. Your memorandum therefore comes at the right point in time.
The strengthened dialogue is particularly important for the implementation of the “new industrial policy” of the EU.
What is this new industrial policy all about? As you know, the Commission has launched in 2005 a renewed Lisbon strategy on Growth and Jobs. One of the main features of this renewed Lisbon strategy is a stronger focus on Growth and Jobs. One key project of the renewed Lisbon strategy on Growth and Jobs, falling under my responsibility, is a new industrial policy.
This new industrial policy was launched by the Commission in October last year. It identifies a number of major cross-sectoral initiatives which are essential to European competitiveness, innovation and growth.
Amongst these cross-sectoral initiatives are better regulation, intellectual property including tackling counterfeiting, and access to markets.
In particular in these three fields we, the Commission and the European Branding Industry, need to strengthen our dialogue to better understand the specific needs of your industries.
Better regulation
Let me start with better regulation – an initiative to which I am very much committed.
As you know, most products in the EU, including nearly all consumer products, are regulated at Community level for the entire Internal Market. The areas covered by EU-legislation range from food, textiles and cosmetics to cars and medicines.
The better regulation initiative aims at ensuring that the amount of regulation is balanced and not overly burdensome so that protective standards are guaranteed and restrictions on industry are kept to the minimum.
On the one hand, regulation is of course indispensable in a modern marketplace. Consumers rightly call for a legal framework that ensures the safety of products placed on the market. After all, a strong but balanced legal framework is in the interest of industry, which relies heavily on the consumer’s confidence in its products.
On the other hand, we have to avoid over-regulation which places unnecessary restrictions on industry’s capacity to exploit its potential, including its brands.
What does the better regulation initiative mean in concrete terms?
First and foremost, the Commission now engages in thorough but proportionate impact assessments for all new major legislative proposals. These impact assessments address the likely economic, social and environmental impacts of a regulatory proposal. They are performed on the basis of a revised set of guidelines that was published in June 2005. The revised guidelines reaffirm the need to look at all relevant aspects, including health, safety and the environment while emphasising the importance of taking into account EU competitiveness. Moreover, the guidelines have recently been amended to include a method for measuring administrative costs.
Apart from impact assessments, the Commission engaged in a screening exercise of pending legislative proposals that was completed at the end of last year. Altogether, almost 1/3 of all legislative proposals that were examined have been withdrawn.
A simplification rolling programme has been adopted, which means that 220 basic legislative acts will be reviewed over the next three years. Our efforts are currently directed at the 54 simplification initiatives that are listed in the rolling programme for 2006. This means that this year roughly 500 pieces of legislation will be evaluated in terms of their potential to be recast, codified or simplified.
Another element complementing the better regulation initiative concerns directly you: It is about consultation of all stakeholders including industry. Let us be clear about that: Consultation of industry is not a “noble gesture” of some bureaucrats. It is in the Commission’s own interest to listen early to stakeholders in order to understand the problems it needs to tackle and in order to find the best-possible solution.
It is here where you, the European branding industry, come into play: I would like to invite you to make your views known to the Commission in a constructive and timely manner. Only an early and constructive dialogue allows us to take your concerns into consideration when fulfilling our regulatory task.
Finally, let me once again re-iterate: better regulation does not mean “no regulation” or “deregulation”. Rather, it is about striking the right balance between protecting the consumer and the environment, and ensuring the competitiveness of our European industry.
Intellectual property
Another key sectoral initiative within the new industrial policy relates to intellectual property and tackling counterfeiting.
Counterfeiting has a substantial negative impact on the European industry. Moreover, it can be dangerous for the consumer. For example, just a few days ago, the Commission had to warn consumers of sales of a counterfeited medicine which is not even authorised in the EU.
The seizure of counterfeited goods at EU-customs has increased dramatically in the past years: It is no longer a problem limited to some exotic luxury brands, but it embraces also medicines, food, and household products affecting all European consumers on a daily basis. A few figures illustrate this:
Counterfeit has grown 10-fold in the period from 1998 to 2004.
Customs are seizing now more than 100 million articles per year at the EU borders.
And this is just the tip of the iceberg. It is estimated that counterfeit reduces the European GDP by approx. 10 billion EUR per year.
The fight against counterfeiting is to a large extent a matter of enforcement. It therefore falls within the competence of the Member States. However, in order to complement the initiatives of Member States, the Commission has already launched a number of anti-counterfeiting and anti-piracy measures, including those in the enforcement and customs fields. For example, new enforcement mechanisms now give custom authorities more power to seize and destroy detected counterfeit goods.
The Commission is determined to continue the fight against counterfeiting. To this end, the Commission intends to present soon concrete suggestions on how to further improve the protection of European industry and consumers against counterfeit goods. It is in particular in this context, where a strengthened dialogue with the European branding industries about their concrete needs is crucial.
Access to markets
The third and last cross-cutting initiative I would like to present to you in the context of the new industrial policy is “access to markets”. Access to markets ensures that European industries benefit from globalisation. Indeed, Europe cannot hide away from what is happening in the rest of the world. Rather, the inevitable globalisation process is an opportunity if we give us the tools to benefit from it.
This holds in particular true for the dynamic economies in Asia, where Europe has to further strengthen its active presence. At present, EU companies still tend to concentrate in more mature markets with less potential for growth. We have to catch up with our main competitors – the US and Japan – who have a stronger active presence in the Asian regions with highly dynamic economies.
The EU is already an open market compared to other major economies. In the last two decades, there has been an extensive elimination of customs tariff rates and non tariff barriers. This development has intensified the competition amongst countries and at the same time allowed for better access to their comparative advantages.
However, tariffs and non-tariff barriers remain which should be eliminated in order to reduce the cost of inputs and thus production costs.
Moreover, we have to ensure that trade liberalisation permits a fair access for European suppliers of goods and services. The true liberalisation of global flows of goods and services needs a fair implementation of the WTO/GATT multilateral rules as well as real market access opportunities. This is why my colleague Peter Mandelson, Commissioner for trade, and I attach the up most importance to the ongoing negotiations in the framework of the Doha Development Agenda.
To ensure access to markets, the Commission is willing to not only look at multilateral systems: It is true that multilateral systems are the most effective and legitimate means of managing and expanding required trade relations. However, greater market access can also be secured with bilateral/regional trade agreements. While the EU has until now strongly supported the multilateral approach, both approaches are mutually supportive to achieve similar goals: a progressive improvement of trading conditions which strengthens access to comparative advantages and supports growth.
Closing remarks
Ladies and gentlemen,
The Commission is aware that European brands are of major importance for innovation and growth in Europe and of benefit for the consumers. Therefore, brands will need to be looked at more closely when implementing a “modern industrial policy”.
The Commission is open for a dialogue with industry how the modern industrial policy can support European branding.
Such dialogue should cover in particular the three areas presented to you – better regulation, intellectual property, and access to markets. The dialogue could be launched in the framework of a “discussion group” bringing together industry, Member States and the Commission. Indeed, a similar initiative in other sectors, such as the mechanical engineering sector, has proven very valuable for regulators on national and European level to better understand the needs and peculiarities of a specific industry.
I welcome your exhibition as well as the memorandum as an additional step towards a strengthened dialogue between the European branding industry and European policy makers.
[1] Study conducted by the consultancy Millward Brown Optimor – financial analysts and published in the Financial Times Deutschland – online under http://www.ftd.de/unternehmen/handel_dienstleister/62758.html?bid=13013&p=1&cp=1
