Maria Letizia Giorgetti-Contribution to workshop

FRANCE STRATÉGIE & OECD WORKSHOP ON NEW INDUSTRIAL POLICY TOOLS Paris, 17 October 2022

Session 2: Can industrial policy be consistent with open and competitive markets?

Maria Letizia Giorgetti - Associate Professor in Industrial Economics, Department of Economics, Management and Quantitative Methods, University of Milan and group of 10 experts in industrial policy, (Ministry of Economic Development, Italy)

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How to ensure that industrial policy does not conflict with competition policy?

Can we find complementarities between competition and industrial policies?

Yes, absolutely there are complementarities. With regards to this point I refer to the following paper " Industrial Policy and competition ", Aghion P., Cai J, Dewatripont, Du L, Harrison A. and Legros P, American Economic Journal: macroeconomics, vol.7, no 4, October 2015.

How to prevent industrial policies from being captured by vested interests?

The solution is to address industrial policies for groups of sectors identified endogenously by the market, according to specific characteristics with a bottom-up approach. The level of composite competiveness for sectors is among the main characteristics for identifying the sectors themselves. The ISCO indicator calculated by ISTAT in Italy - is a good starting point. (Giorgetti Anderloni, Why now more than ever do we need an industrial policy? L'industria, il Mulino 2022) I would suggest two potential lines of intervention: the first one for the most competitivesectors (according to their level of technology intensity), the second one for all firms- regardless of sectors - in order to achieve a better level of resilience to shocks of different kinds. Such interventions have to be monitored, over time, in order to face the current environmental and technological transformations due to the development of the pandemic, war, and the energy crisis. (Di Iorio-Giorgetti 2021, The Italian Manufacturing Sector During the Covid-19 Pandemic: Some Lessons for a “New Industrial Policy, COVER (COVID-19 Empirical Research Conference proceedings in University Milan Press).

For each country, the national industrial policies have to be coordinated with European Union actions: for example, the New industrial Plan 2020. Moreover, for cutting edge sectors that need massive investments in technology we need a collaboration between the public and private sector in order to face current challenges and difficulties.

Can industrial policy be compatible with international trade rules?

"International trade rules generally limit countries' ability to use policies or subsidy schemes that target specific industries within their territories and result in increased exports. Many of these rules are embedded in World Trade Organization (WTO) agreements and bilateral and regional preferential trade arrangements." However, again the point is to avoid subsidizing sectors with a top-down approach.

Moreover, the increase of global value chain reshoring due to lack of raw materials, allows us to reshape the interaction between industrial policy and international trade rules.

How to take into account new challenges posed by digitalisation?

The approval of DMA will lead to the digitalisation that will change the interaction among competitors and consumers. However, there are three important points to discuss: •

a) Who will be the owner of company data at the European level? we risk losing the possibility to control our industrial policy

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b) interface with consumers, thus the Commission will have to develop new regulatory capabilities enabling deep and constant oversight of the regulated gatekeepers and the imposition of complex access and interoperability obligations.

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c) The platforms will also increase their importance with regards to the manufacturing sectors for the trading of intermediate goods. This will change the interactions among companies in many production chains. We need to be prepared to face these changes.