Speech by Executive Vice-President Dombrovskis at the European Parliament of Enterprises

Speech at European Parliament of Enterprises

Chair, ladies and gentlemen: it is a pleasure to be here with you at the European Parliament of Enterprises.

Thank you for inviting me to speak to you about some of the issues affecting the competitiveness of European businesses and the challenges they face.

These are extremely challenging times from many perspectives. Just in the last few years, we have endured one shock after another.

With the COVID-19 pandemic, the world economy suffered widespread disruptions of supply chains. It started a spiral of inflation that advanced economies had not seen in decades.

This was followed by monetary tightening that transformed the financing landscape for businesses.

Then, in February 2022, Russia began its aggression against Ukraine. It caused a commodity and food price shock that disrupted global markets, driving inflation even higher.

We now have a conflict in the Middle East that is aggravating tensions yet further.

Given the size and impact of these consecutive shocks, the European economy has shown remarkable resilience.

But it has not been easy. High inflation has taken its toll.

We also know that many European businesses have been struggling with this volatility and unpredictability, especially smaller ones at earlier stages of their development.

They find it hard to access finance. High interest rates are making the situation worse, affecting their investment decisions.

After many years of a low-rate environment, companies now have to focus on getting through the short term.

Instead, they could be building for future growth and to maintain their longer-term competitiveness.

More broadly, they face issues of regulatory burden, a shortage of skilled labour in certain sectors, securing access to affordable energy and raw materials, and export markets.

The EU is working hard to help European businesses in these difficult times. We never forget that small and medium-sized enterprises provide two of every three jobs in Europe.

They are central to Europe's economic and social fabric, accounting for more than half of GDP. They are vital for our green and digital transitions and long-term prosperity.

In September, the European Commission presented a package of initiatives to provide short-term relief for SMEs, boost their long-term competitiveness, and reinforce a fair and SME-friendly business environment.

Among other areas, we are simplifying tax rules, cutting paperwork, promoting skills and making sure that small businesses are paid in due time.

Access to finance is a major issue that businesses have to grapple with, especially smaller ones.

Take start-ups or scale-ups. For these innovative and fast-growing companies, bank loans are often not an option.

Often, they are not an option at all.

These companies often lack established revenue streams.

They may have little in terms of collateral to pledge. So usually, banks will not lend to them.

What are we doing about it?

Over the past years, we have taken a series of steps to move ahead with the Capital Markets Union to make it easier for SMEs to find and access different sources of funding.

Just two examples: first, reviewing the legislation for the EU label for venture capital funds so that funds can source investors across the EU based on a passporting arrangement.

Second, reviewing the rules governing cross-border distribution of funds, where we brought more convergence and alignment - both in rules and supervisory practices.

Moving to climate neutrality and embracing the digital age goes hand in hand with strengthening Europe's competitiveness.

These two transitions are vital for strengthening the sustainability of our economic growth model.

And for our businesses, they are a pathway to success.

The green transition has the potential to make Europe and its companies a global leader in in the clean tech sector.

In addition, it will reduce our dependence on fossil fuel imports – particularly from Russia. It will not only improve the EU's energy and resource security, but also help us to achieve our emission targets in the battle against climate change.

The digital transition will help us to leverage our strengths and maintain long-term competitiveness as we embrace digital opportunities - for companies and people alike.

All this sounds very good. But in practice: if Europe is to succeed, and lead, in both areas, it is vital to invest – financially and politically - in research and development and innovation for the long term.

Private sector involvement will be key.

The investments needed are massive, way beyond what the public purse can afford. It is another reason to support and promote EU businesses as much as we can.

Equally important is to equip Europe's workforce with the right skills to make the most of these future opportunities, where three out of four SMEs say they find it difficult to recruit people.

While labour shortages have been rising in the EU for nearly a decade, they are particularly significant in sectors that are essential for the green and digital transitions.

Nearly half of EU businesses say that skills shortages hinder their efforts to adopt or use digital technologies.

Four in ten see difficulties in greening their business activities.

This risks weakening the competitiveness of the EU economy, slowing down both transitions and reducing the EU's attractiveness for investment and innovation – and ultimately, the EU's growth.

We are well aware of these issues. And we are reacting accordingly.

On digital, for example: the EU has set a series of ambitious targets to reach by 2030.

For example, 80% of Europeans should have at least basic digital skills and 20 million ICT specialists should be employed, with men and women balanced equally.

Let's also remember that 2023 is the European Year of Skills. The aim is to promote upskilling and reskilling as a way to boost the competitiveness of Europe's businesses.

We also want to make sure skills are relevant for labour market needs by working closely with businesses and social partners.

This is why, in early 2024, the European Commission and Belgian Presidency will organise a social partner event in Val Duchesse to address key challenges facing Europe's labour markets - including the issues of skills and labour shortages.

Ladies and gentlemen

No business can survive and thrive without trade and the opportunity to develop export markets.

Here again, we are doing as much as we can to create an environment for growth and prosperity.

Trade is already serving us very well. We remain the largest trading bloc in the world. One in five jobs in the EU depends on trade. That means 38 million jobs in total.

At the same time, we know that almost 90% of GDP growth in the next five years is expected to come from outside the EU. So it is very important to connect the EU to these external poles of growth.

This is why we continue investing in our bilateral trade relationships.

We already have one of the world's largest networks of trade agreements, which we are continuing to expand.

Negotiations with Chile and Kenya have recently been concluded and the agreement with New Zealand has just been signed.

We are making every effort to finalise talks with Mexico and Mercosur, while advancing negotiations with Australia, India and a number of ASEAN countries.

The key is to have flexible approaches.

The time of one-size-fits-all solutions is over.

In certain cases, a traditional trade agreement will be the right approach. In others, we need other arrangements that allow us to focus on specific issues of mutual interest.

Here, our Trade and Technology Councils with the United States and India, our digital trade agreements, the Raw Material Partnerships, the Sustainable Investment Facilitation Agreements and other partnerships come into play.

In general, however, we do our utmost to help EU companies make the most of the rights and privileges that we have negotiated for them.

And we have worked particularly hard to develop several practical tools to help companies go international.

One major tool is our Single Entry Point. This helps companies to open complaints when they face barriers to trade in foreign markets.

Another example is step-by-step information about how to use the benefits of our trade agreements.

Access2Markets has all you need to know about duties, taxes, product rules and requirements for all EU countries and over 120 other markets around the world.

And we have just added a new feature to the platform this week: the Access2 Conformity tool. Thanks to the EU's Mutual Recognition Agreements, companies don't have to test their products twice in order to trade.

We regularly provide tutorials in various formats in person and online to train companies on the best use of these tools.

Earlier this month, I had the pleasure to meet Estonian businesses for our Market Access Days.

These regular events held in different Member States allow us to drill into the nitty-gritty of all of this, together with our experts and Chief Enforcement Officer.

Nevertheless, openness can only work in today's world if it is not abused. This is why we have such a strong reorientation to what we refer to as the ‘assertiveness agenda'.

A more power-based world requires a better set of tools to be able to react swiftly and effectively to emerging challenges. This is the essence of our recent economic security strategy.

We have just adopted a new anti-coercion instrument, a major boost to the EU's ability to defend itself. The aim is for it to enter into force before the end of the year.

It means we can deal more effectively with those who do not play by the rules, or with those who use economic coercion to pursue political goals.

Last year, we also adopted the International Procurement Instrument and the Foreign Subsidies Regulation.

And we are reviewing our screening of foreign direct investments entering the EU to allow us to block third-country investments into strategic EU sectors where they would pose security risks.

Meanwhile, we have stepped up our export controls to ensure that exports of certain EU goods and technologies to third countries do not create security risks for the EU.

We are also assessing whether there are risks of leakage of export-controlled technology to destinations of concern via investments from the EU into third countries.

Let me conclude with what many businesses see as their biggest burden and torment: red tape.

As part of our efforts to boost productivity and create the right conditions for businesses to flourish, we are looking at how to reduce administrative burdens and reporting requirements.

While these requirements are important to monitor and enforce legislation, for many companies – especially SMEs – they can be time-consuming, costly and affect their capacity to grow.

By rationalising reporting requirements resulting from EU legislation, we aim to reduce the administrative burdens by 25% without undermining the related policy objectives.

Ladies and gentlemen

As I said at the start, the European Commission is very aware of the difficulties and challenges that European businesses are facing – and especially at difficult times such as these.

We know that life has been tough for them for the past years,

And our intention is to lighten the load.

It goes together with strengthening fairness in our business environment, making it an attractive place to invest and trade, and boosting EU companies' long-term competitiveness.

This way, all of Europe – its people as well as businesses – will reap the benefits. Thank you.