Competition and Industrial Policies: Complementary Action for EU Competitiveness

Abstract This paper contributes to the current debate about competition and industrial policies, by illustrating their complementary role in fostering competitiveness and economic growth. Further market integration combined with effective competition policy can unleash the long-term competitive potential of EU firms. Effective competition in domestic markets contributes to the global competitiveness of firms, by incentivizing them to be more efficient and innovative. Preventing inefficient exercise of market power benefits final consumers as well as firms that have access to inputs of higher quality at lower costs. Pro-competitive industrial policies are required to realize the competitive potential of EU firms, notably in the areas of innovation, technological adoption, and decarbonization, characterized by externalities, miscoordination, public goods, and uncertainty. Similarly, public intervention is required to achieve greater economic resilience efficiently, while considering inevitable interdependencies in the global economy. A balance must be struck between avoiding harmful trade wars and supporting EU firms in a challenging international environment.