EU machinery engineering industry has strong international competitiveness

On March 22, the European Commission released the report on the competitiveness of the EU mechanical engineering industry, saying that the EU mechanical engineering industry has strong international competitiveness but faces challenges from China. The main contents of the report are as follows:

First, the mechanical engineering industry is an important part of the EU economy. Mechanical engineering is the collective name for mechanical equipment that generates and uses mechanical energy. It does not include aircraft, vehicles and engines, agricultural and forestry machinery, machine tools, and other special-purpose machinery. The mechanical engineering industry is an important branch of the European Union's manufacturing industry, accounting for 9.1% of the total manufacturing output value, creating 2.9 million jobs. The mechanical engineering industry also made an important contribution to the EU trade balance. In 2010, the EU’s industrial manufactured goods trade deficit was 156.7 billion euros, while the mechanical engineering industry realized a trade surplus of 119.2 billion euros.

The mechanical engineering industry has three characteristics: the majority of small batches and single pieces of production, high skill requirements, and close cooperation between manufacturing, engineering, and design departments. These three characteristics result in a generally faster productivity growth in the mechanical engineering industry than in other manufacturing sectors. Between 1995 and 2008, the growth rate of productivity in the EU mechanical engineering industry was equivalent to about twice the overall growth rate of manufacturing productivity. However, during the financial crisis, the mechanical engineering industry was seriously damaged. The average annual productivity decline during the period from 2008 to 2010 was 4.7%, which was far greater than the average decline of 0.4% in the manufacturing industry.

Second, the competitiveness of the EU mechanical engineering industry is ahead of the United States and Japan. In 2010, the EU mechanical engineering industry accounted for 37.2% of global trade, which was 3 percentage points higher than in 2000. At the same time, the U.S. share fell from 25.6% to 17.4% and Japan's share fell from 21.3% to 15.6%, which is in stark contrast to the EU. Between 2000 and 2010, employment in the EU mechanical engineering industry decreased by 1.5%, while that in the United States and Japan decreased by 2.6% and 3.3% respectively. In terms of value-added, the scale of the mechanical engineering industry in the United States and Japan in 2010 was only 65.4% and 42% of the EU respectively.

In the past 10 years, labor productivity in the EU mechanical engineering industry has increased by an average annual rate of 1.5%, which is higher than that of the United States by 0.8%, and Japan has experienced a decline. However, in absolute terms, the EU’s labor productivity and wage levels still lag behind the United States and Japan. In 2010, the highest average annual increase in labor productivity in the EU member states was only 70,000 euros, 20% lower than the United States, and even less than Japan. The per capita wage of employees in the US mechanical engineering industry is 20% higher than the EU average, and Japan is equivalent to the EU.

Third, the EU mechanical engineering industry is facing severe challenges from China The rapid development of China's mechanical engineering industry, in more ways to form a growing competition for the EU. From 2000 to 2010, China’s share of the international market increased from 3% to 13%. In the past 10 years, labor productivity in China's mechanical engineering industry has grown at an average annual rate of more than 10%, and it has now reached half of the EU average, which is comparable to Poland, the Czech Republic, and Slovakia. While China's wage level is only 11% of the EU, even if it is far from the Eastern European countries, it will create more and more competitive pressure on these countries.

Fourth, the EU mechanical engineering industry still has opportunities for development. By 2025, the added value of the mechanical engineering industries in Europe, the United States, and Japan and BRIC countries will increase from 527 billion euros in 2010 to 928 billion euros, with an average annual growth rate of 3.8%. The EU will increase from EUR 157.5 billion to EUR 204.7 billion, an average annual increase of 1.8%, which is lower than the United States' 2.3%, which is equivalent to Japan. China will increase from 161.4 billion euros to 410.1 billion euros, an average annual increase of 6.4%. However, compared with competitors, the EU mechanical engineering industry has advantages in terms of innovation intensity and technical standards. If we can seize the opportunities of globalization, make full use of the Asian market, and integrate the supply chain, we will still have bright prospects for development. If 60% of the EU mechanical engineering industry's growth comes from external markets and the remaining 40% comes from external markets, the industry's added value will reach 232 billion euros by 2025, an average annual increase of 2.6%.

To seize the opportunities of globalization, the EU needs to introduce policies in various fields to promote the development of the mechanical engineering industry: first, improve the organization and industrial structure; second, improve market supervision; third, make full use of the financial market; and fourth, increase the flexibility of the labor market With regard to liquidity, the fifth is to encourage companies to carry out technological innovation, and the sixth is to help companies enter overseas markets, negotiate with important trade partners, and supervise their compliance with trade agreements. The European Commission should especially monitor China’s industrial policies and restrictions on foreign investment. To ensure that it complies with the WTO Agreement.