Space

4.3 Creating the right environment for innovation and competitiveness

Space activities contribute to employment and competitiveness in many sectors of the economy. However these benefits depend on the existence of an innovative and competitive European space industry.

As part of its call for an integrated strategy for European competitiveness the European Council[1] has asked for policies to be pursued as to contribute consistently to the goal of enhancing the competitiveness of enterprises and industry.

While industrial policy is horizontal in nature and aimed at securing framework conditions favourable to industrial competitiveness, it needs to take account of the specific needs and characteristics of individual sectors[2].

In line with this approach to the aerospace sector, a European policy which deals with all aspects of the space business[3], and fully exploits the specific capabilities of all the institutions involved is essential for the sectors future competitiveness.

Through past institutional programmes and the efforts of companies in the sector, Europe developed leading space capabilities and a world-class industrial capacity in launchers and satellites. However, this position is now threatened by the sharp and sustained downturn in the commercial market whose past growth had allowed European industry to achieve the critical mass needed to maintain and expand capacities and to compete internationally with foreign companies which benefited from much larger, protected, institutional markets.

To overcome these difficulties and maintain a competitive European space industry and the freedom of action which it provides, Europe needs a consolidated industrial and institutional approach to space-related activities in line with the Commissions recent Communication[4] on a coherent framework for aerospace. This includes the efficient allocation of resources and the elimination of outdated national restrictions on space-based services and a suitably adapted spectrum policy.

In setting out a comprehensive European space policy that takes account of the strategic character of the sector and provides a common framework under which the European industry and the different national and intergovernmental agencies involved can optimise their activities, this White Paper identifies many of the steps which are required to create the most favourable environment possible for industry to preserve and further develop its capabilities.

These should be complemented by a coherent approach to policy internally and externally in order to create a predictable and rational environment for innovation and industrial competitiveness.

Industrial adaptation and attracting investment

The slowdown in the commercial market is forcing the space industry to restructure its operations. Since the European space industry is more dependent than others on the commercial market, it is essential that there are no unnecessary hindrances within Europe to the rationalisation and reshaping needed to make the industrial structure more appropriate to market requirements. Thus, in applying competition policy the particular features of the space industry, such as its dual-use nature, have to be taken into account in individual cases.

If the industry is to be able to attract the necessary investment for the future, it will also need a stable flow of activity generated by a strong institutional market. That implies overcoming fragmentation within Europe on defence-related programmes and better co-ordination of civil and defence activities.

However, it is clear that especially in the current economic climate, even the most optimistic view of the possible evolution of public space budgets means that European companies will not benefit from the same scale of institutional market support as their US counterparts.

To develop a stronger institutional market in Europe is likely to mean further recourse to public/private partnerships. In this context, the implementation of GALILEO plays a key role as the first major public/private partnership undertaken at EU level. It will be important to draw the lessons from GALILEO, to help determine the best approach to public/private finance for future space projects.

Demand swings in the worldwide space market create particular problems for smaller companies. Small and medium-sized companies bring creativity and innovation to the space industry. Accordingly, the EU and ESA should continue to develop their programmes for technology incubators and industry days to promote the role of SMEs in the space industry. These companies, mostly active in niche markets, should be taken into account by the primes in their overall strategy. This would avoid unnecessary duplication of R&D efforts and make it possible to spread the benefits and return on investment all over Europe. Space incubators is a mechanism which can be used to foster innovation and SME participation, providing the necessary assistance to make technology based ventures succeed commercially.

Using procurement more effectively

Undoubtedly the industry would benefit from more flexibility in Europes approach to space procurement. The geographical return principle (juste retour)  irrelevant in the EU context which aims at optimising collective interests  generally motivates national investments. It guides a great deal of ESA procurement but could benefit from being used both with more flexibility and a broader definition of return, and more creatively so as not to discourage companies from making more cross-border investment, particularly in the new Member States avoiding, however, unwarranted duplication of efforts. In addition, part of the procurement effort will be aimed at ensuring that strategic technology remains at Europes disposal.

Ensuring a level playing field and more balanced regulations

Since many countries in the world view space technology and a space industry as strategic assets, they often have an interest in developing space capabilities and in entering the world space market. This consequently leads to public support from civil and defence budgets for projects which also serve the commercial market.

The EU should work with other space-faring countries to eliminate these distortions of the commercial space market in order to create a level playing field. This includes encouraging the further efforts which are needed to address the inefficiencies and adverse effects arising from the current US export controls which constrain the expansion of the world commercial space market.

At the same time it must be recognised that competition has become increasingly international and Europe can benefit from joint ventures and other forms of co-operation which take advantage of the different industrial strengths such as technology leadership, human spaceflight technology or lower manufacturing costs available in various countries.

The EU should foster such international industrial co-operation which can be mutually beneficial if it reinforces the competitive advantages of Europes space industry, promotes the mastery of essential technologies or encourages the development of attractive programmes.

Recommended Actions

• Commission to stiumulate faster progress to be made towards a harmonised market for space services in the EU through a better co-ordination on spectrum policy as foreseen by the new decision on spectrum[5];
• Commission and ESA to ensure that SMEs have the opportunity to participate and innovate in the space sector e.g. through the space incubators;
• Commission to draw on the lessons from GALILEO to shape useful guidelines for future public/private financing initiatives with commercial possibilities.

[1] Meeting of 16-17 October 2003

[2] COM (2002) 714: Communication on an Industrial Policy in an enlarged Europe

[3] COM (2003) 600: A coherent framework for aerospace  a response to the STAR 21 report

[4] COM (2003) 600 final

[5] Decision 676/2002/EC on a regulatory framework for radio spectrum policy in the European Community