Perspectives on The Lisbon Agenda: Goals & Challenges

Here is my final paper from my international business class at Oxford:

The European Commission initiated the Lisbon Agenda in March 2000 with the ambitious goal of transforming the EU into a highly competitive knowledge-driven economy by 2010. The European Commission recognized that Europe was falling behind the US in terms of technological innovation, Internet and communications business and e-commerce. The Lisbon Agenda focused on strengthening the EU's research and development capabilities, with a particular focus on innovation in the information and communication technologies sector (ICT), in order to achieve "an Information Society for all."

In addition to promoting technological innovation, the agenda also focuses on entrepreneurship and integrating social and economic policy. In general, the overall objectives of the Lisbon Agenda were stated as establishing an "inclusive, dynamic and knowledge-based economy, producing accelerated and sustained economic growth, restoring full employment as the key objective of social policy and reducing unemployment to the levels already achieved by the best performing countries and modernizing social protection systems."

More specifically, the initiative includes a requisite investment of 3% of GDP in R&D activities, achieving an overall employment rate of 70% (60% for women) by 2010, while reducing the number of people living in poverty from 18% to 10% and cutting child poverty in half by 2010. But has there been significant progress toward meeting these goals so far?

Member States' Initiatives

Since the launch of the Lisbon Agenda in 2000, there have been numerous initiatives and some notable successes by several of the Member States. In fact, there are currently 25 programmes that have been undertaken by several countries. A promising aspect of many of these activities is that they represent collaboration between Member States and/or implementation of programmes based on successes in other EU countries. For example, learning from the success in Ireland and the Netherlands, the Czech Republic is developing a system to monitor skills gaps and anticipate long-term demand. In cooperation with Denmark, Estonia is launching a "one-stop-shop" to teach companies how to benefit from the use of design in business activities. The project "Restructuring, Bankruptcy and a Fresh Start" has contributed to policy reforms in Cyprus, Latvia, Hungary and Norway. France, the Netherlands, Finland and Norway have established formal links between different sectors of the public administration to institute a global entrepreneurship education strategy. And, another project, "Education for Entrepreneurship," is a joint Member State/European Commission initiative, which has served as an inspiration to Estonia, Lithuania, Sweden and Norway. In addition, Luxembourg has taken inspiration from Belgium and the Netherlands and appointed a Commissioner for Administrative Simplification as a role within its Ministry overseeing small-medium enterprise.

Assessment of Success

As we pass the mid-point of the Lisbon Agenda's target date for achievement of its stated goals, it is important to assess the overall progress made thus far. Consensus seems to be that while there have been some successes, there is significant and growing concern that progress is not occurring quickly enough and that the goals will not be reached by 2010.

The Kok Report, which was presented to the EC and Council in November 2004 stated that the first four years of action on the Lisbon Agenda represented "disappointing delivery," due to "an overloaded agenda, poor co-ordination and conflicting priorities,"3 but most importantly due to the lack of political will by the member states.

The issue of political will is one that is being addressed with fervor by the EC's current president José Manuel Barroso. In the most recent annual progress report, which was issued in January 2006, Barroso said:

There has been a step change in activity. We've come a long way since last year and the right foundations are now in place... Member States must get in the driving seat and speed up reforms. They must find the political will to match words with deeds - it's time to move up a gear. Our ambition is clear. We are aiming for top-class universities, highly trained and educated workforces, strong social security and pensions systems, the most competitive industries and the cleanest environment. To those who say that it cannot be done I say, a decade or so ago who would have thought that Ireland would have become one the most prosperous countries of the European Union, or that productivity in Poland would be higher than in South Korea? We can and must go the extra mile for growth and jobs.

While it is acknowledged that there is still a significant and increasing gap in technological innovation with the U.S. and Asia, one promising achievement has been that the Nordic countries, are in fact, outperforming the US and Japan, and Germany is also a high performer. Cyprus, Ireland, Latvia, Portugal and Slovakia have enjoyed significant recent progress in innovation, but they all started from a rather low point in terms of economic development.

Challenges & Issues

What are the conditions and issues that challenge the overall success of the Lisbon Agenda? It seems clear that one significant challenge is that of competing interests and priorities, and the need for consensus among multiple stakeholders, especially on decisions regarding policy, regulations and standards. EU Member States' governments have been reluctant to push through difficult and unpopular economic reforms or to increase their national budgets for R&D initiatives. This has been assessed as insufficient economic reform by the Member States. The European Trade Union Confederation (ETUC) criticises what it views as the "one-sided use of the Lisbon strategy" to legitimise "neo-liberal policy approaches." The business community, including the Union of Industrial and Employers' Confederations of Europe (UNICE) believes that the high cost of doing business and stiff regulations are making Europe less competitive. The European Association of Craft, Small and Medium-sized Enterprises (UEAPME) believes that the Open Method of Co-ordination is partially to blame for the delay in meeting the agenda's goals. In short, business and industry have begun to lose faith in the Lisbon process. In addition, environmental groups want regulations maintained in order to protect environment, and other NGOs represent myriad other special interests. And, finally, there has been a heavy focus by the EC in recent years on consumer rights.

One might suggest that the result of this multitude of competing priorities has been a significant barrier to the EU being able to act as nimbly and quickly as is often required for success in today's global marketplace, and in order to achieve the Lisbon Agenda's goal of creating a sustaining a highly competitive knowledge-based economy.

A Recent Example: RFID Technology Adoption

The implications of this challenge become apparent when examining some recent initiatives, and present us with the opportunity to examine two different perspectives on how one might view the challenges and future success of the Lisbon Agenda. For example, there is currently a desire by the EU to stimulate the use of Radio Frequency Identification (RFID) technology, while still protecting personal data. RFID is an automatic identification method that can tag, store and remotely retrieve data. An RFID tag is an object that can be attached to or incorporated into any product using radio waves. RFID technology provides business with an important competitive advantage by enabling faster and more efficient supply chains and greater visibility into inventory and merchandise movement. While RFID is being deployed on a large-scale in the United States, Europe has been slow to catch up. From March through June of this year, the European Commission held five workshops to assess the potential of RFID for business and society.

The workshops addressed interoperability standards, international compatibility, radio spectrum allocation, an examination of the future of RFID technology and consumer privacy and security concerns. In early July, the EC opened a forum for public comment on the topic of RFID through the launch of a website, 'Your Voice in Europe' (http://ec.europa.eu/yourvoice). In October 2006, the EC will present its findings from the workshops and public feedback to a group of experts and decision-makers and in December. the EC will report on its assessment and then prepare its Communication to European Parliament and Council for review, in effect losing another year in terms of large-scale deployment of
RFID technology in Europe. But, some maintain that this is time well spent.

Viviane Reding, the EC's Information Society & Media Commissioner, commented on the timeline for the initiative, "We need to build a society-wide consensus on the future of RFID. We need to ensure that RFID technology delivers on its economic potential and to create the right opportunities for its use for the wider public good, while ensuring that citizens remain in control of their data. The European Commission intends to assume these twin responsibilities. I invite all stakeholders to contribute to this debate."

"Europe has been slow on the uptake," according to Daniel Taylor, managing director of the Mobile Enterprise Alliance, a global advocacy organization for the industry. "Part of that has been the lack of a behemoth retailer like WalMart, which has pretty much shoved RFID into their supply chain - regardless of whether it makes economic sense for the manufacturer."

Taylor continues, "EU RFID adoption is driven by true market demand (and ROI/business models), whereas the more rapidly-adopting U.S. market is driven almost entirely by large business. I'd consider the EU adoption rate to be healthy and sustainable in a way that the U.S. market is not, having been driven by artificial, non-market forces."

There is a larger discussion around standards and the role of standards in terms of the "healthy and sustainable" development and deployment of new technologies, according to Taylor.

Standards organizations can only do so much to drive the standard into the marketplace. Standards are an externality that require consensus among key vendors. There is a time and a place for standards, usually after a few vendors have tried to create their own de facto standards. When several of those monopolistic approaches fail to deliver (they almost always do), that's when the market is ripe for an open standards activity. RFID is slow on the standards front. Formal standards seem to lag behind de facto standards driven by large global retailers like WalMart, and companies like Tesco in the UK. The critical issue for RFID is the cost of the tags. Without a consistent standard, the cost of the tag remains high. So, standards will drive down the cost of tags and readers. And lower cost leads to greater deployments. It's a chicken-and-egg issue.

What Taylor seems to be suggesting is that although the EU is adopting new technologies like RFID more slowly than the US, that the EU's approach may turn out to be more prudent, and in the end, more successful for its in-depth consideration of issues such as international standards and interoperability and consumer issues such as privacy and security. This presents us with a different perspective on the issue of the EC balancing multiple priorities and its desire to drive some form of consensus among all interested parties. But while some may assess this strategy as a wise long-term approach, it still puts the likelihood of reaching the Lisbon Agenda's goals by 2010 into question.

What Is Needed for Success?

Does European business and industry agree with this "slow and steady wins the race" assessment? According to recent statements and papers, what is needed for success of the Lisbon Agenda according to business and industry's perspective is: more immediate focus at the national and European levels, a review of the open method of co-ordination, a strengthening of the position of the Competitiveness Council, social security system reform, increased mandatory R&D/innovation investment by Member States, universities and industry, reduced corporate tax levels; better education on entrepreneurship; more flexible regulation of labour markets, the opportunity for business to evaluate new legislative proposals and the implementation of internal market legislation.

Next Steps

What does the future hold for the Lisbon Agenda goals? According to the most recent annual progress report,8 there are four "Priority Action Areas" that echo that original tenets of the Agenda. The first area is a renewed and strengthened focus on education and research, including investment in higher education of up to 2% of GDP by 2010; improving marketable skills and a greater emphasis on math and foreign languages; a greater share of state aids (25%) and structural funding being spent on R&D and the establishment of a European Institute for Technology by the end of 2007. The second area is "freeing up SMEs and unlocking business potential" by offering more support to entrepreneurs through education, reduction of costs and the establishment of "one-stop" administrative shops to speed the process of starting a new business. The third primary objective is getting people into work by Member States adopting a "lifecycle approach" to employment, with people of all ages offered the support they need. And, the fourth area is a focus on efficient, secure and sustainable energy to address rising oil and gas prices and pollution via better coordination between Europe's electricity grids and gas pipeline systems, improved regulation of energy markets and more competition, incentives to promote sustainable energy use and support research in energy efficiency, clean energy and renewable energy and coordinated negotiations with the external energy suppliers.

Looking Ahead to 2010

Ambitious goals, looming deadlines, competing priorities, an ever-widening circle of stakeholders, the constraints and necessary slow-down imposed by the EC's desire to establish universal standards and regulations, and the increasing widening and diversity of the EU all challenge the success of the Lisbon Agenda. However, the EU must become competitive, particularly in the area of ICT, in order to successfully compete in the global economy of the future. There seems to be political will and the will of the business community, but whether they will be able to work together to achieve these goals remains to be seen.

Whether the goals are realized by 2010 or later, one might argue that if the EU can stay focused on the achievement of the Lisbon Agenda's primary objectives, as well as continue to emphasise consumer rights, the establishment of internationally-recognized technology standards and harmonised fiscal and competition policies, it will create a strong foundation for success and the EU will be well-positioned to evolve into a large and formidable player in the global marketplace. On the other hand, some historians and economists suggest that the EU's expanded corporatist vision for Europe will become too cumbersome and bureaucratic to be effective, thereby weakening the competitiveness of Europe's economy, as well as the Member States' national economies. Will the Lisbon Agenda prove to have positive or negative effects on the evolution of the EU from an economic perspective? That remains to be seen.

Resources:

EuroActiv.com - http://www.euractiv.com/

European Commission - http://ec.europa.eu

Europe's Information Society - http://europa.eu.int/information_society/

European Trade Union Confederation (EUTC) - http://www.etuc.org/

Mobile Enterprise Alliance - www.mobileenterprise.org

RFID Consultation website: http://www.rfidconsultation.eu and roadmap: http://www.rfidconsultation.eu/docs/imagens/roadmap.jpg

Union of Industrial and Employers' Confederations of Europe (UNICE) - http://www.unice.org