Germany's quest for a New EU industrial policy: Why it is failing

Abstract

German Chancellor Schroeder has expressed publicly the desire for a fundamental revision of European Union industrial policy to conform more closely with the changing needs of the German political economy. What is the nature of this challenge? To what extent has the German government been able to alter EU industrial policy? And to the extent it has not been able to do so, why not, given the scope of Germany's power in Europe? Using the process of Economic and Monetary Union (EMU) as a paradigm for assessing German power in Europe, I argue that the German quest to remake EU industrial policy is likely to fail for three reasons: (1) emulation: Germany has not been a model for EU industrial policy; (2) timing and sequencing: EU industrial policy became institutionally embedded from the late 1980s to the early 1990s, when the influence of the German industrial model was waning; and (3) path dependence: for nearly two decades, the overriding goal of the European integration project has been to advance the single market. As this has taken place, policies toward industry have been constructed on the premise of ‘competitiveness through competition’, a notion at odds with the prevailing German conception of an industrial policy that differentiates between sectors according to conditions in global markets.