European Commission Wants R&D at 3% of GDP by 2010

Earlier this week, the European Commission presented its strategy to respond to the March 2002 Barcelona European Council's call to raise research spending to 3 percent of the European Union's (EU) average Gross Domestic Product (GDP) by 2010. Today, Europe is at 1.9 percent on average across the member countries.

The Communication More Research for Europe looks into Europe's under-investment in science and technology and its harmful consequences for EU competitiveness, growth and employment. R&D investment (private and public) in the U.S. now exceeds EU expenditure by more than €120 billion every year. In 2000, in the U.S. €288 billion was spent on R&D, while only €164 billion was spent in the EU.

The report states Japan already has achieved the 3 percent level, with R&D expenditures accounting for 2.98 percent of its GDP in 2000. The USA is coming closer (with 2.69 percent in 2000, which has been constantly rising since 1995). In Europe, R&D intensity, at 1.93 percent in 2000, has been stagnating at under 2 percent since the beginning of the last decade, the Commission writes.

The 3 percent level is a target for Europe as a whole: the report admits not all European countries can be expected to reach the 3 percent target by 2010, but all of them should take part in efforts to set more attractive framework conditions for R&D investment and to improve their use of financial incentives. R&D expenditure is already above 3 percent of GDP in Sweden and Finland and above 2.5 percent of GDP in Germany. More troubling is that R&D spending remains below 1 percent of GDP in Greece, Portugal, Spain and in all Candidate Countries except the Czech Republic and Slovenia.

Without prompt action, the Commission asserts, this knowledge gap will hamper Europe's innovative potential and its capacity to become the most competitive and dynamic knowledge-based economy in the world by 2010, a goal set by the Lisbon European Council in March 2000. The main challenge is to increase R&D business funding in Europe, which should be raised to two-thirds of R&D expenditure, a level already attained or exceeded in the U.S., Japan and several Member States. Currently, the EU average is 55 percent.

The report suggests coordinated action at European, national and regional levels is therefore necessary to make Europe more attractive to business investment in R&D. The Commission believes access to finance, better regulation, human resources, intellectual property rights, fiscal policies and other incentives have to be fine-tuned to R&D needs.

The Communication identifies framework conditions that need to be addressed in a consistent way. These include:

• a supply of high quality human resources;
• a strong public research base with upgraded links to industry;
• a dynamic entrepreneurship culture;
• appropriate systems of intellectual property rights;
• a competitive environment with research and innovation-friendly regulations and competition rules; and
• supportive financial markets, macro-economic stability and favourable fiscal conditions.

Financial incentives for private R&D and technology-based innovation could also be used in more consistent and effective ways, the Commission writes. In this regard, public authorities can use a range of financing instruments, particularly direct support measures, fiscal incentives, guarantee schemes and public support for risk capital.

The Commission will launch stakeholder consultation to identify a focused set of actions by early 2003.

More information is available at: http://europa.eu.int/comm/index_en.htm