Omnibus simplification package: Trying to compete in a race to the bottom that is already lost
Earlier this month the EU Parliament and Council voted in favour of adopting the proposed Omnibus simplification package by the Commission published in February.
The package targets the reduction of administrative burdens and simplification of EU regulations for businesses regarding sustainability. This initiative aims to streamline compliance processes, lower costs, and create a more efficient reporting system, thereby enhancing the competitiveness of European companies.
In this blog post we will look at how – and if – this strategy can generate a competitive advantage from a strategic management perspective in the context of the challenges that the key industries in the bloc face.
Type of competitive advantage
Competitive advantage refers to a company’s ability to achieve superior performance compared to competitors. This advantage comes from either cost leadership (being the lowest-cost producer) or differentiation (offering unique value customers are willing to pay for).
In terms of cost advantage, a company can create a competitive advantage through economies of scale and learning, production techniques, product design, input costs, capacity utilization, and residual efficiency.
In the case of the Omnibus simplification package, the latter from cost advantage applies. That is, residual efficiency.
The Draghi report on the challenges of the EU industrial landscape
The Draghi report highlights that EU's industrial landscape is characterized by a lack of dynamism, with traditional sectors maintaining dominance over extended periods. This static structure has led to reduced innovation and investment, hindering the emergence of new growth sectors. Key observations from the report include:
Dominance of Established Companies: The top three investors in R&D in Europe have remained automotive companies for the past two decades. In contrast, the US has seen a shift from automotive and pharmaceutical leaders to technology companies leading R&D investments.
Lack of High-Valuation New Companies: Europe has not produced any companies with a market capitalization exceeding €100bn that were established from scratch in the last fifty years. Conversely, all six US companies valued above €1tr have been founded within this timeframe.
Insufficient Industrial Dynamism: A cycle of low industrial dynamism, leading to low innovation, investment, and productivity growth across EU member states. This cycle perpetuates the existing industrial structure, making it challenging for new sectors to emerge and thrive.
This entrenched industrial structure contributes to the EU's innovation gap, as established industries are not inclined to adopt disruptive technologies or business models.
If - and how - the simplification package addresses key challenges by industry
As mentioned previously, the package mainly focuses on reducing bureaucratic costs, aiming to enhance competitiveness by streamlining administrative processes and making it easier for EU companies to operate.
This indirectly contributes to residual efficiency — reducing inefficiencies that arise from regulation. However, it does not directly address fundamental cost drivers like labor, energy, or production scalability.
Now, considering the dominant industries in the EU, let us assess whether the package can do more than just delay an already on-going decline in the bloc’s key industries in the table below.
Impact evaluation Omnibus simplification package on EU key industries
Big Picture: A Last Attempt in Vain?
The Omnibus Proposal addresses bureaucratic inefficiencies but fails to resolve fundamental cost disadvantages. The EU has permanently lost cost competitiveness in several industries due to:
High labor costs compared to global competitors.
Expensive energy and regulatory burdens.
A shift in global industrial dynamics, where China dominates manufacturing and the US leads in technology.
This leads us to the following key takeaways:
Industries relying on cost competition (automotive, textiles, chemicals, agriculture) cannot regain competitiveness.
Sectors with differentiation potential (pharmaceuticals, aerospace, ICT) might benefit from efficiency improvements.
The future of EU competitiveness lies in high-end innovation, AI, green tech, and sustainability — not traditional mass production.
If the EU relies on deregulation alone, it only delays an inevitable restructuring.
Ultimately, the Omnibus Proposal might slow industrial decline, but it cannot reverse global trends. The EU must pivot towards differentiation and strategic autonomy to secure its industrial future.
As the Draghi Report rightly puts it, this requires fostering an environment that encourages entrepreneurship, supports emerging industries, and facilitates the scaling of new companies to rejuvenate the EU's industrial landscape.