# Official Journal C 267/27 O

| | ISSN 1725-2423 |
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| Official Journal
  of the European Union | C 267 |
| | |
| English edition | Information and Notices | Volume 4827 October 2005 |

ISSN 1725-2423

Official Journal

of the European Union

C 267

English edition

Information and Notices

Volume 4827 October 2005

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| Notice No | Contents | page |
| --- | --- | --- |
| | II   Preparatory Acts |
| | European Economic and Social Committee |
| | 417th plenary session (meeting of 11 and 12 May 2005) |
| 2005/C 267/1 | Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/83/EC and Regulation (EC) No 726/2004 (COM(2004) 599 final — 2004/0217 COD) | 1 |
| 2005/C 267/2 | Opinion of the European Economic and Social Committee on Industrial Change in the Mechanical Engineering Sector | 9 |
| 2005/C 267/3 | Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/88/EC concerning certain aspects of the organisation of working time (COM(2004) 607 final — 2004/0209 COD) | 16 |
| 2005/C 267/4 | Opinion of the European Economic and Social Committee on The role of sustainable development within the forthcoming financial perspectives | 22 |
| 2005/C 267/5 | Opinion of the European Economic and Social Committee on a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering, including terrorist financing (COM(2004) 448 final) | 30 |
| 2005/C 267/6 | Opinion of the European Economic and Social Committee on India-EU relations | 36 |
| 2005/C 267/7 | Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 77/388/EEC with a view to simplifying value added tax obligations and the Proposal for a Council Regulation amending Regulation (EC) No 1798/2003 as regards the introduction of administrative cooperation arrangements in the context of the one-stop scheme and the refund procedure for value added tax (COM(2004) 728 final — 2004/0261 (CNS) — 2004/0262 (CNS)) | 45 |
| 2005/C 267/8 | Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation — European Fisheries Fund (COM(2004) 497 final — 2004/0169 (CNS)) | 50 |
| 2005/C 267/9 | Opinion of the European Economic and Social Committee on the Proposal for a Council Decision on the system of the European Communities' own resources (COM(2004) 501 final — 2004/0170 (CNS)) | 57 |

Notice No

Contents

page

II   Preparatory Acts

European Economic and Social Committee

417th plenary session (meeting of 11 and 12 May 2005)

2005/C 267/1

Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/83/EC and Regulation (EC) No 726/2004 (COM(2004) 599 final — 2004/0217 COD)

(COM(2004) 599 final — 2004/0217 COD)

1

2005/C 267/2

Opinion of the European Economic and Social Committee on Industrial Change in the Mechanical Engineering Sector

9

2005/C 267/3

Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/88/EC concerning certain aspects of the organisation of working time (COM(2004) 607 final — 2004/0209 COD)

(COM(2004) 607 final — 2004/0209 COD)

16

2005/C 267/4

Opinion of the European Economic and Social Committee on The role of sustainable development within the forthcoming financial perspectives

22

2005/C 267/5

Opinion of the European Economic and Social Committee on a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering, including terrorist financing (COM(2004) 448 final)

(COM(2004) 448 final)

30

2005/C 267/6

Opinion of the European Economic and Social Committee on India-EU relations

36

2005/C 267/7

Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 77/388/EEC with a view to simplifying value added tax obligations and the Proposal for a Council Regulation amending Regulation (EC) No 1798/2003 as regards the introduction of administrative cooperation arrangements in the context of the one-stop scheme and the refund procedure for value added tax (COM(2004) 728 final — 2004/0261 (CNS) — 2004/0262 (CNS))

(COM(2004) 728 final — 2004/0261 (CNS) — 2004/0262 (CNS))

45

2005/C 267/8

Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation — European Fisheries Fund (COM(2004) 497 final — 2004/0169 (CNS))

(COM(2004) 497 final — 2004/0169 (CNS))

50

2005/C 267/9

Opinion of the European Economic and Social Committee on the Proposal for a Council Decision on the system of the European Communities' own resources (COM(2004) 501 final — 2004/0170 (CNS))

(COM(2004) 501 final — 2004/0170 (CNS))

57

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EN

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II Preparatory Acts

European Economic and Social Committee

417th plenary session (meeting of 11 and 12 May 2005)

| 27.10.2005 | EN | Official Journal of the European Union | C 267/1 |
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27.10.2005

EN

Official Journal of the European Union

C 267/1

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Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/83/EC and Regulation (EC) No 726/2004

(COM(2004) 599 final — 2004/0217 COD)

(2005/C 267/01)

On 12 November 2004 the Council decided to consult the European Economic and Social Committee, under Article 251 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 20 April 2005. The rapporteur was Mr Braghin.

At its 417th plenary session (meeting of 11/12 May 2005), the European Economic and Social Committee adopted the following opinion unanimously.

1.   Summary of the Committee's recommendations

| 1.1 | The EESC considers protecting the paediatric population to be a top priority since it is a vulnerable group with specific physiological psychological, and developmental characteristics. For this reason, it believes that the decision to conduct paediatric studies should be based on clearly identified, scientifically researched needs and that compliance with the ethical conditions for the trials themselves should be ensured. |
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1.1

The EESC considers protecting the paediatric population to be a top priority since it is a vulnerable group with specific physiological psychological, and developmental characteristics. For this reason, it believes that the decision to conduct paediatric studies should be based on clearly identified, scientifically researched needs and that compliance with the ethical conditions for the trials themselves should be ensured.

| 1.2 | The EESC approves of the proposal to set up a Paediatric Committee within the EMEA, believing that it is an appropriate instrument for ensuring quality paediatric studies based on scientific and ethical principles. It recommends that it should include a broader spectrum of specific paediatric competences with respect to the development and use of paediatric medicines, and that the number of experts assigned to it by the Commission should be increased. |
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1.2

The EESC approves of the proposal to set up a Paediatric Committee within the EMEA, believing that it is an appropriate instrument for ensuring quality paediatric studies based on scientific and ethical principles. It recommends that it should include a broader spectrum of specific paediatric competences with respect to the development and use of paediatric medicines, and that the number of experts assigned to it by the Commission should be increased.

| 1.3 | The EESC considers that the Paediatric Committee's responsibilities should be broadened at the outset. In particular, it recommends that its role be strengthened in the context of the European network of researchers and research centres for paediatric studies. It further recommends that it should be entrusted with the scientific management of the Medicines Investigation for the Children of Europe (MICE) programme that the Commission proposes to set up under an appropriate initiative. |
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1.3

The EESC considers that the Paediatric Committee's responsibilities should be broadened at the outset. In particular, it recommends that its role be strengthened in the context of the European network of researchers and research centres for paediatric studies. It further recommends that it should be entrusted with the scientific management of the Medicines Investigation for the Children of Europe (MICE) programme that the Commission proposes to set up under an appropriate initiative.

| 1.4 | The EESC welcomes the proposed authorisation procedure and especially supports the new PUMA procedure (the Paediatric Use Marketing Authorisation) for pharmaceuticals with existing market authorisation. It would further recommend introducing an abridged centralised procedure for cases where this is justified by the safety data, especially if gathered through the periodic safety update reports. It also suggests specifying that in cases where grounds are established for adopting orphan medicine procedures for a specific subcategory of the paediatric population, the market authorisation holder may opt for either of the two procedures. |
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1.4

The EESC welcomes the proposed authorisation procedure and especially supports the new PUMA procedure (the Paediatric Use Marketing Authorisation) for pharmaceuticals with existing market authorisation. It would further recommend introducing an abridged centralised procedure for cases where this is justified by the safety data, especially if gathered through the periodic safety update reports. It also suggests specifying that in cases where grounds are established for adopting orphan medicine procedures for a specific subcategory of the paediatric population, the market authorisation holder may opt for either of the two procedures.

| 1.5 | In view of the time and resources required for paediatric studies as well as sensitive ethical and compliance issues relating to paediatric patients, the EESC agrees with the proposal to set up a system of incentives and rewards but would suggest strengthening them in certain specific situations. |
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1.5

In view of the time and resources required for paediatric studies as well as sensitive ethical and compliance issues relating to paediatric patients, the EESC agrees with the proposal to set up a system of incentives and rewards but would suggest strengthening them in certain specific situations.

| 1.6 | The EESC supports the proposal to increase the availability of information on the use of medicines in the paediatric sector to medical and health practitioners, including greater access to information on the EudraCT Database (1). It further recommends adopting a broader communication strategy that facilitates a safer and more effective use of medicines in children. |
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1.6

The EESC supports the proposal to increase the availability of information on the use of medicines in the paediatric sector to medical and health practitioners, including greater access to information on the EudraCT Database (1). It further recommends adopting a broader communication strategy that facilitates a safer and more effective use of medicines in children.

| 1.7 | The EESC considers it necessary to conduct a detailed study of the epidemiological situation for infants, therapeutic approaches and existing shortcomings in the availability of paediatric medicines, as well as a more detailed study of the paediatric use of so-called off-label prescriptions. |
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1.7

The EESC considers it necessary to conduct a detailed study of the epidemiological situation for infants, therapeutic approaches and existing shortcomings in the availability of paediatric medicines, as well as a more detailed study of the paediatric use of so-called off-label prescriptions.

| 1.8 | The EESC would therefore recommend that the Commission play an active role in setting up a network linking the relevant authorities and specialised research centres, in order to further our understanding of demand mechanisms for medicines and better therapeutic practice. |
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1.8

The EESC would therefore recommend that the Commission play an active role in setting up a network linking the relevant authorities and specialised research centres, in order to further our understanding of demand mechanisms for medicines and better therapeutic practice.

| 1.9 | Finally, the EESC hopes that cooperation with the WHO and the dialogue with the relevant international authorities can be stepped up in order to speed up authorisation procedures for paediatric medicines and avoid any duplication or futile repetition of clinical studies. |
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1.9

Finally, the EESC hopes that cooperation with the WHO and the dialogue with the relevant international authorities can be stepped up in order to speed up authorisation procedures for paediatric medicines and avoid any duplication or futile repetition of clinical studies.

2.   Introduction

| 2.1 | The paediatric population is a vulnerable group that differs from the adult population because of its specific developmental, physiological and psychological characteristics, which makes age and development related research of medicines particularly important. In contrast to the situation in adults, more than 50 % of the medicines used to treat the children of Europe have not been tested and are not authorised for use in children: the health and therefore quality of life of the children of Europe may suffer from a lack of testing and authorisation of medicines for their use. |
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2.1

The paediatric population is a vulnerable group that differs from the adult population because of its specific developmental, physiological and psychological characteristics, which makes age and development related research of medicines particularly important. In contrast to the situation in adults, more than 50 % of the medicines used to treat the children of Europe have not been tested and are not authorised for use in children: the health and therefore quality of life of the children of Europe may suffer from a lack of testing and authorisation of medicines for their use.

| 2.2 | Although there may be concerns voiced about conducting trials in the paediatric population, this has to be balanced by the ethical issues related to giving medicines to a population in which they have not been tested and therefore their effects, positive or negative, are unknown. In order to address the concerns about trials in children, the EU Directive on clinical trials (2) lays down specific requirements to protect children who take part in clinical trials in the EU. |
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2.2

Although there may be concerns voiced about conducting trials in the paediatric population, this has to be balanced by the ethical issues related to giving medicines to a population in which they have not been tested and therefore their effects, positive or negative, are unknown. In order to address the concerns about trials in children, the EU Directive on clinical trials (2) lays down specific requirements to protect children who take part in clinical trials in the EU.

| 2.3 | The general objectives of the proposal are:






  — | to increase the development of medicines for use in children; |
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2.3

The general objectives of the proposal are:

—

to increase the development of medicines for use in children;

| — | to ensure that medicines used to treat children undergo high quality research; |
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—

to ensure that medicines used to treat children undergo high quality research;

| — | to ensure that medicines used to treat children are appropriately authorised for use in children; |
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—

to ensure that medicines used to treat children are appropriately authorised for use in children;

| — | to improve the information available on the use of medicines in children, and; |
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—

to improve the information available on the use of medicines in children, and;

| — | to achieve these objectives without subjecting children to unnecessary clinical trials and in full compliance with the EU Clinical Trials Directive. |
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—

to achieve these objectives without subjecting children to unnecessary clinical trials and in full compliance with the EU Clinical Trials Directive.

| 2.4 | The proposal includes a number of measures to achieve these objectives. The most significant are the following: |
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2.4

The proposal includes a number of measures to achieve these objectives. The most significant are the following:

| 2.4.1 | Setting up a Paediatric Committee within the European Medicines Agency (EMEA). The Paediatric Committee should be responsible for the assessment and agreement of paediatric investigation plans and for the relevant system of waivers and deferrals. It should also be responsible for assessing the compliance of dossiers with approved paediatric investigation plans and existing Community legislation; adopting an inventory of therapeutic needs in the paediatric population, and improving the information available on the safe use of medicines in various paediatric fields, in order, inter alia, to avoid duplicating or conducting unnecessary studies. |
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2.4.1

Setting up a Paediatric Committee within the European Medicines Agency (EMEA). The Paediatric Committee should be responsible for the assessment and agreement of paediatric investigation plans and for the relevant system of waivers and deferrals. It should also be responsible for assessing the compliance of dossiers with approved paediatric investigation plans and existing Community legislation; adopting an inventory of therapeutic needs in the paediatric population, and improving the information available on the safe use of medicines in various paediatric fields, in order, inter alia, to avoid duplicating or conducting unnecessary studies.

| 2.4.2 | The studies in children are to be based on a paediatric investigation plan approved by the Paediatric Committee. When assessing such plans the Paediatric Committee will take into consideration two overarching principles: that studies should only be performed if there is a potential therapeutic benefit to children (and avoiding duplication of studies). The requirements for studies in children should not delay the authorisation of medicines for other populations. |
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2.4.2

The studies in children are to be based on a paediatric investigation plan approved by the Paediatric Committee. When assessing such plans the Paediatric Committee will take into consideration two overarching principles: that studies should only be performed if there is a potential therapeutic benefit to children (and avoiding duplication of studies). The requirements for studies in children should not delay the authorisation of medicines for other populations.

| 2.4.3 | All studies performed in accordance with a completed, agreed paediatric investigation plan are to be presented at the time of application for authorisation for new active ingredients, new indications, new pharmaceutical forms or new routes of administration for an authorised medicine, unless a waiver or a deferral has been granted by the Paediatric Committee. |
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2.4.3

All studies performed in accordance with a completed, agreed paediatric investigation plan are to be presented at the time of application for authorisation for new active ingredients, new indications, new pharmaceutical forms or new routes of administration for an authorised medicine, unless a waiver or a deferral has been granted by the Paediatric Committee.

| 2.4.4 | In order to establish a vehicle for providing incentives for off-patent medicines, a new type of marketing authorisation, PUMA, is proposed. It will utilise existing marketing authorisation procedures but is specifically for medicinal products developed exclusively for use in children. |
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2.4.4

In order to establish a vehicle for providing incentives for off-patent medicines, a new type of marketing authorisation, PUMA, is proposed. It will utilise existing marketing authorisation procedures but is specifically for medicinal products developed exclusively for use in children.

| 2.4.5 | To increase the availability of medicines for children across the Community, because the requirements in the proposals are linked to Community-wide rewards and to prevent the distortion of free trade within the Community, it is proposed that an application for a marketing authorisation including at least one paediatric indication based on the results of an agreed paediatric investigation plan will have access to the centralised Community procedure. |
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2.4.5

To increase the availability of medicines for children across the Community, because the requirements in the proposals are linked to Community-wide rewards and to prevent the distortion of free trade within the Community, it is proposed that an application for a marketing authorisation including at least one paediatric indication based on the results of an agreed paediatric investigation plan will have access to the centralised Community procedure.

| 2.4.6 | For new medicines and for products covered by a patent or a Supplementary Protection Certificate (SPC), if all the measures included in the agreed paediatric investigation plan are complied with, if the product is authorised in all Member States and if relevant information on the results of studies is included in product information, the six-month SPC extension will be granted. |
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2.4.6

For new medicines and for products covered by a patent or a Supplementary Protection Certificate (SPC), if all the measures included in the agreed paediatric investigation plan are complied with, if the product is authorised in all Member States and if relevant information on the results of studies is included in product information, the six-month SPC extension will be granted.

| 2.4.7 | Similar incentives are proposed for orphan medicinal products, for which, provided that the requirements for data on use in children are fully met, the usual ten-year market exclusivity is extended by two years. |
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2.4.7

Similar incentives are proposed for orphan medicinal products, for which, provided that the requirements for data on use in children are fully met, the usual ten-year market exclusivity is extended by two years.

| 2.4.8 | Products with existing marketing authorisation, will benefit from the data protection associated with a new marketing authorisation (PUMA). |
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2.4.8

Products with existing marketing authorisation, will benefit from the data protection associated with a new marketing authorisation (PUMA).

| 2.5 | The Clinical Trials Directive establishes a Community database of clinical trials (EudraCT). It is proposed to build onto this database an information resource of all ongoing and terminated paediatric studies conducted both in the Community and in third countries. |
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2.5

The Clinical Trials Directive establishes a Community database of clinical trials (EudraCT). It is proposed to build onto this database an information resource of all ongoing and terminated paediatric studies conducted both in the Community and in third countries.

| 2.6 | The Commission intends to examine the possibility of setting up a paediatric study programme: Medicines Investigation for the Children of Europe (MICE), taking into consideration existing Community Programmes. |
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2.6

The Commission intends to examine the possibility of setting up a paediatric study programme: Medicines Investigation for the Children of Europe (MICE), taking into consideration existing Community Programmes.

| 2.7 | Establishing a Community network has also been proposed. The network would link together national networks and clinical trial centres in order to build up the necessary competences at a European level and to facilitate the implementation of studies, to increase cooperation and avoid duplication of studies. |
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2.7

Establishing a Community network has also been proposed. The network would link together national networks and clinical trial centres in order to build up the necessary competences at a European level and to facilitate the implementation of studies, to increase cooperation and avoid duplication of studies.

| 2.8 | The proposal is based on Article 95 of the EC Treaty. Article 95, which prescribes the codecision procedure described in Article 251, is the legal basis for achieving the aims set out in Article 14 of the Treaty, which includes the free movement of goods (Article 14(2)), in this case human medicinal products. |
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2.8

The proposal is based on Article 95 of the EC Treaty. Article 95, which prescribes the codecision procedure described in Article 251, is the legal basis for achieving the aims set out in Article 14 of the Treaty, which includes the free movement of goods (Article 14(2)), in this case human medicinal products.

3.   General comments

3.1   Safeguarding paediatric health and clinical trials in children

| 3.1.1 | The Committee considers the protection of the paediatric population to be a top priority, insofar as it is a vulnerable group with specific developmental, physiological and psychological characteristics. If this fundamental objective is to be pursued in the field of paediatric pharmaceuticals, the following conditions must be fulfilled:






  — | only necessary clinical trials in children are to be conducted, and futile duplication should be avoided; |
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3.1.1

The Committee considers the protection of the paediatric population to be a top priority, insofar as it is a vulnerable group with specific developmental, physiological and psychological characteristics. If this fundamental objective is to be pursued in the field of paediatric pharmaceuticals, the following conditions must be fulfilled:

—

only necessary clinical trials in children are to be conducted, and futile duplication should be avoided;

| — | clinical tests must be adequately controlled, monitored, and conducted in accordance with the ethical imperative to provide maximum protection for the paediatric patient; |
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—

clinical tests must be adequately controlled, monitored, and conducted in accordance with the ethical imperative to provide maximum protection for the paediatric patient;

| — | adequate information and communication processes must guarantee a deeper understanding of recommended therapeutic approaches for this group; |
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adequate information and communication processes must guarantee a deeper understanding of recommended therapeutic approaches for this group;

| — | active pharmacovigilance mechanisms should facilitate the continual and scientifically grounded updating of paediatric therapeutic practice. |
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—

active pharmacovigilance mechanisms should facilitate the continual and scientifically grounded updating of paediatric therapeutic practice.

| 3.1.2 | The EESC therefore considers that the decision to require and conduct clinical studies should be based on clearly defined needs supported by research. It should therefore be verified that:






  — | existing information on the pharmaceutical product does not adequately ensure safe and effective use in children (3); |
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3.1.2

The EESC therefore considers that the decision to require and conduct clinical studies should be based on clearly defined needs supported by research. It should therefore be verified that:

—

existing information on the pharmaceutical product does not adequately ensure safe and effective use in children (3);

| — | the level of (current or potential) use in children is substantial (4); |
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the level of (current or potential) use in children is substantial (4);

| — | the medicine is likely to have benefits; |
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—

the medicine is likely to have benefits;

| — | the additional scientific and medical information acquired through the use of a medicine with existing authorisation implies benefits for paediatric use. |
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—

the additional scientific and medical information acquired through the use of a medicine with existing authorisation implies benefits for paediatric use.

| 3.1.3 | In view of the above, the EESC believes that it would be appropriate for the ethical standards and specific regulations for protecting minors laid down in the Directive on the implementation of good clinical practice in the conduct of clinical trials (5) to be mentioned in the Directive's articles and not only in the recitals. The Paediatric Committee's general criteria for approving the paediatric investigation plan (PIP) should take account of the recommendations of the relevant International Conference on Harmonisation (6), and should comply with directive 2001/20/EC on clinical trials in order to ensure compliance with the ethical conditions for the trials themselves. |
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3.1.3

In view of the above, the EESC believes that it would be appropriate for the ethical standards and specific regulations for protecting minors laid down in the Directive on the implementation of good clinical practice in the conduct of clinical trials (5) to be mentioned in the Directive's articles and not only in the recitals. The Paediatric Committee's general criteria for approving the paediatric investigation plan (PIP) should take account of the recommendations of the relevant International Conference on Harmonisation (6), and should comply with directive 2001/20/EC on clinical trials in order to ensure compliance with the ethical conditions for the trials themselves.

| 3.1.4 | The EESC therefore insists that the proposal's true focus should be the paediatric patient and his health needs. It is from this perspective that we should deal with issues relating to the medical approach and consequently the clinical and therapeutic information that should be available to medical personnel and, for the purposes of their specific competences, to other health care professionals to enable them to treat a specific patient requiring their care. |
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3.1.4

The EESC therefore insists that the proposal's true focus should be the paediatric patient and his health needs. It is from this perspective that we should deal with issues relating to the medical approach and consequently the clinical and therapeutic information that should be available to medical personnel and, for the purposes of their specific competences, to other health care professionals to enable them to treat a specific patient requiring their care.

3.2   Basic information gaps affecting the use of medicines

| 3.2.1 | The EESC considers the assessment of the present situation, causes and risks to be insufficient. The EIA dedicates only a few pages to them and the explanatory memorandum of the proposal makes no reference to them whatsoever. |
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3.2.1

The EESC considers the assessment of the present situation, causes and risks to be insufficient. The EIA dedicates only a few pages to them and the explanatory memorandum of the proposal makes no reference to them whatsoever.

| 3.2.1.1 | It would have been appropriate to conduct a study on the epidemiological situation for infants and gaps in the existing therapeutic arsenal, thereby orientating research trends appropriately in order to identify research priorities to be supported through Community funding (within the framework of ongoing discussions on the 7th Research Framework Programme). In addition, such a study would have showcased the work of the CHMP Paediatric Expert Group, which has drawn up a list of 65 unpatented active ingredients to be treated as research and development priorities in paediatrics. It would also have facilitated and accelerated ongoing efforts to implement the abovementioned MICE paediatric study programme. |
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3.2.1.1

It would have been appropriate to conduct a study on the epidemiological situation for infants and gaps in the existing therapeutic arsenal, thereby orientating research trends appropriately in order to identify research priorities to be supported through Community funding (within the framework of ongoing discussions on the 7th Research Framework Programme). In addition, such a study would have showcased the work of the CHMP Paediatric Expert Group, which has drawn up a list of 65 unpatented active ingredients to be treated as research and development priorities in paediatrics. It would also have facilitated and accelerated ongoing efforts to implement the abovementioned MICE paediatric study programme.

| 3.2.1.2 | Since the return on investment is probable, the market for medicines to treat paediatric diseases with high incidence rates is substantial enough to motivate the pharmaceutical industry to develop new paediatric indications and adapt formulations for the paediatric population. However the cost of development for rarer diseases or diseases affecting specific sub age groups outweighs the return on investment. The industry (especially small/medium-sized European companies) cannot afford these costs without adequate incentives or research funding. It is precisely for these rarer diseases affecting specific sub groups that additional tools must be provided to compensate for the high cost, in terms of human, time and financial resources, of investing in paediatric research. |
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3.2.1.2

Since the return on investment is probable, the market for medicines to treat paediatric diseases with high incidence rates is substantial enough to motivate the pharmaceutical industry to develop new paediatric indications and adapt formulations for the paediatric population. However the cost of development for rarer diseases or diseases affecting specific sub age groups outweighs the return on investment. The industry (especially small/medium-sized European companies) cannot afford these costs without adequate incentives or research funding. It is precisely for these rarer diseases affecting specific sub groups that additional tools must be provided to compensate for the high cost, in terms of human, time and financial resources, of investing in paediatric research.

| 3.2.2 | The Committee believes that it would also have been appropriate to conduct a more detailed study on the paediatric use of so-called off-label prescriptions. Such a study would have established the extent of the practice and the precise negative effects associated with the inappropriate use of medicinal products. A better insight into the situation could have facilitated a more substantiated analysis of possible remedies and incentives to be applied. |
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3.2.2

The Committee believes that it would also have been appropriate to conduct a more detailed study on the paediatric use of so-called off-label prescriptions. Such a study would have established the extent of the practice and the precise negative effects associated with the inappropriate use of medicinal products. A better insight into the situation could have facilitated a more substantiated analysis of possible remedies and incentives to be applied.

| 3.2.2.1 | The EESC realises that the relevant information is heterogeneous, and has been gathered in the Member States by different bodies with extremely diverse, incomplete, and distortive operational procedures. As a consequence, it is doubtful whether the data will lend itself to comparison or the extrapolation of general observations that are scientifically grounded. Despite the limitations, a study of prescriptions and the use of medicines would provide a preliminary, albeit schematic, overview of obvious discrepancies in terms of the scope and use of therapeutic classes and the active ingredients used, sometimes without scientifically grounded therapeutic justification. |
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3.2.2.1

The EESC realises that the relevant information is heterogeneous, and has been gathered in the Member States by different bodies with extremely diverse, incomplete, and distortive operational procedures. As a consequence, it is doubtful whether the data will lend itself to comparison or the extrapolation of general observations that are scientifically grounded. Despite the limitations, a study of prescriptions and the use of medicines would provide a preliminary, albeit schematic, overview of obvious discrepancies in terms of the scope and use of therapeutic classes and the active ingredients used, sometimes without scientifically grounded therapeutic justification.

| 3.2.2.2 | Another discernible shortcoming lies in the analysis of differences in medical practice in Member States, which is undoubtedly relevant on the basis of the data gathered on the classes of medicines prescribed for various diseases. The EESC not only considers that such a study can no longer be postponed, it also believes that it would be particularly effective in safeguarding public health, which is a primary asset. Bearing in mind that vocational training, health care procedures, and the administration of treatment and medicine are Member State competences, the EESC hopes that the open method of coordination will also be applied to pharmaceuticals. It also hopes that, in the interests of public health, a set of well-formulated and coordinated guidelines on best medical practice in various therapeutic fields and patient population strata, including the paediatric population, will be drafted in good time, with the active support of medical and patient associations. |
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3.2.2.2

Another discernible shortcoming lies in the analysis of differences in medical practice in Member States, which is undoubtedly relevant on the basis of the data gathered on the classes of medicines prescribed for various diseases. The EESC not only considers that such a study can no longer be postponed, it also believes that it would be particularly effective in safeguarding public health, which is a primary asset. Bearing in mind that vocational training, health care procedures, and the administration of treatment and medicine are Member State competences, the EESC hopes that the open method of coordination will also be applied to pharmaceuticals. It also hopes that, in the interests of public health, a set of well-formulated and coordinated guidelines on best medical practice in various therapeutic fields and patient population strata, including the paediatric population, will be drafted in good time, with the active support of medical and patient associations.

| 3.2.3 | A parallel study should have been conducted on the findings of monitoring and pharmacovigilance mechanisms, an area where European legislation is undoubtedly in the vanguard. Clearly, pharmacovigilance networks should have already identified the presence or absence of cases of inappropriate use and, indirectly, therapeutic shortcomings, for which, the EU authorities, in cooperation with the relevant national authorities, could already have established an appropriate information policy. |
| --- | --- |

3.2.3

A parallel study should have been conducted on the findings of monitoring and pharmacovigilance mechanisms, an area where European legislation is undoubtedly in the vanguard. Clearly, pharmacovigilance networks should have already identified the presence or absence of cases of inappropriate use and, indirectly, therapeutic shortcomings, for which, the EU authorities, in cooperation with the relevant national authorities, could already have established an appropriate information policy.

| 3.2.4 | Given the widespread use of off-label prescriptions, we need to question the relative efficacy of an approach based on authorisation procedures (as recommended in the proposal under consideration). The Committee believes that it would have been advisable to adopt parallel actions to encourage good practice in the use of paediatric pharmaceuticals by doctors, health operators in general, and parents, whose understandable anxieties to alleviate their children's suffering often put the doctor under pressure to prescribe short-term remedies that do not always meet the young patient's real needs. |
| --- | --- |

3.2.4

Given the widespread use of off-label prescriptions, we need to question the relative efficacy of an approach based on authorisation procedures (as recommended in the proposal under consideration). The Committee believes that it would have been advisable to adopt parallel actions to encourage good practice in the use of paediatric pharmaceuticals by doctors, health operators in general, and parents, whose understandable anxieties to alleviate their children's suffering often put the doctor under pressure to prescribe short-term remedies that do not always meet the young patient's real needs.

| 3.2.5 | Another aspect that has not been taken into proper account is the importance of the pharmacist's role in purchase decisions and in providing advice on the appropriate use of medicines. This category of health professional could provide valuable support for an active education and pharmacovigilance policy. |
| --- | --- |

3.2.5

Another aspect that has not been taken into proper account is the importance of the pharmacist's role in purchase decisions and in providing advice on the appropriate use of medicines. This category of health professional could provide valuable support for an active education and pharmacovigilance policy.

| 3.2.6 | It would also be worth deepening the analysis of available data on safe use, especially pharmacovigilance, in order to assess whether the different prescriptive approaches applied in various EU Member States and the different pharmaceutical classifications have different impacts in terms of inappropriate use and adverse reactions. |
| --- | --- |

3.2.6

It would also be worth deepening the analysis of available data on safe use, especially pharmacovigilance, in order to assess whether the different prescriptive approaches applied in various EU Member States and the different pharmaceutical classifications have different impacts in terms of inappropriate use and adverse reactions.

| 3.2.7 | The EESC realises that these matters go beyond the primary scope of the proposal under consideration but would nevertheless recommend that the Commission play an active role in establishing a network linking the authorities to specialist research centres in order to increase our understanding of the mechanisms that influence demand for pharmaceuticals, their rational use, best therapeutic practice, and other similar aspects, thereby facilitating the harmonisation of the internal market for pharmaceuticals too. |
| --- | --- |

3.2.7

The EESC realises that these matters go beyond the primary scope of the proposal under consideration but would nevertheless recommend that the Commission play an active role in establishing a network linking the authorities to specialist research centres in order to increase our understanding of the mechanisms that influence demand for pharmaceuticals, their rational use, best therapeutic practice, and other similar aspects, thereby facilitating the harmonisation of the internal market for pharmaceuticals too.

3.3   The paediatric committee and clinical trials

| 3.3.1 | The EESC agrees with the proposal to establish a Paediatric Committee within the EMEA. The responsibilities of this committee are extremely diverse and range from the assessment of the content and modalities of all paediatric investigation plans to the preventive assessment of the potential benefits for the paediatric population; from scientific support for drafting such plans in compliance with good clinical trials practice to providing a therapeutic inventory, and support and consultancy services for setting up a European network of researchers, and centres with specific competencies in conducting studies in the paediatric population. In addition to the abovementioned responsibilities, the committee will also be responsible for avoiding the duplication of studies. |
| --- | --- |

3.3.1

The EESC agrees with the proposal to establish a Paediatric Committee within the EMEA. The responsibilities of this committee are extremely diverse and range from the assessment of the content and modalities of all paediatric investigation plans to the preventive assessment of the potential benefits for the paediatric population; from scientific support for drafting such plans in compliance with good clinical trials practice to providing a therapeutic inventory, and support and consultancy services for setting up a European network of researchers, and centres with specific competencies in conducting studies in the paediatric population. In addition to the abovementioned responsibilities, the committee will also be responsible for avoiding the duplication of studies.

| 3.3.2 | In view of the broad range of the Paediatric Committee's responsibilities, the EESC does not consider the competences set out in Article 4(1) to be sufficient, especially with regard to pre-clinical and clinical development methodology (in particular, experts in pharmacology, toxicology, pharmacocinetics, biometrics, and biostatistics), specialists (including neonatologists) in the paediatric fields corresponding to the most significant therapeutic groups, and experts in pharmacoepidemiology. Furthermore, the EESC would recommend that the number of experts designated by the Commission be increased to include the representatives of health care facilities for children. |
| --- | --- |

3.3.2

In view of the broad range of the Paediatric Committee's responsibilities, the EESC does not consider the competences set out in Article 4(1) to be sufficient, especially with regard to pre-clinical and clinical development methodology (in particular, experts in pharmacology, toxicology, pharmacocinetics, biometrics, and biostatistics), specialists (including neonatologists) in the paediatric fields corresponding to the most significant therapeutic groups, and experts in pharmacoepidemiology. Furthermore, the EESC would recommend that the number of experts designated by the Commission be increased to include the representatives of health care facilities for children.

| 3.3.3 | The EESC notes that the paediatric population is defined as ‘that part of the population aged between birth and 18 years’ (Article 2) and realises that, to date, not even a standard ICH definition has been agreed upon. The EESC hopes that in conducting specific studies for each subpopulation, the Paediatric Committee will avoid subjecting to unnecessary studies a population whose constitution and age do not expose them to risk. |
| --- | --- |

3.3.3

The EESC notes that the paediatric population is defined as ‘that part of the population aged between birth and 18 years’ (Article 2) and realises that, to date, not even a standard ICH definition has been agreed upon. The EESC hopes that in conducting specific studies for each subpopulation, the Paediatric Committee will avoid subjecting to unnecessary studies a population whose constitution and age do not expose them to risk.

| 3.3.4 | The EESC approves of the principle that paediatric investigation plans should be submitted during the development phase of a new pharmaceutical product and welcomes the possibility of continued dialogue between the proposer and the Paediatric Committee. The EESC is nevertheless concerned by the request to submit them ‘unless otherwise justified, not later than upon completion of the human pharmaco-kinetic studies’ (Article 17(1)). In fact, during this phase, safety trials in the adult patient population will not have been concluded, and consequently the safety profile will not be clearly defined. It would therefore not be possible to draw up a comprehensive, well-formulated paediatric investigation plan (especially for the various subcategories of the paediatric population). This would incur the risk of starting unnecessary studies or repeating studies with different dosages from those initially foreseen. |
| --- | --- |

3.3.4

The EESC approves of the principle that paediatric investigation plans should be submitted during the development phase of a new pharmaceutical product and welcomes the possibility of continued dialogue between the proposer and the Paediatric Committee. The EESC is nevertheless concerned by the request to submit them ‘unless otherwise justified, not later than upon completion of the human pharmaco-kinetic studies’ (Article 17(1)). In fact, during this phase, safety trials in the adult patient population will not have been concluded, and consequently the safety profile will not be clearly defined. It would therefore not be possible to draw up a comprehensive, well-formulated paediatric investigation plan (especially for the various subcategories of the paediatric population). This would incur the risk of starting unnecessary studies or repeating studies with different dosages from those initially foreseen.

| 3.3.5 | The EESC is also concerned that the request will delay the development of new medicines for the adult population, whereas at a more advanced stage of development it would be easier to identify at-risk populations, including the paediatric population, focus research efforts on important information gaps and put forward better targeted plans for active pharmacovigilance. |
| --- | --- |

3.3.5

The EESC is also concerned that the request will delay the development of new medicines for the adult population, whereas at a more advanced stage of development it would be easier to identify at-risk populations, including the paediatric population, focus research efforts on important information gaps and put forward better targeted plans for active pharmacovigilance.

| 3.3.6 | The EESC also expresses concern at the proposal that ‘any studies completed before this proposed legislation is adopted will not be eligible for the rewards and incentives proposed for the EU. They will, however, be taken into account for the requirements contained in the proposals and it will be mandatory for companies to submit the studies to the competent authorities once this proposed legislation is adopted’ (7). This proposal risks slowing down or reducing the number of ongoing or projected studies by companies, while waiting for the final version of the regulation to be implemented throughout the European Union. |
| --- | --- |

3.3.6

The EESC also expresses concern at the proposal that ‘any studies completed before this proposed legislation is adopted will not be eligible for the rewards and incentives proposed for the EU. They will, however, be taken into account for the requirements contained in the proposals and it will be mandatory for companies to submit the studies to the competent authorities once this proposed legislation is adopted’ (7). This proposal risks slowing down or reducing the number of ongoing or projected studies by companies, while waiting for the final version of the regulation to be implemented throughout the European Union.

3.4   Incentive measures

| 3.4.1 | The EESC agrees that there is a need to create appropriate incentives to ensure that paediatric clinical trials are conducted in accordance with principles of best practice and ethical standards, and that paediatricians, paediatric clinics and wards are provided with an enhanced therapeutic arsenal, including safe, effective, high quality pharmaceuticals that have been conceived and designed for the paediatric population, following the logic of the terms of the Council Resolution of 14 December 2000 and bearing in mind experience gained in the United States in the light of specific legislation (8) adopted in that country. |
| --- | --- |

3.4.1

The EESC agrees that there is a need to create appropriate incentives to ensure that paediatric clinical trials are conducted in accordance with principles of best practice and ethical standards, and that paediatricians, paediatric clinics and wards are provided with an enhanced therapeutic arsenal, including safe, effective, high quality pharmaceuticals that have been conceived and designed for the paediatric population, following the logic of the terms of the Council Resolution of 14 December 2000 and bearing in mind experience gained in the United States in the light of specific legislation (8) adopted in that country.

| 3.4.2 | The time and resources required for studies of this type, as well as sensitive ethical and compliance issues relating to paediatric patients, explain why market forces have not been sufficient to develop pharmaceutical products that may be specifically categorised as ‘paediatric’. In view of this fact, the EESC considers that the incentives and rewards granted in certain situations are not always sufficient. |
| --- | --- |

3.4.2

The time and resources required for studies of this type, as well as sensitive ethical and compliance issues relating to paediatric patients, explain why market forces have not been sufficient to develop pharmaceutical products that may be specifically categorised as ‘paediatric’. In view of this fact, the EESC considers that the incentives and rewards granted in certain situations are not always sufficient.

| 3.4.2.1 | In particular, the six-month extension of the Supplementary Protection Certificate does not appear to adequately compensate for the higher costs, risks and delays in completing the dossier and obtaining authorisation that paediatric studies could imply for a new product. Admittedly, appropriate waivers and deferrals have been foreseen. Nevertheless, if paediatric research were made compulsory, the commitment would become particularly expensive and time-consuming. |
| --- | --- |

3.4.2.1

In particular, the six-month extension of the Supplementary Protection Certificate does not appear to adequately compensate for the higher costs, risks and delays in completing the dossier and obtaining authorisation that paediatric studies could imply for a new product. Admittedly, appropriate waivers and deferrals have been foreseen. Nevertheless, if paediatric research were made compulsory, the commitment would become particularly expensive and time-consuming.

| 3.4.2.2 | The EESC notes with concern the current tendency to focus research and development efforts on active ingredients with broad market potential, which absorb a growing proportion of investment in research and development, whereas ingredients with smaller or niche market potential are secondary priorities. If this mechanism were applied to new paediatric medicines, it would be impossible to fulfil the objective of obtaining a genuinely innovative and sufficiently diverse arsenal of paediatric medicines within a reasonable timeframe. The EESC advocates that such risks be carefully monitored and specifically assessed in the context of the proposed general report on the experience gained from the application of the regulation. |
| --- | --- |

3.4.2.2

The EESC notes with concern the current tendency to focus research and development efforts on active ingredients with broad market potential, which absorb a growing proportion of investment in research and development, whereas ingredients with smaller or niche market potential are secondary priorities. If this mechanism were applied to new paediatric medicines, it would be impossible to fulfil the objective of obtaining a genuinely innovative and sufficiently diverse arsenal of paediatric medicines within a reasonable timeframe. The EESC advocates that such risks be carefully monitored and specifically assessed in the context of the proposed general report on the experience gained from the application of the regulation.

| 3.4.3 | The new procedure outlined in Title III Chapter II (PUMA) for medicines with marketing authorisation that are not protected by a patent or supplementary protection certificate constitutes an important and viable innovation for available paediatric use marketing authorisation procedures. The possibility of following centralised procedures even if the initial authorisation for a pharmaceutical product for adults has been obtained through national procedures constitutes a genuine opportunity. |
| --- | --- |

3.4.3

The new procedure outlined in Title III Chapter II (PUMA) for medicines with marketing authorisation that are not protected by a patent or supplementary protection certificate constitutes an important and viable innovation for available paediatric use marketing authorisation procedures. The possibility of following centralised procedures even if the initial authorisation for a pharmaceutical product for adults has been obtained through national procedures constitutes a genuine opportunity.

| 3.4.4 | Welcome progress has been achieved in terms of procedural flexibility, in particular, the possibility of referring to existing data in an authorised medicine's dossier (Article 31(4)) and the possibility of using a known brand name by simply adding the letter ‘P’ in superscript (Article 31(5)). In such instances, the EESC recommends that the pharmaceutical form and dosage should also be prominently displayed on the packaging if they have been adapted for paediatric use. |
| --- | --- |

3.4.4

Welcome progress has been achieved in terms of procedural flexibility, in particular, the possibility of referring to existing data in an authorised medicine's dossier (Article 31(4)) and the possibility of using a known brand name by simply adding the letter ‘P’ in superscript (Article 31(5)). In such instances, the EESC recommends that the pharmaceutical form and dosage should also be prominently displayed on the packaging if they have been adapted for paediatric use.

| 3.4.5 | However, the EESC notes that this flexibility is countered by a certain rigidity which could act as a disincentive to paediatric research, for instance, the obligation to obtain authorisation in all Member States in order to benefit from the extension of the Supplementary Protection Certificate (SPC). The Committee considers that this provision is excessive, especially in an enlarged Union. It believes that only large multinationals producing pharmaceuticals of guaranteed success will actually benefit. |
| --- | --- |

3.4.5

However, the EESC notes that this flexibility is countered by a certain rigidity which could act as a disincentive to paediatric research, for instance, the obligation to obtain authorisation in all Member States in order to benefit from the extension of the Supplementary Protection Certificate (SPC). The Committee considers that this provision is excessive, especially in an enlarged Union. It believes that only large multinationals producing pharmaceuticals of guaranteed success will actually benefit.

| 3.4.6 | The assertion that all data relating to development should be disclosed is also cause for concern since it changes existing legislation on the disclosure of information and data relating to marketing authorisation dossiers. This approach would also appear to act as a disincentive to launching research into new types of drugs and the appropriate dosage for paediatric use of established medicinal products that are already marketed. |
| --- | --- |

3.4.6

The assertion that all data relating to development should be disclosed is also cause for concern since it changes existing legislation on the disclosure of information and data relating to marketing authorisation dossiers. This approach would also appear to act as a disincentive to launching research into new types of drugs and the appropriate dosage for paediatric use of established medicinal products that are already marketed.

3.5   Information on the use of medicines for children

| 3.5.1 | One of the proposal's objectives is to increase the availability of information on the use of medicines in the paediatric sector. The EESC agrees that the increased availability of information could facilitate the safe and effective use of medicines in children and thereby promote public health. Furthermore, the availability of information could help to avoid duplicating studies or carrying out unnecessary studies on children. |
| --- | --- |

3.5.1

One of the proposal's objectives is to increase the availability of information on the use of medicines in the paediatric sector. The EESC agrees that the increased availability of information could facilitate the safe and effective use of medicines in children and thereby promote public health. Furthermore, the availability of information could help to avoid duplicating studies or carrying out unnecessary studies on children.

| 3.5.2 | For this reason, the EESC also supports the proposal to use the Community clinical trials database (EudraCT), established by the Clinical Trials Directive, as a foundation for an information resource on all ongoing and terminated paediatric studies conducted in the Community and third countries. |
| --- | --- |

3.5.2

For this reason, the EESC also supports the proposal to use the Community clinical trials database (EudraCT), established by the Clinical Trials Directive, as a foundation for an information resource on all ongoing and terminated paediatric studies conducted in the Community and third countries.

| 3.5.2.1 | Nevertheless, the arrangements for using this database are not sufficiently clear: who should have access, what data should be disclosed or withheld on grounds of individual privacy protection, or the need to protect sensitive or confidential industrial information. |
| --- | --- |

3.5.2.1

Nevertheless, the arrangements for using this database are not sufficiently clear: who should have access, what data should be disclosed or withheld on grounds of individual privacy protection, or the need to protect sensitive or confidential industrial information.

| 3.5.2.2 | Similarly, no clear line has been drawn between available technical information (available to health professionals) and information to be made available to the general public in the package leaflet. In this segment of the paediatric market, comprehensible and transparent package leaflets play a particularly important role in preventing behaviour that could potentially harm the paediatric patient. |
| --- | --- |

3.5.2.2

Similarly, no clear line has been drawn between available technical information (available to health professionals) and information to be made available to the general public in the package leaflet. In this segment of the paediatric market, comprehensible and transparent package leaflets play a particularly important role in preventing behaviour that could potentially harm the paediatric patient.

| 3.5.3 | Title VI on Communication and Coordination outlines a series of actions and obligations (for instance, the fact that available data on all existing uses of medicinal products in the paediatric population must be collected by the Member States within two years of the entry into force of the Regulation — Article 41). However, it does not tackle the issue of understanding the proper use of pharmaceutical products in the paediatric sector and the policies to be adopted vis-à-vis health professionals and the general public. |
| --- | --- |

3.5.3

Title VI on Communication and Coordination outlines a series of actions and obligations (for instance, the fact that available data on all existing uses of medicinal products in the paediatric population must be collected by the Member States within two years of the entry into force of the Regulation — Article 41). However, it does not tackle the issue of understanding the proper use of pharmaceutical products in the paediatric sector and the policies to be adopted vis-à-vis health professionals and the general public.

4.   Concluding comments

| 4.1 | The EESC reiterates its fundamental agreement with the proposed regulation, but wonders whether its legal basis, more specifically, Article 95 of the EC Treaty for implementing objectives established under Article 14(2) (free circulation of goods), is the most appropriate basis in an area of implementation with significant public health implications. Although all legislation adopted for the pharmaceutical sector is based on the abovementioned article, it should be borne in mind that, in the case under consideration, the fundamental objective is the health and protection of the paediatric population. |
| --- | --- |

4.1

The EESC reiterates its fundamental agreement with the proposed regulation, but wonders whether its legal basis, more specifically, Article 95 of the EC Treaty for implementing objectives established under Article 14(2) (free circulation of goods), is the most appropriate basis in an area of implementation with significant public health implications. Although all legislation adopted for the pharmaceutical sector is based on the abovementioned article, it should be borne in mind that, in the case under consideration, the fundamental objective is the health and protection of the paediatric population.

| 4.2 | The EESC hopes the Commission will soon draw up another proposal that focuses on the demand for pharmaceuticals, rather than on supply. The objective would be to create an operational tool that facilitates and encourages data collection and dissemination on the availability and use of medicines; setting up epidemiological and prescriptive use data bases; as well as establishing guidelines through the increased involvement of health professionals and patient associations, thereby simultaneously extending the application of the open method of coordination to this sector. |
| --- | --- |

4.2

The EESC hopes the Commission will soon draw up another proposal that focuses on the demand for pharmaceuticals, rather than on supply. The objective would be to create an operational tool that facilitates and encourages data collection and dissemination on the availability and use of medicines; setting up epidemiological and prescriptive use data bases; as well as establishing guidelines through the increased involvement of health professionals and patient associations, thereby simultaneously extending the application of the open method of coordination to this sector.

| 4.3 | The communication and coordination process in Title VI seems somewhat restrictive. The EESC recommends that a broader communication strategy resulting in a more rational use of medicine in paediatrics should be prepared and implemented. Furthermore, doctors and health care professionals should be supplied with all necessary information tools for their purposes. Following the same line of thought, we should reconsider whether, and under what procedures, scientific researchers and doctors should have access to the information on clinical trials that is available on the European Clinical Trials Database (EudraCT). |
| --- | --- |

4.3

The communication and coordination process in Title VI seems somewhat restrictive. The EESC recommends that a broader communication strategy resulting in a more rational use of medicine in paediatrics should be prepared and implemented. Furthermore, doctors and health care professionals should be supplied with all necessary information tools for their purposes. Following the same line of thought, we should reconsider whether, and under what procedures, scientific researchers and doctors should have access to the information on clinical trials that is available on the European Clinical Trials Database (EudraCT).

| 4.4 | The EESC welcomes the proposal to set up a paediatric study programme, Medicines Investigation for Children in Europe (MICE), to provide Community funding for research carried out by groups, companies, and paediatric hospital networks on the paediatric use of unpatented medicines, or observational or cohort studies in their post-registration phase. The EESC would, however, have preferred orientation guidelines and a more precise definition of the Paediatric Committee's role in this respect. This would avoid lengthy discussions as to who should identify priority therapeutic fields requiring further information on paediatric use, the assessment of priority needs and the specific studies to be conducted, particularly in view of the considerable differences in current medical practice in Member States. |
| --- | --- |

4.4

The EESC welcomes the proposal to set up a paediatric study programme, Medicines Investigation for Children in Europe (MICE), to provide Community funding for research carried out by groups, companies, and paediatric hospital networks on the paediatric use of unpatented medicines, or observational or cohort studies in their post-registration phase. The EESC would, however, have preferred orientation guidelines and a more precise definition of the Paediatric Committee's role in this respect. This would avoid lengthy discussions as to who should identify priority therapeutic fields requiring further information on paediatric use, the assessment of priority needs and the specific studies to be conducted, particularly in view of the considerable differences in current medical practice in Member States.

| 4.5 | The EESC therefore recommends that these competences be specifically attributed to the Paediatric Committee under Article 7 of the regulation, in order to facilitate speedy implementation and ensure better coordination of all the Paediatric Committee's institutional activities. |
| --- | --- |

4.5

The EESC therefore recommends that these competences be specifically attributed to the Paediatric Committee under Article 7 of the regulation, in order to facilitate speedy implementation and ensure better coordination of all the Paediatric Committee's institutional activities.

| 4.6 | At the same time, the EESC hopes that, in establishing and implementing a European network of researchers and centres with specific roles to play in carrying out studies on the paediatric population under Article 43, the Paediatric Committee will not merely assume a supportive and advisory role for the agency. It should play an active part, with the possible support of a forum that brings experts from all Member States together, be they academics or paediatric sub-specialists. Furthermore, the EESC recommends including, should it be necessary to define specific research study protocols, researchers from companies involved in the protocol through their own products, insofar as they are best placed to know the specific features of these products. |
| --- | --- |

4.6

At the same time, the EESC hopes that, in establishing and implementing a European network of researchers and centres with specific roles to play in carrying out studies on the paediatric population under Article 43, the Paediatric Committee will not merely assume a supportive and advisory role for the agency. It should play an active part, with the possible support of a forum that brings experts from all Member States together, be they academics or paediatric sub-specialists. Furthermore, the EESC recommends including, should it be necessary to define specific research study protocols, researchers from companies involved in the protocol through their own products, insofar as they are best placed to know the specific features of these products.

| 4.7 | The fact that the Paediatric Committee's primary role is to approve paediatric investigation plans (PIP), which is at the very heart of the proposal leads the EESC to fear that the tendency to formalise clinical paediatric studies will prevail over the pursuit of some of the objectives, including ethical objectives, cited above, such as avoiding futile duplication or paediatric studies that are not genuinely necessary. |
| --- | --- |

4.7

The fact that the Paediatric Committee's primary role is to approve paediatric investigation plans (PIP), which is at the very heart of the proposal leads the EESC to fear that the tendency to formalise clinical paediatric studies will prevail over the pursuit of some of the objectives, including ethical objectives, cited above, such as avoiding futile duplication or paediatric studies that are not genuinely necessary.

| 4.8 | The EESC suggests that the need to analyse information on the EudraCT database and conduct a detailed assessment of the periodic safety update reports (established under the most recent legislative amendments) should be specifically included amongst the Committee's competences. The reports include epidemiological data, prescription surveys, and the results of published studies, thereby reducing the magnitude and duration of clinical studies, or in some cases making them redundant. |
| --- | --- |

4.8

The EESC suggests that the need to analyse information on the EudraCT database and conduct a detailed assessment of the periodic safety update reports (established under the most recent legislative amendments) should be specifically included amongst the Committee's competences. The reports include epidemiological data, prescription surveys, and the results of published studies, thereby reducing the magnitude and duration of clinical studies, or in some cases making them redundant.

| 4.9 | From a procedural point of view, it should be assumed that, should such documentation permit the assessment of safety data for existing medicines (obtained through pharmacovigilance, information reports and the periodic safety update reports) regarding formulations and dosage for paediatric use, it will be possible to adopt a shorter, simpler centralised procedure to amend appropriately the technical information in the package leaflet, rather than the PUMA procedure, which remains lengthy and expensive (9). |
| --- | --- |

4.9

From a procedural point of view, it should be assumed that, should such documentation permit the assessment of safety data for existing medicines (obtained through pharmacovigilance, information reports and the periodic safety update reports) regarding formulations and dosage for paediatric use, it will be possible to adopt a shorter, simpler centralised procedure to amend appropriately the technical information in the package leaflet, rather than the PUMA procedure, which remains lengthy and expensive (9).

| 4.10 | Also from the procedural point of view, the EESC considers that it is necessary to specify that in cases where grounds are established for adopting orphan medicine procedures for a subcategory of the paediatric population, the market authorisation holder may opt for either of the two procedures. |
| --- | --- |

4.10

Also from the procedural point of view, the EESC considers that it is necessary to specify that in cases where grounds are established for adopting orphan medicine procedures for a subcategory of the paediatric population, the market authorisation holder may opt for either of the two procedures.

| 4.11 | The EESC emphasises the importance of publishing research results and approved changes to the package leaflet, and including information for paediatric use for all unpatented medicines with the same active ingredients. |
| --- | --- |

4.11

The EESC emphasises the importance of publishing research results and approved changes to the package leaflet, and including information for paediatric use for all unpatented medicines with the same active ingredients.

| 4.12 | The EU is already the regulatory authority for the registration of pharmaceuticals in developing countries, and the WHO already consults it when assessing medicines that can be registered in such countries. It is to be hoped that an expeditious application of this regulation in the EU will also have a positive impact on paediatric therapies available in the least developed countries. The EESC hopes that constructive cooperation with the WHO will be further strengthened and that the Commission will pursue regular dialogue with all international authorities in order to speed up approval procedures for new substances and indications, dosages and formulations that are more appropriate for paediatric use, thereby avoiding any unnecessary duplication and repetition of clinical studies. |
| --- | --- |

4.12

The EU is already the regulatory authority for the registration of pharmaceuticals in developing countries, and the WHO already consults it when assessing medicines that can be registered in such countries. It is to be hoped that an expeditious application of this regulation in the EU will also have a positive impact on paediatric therapies available in the least developed countries. The EESC hopes that constructive cooperation with the WHO will be further strengthened and that the Commission will pursue regular dialogue with all international authorities in order to speed up approval procedures for new substances and indications, dosages and formulations that are more appropriate for paediatric use, thereby avoiding any unnecessary duplication and repetition of clinical studies.

Brussels, 11 May 2005

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

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(1)  European Clinical Trials Database

1

(2)  OJ L 121, 1.5.2001

2

(3)  In the USA, the FDA may require trials for paediatric use in cases where the inadequate labelling of a medicine on the market could expose patients to significant risk.

3

(4)  In the USA, the FDA defines ‘substantial’ as at least 50,000 patients. At this level, a company may be required to conduct clinical paediatric trials.

4

(5)  OJ L 121 of 1 May 2001

5

(6)  With particular reference to guideline ICH E 11, which states: ‘The ethical imperative to obtain knowledge of the effects of the medicinal products in paediatric patients has to be balanced against the ethical imperative to protect each paediatric patient in clinical trials’.

6

(7)  See the explanatory memorandum under Information on the use of medicines for children, p. 7

7

Information on the use of medicines for children,

(8)  Best Pharmaceuticals for Children Act, 1 April 2002, Public Law n. 107-109.

8

Best Pharmaceuticals for Children Act

(9)  A simplified mechanism of this type has already been adopted in the United States, where 33 products now include paediatric information in their leaflet as a result of post-registration clinical studies (since periodic safety update reports do not exist in the United States such studies were required), whereas 53 are authorised for exclusive paediatric use on the basis of a complete clinical study plan.

9

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| 27.10.2005 | EN | Official Journal of the European Union | C 267/9 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/9

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Opinion of the European Economic and Social Committee on Industrial Change in the Mechanical Engineering Sector

(2005/C 267/02)

On 1 July 2004 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an opinion on Industrial change in the mechanical engineering sector.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 27 April 2005. The rapporteur was Mr van Iersel and the co-rapporteur was Mr Castañeda.

At its 417th plenary session, held on 11 and 12 May 2005 (meeting of 11 May 2005), the European Economic and Social Committee adopted the following opinion by 211 votes to none with 4 abstentions.

Executive summary

Mechanical engineering is a sector in its own right but, as a supplier of capital goods and common technologies used by different industries, it acts also as a cross-fertiliser, causing a knock-on effect on a much greater number of European sectors. It is a key innovative industry and, as such, any European industrial policy must consider mechanical engineering a strategic sector. The sector fits perfectly well into a concrete programme of fixed objectives at regional, national and EU level aimed at the realisation of the Lisbon agenda. This requires both horizontal and sector-specific policies, as well as an adequate mix of the two. Any such policies should help the sector to excel not only across Europe but also worldwide.

There are a number of issues to be addressed in the ongoing process of consultation and policy-making at EU level (as regards mechanical engineering), that will have a stimulating effect on similar processes at national and regional level across Europe. Among the specific conditions to be fulfilled at EU level are: better lawmaking, including regulatory impact assessment prior to regulation as well as a proper implementation and enforcement of existing EU legislation; effective market surveillance; the establishment of a technology platform in order to bridge the gap between research centres and universities and the industry; reducing the growing mismatch between European funded R&D and the needs of this industry; a competition policy that favours development and innovation in SMEs; improvement of access to financial markets and a trade policy that guarantees freedom of access to investment in third country markets. Also of great importance is the adaptation of skills to current standards.

A dialogue between the Commission and all stakeholders at EU level on the implications for industry may set up a framework beneficial for mechanical engineering in the EU and will contribute to the promotion and development of strong regional clusters. All of this requires an active commitment on the part of the European institutions, in particular the Commission.

1.   Introduction

| 1.1 | The European Commission is developing a ‘new style’ industrial policy. This policy is based on three pillars: better regulation, sector-specific approach and an integrated approach at EU-level. It is linked directly both to the Lisbon Strategy and to the current re-appraisal of the manufacturing industry's contribution to the European economy. |
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1.1

The European Commission is developing a ‘new style’ industrial policy. This policy is based on three pillars: better regulation, sector-specific approach and an integrated approach at EU-level. It is linked directly both to the Lisbon Strategy and to the current re-appraisal of the manufacturing industry's contribution to the European economy.

| 1.2 | In a large number of sectors this revival of industrial policy at EU-level is warmly welcomed. The EESC supports fully the principles of the ‘new style’ industrial policy (1), the success of which will depend mainly upon an appropriate combination of actions both at horizontal and sectoral level, for the following reasons:






  — | industrial sectors differ considerably; |
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1.2

In a large number of sectors this revival of industrial policy at EU-level is warmly welcomed. The EESC supports fully the principles of the ‘new style’ industrial policy (1), the success of which will depend mainly upon an appropriate combination of actions both at horizontal and sectoral level, for the following reasons:

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industrial sectors differ considerably;

| — | the sectoral level is, in a number of areas, the most appropriate for bringing together industry representatives, including relevant social partners, government officials and policymakers (Commission and national authorities), and other important stakeholders such as customers, educational and training establishments, science and technology institutes, as well as banks. |
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the sectoral level is, in a number of areas, the most appropriate for bringing together industry representatives, including relevant social partners, government officials and policymakers (Commission and national authorities), and other important stakeholders such as customers, educational and training establishments, science and technology institutes, as well as banks.

| 1.3 | There is general political agreement about the need for Europe to meet the challenges of the future by becoming a strong leader in a globalised world. Making the Lisbon agenda a reality is, today more than ever, of major importance. Europe should therefore not only combat its own perceived weaknesses (as compared with its trade partners) but should also support and develop its strengths. The engineering goods industry provides substantial technological resources, as it owns the technology present not only in its products but also in the processes of its clients, which include the rest of manufacturing industry and essential utilities such as energy, water, transport and communications. |
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1.3

There is general political agreement about the need for Europe to meet the challenges of the future by becoming a strong leader in a globalised world. Making the Lisbon agenda a reality is, today more than ever, of major importance. Europe should therefore not only combat its own perceived weaknesses (as compared with its trade partners) but should also support and develop its strengths. The engineering goods industry provides substantial technological resources, as it owns the technology present not only in its products but also in the processes of its clients, which include the rest of manufacturing industry and essential utilities such as energy, water, transport and communications.

| 1.4 | With the reactivation of the Lisbon agenda and today's focus on growth and jobs, the Commission rightly emphasises the core role of manufacturing industry, in particular of SMEs. Accordingly, any European industrial policy must consider mechanical engineering as a strategic sector, which, moreover, is flourishing at the present time. Indeed, attention should not only be focussed on sectors facing immediate challenges but equal attention must also be paid to successful sectors. |
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1.4

With the reactivation of the Lisbon agenda and today's focus on growth and jobs, the Commission rightly emphasises the core role of manufacturing industry, in particular of SMEs. Accordingly, any European industrial policy must consider mechanical engineering as a strategic sector, which, moreover, is flourishing at the present time. Indeed, attention should not only be focussed on sectors facing immediate challenges but equal attention must also be paid to successful sectors.

| 1.4.1 | Mechanical engineering is not only a sector in its own right but, as a supplier of capital goods and common technologies used by different industries, it acts as a cross-fertiliser causing a knock-on effect to a much greater number of European sectors. |
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1.4.1

Mechanical engineering is not only a sector in its own right but, as a supplier of capital goods and common technologies used by different industries, it acts as a cross-fertiliser causing a knock-on effect to a much greater number of European sectors.

| 1.4.2 | The mechanical engineering sector, as provider of enabling technology to all other sectors of the economy, provides the fundamental industrial infrastructure underpinning the European economy. |
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1.4.2

The mechanical engineering sector, as provider of enabling technology to all other sectors of the economy, provides the fundamental industrial infrastructure underpinning the European economy.

| 1.4.3 | Moreover, mechanical engineering is one of the major exporting sectors accounting for about 15 % of exports of EU manufactured goods. |
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1.4.3

Moreover, mechanical engineering is one of the major exporting sectors accounting for about 15 % of exports of EU manufactured goods.

| 1.5 | Mechanical engineering has benefited considerably from the internal market, which has provided European manufacturers with a substantial home base. However, while the sector needs a proportionate level of coherent international standards and European regulation, it is essential to maintain balance in order to avoid any over-regulation that might hinder competitiveness. At the same time, greater focus on the implementation and enforcement of regulation is required. |
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1.5

Mechanical engineering has benefited considerably from the internal market, which has provided European manufacturers with a substantial home base. However, while the sector needs a proportionate level of coherent international standards and European regulation, it is essential to maintain balance in order to avoid any over-regulation that might hinder competitiveness. At the same time, greater focus on the implementation and enforcement of regulation is required.

| 1.6 | There is a need for both horizontal and sector-specific policies, as well as for an adequate mix of the two. |
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1.6

There is a need for both horizontal and sector-specific policies, as well as for an adequate mix of the two.

2.   Strategic importance

| 2.1 | The mechanical engineering sector plays a crucial role in the European economy for a number of reasons: |
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2.1

The mechanical engineering sector plays a crucial role in the European economy for a number of reasons:

| 2.1.1 | Mechanical engineering is a strategic industry: it is a high added-value, knowledge-intensive sector which supplies all other sectors of the economy with the machines, production systems, components and associated services, as well as technology and knowledge they need. It is also considered an important contribution to sustainable development because it can result in more efficient production and, in this way, in the decoupling of resource use from economic growth. Mechanical engineering is not a homogeneous but a very diversified industry which covers a wide range of sub-sectors, including: lifting and handling equipment; machine tools; woodworking machinery; non-domestic cooling and ventilation equipment; pumps and compressors; machinery for mining, quarrying and construction; bearings, gears, gearing and driving elements; taps and valves, engines and turbines; agricultural and forestry machinery; machinery for textile, apparel and leather production; machinery for food, beverage and tobacco processing; agricultural equipment; machinery for paper and paperboard production; industrial furnaces and furnace burners; machinery for metallurgy, etc. In addition to all this, there are the common technologies, such as mechatronics, which combine mechanical and electronic elements. |
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2.1.1

Mechanical engineering is a strategic industry: it is a high added-value, knowledge-intensive sector which supplies all other sectors of the economy with the machines, production systems, components and associated services, as well as technology and knowledge they need. It is also considered an important contribution to sustainable development because it can result in more efficient production and, in this way, in the decoupling of resource use from economic growth. Mechanical engineering is not a homogeneous but a very diversified industry which covers a wide range of sub-sectors, including: lifting and handling equipment; machine tools; woodworking machinery; non-domestic cooling and ventilation equipment; pumps and compressors; machinery for mining, quarrying and construction; bearings, gears, gearing and driving elements; taps and valves, engines and turbines; agricultural and forestry machinery; machinery for textile, apparel and leather production; machinery for food, beverage and tobacco processing; agricultural equipment; machinery for paper and paperboard production; industrial furnaces and furnace burners; machinery for metallurgy, etc. In addition to all this, there are the common technologies, such as mechatronics, which combine mechanical and electronic elements.

| 2.1.2 | Mechanical engineering provides not only the equipment, but also the skills and knowledge for improving existing processes and products and for developing new products in all subsectors. This is of particular importance when viewed in the context of the economic development of an enlarged Europe and beyond. |
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2.1.2

Mechanical engineering provides not only the equipment, but also the skills and knowledge for improving existing processes and products and for developing new products in all subsectors. This is of particular importance when viewed in the context of the economic development of an enlarged Europe and beyond.

| 2.1.3 | European mechanical engineering is a world leader with 41 % of global output, Europe is the world's largest producer and exporter of machinery (EU 261,707 million in 2002), including complete plant exports. It is vital to maintain such a leadership position, if Europe is to become the most competitive knowledge-driven economy in the world. |
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2.1.3

European mechanical engineering is a world leader with 41 % of global output, Europe is the world's largest producer and exporter of machinery (EU 261,707 million in 2002), including complete plant exports. It is vital to maintain such a leadership position, if Europe is to become the most competitive knowledge-driven economy in the world.

| 2.1.4 | Mechanical engineering is a major industry: it is not only one of Europe's largest industrial sectors, accounting for 8 % of total manufacturing output, but also one of the largest employers with some 140 000 companies (of which, 21 600 have more than 20 employees) providing some 2.49 million people with, for the most part, highly qualified jobs. The strong domestic European market that mechanical engineering enjoys (2003: EU 15, EUR 285 bn; EU 25, EUR 305 bn) represents 70 % of production in the internal market and reinforces both the competitive edge of the industry and the stability of employment in the sector. This industry is therefore essential for attaining the Lisbon objectives. |
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2.1.4

Mechanical engineering is a major industry: it is not only one of Europe's largest industrial sectors, accounting for 8 % of total manufacturing output, but also one of the largest employers with some 140 000 companies (of which, 21 600 have more than 20 employees) providing some 2.49 million people with, for the most part, highly qualified jobs. The strong domestic European market that mechanical engineering enjoys (2003: EU 15, EUR 285 bn; EU 25, EUR 305 bn) represents 70 % of production in the internal market and reinforces both the competitive edge of the industry and the stability of employment in the sector. This industry is therefore essential for attaining the Lisbon objectives.

| 2.1.5 | Mechanical engineering is a key innovative industry: in Europe it is particularly strong in the area of customised machinery and niche markets, which is of great importance to the innovation capacity of all other sectors of the economy. It is also vital to the capacity of all sectors of industry to provide high added-value, thereby achieving a competitive advantage that offsets any handicaps Europe may face in areas such as labour costs. Mechanical engineering is a driver of innovation and a pioneer, applying and integrating innovations into its own products and processes. It should be borne in mind that mechanical engineering is a link — very often the first– in a value-creating chain: should one part of this chain fail, the whole would suffer. |
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2.1.5

Mechanical engineering is a key innovative industry: in Europe it is particularly strong in the area of customised machinery and niche markets, which is of great importance to the innovation capacity of all other sectors of the economy. It is also vital to the capacity of all sectors of industry to provide high added-value, thereby achieving a competitive advantage that offsets any handicaps Europe may face in areas such as labour costs. Mechanical engineering is a driver of innovation and a pioneer, applying and integrating innovations into its own products and processes. It should be borne in mind that mechanical engineering is a link — very often the first– in a value-creating chain: should one part of this chain fail, the whole would suffer.

| 2.1.6 | Mechanical engineering is an industry of entrepreneurs, dominated by SMEs (2) — which are to a great extent family-owned — with all the attendant challenges faced by those companies, many of which are also global businesses. Mechanical engineering therefore epitomises the spirit of entrepreneurship fundamental to realising the Lisbon objectives. |
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2.1.6

Mechanical engineering is an industry of entrepreneurs, dominated by SMEs (2) — which are to a great extent family-owned — with all the attendant challenges faced by those companies, many of which are also global businesses. Mechanical engineering therefore epitomises the spirit of entrepreneurship fundamental to realising the Lisbon objectives.

| 2.1.7 | Certain other characteristics of the mechanical engineering industry include the following:






  — | it is not a capital-intensive activity in comparison to other manufacturing sectors but still employs highly qualified personnel in the design and production of tailor-made machines and industrial plants; |
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2.1.7

Certain other characteristics of the mechanical engineering industry include the following:

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it is not a capital-intensive activity in comparison to other manufacturing sectors but still employs highly qualified personnel in the design and production of tailor-made machines and industrial plants;

| — | its progress over the last decades is based on increasing adaptability resulting from innovation, permitting an integration of various competitive components that is then marketed worldwide; |
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its progress over the last decades is based on increasing adaptability resulting from innovation, permitting an integration of various competitive components that is then marketed worldwide;

| — | given the universal role of machinery in all production processes, excellent reliability is a must in this sector, which is inseparable from the commonly accepted image of a strong European industrial tradition. |
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given the universal role of machinery in all production processes, excellent reliability is a must in this sector, which is inseparable from the commonly accepted image of a strong European industrial tradition.

| 2.2 | Mechanical engineering companies enjoy particularly strong customer relationships as production of goods by machine is generally a complex process requiring advanced engineering skills and continuous technical assistance and servicing by the equipment manufacturer. It is an essential part of the industrial fabric and a base for successful clusters, where there is geographical proximity of manufacturing to end users such as in Baden-Württemberg, Rheinland-Pfalz, Piemonte, Lombardia, Rhone-Alp, the UK Midlands and Eindhoven-Aachen. These examples underline the often successful and indispensable contribution made by regional and local authorities. |
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2.2

Mechanical engineering companies enjoy particularly strong customer relationships as production of goods by machine is generally a complex process requiring advanced engineering skills and continuous technical assistance and servicing by the equipment manufacturer. It is an essential part of the industrial fabric and a base for successful clusters, where there is geographical proximity of manufacturing to end users such as in Baden-Württemberg, Rheinland-Pfalz, Piemonte, Lombardia, Rhone-Alp, the UK Midlands and Eindhoven-Aachen. These examples underline the often successful and indispensable contribution made by regional and local authorities.

| 2.3 | Mechanical engineering plays a vital role in improving the environment by producing equipment for the treatment and processing of water, soil, air, waste and manure. It also contributes to facilitating the use of renewable energy sources. |
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2.3

Mechanical engineering plays a vital role in improving the environment by producing equipment for the treatment and processing of water, soil, air, waste and manure. It also contributes to facilitating the use of renewable energy sources.

| 2.4 | The mechanical engineering sector is a world leader, underpinning European manufacturing and exports and, therefore, is one of Europe's strengths.
  The introduction of measures to develop mechanical engineering should help the sector to excel not only Europe-wide but also worldwide. |
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2.4

The mechanical engineering sector is a world leader, underpinning European manufacturing and exports and, therefore, is one of Europe's strengths.

The introduction of measures to develop mechanical engineering should help the sector to excel not only Europe-wide but also worldwide.

| 2.5 | A very good argument for enhanced support of the sector is that provided by the emphasis the US Administration has recently put on mechanical engineering. Countries such as the USA are increasingly aware of the importance of manufacturing in general and of the mechanical engineering sector in particular, to the economy and to national security (3). |
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2.5

A very good argument for enhanced support of the sector is that provided by the emphasis the US Administration has recently put on mechanical engineering. Countries such as the USA are increasingly aware of the importance of manufacturing in general and of the mechanical engineering sector in particular, to the economy and to national security (3).

3.   What needs to be done at European level

3.1   Industrial change and innovation

| 3.1.1 | Industrial change and innovation in production and processing is the order of the day. Less sophisticated production, requiring less highly qualified operating personnel, is being increasingly outsourced to other parts of the world. In order to maintain and reinforce its position in the home market as well as abroad, ongoing adaptation and innovation in the sector is required. This should be a matter of concern for all parties involved at regional, national and EU level. |
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3.1.1

Industrial change and innovation in production and processing is the order of the day. Less sophisticated production, requiring less highly qualified operating personnel, is being increasingly outsourced to other parts of the world. In order to maintain and reinforce its position in the home market as well as abroad, ongoing adaptation and innovation in the sector is required. This should be a matter of concern for all parties involved at regional, national and EU level.

| 3.1.2 | The sector drew the attention of EU regulators as early as 1994 who responded in the form of a Communication (4), which was followed by a Council Resolution (5). Neither the European Commission nor the Member States have shown much inclination to implement the proposed follow-up to the Communication and the Council Resolution. Such reticence can hardly be viewed as a positive implementation of policy. This hesitant general attitude had changed under the last Commission because of the priority placed on manufacturing competitiveness in the framework of the Lisbon strategy. This might have led to a favourable climate for genuine partnerships at EU-level, which, hopefully, would have promoted positive interaction between players at national and local level, as appropriate. Unfortunately, the Commission seems to be focusing today on a limited number of so-called flagship-sectors, among which mechanical engineering is not included at present. |
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3.1.2

The sector drew the attention of EU regulators as early as 1994 who responded in the form of a Communication (4), which was followed by a Council Resolution (5). Neither the European Commission nor the Member States have shown much inclination to implement the proposed follow-up to the Communication and the Council Resolution. Such reticence can hardly be viewed as a positive implementation of policy. This hesitant general attitude had changed under the last Commission because of the priority placed on manufacturing competitiveness in the framework of the Lisbon strategy. This might have led to a favourable climate for genuine partnerships at EU-level, which, hopefully, would have promoted positive interaction between players at national and local level, as appropriate. Unfortunately, the Commission seems to be focusing today on a limited number of so-called flagship-sectors, among which mechanical engineering is not included at present.

| 3.1.3 | ‘New style’ industrial policy aims at breaking through the barriers that have characterised for so long the relationship between public and private actors. The actors must be aware that each of them is serving the common objectives. Such an industrial policy aims at bringing together people and organisations to bridge gaps that, previously, have often prevented sufficient innovation. |
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3.1.3

‘New style’ industrial policy aims at breaking through the barriers that have characterised for so long the relationship between public and private actors. The actors must be aware that each of them is serving the common objectives. Such an industrial policy aims at bringing together people and organisations to bridge gaps that, previously, have often prevented sufficient innovation.

| 3.1.4 | The wide variety of specialised and often high-tech SMEs in the sector, places high demands on the organisation and management of production processes. Contrary to certain other sectors with a relatively small number of leading companies, specific instruments and approaches have to be foreseen. One such specific approach, for example, might be the creation of a Technology Platform for Manufacturing Enabling Industries or the establishment of a particular programme which could play an outstanding role in this regard (6). A substantial investment in R&D is required. |
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3.1.4

The wide variety of specialised and often high-tech SMEs in the sector, places high demands on the organisation and management of production processes. Contrary to certain other sectors with a relatively small number of leading companies, specific instruments and approaches have to be foreseen. One such specific approach, for example, might be the creation of a Technology Platform for Manufacturing Enabling Industries or the establishment of a particular programme which could play an outstanding role in this regard (6). A substantial investment in R&D is required.

| 3.1.5 | A technology platform or specific programme should draw on the reservoir of skills developed as a result of a longstanding European tradition in mechanical engineering and form an alliance of the support for European research programmes, industrial knowledge in the mechanical engineering clusters and the strengths of specialised European research institutes. |
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3.1.5

A technology platform or specific programme should draw on the reservoir of skills developed as a result of a longstanding European tradition in mechanical engineering and form an alliance of the support for European research programmes, industrial knowledge in the mechanical engineering clusters and the strengths of specialised European research institutes.

| 3.1.6 | Such programmes for mechanical engineering must take into account the variety of subsectors and the interaction between them, such as common innovations, the combination of technologies and, consequently, the need to develop effective knowledge circulation in production and business services. |
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3.1.6

Such programmes for mechanical engineering must take into account the variety of subsectors and the interaction between them, such as common innovations, the combination of technologies and, consequently, the need to develop effective knowledge circulation in production and business services.

| 3.1.7 | The gap between research centres and universities on the one hand, and the market sector on the other, needs to be bridged. European R&D-programmes should certainly not be exclusively science-driven operating on a long term perspective, but should also strive to achieve a balance by reserving funding for applied research, which leads to innovative products. |
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3.1.7

The gap between research centres and universities on the one hand, and the market sector on the other, needs to be bridged. European R&D-programmes should certainly not be exclusively science-driven operating on a long term perspective, but should also strive to achieve a balance by reserving funding for applied research, which leads to innovative products.

| 3.1.8 | The technology platform should contribute greatly to a better understanding between research centres of all kinds and the mechanical goods industry, which would, in turn, produce beneficial effects for similar fora in the Member States. |
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3.1.8

The technology platform should contribute greatly to a better understanding between research centres of all kinds and the mechanical goods industry, which would, in turn, produce beneficial effects for similar fora in the Member States.

| 3.1.9 | The presence of so many SMEs and mid-size companies in this sector emphasises the need for fewer constraints and less administration and greater access to EU programmes. |
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3.1.9

The presence of so many SMEs and mid-size companies in this sector emphasises the need for fewer constraints and less administration and greater access to EU programmes.

| 3.1.10 | Naturally, the realisation of large-scale industrial projects requires R&D programmes to be focused on breakthrough technologies. These have a knock-on effect on the whole value chain. However, it is important to achieve the right balance of funding between such major projects and SMEs. |
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3.1.10

Naturally, the realisation of large-scale industrial projects requires R&D programmes to be focused on breakthrough technologies. These have a knock-on effect on the whole value chain. However, it is important to achieve the right balance of funding between such major projects and SMEs.

| 3.1.11 | All this will also have a positive impact on national programmes. In an environment dominated by interaction and benchmarking, best practice must be taken into account. Because of the overwhelming number of SMEs, national branch organisations have to play an active role in this field. |
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3.1.11

All this will also have a positive impact on national programmes. In an environment dominated by interaction and benchmarking, best practice must be taken into account. Because of the overwhelming number of SMEs, national branch organisations have to play an active role in this field.

3.2   Industrial change and skills

| 3.2.1 | There is a close interconnection between ‘new style’ industrial policies, innovation, creativity productivity and skills. |
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3.2.1

There is a close interconnection between ‘new style’ industrial policies, innovation, creativity productivity and skills.

| 3.2.2 | Nowadays young people are less inclined to study and to work in the technical industries, a phenomenon that has partly to do with an outdated image of industry. This calls for action focusing on new technologies by industry itself, supported by a cultural drive on the part of national and Community media, with a view to altering public perception. Good communication between companies and the public, particularly with youngsters, is crucial. A change of mentality and approach is needed to reverse current trends. Increased awareness of the reality of mechanical engineering is needed. This concerns the overall process of technology, business services, the chains of inter-related technologies, processing, marketing, internationalisation, etc. The better these inter-relations and exciting processes are presented, the more it will foster interest amongst the general public and young people in particular. |
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3.2.2

Nowadays young people are less inclined to study and to work in the technical industries, a phenomenon that has partly to do with an outdated image of industry. This calls for action focusing on new technologies by industry itself, supported by a cultural drive on the part of national and Community media, with a view to altering public perception. Good communication between companies and the public, particularly with youngsters, is crucial. A change of mentality and approach is needed to reverse current trends. Increased awareness of the reality of mechanical engineering is needed. This concerns the overall process of technology, business services, the chains of inter-related technologies, processing, marketing, internationalisation, etc. The better these inter-relations and exciting processes are presented, the more it will foster interest amongst the general public and young people in particular.

| 3.2.3 | All improvements begin with innovative and challenging educational systems. Up-to-date modules have to be devised, also in companies themselves. Industry must be encouraged to cooperate closely with educational institutes, higher education establishments, and vocational training centres. Direct participation of managers in relevant educational programmes must be encouraged and, in return, teachers must be offered the opportunity of interaction with industry. Schools should be encouraged to exhibit at (international) business fairs. |
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3.2.3

All improvements begin with innovative and challenging educational systems. Up-to-date modules have to be devised, also in companies themselves. Industry must be encouraged to cooperate closely with educational institutes, higher education establishments, and vocational training centres. Direct participation of managers in relevant educational programmes must be encouraged and, in return, teachers must be offered the opportunity of interaction with industry. Schools should be encouraged to exhibit at (international) business fairs.

| 3.2.4 | Business parks and technology parks around technical universities should be set up or developed more actively. Successful examples such as Cambridge University, Eindhoven, Aachen and others are to be highlighted. |
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3.2.4

Business parks and technology parks around technical universities should be set up or developed more actively. Successful examples such as Cambridge University, Eindhoven, Aachen and others are to be highlighted.

| 3.2.5 | Due to rapidly developing product and service cycles, life-long learning and, consequently, employee flexibility towards change, must become common practice in companies. |
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3.2.5

Due to rapidly developing product and service cycles, life-long learning and, consequently, employee flexibility towards change, must become common practice in companies.

| 3.2.6 | Effective coordination between industry (management, trade unions, staff) and educational establishments at all levels will reinforce regional specialties and, consequently, promote the formation and development of strong regional clusters. This coordination would be largely regional not only because of the enormous number of companies involved, but also because of the impact of regional specialities and differing cultures. |
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3.2.6

Effective coordination between industry (management, trade unions, staff) and educational establishments at all levels will reinforce regional specialties and, consequently, promote the formation and development of strong regional clusters. This coordination would be largely regional not only because of the enormous number of companies involved, but also because of the impact of regional specialities and differing cultures.

| 3.2.7 | Dialogue between social partners on industrial implications at EU-level can lead to beneficial results. Illustrative examples, comparisons and benchmarks at EU-level may deliver a welcome framework and may set or reinforce the trend for national and regional programmes. A very nice illustration of a dialogue creating such a framework, is that conducted by the WEM-EMF ad-hoc Working Group in 2003 (7). It would be useful to measure the results of the wide variety of initiatives and to make an evaluation of best practices as this may foster dynamism in other regions. |
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3.2.7

Dialogue between social partners on industrial implications at EU-level can lead to beneficial results. Illustrative examples, comparisons and benchmarks at EU-level may deliver a welcome framework and may set or reinforce the trend for national and regional programmes. A very nice illustration of a dialogue creating such a framework, is that conducted by the WEM-EMF ad-hoc Working Group in 2003 (7). It would be useful to measure the results of the wide variety of initiatives and to make an evaluation of best practices as this may foster dynamism in other regions.

| 3.2.8 | This process can be deepened, notably with the participation of the new Member States, and may be extended to include the participation of educational establishments. |
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3.2.8

This process can be deepened, notably with the participation of the new Member States, and may be extended to include the participation of educational establishments.

| 3.2.9 | Although the mobility of engineers and engineering technicians within the EU still leaves much to be desired, the Bologna process and the growing convergence among the curricula of European engineering universities, vocational training centres and professional bodies of engineers is leading towards a European labour market in engineering skills. |
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3.2.9

Although the mobility of engineers and engineering technicians within the EU still leaves much to be desired, the Bologna process and the growing convergence among the curricula of European engineering universities, vocational training centres and professional bodies of engineers is leading towards a European labour market in engineering skills.

3.3   Framework conditions

The framework conditions in which businesses operate are extremely important. They include the following:

3.3.1   The internal market

The internal market should guarantee harmonised access to the EU-EEA market and therefore increase European competitiveness. Unfortunately, the internal market for products is not yet fully achieved and the following shortcomings need to be addressed in particular:

3.3.1.1   Regulations

| — | Better law-making is an essential prerequisite for all companies but particularly for SMEs. |
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Better law-making is an essential prerequisite for all companies but particularly for SMEs.

| — | Legislation should be used only when it is really necessary, that is to say, on the basis of a detailed impact assessment, including a full consultation of stakeholders. |
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—

Legislation should be used only when it is really necessary, that is to say, on the basis of a detailed impact assessment, including a full consultation of stakeholders.

| — | Legislation should be kept simple, with as few administrative burdens as possible. This applies especially to SMEs, which comprise the overwhelming majority of European mechanical engineering companies (8). Unfortunately it is all too often the case that EU regulators, in spite of their good intentions, overlook the high level of unnecessary administrative burden arising from regulation. |
| --- | --- |

—

Legislation should be kept simple, with as few administrative burdens as possible. This applies especially to SMEs, which comprise the overwhelming majority of European mechanical engineering companies (8). Unfortunately it is all too often the case that EU regulators, in spite of their good intentions, overlook the high level of unnecessary administrative burden arising from regulation.

| — | Regulatory impact assessment is essential: it should be used by all EU — and national institutions, not only in the initial proposal but throughout the legislative process and ex-post, for a certain period following application of the legislation. This would permit an evaluation of the degree of success in achieving policy objectives. |
| --- | --- |

—

Regulatory impact assessment is essential: it should be used by all EU — and national institutions, not only in the initial proposal but throughout the legislative process and ex-post, for a certain period following application of the legislation. This would permit an evaluation of the degree of success in achieving policy objectives.

| — | Existing EU legislation should be implemented and enforced properly: the Commission should improve its follow-up and ensure harmonised implementation. All relevant parties should be encouraged to engage in and to monitor implementation and proper enforcement. |
| --- | --- |

—

Existing EU legislation should be implemented and enforced properly: the Commission should improve its follow-up and ensure harmonised implementation. All relevant parties should be encouraged to engage in and to monitor implementation and proper enforcement.

| — | All regulations issued by different directives must be harmonised and all manufacturing definitions referred to in directives must be uniform. |
| --- | --- |

—

All regulations issued by different directives must be harmonised and all manufacturing definitions referred to in directives must be uniform.

| — | Additional national requirements should be avoided. There is far too much product-requirement divergence between Member States and this is further reinforced by divergences in transpositions. Such ‘goldplating’, as it is commonly know, only leads to fragmentation of the internal market and therefore undermines the competitive edge. |
| --- | --- |

—

Additional national requirements should be avoided. There is far too much product-requirement divergence between Member States and this is further reinforced by divergences in transpositions. Such ‘goldplating’, as it is commonly know, only leads to fragmentation of the internal market and therefore undermines the competitive edge.

3.3.1.2   Market surveillance

Improved market surveillance is crucial: in Europe it is insufficient at present and creates an unlevel playing field (9). Customs authorities should therefore increase their controls and be provided with the necessary ways and means to guarantee that products may not be placed on the market unless they conform to all applicable rules.

Control of engineering products at EU borders should also be tightened in order to combat counterfeiting, which is a serious and growing problem that affects as much as 5 % of equipment sold in the EU. It is not satisfactory that Member States should only act when there is an accident.

Given that market surveillance is undertaken by national authorities according to differing criteria, harmonisation is required. This could be achieved by the Commission issuing a market-surveillance guide for all Member States.

3.3.2   Trade

The main objective is to achieve market access for European companies without undermining Europe's own standards in the internal market. With EUR 129 billion worth of machines and equipment exported, the EU is the leader of the world mechanical equipment market. Freedom of access to and investment in third-country markets is thus of vital importance for the mechanical engineering industry.

Another important issue is the liberalisation of the global trade in engineering products and services (including many in the internal market). European mechanical engineering has been a frontrunner in terms of dismantling tariff and non-tariff barriers to trade in the Uruguay round and in the Doha round. The Commission should continue its multilateral, regional and bilateral trade talks in order to push for the elimination of technical barriers to trade, to liberalise outward investment and establishment, to liberalise business services and to phase out import tariffs on engineering products under condition of reciprocity.

Regarding business services, the main objective would be to ensure freedom from interference in the provision of products and allied services.

3.3.3   Competition policy

If the EU is to become the most dynamic worldwide economy, it is not only important that new technologies be developed, but it is also essential that their rapid dissemination be promoted significantly. It is therefore important to create appropriate framework conditions at the level of competition policy, to facilitate the transfer of technology to third parties. When an innovative technology is developed — and mechanical engineering in Europe is often specialised in niche markets — the use of market thresholds, as favoured by European competition authorities for the purpose of determining specific anti-competitive effects, is inappropriate.

3.3.4   Taxes and financing

Taxation levels are generally very high in the European Union. Besides the fact that a decrease in corporate tax is most useful in a capital goods environment, other measures such as investment tax credits will provide a positive incentive.

3.3.5   Banking

The role of financial institutions is often overlooked but they play a major role in carrying out industrial policy objectives by either accepting or rejecting risk and through their degree of accessibility. In some countries, such as, it would appear, Germany and France, practices are more stimulating than they are in others. The EESC is in favour of introducing this aspect to the industrial policy arena, especially in this sector, of such significance to SMEs. This could lead to improved practices across Europe. Other aspects, such as the Basel II provisions are increasingly hampering access to the finance required for investment in research for the development of innovative products or for the growth of businesses in general.

3.4   Ongoing analyses and dialogue between all parties involved, in particular the social partners, on industrial implications at EU-level (as well as at national and regional levels) will certainly provide impetus to these processes.

4.   Recommendations

| 4.1 | The EESC is of the opinion that, when devising industrial policy, words must be followed by deeds. The so-called cost of ‘non-Europe’ could be especially high in mechanical engineering when one considers that this sector is, in spite of its leading role and its important core competences, facing a number of challenges that are not only cyclical, but also structural. These need to be addressed and consideration of the following points is vital in this respect: |
| --- | --- |

4.1

The EESC is of the opinion that, when devising industrial policy, words must be followed by deeds. The so-called cost of ‘non-Europe’ could be especially high in mechanical engineering when one considers that this sector is, in spite of its leading role and its important core competences, facing a number of challenges that are not only cyclical, but also structural. These need to be addressed and consideration of the following points is vital in this respect:

| 4.2 | This sector fits perfectly well into a concrete programme of fixing objectives at regional, national and EU level aimed at the implementation of the Lisbon agenda. |
| --- | --- |

4.2

This sector fits perfectly well into a concrete programme of fixing objectives at regional, national and EU level aimed at the implementation of the Lisbon agenda.

| 4.3 | In the view of the EESC the significance of the EU commitment would be twofold:






  — | an overall agenda is to be set for a qualitative reinforcement of the performance of mechanical engineering in Europe, and |
| --- | --- | --- |

4.3

In the view of the EESC the significance of the EU commitment would be twofold:

—

an overall agenda is to be set for a qualitative reinforcement of the performance of mechanical engineering in Europe, and

| — | specific conditions have to be fulfilled at EU level concerning regulations, R&D, trade, benchmarking and others. |
| --- | --- |

—

specific conditions have to be fulfilled at EU level concerning regulations, R&D, trade, benchmarking and others.

| 4.3.1 | Responsibility for this is shared by the Commission and the Competitiveness Council, in close cooperation with representatives of the sector. Regular meetings between the sector, including relevant social partners and the Commission, are desirable. To that end, the organisation of the EU's policy support infrastructures, in particular in the Enterprise and Industry Directorate General, should take due account of the requirements of the mechanical engineering sector. |
| --- | --- |

4.3.1

Responsibility for this is shared by the Commission and the Competitiveness Council, in close cooperation with representatives of the sector. Regular meetings between the sector, including relevant social partners and the Commission, are desirable. To that end, the organisation of the EU's policy support infrastructures, in particular in the Enterprise and Industry Directorate General, should take due account of the requirements of the mechanical engineering sector.

| 4.3.2 | The EESC also pleads in favour of ensuring the Commission has sufficient practical knowledge of and expertise in the mechanical engineering sector. |
| --- | --- |

4.3.2

The EESC also pleads in favour of ensuring the Commission has sufficient practical knowledge of and expertise in the mechanical engineering sector.

| 4.4 | The EESC is of the opinion that special attention should be paid to this sector at EU level because of the overwhelming number of SMEs it contains. In this regard, the following aspects merit particular emphasis: |
| --- | --- |

4.4

The EESC is of the opinion that special attention should be paid to this sector at EU level because of the overwhelming number of SMEs it contains. In this regard, the following aspects merit particular emphasis:

| 4.4.1 | As regards research and innovation, the growing mismatch between European-funded R&D and the needs of the mechanical engineering industry should be addressed and company participation should be made easier in order to match the ambitious goal of increasing competitiveness with equally ambitious financial means in the corresponding items of the EU budget. Most of the companies are SMEs and mid-range companies and, at present, European industrial research projects address them inadequately and make company participation difficult. |
| --- | --- |

4.4.1

As regards research and innovation, the growing mismatch between European-funded R&D and the needs of the mechanical engineering industry should be addressed and company participation should be made easier in order to match the ambitious goal of increasing competitiveness with equally ambitious financial means in the corresponding items of the EU budget. Most of the companies are SMEs and mid-range companies and, at present, European industrial research projects address them inadequately and make company participation difficult.

| 4.4.2 | The regulatory framework conditions in the EU need to be improved in consultation with the sector, as over-regulation and the growing weight of bureaucracy are jeopardising instead of stimulating dynamic entrepreneurship. |
| --- | --- |

4.4.2

The regulatory framework conditions in the EU need to be improved in consultation with the sector, as over-regulation and the growing weight of bureaucracy are jeopardising instead of stimulating dynamic entrepreneurship.

| 4.4.3 | Market surveillance should be stepped up, with a view to ensuring a level playing field between European companies and also between European manufacturers and imports from third countries. |
| --- | --- |

4.4.3

Market surveillance should be stepped up, with a view to ensuring a level playing field between European companies and also between European manufacturers and imports from third countries.

| 4.4.4 | Access to financial markets for these companies has to be improved. |
| --- | --- |

4.4.4

Access to financial markets for these companies has to be improved.

| 4.4.5 | Trade relations with third countries must guarantee freedom of access to and investment in third country markets. |
| --- | --- |

4.4.5

Trade relations with third countries must guarantee freedom of access to and investment in third country markets.

| 4.4.6 | Competition policy should favour the development and innovation and technology in SMEs. |
| --- | --- |

4.4.6

Competition policy should favour the development and innovation and technology in SMEs.

| 4.4.7 | A discussion at EU level between social partners and the Commission on improving output, skills and educational training systems may create a helpful framework for concrete realisation of similar dialogues in the Member States, especially at regional level. |
| --- | --- |

4.4.7

A discussion at EU level between social partners and the Commission on improving output, skills and educational training systems may create a helpful framework for concrete realisation of similar dialogues in the Member States, especially at regional level.

| 4.5 | As an industry in transition, mechanical engineering is evolving rapidly from an industry focused on products to a ‘value/access provider’, integrating an ever-increasing service content and providing total solutions to its customers. This major challenge, which is key to maintaining sustainable growth and a strong position on world markets, has to be met by appropriate EU policies.
  The EESC hopes that the Commission will take its recommendations into account as well as all the appropriate measures, leading Europe to what, according to its President Mr Barroso, is one of its Commission's main priorities, namely making the Lisbon Strategy a reality. |
| --- | --- |

4.5

As an industry in transition, mechanical engineering is evolving rapidly from an industry focused on products to a ‘value/access provider’, integrating an ever-increasing service content and providing total solutions to its customers. This major challenge, which is key to maintaining sustainable growth and a strong position on world markets, has to be met by appropriate EU policies.

The EESC hopes that the Commission will take its recommendations into account as well as all the appropriate measures, leading Europe to what, according to its President Mr Barroso, is one of its Commission's main priorities, namely making the Lisbon Strategy a reality.

Brussels, 11 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  Cf. EESC opinion on Fostering structural change: an industrial policy for an enlarged Europe (COM(2004) 274 final, 21.4.2004), adopted on 15.12.2004; rapporteur Mr van Iersel.

1

(2)  Only 21,600 of these employ 20 persons or more, and only about 4,500 of these companies employ 100 or more people.

2

(3)  See: Manufacturing in America – US Dept of Commerce. A further specific example of the strategic importance of Mechanical Engineering is the provision included in the Fiscal Year 2004 USA ‘Defence Authorisation Act’, which provides an incentive to US-defence contractors to use US-built machine tools in defence contracts. This is due to the fact that it is felt as critical to maintain an independent machine-tool capacity for defence, security and political reasons.

3

(4)  Communication from the Commission to the Council, Parliament and Economic and Social Committee – Strengthening the competitiveness of the European machinery construction industry (COM(94) 380 final of 25 October 1994).

4

(5)  Council Resolution on the strengthening of the competitiveness of the European mechanical engineering industry of 27 November 1995, published in OJ C 341 of 19 December 1995, pp. 1-2.

5

(6)  Inter alia EESC opinion on Science and Technology, CESE 1647/2004, rapporteur Prof. Wolf and complementary opinion on Science and Technology, rapporteur Mr van Iersel.

6

Inter alia

(7)  Ad-hoc Working Group of The Employers' Organisation of the Metal Trades in Europe and The European Metalworkers' Federation, ‘Major outcome from the exchange of national examples’, January 2003.

7

(8)  Example: the REACH proposal on chemical products and the proposed Directive on Eco-design of Energy-Using Products, which in their present form are difficult for companies to manage

8

(9)  For instance, in the context of construction equipment (and other machines), there have been many cases which show the existence of a ‘grey market’ with machines imported from third countries, which are CE-marked and have a declaration of conformity but are NOT in conformity with European regulations. There are also abundant cases of machines which neither bear a CE marking nor are in conformity and are nevertheless placed on the European market with total impunity. In order to guarantee a level playing field between European manufacturers and others from third countries, this should be avoided.

9

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| 27.10.2005 | EN | Official Journal of the European Union | C 267/16 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/16

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Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/88/EC concerning certain aspects of the organisation of working time

(COM(2004) 607 final — 2004/0209 COD)

(2005/C 267/03)

On 20 October 2004 the Council decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 21 April 2005 The rapporteur was Ms Engelen-Kefer.

At its 417th plenary session, held on 11-12 May 2005 (meeting of 11 May), the European Economic and Social Committee adopted the following opinion by 160 votes to 101, with eight abstentions.

1.   Introduction

| 1.1 | On 22 September 2004 the European Commission submitted its Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/88/EC concerning certain aspects of the organisation of working time (1). |
| --- | --- |

1.1

On 22 September 2004 the European Commission submitted its Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/88/EC concerning certain aspects of the organisation of working time (1).

| 1.2 | The Commission justifies its proposed amendment firstly on the grounds that the need for review is implicit in the Directive itself. Two of its provisions, in fact, stipulate a review before 23 November 2003. These concern the derogations to the reference period for the application of Article 6 (maximum weekly working time) and the possibility of not applying Article 6 if the worker gives his agreement to carry out such work (Article 22, individual opt-out). The Commission also states that the interpretation of the Directive by the European Court of Justice has an impact on the concept of ‘working time’ and, consequently, on essential provisions of the Directive, which are therefore to be reviewed. |
| --- | --- |

1.2

The Commission justifies its proposed amendment firstly on the grounds that the need for review is implicit in the Directive itself. Two of its provisions, in fact, stipulate a review before 23 November 2003. These concern the derogations to the reference period for the application of Article 6 (maximum weekly working time) and the possibility of not applying Article 6 if the worker gives his agreement to carry out such work (Article 22, individual opt-out). The Commission also states that the interpretation of the Directive by the European Court of Justice has an impact on the concept of ‘working time’ and, consequently, on essential provisions of the Directive, which are therefore to be reviewed.

| 1.3 | The two-stage hearing of the social partners agreed upon has revealed that they declined the Commission's call to commence negotiations on this question. They have instead asked the Commission to adopt a proposal for a Directive. |
| --- | --- |

1.3

The two-stage hearing of the social partners agreed upon has revealed that they declined the Commission's call to commence negotiations on this question. They have instead asked the Commission to adopt a proposal for a Directive.

| 1.4 | The Commission further points out that a balanced solution is required which covers the key issues submitted to the social partners for comment, and that this must meet certain criteria. They must:






  — | ensure a higher standard of protection of workers' health and safety with regard to working time; |
| --- | --- | --- |

1.4

The Commission further points out that a balanced solution is required which covers the key issues submitted to the social partners for comment, and that this must meet certain criteria. They must:

—

ensure a higher standard of protection of workers' health and safety with regard to working time;

| — | give companies and Member States greater flexibility in managing working time; |
| --- | --- |

—

give companies and Member States greater flexibility in managing working time;

| — | allow greater compatibility between work and family life; |
| --- | --- |

—

allow greater compatibility between work and family life;

| — | avoid imposing unreasonable constraints on companies, in particular SMEs (2). |
| --- | --- |

—

avoid imposing unreasonable constraints on companies, in particular SMEs (2).

| 1.5 | The Commission is of the opinion that the present proposal takes account of these criteria. |
| --- | --- |

1.5

The Commission is of the opinion that the present proposal takes account of these criteria.

2.   Gist of the Commission proposal

2.1   Definition of terms (Article 2) (3)

| 2.1.1 | The definition of working time remains unchanged. Two new definitions are introduced: ‘on-call time’ and ‘inactive part of on-call time’. The latter is defined as a period during which the worker is on call ‘but not required by his employer to carry out his activity or duties’ (Article 2 (1b)). |
| --- | --- |

2.1.1

The definition of working time remains unchanged. Two new definitions are introduced: ‘on-call time’ and ‘inactive part of on-call time’. The latter is defined as a period during which the worker is on call ‘but not required by his employer to carry out his activity or duties’ (Article 2 (1b)).

| 2.1.2 | It is also specified that the inactive part of on-call time ‘shall not be regarded as working time, unless national law or, in accordance with national law and/or practice, a collective agreement or an agreement between the two sides of industry decides otherwise’ (Article 2a). |
| --- | --- |

2.1.2

It is also specified that the inactive part of on-call time ‘shall not be regarded as working time, unless national law or, in accordance with national law and/or practice, a collective agreement or an agreement between the two sides of industry decides otherwise’ (Article 2a).

2.2   Reference Period (Articles 16 and 19) and Compensatory Rest Period (Article 17)

| 2.2.1 | The reference period for the maximum weekly working time under Article 6 continues to be limited in principle to ‘a period not exceeding four months’. An addendum is proposed which states that Member States may, ‘by law or regulation, for objective or technical reasons, or reasons concerning the organisation of work, extend the reference period referred to above to twelve months’ (Article 16 b). In such a case the general principles of protection of worker health and safety and of consulting social partners are to be respected and social dialogue promoted. |
| --- | --- |

2.2.1

The reference period for the maximum weekly working time under Article 6 continues to be limited in principle to ‘a period not exceeding four months’. An addendum is proposed which states that Member States may, ‘by law or regulation, for objective or technical reasons, or reasons concerning the organisation of work, extend the reference period referred to above to twelve months’ (Article 16 b). In such a case the general principles of protection of worker health and safety and of consulting social partners are to be respected and social dialogue promoted.

| 2.2.2 | The present limit of six months on derogations from the reference period for the maximum weekly working on the basis of collective agreement ceases to apply. The Member States can, however, allow, for objective or technical reasons or reasons concerning the organisation of work, ‘collective agreements or agreements concluded between the two sides of industry to set reference periods, concerning the maximum weekly working time, in no case exceeding twelve months’ (Article 19). In such a case, the general principles of worker health and safety protection are to be respected. |
| --- | --- |

2.2.2

The present limit of six months on derogations from the reference period for the maximum weekly working on the basis of collective agreement ceases to apply. The Member States can, however, allow, for objective or technical reasons or reasons concerning the organisation of work, ‘collective agreements or agreements concluded between the two sides of industry to set reference periods, concerning the maximum weekly working time, in no case exceeding twelve months’ (Article 19). In such a case, the general principles of worker health and safety protection are to be respected.

| 2.2.3 | Articles 3 and 5 of the Directive stipulate daily rest periods of 11 consecutive hours per 24-hour period and weekly rest periods of 24 hours per 7-day period in addition to the daily rest period of 11 hours. If there is a derogation from this requirement, workers must be granted equivalent compensatory rest periods. In connection with derogations from the Directive's minimum level of regulation for certain activities and groups of workers, including in the health sector, the period within which equivalent compensatory rest periods should be provided is specified as ‘within a time limit not exceeding 72 hours’ (Article 17(2)). |
| --- | --- |

2.2.3

Articles 3 and 5 of the Directive stipulate daily rest periods of 11 consecutive hours per 24-hour period and weekly rest periods of 24 hours per 7-day period in addition to the daily rest period of 11 hours. If there is a derogation from this requirement, workers must be granted equivalent compensatory rest periods. In connection with derogations from the Directive's minimum level of regulation for certain activities and groups of workers, including in the health sector, the period within which equivalent compensatory rest periods should be provided is specified as ‘within a time limit not exceeding 72 hours’ (Article 17(2)).

2.3   Individual opt-out (Article 22)

| 2.3.1 | Under the Directive in force the Member States have the possibility, under certain conditions, of not applying Article 6 on the maximum weekly working time, providing the employee gives his consent. The proposed amendment retains this possibility of individual opt-out, but expressly adds the requirement that this be provided for in a collective agreement. If no collective agreement is in force and there is no worker representation in the company, it should still be possible not to apply Article 6 on the maximum weekly working time on the basis of an individual agreement with the employee. The general principles of worker health and safety protection are to be respected. |
| --- | --- |

2.3.1

Under the Directive in force the Member States have the possibility, under certain conditions, of not applying Article 6 on the maximum weekly working time, providing the employee gives his consent. The proposed amendment retains this possibility of individual opt-out, but expressly adds the requirement that this be provided for in a collective agreement. If no collective agreement is in force and there is no worker representation in the company, it should still be possible not to apply Article 6 on the maximum weekly working time on the basis of an individual agreement with the employee. The general principles of worker health and safety protection are to be respected.

| 2.3.2 | The following conditions for use of the individual opt-out are not in the Directive in force:






  — | This necessary consent of the employee shall be valid for a period not exceeding one year, renewable. It is not valid if given when the contract of employment is signed or during the probation period. |
| --- | --- | --- |

2.3.2

The following conditions for use of the individual opt-out are not in the Directive in force:

—

This necessary consent of the employee shall be valid for a period not exceeding one year, renewable. It is not valid if given when the contract of employment is signed or during the probation period.

| — | The Member States must ensure that no worker works more than 65 hours a week, unless the collective agreement or agreement between the two sides of industry provides otherwise. |
| --- | --- |

—

The Member States must ensure that no worker works more than 65 hours a week, unless the collective agreement or agreement between the two sides of industry provides otherwise.

| — | Records to be maintained by the employer must register the actual hours worked and the employer must place these at the disposal of the competent authorities when so required. |
| --- | --- |

—

Records to be maintained by the employer must register the actual hours worked and the employer must place these at the disposal of the competent authorities when so required.

| 2.3.3 | The proposed amendment also stipulates that within five years of the Directive entering into force, the Commission shall submit a report on its application, and especially on the application of the individual opt-out. |
| --- | --- |

2.3.3

The proposed amendment also stipulates that within five years of the Directive entering into force, the Commission shall submit a report on its application, and especially on the application of the individual opt-out.

3.   General evaluation

| 3.1 | The European social partners have widely differing positions on the revision of the Directive and have therefore made no use of the possibility afforded in Article 139 of the TEC to conclude an agreement. The diverging positions which emerged from the second Commission consultation are set out in the reasoning of the Commission's proposed amendment. The ETUC was ready to start negotiations, but the employers showed no interest, as ‘in the light of the ETUC reactions to the Commission consultation documents, UNICE [saw] no prospect for reaching agreement on how to revise the directive through negotiations in the social dialogue’ (4). The EESC regrets that negotiations between the social partners did not take place. It does not, however, see its role in being a substitute for these negotiations between the social partners. Rather, it reiterates once more that working time is precisely the issue in which the social partners have a very important role to play (5). In the EESC's view, the Commission and Council would be well advised to seek a compromise with the European Parliament which would take equal account of the interests of both social partners. In its opinion, the Committee will therefore concentrate on general considerations and evaluations of the Commission's proposed amendment. |
| --- | --- |

3.1

The European social partners have widely differing positions on the revision of the Directive and have therefore made no use of the possibility afforded in Article 139 of the TEC to conclude an agreement. The diverging positions which emerged from the second Commission consultation are set out in the reasoning of the Commission's proposed amendment. The ETUC was ready to start negotiations, but the employers showed no interest, as ‘in the light of the ETUC reactions to the Commission consultation documents, UNICE [saw] no prospect for reaching agreement on how to revise the directive through negotiations in the social dialogue’ (4). The EESC regrets that negotiations between the social partners did not take place. It does not, however, see its role in being a substitute for these negotiations between the social partners. Rather, it reiterates once more that working time is precisely the issue in which the social partners have a very important role to play (5). In the EESC's view, the Commission and Council would be well advised to seek a compromise with the European Parliament which would take equal account of the interests of both social partners. In its opinion, the Committee will therefore concentrate on general considerations and evaluations of the Commission's proposed amendment.

| 3.2 | The globalisation of markets and production and the related increase in the international division of labour presents new challenges to businesses and the European economy as a whole. There is no doubt that globalisation is leading to more intense international competition and the need to accommodate to changed market conditions. This development also puts pressure on the European social model, the essence of which is that economic power and social progress go hand in hand. The European development model, which is embodied in the Lisbon Strategy, is based on an integrated strategy to promote economic performance, investments in people, social cohesion, quality of work, a high level of social protection and recognition of the importance of social dialogue. An important instrument of European social policy, minimum labour standards should lead to an improvement in the level of protection and thereby limit competition over labour standards while avoiding distortions to competition. The revision of the working time Directive should be examined against this backdrop in terms of whether it meets this goal. |
| --- | --- |

3.2

The globalisation of markets and production and the related increase in the international division of labour presents new challenges to businesses and the European economy as a whole. There is no doubt that globalisation is leading to more intense international competition and the need to accommodate to changed market conditions. This development also puts pressure on the European social model, the essence of which is that economic power and social progress go hand in hand. The European development model, which is embodied in the Lisbon Strategy, is based on an integrated strategy to promote economic performance, investments in people, social cohesion, quality of work, a high level of social protection and recognition of the importance of social dialogue. An important instrument of European social policy, minimum labour standards should lead to an improvement in the level of protection and thereby limit competition over labour standards while avoiding distortions to competition. The revision of the working time Directive should be examined against this backdrop in terms of whether it meets this goal.

| 3.3 | The EU working hours directive establishes minimum rules for achieving the Community's social objectives as set out in the Treaty. The Treaty's social provisions formulate the goal of ‘improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained’ (EC Treaty, Article 136). Explicit reference is made to the European Social Charter of 1961 and the 1989 Community Charter of the Fundamental Social Rights of Workers; the spirit of these is to be respected in pursuing the Community's social objectives. According to the 1989 Community Charter of the Fundamental Social Rights of Workers, ‘Every worker must enjoy satisfactory health and safety conditions in his working environment’ and ‘Appropriate measures must be taken in order to achieve further harmonisation of conditions in this area while maintaining the improvements made.’ (6) The social right to just working conditions is formulated in the Council of Europe's European Social Charter of 1961 (revised 1996), which all EU Member States have recognised. The Charter sets out the duty of the Member States ‘to provide for reasonable daily and weekly working hours [and for] the working week to be progressively reduced’ and ‘to ensure a weekly rest period’ (Article 2). The spirit of both Charters is that the limiting and progressive shortening of working time constitutes a fundamental social right and that harmonisation through a minimum level of regulation at European level must lead to social progress. |
| --- | --- |

3.3

The EU working hours directive establishes minimum rules for achieving the Community's social objectives as set out in the Treaty. The Treaty's social provisions formulate the goal of ‘improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained’ (EC Treaty, Article 136). Explicit reference is made to the European Social Charter of 1961 and the 1989 Community Charter of the Fundamental Social Rights of Workers; the spirit of these is to be respected in pursuing the Community's social objectives. According to the 1989 Community Charter of the Fundamental Social Rights of Workers, ‘Every worker must enjoy satisfactory health and safety conditions in his working environment’ and ‘Appropriate measures must be taken in order to achieve further harmonisation of conditions in this area while maintaining the improvements made.’ (6) The social right to just working conditions is formulated in the Council of Europe's European Social Charter of 1961 (revised 1996), which all EU Member States have recognised. The Charter sets out the duty of the Member States ‘to provide for reasonable daily and weekly working hours [and for] the working week to be progressively reduced’ and ‘to ensure a weekly rest period’ (Article 2). The spirit of both Charters is that the limiting and progressive shortening of working time constitutes a fundamental social right and that harmonisation through a minimum level of regulation at European level must lead to social progress.

| 3.4 | The European Union Charter of Fundamental Rights, which is part of the future EU Constitution, establishes the right to limitation of the maximum working time as a fundamental social right binding for the Union. The fundamental right of fair and just working conditions is specified thus: ‘Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave.’ (7) The EESC is of the view that the evaluation of the Commission's proposed amendment must be based on this movement at European level towards a fundamental social right and take account of this context. This raises the question: does the amendment contribute to achieving this fundamental social right through a Europe-wide minimum level of regulation, or is it the case, instead, that the room for flexibility will be broadened to the benefit of economic interests, without the needs of employees for protection being taken into account at the same time? In this case, we would be a long way from an appropriate response to the novelty of the innovations to be achieved in terms of entrepreneurial flexibility and guarantees of security for workers, as called for by a service and knowledge-based society for all businesses, but more particularly for small and medium-sized enterprises and enterprises in the social economy. |
| --- | --- |

3.4

The European Union Charter of Fundamental Rights, which is part of the future EU Constitution, establishes the right to limitation of the maximum working time as a fundamental social right binding for the Union. The fundamental right of fair and just working conditions is specified thus: ‘Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave.’ (7) The EESC is of the view that the evaluation of the Commission's proposed amendment must be based on this movement at European level towards a fundamental social right and take account of this context. This raises the question: does the amendment contribute to achieving this fundamental social right through a Europe-wide minimum level of regulation, or is it the case, instead, that the room for flexibility will be broadened to the benefit of economic interests, without the needs of employees for protection being taken into account at the same time? In this case, we would be a long way from an appropriate response to the novelty of the innovations to be achieved in terms of entrepreneurial flexibility and guarantees of security for workers, as called for by a service and knowledge-based society for all businesses, but more particularly for small and medium-sized enterprises and enterprises in the social economy.

| 3.5 | The proposed amendment is further to be judged on the degree to which the goals set by the Commission itself are attained. These are to combine the improvement of work and health protection with greater flexibility in working time arrangements, in particular a better balance between work and family, while avoiding disproportionate burdens for SMEs. The EESC has already addressed these goals in its opinion on the Commission's Communication ‘Re-exam of Directive 93/104/EC’ (8) and concluded that ‘the directive should be regarded as providing a certain degree of negotiating flexibility’ (9). At the same time it found that ‘National legislation on working time is generally based on employers and employees taking joint responsibility for ensuring that working time is organised satisfactorily. It is up to the social partners at various levels in the Member States to resolve any working time issues that emerge in the workplace, basing their decisions on working time rules and as part of collective agreements.’ (10) The EESC feels that it is primarily the responsibility of the Member States to ensure general work and health protection through legal limitation of the maximum working week. The parties to collective agreements, on the other hand, can agree flexible forms of work organisation — within the maximum limits established by legislation and collective agreement — which can take into account the special needs in a sector and at the same time guarantee work and health protection, and thus reconcile flexibility and social security. What is important in the EESC's view is a good balance between flexibility and social protection, and this is best guaranteed through regulations established by collective agreement. |
| --- | --- |

3.5

The proposed amendment is further to be judged on the degree to which the goals set by the Commission itself are attained. These are to combine the improvement of work and health protection with greater flexibility in working time arrangements, in particular a better balance between work and family, while avoiding disproportionate burdens for SMEs. The EESC has already addressed these goals in its opinion on the Commission's Communication ‘Re-exam of Directive 93/104/EC’ (8) and concluded that ‘the directive should be regarded as providing a certain degree of negotiating flexibility’ (9). At the same time it found that ‘National legislation on working time is generally based on employers and employees taking joint responsibility for ensuring that working time is organised satisfactorily. It is up to the social partners at various levels in the Member States to resolve any working time issues that emerge in the workplace, basing their decisions on working time rules and as part of collective agreements.’ (10) The EESC feels that it is primarily the responsibility of the Member States to ensure general work and health protection through legal limitation of the maximum working week. The parties to collective agreements, on the other hand, can agree flexible forms of work organisation — within the maximum limits established by legislation and collective agreement — which can take into account the special needs in a sector and at the same time guarantee work and health protection, and thus reconcile flexibility and social security. What is important in the EESC's view is a good balance between flexibility and social protection, and this is best guaranteed through regulations established by collective agreement.

| 3.6 | Under the present Directive the four-month reference period for overtime can only be extended by collective agreement. The proposed amendment allows Member States for the first time to extend the reference period — generally to twelve months — through legal and administrative measures. The EESC addressed this question in its earlier opinion and concluded: ‘As a 12-month reference period is already used in many Member States by virtue of collective agreements, the EESC feels, given the current provisions, which allow for the option of extending the reference period through collective agreements, that the social partners have the necessary flexibility to adjust working time to deal with different situations in Member States, sectors, and companies. Therefore, these provisions should be retained.’ (11)

  In the EESC's view, flexible working time models under the Directive in force and those based on collective agreements also promote the interests of workers in having greater control over their time, enable them to safeguard their health and safety, which are vital, and, above all, promote a greater compatibility of work and the family. |
| --- | --- |

3.6

Under the present Directive the four-month reference period for overtime can only be extended by collective agreement. The proposed amendment allows Member States for the first time to extend the reference period — generally to twelve months — through legal and administrative measures. The EESC addressed this question in its earlier opinion and concluded: ‘As a 12-month reference period is already used in many Member States by virtue of collective agreements, the EESC feels, given the current provisions, which allow for the option of extending the reference period through collective agreements, that the social partners have the necessary flexibility to adjust working time to deal with different situations in Member States, sectors, and companies. Therefore, these provisions should be retained.’ (11)

In the EESC's view, flexible working time models under the Directive in force and those based on collective agreements also promote the interests of workers in having greater control over their time, enable them to safeguard their health and safety, which are vital, and, above all, promote a greater compatibility of work and the family.

| 3.7 | Under the Commission's proposal, the so-called inactive part of on-call time should not be regarded as working time and is in part defined by the employer calling on work to be performed. The adoption of a definition of on-call time and, above all, of the inactive part of on-call time, is not in harmony with the rulings of the European Court of Justice in the cases of Simap, Sergas, Jaeger and Pfeiffer, in which it was ruled that ‘being available at the workplace’ is itself work and must therefore be calculated as working time (12). This ruling is based not only on an interpretation of the wording of the current Directive in force, but on its sense and purpose, including international legal bases such as the ILO Conventions 1 (Industry) and 30 (Commerce and Offices) and the European Social Charter. This means that the Member States should have complied in their national working time law with the European Court of Justice's interpretation of the concept of working time in the Directive in force. |
| --- | --- |

3.7

Under the Commission's proposal, the so-called inactive part of on-call time should not be regarded as working time and is in part defined by the employer calling on work to be performed. The adoption of a definition of on-call time and, above all, of the inactive part of on-call time, is not in harmony with the rulings of the European Court of Justice in the cases of Simap, Sergas, Jaeger and Pfeiffer, in which it was ruled that ‘being available at the workplace’ is itself work and must therefore be calculated as working time (12). This ruling is based not only on an interpretation of the wording of the current Directive in force, but on its sense and purpose, including international legal bases such as the ILO Conventions 1 (Industry) and 30 (Commerce and Offices) and the European Social Charter. This means that the Member States should have complied in their national working time law with the European Court of Justice's interpretation of the concept of working time in the Directive in force.

| 3.7.1 | Involving the employer's call to work means that being on call at the workplace no longer constitutes performance of work. This position fails to recognise the fact that employees on call are not free in what they do at the workplace and neither have free time nor can claim rest time. It is the nature of being on call that the employee cannot use his time as he wishes, but must be constantly at a workplace ready for work — i.e. available. Putting this distinctive situation on the same footing as ‘rest time’ would lead to excessively long working time, which would substantially imperil the work and safety protection of the workers concerned. Moreover, it seems hardly possible in practice to use the absence of an explicit call to perform work as the basis for defining inactive time. Whether a particular activity is performed depends on the demands of the workplace at any given time and not on a call from the employer, as can easily be imagined in the case of a hospital or the fire service. |
| --- | --- |

3.7.1

Involving the employer's call to work means that being on call at the workplace no longer constitutes performance of work. This position fails to recognise the fact that employees on call are not free in what they do at the workplace and neither have free time nor can claim rest time. It is the nature of being on call that the employee cannot use his time as he wishes, but must be constantly at a workplace ready for work — i.e. available. Putting this distinctive situation on the same footing as ‘rest time’ would lead to excessively long working time, which would substantially imperil the work and safety protection of the workers concerned. Moreover, it seems hardly possible in practice to use the absence of an explicit call to perform work as the basis for defining inactive time. Whether a particular activity is performed depends on the demands of the workplace at any given time and not on a call from the employer, as can easily be imagined in the case of a hospital or the fire service.

| 3.7.2 | It its earlier opinion the EESC stated that ‘the way working time rules are framed in collective agreements is of vital importance to the social partners, which have a wealth of expertise and experience in these matters.’ (13) In the EESC's view, this also holds in particular for the legislation of working time organisation in the case of being on-call. This should therefore be left to the parties to collective agreements, the parties being obliged to comply with the key legal texts referred to in point 3.7. |
| --- | --- |

3.7.2

It its earlier opinion the EESC stated that ‘the way working time rules are framed in collective agreements is of vital importance to the social partners, which have a wealth of expertise and experience in these matters.’ (13) In the EESC's view, this also holds in particular for the legislation of working time organisation in the case of being on-call. This should therefore be left to the parties to collective agreements, the parties being obliged to comply with the key legal texts referred to in point 3.7.

| 3.7.3 | The EESC is aware of the fact that in different branches, professions and businesses different conditions apply to the demands made during on-call time. However, in the EESC's view, the Commission's proposal for a general division into an active and an inactive part of on-call time does not contribute to solving these practical problems. As a special form of working time, on-call times need special regulations — tailored to the needs of this or that branch or activity — which will have to be negotiated by the partners to collective agreements. The practice of collective agreements has set many good precedents for this. |
| --- | --- |

3.7.3

The EESC is aware of the fact that in different branches, professions and businesses different conditions apply to the demands made during on-call time. However, in the EESC's view, the Commission's proposal for a general division into an active and an inactive part of on-call time does not contribute to solving these practical problems. As a special form of working time, on-call times need special regulations — tailored to the needs of this or that branch or activity — which will have to be negotiated by the partners to collective agreements. The practice of collective agreements has set many good precedents for this.

| 3.8 | The directive in force sets no time limit for granting equivalent compensatory rest time in the case of derogations from minimum regulations on the rest periods to be observed. There is therefore a clarification and specification in the amendment; this, however, is not in harmony with the relevant ruling of the ECJ. In its decision in the Jaeger case, the ECJ ruled that compensatory rest periods were to be granted without delay. The EESC is of the view that a limited amount of flexibility in granting compensatory rest periods, which the amendment is intended to achieve, could be in the interests of both the business and the worker concerned, if work and safety protection are also taken into account. Here, too, it should be left to the partners to collective agreements — on the appropriate level dictated by national practice — to find solutions geared to the requirements in different businesses. |
| --- | --- |

3.8

The directive in force sets no time limit for granting equivalent compensatory rest time in the case of derogations from minimum regulations on the rest periods to be observed. There is therefore a clarification and specification in the amendment; this, however, is not in harmony with the relevant ruling of the ECJ. In its decision in the Jaeger case, the ECJ ruled that compensatory rest periods were to be granted without delay. The EESC is of the view that a limited amount of flexibility in granting compensatory rest periods, which the amendment is intended to achieve, could be in the interests of both the business and the worker concerned, if work and safety protection are also taken into account. Here, too, it should be left to the partners to collective agreements — on the appropriate level dictated by national practice — to find solutions geared to the requirements in different businesses.

| 3.9 | The individual opt-out is a general derogation from the minimum level of regulation in the Directive on maximum working time. It is true that the proposed amendment formulates a few additional conditions which may limit misuse. However, the fact that the individual opt-out is in principle subject to collective agreement cannot mask the fact that the responsibility for work and health protection is transferred through the legal limitation of the maximum working week from the Member States to the social partners. Moreover, this derogation can still be used where no collective agreement is in place and there is no representation of workers' interests in the company or undertaking. |
| --- | --- |

3.9

The individual opt-out is a general derogation from the minimum level of regulation in the Directive on maximum working time. It is true that the proposed amendment formulates a few additional conditions which may limit misuse. However, the fact that the individual opt-out is in principle subject to collective agreement cannot mask the fact that the responsibility for work and health protection is transferred through the legal limitation of the maximum working week from the Member States to the social partners. Moreover, this derogation can still be used where no collective agreement is in place and there is no representation of workers' interests in the company or undertaking.

| 3.9.1 | In its earlier opinion the EESC addressed the possible consequences for work and health protection of this derogation and pointed out that the derogation ‘can thus only be applied if the Member State respects “the general principles of the protection of health and safety of workers”’ (14). The EESC recognises that the Commission is endeavouring with its proposed amendment to limit misuse. It doubts, however, that the proposed additional conditions fulfil this purpose. The EESC would ask whether the retention of the individual opt-out does not, on the whole, run contrary to the very aim of the Directive as a European minimum level of regulation to protect the health and safety of workers. That the Commission shares these reservations clearly emerges from its communication in the first phase of the consultations of the social partners, which states: ‘Existing provisions in Article 18.1 b) i) that give the possibility of being able, on a voluntary and individual basis, to work more than 48 hours per week, averaged out over a given period, could put at risk the Directive's aim of protecting workers' safety and health.’ (15) It goes on to say: ‘It also brings out an unexpected effect in that it is difficult to ensure (or at least check) that the other provisions in the Directive have been complied with, concerning whether workers have signed the opt-out agreement.’ (16) The EESC would therefore ask why the Commission did not make use of the option it referred to in its consultation paper in the second phase of the consultation of the social partners, namely to take up the proposal of the European Parliament and ‘revise the individual opt-out with a view to its phasing out as soon as possible. In the meantime, tighten the conditions for application of the individual opt-out under Article 18.1 (b) (i) with a view to strengthening its voluntary nature and preventing abuses in practice.’ (17) |
| --- | --- |

3.9.1

In its earlier opinion the EESC addressed the possible consequences for work and health protection of this derogation and pointed out that the derogation ‘can thus only be applied if the Member State respects “the general principles of the protection of health and safety of workers”’ (14). The EESC recognises that the Commission is endeavouring with its proposed amendment to limit misuse. It doubts, however, that the proposed additional conditions fulfil this purpose. The EESC would ask whether the retention of the individual opt-out does not, on the whole, run contrary to the very aim of the Directive as a European minimum level of regulation to protect the health and safety of workers. That the Commission shares these reservations clearly emerges from its communication in the first phase of the consultations of the social partners, which states: ‘Existing provisions in Article 18.1 b) i) that give the possibility of being able, on a voluntary and individual basis, to work more than 48 hours per week, averaged out over a given period, could put at risk the Directive's aim of protecting workers' safety and health.’ (15) It goes on to say: ‘It also brings out an unexpected effect in that it is difficult to ensure (or at least check) that the other provisions in the Directive have been complied with, concerning whether workers have signed the opt-out agreement.’ (16) The EESC would therefore ask why the Commission did not make use of the option it referred to in its consultation paper in the second phase of the consultation of the social partners, namely to take up the proposal of the European Parliament and ‘revise the individual opt-out with a view to its phasing out as soon as possible. In the meantime, tighten the conditions for application of the individual opt-out under Article 18.1 (b) (i) with a view to strengthening its voluntary nature and preventing abuses in practice.’ (17)

| 3.10 | It is also a broad aim of the Commission's amendment to contribute to greater compatibility between work and the family. On this question the Commission refers to the amendments proposed for Art. 22(1) (individual opt-out) and Recital 6, which contains the invitation to the social partners to conclude appropriate agreements. The EESC is of the view that the Commission is taking the soft option with these references. Greater compatibility of work and the family requires working times that can be planned and calculated in advance, i.e. a flexibility which is not geared unilaterally to the demands of business, but gives the parents concerned space for dividing working time according to the needs of the family. The individual opt-out is in no way conducive to this, as it makes possible a prolongation of the daily and weekly working time beyond the Directive's minimum level of regulation. The EESC had already stated in its earlier Opinion that: ‘The opt-out would thus seem to have a negative effect on equal opportunities between women and men.’ (18) In the EESC's view, the Directive in force is sufficiently flexible to take account of the special needs of families, while the individual opt-out makes things more, rather than less, difficult. |
| --- | --- |

3.10

It is also a broad aim of the Commission's amendment to contribute to greater compatibility between work and the family. On this question the Commission refers to the amendments proposed for Art. 22(1) (individual opt-out) and Recital 6, which contains the invitation to the social partners to conclude appropriate agreements. The EESC is of the view that the Commission is taking the soft option with these references. Greater compatibility of work and the family requires working times that can be planned and calculated in advance, i.e. a flexibility which is not geared unilaterally to the demands of business, but gives the parents concerned space for dividing working time according to the needs of the family. The individual opt-out is in no way conducive to this, as it makes possible a prolongation of the daily and weekly working time beyond the Directive's minimum level of regulation. The EESC had already stated in its earlier Opinion that: ‘The opt-out would thus seem to have a negative effect on equal opportunities between women and men.’ (18) In the EESC's view, the Directive in force is sufficiently flexible to take account of the special needs of families, while the individual opt-out makes things more, rather than less, difficult.

4.   Conclusions

| 4.1 | In the EESC's view, the points made in the general evaluation of the proposed amendment raise legitimate doubts as to whether the Commission's proposed amendment is capable of actually achieving the goals pursued. These doubts relate particularly to the intended balance between flexibility and work and health protection, and therefore to the greater compatibility between work and the family. If the conclusion is that the amendment does not achieve a good balance between these goals, the only logical consequence is to amend the Commission's proposal. In the EESC's view, it now falls to the European Parliament, through the legislative process, to present the necessary proposals for amendments. On this question, the EESC takes the view that there is some justification for asking whether the individual opt-out, which could possibly invalidate the Directive's core minimum level of regulation on the maximum weekly working time, is in harmony with the fundamental rights goals of the new EU Constitution. |
| --- | --- |

4.1

In the EESC's view, the points made in the general evaluation of the proposed amendment raise legitimate doubts as to whether the Commission's proposed amendment is capable of actually achieving the goals pursued. These doubts relate particularly to the intended balance between flexibility and work and health protection, and therefore to the greater compatibility between work and the family. If the conclusion is that the amendment does not achieve a good balance between these goals, the only logical consequence is to amend the Commission's proposal. In the EESC's view, it now falls to the European Parliament, through the legislative process, to present the necessary proposals for amendments. On this question, the EESC takes the view that there is some justification for asking whether the individual opt-out, which could possibly invalidate the Directive's core minimum level of regulation on the maximum weekly working time, is in harmony with the fundamental rights goals of the new EU Constitution.

| 4.2 | The EESC would also like to stress once again that it is the prime task of the parties to collective agreements on the national level to agree on flexible working models which take account of the specific needs in a given sector, while respecting fundamental rights. This holds in particular for the regulation of on-call time as a distinct form of working time. |
| --- | --- |

4.2

The EESC would also like to stress once again that it is the prime task of the parties to collective agreements on the national level to agree on flexible working models which take account of the specific needs in a given sector, while respecting fundamental rights. This holds in particular for the regulation of on-call time as a distinct form of working time.

| 4.3 | The EESC therefore requests the EU Commission, the European Parliament and the EU Council, in revising the directive, to be mindful of the following:






  — | the prime role of the parties to collective agreements in examining the reference period for calculating the weekly maximum working time and keeping it within the present bounds of the directive; |
| --- | --- | --- |

4.3

The EESC therefore requests the EU Commission, the European Parliament and the EU Council, in revising the directive, to be mindful of the following:

—

the prime role of the parties to collective agreements in examining the reference period for calculating the weekly maximum working time and keeping it within the present bounds of the directive;

| — | the guaranteeing of a basis for on-call time which is in harmony with the ruling of the ECJ and gives precedence to solutions achieved through collective agreement; |
| --- | --- |

—

the guaranteeing of a basis for on-call time which is in harmony with the ruling of the ECJ and gives precedence to solutions achieved through collective agreement;

| — | measures for working time organisation which are conducive to greater compatibility of work and the family; |
| --- | --- |

—

measures for working time organisation which are conducive to greater compatibility of work and the family;

| — | examination of the individual opt-out to determine whether its retention does not run counter to the spirit and aim of the Directive itself. |
| --- | --- |

—

examination of the individual opt-out to determine whether its retention does not run counter to the spirit and aim of the Directive itself.

Brussels, 11 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  COM(2004) 607 final – 2004/209 (COD)

1

(2)  COM(2004) 607 final – 2004/209 (COD), p. 3-4

2

(3)  The articles mentioned in points 2.1, 2.2 and 2.3 refer to Directive 2003/88/EC

3

(4)  Letter of 2.6.2004 from UNICE to Commissioner Dimas

4

(5)  Opinion of the European Economic and Social Committee on the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions and the social partners at Community level concerning the re-exam of Directive 93/104/EC concerning certain aspects of the organisation of working time, 2.2.5 (OJ C 302 of 7 December 2004, p. 74).

5

(6)  Community Charter of the Fundamental Social Rights of Workers, point 19

6

(7)  Article 31 of the European Union Charter of Fundamental Rights, Article II-91 of the Draft Constitutional Treaty

7

(8)  Commission Communication of 15.1.2004 (COM(2003) 843 final)

8

(9)  See the EESC Opinion (point 2.2.8) referred to in footnote 5

9

(10)  Idem, 2.2.7

10

(11)  Idem, 3.1.7

11

(12)  Idem, 3.2.2

12

(13)  Idem, 2.2.6

13

(14)  Idem, 3.3.2

14

(15)  COM(2003) 843 final of 30 December 2003, p.25 (several linguistic mistakes in the quote have been corrected). The article mentioned refers to Directive 93/104/EC.

15

(16)  Idem p. 22

16

(17)  Commission consultation paper: Second stage of consultation of the social partners at the Community level concerning the review of Directive 93/104/EC concerning certain aspects of the adaptation of the working time, document SEC(2004) 610. The article mentioned refers to Directive 93/104/EC.

17

(18)  See the EESC Opinion (point 3.3.6) referred to in footnote 5

18

---

APPENDIX

to the Opinion of the European Economic and Social Committee

The following amendment was rejected. However, it was supported by more than a quarter of the votes cast:

(COUNTER-OPINION)

Replace the entire section opinion by:

The Committee generally supports the Commission's proposal for amending Directive 2003/88/EC concerning certain aspects of the organisation of working time.

This proposal is based on Article 137(2) in the Treaty establishing the European Community according to which the directives adopted should ‘improve the working environment to protect the worker's health and safety’ while it ‘must avoid imposing administrative, financial and legal constraints in such a way as to hold back the creation and development of small and medium sized undertakings’. The Committee believes this proposal ensures a high level of protection of workers' health and safety, whilst allowing companies flexibility in managing working time.

The Committee fully supports the criteria to be met by any future proposal as indicated by the Commission:

| — | ensure high standard of protection of workers' health and safety with regard to working time; |
| --- | --- |

—

ensure high standard of protection of workers' health and safety with regard to working time;

| — | give companies and Member States greater flexibility in managing working time; |
| --- | --- |

—

give companies and Member States greater flexibility in managing working time;

| — | allow greater compatibility between work and family life; |
| --- | --- |

—

allow greater compatibility between work and family life;

| — | avoid imposing unreasonable constraints on companies, in particular SMEs. |
| --- | --- |

—

avoid imposing unreasonable constraints on companies, in particular SMEs.

The Commission rightly emphasised the important role on this issue of Member States and social partners at national, branch or enterprise level.

More specifically, the Committee notes that a 12-month reference period is already used in many Member States; it therefore believes the current provisions should promote the annualisation of the reference period.

Concerning on-call time the Committee points out that several Member States have national legislation and practices which contain rules on time spent 'on-call' in various sectors and especially in the health sector. These rules vary in different ways, but it is common in all cases that either on-call time does not count as working time at all or only partly.

The Committee supports the Commission that the inactive part of on-call time should not be regarded as working time. This is crucial for the functioning of all enterprises, especially SMEs and for the further development of social economy.

Furthermore, the Committee indicates that on-call time should not be considered as resting time as this would lead to excessively long working hours, which could hamper the reconciliation of work and family life and endanger the health and safety of workers.

The Committee considers that, if necessary, inactive part of on-call time could be established as an average number of hours, in order to take into account the different needs in the various sectors and enterprises.

The Committee believes that the possibility of opt-out should be maintained and the collective opt-out should be put on equal footing with the individual opt-out. This is important in order to take into account the different industrial relation practices across the enlarged EU as well as the needs of enterprises and the needs and wishes of workers that might wish to work longer in different periods of their lives.

Nevertheless, it has to be assured that this possibility stays voluntary, is not used in an abusive way and that the worker can withdraw his consent to work longer when his life circumstances change. The Committee therefore supports the additional conditions linked to the opt-out as suggested by the Commissions' proposal.

Voting

| For | : | 109 |
| --- | --- | --- |
| Against | : | 156 |
| Abstentions | : | 7 |

For

:

109

Against

:

156

Abstentions

:

7

---

| 27.10.2005 | EN | Official Journal of the European Union | C 267/22 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/22

---

Opinion of the European Economic and Social Committee on ‘The role of sustainable development within the forthcoming financial perspectives’

(2005/C 267/04)

On 29 November 2004 the future Luxembourg Presidency of the Council of the European Union decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on ‘The role of sustainable development within the forthcoming financial perspectives’.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 18 April 2005. The rapporteur was Ms Sirkeinen, co-rapporteurs were Mr Ehnmark and Mr Ribbe.

At its 417th plenary session, held on 11/12 May 2005 (meeting of 11 May), the European Economic and Social Committee adopted the following opinion by 151 votes to 1 with 8 abstentions:

1.   Introduction

| 1.1 | The EESC has earlier adopted opinions covering comprehensively the sustainable development strategy of the EU. In this exploratory opinion the EESC discusses, as requested by the Luxembourg Presidency, the relationship between sustainable development and the financial perspectives; that is, what can and needs to be done by budget policies to integrate and enhance sustainable development. This opinion is structured according to the headings — priority areas — of the Communication on the financial perspectives. |
| --- | --- |

1.1

The EESC has earlier adopted opinions covering comprehensively the sustainable development strategy of the EU. In this exploratory opinion the EESC discusses, as requested by the Luxembourg Presidency, the relationship between sustainable development and the financial perspectives; that is, what can and needs to be done by budget policies to integrate and enhance sustainable development. This opinion is structured according to the headings — priority areas — of the Communication on the financial perspectives.

| 1.2 | The relationship between the EU budget and the objective of sustainable development is complex. The EESC endeavours in this opinion to shed light on this, but cannot here cover all details. Therefore it is important to collect and analyse knowledge and views on the issues involved on a broad scale. |
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1.2

The relationship between the EU budget and the objective of sustainable development is complex. The EESC endeavours in this opinion to shed light on this, but cannot here cover all details. Therefore it is important to collect and analyse knowledge and views on the issues involved on a broad scale.

| 1.3 | The EESC is ready and willing to play an active role in the continuing work on sustainable development. To this end, it can also make a significant contribution in keeping with the tasks entrusted to it for the implementation of the Lisbon Strategy by the March 2005 European Council. The interactive network encompassing civil society and stakeholders which it has been asked to set up is an appropriate platform for an effective, multidimensional (economic, social, environmental) and clear evaluation, while at the same time promoting ownership of Community policies by grassroots players. |
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1.3

The EESC is ready and willing to play an active role in the continuing work on sustainable development. To this end, it can also make a significant contribution in keeping with the tasks entrusted to it for the implementation of the Lisbon Strategy by the March 2005 European Council. The interactive network encompassing civil society and stakeholders which it has been asked to set up is an appropriate platform for an effective, multidimensional (economic, social, environmental) and clear evaluation, while at the same time promoting ownership of Community policies by grassroots players.

2.   The Commission Communication on the Financial Perspectives 2007-2013

| 2.1 | In its Communication ‘Building our common Future — Policy challenges and Budgetary means of the enlarged Union 2007-2013’ (1) of 10.2.2004, the Commission presents its priorities for the enlarged European Union and its proposals for financial requirements, instruments, governance and the new financial framework as well as the financing system. The three priorities for the next financial perspectives are:






  — | completing the internal market in order to achieve, in particular, the broader objective of sustainable development, |
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2.1

In its Communication ‘Building our common Future — Policy challenges and Budgetary means of the enlarged Union 2007-2013’ (1) of 10.2.2004, the Commission presents its priorities for the enlarged European Union and its proposals for financial requirements, instruments, governance and the new financial framework as well as the financing system. The three priorities for the next financial perspectives are:

—

completing the internal market in order to achieve, in particular, the broader objective of sustainable development,

| — | the political concept of European citizenship, which hinges on the completion of an area of freedom, justice, security and access to public goods, and |
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—

the political concept of European citizenship, which hinges on the completion of an area of freedom, justice, security and access to public goods, and

| — | Europe as a global partner, promoting sustainable development and contributing to security. |
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—

Europe as a global partner, promoting sustainable development and contributing to security.

| 2.1.1 | The proposal for a new financial framework is grouped under the headings (table as an annex)






  1. | Sustainable growth






  1a. | Competitiveness for growth and employment |
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2.1.1

The proposal for a new financial framework is grouped under the headings (table as an annex)

1.

Sustainable growth

1a.

Competitiveness for growth and employment

| 1b. | Cohesion for growth and employment |
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1b.

Cohesion for growth and employment

| 2. | Preservation and management of natural resources incl. Agriculture |
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2.

Preservation and management of natural resources incl. Agriculture

| 3. | Citizenship, freedom, security and justice |
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3.

Citizenship, freedom, security and justice

| 4. | The EU as a global partner |
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4.

The EU as a global partner

| 5. | Administration. |
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5.

Administration.

| 2.1.2 | The Commission proposes a larger increase in expenditure under priority 1. It is proposed to raise total appropriations for commitments from EUR 120.7 million in 2006 to EUR 158.4 million in 2013. This should be covered by payments of 1.24 % of GNI, including a margin of 0.10 %. |
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2.1.2

The Commission proposes a larger increase in expenditure under priority 1. It is proposed to raise total appropriations for commitments from EUR 120.7 million in 2006 to EUR 158.4 million in 2013. This should be covered by payments of 1.24 % of GNI, including a margin of 0.10 %.

| 2.1.3 | In its opinion on the financial perspectives 2007-2013 the EESC generally endorses the communication as it is seen as cohesive, having a solid, farsighted political premise, providing clear and consistent practical policy priorities and choices as well as being balanced. On the level of own resources of the Community budget, the EESC takes the view that is necessary to ‘opt for increasing the own resources of the Community budget for the new 2007-2013 programming period beyond the current budgetary framework, to the maximum level of 1.30 % of GDP’. |
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2.1.3

In its opinion on the financial perspectives 2007-2013 the EESC generally endorses the communication as it is seen as cohesive, having a solid, farsighted political premise, providing clear and consistent practical policy priorities and choices as well as being balanced. On the level of own resources of the Community budget, the EESC takes the view that is necessary to ‘opt for increasing the own resources of the Community budget for the new 2007-2013 programming period beyond the current budgetary framework, to the maximum level of 1.30 % of GDP’.

3.   General comments

| 3.1 | It is of utmost importance that the new financial perspectives, the frame of the EU budgets for 2007-2013, reflect clearly the priorities of the Union, in particular the Lisbon goals and sustainable development. To this end a significant restructuring of expenditures must take place. If the financial perspectives, given their fairly long term, do not direct EU development in the right direction, there is little hope that other policies or later financial adjustments will succeed in doing so. |
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3.1

It is of utmost importance that the new financial perspectives, the frame of the EU budgets for 2007-2013, reflect clearly the priorities of the Union, in particular the Lisbon goals and sustainable development. To this end a significant restructuring of expenditures must take place. If the financial perspectives, given their fairly long term, do not direct EU development in the right direction, there is little hope that other policies or later financial adjustments will succeed in doing so.

| 3.2 | The EESC does not in this opinion discuss at length the issue of level of own resources, since this was thoroughly done in the previous opinion referred to in 2.1 It is, however, important to point out that Europe cannot be strong in delivering on its priorities and meeting the needs and expectations of its citizens unless it has strong financial resources. EU financing can have a significant multiplier effect on total resources devoted to given objectives, and this potential should be fully exploited. At present, there is tension between firstly, the views of the net contributing Member States, secondly those of the current main beneficiaries, thirdly political commitments to new Member States and their citizens and fourthly needs to reallocate resources to new priorities of the EU. The Committee stresses that a restructuring of expenditures towards the priorities of the Union must take place irrespective of the level of own resources finally decided upon. |
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3.2

The EESC does not in this opinion discuss at length the issue of level of own resources, since this was thoroughly done in the previous opinion referred to in 2.1 It is, however, important to point out that Europe cannot be strong in delivering on its priorities and meeting the needs and expectations of its citizens unless it has strong financial resources. EU financing can have a significant multiplier effect on total resources devoted to given objectives, and this potential should be fully exploited. At present, there is tension between firstly, the views of the net contributing Member States, secondly those of the current main beneficiaries, thirdly political commitments to new Member States and their citizens and fourthly needs to reallocate resources to new priorities of the EU. The Committee stresses that a restructuring of expenditures towards the priorities of the Union must take place irrespective of the level of own resources finally decided upon.

4.   The concept of sustainable development

| 4.1 | The EU strategy for sustainable development is based on interpenetration, interdependence and coherence between the so-called ‘three pillars’ of economic, social and environmental considerations. Sustainable development covers both quantitative and qualitative aspects. Policy decisions have to take all three aspects into consideration simultaneously. Policies directed mainly to one of these areas, or other policy areas, have to be coherent with the goals of the other areas. |
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4.1

The EU strategy for sustainable development is based on interpenetration, interdependence and coherence between the so-called ‘three pillars’ of economic, social and environmental considerations. Sustainable development covers both quantitative and qualitative aspects. Policy decisions have to take all three aspects into consideration simultaneously. Policies directed mainly to one of these areas, or other policy areas, have to be coherent with the goals of the other areas.

| 4.2 | Sustainable development has a long-term and a global aspect. Intergenerational justice means that present generations should not live at the expense of future generations. Global distributive justice does not allow us to live at the expense of other societies or by stifling the development of their well-being or global poverty eradication. |
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4.2

Sustainable development has a long-term and a global aspect. Intergenerational justice means that present generations should not live at the expense of future generations. Global distributive justice does not allow us to live at the expense of other societies or by stifling the development of their well-being or global poverty eradication.

| 4.3 | The sustainable development strategy differs from the standard definition of a strategy because, rather than defining a goal and a programme of measures to reach it, it takes the sustainability of the development approach as its key objective. At no point can sustainable development be said to have achieved completion; it is not so much a goal as a process. The important issue is to ensure that developments, particularly in the longer term, are consistent with one another and firmly aimed at fulfilling the criteria mentioned above (points 4.1 and 4.2). This is the real challenge of sustainable development — it cannot be delivered by specific targets or policies, although it must be possible to measure major reversals in trends (such as progress on the millennium goals). |
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4.3

The sustainable development strategy differs from the standard definition of a strategy because, rather than defining a goal and a programme of measures to reach it, it takes the sustainability of the development approach as its key objective. At no point can sustainable development be said to have achieved completion; it is not so much a goal as a process. The important issue is to ensure that developments, particularly in the longer term, are consistent with one another and firmly aimed at fulfilling the criteria mentioned above (points 4.1 and 4.2). This is the real challenge of sustainable development — it cannot be delivered by specific targets or policies, although it must be possible to measure major reversals in trends (such as progress on the millennium goals).

| 4.4 | Sustainable development requires a high level of policy coherence, at EU and national level. The total effort is very much a combination of big-scale and small-scale steps, together building up a process that counters unsustainable developments and promotes changes that are in line with the overarching objectives. One of the most difficult challenges in this approach is to develop indicators that properly reflect developments. |
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4.4

Sustainable development requires a high level of policy coherence, at EU and national level. The total effort is very much a combination of big-scale and small-scale steps, together building up a process that counters unsustainable developments and promotes changes that are in line with the overarching objectives. One of the most difficult challenges in this approach is to develop indicators that properly reflect developments.

| 4.5 | The EU sustainable development strategy concentrates presently on a few of the most urgent unsustainable trends in our societies — climate change, transport, public health and natural resources. Others, like eradication of poverty and population ageing have been left out, and can be added at a later stage. |
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4.5

The EU sustainable development strategy concentrates presently on a few of the most urgent unsustainable trends in our societies — climate change, transport, public health and natural resources. Others, like eradication of poverty and population ageing have been left out, and can be added at a later stage.

| 4.6 | The EESC has in its earlier opinions on sustainable development urged action in certain policy areas. These are: support for private and public investment in new and clean technology, new efforts to improve quality of work, setting prices on the use of natural resources as well as strategies for decreasing dependence of fossil fuels. |
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4.6

The EESC has in its earlier opinions on sustainable development urged action in certain policy areas. These are: support for private and public investment in new and clean technology, new efforts to improve quality of work, setting prices on the use of natural resources as well as strategies for decreasing dependence of fossil fuels.

| 4.7 | Policies in these areas, how important they may be, are however not alone sufficient to deliver on the objective of sustainable development. The goal and criteria of sustainability should be reflected in all policies. Individual EU policies must be framed more coherently. |
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4.7

Policies in these areas, how important they may be, are however not alone sufficient to deliver on the objective of sustainable development. The goal and criteria of sustainability should be reflected in all policies. Individual EU policies must be framed more coherently.

| 4.8 | It may be time to reconsider the form of the EU approach to sustainable development. The forthcoming revision of the sustainable development strategy will have to consider the best way to implement the overarching principle of sustainable development. |
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4.8

It may be time to reconsider the form of the EU approach to sustainable development. The forthcoming revision of the sustainable development strategy will have to consider the best way to implement the overarching principle of sustainable development.

5.   The financial perspectives and sustainable development

| 5.1 | The structure and detailed contents of the budget have a fundamental influence on the direction of EU developments. The renewal of the budget structure, giving the new priority headings, features an acknowledgement of the importance of sustainable development. The EESC expects this to be reflected in the implementation of the budget in real terms, and not only doing the same things in the same way under new headings. |
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5.1

The structure and detailed contents of the budget have a fundamental influence on the direction of EU developments. The renewal of the budget structure, giving the new priority headings, features an acknowledgement of the importance of sustainable development. The EESC expects this to be reflected in the implementation of the budget in real terms, and not only doing the same things in the same way under new headings.

| 5.2 | The EESC shares the view of the Commission in giving priority to growth and employment, in the Lisbon perspective of the years up to 2010. Growth must be understood as economic growth taking into account the key European values of social inclusion, health and environmental protection. Competitiveness and economic growth are not final goals in themselves, but tools for promoting social and environmental goals. The problem is, however, that consistently slower growth and weaker competitiveness in the EU compared to the other main economic areas can put both the European social model and our environmental values at risk. |
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5.2

The EESC shares the view of the Commission in giving priority to growth and employment, in the Lisbon perspective of the years up to 2010. Growth must be understood as economic growth taking into account the key European values of social inclusion, health and environmental protection. Competitiveness and economic growth are not final goals in themselves, but tools for promoting social and environmental goals. The problem is, however, that consistently slower growth and weaker competitiveness in the EU compared to the other main economic areas can put both the European social model and our environmental values at risk.

| 5.3 | Budgetary decisions should also take into account the fact that social and environmental development for their part also contribute to economic growth. |
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5.3

Budgetary decisions should also take into account the fact that social and environmental development for their part also contribute to economic growth.

| 5.4 | The EU is not monolithic in its achievements vis-à-vis sustainable development. Member States are in very different situations. A few have been able to successfully combine relatively strong economic growth with a high level of social and environmental protection. There seems to have been a positive interaction between developments in different areas. Some other Member States, again, seem to struggle with the opposite situation, a combination of very sluggish growth, difficulties in addressing social problems and lagging behind in environmental development. New Member States are in a different situation than the older ones, characterised by growth and clear development from problematic starting points in the other ‘pillars’. |
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5.4

The EU is not monolithic in its achievements vis-à-vis sustainable development. Member States are in very different situations. A few have been able to successfully combine relatively strong economic growth with a high level of social and environmental protection. There seems to have been a positive interaction between developments in different areas. Some other Member States, again, seem to struggle with the opposite situation, a combination of very sluggish growth, difficulties in addressing social problems and lagging behind in environmental development. New Member States are in a different situation than the older ones, characterised by growth and clear development from problematic starting points in the other ‘pillars’.

| 5.5 | Enlargement has been the most dominant factor of change for the EU in recent years, and will probably remain so during the 2007-2013 period covered by the financial perspectives. Obviously, this has a considerable impact on the budget, in particular on expenditure for cohesion. The EESC has discussed the issues of enlargement, cohesion and funding in other contexts. Concerning sustainable development, it is clear that joining the EU constitutes a major challenge with regard to developing national policies towards sustainable development, and taking part in the overall EU actions and considerations. After accession, the acquis communautaire guides their development in environmental, health, social and other fields towards sustainability, insofar as sustainable development (not explicitly included in the acquis) is promoted by the acquis. But most of the work towards sustainability still needs to be done. Support programmes providing assistance in the form both of financial resources and expertise can, and should, help these societies to develop in a sustainable direction. |
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5.5

Enlargement has been the most dominant factor of change for the EU in recent years, and will probably remain so during the 2007-2013 period covered by the financial perspectives. Obviously, this has a considerable impact on the budget, in particular on expenditure for cohesion. The EESC has discussed the issues of enlargement, cohesion and funding in other contexts. Concerning sustainable development, it is clear that joining the EU constitutes a major challenge with regard to developing national policies towards sustainable development, and taking part in the overall EU actions and considerations. After accession, the acquis communautaire guides their development in environmental, health, social and other fields towards sustainability, insofar as sustainable development (not explicitly included in the acquis) is promoted by the acquis. But most of the work towards sustainability still needs to be done. Support programmes providing assistance in the form both of financial resources and expertise can, and should, help these societies to develop in a sustainable direction.

| 5.6 | The priority areas of the sustainable development strategy as well as other areas with recognised unsustainable trends — mentioned in paragraphs 4.4. and 4.5. — must be treated as priorities in budgetary policies as well. |
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5.6

The priority areas of the sustainable development strategy as well as other areas with recognised unsustainable trends — mentioned in paragraphs 4.4. and 4.5. — must be treated as priorities in budgetary policies as well.

| 5.7 | A budget heading as such is mostly neither ‘sustainable’ nor ‘unsustainable’. The effects on sustainable development depend on the detailed design of programmes, objectives and criteria for projects to be financed. |
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5.7

A budget heading as such is mostly neither ‘sustainable’ nor ‘unsustainable’. The effects on sustainable development depend on the detailed design of programmes, objectives and criteria for projects to be financed.

| 5.8 | The key instrument for ensuring policy coherence with sustainable development goals is impact assessment. This is acknowledged by all stakeholders, including the Commission, but steps towards a systematic, independent and competent assessment of all proposals of importance have been slow. The EESC sees the preparation and the implementation of the new financial perspectives as a window of opportunity to finally introduce systematic assessment in practice. |
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5.8

The key instrument for ensuring policy coherence with sustainable development goals is impact assessment. This is acknowledged by all stakeholders, including the Commission, but steps towards a systematic, independent and competent assessment of all proposals of importance have been slow. The EESC sees the preparation and the implementation of the new financial perspectives as a window of opportunity to finally introduce systematic assessment in practice.

| 5.9 | Impact assessments need to be performed on every single programme in the budget and their objectives. In this context in particular support for unsustainable activities, related to areas identified in the sustainable development strategy and inter alia in EESC opinions, should be stopped. Impact assessments with regard to effects on long-term sustainable development should also be introduced in the Lisbon strategy, in line with what the EESC has previously recommended. |
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5.9

Impact assessments need to be performed on every single programme in the budget and their objectives. In this context in particular support for unsustainable activities, related to areas identified in the sustainable development strategy and inter alia in EESC opinions, should be stopped. Impact assessments with regard to effects on long-term sustainable development should also be introduced in the Lisbon strategy, in line with what the EESC has previously recommended.

| 5.10 | Clear and transparent criteria ought to be used for the selection of projects to be financed under different budget headings and programmes. These should include sustainability criteria, such as the impact of the project on the environment, health, creation or loss of jobs and EU competitiveness. |
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5.10

Clear and transparent criteria ought to be used for the selection of projects to be financed under different budget headings and programmes. These should include sustainability criteria, such as the impact of the project on the environment, health, creation or loss of jobs and EU competitiveness.

| 5.11 | Particular attention should be directed to the use of resources from structural funds, the cohesion fund and agricultural expenditure as well as the TEN programmes. In these fields of EU activity, which represent the vast majority of EU expenditure, choices have to be systematically directed towards solutions that fulfil sustainability criteria as far as possible. |
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5.11

Particular attention should be directed to the use of resources from structural funds, the cohesion fund and agricultural expenditure as well as the TEN programmes. In these fields of EU activity, which represent the vast majority of EU expenditure, choices have to be systematically directed towards solutions that fulfil sustainability criteria as far as possible.

| 5.12 | In these areas better supervision of results and of the impact of money spent is needed. It is not enough to monitor how much money has been spent and whether there have been any infringements of administrative rules. In order to be able to develop activities in the right direction, comprehensive impact studies in relation to sustainable development criteria are needed. |
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5.12

In these areas better supervision of results and of the impact of money spent is needed. It is not enough to monitor how much money has been spent and whether there have been any infringements of administrative rules. In order to be able to develop activities in the right direction, comprehensive impact studies in relation to sustainable development criteria are needed.

| 5.13 | Merely conducting assessments of the likely impact of proposed policies does not always give a complete picture on which to base decisions. In some cases the impact of inaction also needs to be studied and the results assessed in comparison with the impact of various possible measures. |
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5.13

Merely conducting assessments of the likely impact of proposed policies does not always give a complete picture on which to base decisions. In some cases the impact of inaction also needs to be studied and the results assessed in comparison with the impact of various possible measures.

6.   Comments on the priority areas of the financial perspectives

6.1   A) Sustainable growth — Competitiveness for growth and employment

| 6.1.1 | The EESC agrees with the main objectives of the Commission proposal for competitiveness for growth and employment: promoting the competitiveness of enterprises in a fully integrated single market, strengthening the European RD&T-effort, connecting Europe through EU networks, improving the quality of education and training and the social policy agenda, and helping European society to anticipate and manage change. |
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6.1.1

The EESC agrees with the main objectives of the Commission proposal for competitiveness for growth and employment: promoting the competitiveness of enterprises in a fully integrated single market, strengthening the European RD&T-effort, connecting Europe through EU networks, improving the quality of education and training and the social policy agenda, and helping European society to anticipate and manage change.

| 6.1.2 | Under this heading, the EESC wants in particular to stress the key role of knowledge, R&D and new technology. By putting real emphasis on this and providing adequate resources, Europe has a unique chance to enhance productivity, competitiveness, growth and employment in the face of fierce competition from other parts of the globe, and also to ease the stress on environment and natural resources by using more eco-efficient technological solutions to peoples' needs which safeguard health and security. |
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6.1.2

Under this heading, the EESC wants in particular to stress the key role of knowledge, R&D and new technology. By putting real emphasis on this and providing adequate resources, Europe has a unique chance to enhance productivity, competitiveness, growth and employment in the face of fierce competition from other parts of the globe, and also to ease the stress on environment and natural resources by using more eco-efficient technological solutions to peoples' needs which safeguard health and security.

| 6.1.3 | As emphasised by the recent Stakeholder Forum on Sustainable Development in the EU which the EESC organised on 14-15 April in cooperation with the Commission, sustainable development as an overarching objective for the European Union necessitates systematic and long-term efforts in the field of research and development, covering all three pillars of economic, social and environmental progress. A number of universities and scientific institutions in the EU have formed networks for coordinated research on sustainable development. The financial perspectives provide a valuable opportunity for supporting these and other initiatives. |
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6.1.3

As emphasised by the recent Stakeholder Forum on Sustainable Development in the EU which the EESC organised on 14-15 April in cooperation with the Commission, sustainable development as an overarching objective for the European Union necessitates systematic and long-term efforts in the field of research and development, covering all three pillars of economic, social and environmental progress. A number of universities and scientific institutions in the EU have formed networks for coordinated research on sustainable development. The financial perspectives provide a valuable opportunity for supporting these and other initiatives.

| 6.1.4 | Increasing global competition for minerals and oil — to take but two examples — and its consequences for costs illustrate the need to develop new materials, new production processes, and in general terms more resource-efficient technologies. |
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6.1.4

Increasing global competition for minerals and oil — to take but two examples — and its consequences for costs illustrate the need to develop new materials, new production processes, and in general terms more resource-efficient technologies.

| 6.1.4.1 | The EESC consequently reiterates its earlier support for the Commission's proposals concerning the European Research area, doubling the financial contribution to the 7th Framework Programme and launching the Environmental Technology Action Plan. In its forthcoming opinions on the 7th Framework Programme and specific programmes the EESC will also incorporate the aspect of sustainable development. |
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6.1.4.1

The EESC consequently reiterates its earlier support for the Commission's proposals concerning the European Research area, doubling the financial contribution to the 7th Framework Programme and launching the Environmental Technology Action Plan. In its forthcoming opinions on the 7th Framework Programme and specific programmes the EESC will also incorporate the aspect of sustainable development.

| 6.1.5 | In this part of the financial perspectives, covering TENs in addition to R&D and innovation, special emphasis is needed on energy and transport. Support for development of technologies and market launches of renewable forms of energy, energy efficiency and clean energy solutions need to have high priority. TEN-T projects that merely increase the volume of transport do not comply with the sustainability principle. |
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6.1.5

In this part of the financial perspectives, covering TENs in addition to R&D and innovation, special emphasis is needed on energy and transport. Support for development of technologies and market launches of renewable forms of energy, energy efficiency and clean energy solutions need to have high priority. TEN-T projects that merely increase the volume of transport do not comply with the sustainability principle.

| 6.1.6 | The EESC has emphasised in several opinions that particularly in the areas of transport and energy additional efforts are needed to redirect developments towards sustainability. The Committee has also proposed policy lines towards this end. The Communication on the financial perspectives does not make it clear whether it is intended to make sufficient resources available for this purpose. |
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6.1.6

The EESC has emphasised in several opinions that particularly in the areas of transport and energy additional efforts are needed to redirect developments towards sustainability. The Committee has also proposed policy lines towards this end. The Communication on the financial perspectives does not make it clear whether it is intended to make sufficient resources available for this purpose.

| 6.1.7 | In preparing the EU for the intensively competitive global community the financial perspectives will have to approach two diametrically opposing challenges: first, the high level of unemployment in most EU member states, second, the need — in the near future — for more people in the labour market. The EESC has already put forward recommendations on these issues in several of its recent opinions on ‘Employment policy: the role of the EESC following the enlargement of the EU and from the point of view of the Lisbon Process’, on ‘Business competitiveness’ and on ‘Improving the implementation of the Lisbon Strategy’. |
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6.1.7

In preparing the EU for the intensively competitive global community the financial perspectives will have to approach two diametrically opposing challenges: first, the high level of unemployment in most EU member states, second, the need — in the near future — for more people in the labour market. The EESC has already put forward recommendations on these issues in several of its recent opinions on ‘Employment policy: the role of the EESC following the enlargement of the EU and from the point of view of the Lisbon Process’, on ‘Business competitiveness’ and on ‘Improving the implementation of the Lisbon Strategy’.

| 6.1.8 | In particular, the EESC would like to see a new approach for life-long learning, as this is a tool both for improving employment and for shaping a higher awareness of the issues at hand in the perspective of sustainable development. Life-long learning appears to be one of the key missing links in the efforts to implement the Lisbon strategy. A serious commitment to sustainable development requires, in this area, cooperation between the social partners as well as additional financial contributions by Member States. |
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6.1.8

In particular, the EESC would like to see a new approach for life-long learning, as this is a tool both for improving employment and for shaping a higher awareness of the issues at hand in the perspective of sustainable development. Life-long learning appears to be one of the key missing links in the efforts to implement the Lisbon strategy. A serious commitment to sustainable development requires, in this area, cooperation between the social partners as well as additional financial contributions by Member States.

6.2   B) Cohesion for growth and employment

| 6.2.1 | Cohesion has been necessary to deepen the integration process. The EESC acknowledges the attempt by the Commission to re-focus cohesion actions on sustainable development objectives. |
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6.2.1

Cohesion has been necessary to deepen the integration process. The EESC acknowledges the attempt by the Commission to re-focus cohesion actions on sustainable development objectives.

| 6.2.2 | Cohesion policy should aim at increasing economic performance and creating more and better jobs by mobilising unused resources. EU funds should not be used to support lame-duck enterprises in a way that distorts competition or merely transfers jobs from one part of the EU to another. Actions should primarily focus on supporting new, sustainable jobs, increased competitiveness, human and physical capital, internal-market consolidation, and improving labour mobility. |
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6.2.2

Cohesion policy should aim at increasing economic performance and creating more and better jobs by mobilising unused resources. EU funds should not be used to support lame-duck enterprises in a way that distorts competition or merely transfers jobs from one part of the EU to another. Actions should primarily focus on supporting new, sustainable jobs, increased competitiveness, human and physical capital, internal-market consolidation, and improving labour mobility.

| 6.2.3 | Concentration of resources towards regions lagging behind (objective 1) and for a closer fit with the general strategic goals of the EU in the framework of sustainable development should be supported. More emphasis on cross-border cooperation is also essential to integrate the internal market more deeply. |
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6.2.3

Concentration of resources towards regions lagging behind (objective 1) and for a closer fit with the general strategic goals of the EU in the framework of sustainable development should be supported. More emphasis on cross-border cooperation is also essential to integrate the internal market more deeply.

| 6.2.4 | The transition period for the regions in which per capita GDP is higher than 75 % of the Community average, as a result of the statistical effect of enlargement, is needed. However, subsidies should progressively be reduced. |
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6.2.4

The transition period for the regions in which per capita GDP is higher than 75 % of the Community average, as a result of the statistical effect of enlargement, is needed. However, subsidies should progressively be reduced.

| 6.2.5 | Here too clear qualitative tests should be put in place. Due to the availability of funding ‘from Brussels’, a considerable amount of resources, which could have been used much more efficiently, has been used for planning. Nor has regional planning always created new jobs in Europe. |
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6.2.5

Here too clear qualitative tests should be put in place. Due to the availability of funding ‘from Brussels’, a considerable amount of resources, which could have been used much more efficiently, has been used for planning. Nor has regional planning always created new jobs in Europe.

| 6.2.6 | There is need for a higher degree of ownership of specific measures for sustainable development at local and regional levels. The EESC recommends that projects for cohesion should be assessed not only in terms of economic growth and employment, but also in terms of their effects on sustainable long-term development of the region. |
| --- | --- |

6.2.6

There is need for a higher degree of ownership of specific measures for sustainable development at local and regional levels. The EESC recommends that projects for cohesion should be assessed not only in terms of economic growth and employment, but also in terms of their effects on sustainable long-term development of the region.

6.3   Preservation and management of natural resources

The Common Agricultural Policy (CAP)

| 6.3.1 | The Committee's opinion on the Future of the CAP
   (2) included detailed descriptions and analyses of the various reform measures taken by the EU in the field of agricultural policy, and pointed out the difficult circumstances faced by European sustainable agriculture against a backdrop of globalised markets. In its opinion, the Committee noted that reforms were always preceded by criticisms and debates questioning whether agricultural expenditure was balanced and socially equitable, and by concerns about their environmental impact. The Luxembourg reform has not ended these debates. |
| --- | --- |

6.3.1

The Committee's opinion on the Future of the CAP
   (2) included detailed descriptions and analyses of the various reform measures taken by the EU in the field of agricultural policy, and pointed out the difficult circumstances faced by European sustainable agriculture against a backdrop of globalised markets. In its opinion, the Committee noted that reforms were always preceded by criticisms and debates questioning whether agricultural expenditure was balanced and socially equitable, and by concerns about their environmental impact. The Luxembourg reform has not ended these debates.

| 6.3.2 | This prompted a series of proposals from the Commission on gearing agricultural expenditure more closely to ‘greater sustainability’. For example, former Agriculture Commissioner Fischler initially suggested the introduction of a ceiling and then of a sliding scale for payments in order to secure a ‘fairer’ distribution of support. Mandatory linkage of direct support to environmental constraints that go beyond the legislation in force was also discussed on several occasions by Commissioners McSharry and Fischler, so as to assess the environmental impact of the funding too. However, these proposals failed to obtain majority support in the Council. |
| --- | --- |

6.3.2

This prompted a series of proposals from the Commission on gearing agricultural expenditure more closely to ‘greater sustainability’. For example, former Agriculture Commissioner Fischler initially suggested the introduction of a ceiling and then of a sliding scale for payments in order to secure a ‘fairer’ distribution of support. Mandatory linkage of direct support to environmental constraints that go beyond the legislation in force was also discussed on several occasions by Commissioners McSharry and Fischler, so as to assess the environmental impact of the funding too. However, these proposals failed to obtain majority support in the Council.

| 6.3.3 | The agricultural reforms decided in summer 2003 give Member States two basic options for introducing production subsidies to implement the new direct payments: these involve either a production subsidy based on the level of existing payments, or one that is calculated wholly or at least in part on the basis of the farm's acreage (‘regionalisation’). |
| --- | --- |

6.3.3

The agricultural reforms decided in summer 2003 give Member States two basic options for introducing production subsidies to implement the new direct payments: these involve either a production subsidy based on the level of existing payments, or one that is calculated wholly or at least in part on the basis of the farm's acreage (‘regionalisation’).

| 6.3.4 | In neither case has it been made mandatory — even this time round — to tie future payment to the retaining and/or creation of jobs. Against the backdrop of the sustainability debate, this is likely to spark a new debate within society, in the same way as the related issue of the environmental component. |
| --- | --- |

6.3.4

In neither case has it been made mandatory — even this time round — to tie future payment to the retaining and/or creation of jobs. Against the backdrop of the sustainability debate, this is likely to spark a new debate within society, in the same way as the related issue of the environmental component.

| 6.3.5 | After all, the ‘cross-compliance standards’ which farmers have to meet do not go very far beyond compliance with existing laws, a fact which in some Member States, as the reform has been transposed into national policy, has already led to heated controversy. |
| --- | --- |

6.3.5

After all, the ‘cross-compliance standards’ which farmers have to meet do not go very far beyond compliance with existing laws, a fact which in some Member States, as the reform has been transposed into national policy, has already led to heated controversy.

| 6.3.6 | For the EESC it is clear that transfer of government funds must always be linked with the common good. Payments must be justified, warranted and socially acceptable. Ideally there should be a clearly recognisable link between the CAP and the sustainability objectives of the Gothenburg and Lisbon strategies (creating jobs, promoting social justice, preserving the environment); however, at present no such link is yet discernible, at least for the majority of citizens. This is likely to spark further discussions about the whole point of such payments and about the role of farmers in relation to these objectives. The mid-term reform of the CAP, which has been carried out against the wishes of most representatives of European farmers and livestock breeders, should be reorientated towards stimulating sustainable family farming in Europe, which would give it social legitimacy. |
| --- | --- |

6.3.6

For the EESC it is clear that transfer of government funds must always be linked with the common good. Payments must be justified, warranted and socially acceptable. Ideally there should be a clearly recognisable link between the CAP and the sustainability objectives of the Gothenburg and Lisbon strategies (creating jobs, promoting social justice, preserving the environment); however, at present no such link is yet discernible, at least for the majority of citizens. This is likely to spark further discussions about the whole point of such payments and about the role of farmers in relation to these objectives. The mid-term reform of the CAP, which has been carried out against the wishes of most representatives of European farmers and livestock breeders, should be reorientated towards stimulating sustainable family farming in Europe, which would give it social legitimacy.

| 6.3.7 | Payments under the first pillar of the CAP, and particularly direct payments, are undoubtedly of vital importance to many farmers. However, decoupled direct payments, instead of offering any political scope to steer farmers towards sustainable production, are rather a means of safeguarding incomes, which does not even benefit all farmers equally. |
| --- | --- |

6.3.7

Payments under the first pillar of the CAP, and particularly direct payments, are undoubtedly of vital importance to many farmers. However, decoupled direct payments, instead of offering any political scope to steer farmers towards sustainable production, are rather a means of safeguarding incomes, which does not even benefit all farmers equally.

| 6.3.8 | Under the second pillar — support for rural development — payments are subject to clearly defined quid pro quos, set by programmes developed at Community level. Examples of these are the agri-environmental programmes, support for organic farming, diversification of farming activities (e.g. promoting processing and sales of raw products), as well as support for small and micro-businesses in rural areas. |
| --- | --- |

6.3.8

Under the second pillar — support for rural development — payments are subject to clearly defined quid pro quos, set by programmes developed at Community level. Examples of these are the agri-environmental programmes, support for organic farming, diversification of farming activities (e.g. promoting processing and sales of raw products), as well as support for small and micro-businesses in rural areas.

| 6.3.9 | In this context, the call by the new Agriculture Commissioner Fischer-Boel at the launch of the Green Week in Berlin on 20 January 2005 to ‘make rural development a cornerstone of the Lisbon strategy’ is of relevance. Also significant are comments from the Commissioner's cabinet to the effect that, whereas there is unlikely to be a great deal of job creation under the first pillar, rural development policy is seen to have considerable potential. The EESC feels that it would be particularly helpful for the Commission to carry out studies as soon as possible to corroborate the probable impact of the CAP's two pillars on employment, the environment and social matters. |
| --- | --- |

6.3.9

In this context, the call by the new Agriculture Commissioner Fischer-Boel at the launch of the Green Week in Berlin on 20 January 2005 to ‘make rural development a cornerstone of the Lisbon strategy’ is of relevance. Also significant are comments from the Commissioner's cabinet to the effect that, whereas there is unlikely to be a great deal of job creation under the first pillar, rural development policy is seen to have considerable potential. The EESC feels that it would be particularly helpful for the Commission to carry out studies as soon as possible to corroborate the probable impact of the CAP's two pillars on employment, the environment and social matters.

| 6.3.10 | The new draft regulation on rural development currently under discussion envisages more activities in this area (e.g. funding of NATURA 2000 areas and implementation of the Water Framework Directive). Rural development is thus increasingly becoming an important political tool to steer farmers towards sustainability, a tendency which is welcomed by the EESC. |
| --- | --- |

6.3.10

The new draft regulation on rural development currently under discussion envisages more activities in this area (e.g. funding of NATURA 2000 areas and implementation of the Water Framework Directive). Rural development is thus increasingly becoming an important political tool to steer farmers towards sustainability, a tendency which is welcomed by the EESC.

| 6.3.11 | However, the Commission's plans for the 2007-2013 period envisage maintaining the budget for rural development at current levels. For the EESC this means that, given its objectives, rural development is underfunded even in the EU's financial perspective. |
| --- | --- |

6.3.11

However, the Commission's plans for the 2007-2013 period envisage maintaining the budget for rural development at current levels. For the EESC this means that, given its objectives, rural development is underfunded even in the EU's financial perspective.

| 6.3.12 | Given the central relevance of rural development measures to the sustainability debate, the Committee wholly fails to understand the current Council discussion — launched by the six net contributor countries — on sweeping cuts in this area. |
| --- | --- |

6.3.12

Given the central relevance of rural development measures to the sustainability debate, the Committee wholly fails to understand the current Council discussion — launched by the six net contributor countries — on sweeping cuts in this area.

6.4   Citizenship, freedom, security and justice

| 6.4.1 | To ensure a true area of freedom, security and justice for the Europeans action at the EU level is necessary, both in order to achieve effectiveness but also to share the financial burden. Successful integration of immigrants is a matter of both social cohesion and a prerequisite for economic efficiency. The establishment of the European Border Agency, a common asylum and immigration policy, measures involving legal residents or newly arrived third country nationals in EU Member States, as well as prevention and return of illegal residents are supported by the EESC. |
| --- | --- |

6.4.1

To ensure a true area of freedom, security and justice for the Europeans action at the EU level is necessary, both in order to achieve effectiveness but also to share the financial burden. Successful integration of immigrants is a matter of both social cohesion and a prerequisite for economic efficiency. The establishment of the European Border Agency, a common asylum and immigration policy, measures involving legal residents or newly arrived third country nationals in EU Member States, as well as prevention and return of illegal residents are supported by the EESC.

| 6.4.2 | Preventing and fighting crime and terrorism is a key challenge for the Union. Sufficient resources to address the need for security is a prerequisite for administrative, social and economic sustainability of our societies. |
| --- | --- |

6.4.2

Preventing and fighting crime and terrorism is a key challenge for the Union. Sufficient resources to address the need for security is a prerequisite for administrative, social and economic sustainability of our societies.

| 6.4.3 | Safety and security of our everyday life, including daily needs, is a high priority for Europeans. Citizens expect from the Union a high level of protection against risks of natural disasters, health and environmental crisis and other large-scale disasters. Dangers to health from hazardous substances in the environment or alimentation as well as safety and security standards of, in particular, energy and transport, need continuous attention and action at the Union level. |
| --- | --- |

6.4.3

Safety and security of our everyday life, including daily needs, is a high priority for Europeans. Citizens expect from the Union a high level of protection against risks of natural disasters, health and environmental crisis and other large-scale disasters. Dangers to health from hazardous substances in the environment or alimentation as well as safety and security standards of, in particular, energy and transport, need continuous attention and action at the Union level.

| 6.4.4 | An adequate level of basic services of general interest, such as health and education, energy, transport and communications needs to be ensured. Physical safety of supply in some of these cases, as energy and transport, is an important aspect when developing the internal market as well as multi- and bilateral trading and other external relations. |
| --- | --- |

6.4.4

An adequate level of basic services of general interest, such as health and education, energy, transport and communications needs to be ensured. Physical safety of supply in some of these cases, as energy and transport, is an important aspect when developing the internal market as well as multi- and bilateral trading and other external relations.

| 6.4.5 | Sustainable development is gradually making headway thanks to the awareness, attitudes and actions of individual citizens and groups, and cannot ever again be substituted solely by top-down actions decided by those at the head of our systems, organisations and institutions. Europe can pride itself on well-organised and functioning societies, including well educated and actively participating citizens as well as a highly developed structure of civil society organisations. This is perhaps the best possible cultural basis for further sustainable development. |
| --- | --- |

6.4.5

Sustainable development is gradually making headway thanks to the awareness, attitudes and actions of individual citizens and groups, and cannot ever again be substituted solely by top-down actions decided by those at the head of our systems, organisations and institutions. Europe can pride itself on well-organised and functioning societies, including well educated and actively participating citizens as well as a highly developed structure of civil society organisations. This is perhaps the best possible cultural basis for further sustainable development.

| 6.4.6 | Enlargement has further widened the variety of cultures in Europe. This can enrich everybody's life, but efforts are needed to promote mutual understanding. Sharing of knowledge and experiences of economic, political and everyday life, including on how to proceed towards sustainable development, needs also to be supported. The beneficiaries would not only be the new Member States, but all of Europe and its citizens. |
| --- | --- |

6.4.6

Enlargement has further widened the variety of cultures in Europe. This can enrich everybody's life, but efforts are needed to promote mutual understanding. Sharing of knowledge and experiences of economic, political and everyday life, including on how to proceed towards sustainable development, needs also to be supported. The beneficiaries would not only be the new Member States, but all of Europe and its citizens.

6.5   The EU as a global partner

| 6.5.1 | At the UN World Summit on Sustainable Development in Johannesburg, the EU profiled itself as a dynamic and result-oriented participant. Launching new efforts such as the Water and Energy initiatives (the partnerships of the willing) gained much goodwill for the EU. |
| --- | --- |

6.5.1

At the UN World Summit on Sustainable Development in Johannesburg, the EU profiled itself as a dynamic and result-oriented participant. Launching new efforts such as the Water and Energy initiatives (the partnerships of the willing) gained much goodwill for the EU.

| 6.5.2 | At the UN level, implementation of the 52-page action plan from Johannesburg is progressing. It is a slow process, with considerable difficulties for the participating countries to live up to the promises and plans. |
| --- | --- |

6.5.2

At the UN level, implementation of the 52-page action plan from Johannesburg is progressing. It is a slow process, with considerable difficulties for the participating countries to live up to the promises and plans.

| 6.5.3 | The EU must live up to its commitments and the leading role it took at the World Summit. This needs to be reflected in the allocations of the financial perspectives. |
| --- | --- |

6.5.3

The EU must live up to its commitments and the leading role it took at the World Summit. This needs to be reflected in the allocations of the financial perspectives.

| 6.5.4 | In particular, the EU will have to give more impetus to efforts in the least developed countries (LDCs), with focus on basic needs such as water, energy, healthcare, safe food, basic education and training as well as the development of agriculture. |
| --- | --- |

6.5.4

In particular, the EU will have to give more impetus to efforts in the least developed countries (LDCs), with focus on basic needs such as water, energy, healthcare, safe food, basic education and training as well as the development of agriculture.

| 6.5.5 | Individual EU countries have developed ambitious support programmes for LDCs, particularly in Africa. There is a need for better co-ordination between the EU level and the national level as to outlining and implementing these development programmes. In the ACP (Africa, Caribbean, Pacific) countries, the Cotonou programme has proved to be a valuable tool for involving social partners and organised civil society. |
| --- | --- |

6.5.5

Individual EU countries have developed ambitious support programmes for LDCs, particularly in Africa. There is a need for better co-ordination between the EU level and the national level as to outlining and implementing these development programmes. In the ACP (Africa, Caribbean, Pacific) countries, the Cotonou programme has proved to be a valuable tool for involving social partners and organised civil society.

| 6.5.6 | Sustainable development is to some degree integrated in these development programmes. It has to be given a central place, in accordance with the action plan adopted at Johannesburg. |
| --- | --- |

6.5.6

Sustainable development is to some degree integrated in these development programmes. It has to be given a central place, in accordance with the action plan adopted at Johannesburg.

| 6.5.7 | In order to increase the coordination of efforts, and to strengthen the dimensions of sustainable development, the EESC recommends further initiatives from the EU, primarily in the form of building ‘coalitions of the willing’ for specific development issues, such as water, energy, safe food and healthcare. |
| --- | --- |

6.5.7

In order to increase the coordination of efforts, and to strengthen the dimensions of sustainable development, the EESC recommends further initiatives from the EU, primarily in the form of building ‘coalitions of the willing’ for specific development issues, such as water, energy, safe food and healthcare.

7.   Conclusions

| 7.1 | The renewal of the budget structure, giving the new priority headings, features an acknowledgement of the importance of sustainable development. The EESC expects this to be reflected in the implementation of the budget in real terms, and not only doing the same things in the same way under new headings. The Committee stresses that a restructuring of expenditures towards the priorities of the Union must take place irrespective of the level of own resources finally decided upon. |
| --- | --- |

7.1

The renewal of the budget structure, giving the new priority headings, features an acknowledgement of the importance of sustainable development. The EESC expects this to be reflected in the implementation of the budget in real terms, and not only doing the same things in the same way under new headings. The Committee stresses that a restructuring of expenditures towards the priorities of the Union must take place irrespective of the level of own resources finally decided upon.

| 7.2 | It is of utmost importance that the new financial perspectives, the frame of the EU budgets for 2007-2013, reflect clearly the priorities of the Union, in particular the Lisbon goals and sustainable development. To this end a significant restructuring of expenditures must take place. If the financial perspectives, given their fairly long term, do not direct EU development in the right direction, there is little hope that other policies or later financial adjustments will succeed in doing so. |
| --- | --- |

7.2

It is of utmost importance that the new financial perspectives, the frame of the EU budgets for 2007-2013, reflect clearly the priorities of the Union, in particular the Lisbon goals and sustainable development. To this end a significant restructuring of expenditures must take place. If the financial perspectives, given their fairly long term, do not direct EU development in the right direction, there is little hope that other policies or later financial adjustments will succeed in doing so.

| 7.3 | The EESC shares the view of the Commission in giving priority to growth and employment in the Lisbon perspective of the years up to 2010. Growth must be understood as economic growth taking into account the key European values of social inclusion, health and environmental protection. Competitiveness and economic growth are not final goals in themselves, but tools for promoting social and environmental goals. The problem is, however, that consistently slower growth and weaker competitiveness in the EU compared to the other main economic areas can put both the European social model and our environmental values at risk. |
| --- | --- |

7.3

The EESC shares the view of the Commission in giving priority to growth and employment in the Lisbon perspective of the years up to 2010. Growth must be understood as economic growth taking into account the key European values of social inclusion, health and environmental protection. Competitiveness and economic growth are not final goals in themselves, but tools for promoting social and environmental goals. The problem is, however, that consistently slower growth and weaker competitiveness in the EU compared to the other main economic areas can put both the European social model and our environmental values at risk.

| 7.4 | The priority areas of the sustainable development strategy as well as other areas with recognised unsustainable trends — climate change, transport, public health, natural resources, eradication of poverty, population ageing and dependence on fossil fuels — must be treated as priorities in budgetary policies as well. |
| --- | --- |

7.4

The priority areas of the sustainable development strategy as well as other areas with recognised unsustainable trends — climate change, transport, public health, natural resources, eradication of poverty, population ageing and dependence on fossil fuels — must be treated as priorities in budgetary policies as well.

| 7.5 | A budget heading as such is mostly neither ‘sustainable’ nor ‘unsustainable’. The effects on sustainable development depend on the detailed design of programmes, objectives and criteria for projects to be financed. |
| --- | --- |

7.5

A budget heading as such is mostly neither ‘sustainable’ nor ‘unsustainable’. The effects on sustainable development depend on the detailed design of programmes, objectives and criteria for projects to be financed.

| 7.6 | The key instrument for ensuring policy coherence with sustainable development goals is impact assessment. Impact assessments need to be performed on every single programme in the budget and their objectives. In this context support for unsustainable activities in particular should be stopped. |
| --- | --- |

7.6

The key instrument for ensuring policy coherence with sustainable development goals is impact assessment. Impact assessments need to be performed on every single programme in the budget and their objectives. In this context support for unsustainable activities in particular should be stopped.

| 7.7 | Clear and transparent criteria ought to be used for the selection of projects to be financed under different budget headings and programmes. These should include sustainability criteria, such as the impact of the project on the environment, health, creation or loss of jobs and EU competitiveness. |
| --- | --- |

7.7

Clear and transparent criteria ought to be used for the selection of projects to be financed under different budget headings and programmes. These should include sustainability criteria, such as the impact of the project on the environment, health, creation or loss of jobs and EU competitiveness.

| 7.8 | Particular attention should be directed to the use of resources from structural funds, the cohesion fund and agricultural expenditure as well as the TEN programmes. In these fields of EU activity, which represent the vast majority of EU expenditure, choices have to be systematically directed towards solutions that fulfil sustainability criteria as far as possible. |
| --- | --- |

7.8

Particular attention should be directed to the use of resources from structural funds, the cohesion fund and agricultural expenditure as well as the TEN programmes. In these fields of EU activity, which represent the vast majority of EU expenditure, choices have to be systematically directed towards solutions that fulfil sustainability criteria as far as possible.

| 7.9 | The EESC wants in particular to stress the key role of knowledge, R&D and new technology. By putting real emphasis on this and providing adequate resources, Europe has a unique chance to enhance productivity, competitiveness, growth and employment in the face of fierce competition from other parts of the globe, and also to ease the stress on environment and natural resources by using more eco-efficient technological solutions to peoples' needs which safeguard health and security. |
| --- | --- |

7.9

The EESC wants in particular to stress the key role of knowledge, R&D and new technology. By putting real emphasis on this and providing adequate resources, Europe has a unique chance to enhance productivity, competitiveness, growth and employment in the face of fierce competition from other parts of the globe, and also to ease the stress on environment and natural resources by using more eco-efficient technological solutions to peoples' needs which safeguard health and security.

Brussels, 11 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  COM(2004) 101 final

1

(2)  OJ C 125 of 27.5.2002, pp. 87-99

2

---

APPENDIX

to the opinion of the European Economic and Social Committee

The following amendments, which received at least a quarter of the votes cast, were rejected at the plenary session:

Point 4.5

Amend as follows:

‘The EU sustainable development strategy concentrates presently on a few of the most seemingly urgent unsustainable trends in our societies — climate change, transport, public health and natural resources. Others, like
  e
  The eradication of extreme poverty and hardship
  population ageing have been left out, and can be added at a later stage
  and the age revolution must be dealt with at the same time. One of the main changes required and facilitated by the sustainable development strategy is to get away from this notion of priorities, without losing sight of the need to act, even on a sectoral basis.’

Reason

These proposals all have the same aim: to spell out in more detail than in the exploratory opinion the main cultural changes required and generated by the strategy and concept of sustainable development.

It should be stressed that the cultural changes in question are already at work within society and among individuals, and if they are encouraged by policies and institutions (and therefore the financial perspectives), then the sustainable development strategy will become truly operational. Otherwise, our worst fears for the future could become reality.

Voting:

| For | : | 51 |
| --- | --- | --- |
| Against | : | 54 |
| Abstentions | : | 26. |

For

:

51

Against

:

54

Abstentions

:

26.

---

| 27.10.2005 | EN | Official Journal of the European Union | C 267/30 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/30

---

Opinion of the European Economic and Social Committee on a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering, including terrorist financing

(COM(2004) 448 final)

(2005/C 267/05)

On 21 October 2004, the European Council decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 April 2005. The rapporteur was Mr Simpson.

At its 417th plenary session on 11 and 12 May 2005 (meeting of 11 May 2005), the Economic and Social Committee adopted the following opinion by 107 votes in favour and one abstention.

1.   Summary

| 1.1 | This draft directive will be the third in connection with the prevention of money laundering, following the first in 1991 (91/308/EEC) and the second in 2001 (2001/97/EC). |
| --- | --- |

1.1

This draft directive will be the third in connection with the prevention of money laundering, following the first in 1991 (91/308/EEC) and the second in 2001 (2001/97/EC).

| 1.2 | The key drivers for this draft directive are: 1) the inclusion of a specific reference to terrorist financing, although this was agreed by Member States under the previous directive to be include within the concept of serious offences, and 2) to take account of the revised Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF) (1) published in June 2003. |
| --- | --- |

1.2

The key drivers for this draft directive are: 1) the inclusion of a specific reference to terrorist financing, although this was agreed by Member States under the previous directive to be include within the concept of serious offences, and 2) to take account of the revised Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF) (1) published in June 2003.

2.   General comments

| 2.1 | The key groups affected by obligations that would be imposed under the draft directive are:






  a) | businesses in those sectors required to comply with the provisions of the directive (‘the regulated sector’); |
| --- | --- | --- |

2.1

The key groups affected by obligations that would be imposed under the draft directive are:

a)

businesses in those sectors required to comply with the provisions of the directive (‘the regulated sector’);

| b) | users of services provided by the regulated sector (i.e. their customers and clients); |
| --- | --- |

b)

users of services provided by the regulated sector (i.e. their customers and clients);

| c) | persons making reports of knowledge or suspicion of money laundering; |
| --- | --- |

c)

persons making reports of knowledge or suspicion of money laundering;

| d) | law enforcement agencies and the Financial Intelligence Units (‘FIUs’) who receive and use the intelligence contained in money-laundering reports; and |
| --- | --- |

d)

law enforcement agencies and the Financial Intelligence Units (‘FIUs’) who receive and use the intelligence contained in money-laundering reports; and

| e) | elements of the criminal community — those committing ‘serious crimes’ (defined in Article 3 (7) of the draft directive) where those crimes result in proceeds, or involve handling funds, relating to criminal activity. |
| --- | --- |

e)

elements of the criminal community — those committing ‘serious crimes’ (defined in Article 3 (7) of the draft directive) where those crimes result in proceeds, or involve handling funds, relating to criminal activity.

| 2.2 | The draft directive is intended to replace the existing directives, which will be repealed. |
| --- | --- |

2.2

The draft directive is intended to replace the existing directives, which will be repealed.

| 2.3 | The key changes, compared with the first and second directives, are:






  i. | The inclusion of specific reference to terrorist financing and further detail as regards ‘serious offences’. |
| --- | --- | --- |

2.3

The key changes, compared with the first and second directives, are:

i.

The inclusion of specific reference to terrorist financing and further detail as regards ‘serious offences’.

| ii. | Increased coverage regarding trust and company service providers and high value dealers in goods and services. |
| --- | --- |

ii.

Increased coverage regarding trust and company service providers and high value dealers in goods and services.

| iii. | Considerable expansion of details concerning customer due diligence and verification of identity, including beneficial ownership. |
| --- | --- |

iii.

Considerable expansion of details concerning customer due diligence and verification of identity, including beneficial ownership.

| iv. | Provision regarding protection of employees making money-laundering reports. |
| --- | --- |

iv.

Provision regarding protection of employees making money-laundering reports.

| v. | A prohibition against informing a client that a report has been made. |
| --- | --- |

v.

A prohibition against informing a client that a report has been made.

| vi. | A requirement to apply EU standards in branches and subsidiaries outside the EU. |
| --- | --- |

vi.

A requirement to apply EU standards in branches and subsidiaries outside the EU.

| 2.4 | The draft directive allows for further convergence with countries where the recommendations of the Financial Action Task Force on Money Laundering (FATF) of the Organisation for Economic Cooperation and Development (OECD) have been, or will be, applied. |
| --- | --- |

2.4

The draft directive allows for further convergence with countries where the recommendations of the Financial Action Task Force on Money Laundering (FATF) of the Organisation for Economic Cooperation and Development (OECD) have been, or will be, applied.

| 2.5 | The consolidation in the new directive of the requirements of the first and second directives is also an aide to clarity. |
| --- | --- |

2.5

The consolidation in the new directive of the requirements of the first and second directives is also an aide to clarity.

| 2.6 | However, the third directive follows very closely on the heels of the second directive, which itself had greatly expanded the scope of anti-money laundering provisions, and the range of sectors affected. There has only been a short period to evaluate the impact of the 2001 Directive, and the Committee notes that, as yet, there has been no comprehensive study has been made of the effectiveness of the existing regime, or its proportionality, including whether Member States' government investment is in balance with that made by the regulated sector. |
| --- | --- |

2.6

However, the third directive follows very closely on the heels of the second directive, which itself had greatly expanded the scope of anti-money laundering provisions, and the range of sectors affected. There has only been a short period to evaluate the impact of the 2001 Directive, and the Committee notes that, as yet, there has been no comprehensive study has been made of the effectiveness of the existing regime, or its proportionality, including whether Member States' government investment is in balance with that made by the regulated sector.

| 2.7 | The EESC welcomes measures that will make money laundering and terrorist financing more difficult. In support of the EU-wide application of preventative measures, the EESC recognises that money launderers will attempt to exploit weaknesses in the monitoring systems and that the money will be moved to the weakest points in the supervisory system. For this reason, Member States need to establish rigorous standards across the European Union and encourage their establishment in other countries. |
| --- | --- |

2.7

The EESC welcomes measures that will make money laundering and terrorist financing more difficult. In support of the EU-wide application of preventative measures, the EESC recognises that money launderers will attempt to exploit weaknesses in the monitoring systems and that the money will be moved to the weakest points in the supervisory system. For this reason, Member States need to establish rigorous standards across the European Union and encourage their establishment in other countries.

| 2.8 | This opinion comments in more detail on specific aspects of the draft directive. |
| --- | --- |

2.8

This opinion comments in more detail on specific aspects of the draft directive.

3.   Comments on specific areas of key change

3.1   Terrorism and serious crimes

| 3.1.1 | The ESC endorses the inclusion of terrorist financing within the draft directive. |
| --- | --- |

3.1.1

The ESC endorses the inclusion of terrorist financing within the draft directive.

| 3.1.2 | As regards the definition of serious crimes and money laundering, further clarification would help those affected to have a better comprehension of the precise intentions of the directive and, accordingly, help to ensure consistent and effective implementation of the law. |
| --- | --- |

3.1.2

As regards the definition of serious crimes and money laundering, further clarification would help those affected to have a better comprehension of the precise intentions of the directive and, accordingly, help to ensure consistent and effective implementation of the law.

| 3.1.3 | It is important to bring clarity to the level of knowledge of criminal law that is actually required of persons working in the regulated sector, the great majority of whom have little or no expertise in this area. Article 3(7) of the draft directive contains a detailed definition of ‘serious crimes’ but we recommend that this definition is qualified to make clear that, in determining whether to make a money-laundering report, a person in the regulated sector is only required to apply the knowledge and skill concerning criminal law that a person carrying out that function would be expected to have. To do otherwise would put a disproportionate burden on the regulated sector (both in terms of training their staff and controlling their actions) with all the risks of increased costs, and undue disruption for customers and clients, related to it. It could also bring unnecessary risks to persons working in the regulated sector. |
| --- | --- |

3.1.3

It is important to bring clarity to the level of knowledge of criminal law that is actually required of persons working in the regulated sector, the great majority of whom have little or no expertise in this area. Article 3(7) of the draft directive contains a detailed definition of ‘serious crimes’ but we recommend that this definition is qualified to make clear that, in determining whether to make a money-laundering report, a person in the regulated sector is only required to apply the knowledge and skill concerning criminal law that a person carrying out that function would be expected to have. To do otherwise would put a disproportionate burden on the regulated sector (both in terms of training their staff and controlling their actions) with all the risks of increased costs, and undue disruption for customers and clients, related to it. It could also bring unnecessary risks to persons working in the regulated sector.

| 3.1.4 | ‘Serious crime’ (defined to include ‘at least’ the activities listed in Article 3(7)) appears to be framed as a minimum standard. Implementation to date of the existing directives shows that Member States have taken different approaches resulting in regimes either encompassing all crimes, or alternatively encompassing only serious crimes. |
| --- | --- |

3.1.4

‘Serious crime’ (defined to include ‘at least’ the activities listed in Article 3(7)) appears to be framed as a minimum standard. Implementation to date of the existing directives shows that Member States have taken different approaches resulting in regimes either encompassing all crimes, or alternatively encompassing only serious crimes.

| 3.1.5 | Consideration should be given to limiting Member States' choice in this regard to promote an even application of the anti-money laundering regulation and accordingly, provide a level playing field for the regulated sector across the EU. If Member States wish to apply the draft directive on a wider basis, the ESC recommends that consideration is given to a regime where reporting is compulsory only in respect of serious crimes (the minimum standard), but with a facility to make voluntary reports, afforded the same protection by law as the compulsory reports, in respect of other crimes. |
| --- | --- |

3.1.5

Consideration should be given to limiting Member States' choice in this regard to promote an even application of the anti-money laundering regulation and accordingly, provide a level playing field for the regulated sector across the EU. If Member States wish to apply the draft directive on a wider basis, the ESC recommends that consideration is given to a regime where reporting is compulsory only in respect of serious crimes (the minimum standard), but with a facility to make voluntary reports, afforded the same protection by law as the compulsory reports, in respect of other crimes.

| 3.1.6 | An ‘all crimes’ compulsory regime, particularly where linked to an extra territorial requirement for reporting, risks diverting valuable private sector and law enforcement resources to no good effect. The need for the UK ‘limited intelligence value’ reporting system, designed in an attempt to minimise effort, by both the regulated sector and law enforcement authorities in dealing with matters of no or very little value to law enforcement (and those matters already reported to the relevant authority), illustrates well some of the pitfalls of a compulsory ‘all crimes’ regime. |
| --- | --- |

3.1.6

An ‘all crimes’ compulsory regime, particularly where linked to an extra territorial requirement for reporting, risks diverting valuable private sector and law enforcement resources to no good effect. The need for the UK ‘limited intelligence value’ reporting system, designed in an attempt to minimise effort, by both the regulated sector and law enforcement authorities in dealing with matters of no or very little value to law enforcement (and those matters already reported to the relevant authority), illustrates well some of the pitfalls of a compulsory ‘all crimes’ regime.

| 3.1.7 | The Committee considers that the fixed monetary de minimis limit laid down in Article 6 (b) (EUR 15 000) is reasonable, given that this limit can be reached through one or several transactions that appear to be interlinked in some way. |
| --- | --- |

3.1.7

The Committee considers that the fixed monetary de minimis limit laid down in Article 6 (b) (EUR 15 000) is reasonable, given that this limit can be reached through one or several transactions that appear to be interlinked in some way.

| 3.1.8 | A further worthwhile clarification, to promote consistency, would be to make explicit that the definition of money laundering, from Article 1.1(c) of the second directive (repeated in Article 1.2(c) of the draft directive), includes the possession of the proceeds of a criminal's own crime, without any further transaction having been necessary. |
| --- | --- |

3.1.8

A further worthwhile clarification, to promote consistency, would be to make explicit that the definition of money laundering, from Article 1.1(c) of the second directive (repeated in Article 1.2(c) of the draft directive), includes the possession of the proceeds of a criminal's own crime, without any further transaction having been necessary.

| 3.1.9 | Article 2.1(3)b sets out five categories of transaction conducted by independent legal professionals to which the Directive would apply. The Committee recommend the addition of a sixth category: (vi) tax advice. |
| --- | --- |

3.1.9

Article 2.1(3)b sets out five categories of transaction conducted by independent legal professionals to which the Directive would apply. The Committee recommend the addition of a sixth category: (vi) tax advice.

3.2   Trust and company service providers and dealers in high value transactions

| 3.2.1 | Article 3 (9) defines ‘trust and company service providers’ and Article 2.1(3)(f) defines ‘high value dealers’. The clarification in the definitions is welcomed and particularly the inclusion of ‘services’ within Article 2.1(3)(f). Money laundering can be carried out by the manipulation of large transactions for services in cash, just as it can be carried out by the manipulation of large transactions for goods in cash. |
| --- | --- |

3.2.1

Article 3 (9) defines ‘trust and company service providers’ and Article 2.1(3)(f) defines ‘high value dealers’. The clarification in the definitions is welcomed and particularly the inclusion of ‘services’ within Article 2.1(3)(f). Money laundering can be carried out by the manipulation of large transactions for services in cash, just as it can be carried out by the manipulation of large transactions for goods in cash.

3.3   Customer due diligence and verification of identity, including beneficial ownership

| 3.3.1 | The Articles concerning these subjects must be clear, and capable of being applied on a risk-based system. Dealing with these aspects of the money laundering regulation is a major contributor to the cost of compliance, and also has a direct impact on customers and clients. |
| --- | --- |

3.3.1

The Articles concerning these subjects must be clear, and capable of being applied on a risk-based system. Dealing with these aspects of the money laundering regulation is a major contributor to the cost of compliance, and also has a direct impact on customers and clients.

3.3.2   Definition of beneficial owner

| 3.3.2.1 | Article 3 (8) refers to a beneficial owner as being a natural person who ultimately, directly or indirectly, owns or controls 10 % or more of the shares or the voting rights of a legal person or the property of a foundation, a trust or a similar legal arrangement or who otherwise exercises comparable influence, for instance over management. The Committee considers this to be too low a threshold, when taken together with Article 7.1 (b), and the reference to risk-based measures in Article 7.2. |
| --- | --- |

3.3.2.1

Article 3 (8) refers to a beneficial owner as being a natural person who ultimately, directly or indirectly, owns or controls 10 % or more of the shares or the voting rights of a legal person or the property of a foundation, a trust or a similar legal arrangement or who otherwise exercises comparable influence, for instance over management. The Committee considers this to be too low a threshold, when taken together with Article 7.1 (b), and the reference to risk-based measures in Article 7.2.

| 3.3.2.2 | The draft directive should refer to the principles regarding requirements for identification and impose a requirement on Member States to provide guidance, either directly or by allowing representative professional bodies to produce it, on a risk-based system of identification allowing varying levels of identification of beneficial owners depending on circumstances. |
| --- | --- |

3.3.2.2

The draft directive should refer to the principles regarding requirements for identification and impose a requirement on Member States to provide guidance, either directly or by allowing representative professional bodies to produce it, on a risk-based system of identification allowing varying levels of identification of beneficial owners depending on circumstances.

| 3.3.2.3 | Whilst we can understand the motivation for stringent requirements, in practice their universal application without regard to risk tends to penalise legitimate customers and clients through additional cost, effort and potential loss of commercial confidentiality as regards transactions planned to be undertaken, whilst having little or no effect on illegal activities. |
| --- | --- |

3.3.2.3

Whilst we can understand the motivation for stringent requirements, in practice their universal application without regard to risk tends to penalise legitimate customers and clients through additional cost, effort and potential loss of commercial confidentiality as regards transactions planned to be undertaken, whilst having little or no effect on illegal activities.

| 3.3.2.4 | The Committee recommends that the minimum requirement to identify ownership or control should be 25 % either by an individual or by a group acting as a ‘concert party’. |
| --- | --- |

3.3.2.4

The Committee recommends that the minimum requirement to identify ownership or control should be 25 % either by an individual or by a group acting as a ‘concert party’.

3.3.3   Politically exposed persons

| 3.3.3.1 | The Committee considers that the proposed definition of politically exposed persons, as in Article 3 (10), is unnecessarily wide ranging and should be amended to introduce the phrase ‘who are not citizens of the EU’ after the phrase ‘natural persons’. PEPs within the European Union (though not necessarily immune to the temptations of corruption) are subject to assured democratic controls which make the enhanced due diligence requirements envisaged in Article 11.1 unnecessary. |
| --- | --- |

3.3.3.1

The Committee considers that the proposed definition of politically exposed persons, as in Article 3 (10), is unnecessarily wide ranging and should be amended to introduce the phrase ‘who are not citizens of the EU’ after the phrase ‘natural persons’. PEPs within the European Union (though not necessarily immune to the temptations of corruption) are subject to assured democratic controls which make the enhanced due diligence requirements envisaged in Article 11.1 unnecessary.

3.3.4   Customer due diligence and identification

| 3.3.4.1 | ‘Customer due diligence’ is an area of the draft directive where more precise definition of terms is required to bring clarity. Terms such as ‘due diligence’, ‘scrutiny’ and ‘verification’ may be open to varying interpretations across different parts of the regulated sector, and across different Member States, and accordingly they should be defined more precisely to enable a common understanding. |
| --- | --- |

3.3.4.1

‘Customer due diligence’ is an area of the draft directive where more precise definition of terms is required to bring clarity. Terms such as ‘due diligence’, ‘scrutiny’ and ‘verification’ may be open to varying interpretations across different parts of the regulated sector, and across different Member States, and accordingly they should be defined more precisely to enable a common understanding.

| 3.3.4.2 | As in relation to identification, the Committee recommends that the draft directive should require Member States to provide for clear risk-based guidance within their own territories. |
| --- | --- |

3.3.4.2

As in relation to identification, the Committee recommends that the draft directive should require Member States to provide for clear risk-based guidance within their own territories.

| 3.3.4.3 | Article 6 (c) requires the application of customer due diligence procedures when there is a suspicion of money laundering, regardless of any derogation, exemption or threshold. This may not be practicable, as performing such procedures when prompted by suspicion might put the suspected party or parties on notice. The stipulations in Article 6 (c) should be qualified to indicate that such procedures should be performed only to the extent possible without alerting the suspected parties. |
| --- | --- |

3.3.4.3

Article 6 (c) requires the application of customer due diligence procedures when there is a suspicion of money laundering, regardless of any derogation, exemption or threshold. This may not be practicable, as performing such procedures when prompted by suspicion might put the suspected party or parties on notice. The stipulations in Article 6 (c) should be qualified to indicate that such procedures should be performed only to the extent possible without alerting the suspected parties.

| 3.3.4.4 | In respect of the simplified customer due diligence procedures as specified in Article 10.3 (c), the Committee recommends modifying the latter part as follows, by adding the words in italics: ‘a pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages and/or from employers ...’. |
| --- | --- |

3.3.4.4

In respect of the simplified customer due diligence procedures as specified in Article 10.3 (c), the Committee recommends modifying the latter part as follows, by adding the words in italics: ‘a pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages and/or from employers ...’.

| 3.3.4.4.1 | Article 11.2 proposes to prohibit credit institutions from entering into a relationship with a correspondent bank which permits its accounts to be used by shell banks. It may not always be easy for a credit institution to discover when a correspondent bank does so. It should be clear that institutions will only be expected to take reasonable precautions in relation to their respondent banks, to assess the latter's policy in relation to shell banks. |
| --- | --- |

3.3.4.4.1

Article 11.2 proposes to prohibit credit institutions from entering into a relationship with a correspondent bank which permits its accounts to be used by shell banks. It may not always be easy for a credit institution to discover when a correspondent bank does so. It should be clear that institutions will only be expected to take reasonable precautions in relation to their respondent banks, to assess the latter's policy in relation to shell banks.

| 3.3.4.5 | In Article 11.1 (a), the reference to documentary evidence does not need to be qualified by the word ‘additional’ which could be deleted. |
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3.3.4.5

In Article 11.1 (a), the reference to documentary evidence does not need to be qualified by the word ‘additional’ which could be deleted.

| 3.3.4.6 | Article 12 permits reliance on third parties for the performance of customer due diligence procedures but indicates that the ultimate responsibility for such procedures remains with the institutions or persons covered by the proposed Directive. The Committee recommends removal of the latter part of Article 12, related to ‘the ultimate responsibility shall remain with the institution or person covered by this Directive which relies on the third party’ and its replacement by the principle included in recital (20) on page 11 of the proposed Directive (avoiding duplication of work by relying on customer-identification procedures performed by third parties that are regulated). Unless reliance is permitted, once reasonable measures have been undertaken to establish the bona fidae nature of the third party, this provision will not avoid duplication of work. |
| --- | --- |

3.3.4.6

Article 12 permits reliance on third parties for the performance of customer due diligence procedures but indicates that the ultimate responsibility for such procedures remains with the institutions or persons covered by the proposed Directive. The Committee recommends removal of the latter part of Article 12, related to ‘the ultimate responsibility shall remain with the institution or person covered by this Directive which relies on the third party’ and its replacement by the principle included in recital (20) on page 11 of the proposed Directive (avoiding duplication of work by relying on customer-identification procedures performed by third parties that are regulated). Unless reliance is permitted, once reasonable measures have been undertaken to establish the bona fidae nature of the third party, this provision will not avoid duplication of work.

| 3.3.4.7 | Article 13.2 seeking the reporting of suspicions might usefully be extended to add an extra sentence: ‘The Commission should investigate such referrals and inform Member States of the conclusions reached.’ |
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3.3.4.7

Article 13.2 seeking the reporting of suspicions might usefully be extended to add an extra sentence: ‘The Commission should investigate such referrals and inform Member States of the conclusions reached.’

| 3.3.4.8 | To remove doubts about the compatibility of the provisions of Article 14 with the privacy regulations in certain Member States, the term ‘immediate’ should be removed from Article 14 and the third party must be permitted to seek consent from the persons whose information is being disclosed. The word ‘immediately’ might be replaced by ‘promptly’. |
| --- | --- |

3.3.4.8

To remove doubts about the compatibility of the provisions of Article 14 with the privacy regulations in certain Member States, the term ‘immediate’ should be removed from Article 14 and the third party must be permitted to seek consent from the persons whose information is being disclosed. The word ‘immediately’ might be replaced by ‘promptly’.

3.4   Prohibition on informing

| 3.4.1 | The Committee recommends a more closely defined meaning of ‘prohibition’ as regards the first part of Article 25. It is required in some Member States that regulated sector personnel report to certain regulators or parts of the judiciary as well as the FIU [Financial intelligence unit], and also in practice the fight against money laundering may be facilitated by careful exchanges of information between parties not complicit in the money laundering. To allow for these positive forms of disclosure, we recommend altering the Article to make explicit the fact that disclosure is prohibited only where this may tip off a suspect, or prejudice a money laundering investigation. |
| --- | --- |

3.4.1

The Committee recommends a more closely defined meaning of ‘prohibition’ as regards the first part of Article 25. It is required in some Member States that regulated sector personnel report to certain regulators or parts of the judiciary as well as the FIU [Financial intelligence unit], and also in practice the fight against money laundering may be facilitated by careful exchanges of information between parties not complicit in the money laundering. To allow for these positive forms of disclosure, we recommend altering the Article to make explicit the fact that disclosure is prohibited only where this may tip off a suspect, or prejudice a money laundering investigation.

3.5   Fair competition in overseas businesses

| 3.5.1 | In recital (23) on page 11, as well as in Article 27, it is suggested that Community standards should be applied in third countries where Community credit and financial institutions have branches and majority owned subsidiaries and where legislation in the area of money laundering and terrorist financing is found to be deficient. |
| --- | --- |

3.5.1

In recital (23) on page 11, as well as in Article 27, it is suggested that Community standards should be applied in third countries where Community credit and financial institutions have branches and majority owned subsidiaries and where legislation in the area of money laundering and terrorist financing is found to be deficient.

| 3.5.2 | The Committee has a concern that such an application may render Community credit and financial institutions branches and majority-owned subsidiaries unable to operate effectively and competitively in countries where money-laundering laws are not of a standard comparable to those in the EU. Therefore, the application of EU or comparable standards should be encouraged but an absolute requirement for application overseas may be premature. It would be preferable, in these situations, for institutions to inform the competent authorities in other countries, with a view to assistance being provided to them to improve their controls in relation to money laundering and terrorist finance. |
| --- | --- |

3.5.2

The Committee has a concern that such an application may render Community credit and financial institutions branches and majority-owned subsidiaries unable to operate effectively and competitively in countries where money-laundering laws are not of a standard comparable to those in the EU. Therefore, the application of EU or comparable standards should be encouraged but an absolute requirement for application overseas may be premature. It would be preferable, in these situations, for institutions to inform the competent authorities in other countries, with a view to assistance being provided to them to improve their controls in relation to money laundering and terrorist finance.

| 3.5.3 | It would be more appropriate for the EU to reinforce the application of good and relevant globally recognised standards by replacing the references to the application of EU requirements with the application of the FATF 40 recommendations. This would remove any implications that the EU is trying to enforce its requirements with extra-territorial effect, where there are global standards with broadly equivalent effectiveness. |
| --- | --- |

3.5.3

It would be more appropriate for the EU to reinforce the application of good and relevant globally recognised standards by replacing the references to the application of EU requirements with the application of the FATF 40 recommendations. This would remove any implications that the EU is trying to enforce its requirements with extra-territorial effect, where there are global standards with broadly equivalent effectiveness.

3.6   Employee protection

| 3.6.1 | The Committee applauds the inclusion in Article 24 of this protection and urge the Commission to extend this further to include a reference to judicial processes and the role of police authorities in providing protection. Clarity over protection of the confidentiality of the source of the money-laundering report is critical to the smooth and complete operation of the reporting systems. Not only employees, but their employee organisations should be covered by Article 24 which should also specifically refer to the obligation of Member States to keep the identity of reporters confidential to the fullest extent permitted by Member State criminal and civil law. The Directive should specifically provide that the identity of reporters should be kept strictly confidential, unless they have given consent to its disclosure, or it is essential for a fair judicial process in criminal proceedings. |
| --- | --- |

3.6.1

The Committee applauds the inclusion in Article 24 of this protection and urge the Commission to extend this further to include a reference to judicial processes and the role of police authorities in providing protection. Clarity over protection of the confidentiality of the source of the money-laundering report is critical to the smooth and complete operation of the reporting systems. Not only employees, but their employee organisations should be covered by Article 24 which should also specifically refer to the obligation of Member States to keep the identity of reporters confidential to the fullest extent permitted by Member State criminal and civil law. The Directive should specifically provide that the identity of reporters should be kept strictly confidential, unless they have given consent to its disclosure, or it is essential for a fair judicial process in criminal proceedings.

| 3.6.2 | Article 24 should be amended to ensure that the protection provisions extend to sole practitioners and small businesses. |
| --- | --- |

3.6.2

Article 24 should be amended to ensure that the protection provisions extend to sole practitioners and small businesses.

3.7   Other comments

3.7.1   Sectoral application of the proposed Directive

| 3.7.1.1 | Unless otherwise defined, all the systems' requirements included in the draft directive are applicable to all institutions and persons as defined in Article 2. As the regulated sector is now diverse, consideration needs to be given to the situation of institutions or professions whose activities are only partly covered by the draft directive as they need clarification as to how they are to apply the provisions to relevant parts, and not other parts, of their business. |
| --- | --- |

3.7.1.1

Unless otherwise defined, all the systems' requirements included in the draft directive are applicable to all institutions and persons as defined in Article 2. As the regulated sector is now diverse, consideration needs to be given to the situation of institutions or professions whose activities are only partly covered by the draft directive as they need clarification as to how they are to apply the provisions to relevant parts, and not other parts, of their business.

| 3.7.1.2 | It is unclear why Article 2 restricts the applicability of the draft directive to notaries and other independent legal professionals only when carrying out certain activities, while other liberal professions, with equivalently high standards of ethical and competence standards enforced on their membership, have all their services included. The Committee understands that there are certain activities reserved to notaries and other legal professionals in some Member States (usually linked to their role as advocates in formal legal proceedings), and that within those areas legal professionals can be validly distinguished from the members of other liberal professions, and thus that an argument exists for their exclusion from the scope of the Directive. However, the Committee believes that they should be included within the scope of the Directive wherever the activities in which they are engaged are not reserved to legal professionals, and the services would be included within the scope of the Directive if carried out by any other appropriately regulated professional firm. |
| --- | --- |

3.7.1.2

It is unclear why Article 2 restricts the applicability of the draft directive to notaries and other independent legal professionals only when carrying out certain activities, while other liberal professions, with equivalently high standards of ethical and competence standards enforced on their membership, have all their services included. The Committee understands that there are certain activities reserved to notaries and other legal professionals in some Member States (usually linked to their role as advocates in formal legal proceedings), and that within those areas legal professionals can be validly distinguished from the members of other liberal professions, and thus that an argument exists for their exclusion from the scope of the Directive. However, the Committee believes that they should be included within the scope of the Directive wherever the activities in which they are engaged are not reserved to legal professionals, and the services would be included within the scope of the Directive if carried out by any other appropriately regulated professional firm.

3.7.2   Reporting obligations

| 3.7.2.1 | Article 17 requires that the institutions and persons covered by the draft directive examine with special attention any activity which is likely to be related to money laundering. |
| --- | --- |

3.7.2.1

Article 17 requires that the institutions and persons covered by the draft directive examine with special attention any activity which is likely to be related to money laundering.

| 3.7.2.2 | This requirement could result in the performance of substantial additional procedures by the institutions and persons covered by the draft directive and also raise the risk of a subject being ‘tipped off’ by the conduct of special procedures. |
| --- | --- |

3.7.2.2

This requirement could result in the performance of substantial additional procedures by the institutions and persons covered by the draft directive and also raise the risk of a subject being ‘tipped off’ by the conduct of special procedures.

| 3.7.2.3 | The Committee believes that it should not be the task of the regulated sector to perform investigations in the sense apparently meant in Article 17, but to be alert to the need to form suspicions on the basis of information which came to them during the normal course of business and to report on such information for investigation by law-enforcement authorities. |
| --- | --- |

3.7.2.3

The Committee believes that it should not be the task of the regulated sector to perform investigations in the sense apparently meant in Article 17, but to be alert to the need to form suspicions on the basis of information which came to them during the normal course of business and to report on such information for investigation by law-enforcement authorities.

3.7.3   Member States' option for stricter provisions

| 3.7.3.1 | Article 4 allows Member States to adopt or retain in force stricter provisions than those contained in the draft directive. |
| --- | --- |

3.7.3.1

Article 4 allows Member States to adopt or retain in force stricter provisions than those contained in the draft directive.

| 3.7.3.2 | Material differences in the toughness of provisions from one Member State to another may harm the principle of the single market, result in a disruption of fair competition, and may encourage criminals to migrate their money-laundering activities to less stringent Member States. |
| --- | --- |

3.7.3.2

Material differences in the toughness of provisions from one Member State to another may harm the principle of the single market, result in a disruption of fair competition, and may encourage criminals to migrate their money-laundering activities to less stringent Member States.

| 3.7.3.3 | The Committee recommends that the provision allowing local variation is limited to those areas where such variation (if it is to be imposed by Member States on a compulsory rather than voluntary basis) is necessary to reflect specific local conditions. |
| --- | --- |

3.7.3.3

The Committee recommends that the provision allowing local variation is limited to those areas where such variation (if it is to be imposed by Member States on a compulsory rather than voluntary basis) is necessary to reflect specific local conditions.

3.7.4   Comments on specific paragraphs

| 3.7.4.1 | The Committee welcomes the responsibility placed on Member States to provide feedback (Article 31.3) and recommends that this is specifically made the responsibility of the FIU. Feedback is useful as it promotes better and more effective future compliance in applying the legislation. |
| --- | --- |

3.7.4.1

The Committee welcomes the responsibility placed on Member States to provide feedback (Article 31.3) and recommends that this is specifically made the responsibility of the FIU. Feedback is useful as it promotes better and more effective future compliance in applying the legislation.

| 3.7.4.2 | Article 19. 1 (b) requires that the institutions and persons covered by the proposed Directive to furnish the Financial Intelligence Unit with all necessary further information in accordance with applicable legislation. The Committee would like to point out that the law enforcement perception of ‘all necessary further information’ might be very far reaching and indeed it may not be possible for the regulated sector to comply with such a requirement. We recommend the term ‘all necessary’ is replaced with wording which allows the Member States to confirm with their regulated sectors the additional information that can be required to be provided, without becoming unnecessarily burdensome and safeguards to ensure that this is not exceeded by the FIU. |
| --- | --- |

3.7.4.2

Article 19. 1 (b) requires that the institutions and persons covered by the proposed Directive to furnish the Financial Intelligence Unit with all necessary further information in accordance with applicable legislation. The Committee would like to point out that the law enforcement perception of ‘all necessary further information’ might be very far reaching and indeed it may not be possible for the regulated sector to comply with such a requirement. We recommend the term ‘all necessary’ is replaced with wording which allows the Member States to confirm with their regulated sectors the additional information that can be required to be provided, without becoming unnecessarily burdensome and safeguards to ensure that this is not exceeded by the FIU.

| 3.7.4.3 | Article 20.2 should provide that suspicions formed in the course of providing legal advice (by notaries, independent legal advisers, auditors, external accountants or tax advisers) should be exempted from the suspicions reporting requirements. The current wording of this paragraph is more restrictive, suggesting that the exemption may only be limited to advice given when ascertaining the legal position of their client preceding legal proceedings. This would be an unjustifiable restriction on the human rights of clients to obtain legal advice in confidence. |
| --- | --- |

3.7.4.3

Article 20.2 should provide that suspicions formed in the course of providing legal advice (by notaries, independent legal advisers, auditors, external accountants or tax advisers) should be exempted from the suspicions reporting requirements. The current wording of this paragraph is more restrictive, suggesting that the exemption may only be limited to advice given when ascertaining the legal position of their client preceding legal proceedings. This would be an unjustifiable restriction on the human rights of clients to obtain legal advice in confidence.

| 3.7.4.4 | The provision of Article 23 that disclosure in accordance with the draft directive shall not constitute a breach of any restriction on disclosure of information has omitted that such disclosure needs to be made ‘in good faith’ to qualify for this protection. This was stipulated in the second directive. This qualification should be reinstated to emphasise that the regulated sector must be required to act responsibly and in good faith in order to benefit from the necessarily wide-ranging statutory protection. To specify otherwise risks distorting the balance of rights of persons and their access to justice. |
| --- | --- |

3.7.4.4

The provision of Article 23 that disclosure in accordance with the draft directive shall not constitute a breach of any restriction on disclosure of information has omitted that such disclosure needs to be made ‘in good faith’ to qualify for this protection. This was stipulated in the second directive. This qualification should be reinstated to emphasise that the regulated sector must be required to act responsibly and in good faith in order to benefit from the necessarily wide-ranging statutory protection. To specify otherwise risks distorting the balance of rights of persons and their access to justice.

4.   Conclusions

| 4.1 | Though the Committee support the twofold objective of ensuring the comprehensive application by the EU of global standards, as set out in the FATF 40 Recommendations, and the clear inclusion of terrorist financing, the Committee regrets that this 3rd Money Laundering Directive has been prepared before there has been an opportunity to fully evaluate the merits of the 2nd.Directive approved in 2001. Embarking on the preparation of a 3rd Directive, so soon after the second, and without a significant period for reflection to consider the lessons to be learnt from the application of the 2nd Directive may be somewhat precipitous. |
| --- | --- |

4.1

Though the Committee support the twofold objective of ensuring the comprehensive application by the EU of global standards, as set out in the FATF 40 Recommendations, and the clear inclusion of terrorist financing, the Committee regrets that this 3rd Money Laundering Directive has been prepared before there has been an opportunity to fully evaluate the merits of the 2nd.Directive approved in 2001. Embarking on the preparation of a 3rd Directive, so soon after the second, and without a significant period for reflection to consider the lessons to be learnt from the application of the 2nd Directive may be somewhat precipitous.

| 4.1.1 | To justify the preparation of a 3rd Directive at this time, it is essential that it is also used to improve upon the 2nd Directive and its implementation in further ways. In particular, we note, with approval, some provisions that have been included:






  — | to remove certain unduly burdensome aspects of the 2nd Directive, where requirements imposed are not reflected by equivalent benefits in terms of law enforcement and the fight against crime; |
| --- | --- | --- |

4.1.1

To justify the preparation of a 3rd Directive at this time, it is essential that it is also used to improve upon the 2nd Directive and its implementation in further ways. In particular, we note, with approval, some provisions that have been included:

—

to remove certain unduly burdensome aspects of the 2nd Directive, where requirements imposed are not reflected by equivalent benefits in terms of law enforcement and the fight against crime;

| — | to reduce inconsistencies in anti-money laundering requirements and practices both within the EU (in terms of both different Member States and different parts of the regulated sector or other sectors vulnerable to money laundering) and between it and third countries (this necessarily implies a reduction of Member State options under the Directive for their own discretionary variations); and |
| --- | --- |

—

to reduce inconsistencies in anti-money laundering requirements and practices both within the EU (in terms of both different Member States and different parts of the regulated sector or other sectors vulnerable to money laundering) and between it and third countries (this necessarily implies a reduction of Member State options under the Directive for their own discretionary variations); and

| — | to introduce clearer protections for the employees of reporting institutions |
| --- | --- |

—

to introduce clearer protections for the employees of reporting institutions

| 4.2 | The suggestions made in this opinion are intended to improve the Directive in ways that would contribute to these complimentary but not inconsistent objectives. Any further changes introduced during the final stages of the negotiation of the Directive should bear these over-riding principles in mind. |
| --- | --- |

4.2

The suggestions made in this opinion are intended to improve the Directive in ways that would contribute to these complimentary but not inconsistent objectives. Any further changes introduced during the final stages of the negotiation of the Directive should bear these over-riding principles in mind.

| 4.3 | In view of the short period from the coming into force of the 2nd Directive, in many Member States, a relatively generous period should be allowed, for the implementation of the 3rd Directive. |
| --- | --- |

4.3

In view of the short period from the coming into force of the 2nd Directive, in many Member States, a relatively generous period should be allowed, for the implementation of the 3rd Directive.

| 4.4 | As experience is gained of the administration of the Directives to prevent money laundering and terrorist financing, the European Union will probably need to consider some links and policy synergies with other aspects of criminal behaviour and its deterrence. The Committee has noted suggestions for:






  — | comparison of the draft Directive with the work of the Council of Europe on criminal law; |
| --- | --- | --- |

4.4

As experience is gained of the administration of the Directives to prevent money laundering and terrorist financing, the European Union will probably need to consider some links and policy synergies with other aspects of criminal behaviour and its deterrence. The Committee has noted suggestions for:

—

comparison of the draft Directive with the work of the Council of Europe on criminal law;

| — | clarification of arrangements for the confiscation of criminal funds; |
| --- | --- |

—

clarification of arrangements for the confiscation of criminal funds;

| — | more on helping 3rd Countries with problems of organised crime; |
| --- | --- |

—

more on helping 3rd Countries with problems of organised crime;

| — | specific vulnerable areas, such as cross border tax evasion |
| --- | --- |

—

specific vulnerable areas, such as cross border tax evasion

| 4.5 | The Committee welcomes the further development of the rules to prevent money laundering and terrorist financing as a symbol of a European Union that is ensuring high standards of probity and conduct in public and private behaviour. The Directive is both a practical step in the management of financial affairs and also a means of strengthening the European Union. |
| --- | --- |

4.5

The Committee welcomes the further development of the rules to prevent money laundering and terrorist financing as a symbol of a European Union that is ensuring high standards of probity and conduct in public and private behaviour. The Directive is both a practical step in the management of financial affairs and also a means of strengthening the European Union.

Brussels, 11 May 2005.

The President

of theEuropean Economic and Social Committee

Anne-Marie SIGMUND

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(1)  The FATF is an inter-governmental body which sets standards, and develops and promotes policies to combat money laundering and terrorist financing. Website: www.fatf-gafi.org

1

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| 27.10.2005 | EN | Official Journal of the European Union | C 267/36 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/36

---

Opinion of the European Economic and Social Committee on India-EU relations

(2005/C 267/06)

At its plenary session of 27 January 2004, the European Economic and Social Committee decided, under Rule 29(2) of its Rules of Procedure, to draw up an opinion on
  India-EU relations.

The Section for External Relations, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 14 March 2005. The rapporteur was Mr Sukhdev Sharma.

At its 417th plenary session (meeting of 12 May 2005), the European Economic and Social Committee adopted the following opinion (unanimously) by 145 votes in favour and two abstentions.

1.   Introduction

| 1.1 | The first Information Report on ‘India-EU Relations’ (CES 947/2000) was adopted by the Section for External Relations in December 2000, in the run-up to the first meeting of the India-EU Round Table, held in New Delhi in January 2001. The European members of the Round Table are drawn from the EESC, while its Indian members come from a cross-section of organised civil society (see Appendix I). |
| --- | --- |

1.1

The first Information Report on ‘India-EU Relations’ (CES 947/2000) was adopted by the Section for External Relations in December 2000, in the run-up to the first meeting of the India-EU Round Table, held in New Delhi in January 2001. The European members of the Round Table are drawn from the EESC, while its Indian members come from a cross-section of organised civil society (see Appendix I).

| 1.2 | Since its inauguration in 2001, the Round Table has established itself as an important institution for the further development of EU-India relations. It held its seventh meeting in June 2004 in Srinagar, Kashmir, and its eighth in December 2004 in London, when such sensitive issues as child labour and gender equality at the workplace were discussed in a frank yet constructive manner. (See Section 5: The EU-India civil society dialogue so far.) |
| --- | --- |

1.2

Since its inauguration in 2001, the Round Table has established itself as an important institution for the further development of EU-India relations. It held its seventh meeting in June 2004 in Srinagar, Kashmir, and its eighth in December 2004 in London, when such sensitive issues as child labour and gender equality at the workplace were discussed in a frank yet constructive manner. (See Section 5: The EU-India civil society dialogue so far.)

| 1.3 | This own-initiative opinion on India-EU relations has been prepared in view of the growing importance of these relations since 2000. This importance is clearly reflected in a number of developments in 2004. |
| --- | --- |

1.3

This own-initiative opinion on India-EU relations has been prepared in view of the growing importance of these relations since 2000. This importance is clearly reflected in a number of developments in 2004.

| 1.4 | This own-initiative opinion therefore does not limit itself to updating the 2000 Information Report on India-EU Relations. It also stresses the need for the EESC to take full advantage of the strong political support, in both the EU institutions and the Indian government, for closer cooperation between European and Indian civil societies. To this end this own-initiative opinion notes the contribution that the EESC has already made to bringing together Indian and European civil societies in a meaningful dialogue. It sets out the further contribution which the EESC can make, particularly to the preparation of the Joint Action Plan for an EU-India Strategic Partnership, notably through the Round Table. |
| --- | --- |

1.4

This own-initiative opinion therefore does not limit itself to updating the 2000 Information Report on India-EU Relations. It also stresses the need for the EESC to take full advantage of the strong political support, in both the EU institutions and the Indian government, for closer cooperation between European and Indian civil societies. To this end this own-initiative opinion notes the contribution that the EESC has already made to bringing together Indian and European civil societies in a meaningful dialogue. It sets out the further contribution which the EESC can make, particularly to the preparation of the Joint Action Plan for an EU-India Strategic Partnership, notably through the Round Table.

| 1.5 | The European Commission sent its wide-ranging proposals for a strategic partnership with India to the Council, European Parliament and the EESC in June 2004, in response to the fact that India-EU relations have ‘developed exponentially in scope and intensity in recent years.’ The Commission called for an Action Plan, to be endorsed at the sixth India-EU summit in 2005. |
| --- | --- |

1.5

The European Commission sent its wide-ranging proposals for a strategic partnership with India to the Council, European Parliament and the EESC in June 2004, in response to the fact that India-EU relations have ‘developed exponentially in scope and intensity in recent years.’ The Commission called for an Action Plan, to be endorsed at the sixth India-EU summit in 2005.

| 1.6 | The Indian government responded favourably in August to the Commission's Communication of June 16, and proposed the creation of a Ministerial level committee to draft the Action Plan, for approval by the sixth summit. |
| --- | --- |

1.6

The Indian government responded favourably in August to the Commission's Communication of June 16, and proposed the creation of a Ministerial level committee to draft the Action Plan, for approval by the sixth summit.

| 1.7 | The EU Council, in its Conclusions, adopted in October, ‘welcomed the thorough and comprehensive’ Commission Communication. The Council fully supported its overall objectives, and undertook to ‘work with the Commission towards their implementation.’ |
| --- | --- |

1.7

The EU Council, in its Conclusions, adopted in October, ‘welcomed the thorough and comprehensive’ Commission Communication. The Council fully supported its overall objectives, and undertook to ‘work with the Commission towards their implementation.’

| 1.8 | The European Parliament recommended to the Council in October that it ‘take the decision to up-grade the India-EU relationship to a Strategic Partnership,’ and that it also take the ‘necessary practical steps’ to this end. |
| --- | --- |

1.8

The European Parliament recommended to the Council in October that it ‘take the decision to up-grade the India-EU relationship to a Strategic Partnership,’ and that it also take the ‘necessary practical steps’ to this end.

| 1.9 | The fifth India-EU summit, held in the Hague in November, called on the two sides ‘to jointly elaborate a comprehensive India-EU Action Plan for a Strategic Partnership and a new Joint Political Declaration, based on the Commission's Communication, the Council's Conclusions and India's response paper, for approval at the sixth summit meeting.’ |
| --- | --- |

1.9

The fifth India-EU summit, held in the Hague in November, called on the two sides ‘to jointly elaborate a comprehensive India-EU Action Plan for a Strategic Partnership and a new Joint Political Declaration, based on the Commission's Communication, the Council's Conclusions and India's response paper, for approval at the sixth summit meeting.’

| 1.10 | At its December meeting in London, the Round Table, in its recommendations to the India-EU summit in 2005, ‘recognised that the India-EU Strategic Partnership provided opportunities to enhance and widen the role of civil society in this partnership, through the forum of the Round Table.’ It emphasised ‘that civil society must be an integral part of this new partnership,’ and expressed itself ‘keen to actively contribute to the Joint Action Plan.’ |
| --- | --- |

1.10

At its December meeting in London, the Round Table, in its recommendations to the India-EU summit in 2005, ‘recognised that the India-EU Strategic Partnership provided opportunities to enhance and widen the role of civil society in this partnership, through the forum of the Round Table.’ It emphasised ‘that civil society must be an integral part of this new partnership,’ and expressed itself ‘keen to actively contribute to the Joint Action Plan.’

| 1.11 | The length of the European Commission's paper, and the Indian Government's response, might suggest that much remains to be done to strengthen and deepen India-EU relations. The fact is that they already enjoy a close relationship, within a ‘partnership based on the sound foundation of shared values and beliefs,’ according to the summit statement. Indeed, the three documents mentioned above make clear how much has been achieved to date. |
| --- | --- |

1.11

The length of the European Commission's paper, and the Indian Government's response, might suggest that much remains to be done to strengthen and deepen India-EU relations. The fact is that they already enjoy a close relationship, within a ‘partnership based on the sound foundation of shared values and beliefs,’ according to the summit statement. Indeed, the three documents mentioned above make clear how much has been achieved to date.

| 1.12 | The India-EU partnership has evolved over the years from economic and development cooperation to acquire higher political and strategic dimensions, given that both India and the EU are important actors on the global stage, with a shared view of a world order based on multilateralism. Their political dialogue now includes a regular summit, which in recent years have taken place annually, annual ‘troika’ ministerial meetings, and following the adoption of the India-EU Joint Declaration on Terrorism in 2001, twice yearly meetings of COTER Troika, a political working group on anti-terrorism. The institutional machinery also includes the Consular Affairs working group, twice yearly meetings of senior EU and Indian officials since 2000, as well as the biannual meetings of the India-EU Round Table. |
| --- | --- |

1.12

The India-EU partnership has evolved over the years from economic and development cooperation to acquire higher political and strategic dimensions, given that both India and the EU are important actors on the global stage, with a shared view of a world order based on multilateralism. Their political dialogue now includes a regular summit, which in recent years have taken place annually, annual ‘troika’ ministerial meetings, and following the adoption of the India-EU Joint Declaration on Terrorism in 2001, twice yearly meetings of COTER Troika, a political working group on anti-terrorism. The institutional machinery also includes the Consular Affairs working group, twice yearly meetings of senior EU and Indian officials since 2000, as well as the biannual meetings of the India-EU Round Table.

| 1.13 | Trade and investment remain a cornerstone of the India-EU relationship. The EU is India's largest trading partner and the main source of foreign inward investment. Although both trade and investment are clearly below potential, Indian and European economic operators made recommendations for action in eight sectors under a joint initiative for enhancing trade and investment. A EUR 13.4 million trade and investment development programme will build on these recommendations. Meanwhile, the EU and India have concluded a customs cooperation agreement, designed to improve trade flows, and are negotiating a maritime agreement, to encourage the development of the activities of Indian and European shipping companies. |
| --- | --- |

1.13

Trade and investment remain a cornerstone of the India-EU relationship. The EU is India's largest trading partner and the main source of foreign inward investment. Although both trade and investment are clearly below potential, Indian and European economic operators made recommendations for action in eight sectors under a joint initiative for enhancing trade and investment. A EUR 13.4 million trade and investment development programme will build on these recommendations. Meanwhile, the EU and India have concluded a customs cooperation agreement, designed to improve trade flows, and are negotiating a maritime agreement, to encourage the development of the activities of Indian and European shipping companies.

| 1.14 | India's Information Technology (IT) exports to the EU rose to over EUR 2 billion in 2003, and represented 20 % of the country's total software exports. Some 900 Indian and European companies and organisations took part in the 2004 Euro-India cooperation forum on the Information Society, held in New Delhi in March 2004. Meanwhile, an Information Society dialogue was launched on the basis of the 2001 Joint India-EU Vision Statement on the development of the information society and information and communication technology. It provides for research in six priority sectors and an in-depth dialogue on regulatory frameworks for the Information Society and electronic communications. |
| --- | --- |

1.14

India's Information Technology (IT) exports to the EU rose to over EUR 2 billion in 2003, and represented 20 % of the country's total software exports. Some 900 Indian and European companies and organisations took part in the 2004 Euro-India cooperation forum on the Information Society, held in New Delhi in March 2004. Meanwhile, an Information Society dialogue was launched on the basis of the 2001 Joint India-EU Vision Statement on the development of the information society and information and communication technology. It provides for research in six priority sectors and an in-depth dialogue on regulatory frameworks for the Information Society and electronic communications.

| 1.15 | Cooperation in science and technology, which began in the mid-1980s, has emerged as one of the most promising areas of India-EU cooperation. The 2002 scientific and technological cooperation agreement provides a legal framework for Indian and European scientists to take part in each other's programmes, while India is a ‘target country’ for collaboration under the international framework of the EU's sixth Framework Research Programme. |
| --- | --- |

1.15

Cooperation in science and technology, which began in the mid-1980s, has emerged as one of the most promising areas of India-EU cooperation. The 2002 scientific and technological cooperation agreement provides a legal framework for Indian and European scientists to take part in each other's programmes, while India is a ‘target country’ for collaboration under the international framework of the EU's sixth Framework Research Programme.

| 1.16 | India and the EU are working on a draft cooperation agreement on the EU's Galileo satellite navigation project. Given India's capabilities in satellite and navigation related activities, the agreement will encourage industrial cooperation in many high-tech areas. India and the EU already have a long history of working together through their respective space agencies, ESA and ISRO, in the peaceful exploration and use of outer space. The EU meanwhile has expressed an interest in India's unmanned lunar exploration mission, Chandrayaan-1. |
| --- | --- |

1.16

India and the EU are working on a draft cooperation agreement on the EU's Galileo satellite navigation project. Given India's capabilities in satellite and navigation related activities, the agreement will encourage industrial cooperation in many high-tech areas. India and the EU already have a long history of working together through their respective space agencies, ESA and ISRO, in the peaceful exploration and use of outer space. The EU meanwhile has expressed an interest in India's unmanned lunar exploration mission, Chandrayaan-1.

| 1.17 | There are new approaches to development cooperation. India is becoming an atypical actor, with an evolving development policy, in which it is both recipient and donor. This shift was evident during the devastation that followed the ‘tsunami’ which struck countries bordering the Indian ocean on 26 December 2004. India refused foreign emergency aid, even while providing large-scale emergency assistance to Sri Lanka. As recipient, India now accepts development aid from a select group of bilateral donors now expanded to include the EU, the G-8 countries and small bilateral donors who are not part of G-8, but which are accepted if contributions exceed $ 25 million per year. The EU is providing EUR 225 million in grants to India for the period 2001 and 2006, four-fifths of it for poverty reduction. Development cooperation will focus on the states of Rajasthan and Chattisgarh, and will be largely devoted to education and health programmes. |
| --- | --- |

1.17

There are new approaches to development cooperation. India is becoming an atypical actor, with an evolving development policy, in which it is both recipient and donor. This shift was evident during the devastation that followed the ‘tsunami’ which struck countries bordering the Indian ocean on 26 December 2004. India refused foreign emergency aid, even while providing large-scale emergency assistance to Sri Lanka. As recipient, India now accepts development aid from a select group of bilateral donors now expanded to include the EU, the G-8 countries and small bilateral donors who are not part of G-8, but which are accepted if contributions exceed $ 25 million per year. The EU is providing EUR 225 million in grants to India for the period 2001 and 2006, four-fifths of it for poverty reduction. Development cooperation will focus on the states of Rajasthan and Chattisgarh, and will be largely devoted to education and health programmes.

| 1.18 | The EESC must respond effectively to this rush of politically significant developments in a period of six months, the first half of 2005. The European Commission in fact has proposed in its June Communication that the Round Table should be fully integrated into the India-EU institutional machinery, with its co-chairs invited to present non-binding policy recommendations to the summit. The Council supported the Commission's proposals to increase mutual understanding through ‘increased cooperation between political parties, trade unions, business associations, universities and civil societies.’ And The Hague summit agreed to ‘promote cooperation between political parties, trade unions, business associations, universities and civil societies.’ |
| --- | --- |

1.18

The EESC must respond effectively to this rush of politically significant developments in a period of six months, the first half of 2005. The European Commission in fact has proposed in its June Communication that the Round Table should be fully integrated into the India-EU institutional machinery, with its co-chairs invited to present non-binding policy recommendations to the summit. The Council supported the Commission's proposals to increase mutual understanding through ‘increased cooperation between political parties, trade unions, business associations, universities and civil societies.’ And The Hague summit agreed to ‘promote cooperation between political parties, trade unions, business associations, universities and civil societies.’

| 1.19 | This own-initiative opinion also looks at the ways in which the Round Table can be made more effective, and its website, the India-EU civil society Internet Forum, used both to add to the Round Table's effectiveness and to reach out to a much wider range of Indian and European civil society organisations. |
| --- | --- |

1.19

This own-initiative opinion also looks at the ways in which the Round Table can be made more effective, and its website, the India-EU civil society Internet Forum, used both to add to the Round Table's effectiveness and to reach out to a much wider range of Indian and European civil society organisations.

2.   Contributing to the India-EU Strategic Partnership

| 2.1 | The Round Table welcomed the launch of the India-EU strategic partnership, when it met in London in December, 2004, and undertook to contribute to the Joint Action Plan to be drawn up in 2005, ahead of the sixth India-EU summit. It declared its intention ‘to make proposals in areas where civil society can bring real added value, particularly with regard to achieving the Millennium Development Goals, promoting sustainable development and managing globalisation.’ The Round Table also undertook to see how civil society can help implement the Joint Declaration on Cultural Relations. |
| --- | --- |

2.1

The Round Table welcomed the launch of the India-EU strategic partnership, when it met in London in December, 2004, and undertook to contribute to the Joint Action Plan to be drawn up in 2005, ahead of the sixth India-EU summit. It declared its intention ‘to make proposals in areas where civil society can bring real added value, particularly with regard to achieving the Millennium Development Goals, promoting sustainable development and managing globalisation.’ The Round Table also undertook to see how civil society can help implement the Joint Declaration on Cultural Relations.

| 2.2 | The Round Table, like the EESC, is well placed to contribute to the India-EU strategic partnership. Since its inaugural meeting in New Delhi in January 2001, the Round Table has (1) discussed many of the topics covered by the European Commission in its 16 June Communication, and (2) made recommendations to the India-EU summits on these very topics. At its London meeting it recognised that the emerging strategic partnership ‘provided opportunities to enhance and widen the role of civil society, through the forum of the Round Table.’ The Round Table had already discussed and made recommendations on a number of issues, including globalisation, trade and investment; the WTO; intellectual property, and media and culture at its second meeting, held in Brussels in July 2001. It not only returned to these subjects at subsequent meetings, but also broadened its agenda to include cooperation in food and agribusiness; human rights in the work place; sustainable development and tourism. It will take its earlier exchanges on cultural issues a good deal further with a discussion, at its next meeting, on cultural and religious pluralism in democratic societies. |
| --- | --- |

2.2

The Round Table, like the EESC, is well placed to contribute to the India-EU strategic partnership. Since its inaugural meeting in New Delhi in January 2001, the Round Table has (1) discussed many of the topics covered by the European Commission in its 16 June Communication, and (2) made recommendations to the India-EU summits on these very topics. At its London meeting it recognised that the emerging strategic partnership ‘provided opportunities to enhance and widen the role of civil society, through the forum of the Round Table.’ The Round Table had already discussed and made recommendations on a number of issues, including globalisation, trade and investment; the WTO; intellectual property, and media and culture at its second meeting, held in Brussels in July 2001. It not only returned to these subjects at subsequent meetings, but also broadened its agenda to include cooperation in food and agribusiness; human rights in the work place; sustainable development and tourism. It will take its earlier exchanges on cultural issues a good deal further with a discussion, at its next meeting, on cultural and religious pluralism in democratic societies.

| 2.3 | Rather than look at all the topics raised by the European Commission in the framework of the strategic partnership, the Round table decided at its London meeting to confine itself to those areas where civil society has a unique contribution to make. It could therefore usefully consider its contribution to the following areas, identified by the Commission as important elements of the emerging strategic partnership. |
| --- | --- |

2.3

Rather than look at all the topics raised by the European Commission in the framework of the strategic partnership, the Round table decided at its London meeting to confine itself to those areas where civil society has a unique contribution to make. It could therefore usefully consider its contribution to the following areas, identified by the Commission as important elements of the emerging strategic partnership.

| 2.3.1 | Conflict prevention and post-conflict reconstruction: These are areas in which India has played an important part, both through the UN and bilaterally, as in Afghanistan, as the Commission has pointed out. Hence its proposal that that the EU and India explore ways of formalising regular cooperation in these areas. The Commission also suggests that they co-sponsor a UN conference on conflict prevention and post-conflict management, and start a dialogue on the contribution of regional integration to conflict prevention. |
| --- | --- |

2.3.1

Conflict prevention and post-conflict reconstruction: These are areas in which India has played an important part, both through the UN and bilaterally, as in Afghanistan, as the Commission has pointed out. Hence its proposal that that the EU and India explore ways of formalising regular cooperation in these areas. The Commission also suggests that they co-sponsor a UN conference on conflict prevention and post-conflict management, and start a dialogue on the contribution of regional integration to conflict prevention.

| 2.3.2 | Migration: International migration has increased in the face of globalisation, the Commission notes. This has led to increased migrant remittances, on the one hand, and to problems of illegal migration and human trafficking on the other. The Commission favours a comprehensive dialogue, covering not only legal migration, including labour migration and the movement of workers, and visa issues, but also combating smugglers and traffickers, the return and readmission of illegal migrants, and other migration-related subjects. |
| --- | --- |

2.3.2

Migration: International migration has increased in the face of globalisation, the Commission notes. This has led to increased migrant remittances, on the one hand, and to problems of illegal migration and human trafficking on the other. The Commission favours a comprehensive dialogue, covering not only legal migration, including labour migration and the movement of workers, and visa issues, but also combating smugglers and traffickers, the return and readmission of illegal migrants, and other migration-related subjects.

| 2.3.3 | Democracy and human rights: The Commission favours extending the present dialogue to such topics as abolition of the death penalty, gender discrimination, child labour and labour rights, corporate social responsibility and religious freedom. The Commission is prepared to fund projects in India under the European Initiative for Human Rights and Democracy. The EESC feels that caste-based discriminations need to be addressed. |
| --- | --- |

2.3.3

Democracy and human rights: The Commission favours extending the present dialogue to such topics as abolition of the death penalty, gender discrimination, child labour and labour rights, corporate social responsibility and religious freedom. The Commission is prepared to fund projects in India under the European Initiative for Human Rights and Democracy. The EESC feels that caste-based discriminations need to be addressed.

| 2.3.4 | Environmental issues: India and the EU should work together to promote cooperation on global environmental challenges, like the UN Conventions on Biological Diversity, where a constructive dialogue could be developed on ‘Access and Benefit Sharing’ (ABS). India would be invited to organise an India-EU Environmental Forum, including civil society and business, in order to exchange views, know-how and scientific and technical information. The Committee believes that issues of energy policy and energy security should be addressed in the near future by the India-EU Round Table. |
| --- | --- |

2.3.4

Environmental issues: India and the EU should work together to promote cooperation on global environmental challenges, like the UN Conventions on Biological Diversity, where a constructive dialogue could be developed on ‘Access and Benefit Sharing’ (ABS). India would be invited to organise an India-EU Environmental Forum, including civil society and business, in order to exchange views, know-how and scientific and technical information. The Committee believes that issues of energy policy and energy security should be addressed in the near future by the India-EU Round Table.

| 2.3.5 | Sustainable development: To be promoted through dialogue on issues such as encouraging trade flows in sustainably produced goods, labelling and sustainable impact assessment, according to the European Commission. The Commission also supports greater use of the Sustainable Trade and Innovation Centre (STIC). |
| --- | --- |

2.3.5

Sustainable development: To be promoted through dialogue on issues such as encouraging trade flows in sustainably produced goods, labelling and sustainable impact assessment, according to the European Commission. The Commission also supports greater use of the Sustainable Trade and Innovation Centre (STIC).

| 2.3.6 | Development cooperation: India has reduced the number of bilateral donors to six (the EU, UK, Germany, US, Japan and Russia). The country in fact has become both a recipient and a donor of development aid. Even so, the Commission wants the EU to help India meet the Millennium Development Goals. Social and economic cohesion could be made a priority, based on the experience gained in EU support programmes in India in elementary education and basic health. The Commission believes that EU development cooperation should focus increasingly on helping marginalised groups. It should also support the promotion of the core ILO conventions. In the view of the EESC, India should ratify the 3 core ILO Conventions which have not yet been ratified by India. |
| --- | --- |

2.3.6

Development cooperation: India has reduced the number of bilateral donors to six (the EU, UK, Germany, US, Japan and Russia). The country in fact has become both a recipient and a donor of development aid. Even so, the Commission wants the EU to help India meet the Millennium Development Goals. Social and economic cohesion could be made a priority, based on the experience gained in EU support programmes in India in elementary education and basic health. The Commission believes that EU development cooperation should focus increasingly on helping marginalised groups. It should also support the promotion of the core ILO conventions. In the view of the EESC, India should ratify the 3 core ILO Conventions which have not yet been ratified by India.

| 2.3.7 | Cultural cooperation: The Commission wants to reinforce cooperation in film and music in particular. A Cultural Week would be held to coincide with the political and business summits. The Committee notes that the 2006 year for inter-cultural dialogue could provide a suitable opportunity for the Round Table to address the issue. |
| --- | --- |

2.3.7

Cultural cooperation: The Commission wants to reinforce cooperation in film and music in particular. A Cultural Week would be held to coincide with the political and business summits. The Committee notes that the 2006 year for inter-cultural dialogue could provide a suitable opportunity for the Round Table to address the issue.

| 2.3.8 | Visibility: Indian public opinion needs to be informed of all the facets of the EU, not just its trade relations, in the Commission's view. It will launch a research project to identify target audiences, key messages, main instruments and how best to deploy them. Member states as well as the European Parliament are invited to contribute to the work of raising the EU's profile in India. New Delhi would be expected to devise its own communications strategy. |
| --- | --- |

2.3.8

Visibility: Indian public opinion needs to be informed of all the facets of the EU, not just its trade relations, in the Commission's view. It will launch a research project to identify target audiences, key messages, main instruments and how best to deploy them. Member states as well as the European Parliament are invited to contribute to the work of raising the EU's profile in India. New Delhi would be expected to devise its own communications strategy.

| 2.3.9 | Trade and investment: As the European Commission points out in its Communication, trade and investment form ‘a cornerstone of the India-EU relationship.’ Several of the proposals contained in its Communication therefore deal with these two subjects, at both the multilateral and bilateral levels. The Commission wants the EU to achieve greater convergence with India on key issues in the Doha Development round of trade negotiations in the WTO. It also favours a bilateral dialogue on intellectual property rights (IPR), for example, in order to reach a common understanding on TRIPS. |
| --- | --- |

2.3.9

Trade and investment: As the European Commission points out in its Communication, trade and investment form ‘a cornerstone of the India-EU relationship.’ Several of the proposals contained in its Communication therefore deal with these two subjects, at both the multilateral and bilateral levels. The Commission wants the EU to achieve greater convergence with India on key issues in the Doha Development round of trade negotiations in the WTO. It also favours a bilateral dialogue on intellectual property rights (IPR), for example, in order to reach a common understanding on TRIPS.

| 2.4 | In a section of its Communication devoted to boosting business-to-business cooperation, the Commission wants the EU to help set up a Business Leaders Round Table. The proposal has the support of The Hague summit. Meanwhile, the India-EU Joint Initiative for enhancing trade and investment has enabled a direct dialogue between business and policy makers. Indian business and industrial organisations already hold an India-EU Business Summit to coincide with the political summit, and submit the findings of the business leaders to their political leaders. |
| --- | --- |

2.4

In a section of its Communication devoted to boosting business-to-business cooperation, the Commission wants the EU to help set up a Business Leaders Round Table. The proposal has the support of The Hague summit. Meanwhile, the India-EU Joint Initiative for enhancing trade and investment has enabled a direct dialogue between business and policy makers. Indian business and industrial organisations already hold an India-EU Business Summit to coincide with the political summit, and submit the findings of the business leaders to their political leaders.

| 2.5 | Given that the Round Table's members are drawn from business and employers' organisations also, it could usefully consider how best to take part in the activities, jointly undertaken by the Indian and European business communities. While it clearly has a role to play in strengthening the India-EU economic partnership favoured by the Commission, the Round Table's contribution to the Joint Action Plan should focus on promoting sustainable development and managing globalisation, as the London meeting decided. |
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2.5

Given that the Round Table's members are drawn from business and employers' organisations also, it could usefully consider how best to take part in the activities, jointly undertaken by the Indian and European business communities. While it clearly has a role to play in strengthening the India-EU economic partnership favoured by the Commission, the Round Table's contribution to the Joint Action Plan should focus on promoting sustainable development and managing globalisation, as the London meeting decided.

| 2.6 | The Round Table's members come from the academic community also. It could therefore consider its contribution to the academic programmes set up by the European Commission or in preparation, and mentioned in its Communication. They include a European studies programme at the Jawaharlal Nehru University in New Delhi. A scholarship programme, with a budget of EUR33 million, should become operational from the academic year 2005/2006. It will be linked to the EU's Erasmus Mundus programme, and will focus on postgraduate studies for Indian students in EU universities. |
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2.6

The Round Table's members come from the academic community also. It could therefore consider its contribution to the academic programmes set up by the European Commission or in preparation, and mentioned in its Communication. They include a European studies programme at the Jawaharlal Nehru University in New Delhi. A scholarship programme, with a budget of EUR33 million, should become operational from the academic year 2005/2006. It will be linked to the EU's Erasmus Mundus programme, and will focus on postgraduate studies for Indian students in EU universities.

3.   Civil society in India and Europe

What do we mean by ‘civil society?’ The EESC believes that ‘it can be defined only loosely, as a society that embraces democracy. Civil society is a collective term for all types of social action, by individuals or groups, that do not emanate from the state and are not run by it’ (1). Its advocates in India would agree that civil society embraces democracy and that it can act effectively only in a democracy. Indeed, some who are active in civil society organisations in India have been inspired by the achievements of civil society in Europe and the United States, others by the tradition of social and political activism established by Mahatma Gandhi.

3.1   Civil society in India

| 3.1.1 | The growing importance of Indian civil society is evident in the proliferation of all kinds of voluntary organisations. (This is the preferred term in India; the term ‘non-governmental organisation,’ or NGO, has become popular only in the last 20 years.) Their number was estimated at between 50 000 and 100 000 some 10 years ago, and it has almost certainly risen since then. Civil society organisations engage in a wide range of activities throughout India, and include business and professional organisations and trade unions. |
| --- | --- |

3.1.1

The growing importance of Indian civil society is evident in the proliferation of all kinds of voluntary organisations. (This is the preferred term in India; the term ‘non-governmental organisation,’ or NGO, has become popular only in the last 20 years.) Their number was estimated at between 50 000 and 100 000 some 10 years ago, and it has almost certainly risen since then. Civil society organisations engage in a wide range of activities throughout India, and include business and professional organisations and trade unions.

| 3.1.2 | Indian civil society organisations:






  — | are engaged in the traditional development activities associated with NGOs — running literacy programmes, operating dispensaries and clinics, helping artisans, such as weavers, market their products, etc. As they usually operate at the local level, they also help government agencies implement public policy in a decentralised manner; |
| --- | --- | --- |

3.1.2

Indian civil society organisations:

—

are engaged in the traditional development activities associated with NGOs — running literacy programmes, operating dispensaries and clinics, helping artisans, such as weavers, market their products, etc. As they usually operate at the local level, they also help government agencies implement public policy in a decentralised manner;

| — | conduct in-depth research in order to lobby the Central and State governments and/or industry; |
| --- | --- |

—

conduct in-depth research in order to lobby the Central and State governments and/or industry;

| — | try to raise the political awareness of various social groups, encouraging them to demand their rights; |
| --- | --- |

—

try to raise the political awareness of various social groups, encouraging them to demand their rights;

| — | represent special interest groups, such as the disabled, the aged and refugees; |
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—

represent special interest groups, such as the disabled, the aged and refugees;

| — | act as innovators, trying out new approaches in solving social problems; |
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—

act as innovators, trying out new approaches in solving social problems;

| — | represent Employer organisations, trade unions, mutual organisations and cooperatives; |
| --- | --- |

—

represent Employer organisations, trade unions, mutual organisations and cooperatives;

| — | include organisations representing farmers; |
| --- | --- |

—

include organisations representing farmers;

| — | include organisations active in combating the spread of HIV/AIDS, and |
| --- | --- |

—

include organisations active in combating the spread of HIV/AIDS, and

| — | finally, there are the activists. Since the 1970s they have been forming broad-based social movements — farmers' movements; women's movements, defining and promoting women's issues; environmental movements, which try to get the government to pay more attention to environmental concerns; movements defending consumers' rights, etc. |
| --- | --- |

—

finally, there are the activists. Since the 1970s they have been forming broad-based social movements — farmers' movements; women's movements, defining and promoting women's issues; environmental movements, which try to get the government to pay more attention to environmental concerns; movements defending consumers' rights, etc.

| 3.1.3 | On development issues in particular both NGOs and the government feel they must work as partners. Thus the country's Planning Commission has funded voluntary organisations at various times. The tenth 5-year plan, the latest, notes that:
  ‘Plans should be reflective of the actual requirements of people, and economically and socially sensitive to the ethos of people for whom they are meant. People must feel the sense of ownership of such plans and must contribute to such end. The trend of expecting the government to do everything for the people must end; programmes and schedules where people participate have been known to be much more effective.’ |
| --- | --- |

3.1.3

On development issues in particular both NGOs and the government feel they must work as partners. Thus the country's Planning Commission has funded voluntary organisations at various times. The tenth 5-year plan, the latest, notes that:

‘Plans should be reflective of the actual requirements of people, and economically and socially sensitive to the ethos of people for whom they are meant. People must feel the sense of ownership of such plans and must contribute to such end. The trend of expecting the government to do everything for the people must end; programmes and schedules where people participate have been known to be much more effective.’

| 3.1.4 | The Planning Commission has a voluntary action cell, which is its interface with the voluntary sector. It has now decided ‘to form consultative groups ... consisting of people from various parts of the country who know what is happening on the ground and who can suggest what needs to be changed and how,’ according to Ms Sayeeda Hameed, a member of the Planning Commission. (2) |
| --- | --- |

3.1.4

The Planning Commission has a voluntary action cell, which is its interface with the voluntary sector. It has now decided ‘to form consultative groups ... consisting of people from various parts of the country who know what is happening on the ground and who can suggest what needs to be changed and how,’ according to Ms Sayeeda Hameed, a member of the Planning Commission. (2)

| 3.1.5 | The Congress Party has always been supportive of civil society, and the Congress-led coalition government in New Delhi is likely to attach greater importance to its activities than its predecessor. Shortly after it was set up, the new Government held consultations with civil society organisations, to get their response to its Common Minimum Programme (CMP). It has set up a National Advisory Council (NAC), chaired by Mrs. Sonia Gandhi, leader of the Congress Party, which should be seen in this light. A leading Congress Party member who was associated with the creation of the NAC, noted that it ‘would be the interface of the United Progressive Alliance (UPA) government with civil society; it will bring in fresh thinking into planning that otherwise is not associated with the government’ (3). The NAC, whose 12 members were nominated by Prime Minister Manmohan Singh, is expected to advise him on how the Alliance's Common Minimum Programme should be implemented. While advisors to governments are often retired civil servants or diplomats, half the members of the NAC are hands-on public workers from the non-governmental sector (4). Mrs Sonia Gandhi would like to give priority initially to agriculture, education, health and employment. |
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3.1.5

The Congress Party has always been supportive of civil society, and the Congress-led coalition government in New Delhi is likely to attach greater importance to its activities than its predecessor. Shortly after it was set up, the new Government held consultations with civil society organisations, to get their response to its Common Minimum Programme (CMP). It has set up a National Advisory Council (NAC), chaired by Mrs. Sonia Gandhi, leader of the Congress Party, which should be seen in this light. A leading Congress Party member who was associated with the creation of the NAC, noted that it ‘would be the interface of the United Progressive Alliance (UPA) government with civil society; it will bring in fresh thinking into planning that otherwise is not associated with the government’ (3). The NAC, whose 12 members were nominated by Prime Minister Manmohan Singh, is expected to advise him on how the Alliance's Common Minimum Programme should be implemented. While advisors to governments are often retired civil servants or diplomats, half the members of the NAC are hands-on public workers from the non-governmental sector (4). Mrs Sonia Gandhi would like to give priority initially to agriculture, education, health and employment.

3.2   Civil society in the European Union (5)

| 3.2.1 | Civil society is as dynamic in the EU as it is in India with numerous organizations that are active at the local, national and EU level. But it has an important advantage over the latter: organised European civil society has its own ‘apex body’ in Indian jargon — the European Economic and Social Committee (EESC) in Brussels. What is more the EESC is an integral part of the institutions set up under the 1957 Treaty of Rome, which established the 6-nation European Economic Community, that is today's 25-nation European Union (6). The EESC today has 317 members, drawn from the 25 Member States. They are appointed by the EU Council of Ministers, on the basis of proposals by the Member States. Members belong to one of three groups: employers, workers and various other interests. Members of the third group represent farmers, small and medium-sized enterprises, artisans, the professions, cooperatives, consumer organisations, environmental protection groups, family associations, women's organisations, scientists and teachers, non-governmental organisations (NGOs), etc., according to the Treaty of Rome. |
| --- | --- |

3.2.1

Civil society is as dynamic in the EU as it is in India with numerous organizations that are active at the local, national and EU level. But it has an important advantage over the latter: organised European civil society has its own ‘apex body’ in Indian jargon — the European Economic and Social Committee (EESC) in Brussels. What is more the EESC is an integral part of the institutions set up under the 1957 Treaty of Rome, which established the 6-nation European Economic Community, that is today's 25-nation European Union (6). The EESC today has 317 members, drawn from the 25 Member States. They are appointed by the EU Council of Ministers, on the basis of proposals by the Member States. Members belong to one of three groups: employers, workers and various other interests. Members of the third group represent farmers, small and medium-sized enterprises, artisans, the professions, cooperatives, consumer organisations, environmental protection groups, family associations, women's organisations, scientists and teachers, non-governmental organisations (NGOs), etc., according to the Treaty of Rome.

| 3.2.2 | The EESC is a non-political consultative body, with advisory powers. Its purpose is to inform the EU institutions responsible for decision-making of the views of its members. There are some 14 policy areas in which a decision may be taken by the EU Council or European Commission only after it has consulted the EESC. These areas include: agriculture; the free movement of persons and services; social policy, education, vocational training and youth; public health; consumer protection; industrial policy; research and technological development and the environment. The Council, Commission and European Parliament may also consult the EESC on any other matter, as they see fit. The EESC, for its part, may also issue an opinion on matters it regards important of consideration; hence this ‘own-initiative opinion’ on EU-India relations. |
| --- | --- |

3.2.2

The EESC is a non-political consultative body, with advisory powers. Its purpose is to inform the EU institutions responsible for decision-making of the views of its members. There are some 14 policy areas in which a decision may be taken by the EU Council or European Commission only after it has consulted the EESC. These areas include: agriculture; the free movement of persons and services; social policy, education, vocational training and youth; public health; consumer protection; industrial policy; research and technological development and the environment. The Council, Commission and European Parliament may also consult the EESC on any other matter, as they see fit. The EESC, for its part, may also issue an opinion on matters it regards important of consideration; hence this ‘own-initiative opinion’ on EU-India relations.

| 3.2.3 | The EESC's role as a facilitator of a dialogue with civil society extends beyond the borders of the 25-nation European Union. It is an active participant in an on-going dialogue with the Euromed partnership countries and the African, Caribbean and Pacific (ACP) countries with whom the EU is linked through the Cotonu Convention. It also is engaged in a dialogue with civil society in the Latin American countries, including the Mercosur states and, last but not least India- through the India-EU Round Table and China. |
| --- | --- |

3.2.3

The EESC's role as a facilitator of a dialogue with civil society extends beyond the borders of the 25-nation European Union. It is an active participant in an on-going dialogue with the Euromed partnership countries and the African, Caribbean and Pacific (ACP) countries with whom the EU is linked through the Cotonu Convention. It also is engaged in a dialogue with civil society in the Latin American countries, including the Mercosur states and, last but not least India- through the India-EU Round Table and China.

4.   Recent developments in India and the EU

| 4.1 | A full account of the dramatic changes taking place in both the EU and India would run to several hundred pages. This report focuses on the key developments that will enable the EESC to contribute more effectively to strengthening EU-India relations. The key developments as regards the EU are its enlargement to 25 Member States, action to create a wider Europe through the European Neighbourhood Policy (ENP) and the implementation of the ‘Lisbon Strategy’ which the European Council adopted in Lisbon in March, 2000. This strategy, with its emphasis on sustainable development, seeks to make the EU the most competitive and dynamic knowledge-based economy in the world by 2010. Another key development has been the agreement on a European Constitution, which now awaits ratification by the 25 Member States. |
| --- | --- |

4.1

A full account of the dramatic changes taking place in both the EU and India would run to several hundred pages. This report focuses on the key developments that will enable the EESC to contribute more effectively to strengthening EU-India relations. The key developments as regards the EU are its enlargement to 25 Member States, action to create a wider Europe through the European Neighbourhood Policy (ENP) and the implementation of the ‘Lisbon Strategy’ which the European Council adopted in Lisbon in March, 2000. This strategy, with its emphasis on sustainable development, seeks to make the EU the most competitive and dynamic knowledge-based economy in the world by 2010. Another key development has been the agreement on a European Constitution, which now awaits ratification by the 25 Member States.

| 4.2 | The EU's enlargement on 1 May 2004 has dramatically altered both the political and economic landscape of Europe. The political consequences of enlargement are likely to be more important than the economic, if only because the process of integrating the economies of the 10 new member states began well before they formally joined the EU on 1 May 2004. Enlargement has raised the EU's population from 380 million to 455 million, so that it now accounts for 7.3 % of world population. It has increased the EU's gross domestic product (GDP) from EUR 9.3 trillion to EUR 9.7 trillion, raising the EU's share of world GDP to 28.7 %. Enlargement has resulted, however, in a fall in per capita GDP to EUR 21.000 (from EUR 24,100) and a fall in its trade with non-EU countries to EUR 1.8 trillion (from EUR 2 trillion). This is because the trade between the EU-15 and the 10 candidate countries is now part of the internal trade of the 25-nation EU. |
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4.2

The EU's enlargement on 1 May 2004 has dramatically altered both the political and economic landscape of Europe. The political consequences of enlargement are likely to be more important than the economic, if only because the process of integrating the economies of the 10 new member states began well before they formally joined the EU on 1 May 2004. Enlargement has raised the EU's population from 380 million to 455 million, so that it now accounts for 7.3 % of world population. It has increased the EU's gross domestic product (GDP) from EUR 9.3 trillion to EUR 9.7 trillion, raising the EU's share of world GDP to 28.7 %. Enlargement has resulted, however, in a fall in per capita GDP to EUR 21.000 (from EUR 24,100) and a fall in its trade with non-EU countries to EUR 1.8 trillion (from EUR 2 trillion). This is because the trade between the EU-15 and the 10 candidate countries is now part of the internal trade of the 25-nation EU.

| 4.3 | With enlargement, the EU's borders have expanded. The EU began to develop policies, aimed at creating ‘a ring of friends’, in advance of enlargement, however. To this end it has conceived the European Neighbourhood Policy (ENP), covering six East European countries (Ukraine, Moldova, Georgia, Armenia, Azerbaijan and Belarus) and nine southern Mediterranean countries — Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Syria and Tunisia — and the Palestinian Authority. The aim of the ENP, as confirmed by the EU Council in April, 2004, is to ‘share the benefits of an enlarged EU with neighbouring countries, in order to contribute to increased stability, security and prosperity of the European Union and its neighbours (7)’. The ENP involves ‘a significant degree of economic integration and a deepening of political cooperation, with the aim of preventing the emergence of new dividing lines between the enlarged EU and its neighbours’, according to the Council. |
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4.3

With enlargement, the EU's borders have expanded. The EU began to develop policies, aimed at creating ‘a ring of friends’, in advance of enlargement, however. To this end it has conceived the European Neighbourhood Policy (ENP), covering six East European countries (Ukraine, Moldova, Georgia, Armenia, Azerbaijan and Belarus) and nine southern Mediterranean countries — Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Syria and Tunisia — and the Palestinian Authority. The aim of the ENP, as confirmed by the EU Council in April, 2004, is to ‘share the benefits of an enlarged EU with neighbouring countries, in order to contribute to increased stability, security and prosperity of the European Union and its neighbours (7)’. The ENP involves ‘a significant degree of economic integration and a deepening of political cooperation, with the aim of preventing the emergence of new dividing lines between the enlarged EU and its neighbours’, according to the Council.

| 4.4 | In the case of India, the key development was the largely unexpected outcome of the general elections held in May, which resulted in a Congress-led coalition under Prime Minister Manmohan Singh succeeding the BJP-led coalition under Prime Minister Atal Behari Vajpayee. The high level of participation in the general elections, the successful use of electronic voting machines throughout the country, and the smooth transfer of power in New Delhi, despite the political upheaval occasioned by the elections results, all justified India's claim to be the world's largest democracy. |
| --- | --- |

4.4

In the case of India, the key development was the largely unexpected outcome of the general elections held in May, which resulted in a Congress-led coalition under Prime Minister Manmohan Singh succeeding the BJP-led coalition under Prime Minister Atal Behari Vajpayee. The high level of participation in the general elections, the successful use of electronic voting machines throughout the country, and the smooth transfer of power in New Delhi, despite the political upheaval occasioned by the elections results, all justified India's claim to be the world's largest democracy.

| 4.5 | The Congress party's surprise victory led to speculation that any Congress-led coalition government either could not last or would be obliged, by its ‘outside’ supporters, the Communist party in particular, to roll back the reforms. It must be remembered, however, that the reforms, which included dismantling import controls and opening up capital markets, were launched by a Congress government in 1991, and that its chief architects were the new Prime Minister, Manmohan Singh, and the new Finance Minister, Palaniappan Chidambaram. The latter in fact sees himself as the ‘investment minister’ in the Congress-led coalition. In other words, civil society organisations representing business and finance, such as those represented on the EU-India Round Table, will work with him to develop the country's knowledge-based economic sectors. |
| --- | --- |

4.5

The Congress party's surprise victory led to speculation that any Congress-led coalition government either could not last or would be obliged, by its ‘outside’ supporters, the Communist party in particular, to roll back the reforms. It must be remembered, however, that the reforms, which included dismantling import controls and opening up capital markets, were launched by a Congress government in 1991, and that its chief architects were the new Prime Minister, Manmohan Singh, and the new Finance Minister, Palaniappan Chidambaram. The latter in fact sees himself as the ‘investment minister’ in the Congress-led coalition. In other words, civil society organisations representing business and finance, such as those represented on the EU-India Round Table, will work with him to develop the country's knowledge-based economic sectors.

| 4.6 | The Government nevertheless wants its economic strategy to have ‘a human face’, in order to lift out of poverty the estimated 300 million Indians surviving on less than EUR 0.75 ($1) a day. Hence its efforts to achieve annual growth rates of 7 % to 8 %, to help farmers, empower women and increase spending on health and education. |
| --- | --- |

4.6

The Government nevertheless wants its economic strategy to have ‘a human face’, in order to lift out of poverty the estimated 300 million Indians surviving on less than EUR 0.75 ($1) a day. Hence its efforts to achieve annual growth rates of 7 % to 8 %, to help farmers, empower women and increase spending on health and education.

| 4.7 | The challenges facing Indian civil society would provide European civil society organisations an opportunity to cooperate with Indian counterparts, to their mutual benefit. This would be done initially through the EU-India Round Table, but could involve, fairly quickly, organisations with which the European and Indian members of the Round Table have close links as well as other members of the EESC with expertise in rural development, health and education, for example. This collaboration in the field, as it were, between European and Indian civil society would ensure that the Round Table's recommendations to the annual EU-India summits were practical, because based on experience. |
| --- | --- |

4.7

The challenges facing Indian civil society would provide European civil society organisations an opportunity to cooperate with Indian counterparts, to their mutual benefit. This would be done initially through the EU-India Round Table, but could involve, fairly quickly, organisations with which the European and Indian members of the Round Table have close links as well as other members of the EESC with expertise in rural development, health and education, for example. This collaboration in the field, as it were, between European and Indian civil society would ensure that the Round Table's recommendations to the annual EU-India summits were practical, because based on experience.

5.   The EU-India civil society dialogue so far

| 5.1 | In order to map the way ahead, we must first look at where we are coming from. The starting point for an enhanced civil society dialogue must therefore be the institutional machinery already in place for conducting such a dialogue and its achievements to date. For the EESC this means assessing the work of the EU-India Round Table to date and agreeing on how best to further its aims, always bearing in mind such related developments as the Hague Summit decision to promote cooperation between not only civil societies but also political parties, trade unions, employer organisations and universities. |
| --- | --- |

5.1

In order to map the way ahead, we must first look at where we are coming from. The starting point for an enhanced civil society dialogue must therefore be the institutional machinery already in place for conducting such a dialogue and its achievements to date. For the EESC this means assessing the work of the EU-India Round Table to date and agreeing on how best to further its aims, always bearing in mind such related developments as the Hague Summit decision to promote cooperation between not only civil societies but also political parties, trade unions, employer organisations and universities.

| 5.2 | Reference has been made to the issues that have been discussed at the various meetings of the Round Table since its inception in 2001, in order to demonstrate its credibility as a key partner in the elaboration of the Joint Action Plan. Some idea of the continuity in the work of the Round Table, the scope of the topics under discussion, and the atmosphere of trust in which these discussions take place may be had by looking at the outcome of recent meetings. |
| --- | --- |

5.2

Reference has been made to the issues that have been discussed at the various meetings of the Round Table since its inception in 2001, in order to demonstrate its credibility as a key partner in the elaboration of the Joint Action Plan. Some idea of the continuity in the work of the Round Table, the scope of the topics under discussion, and the atmosphere of trust in which these discussions take place may be had by looking at the outcome of recent meetings.

| 5.3 | Thus at its sixth meeting, held in Rome, the Round Table made a series of recommendations, ranging from initiatives to support Corporate Social Responsibility (CSR) and special support for SMEs to the rationalisation of regulations governing the temporary movement of knowledge workers from India within the EU, and support by the EU of industrial clusters in a few select sectors which have export potential and promote development. At the same time the Round Table nominated two rapporteurs to assess how better to integrate the perspectives of civil society organisations into the promotion of trade and sustainable development. |
| --- | --- |

5.3

Thus at its sixth meeting, held in Rome, the Round Table made a series of recommendations, ranging from initiatives to support Corporate Social Responsibility (CSR) and special support for SMEs to the rationalisation of regulations governing the temporary movement of knowledge workers from India within the EU, and support by the EU of industrial clusters in a few select sectors which have export potential and promote development. At the same time the Round Table nominated two rapporteurs to assess how better to integrate the perspectives of civil society organisations into the promotion of trade and sustainable development.

| 5.4 | This topic was discussed at the 7th meeting of the Round Table, held in Srinagar in June 2004. It was agreed that in order to deepen a joint understanding of sustainable development, practical examples from India and the EU should form the basis of the final report, to be submitted to the 9th meeting of the Round Table. The Srinagar meeting also discussed India-EU cooperation for developing tourism, on the basis of a presentation made by EESC and Indian delegates of the Round Table. The Round Table agreed that civil society organisations have an important role to play in the promotion of a sustainable form of tourism, one which encourages economic and social development and benefits the population as a whole. |
| --- | --- |

5.4

This topic was discussed at the 7th meeting of the Round Table, held in Srinagar in June 2004. It was agreed that in order to deepen a joint understanding of sustainable development, practical examples from India and the EU should form the basis of the final report, to be submitted to the 9th meeting of the Round Table. The Srinagar meeting also discussed India-EU cooperation for developing tourism, on the basis of a presentation made by EESC and Indian delegates of the Round Table. The Round Table agreed that civil society organisations have an important role to play in the promotion of a sustainable form of tourism, one which encourages economic and social development and benefits the population as a whole.

| 5.5 | The Rome, Srinagar and London meetings discussed the establishment of the civil society Internet Forum, as recommended by the Bangalore meeting in March 2003. The meetings highlighted the Forum's potential as an ongoing forum of discussion between Indian and European members of the Round Table and an instrument for enhancing the dialogue between civil society organisations in general. |
| --- | --- |

5.5

The Rome, Srinagar and London meetings discussed the establishment of the civil society Internet Forum, as recommended by the Bangalore meeting in March 2003. The meetings highlighted the Forum's potential as an ongoing forum of discussion between Indian and European members of the Round Table and an instrument for enhancing the dialogue between civil society organisations in general.

| 5.6 | The Rome meeting also reviewed the Round Table's main achievements to date. It endorsed the view that an assessment of this achievements cannot be limited to a numerical analysis of the number of recommendations which have been implemented, not least because a number of these recommendations are not within the capacity or remit of EU and Indian civil society to implement. The fact remains that the Round Table has actually adopted recommendations and joint approaches on a variety of topics, including those which could be considered sensitive, if not controversial. It has also highlighted specific forms of cooperation, such as the creation of the Internet Forum, organised hearings of local civil society organisations during its biannual meetings, and promoted ad hoc EESC-India collaboration, such as the help given by the Indian delegation to the EESC, in its work on the Generalised System of Preferences. |
| --- | --- |

5.6

The Rome meeting also reviewed the Round Table's main achievements to date. It endorsed the view that an assessment of this achievements cannot be limited to a numerical analysis of the number of recommendations which have been implemented, not least because a number of these recommendations are not within the capacity or remit of EU and Indian civil society to implement. The fact remains that the Round Table has actually adopted recommendations and joint approaches on a variety of topics, including those which could be considered sensitive, if not controversial. It has also highlighted specific forms of cooperation, such as the creation of the Internet Forum, organised hearings of local civil society organisations during its biannual meetings, and promoted ad hoc EESC-India collaboration, such as the help given by the Indian delegation to the EESC, in its work on the Generalised System of Preferences.

| 5.7 | Given that 60–70 % of the working population is engaged formally or informally in agriculture, discussions in the India-EU Round Table on issues relating to farming and rural development have been hampered by the absence of farmers' representatives in the Indian delegation of the Round Table. |
| --- | --- |

5.7

Given that 60–70 % of the working population is engaged formally or informally in agriculture, discussions in the India-EU Round Table on issues relating to farming and rural development have been hampered by the absence of farmers' representatives in the Indian delegation of the Round Table.

| 5.8. | The Round Table meeting looked at the mechanisms for labour relations and social dialogue in the European Union. It took note of current practice in the Union regarding the actors involved in social dialogue, issues relating to the designation and representativeness of those actors, and the different forums where this dialogue happens. The Round Table also analysed the current labour situation in India, including the structure and composition of trade unions and collective bargaining, labour law reform and India's policy regarding proposals to link labour standards with international trade. It was noted that a large part of the labour force in India is working in the so-called informal sector (small businesses, self-employment, casual employment), and that more should be done to improve the situation of employees. In addition, more efforts are needed to secure the ratification of ILO core labour standards and their implementation in Law and Practice. |
| --- | --- |

5.8.

The Round Table meeting looked at the mechanisms for labour relations and social dialogue in the European Union. It took note of current practice in the Union regarding the actors involved in social dialogue, issues relating to the designation and representativeness of those actors, and the different forums where this dialogue happens. The Round Table also analysed the current labour situation in India, including the structure and composition of trade unions and collective bargaining, labour law reform and India's policy regarding proposals to link labour standards with international trade. It was noted that a large part of the labour force in India is working in the so-called informal sector (small businesses, self-employment, casual employment), and that more should be done to improve the situation of employees. In addition, more efforts are needed to secure the ratification of ILO core labour standards and their implementation in Law and Practice.

6.   An enhanced civil society dialogue: the way ahead

| 6.1 | The time is ripe for an exponential growth in cooperation and collaboration between organised civil society in the 25-nation EU and India. The EU-India summit has already recognised the importance of the work of the Round Table. The Indian Government has taken a number of decisions aimed at strengthening collaboration with civil society in India. The European Commission, in its Communication of 16 June, has called for the Round Table to ‘be fully integrated into the institutional architecture’, and its two co-chairpersons to be invited to attend the India-EU summit meetings. |
| --- | --- |

6.1

The time is ripe for an exponential growth in cooperation and collaboration between organised civil society in the 25-nation EU and India. The EU-India summit has already recognised the importance of the work of the Round Table. The Indian Government has taken a number of decisions aimed at strengthening collaboration with civil society in India. The European Commission, in its Communication of 16 June, has called for the Round Table to ‘be fully integrated into the institutional architecture’, and its two co-chairpersons to be invited to attend the India-EU summit meetings.

| 6.2 | The Indian government noted, in its initial response to the 16 June Communication, that despite the efforts at ‘the official level to keep pace with the changes that India and the EU have been undergoing ... there is still a need for enhancing the level of contacts at other levels, including between our respective civil societies’. |
| --- | --- |

6.2

The Indian government noted, in its initial response to the 16 June Communication, that despite the efforts at ‘the official level to keep pace with the changes that India and the EU have been undergoing ... there is still a need for enhancing the level of contacts at other levels, including between our respective civil societies’.

| 6.3 | The question that inevitably arises is, how can the Round Table be more effective in the decision-shaping and decision-making process, especially as it enjoys the rare privilege of direct access to the highest political authorities, the Indian Prime Minister and the prime minister of the country holding the Presidency of the EU Council, at their annual summits? Section 2 of this own-initiative opinion, on ‘Contributing to the India-EU Strategic Partnership’, has indicated how the Round Table can contribute effectively to the preparation of the Joint Action Plan for a strategic partnership. This activity will last only until the sixth India-EU summit, which is expected to endorse the Plan when it meets during the latter part of 2005. |
| --- | --- |

6.3

The question that inevitably arises is, how can the Round Table be more effective in the decision-shaping and decision-making process, especially as it enjoys the rare privilege of direct access to the highest political authorities, the Indian Prime Minister and the prime minister of the country holding the Presidency of the EU Council, at their annual summits? Section 2 of this own-initiative opinion, on ‘Contributing to the India-EU Strategic Partnership’, has indicated how the Round Table can contribute effectively to the preparation of the Joint Action Plan for a strategic partnership. This activity will last only until the sixth India-EU summit, which is expected to endorse the Plan when it meets during the latter part of 2005.

| 6.4 | Many of the Round Table's recommendations to the India-EU summits will involve medium to long-term commitments. Experience suggests that the recommendations should also relate to projects to be implemented jointly by European and Indian civil society organisations. Political support would make it easier to secure any funds that may be needed, and would allow organised Indian and European civil society to collaborate on a wide range of projects (8). |
| --- | --- |

6.4

Many of the Round Table's recommendations to the India-EU summits will involve medium to long-term commitments. Experience suggests that the recommendations should also relate to projects to be implemented jointly by European and Indian civil society organisations. Political support would make it easier to secure any funds that may be needed, and would allow organised Indian and European civil society to collaborate on a wide range of projects (8).

| 6.5 | If the Round Table is to be effective in the decision-shaping and decision-making process, its agenda clearly must include topics under discussion at the official level such as those relating to the World Trade Organisation (WTO) and the Doha Development round of trade negotiations. The Round Table could increase its effectiveness by collaborating with the EU-India Business Summit, organised by two of its members, from the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII). It should also ask to be associated with the projected business leaders' Round Table proposed by the European Commission. |
| --- | --- |

6.5

If the Round Table is to be effective in the decision-shaping and decision-making process, its agenda clearly must include topics under discussion at the official level such as those relating to the World Trade Organisation (WTO) and the Doha Development round of trade negotiations. The Round Table could increase its effectiveness by collaborating with the EU-India Business Summit, organised by two of its members, from the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII). It should also ask to be associated with the projected business leaders' Round Table proposed by the European Commission.

| 6.6 | As the Round Table's membership includes academics, it could usefully contribute to the success of the EUR 33 million scholarship programme for India, launched by the European Commission in 2005. The EESC itself could expand its own initiatives on India, such as its earlier decision to ask the Round Table's Indian co-chair to take part in its seminar on the WTO after Cancun. |
| --- | --- |

6.6

As the Round Table's membership includes academics, it could usefully contribute to the success of the EUR 33 million scholarship programme for India, launched by the European Commission in 2005. The EESC itself could expand its own initiatives on India, such as its earlier decision to ask the Round Table's Indian co-chair to take part in its seminar on the WTO after Cancun.

| 6.7 | The fact that the channels of communication between officials and business leaders on economic issues are multiplying, does not mean that the Round Table should limit its own discussions on these issues. On the contrary. But rather than focusing on their purely economic aspects, it should look at their non-economic, particularly social, implications. This is what the Round Table agreed in Srinagar to do in the case of sustainable development: it will consider the concept as incorporating not only the economic aspect of development strategy but also its social and environmental aspects. Outsourcing is another topic which lends itself to such an approach. The issues raised in the EU by outsourcing are very different from those which it has raised in India, but they have this in common: the most difficult to resolve are social issues in both cases. In other words, by adopting a holistic approach the Round Table will be able to ensure that the non-economic aspects of what are deemed essentially economic subjects are given equal weight. |
| --- | --- |

6.7

The fact that the channels of communication between officials and business leaders on economic issues are multiplying, does not mean that the Round Table should limit its own discussions on these issues. On the contrary. But rather than focusing on their purely economic aspects, it should look at their non-economic, particularly social, implications. This is what the Round Table agreed in Srinagar to do in the case of sustainable development: it will consider the concept as incorporating not only the economic aspect of development strategy but also its social and environmental aspects. Outsourcing is another topic which lends itself to such an approach. The issues raised in the EU by outsourcing are very different from those which it has raised in India, but they have this in common: the most difficult to resolve are social issues in both cases. In other words, by adopting a holistic approach the Round Table will be able to ensure that the non-economic aspects of what are deemed essentially economic subjects are given equal weight.

| 6.8 | This shift in focus will allow the Round Table to organise EU-India conferences on social issues, as a complement to the business and political summits. Topics for these conferences can be selected from those already discussed by the Round Table, such as gender equality. Additional topics could include the social effects of outsourcing and emigration, for example. The importance of such conferences for the balanced development of both European and Indian society cannot be overstated. |
| --- | --- |

6.8

This shift in focus will allow the Round Table to organise EU-India conferences on social issues, as a complement to the business and political summits. Topics for these conferences can be selected from those already discussed by the Round Table, such as gender equality. Additional topics could include the social effects of outsourcing and emigration, for example. The importance of such conferences for the balanced development of both European and Indian society cannot be overstated.

| 6.9 | The Round Table will need to look at cultural issues in a more focused way. It could contribute to the implementation to the India-EU Joint Declaration on Cultural Relations. But the Round Table could usefully look at the recommendation for ‘a dialogue of civilisations, interfaith dialogue and cultures’, submitted by representatives of Asian civil society to the Asia-Europe Meeting (better known as the ASEM Summit) when they met in Barcelona in June, 2004 (9). ASEM leaders have already begun a dialogue of civilisations, which was attended by EU heads of state or government, but not India, as it is not a member of ASEM. In its response to the Commission's Communication India has indicated its readiness to engage in a dialogue with the EU on the problems posed by religious extremism and fundamentalism. |
| --- | --- |

6.9

The Round Table will need to look at cultural issues in a more focused way. It could contribute to the implementation to the India-EU Joint Declaration on Cultural Relations. But the Round Table could usefully look at the recommendation for ‘a dialogue of civilisations, interfaith dialogue and cultures’, submitted by representatives of Asian civil society to the Asia-Europe Meeting (better known as the ASEM Summit) when they met in Barcelona in June, 2004 (9). ASEM leaders have already begun a dialogue of civilisations, which was attended by EU heads of state or government, but not India, as it is not a member of ASEM. In its response to the Commission's Communication India has indicated its readiness to engage in a dialogue with the EU on the problems posed by religious extremism and fundamentalism.

| 6.10 | Success in these ventures will require the Round Table to reach out to far more civil society organisations than it can physically accommodate during its meetings. But it already has the perfect instrument for this purpose — the Internet Forum which it has set up. By opening up the Forum to other civil society organisations in the EU and India, the Round Table can involve them in its discussions. As the number of such organisations is very large, access can be limited initially to organisations known to the members of the Round Table. As a complement to these exchanges through cyberspace, the Round Table would continue to invite local civil society organisations to its regular meetings. |
| --- | --- |

6.10

Success in these ventures will require the Round Table to reach out to far more civil society organisations than it can physically accommodate during its meetings. But it already has the perfect instrument for this purpose — the Internet Forum which it has set up. By opening up the Forum to other civil society organisations in the EU and India, the Round Table can involve them in its discussions. As the number of such organisations is very large, access can be limited initially to organisations known to the members of the Round Table. As a complement to these exchanges through cyberspace, the Round Table would continue to invite local civil society organisations to its regular meetings.

| 6.11 | The Internet Forum also offers a ready channel of communication for the members of the Round Table in-between their biannual meetings, given that the Indian members are scattered across the length and breadth of their country. Draft reports can be posted on the Forum, for comments by members in advance of the meeting. Discussions during the meeting itself would be much richer as a result, and the recommendations to the EU-India summits more focused. The members can keep each other informed of their own activities, thus making it possible for them to know each other better, certainly at the professional level. And as the number of European and Indian organisations accessing the Forum increases, those with shared interests could use it to start working more closely with each other, sharing experiences to begin with, but going on to develop joint projects. |
| --- | --- |

6.11

The Internet Forum also offers a ready channel of communication for the members of the Round Table in-between their biannual meetings, given that the Indian members are scattered across the length and breadth of their country. Draft reports can be posted on the Forum, for comments by members in advance of the meeting. Discussions during the meeting itself would be much richer as a result, and the recommendations to the EU-India summits more focused. The members can keep each other informed of their own activities, thus making it possible for them to know each other better, certainly at the professional level. And as the number of European and Indian organisations accessing the Forum increases, those with shared interests could use it to start working more closely with each other, sharing experiences to begin with, but going on to develop joint projects.

| 6.12 | Two further issues which the Round Table has extensively discussed are the role of the media in strengthening civil society and cultural cooperation. It can usefully contribute, therefore, (1) to the efforts of the member states, European Parliament and European Commission in raising the EU's profile in India, particularly among civil society organisations, and (2) to the elaboration of a specific chapter on cultural cooperation in the Action Plan for a Strategic Partnership, on the basis of the India-EU Joint Declaration on Cultural Cooperation of 8 November 2004. |
| --- | --- |

6.12

Two further issues which the Round Table has extensively discussed are the role of the media in strengthening civil society and cultural cooperation. It can usefully contribute, therefore, (1) to the efforts of the member states, European Parliament and European Commission in raising the EU's profile in India, particularly among civil society organisations, and (2) to the elaboration of a specific chapter on cultural cooperation in the Action Plan for a Strategic Partnership, on the basis of the India-EU Joint Declaration on Cultural Cooperation of 8 November 2004.

7.   Conclusions

| 7.1 | The EU and India are more determined than ever before to broaden and deepen their cooperation. The latest evidence of this is the speed with which the European Commission and India's diplomatic mission to the EU have begun work on the Action Plan for an India-EU Strategic Partnership. Both want their respective civil societies to contribute to this process. The EESC is already helping bring European and Indian civil societies together through its active participation in the India-EU Round Table, its financial support for the India-EU Internet Forum, and its invitations to the Round Table's Indian co-chair, N. N. Vohra, to take part in activities relevant to India-EU relations. |
| --- | --- |

7.1

The EU and India are more determined than ever before to broaden and deepen their cooperation. The latest evidence of this is the speed with which the European Commission and India's diplomatic mission to the EU have begun work on the Action Plan for an India-EU Strategic Partnership. Both want their respective civil societies to contribute to this process. The EESC is already helping bring European and Indian civil societies together through its active participation in the India-EU Round Table, its financial support for the India-EU Internet Forum, and its invitations to the Round Table's Indian co-chair, N. N. Vohra, to take part in activities relevant to India-EU relations.

| 7.2 | Having welcomed the European Commission's Communication on the India-EU Strategic Partnership, the EESC must now contribute actively to the elaboration of the relevant Action Plan. The London meeting of the Round Table undertook ‘to make proposals to the European Institutions and Indian government in areas where civil society can bring real added value, particularly with regard to the Millennium Development Goals, promoting sustainable development and managing globalisation’. |
| --- | --- |

7.2

Having welcomed the European Commission's Communication on the India-EU Strategic Partnership, the EESC must now contribute actively to the elaboration of the relevant Action Plan. The London meeting of the Round Table undertook ‘to make proposals to the European Institutions and Indian government in areas where civil society can bring real added value, particularly with regard to the Millennium Development Goals, promoting sustainable development and managing globalisation’.

| 7.3 | The Indian government has welcomed the EU's enlargement. In the Joint Press Statement issued after The Hague summit on 8 November 2004, India affirmed its view that ‘deepening and widening of the EU should contribute to further strengthening of our relations’. The EESC, as the consultative body representing European civil society, must therefore both ensure that the 25-nation EU is adequately represented on the Round Table, and raise the profile of India-EU relations in its own activities. The India-EU Round Table can thus become a model for the EESC's relations with other developing countries and regions of the world. |
| --- | --- |

7.3

The Indian government has welcomed the EU's enlargement. In the Joint Press Statement issued after The Hague summit on 8 November 2004, India affirmed its view that ‘deepening and widening of the EU should contribute to further strengthening of our relations’. The EESC, as the consultative body representing European civil society, must therefore both ensure that the 25-nation EU is adequately represented on the Round Table, and raise the profile of India-EU relations in its own activities. The India-EU Round Table can thus become a model for the EESC's relations with other developing countries and regions of the world.

Brussels, 12 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  Economic and Social Committee, ‘Opinion on the role and contribution of civil society organisations in the building of Europe’, pt. 5.1., adopted on 22 September 1999, OJ C 329, 17.11.1999).

1

(2)  Opening the Planning Commission to the people: Sayeeda Hameed, by Rajashri Dasgupta. InfoChange News and Features, September 2004.

2

(3)  ‘The Hindu’, 26 June 2004. Very similar views were expressed by Jaswant Singh, Minister for External Affairs, in the BJP-led coalition government, when he inaugurated the EU-India Round Table with Commission Chris Patten in 2001.

3

(4)  They include Prof. Jean Dreze, an Indian citizen of Belgian origin who has been associated with Dr. Amartya Sen; two former members of the Planning Commission, MM. C.H. Hanumantha Rao and D. Swaminathan. Those from civil society organisations include Ms Aruna Roy, a social activist; Jayaprakash Narayan (health and environment); Ms Mirai Chatterjee (SEWA) and Madhav Chavan (primary education).

4

(5)  A reference to European civil society may seem unnecessary, especially if it is limited to the European Economic and Social Committee. But the Indian civil society organisations will be interested to know that their EU counterparts have what in Indian jargon is an ‘apex body’.

5

(6)  Article 193 of the Treaty stipulated that ‘the Committee shall consist of representatives of the various categories of economic and social activity, in particular, representatives of producers, farmers, carriers, workers, dealers, craftsmen, professional occupations and representatives of the general public’.

6

(7)  General Affairs Council of 14 June 2004. European Neighbourhood Policy — Council conclusions.

7

(8)  Evidence of this was provided by the decision of the Ministry of External Affairs in New Delhi, to make available the funds needed to meet the operating costs in India of the EU-India Internet Forum set up by the Round Table.

8

(9)  The Barcelona Report. Recommendations form civil society on Asia-Europe relations, addressed to the ASEM leaders. Connecting Civil Society from Asia & Europe: an informal consultation. 16-18 June 2004, Barcelona, Spain.

9

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| 27.10.2005 | EN | Official Journal of the European Union | C 267/45 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/45

---

Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 77/388/EEC with a view to simplifying value added tax obligations and the Proposal for a Council Regulation amending Regulation (EC) No 1798/2003 as regards the introduction of administrative cooperation arrangements in the context of the one-stop scheme and the refund procedure for value added tax

(COM(2004) 728 final — 2004/0261 (CNS) — 2004/0262 (CNS))

(2005/C 267/07)

On 24 January 2005 the Council decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned proposals.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 April 2005. The rapporteur was Mr Burani.

At its 417th plenary session, held on 12 May 2005, the European Economic and Social Committee adopted the following opinion by 90 votes nem. con. with one abstention.

1.   Introduction: the Commission document

| 1.1 | In October 2003, the Commission presented a communication (1) reviewing the VAT strategy it had launched in June 2000 and setting out a series of new initiatives to be taken under that strategy. Essentially, the strategy consists of pursuing four main objectives: the simplification, modernisation and more uniform application of current rules, and closer administrative cooperation. |
| --- | --- |

1.1

In October 2003, the Commission presented a communication (1) reviewing the VAT strategy it had launched in June 2000 and setting out a series of new initiatives to be taken under that strategy. Essentially, the strategy consists of pursuing four main objectives: the simplification, modernisation and more uniform application of current rules, and closer administrative cooperation.

| 1.2 | The document referred to the EESC (2) is in three parts:






  a) | a proposal for a Council Directive amending Directive 77/388/EEC with a view to simplifying value added tax obligations; |
| --- | --- | --- |

1.2

The document referred to the EESC (2) is in three parts:

a)

a proposal for a Council Directive amending Directive 77/388/EEC with a view to simplifying value added tax obligations;

| b) | a proposal for a Council Directive laying down rules for the refund of value added tax, provided for in Directive 77/388/EEC, to taxable persons not established in the territory of the country but established in another Member State; |
| --- | --- |

b)

a proposal for a Council Directive laying down rules for the refund of value added tax, provided for in Directive 77/388/EEC, to taxable persons not established in the territory of the country but established in another Member State;

| c) | a proposal for a Council Regulation amending Regulation (EC) No 1798/2003 as regards the introduction of administrative cooperation arrangements in the context of the one-stop scheme and the refund procedure for value added tax. |
| --- | --- |

c)

a proposal for a Council Regulation amending Regulation (EC) No 1798/2003 as regards the introduction of administrative cooperation arrangements in the context of the one-stop scheme and the refund procedure for value added tax.

| 1.2.1 | Only proposals a) and c) require comments from the EESC. The general comments apply to both proposals, as they are both part of a single strategy. |
| --- | --- |

1.2.1

Only proposals a) and c) require comments from the EESC. The general comments apply to both proposals, as they are both part of a single strategy.

| 1.3 | The simplification of business obligations, which had been under consideration for some time, was addressed by a European Council decision of 26 March 2004, which called upon the Competitiveness Council to identify areas for simplification. A decision on the matter was adopted in June 2004 and the Commission issued the document addressed by this opinion in October 2004. Meanwhile, at the informal ECOFIN meeting of 11 September 2004, the Dutch Presidency had raised the issue of ‘Fostering growth by reducing administrative burdens’. The Commission feels that its proposal fits perfectly within this objective. |
| --- | --- |

1.3

The simplification of business obligations, which had been under consideration for some time, was addressed by a European Council decision of 26 March 2004, which called upon the Competitiveness Council to identify areas for simplification. A decision on the matter was adopted in June 2004 and the Commission issued the document addressed by this opinion in October 2004. Meanwhile, at the informal ECOFIN meeting of 11 September 2004, the Dutch Presidency had raised the issue of ‘Fostering growth by reducing administrative burdens’. The Commission feels that its proposal fits perfectly within this objective.

| 1.4 | The Commission surveys (3) published in the second half of 2003 stressed that one of the main objectives had to be to simplify the system for ‘taxable persons who have VAT obligations in a Member State where they are not established’ (in practice, exporters of goods and services — EESC note). Indeed, the administrative burden on those persons is so great and complex that many potential exporters prefer not to engage in any activities subject to VAT whatsoever in another Member State. In addition, the refund procedure is so complex and burdensome that 54 % of large companies have abandoned their claim at some stage in the proceedings. |
| --- | --- |

1.4

The Commission surveys (3) published in the second half of 2003 stressed that one of the main objectives had to be to simplify the system for ‘taxable persons who have VAT obligations in a Member State where they are not established’ (in practice, exporters of goods and services — EESC note). Indeed, the administrative burden on those persons is so great and complex that many potential exporters prefer not to engage in any activities subject to VAT whatsoever in another Member State. In addition, the refund procedure is so complex and burdensome that 54 % of large companies have abandoned their claim at some stage in the proceedings.

| 1.5 | The proposals listed in point 1.2 seek precisely to avoid such difficulties by providing for six practical measures:






  1) | the introduction of the one-stop scheme for non-established taxable persons; |
| --- | --- | --- |

1.5

The proposals listed in point 1.2 seek precisely to avoid such difficulties by providing for six practical measures:

1)

the introduction of the one-stop scheme for non-established taxable persons;

| 2) | the introduction of a one-stop scheme to ‘modernise’ the refund procedure; |
| --- | --- |

2)

the introduction of a one-stop scheme to ‘modernise’ the refund procedure;

| 3) | harmonisation of the scope of the goods and services for which Member States may apply restrictions to the right to deduct; |
| --- | --- |

3)

harmonisation of the scope of the goods and services for which Member States may apply restrictions to the right to deduct;

| 4) | extension of the use of the reverse charge mechanism; |
| --- | --- |

4)

extension of the use of the reverse charge mechanism;

| 5) | a review of the special scheme for small and medium-sized enterprises; |
| --- | --- |

5)

a review of the special scheme for small and medium-sized enterprises;

| 6) | simplification of the distance selling arrangements. |
| --- | --- |

6)

simplification of the distance selling arrangements.

| 1.6 | To help achieve these objectives, the Commission has proposed three legislative initiatives:






  — | modification of the Sixth VAT Directive (4); |
| --- | --- | --- |

1.6

To help achieve these objectives, the Commission has proposed three legislative initiatives:

—

modification of the Sixth VAT Directive (4);

| — | replacement of the Eighth VAT Directive; |
| --- | --- |

—

replacement of the Eighth VAT Directive;

| — | modification of Council Regulation (EC) No 1798/2003 on VAT administrative cooperation (5). |
| --- | --- |

—

modification of Council Regulation (EC) No 1798/2003 on VAT administrative cooperation (5).

| 1.6.1 | The initiatives proposed in the document have already been extensively discussed with the Member States and have been the subject of a wide consultation process with stakeholders on the Internet. |
| --- | --- |

1.6.1

The initiatives proposed in the document have already been extensively discussed with the Member States and have been the subject of a wide consultation process with stakeholders on the Internet.

A.   PART I: THE PROPOSAL FOR A DIRECTIVE

2.   The one-stop-shop project

| 2.1 | The concept of a ‘one-stop-shop’ is not new: it was actually proposed for the first time in Council Directive 2002/38/EC, which, however, limited its scope to e-commerce operators (6) supplying cross-border services to non-taxable persons. Essentially, the one-stop (OS) scheme currently being proposed would extend to all exporters of goods and services the

  option

  of being included in an electronic register in the country in which they are established, which would be valid for all EU countries, thus eliminating the obligation for exporters to be included in the VAT registers of all the Member States to which they export and allowing them to keep their national registration number. |
| --- | --- |

2.1

The concept of a ‘one-stop-shop’ is not new: it was actually proposed for the first time in Council Directive 2002/38/EC, which, however, limited its scope to e-commerce operators (6) supplying cross-border services to non-taxable persons. Essentially, the one-stop (OS) scheme currently being proposed would extend to all exporters of goods and services the

  option

  of being included in an electronic register in the country in which they are established, which would be valid for all EU countries, thus eliminating the obligation for exporters to be included in the VAT registers of all the Member States to which they export and allowing them to keep their national registration number.

| 2.2 | With the introduction of the OS scheme, the situation would be as follows:






  — | if the customer is liable to pay VAT, they must submit their declaration in the Member State in which they are established, in which case the exporter has no declarative obligation; |
| --- | --- | --- |

2.2

With the introduction of the OS scheme, the situation would be as follows:

—

if the customer is liable to pay VAT, they must submit their declaration in the Member State in which they are established, in which case the exporter has no declarative obligation;

| — | if, on the other hand, the non-established trader (vendor/exporter) is the person liable to pay the tax, they can fulfil their obligations by using the OS scheme instead of — as is currently the case — making their declaration in the Member State of destination. The rate will, of course, be that in force in the destination country. |
| --- | --- |

—

if, on the other hand, the non-established trader (vendor/exporter) is the person liable to pay the tax, they can fulfil their obligations by using the OS scheme instead of — as is currently the case — making their declaration in the Member State of destination. The rate will, of course, be that in force in the destination country.

| 2.2.1 | The Commission is convinced that the one-stop model could simplify tax obligations for a considerably larger number and wider range of traders than it does today: in addition to distance selling arrangements, which are already addressed by the current provisions, all direct sales to consumers in other Member States would be covered. However, an even more important aspect is the inclusion in this scheme of transactions between taxable persons for which the reverse charge is not applicable. |
| --- | --- |

2.2.1

The Commission is convinced that the one-stop model could simplify tax obligations for a considerably larger number and wider range of traders than it does today: in addition to distance selling arrangements, which are already addressed by the current provisions, all direct sales to consumers in other Member States would be covered. However, an even more important aspect is the inclusion in this scheme of transactions between taxable persons for which the reverse charge is not applicable.

| 2.2.1.1 | It has been predicted that the OS scheme could be used by around 200 000 operators. It is also likely that export firms — particularly large firms — already included in VAT registers in a country other than their own will continue to use the current system. The OS scheme is an option rather than an obligation. |
| --- | --- |

2.2.1.1

It has been predicted that the OS scheme could be used by around 200 000 operators. It is also likely that export firms — particularly large firms — already included in VAT registers in a country other than their own will continue to use the current system. The OS scheme is an option rather than an obligation.

| 2.3 | However, the one-stop scheme is not the solution to all the problems. In the first place, all the domestic rules on declaration periods, payment and refund rules and implementing arrangements will continue to apply; the Commission explicitly acknowledges that the new scheme is not intended to lead to a complete harmonisation of national rules, which it ‘considers to be neither realistic nor necessary at this stage’. |
| --- | --- |

2.3

However, the one-stop scheme is not the solution to all the problems. In the first place, all the domestic rules on declaration periods, payment and refund rules and implementing arrangements will continue to apply; the Commission explicitly acknowledges that the new scheme is not intended to lead to a complete harmonisation of national rules, which it ‘considers to be neither realistic nor necessary at this stage’.

| 2.3.1 | The issue of transfers of money remains unresolved: these will have to be carried out directly between the taxable person and the Member State of consumption. The Commission notes that experience gained hitherto with the existing electronic commerce special scheme (a scheme with under 1 000 participating businesses in non-EU countries) has shown that dealing with the redistribution of monies received is ‘very burdensome’ for the recipient Member State. Again according to the Commission, extending the scheme to cover a much greater number of operators and transactions would not be ‘a realistic option’: major treasury systems would have to be developed to handle the money flows. However, this task could be performed by financial intermediaries, who might offer a payment handling function to operators. Such services are only to be offered on a voluntary basis and could be particularly attractive to smaller operators ‘but would have to be based on commercial realities’ — in other words, be provided under acceptable conditions. |
| --- | --- |

2.3.1

The issue of transfers of money remains unresolved: these will have to be carried out directly between the taxable person and the Member State of consumption. The Commission notes that experience gained hitherto with the existing electronic commerce special scheme (a scheme with under 1 000 participating businesses in non-EU countries) has shown that dealing with the redistribution of monies received is ‘very burdensome’ for the recipient Member State. Again according to the Commission, extending the scheme to cover a much greater number of operators and transactions would not be ‘a realistic option’: major treasury systems would have to be developed to handle the money flows. However, this task could be performed by financial intermediaries, who might offer a payment handling function to operators. Such services are only to be offered on a voluntary basis and could be particularly attractive to smaller operators ‘but would have to be based on commercial realities’ — in other words, be provided under acceptable conditions.

| 2.3.2 | In conclusion, the OS scheme leaves all existing payment and refund procedures unchanged. The special system for the supply of electronic services to private consumers also remains in place; this provides for a single payment to the exporting Member State, which is responsible for redistributing the monies owed to the States to which the service is being supplied. These arrangements are to be reviewed before 30 June 2006 and, as part of the review, the possibility will be explored of bringing all electronic service-supply operations under the umbrella of the OS scheme. |
| --- | --- |

2.3.2

In conclusion, the OS scheme leaves all existing payment and refund procedures unchanged. The special system for the supply of electronic services to private consumers also remains in place; this provides for a single payment to the exporting Member State, which is responsible for redistributing the monies owed to the States to which the service is being supplied. These arrangements are to be reviewed before 30 June 2006 and, as part of the review, the possibility will be explored of bringing all electronic service-supply operations under the umbrella of the OS scheme.

3.   Other aspects of the proposal

| 3.1 | A 1998 Commission proposal — intended mainly to reform the refund system — also provided for a number of reforms relating to expenditure not eligible for a deduction of VAT, or only eligible for a partial deduction. The aim was to approximate, if not harmonise, the national rules, which differed widely — as they still do. The proposal was not adopted, mainly because of some Member States' concerns regarding their VAT receipts. |
| --- | --- |

3.1

A 1998 Commission proposal — intended mainly to reform the refund system — also provided for a number of reforms relating to expenditure not eligible for a deduction of VAT, or only eligible for a partial deduction. The aim was to approximate, if not harmonise, the national rules, which differed widely — as they still do. The proposal was not adopted, mainly because of some Member States' concerns regarding their VAT receipts.

| 3.1.1 | The current proposal is along the same lines, seeking to harmonise the categories of expenditure that can be excluded from the right to deduct (non-deductible expenditure). Broadly speaking (with a few exceptions and restrictions), this exclusion would apply to:






  — | motorised road vehicles, boats and aircraft; |
| --- | --- | --- |

3.1.1

The current proposal is along the same lines, seeking to harmonise the categories of expenditure that can be excluded from the right to deduct (non-deductible expenditure). Broadly speaking (with a few exceptions and restrictions), this exclusion would apply to:

—

motorised road vehicles, boats and aircraft;

| — | travel, accommodation, food and drink; |
| --- | --- |

—

travel, accommodation, food and drink;

| — | luxuries, amusements and entertainment. |
| --- | --- |

—

luxuries, amusements and entertainment.

All other types of expenditure not included in these categories would be subject to the normal deduction rules.

| 3.2 | For business-to-business (B2B) transactions, the Member State of destination is liable to pay the VAT, which can be refunded under the reverse charge mechanism, which is obligatory for some transactions but can be applied at the discretion of the Member States for others. The Commission is now proposing to extend the scope of the obligatory reverse charge mechanism to include supplies of goods which are installed or assembled by or on behalf of the supplier, the supply of services connected with immovable property, and services covered by Article 9(2)(c) of the Sixth Directive. |
| --- | --- |

3.2

For business-to-business (B2B) transactions, the Member State of destination is liable to pay the VAT, which can be refunded under the reverse charge mechanism, which is obligatory for some transactions but can be applied at the discretion of the Member States for others. The Commission is now proposing to extend the scope of the obligatory reverse charge mechanism to include supplies of goods which are installed or assembled by or on behalf of the supplier, the supply of services connected with immovable property, and services covered by Article 9(2)(c) of the Sixth Directive.

| 3.3 | According to the Commission, the current rules on VAT exemption are inflexible and inconsistent, because of the way exemptions have been granted to individual Member States at the time of their accession to the EU or on other occasions. There are large discrepancies between the treatment received by the different States on the matter: far from being reduced, these discrepancies have increased with the extension of temporary authorisations, or even of their scope. The proposal provides for more flexibility in determining the ceiling below which exemptions can be granted: a ceiling of EUR 100 000 is proposed, but each Member State would be free to set lower thresholds, which could differ according to whether goods or services were being supplied. |
| --- | --- |

3.3

According to the Commission, the current rules on VAT exemption are inflexible and inconsistent, because of the way exemptions have been granted to individual Member States at the time of their accession to the EU or on other occasions. There are large discrepancies between the treatment received by the different States on the matter: far from being reduced, these discrepancies have increased with the extension of temporary authorisations, or even of their scope. The proposal provides for more flexibility in determining the ceiling below which exemptions can be granted: a ceiling of EUR 100 000 is proposed, but each Member State would be free to set lower thresholds, which could differ according to whether goods or services were being supplied.

| 3.4 | The current provisions on distance selling lay down two different ceilings: a total value supplied over a year of EUR 35 000 or EUR 100 000, to be decided by each Member State of destination. Above these thresholds, the supplier has to charge the customer VAT at the rate in force in the Member State of destination. In order to make life easier for operators, the Commission proposes the adoption of a single ceiling of EUR 150 000 which would take into account all sales to all EU countries. |
| --- | --- |

3.4

The current provisions on distance selling lay down two different ceilings: a total value supplied over a year of EUR 35 000 or EUR 100 000, to be decided by each Member State of destination. Above these thresholds, the supplier has to charge the customer VAT at the rate in force in the Member State of destination. In order to make life easier for operators, the Commission proposes the adoption of a single ceiling of EUR 150 000 which would take into account all sales to all EU countries.

4.   The one-stop scheme: comments

| 4.1 | In general, the EESC endorses the setting-up of the one-stop scheme. However, it wishes to make some comments, with a view to helping to make the cross-border VAT mechanism more effective. These comments seek to provide pointers for future developments and additional measures: as far as the current situation is concerned, the Commission has endeavoured to put forward a programme which is realistic but minimalist and therefore — it is hoped — achievable. |
| --- | --- |

4.1

In general, the EESC endorses the setting-up of the one-stop scheme. However, it wishes to make some comments, with a view to helping to make the cross-border VAT mechanism more effective. These comments seek to provide pointers for future developments and additional measures: as far as the current situation is concerned, the Commission has endeavoured to put forward a programme which is realistic but minimalist and therefore — it is hoped — achievable.

| 4.2 | As regards tax harmonisation in general and harmonisation of VAT rules in particular, the situation does not inspire great optimism. Progress is slow and fraught with obstacles, the mechanisms are unclear and often ineffective and the rules complex and, at times, difficult to interpret. It is the people and businesses, and, ultimately, the entire economy which are paying for this situation. Paradoxically, however, the principal victims are the Member States themselves, which often give the impression — confirmed by facts — of wishing to preserve the status quo at all costs for reasons which may or may not be justifiable, continuing to use complex, costly systems because they are afraid of change: red tape thus becomes self-perpetuating. |
| --- | --- |

4.2

As regards tax harmonisation in general and harmonisation of VAT rules in particular, the situation does not inspire great optimism. Progress is slow and fraught with obstacles, the mechanisms are unclear and often ineffective and the rules complex and, at times, difficult to interpret. It is the people and businesses, and, ultimately, the entire economy which are paying for this situation. Paradoxically, however, the principal victims are the Member States themselves, which often give the impression — confirmed by facts — of wishing to preserve the status quo at all costs for reasons which may or may not be justifiable, continuing to use complex, costly systems because they are afraid of change: red tape thus becomes self-perpetuating.

| 4.3 | The initial results of the OS scheme, which has already been set up and is operational in the field of cross-border electronic services, would seem to suggest a low level of interest from operators: indeed, fewer than 1 000 (non-resident) operators have used it, most of which are ‘large’ operators, although it is too early on for that figure to mean much. According to the Commission, support for the one-stop scheme should become more extensive, as 200 000 of the 250 000 resident potential cross-border operators are likely to use it. If this happens, the one-stop scheme will run into difficulties: the Commission notes that the system adopted for electronic commerce is already creating administrative problems and heavy management burdens. The proposed solution is to make the financial authorities responsible for collection and redistribution of monies owed (described by the Commission as ‘burdensome’ processes) and for refunds, rather than including these in the one-stop scheme. This may be necessary but is clearly an unsatisfactory solution. |
| --- | --- |

4.3

The initial results of the OS scheme, which has already been set up and is operational in the field of cross-border electronic services, would seem to suggest a low level of interest from operators: indeed, fewer than 1 000 (non-resident) operators have used it, most of which are ‘large’ operators, although it is too early on for that figure to mean much. According to the Commission, support for the one-stop scheme should become more extensive, as 200 000 of the 250 000 resident potential cross-border operators are likely to use it. If this happens, the one-stop scheme will run into difficulties: the Commission notes that the system adopted for electronic commerce is already creating administrative problems and heavy management burdens. The proposed solution is to make the financial authorities responsible for collection and redistribution of monies owed (described by the Commission as ‘burdensome’ processes) and for refunds, rather than including these in the one-stop scheme. This may be necessary but is clearly an unsatisfactory solution.

| 4.4 | The EESC notes that the task of managing these monies would be just as ‘burdensome’ for the financial authorities as it is for the tax authorities, although the financial authorities are certainly equipped to provide this service. This management of monies would, however, have a cost, which would be borne by the taxpayers or tax authorities. Indeed, it is not specified clearly who would have to bear the cost of the system to be put in place, although the authorities assume that it would be the operators. On the basis of studies carried out, the Commission believes that the new system — based on the one-stop scheme and on a system of reimbursement/settlement of the amounts owed — would still be less costly than the present system. |
| --- | --- |

4.4

The EESC notes that the task of managing these monies would be just as ‘burdensome’ for the financial authorities as it is for the tax authorities, although the financial authorities are certainly equipped to provide this service. This management of monies would, however, have a cost, which would be borne by the taxpayers or tax authorities. Indeed, it is not specified clearly who would have to bear the cost of the system to be put in place, although the authorities assume that it would be the operators. On the basis of studies carried out, the Commission believes that the new system — based on the one-stop scheme and on a system of reimbursement/settlement of the amounts owed — would still be less costly than the present system.

| 4.5 | The EESC does not have the resources to ascertain whether and to what extent the one-stop shop project as a whole, with responsibility for the service entrusted to the financial authorities, would lead to additional costs, or whether it would bring appreciable benefits. Alongside the costs, the financial benefits of simplifying and speeding up procedures for operators and national administrations should be assessed. It is thought that the benefits for operators could be appreciable but limited: the one-stop scheme would remove the need to register in the different destination countries and for documents to be exchanged in paper form, but national rules would still continue to apply (declaration periods, payment and refund rules) and, most importantly, there will continue to be many different national taxation rates if these are not harmonised. |
| --- | --- |

4.5

The EESC does not have the resources to ascertain whether and to what extent the one-stop shop project as a whole, with responsibility for the service entrusted to the financial authorities, would lead to additional costs, or whether it would bring appreciable benefits. Alongside the costs, the financial benefits of simplifying and speeding up procedures for operators and national administrations should be assessed. It is thought that the benefits for operators could be appreciable but limited: the one-stop scheme would remove the need to register in the different destination countries and for documents to be exchanged in paper form, but national rules would still continue to apply (declaration periods, payment and refund rules) and, most importantly, there will continue to be many different national taxation rates if these are not harmonised.

| 4.6 | In short, the EESC endorses the Commission proposal but would draw the decision-makers' attention to the following essential point: if the OS scheme is to be the sole interface between operators and the different national administrations, it must genuinely be solely responsible for procedures and the handling of the sums owed and to be received. In any case, the process will never be complete until tax rates and national rules have been harmonised; this is also essential for the creation of a genuine single market. Another issue which warrants attention is languages: although the one-stop scheme uses a code system for the exchange of information, proper dialogue may prove to be necessary and could involve formulas which it is not always possible to standardise. |
| --- | --- |

4.6

In short, the EESC endorses the Commission proposal but would draw the decision-makers' attention to the following essential point: if the OS scheme is to be the sole interface between operators and the different national administrations, it must genuinely be solely responsible for procedures and the handling of the sums owed and to be received. In any case, the process will never be complete until tax rates and national rules have been harmonised; this is also essential for the creation of a genuine single market. Another issue which warrants attention is languages: although the one-stop scheme uses a code system for the exchange of information, proper dialogue may prove to be necessary and could involve formulas which it is not always possible to standardise.

5.   Other aspects of the proposal for a directive: comments

| 5.1 | The EESC fully endorses the Commission's proposal (point 3.1.1) to harmonise the categories of expenditure that can be excluded from the right to deduct VAT. Its adoption would finally launch a process of approximating tax rules, although it appears at present that the process would not be completed for quite some time. |
| --- | --- |

5.1

The EESC fully endorses the Commission's proposal (point 3.1.1) to harmonise the categories of expenditure that can be excluded from the right to deduct VAT. Its adoption would finally launch a process of approximating tax rules, although it appears at present that the process would not be completed for quite some time.

| 5.2 | The EESC also endorses the proposal to extend the scope of the reverse charge mechanism (point 3.2), but a more decisive step would be to extend it to all B2B transactions carried out within the EU. |
| --- | --- |

5.2

The EESC also endorses the proposal to extend the scope of the reverse charge mechanism (point 3.2), but a more decisive step would be to extend it to all B2B transactions carried out within the EU.

| 5.3 | VAT exemption (point 3.3) warrants comments of a different kind. The EESC has already addressed the issue in its opinion, where it criticised the custom of giving certain categories of operators special, more favourable treatment, not just when new Member States have joined the EU in the various waves of enlargement, but as past situations in the longer-standing Member States have been allowed to continue. The EESC noted — and now reiterates — that exempting some categories of operators from VAT causes distortion of competition both in transnational transactions and — possibly with greater impact here — within the Member States themselves. |
| --- | --- |

5.3

VAT exemption (point 3.3) warrants comments of a different kind. The EESC has already addressed the issue in its opinion, where it criticised the custom of giving certain categories of operators special, more favourable treatment, not just when new Member States have joined the EU in the various waves of enlargement, but as past situations in the longer-standing Member States have been allowed to continue. The EESC noted — and now reiterates — that exempting some categories of operators from VAT causes distortion of competition both in transnational transactions and — possibly with greater impact here — within the Member States themselves.

| 5.3.1 | It should, moreover, be noted that the Commission's comments refer to ‘small

  and medium-sized

  enterprises’, whereas most of the official documents, particularly the accession protocols, only refer to ‘small’ enterprises. This is a clear indication of the intention to play down the importance of the concession and extend it in practice to much larger enterprises. The proposal does not make a distinction, merely referring to ‘persons’ with
  intracommunity
  turnover no greater than EUR 100 000: it is clearly intended, therefore, to extend the benefit of the exemption to all businesses, irrespective of their size. |
| --- | --- |

5.3.1

It should, moreover, be noted that the Commission's comments refer to ‘small

  and medium-sized

  enterprises’, whereas most of the official documents, particularly the accession protocols, only refer to ‘small’ enterprises. This is a clear indication of the intention to play down the importance of the concession and extend it in practice to much larger enterprises. The proposal does not make a distinction, merely referring to ‘persons’ with
  intracommunity
  turnover no greater than EUR 100 000: it is clearly intended, therefore, to extend the benefit of the exemption to all businesses, irrespective of their size.

| 5.3.2 | The purpose of the exemption is not, therefore, to exempt a particular category of business from VAT but a
  category

  of minor

  transactions
  , and the EESC fully endorses this. It remains to be clarified whether businesses exempt from national VAT on the basis of general provisions would be subject to the limit of EUR 100 000 for intracommunity transactions. If so, an absurd situation would arise in which businesses legally exempt would have to pay VAT if they exceeded this limit. |
| --- | --- |

5.3.2

The purpose of the exemption is not, therefore, to exempt a particular category of business from VAT but a
  category

  of minor

  transactions
  , and the EESC fully endorses this. It remains to be clarified whether businesses exempt from national VAT on the basis of general provisions would be subject to the limit of EUR 100 000 for intracommunity transactions. If so, an absurd situation would arise in which businesses legally exempt would have to pay VAT if they exceeded this limit.

| 5.3.3 | In principle, the EESC does not endorse the proposal to give each Member State the option of setting a ceiling lower than EUR 100 000, or even of setting different ceilings for goods and services. This would merely perpetuate the deplorable diversity of existing rules, which make operators' work more complicated, increase administrative costs and ultimately, once again, clearly run counter to the principles underlying the internal market. At the same time, the EESC is quite aware that particular national situations could require derogations from a general rule, and so harmonising the exemption ceiling would not have any significant effect, while there are many other, more substantial discrepancies. |
| --- | --- |

5.3.3

In principle, the EESC does not endorse the proposal to give each Member State the option of setting a ceiling lower than EUR 100 000, or even of setting different ceilings for goods and services. This would merely perpetuate the deplorable diversity of existing rules, which make operators' work more complicated, increase administrative costs and ultimately, once again, clearly run counter to the principles underlying the internal market. At the same time, the EESC is quite aware that particular national situations could require derogations from a general rule, and so harmonising the exemption ceiling would not have any significant effect, while there are many other, more substantial discrepancies.

| 5.4 | As regards distance selling (point 3.4), the EESC warmly appreciates all the Commission's endeavours — including this proposal — to remove the onerous obligations placed on operators by the diversity of national tax rules. Along with the setting-up of the one-stop scheme, the establishment of a single ceiling applying to all Member States should represent genuine progress. |
| --- | --- |

5.4

As regards distance selling (point 3.4), the EESC warmly appreciates all the Commission's endeavours — including this proposal — to remove the onerous obligations placed on operators by the diversity of national tax rules. Along with the setting-up of the one-stop scheme, the establishment of a single ceiling applying to all Member States should represent genuine progress.

B.   PART II: THE PROPOSAL FOR A COUNCIL REGULATION

6.   The Commission document

| 6.1 | The proposal amends Regulation (EC) 1798/2003; this amendment would be necessary if the directive were to be adopted. It contains implementing provisions which do not call for particular comment, as they largely concern arrangements relating to communications between Member States, to the publicising of rules and to cooperation with the Commission. The most important provisions are laid down in Article 34g, relating to the control of taxable persons and their returns. |
| --- | --- |

6.1

The proposal amends Regulation (EC) 1798/2003; this amendment would be necessary if the directive were to be adopted. It contains implementing provisions which do not call for particular comment, as they largely concern arrangements relating to communications between Member States, to the publicising of rules and to cooperation with the Commission. The most important provisions are laid down in Article 34g, relating to the control of taxable persons and their returns.

| 6.2 | The principle underlying the audits is cooperation between the Member States. Audits carried out through the OS scheme can be performed either by the Member State of the OS scheme or by any other Member State of destination, each party being under obligation to inform the other interested parties in advance; the latter are entitled to take part in the audits if they so wish. The procedures to be used to establish cooperation are those laid down in Articles 11 and 12 of the basic regulation. |
| --- | --- |

6.2

The principle underlying the audits is cooperation between the Member States. Audits carried out through the OS scheme can be performed either by the Member State of the OS scheme or by any other Member State of destination, each party being under obligation to inform the other interested parties in advance; the latter are entitled to take part in the audits if they so wish. The procedures to be used to establish cooperation are those laid down in Articles 11 and 12 of the basic regulation.

| 6.3 | Since the regulation deals essentially with procedural matters, the EESC has no particular comments to make. However, it wonders whether the arrangements for cooperation provide for all possibilities in a field which, despite the fact that no completely new elements are introduced (the OS scheme already exists for distance selling), is highly complex in some respects. In the first place, the scheme is
  virtual
  , and does not, therefore, involve personal contact between representatives of national administrations; furthermore, the abovementioned problem of linguistic diversity will do nothing to facilitate cooperation, or, at any rate, effective cooperation. |
| --- | --- |

6.3

Since the regulation deals essentially with procedural matters, the EESC has no particular comments to make. However, it wonders whether the arrangements for cooperation provide for all possibilities in a field which, despite the fact that no completely new elements are introduced (the OS scheme already exists for distance selling), is highly complex in some respects. In the first place, the scheme is
  virtual
  , and does not, therefore, involve personal contact between representatives of national administrations; furthermore, the abovementioned problem of linguistic diversity will do nothing to facilitate cooperation, or, at any rate, effective cooperation.

| 6.3.1 | It should be noted that it is not always possible for audits to be carried out using codes or standardised formulas alone. Although the problem of liaison between administrations and with users is considered to be minor or even non-existent, for reasons that are well known, operators in the sector make no secret of their current difficulties or their concerns for the future. |
| --- | --- |

6.3.1

It should be noted that it is not always possible for audits to be carried out using codes or standardised formulas alone. Although the problem of liaison between administrations and with users is considered to be minor or even non-existent, for reasons that are well known, operators in the sector make no secret of their current difficulties or their concerns for the future.

| 6.4 | Last but not least, the directive fails to deal with something that is of paramount importance to operators: data protection. It is assumed that communications sent by operators to authorities will be protected from disclosure to third parties by the rules on the protection of privacy. However the real danger is not addressed: the danger that third parties will hack into public authorities' databases. In the case in point, data on market shares and clients' names could fall prey to industrial espionage, which can cause serious harm. Before entrusting any public authority with information, individuals and firms are entitled to know what mechanisms and systems are in place to protect them from hackers. |
| --- | --- |

6.4

Last but not least, the directive fails to deal with something that is of paramount importance to operators: data protection. It is assumed that communications sent by operators to authorities will be protected from disclosure to third parties by the rules on the protection of privacy. However the real danger is not addressed: the danger that third parties will hack into public authorities' databases. In the case in point, data on market shares and clients' names could fall prey to industrial espionage, which can cause serious harm. Before entrusting any public authority with information, individuals and firms are entitled to know what mechanisms and systems are in place to protect them from hackers.

Brussels, 12 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  COM(2003) 614 final

1

(2)  COM(2004) 728 final of 29.10.2004

2

(3)  SEC(2004) 1128

3

(4)  See Council Directive 2004/66/EC of 26.4.2004.

4

(5)  See Regulation (EC) No 885/2004 of 26.4.2004.

5

(6)  See EESC Opinion in OJ C 116 of 20.4.2001, p. 59.

6

---

| 27.10.2005 | EN | Official Journal of the European Union | C 267/50 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/50

---

Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation — European Fisheries Fund

(COM(2004) 497 final — 2004/0169 (CNS))

(2005/C 267/08)

On 1 December 2004, the Council decided to consult the European Economic and Social Committee, under Article 37 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 18 April 2005. The rapporteur was Mr Sarró Iparraguirre.

At its 417th plenary session held on 11 and 12 May 2005 (meeting of 11 May), the European Economic and Social Committee adopted the following opinion by 84 votes to 1 with 5 abstentions.

1.   Introduction

| 1.1 | On 1 January 2003 the reform of the Common Fisheries Policy (CFP) entered into force. It provides for the ‘sustainable exploitation of living aquatic resources and of aquaculture in the context of sustainable development, taking account of the environmental, economic and social aspects in a balanced manner’. |
| --- | --- |

1.1

On 1 January 2003 the reform of the Common Fisheries Policy (CFP) entered into force. It provides for the ‘sustainable exploitation of living aquatic resources and of aquaculture in the context of sustainable development, taking account of the environmental, economic and social aspects in a balanced manner’.

| 1.1.1 | Prior to this, on 20 December 2002, the Council of the European Union adopted Council Regulation (EC) 2371/2002 on the conservation and sustainable exploitation of fisheries resources under the Common Fisheries Policy (1). |
| --- | --- |

1.1.1

Prior to this, on 20 December 2002, the Council of the European Union adopted Council Regulation (EC) 2371/2002 on the conservation and sustainable exploitation of fisheries resources under the Common Fisheries Policy (1).

| 1.2 | Title II of the Treaty establishing the European Community, in particular Article 37, provides a legal basis for Community action under the Common Fisheries Policy. From its inception, this action has had a significant structural component that over the past 20 years has contributed to the modernisation of the fisheries sector as a whole. |
| --- | --- |

1.2

Title II of the Treaty establishing the European Community, in particular Article 37, provides a legal basis for Community action under the Common Fisheries Policy. From its inception, this action has had a significant structural component that over the past 20 years has contributed to the modernisation of the fisheries sector as a whole.

| 1.3 | In order to achieve the specific objectives of the Common Fisheries Policy, the Community has to ensure the long-term future of fishing activities, consistent with a sustainable exploitation of resources and a reduced environmental impact, through essential structural adjustments that strike a balance between resources and fishing capacity. |
| --- | --- |

1.3

In order to achieve the specific objectives of the Common Fisheries Policy, the Community has to ensure the long-term future of fishing activities, consistent with a sustainable exploitation of resources and a reduced environmental impact, through essential structural adjustments that strike a balance between resources and fishing capacity.

| 1.4 | These structural adjustments are bringing about great changes in the fisheries sector and steps must be taken to preserve the fishing industry's human capital, to provide it with all the new know-how needed to contribute to the sustainable exploitation of fisheries resources and development of aquaculture, and to protect the socio-economic fabric of coastal areas by adopting accompanying measures for the regeneration of areas affected by the restructuring of the fisheries sector. |
| --- | --- |

1.4

These structural adjustments are bringing about great changes in the fisheries sector and steps must be taken to preserve the fishing industry's human capital, to provide it with all the new know-how needed to contribute to the sustainable exploitation of fisheries resources and development of aquaculture, and to protect the socio-economic fabric of coastal areas by adopting accompanying measures for the regeneration of areas affected by the restructuring of the fisheries sector.

| 1.5 | The Common Fisheries Policy and financial support for the structural reform of this policy were covered by the Multi-annual Guidance Programmes (MAGPs) until 31 December 2002, and then by the Financial Instrument for Fisheries Guidance (FIFG), which will continue until 31 December 2006. |
| --- | --- |

1.5

The Common Fisheries Policy and financial support for the structural reform of this policy were covered by the Multi-annual Guidance Programmes (MAGPs) until 31 December 2002, and then by the Financial Instrument for Fisheries Guidance (FIFG), which will continue until 31 December 2006.

| 1.5.1 | The regulatory framework for all this is simplified considerably by the draft Regulation, which replaces or amends the current Regulations (EC) No 1260/1999 (2), (EC) No 1263/1999 (3), (EC) No 2792/1999 (4) and (EC) No 366/2001 (5). |
| --- | --- |

1.5.1

The regulatory framework for all this is simplified considerably by the draft Regulation, which replaces or amends the current Regulations (EC) No 1260/1999 (2), (EC) No 1263/1999 (3), (EC) No 2792/1999 (4) and (EC) No 366/2001 (5).

2.   General comments

| 2.1 | For the above reasons, the EESC believes this draft Regulation on the European Fisheries Fund (EFF) is necessary, since it follows on from the Financial Instrument for Fisheries Guidance (FIFG) — which under the current (EC) Regulation, will cease to apply on 31.12.2006 — by establishing a new system of financial support for the period from 1.1.2007 to 31.12.2013. |
| --- | --- |

2.1

For the above reasons, the EESC believes this draft Regulation on the European Fisheries Fund (EFF) is necessary, since it follows on from the Financial Instrument for Fisheries Guidance (FIFG) — which under the current (EC) Regulation, will cease to apply on 31.12.2006 — by establishing a new system of financial support for the period from 1.1.2007 to 31.12.2013.

| 2.2 | In short, the draft Regulation could be said to pursue a double objective for the EFF. Firstly, as a financial instrument forming an integral part of the CFP, it is to accompany resource management measures and help adjust production structures in order to ensure a sustainable exploitation of fishery resources and create the sustainable conditions needed from an economic, environmental and social point of view. Secondly, it is an expression of solidarity with the communities and areas engaged in fishing activities. |
| --- | --- |

2.2

In short, the draft Regulation could be said to pursue a double objective for the EFF. Firstly, as a financial instrument forming an integral part of the CFP, it is to accompany resource management measures and help adjust production structures in order to ensure a sustainable exploitation of fishery resources and create the sustainable conditions needed from an economic, environmental and social point of view. Secondly, it is an expression of solidarity with the communities and areas engaged in fishing activities.

| 2.3 | The EESC believes that the EFF must also place particular emphasis on achieving economic cohesion, and more specifically, promoting growth and structural adjustment in the least developed regions, based on the harmonious, balanced and sustainable development of economic activities, jobs and human resources, as well as the protection and improvement of the environment. |
| --- | --- |

2.3

The EESC believes that the EFF must also place particular emphasis on achieving economic cohesion, and more specifically, promoting growth and structural adjustment in the least developed regions, based on the harmonious, balanced and sustainable development of economic activities, jobs and human resources, as well as the protection and improvement of the environment.

| 2.4 | The Committee believes that various comments and recommendations concerning the content of the draft Regulation should be put to the Commission. |
| --- | --- |

2.4

The Committee believes that various comments and recommendations concerning the content of the draft Regulation should be put to the Commission.

3.   Specific comments

| 3.1 | The EFF is based on a simplified instrument with one Regulation and one Fund to cover Community assistance. The EESC believes this approach to be very appropriate, since it will undoubtedly improve the Fund's effectiveness. |
| --- | --- |

3.1

The EFF is based on a simplified instrument with one Regulation and one Fund to cover Community assistance. The EESC believes this approach to be very appropriate, since it will undoubtedly improve the Fund's effectiveness.

| 3.2 | For the sake of such effectiveness, the draft Regulation focuses the operational programmes on five priority axes, omitting all technical detail that could impede the monitoring and implementation of these programmes. It cuts down on the programming process, eliminating additional programmes listing the detailed measures. It simplifies the payment system, enabling Member States to be responsible for implementing the Community budget. With some exceptions, the eligibility rules are to be drawn up at national level. |
| --- | --- |

3.2

For the sake of such effectiveness, the draft Regulation focuses the operational programmes on five priority axes, omitting all technical detail that could impede the monitoring and implementation of these programmes. It cuts down on the programming process, eliminating additional programmes listing the detailed measures. It simplifies the payment system, enabling Member States to be responsible for implementing the Community budget. With some exceptions, the eligibility rules are to be drawn up at national level.

| 3.2.1 | The mere fact, as noted earlier, that this draft Regulation replaces or amends four Regulations currently in force gives an idea of its simplification of this regulatory framework. |
| --- | --- |

3.2.1

The mere fact, as noted earlier, that this draft Regulation replaces or amends four Regulations currently in force gives an idea of its simplification of this regulatory framework.

| 3.2.2 | The Committee approves these regulatory provisions since it believes the simplification of actions to be positive, provided the principle of subsidiarity is correctly applied, enabling Member States to decide on which concrete measures they should focus their economic effort. |
| --- | --- |

3.2.2

The Committee approves these regulatory provisions since it believes the simplification of actions to be positive, provided the principle of subsidiarity is correctly applied, enabling Member States to decide on which concrete measures they should focus their economic effort.

| 3.2.3 | The five priority axes set out in the draft Regulation are:






  a) | Measures for the adaptation of the Community fishing fleet. |
| --- | --- | --- |

3.2.3

The five priority axes set out in the draft Regulation are:

a)

Measures for the adaptation of the Community fishing fleet.

| b) | Aquaculture, processing and marketing of fishery and aquaculture products. |
| --- | --- |

b)

Aquaculture, processing and marketing of fishery and aquaculture products.

| c) | Measures of collective interest. |
| --- | --- |

c)

Measures of collective interest.

| d) | Sustainable development of fishing coastal areas. |
| --- | --- |

d)

Sustainable development of fishing coastal areas.

| e) | Technical assistance. |
| --- | --- |

e)

Technical assistance.

| 3.3 | TITLE I defines the OBJECTIVES AND GENERAL RULES ON ASSISTANCE of the draft Regulation. The Committee, whilst generally agreeing with the Commission's reasoning in Title I, wishes to make the following comments: |
| --- | --- |

3.3

TITLE I defines the OBJECTIVES AND GENERAL RULES ON ASSISTANCE of the draft Regulation. The Committee, whilst generally agreeing with the Commission's reasoning in Title I, wishes to make the following comments:

| 3.3.1 | The EESC considers that Article 3 should make a clear distinction between a ‘vessel owning fisherman’ and an ‘employed fisherman’. |
| --- | --- |

3.3.1

The EESC considers that Article 3 should make a clear distinction between a ‘vessel owning fisherman’ and an ‘employed fisherman’.

| 3.3.2 | The Committee suggests an additional objective for assistance under the Fund to those already set out namely, ‘to safeguard a good quality working environment and to improve living conditions, safety and hygiene in the workplace’. |
| --- | --- |

3.3.2

The Committee suggests an additional objective for assistance under the Fund to those already set out namely, ‘to safeguard a good quality working environment and to improve living conditions, safety and hygiene in the workplace’.

| 3.3.3 | The EESC shares the principles of subsidiarity, shared management and equality between men and women expressed in the draft Regulation, and emphasises the need for these principles to be correctly applied, enabling Member States to decide on appropriate concrete measures. |
| --- | --- |

3.3.3

The EESC shares the principles of subsidiarity, shared management and equality between men and women expressed in the draft Regulation, and emphasises the need for these principles to be correctly applied, enabling Member States to decide on appropriate concrete measures.

| 3.3.4 | As regards financial resources, the Commission proposes the commitment of EUR 4,963 million at 2004 prices, for the period of 2007 to 2013. 0.8 % of this budget is to be devoted to technical assistance, directly managed by the Commission, for a series of actions set out in the draft Regulation. |
| --- | --- |

3.3.4

As regards financial resources, the Commission proposes the commitment of EUR 4,963 million at 2004 prices, for the period of 2007 to 2013. 0.8 % of this budget is to be devoted to technical assistance, directly managed by the Commission, for a series of actions set out in the draft Regulation.

| 3.3.4.1 | 75 % of the commitment appropriations available to the CFP will be committed to the regions covered by the Convergence Objective and 25 % to other regions. As indicated in Annex I of the draft Regulation, of this 75 %, EUR 1,702 million shall be shared between the regions of those new Member States covered by the Convergence Objective and EUR 2,015 million shall be shared between the other regions thus covered. The remaining EUR 1,246 million are to be allocated to the rest of the EU's regions. |
| --- | --- |

3.3.4.1

75 % of the commitment appropriations available to the CFP will be committed to the regions covered by the Convergence Objective and 25 % to other regions. As indicated in Annex I of the draft Regulation, of this 75 %, EUR 1,702 million shall be shared between the regions of those new Member States covered by the Convergence Objective and EUR 2,015 million shall be shared between the other regions thus covered. The remaining EUR 1,246 million are to be allocated to the rest of the EU's regions.

| 3.3.4.2 | The EESC questions whether this budget will be sufficient to fulfil all the commitments made in the draft Regulation. |
| --- | --- |

3.3.4.2

The EESC questions whether this budget will be sufficient to fulfil all the commitments made in the draft Regulation.

| 3.3.5 | The Committee believes the apportionment criteria provided in Article 13 of the draft Regulation, regarding the distribution of funds between Member States, to be appropriate, since it proposes allocating the commitment appropriations available according to the size of the Member State's fishing sector, the scale of adjustment necessary to the fishing effort, the level of employment in the sector and the continuity of measures in hand. However, the EESC emphasises that the ‘continuity of measures in hand’ should take into account the situation of Member States that comply with Community legislation, particularly that relating to the multi-annual guidance programmes. |
| --- | --- |

3.3.5

The Committee believes the apportionment criteria provided in Article 13 of the draft Regulation, regarding the distribution of funds between Member States, to be appropriate, since it proposes allocating the commitment appropriations available according to the size of the Member State's fishing sector, the scale of adjustment necessary to the fishing effort, the level of employment in the sector and the continuity of measures in hand. However, the EESC emphasises that the ‘continuity of measures in hand’ should take into account the situation of Member States that comply with Community legislation, particularly that relating to the multi-annual guidance programmes.

| 3.4 | TITLE II ‘STRATEGIC GUIDELINES’ AND TITLE III ‘PROGRAMMING’ provide for the initial adoption of Community strategic guidelines, then the drawing-up by each Member State of both a national strategic plan for its fisheries sector, in line with the Community strategies, and, in accordance with this national strategic plan, of an operational programme for the period from 1 January 2007 until 31 December 2013. These operational programmes, which need to be in line with Community strategy, the specific objectives of the Common Fisheries Policy and other common policies, are to be drawn up in accordance with the guidelines set out in the draft Regulation and to be submitted to the Commission for approval. |
| --- | --- |

3.4

TITLE II ‘STRATEGIC GUIDELINES’ AND TITLE III ‘PROGRAMMING’ provide for the initial adoption of Community strategic guidelines, then the drawing-up by each Member State of both a national strategic plan for its fisheries sector, in line with the Community strategies, and, in accordance with this national strategic plan, of an operational programme for the period from 1 January 2007 until 31 December 2013. These operational programmes, which need to be in line with Community strategy, the specific objectives of the Common Fisheries Policy and other common policies, are to be drawn up in accordance with the guidelines set out in the draft Regulation and to be submitted to the Commission for approval.

| 3.4.1 | Once approved by the Commission, the operational programmes are to be implemented and can be re-examined in the case of implementation difficulties, significant strategic changes or for reasons of sound management. |
| --- | --- |

3.4.1

Once approved by the Commission, the operational programmes are to be implemented and can be re-examined in the case of implementation difficulties, significant strategic changes or for reasons of sound management.

| 3.4.2 | At all events, the Regulation provides that by 30 April 2011 each Member State is to submit a report to the Commission on the implementation of the national strategic plan, and that by 31 October 2011 the Commission is to submit a report to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions on the implementation of the national strategic plans and the Community strategic guidelines. |
| --- | --- |

3.4.2

At all events, the Regulation provides that by 30 April 2011 each Member State is to submit a report to the Commission on the implementation of the national strategic plan, and that by 31 October 2011 the Commission is to submit a report to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions on the implementation of the national strategic plans and the Community strategic guidelines.

| 3.4.3 | The EESC believes the order of the draft strategic guidelines — Community strategic guidelines, then national guidelines and lastly corresponding operational guidelines — to be logical. Nevertheless, the Committee expresses its concern over whether three months will be sufficient time in which to draw up the national strategic plan, considering the scope of this plan, the difficulties caused by the participation of a ‘partner’ and the number of regions in some coastal countries. |
| --- | --- |

3.4.3

The EESC believes the order of the draft strategic guidelines — Community strategic guidelines, then national guidelines and lastly corresponding operational guidelines — to be logical. Nevertheless, the Committee expresses its concern over whether three months will be sufficient time in which to draw up the national strategic plan, considering the scope of this plan, the difficulties caused by the participation of a ‘partner’ and the number of regions in some coastal countries.

| 3.5 | TITLE IV outlines the co-financing of the EFF according to the five priority axes given in point 3.2. |
| --- | --- |

3.5

TITLE IV outlines the co-financing of the EFF according to the five priority axes given in point 3.2.

| 3.5.1 | Under priority axis 1, ‘Measures for the adaptation of the Community fishing fleet’, the European Commission proposes three main lines of action, taking into account Regulation (EC) No 2371/2002, based on a contribution to the financing of:






  a) | Public aid for ship owners and crews affected by national plans to adjust the fishing effort, in the cases provided for. |
| --- | --- | --- |

3.5.1

Under priority axis 1, ‘Measures for the adaptation of the Community fishing fleet’, the European Commission proposes three main lines of action, taking into account Regulation (EC) No 2371/2002, based on a contribution to the financing of:

a)

Public aid for ship owners and crews affected by national plans to adjust the fishing effort, in the cases provided for.

| b) | Investments on board fishing vessels of 5 years of age or more for modernisation over the main deck to improve safety on board, working conditions and product quality, provided that such modernisation does not increase the ability of the vessel to catch fish. |
| --- | --- |

b)

Investments on board fishing vessels of 5 years of age or more for modernisation over the main deck to improve safety on board, working conditions and product quality, provided that such modernisation does not increase the ability of the vessel to catch fish.

| c) | Socio-economic compensation in support of fleet management, i.e. the promotion of multiple jobs for fishermen, professional training for other jobs and early retirement.
  This line of action also provides for a contribution to the financing of training measures and incentives for young fishermen who wish to become owners of a fishing vessel for the first time. |
| --- | --- |

c)

Socio-economic compensation in support of fleet management, i.e. the promotion of multiple jobs for fishermen, professional training for other jobs and early retirement.

This line of action also provides for a contribution to the financing of training measures and incentives for young fishermen who wish to become owners of a fishing vessel for the first time.

| 3.5.1.1 | The first line of action (point 3.5.1) for which the Commission proposes financial assistance, is public aid for ship owners and crews affected by national plans to adjust the fishing effort, where these form part of the following:






  — | recovery plans; |
| --- | --- | --- |

3.5.1.1

The first line of action (point 3.5.1) for which the Commission proposes financial assistance, is public aid for ship owners and crews affected by national plans to adjust the fishing effort, where these form part of the following:

—

recovery plans;

| — | emergency measures; |
| --- | --- |

—

emergency measures;

| — | non-renewal of fisheries agreements with third countries; |
| --- | --- |

—

non-renewal of fisheries agreements with third countries;

| — | the introduction of management plans; |
| --- | --- |

—

the introduction of management plans;

| — | national plans for exit from the fleet with a maximum duration of two years. |
| --- | --- |

—

national plans for exit from the fleet with a maximum duration of two years.

| 3.5.1.1.1 | The draft Regulation stipulates in Article 24 that the duration of the national fishing effort adjustment plans shall must exceed two years. |
| --- | --- |

3.5.1.1.1

The draft Regulation stipulates in Article 24 that the duration of the national fishing effort adjustment plans shall must exceed two years.

| 3.5.1.1.1.1 | Regulation (EC) No 2371/2002 stipulates that recovery and management plans are to be multi-annual. |
| --- | --- |

3.5.1.1.1.1

Regulation (EC) No 2371/2002 stipulates that recovery and management plans are to be multi-annual.

| 3.5.1.1.1.2 | The EESC believes that to stipulate that fishing effort adjustment plans do not exceed two years in duration could cause serious problems in Member States, demanding a substantial effort in a short space of time, given the multi-annual nature of the recovery plans. The Committee believes that the aid for national fishing effort adjustment plans referred to in Article 23(a) of the draft Regulation should last at least four years. |
| --- | --- |

3.5.1.1.1.2

The EESC believes that to stipulate that fishing effort adjustment plans do not exceed two years in duration could cause serious problems in Member States, demanding a substantial effort in a short space of time, given the multi-annual nature of the recovery plans. The Committee believes that the aid for national fishing effort adjustment plans referred to in Article 23(a) of the draft Regulation should last at least four years.

| 3.5.1.1.2 | Under priority axis 1, the Commission proposes that the national fishing effort adjustment plans include measures for the permanent and temporary cessation of fishing activities. |
| --- | --- |

3.5.1.1.2

Under priority axis 1, the Commission proposes that the national fishing effort adjustment plans include measures for the permanent and temporary cessation of fishing activities.

| 3.5.1.1.2.1 | The draft Regulation states that the permanent cessation of the fishing activities of a vessel may be achieved only by the scrapping of the vessel or its re-assignment for non-profit making purposes. The EESC believes that such a re-assignment should be to alternative activities, regardless of possible profit, since the Commission itself promotes certain profit-making re-assignments, to tourist fishing for example. Furthermore, the Committee believes that the concept of re-assignment could also cover the final export of fishing vessels to third countries and joint enterprises, provided that scientific reports prove the existence of surplus fish stocks that permit the development of sustainable fishing in the waters of the third countries. |
| --- | --- |

3.5.1.1.2.1

The draft Regulation states that the permanent cessation of the fishing activities of a vessel may be achieved only by the scrapping of the vessel or its re-assignment for non-profit making purposes. The EESC believes that such a re-assignment should be to alternative activities, regardless of possible profit, since the Commission itself promotes certain profit-making re-assignments, to tourist fishing for example. Furthermore, the Committee believes that the concept of re-assignment could also cover the final export of fishing vessels to third countries and joint enterprises, provided that scientific reports prove the existence of surplus fish stocks that permit the development of sustainable fishing in the waters of the third countries.

| 3.5.1.1.2.2 | The Committee maintains the view stated in its Opinion on the reform of the Common Fisheries Policy (6): ‘the EESC considers that the joint enterprises are one possible instrument for reorientating the fisheries fleet and for cooperation with third countries under the Cooperation and Development Policy’. |
| --- | --- |

3.5.1.1.2.2

The Committee maintains the view stated in its Opinion on the reform of the Common Fisheries Policy (6): ‘the EESC considers that the joint enterprises are one possible instrument for reorientating the fisheries fleet and for cooperation with third countries under the Cooperation and Development Policy’.

| 3.5.1.1.2.3 | The Committee is concerned by the criteria proposed by the European Commission in Article 25 for the setting of the level of public aid to be received by ship owners should they decide to scrap their vessels, given that the Commission is introducing variable premium values, based on the value of the ship on the national market, its insurance value, the turnover of the vessel and its age and tonnage. In the opinion of the Committee, these criteria could cause problems in the fishing sector and even discrimination depending on the value that each country attributes to vessels. It therefore calls on the Commission to seek alternative criteria that are fairer for all Member States. |
| --- | --- |

3.5.1.1.2.3

The Committee is concerned by the criteria proposed by the European Commission in Article 25 for the setting of the level of public aid to be received by ship owners should they decide to scrap their vessels, given that the Commission is introducing variable premium values, based on the value of the ship on the national market, its insurance value, the turnover of the vessel and its age and tonnage. In the opinion of the Committee, these criteria could cause problems in the fishing sector and even discrimination depending on the value that each country attributes to vessels. It therefore calls on the Commission to seek alternative criteria that are fairer for all Member States.

| 3.5.1.1.3 | In addition to the Fund's financial contribution to the temporary cessation of fishing activities due to fishing effort adjustment plans, the Commission's draft Regulation provides that the EFF may contribute to the financing of temporary cessation allowances to fishermen and the owners of vessels for a maximum period of six months in the event of a natural disaster or other exceptional occurrence which is not the result of resource conservation measures. |
| --- | --- |

3.5.1.1.3

In addition to the Fund's financial contribution to the temporary cessation of fishing activities due to fishing effort adjustment plans, the Commission's draft Regulation provides that the EFF may contribute to the financing of temporary cessation allowances to fishermen and the owners of vessels for a maximum period of six months in the event of a natural disaster or other exceptional occurrence which is not the result of resource conservation measures.

| 3.5.1.1.3.1 | The EESC believes this provision to be vital for dealing with natural disasters or exceptional occurrences. |
| --- | --- |

3.5.1.1.3.1

The EESC believes this provision to be vital for dealing with natural disasters or exceptional occurrences.

| 3.5.1.2 | For fishing vessels of more than five years of age, investments on board are confined to modernisation over the main deck to improve safety on board. |
| --- | --- |

3.5.1.2

For fishing vessels of more than five years of age, investments on board are confined to modernisation over the main deck to improve safety on board.

| 3.5.1.2.1 | The draft Regulation excludes co-financing for the replacement of the fishing vessel's main engine. |
| --- | --- |

3.5.1.2.1

The draft Regulation excludes co-financing for the replacement of the fishing vessel's main engine.

| 3.5.1.2.2 | The EESC believes that, with the exception of rescue and communication systems, which are normally situated over the main deck, the vessels' safety relies largely on equipment found below the main deck. |
| --- | --- |

3.5.1.2.2

The EESC believes that, with the exception of rescue and communication systems, which are normally situated over the main deck, the vessels' safety relies largely on equipment found below the main deck.

| 3.5.1.2.3 | Considering that the need to replace the main engine clearly affects the safety of the vessel, that this replacement does not necessarily have to increase its kWs of power and therefore that its fishing capacity does not necessarily have to be increased either, the Committee proposes that, although Regulation (EC) 2371/2002 limits modernisation to equipment found on the main deck, the Commission should consider the possibility of including the replacement of the main engine in the policy of investment on board fishing vessels, purely as a matter of safety. |
| --- | --- |

3.5.1.2.3

Considering that the need to replace the main engine clearly affects the safety of the vessel, that this replacement does not necessarily have to increase its kWs of power and therefore that its fishing capacity does not necessarily have to be increased either, the Committee proposes that, although Regulation (EC) 2371/2002 limits modernisation to equipment found on the main deck, the Commission should consider the possibility of including the replacement of the main engine in the policy of investment on board fishing vessels, purely as a matter of safety.

| 3.5.1.2.4 | The Committee, in making this request of the Commission, is also thinking of the long-term maintenance of the fishing fleet in the wake of the implementation of the reform of the CFP. |
| --- | --- |

3.5.1.2.4

The Committee, in making this request of the Commission, is also thinking of the long-term maintenance of the fishing fleet in the wake of the implementation of the reform of the CFP.

| 3.5.1.2.5 | In addition to the investments in on board safety mentioned, the draft Regulation also provides for the financing of equipment that enables discards to be kept on board, that forms part of certain pilot projects or that reduces the impact of fishing on habitats and the sea bottom. The EESC agrees with these proposals. |
| --- | --- |

3.5.1.2.5

In addition to the investments in on board safety mentioned, the draft Regulation also provides for the financing of equipment that enables discards to be kept on board, that forms part of certain pilot projects or that reduces the impact of fishing on habitats and the sea bottom. The EESC agrees with these proposals.

| 3.5.1.3 | The draft Regulation provides, and the Committee agrees, that this co-financing of equipment shall be increased by 20 % where applied to vessels that practice ‘small-scale coastal fishing’. |
| --- | --- |

3.5.1.3

The draft Regulation provides, and the Committee agrees, that this co-financing of equipment shall be increased by 20 % where applied to vessels that practice ‘small-scale coastal fishing’.

| 3.5.1.4 | Finally, the EESC welcomes the socio-economic measures provided for in the draft Regulation. These are of fundamental importance to fishermen compelled to leave the fishing sector as a result of the reform of the Common Fisheries Policy. However, the Committee believes these socio-economic measures should include assistance for further training and retraining of those fishermen remaining in sea fishing. |
| --- | --- |

3.5.1.4

Finally, the EESC welcomes the socio-economic measures provided for in the draft Regulation. These are of fundamental importance to fishermen compelled to leave the fishing sector as a result of the reform of the Common Fisheries Policy. However, the Committee believes these socio-economic measures should include assistance for further training and retraining of those fishermen remaining in sea fishing.

| 3.5.1.4.1 | The Committee believes that, as well as fishermen, their fisheries associations should also be eligible for this socio-economic compensation. |
| --- | --- |

3.5.1.4.1

The Committee believes that, as well as fishermen, their fisheries associations should also be eligible for this socio-economic compensation.

| 3.5.1.4.2 | The Committee regrets that young fishermen who wish to become owners of a fishing vessel for the first time are only eligible for financial contributions to their nautical fisheries training and not to the construction of their fishing vessel, which could be subject to various restrictions, as could the size thereof. The EESC calls on the Commission to assess this possibility. |
| --- | --- |

3.5.1.4.2

The Committee regrets that young fishermen who wish to become owners of a fishing vessel for the first time are only eligible for financial contributions to their nautical fisheries training and not to the construction of their fishing vessel, which could be subject to various restrictions, as could the size thereof. The EESC calls on the Commission to assess this possibility.

| 3.5.1.5 | The EESC is aware that these financial contribution lines strictly adhere to Regulation (EC) 2371/2002. However, the Committee is also aware of its obligation vis-à-vis the Member States and consequently European citizens to ensure the socio-economic quality of the Commission's proposals. Therefore, it must point out that with the measures proposed by the Commission, EU fishermen will move more quickly into other types of employment, the Community fishing fleet will be weakened and consequently, the European Union will be increasingly dependent on fish imports from third countries. |
| --- | --- |

3.5.1.5

The EESC is aware that these financial contribution lines strictly adhere to Regulation (EC) 2371/2002. However, the Committee is also aware of its obligation vis-à-vis the Member States and consequently European citizens to ensure the socio-economic quality of the Commission's proposals. Therefore, it must point out that with the measures proposed by the Commission, EU fishermen will move more quickly into other types of employment, the Community fishing fleet will be weakened and consequently, the European Union will be increasingly dependent on fish imports from third countries.

| 3.5.1.6 | Therefore, and taking into account that fishing — one of the most dangerous occupations in Europe and the world — has the highest number of accidents at work, the Committee reiterates the content of its previous Opinions (7) on the Green Paper on the future of the Common Fisheries Policy and on the Commission Communication on the reform of the Common Fisheries Policy, in which it stated that ‘fleet reduction measures should not lose sight of the need to continue to renew and modernise the Community's fleet. There should be a firm commitment to achieving high-quality conditions for processing the raw material, improving the quality of life on board, and enhancing safety for crews’. The EESC calls on the Commission to reconsider the request made in the conclusions of its Opinion on the reform of the CFP, in which it stressed that ‘Public aid should continue to be granted for the renewal and modernisation of the fishing fleet’, as long as fishery resources allow. The EESC calls on the Commission to reconsider the request made in the conclusions of its Opinion on the reform of the CFP, in which it stressed that ‘Public aid should continue to be granted for the renewal and modernisation of the fishing fleet’, as long as fishery resources allow. |
| --- | --- |

3.5.1.6

Therefore, and taking into account that fishing — one of the most dangerous occupations in Europe and the world — has the highest number of accidents at work, the Committee reiterates the content of its previous Opinions (7) on the Green Paper on the future of the Common Fisheries Policy and on the Commission Communication on the reform of the Common Fisheries Policy, in which it stated that ‘fleet reduction measures should not lose sight of the need to continue to renew and modernise the Community's fleet. There should be a firm commitment to achieving high-quality conditions for processing the raw material, improving the quality of life on board, and enhancing safety for crews’. The EESC calls on the Commission to reconsider the request made in the conclusions of its Opinion on the reform of the CFP, in which it stressed that ‘Public aid should continue to be granted for the renewal and modernisation of the fishing fleet’, as long as fishery resources allow. The EESC calls on the Commission to reconsider the request made in the conclusions of its Opinion on the reform of the CFP, in which it stressed that ‘Public aid should continue to be granted for the renewal and modernisation of the fishing fleet’, as long as fishery resources allow.

| 3.5.2 | Priority axis 2 sets out the possibility of Fund support for investments in ‘Aquaculture, processing and marketing of fishery and aquaculture products’. The draft Regulation, after clearly explaining which aquaculture, processing and marketing investments are eligible, and within these investments which measures are eligible, then restricts or reserves such aid to the investments of micro and small enterprises. |
| --- | --- |

3.5.2

Priority axis 2 sets out the possibility of Fund support for investments in ‘Aquaculture, processing and marketing of fishery and aquaculture products’. The draft Regulation, after clearly explaining which aquaculture, processing and marketing investments are eligible, and within these investments which measures are eligible, then restricts or reserves such aid to the investments of micro and small enterprises.

| 3.5.2.1 | The only reason given by the Commission for this restriction is that micro and small enterprises represent 90 % of the aquaculture producing industry. The EESC believes that the principle of subsidiarity should be clearly applied to this priority. The only restriction on the financing of these projects should be that they are economically and commercially viable. This would improve the competitiveness of enterprises and should be decided upon by Member States when they draw up their national strategic plan and fix their specific objectives. The Committee believes that EFF co-financing should be directed at cost-effective enterprises, particularly micro and small enterprises that have a rigorous business plan. Only these enterprises will allow for the preservation of the economic and social fabric needed to improve living conditions and conserve the environment. Therefore, although co-financing for micro and small enterprises is given priority, the Committee requests that other types of cost-effective enterprise also be considered eligible for co-financing. |
| --- | --- |

3.5.2.1

The only reason given by the Commission for this restriction is that micro and small enterprises represent 90 % of the aquaculture producing industry. The EESC believes that the principle of subsidiarity should be clearly applied to this priority. The only restriction on the financing of these projects should be that they are economically and commercially viable. This would improve the competitiveness of enterprises and should be decided upon by Member States when they draw up their national strategic plan and fix their specific objectives. The Committee believes that EFF co-financing should be directed at cost-effective enterprises, particularly micro and small enterprises that have a rigorous business plan. Only these enterprises will allow for the preservation of the economic and social fabric needed to improve living conditions and conserve the environment. Therefore, although co-financing for micro and small enterprises is given priority, the Committee requests that other types of cost-effective enterprise also be considered eligible for co-financing.

| 3.5.2.2 | Considering that the activity of auxiliary fishing vessels supporting aquaculture does not increase the fishing effort's impact on fishery resources, the Committee believes that the draft Regulation should provide for Fund co-financing for the building of new boats such as these. |
| --- | --- |

3.5.2.2

Considering that the activity of auxiliary fishing vessels supporting aquaculture does not increase the fishing effort's impact on fishery resources, the Committee believes that the draft Regulation should provide for Fund co-financing for the building of new boats such as these.

| 3.5.2.3 | Within the eligible measures, the EESC believes that the draft Regulation should provide for the possibility of granting aid for the financing of investments aimed at improving the biological and economic efficiency of the current production systems, in order to facilitate the use of new technologies that are more environmentally friendly and cost-effective. |
| --- | --- |

3.5.2.3

Within the eligible measures, the EESC believes that the draft Regulation should provide for the possibility of granting aid for the financing of investments aimed at improving the biological and economic efficiency of the current production systems, in order to facilitate the use of new technologies that are more environmentally friendly and cost-effective.

| 3.5.2.4 | The draft Regulation presents an innovation regarding aquaculture that the EESC believes to be very important. This provides for the granting of economic compensation, subject to a series of conditions, for the use of aquaculture production methods helping to protect and improve the environment and conserve nature, in order to meet Community objectives relating to fishing and the environment. |
| --- | --- |

3.5.2.4

The draft Regulation presents an innovation regarding aquaculture that the EESC believes to be very important. This provides for the granting of economic compensation, subject to a series of conditions, for the use of aquaculture production methods helping to protect and improve the environment and conserve nature, in order to meet Community objectives relating to fishing and the environment.

| 3.5.2.5 | However, the EESC believes that it is practically impossible to implement Article 31(4) of the draft Regulation. A Member State, when drawing up its operational programme for 2006, cannot predict losses of revenue incurred, additional costs or the need to provide financial support for carrying out the projects for each of the next seven years. Therefore, the EESC calls for the deletion of Article 31(4). |
| --- | --- |

3.5.2.5

However, the EESC believes that it is practically impossible to implement Article 31(4) of the draft Regulation. A Member State, when drawing up its operational programme for 2006, cannot predict losses of revenue incurred, additional costs or the need to provide financial support for carrying out the projects for each of the next seven years. Therefore, the EESC calls for the deletion of Article 31(4).

| 3.5.2.6 | The EESC believes the Fund's contributions to public and animal health measures to be appropriate, in so much as they provide for compensations to shellfish farmers for the temporary suspension of farmed mollusc harvesting due to contamination, and for the financing of the eradication of pathological risks in aquaculture. |
| --- | --- |

3.5.2.6

The EESC believes the Fund's contributions to public and animal health measures to be appropriate, in so much as they provide for compensations to shellfish farmers for the temporary suspension of farmed mollusc harvesting due to contamination, and for the financing of the eradication of pathological risks in aquaculture.

| 3.5.2.7 | Similarly, the Committee believes the draft Regulation's eligible measures for investments in processing and marketing to be sufficient, provided that, as has already been stated, they are not restricted to micro and small enterprises. |
| --- | --- |

3.5.2.7

Similarly, the Committee believes the draft Regulation's eligible measures for investments in processing and marketing to be sufficient, provided that, as has already been stated, they are not restricted to micro and small enterprises.

| 3.5.2.8 | The EESC believes that this priority axis should also clearly provide for financial support for fishing activities in inland or continental waters, which in some Member States of the European Union represent key fishing grounds. |
| --- | --- |

3.5.2.8

The EESC believes that this priority axis should also clearly provide for financial support for fishing activities in inland or continental waters, which in some Member States of the European Union represent key fishing grounds.

| 3.5.3 | Priority axis 3 of the draft Regulation provides for ‘measures of collective interest’. It provides that the Fund may assist collective actions of limited duration which are implemented with the active support of operators themselves or by organisations acting on behalf of producers or other organisations recognised by the Managing Authority and which help to meet the objectives of the Common Fisheries Policy. However, and even though the principles for assistance provide that actions may be implemented by ‘operators themselves’, they also state that the Fund may assist collective actions of limited duration, ‘which would not normally be supported by private enterprise’. Furthermore, Annex II of the draft Regulation does not provide for the financial participation of private beneficiaries in the non-productive investments included in ‘Group 1’, which covers all those investments found in priority axis 3. Therefore, the Committee requests that the Fund may assist collective actions of limited duration called for by private businesses. |
| --- | --- |

3.5.3

Priority axis 3 of the draft Regulation provides for ‘measures of collective interest’. It provides that the Fund may assist collective actions of limited duration which are implemented with the active support of operators themselves or by organisations acting on behalf of producers or other organisations recognised by the Managing Authority and which help to meet the objectives of the Common Fisheries Policy. However, and even though the principles for assistance provide that actions may be implemented by ‘operators themselves’, they also state that the Fund may assist collective actions of limited duration, ‘which would not normally be supported by private enterprise’. Furthermore, Annex II of the draft Regulation does not provide for the financial participation of private beneficiaries in the non-productive investments included in ‘Group 1’, which covers all those investments found in priority axis 3. Therefore, the Committee requests that the Fund may assist collective actions of limited duration called for by private businesses.

| 3.5.3.1 | The Committee welcomes the Fund support for ‘collective actions’ proposed in Article 36 of the EFF. The four wide-ranging lines of action allow for the selection of important objectives for the fisheries sector and for aquaculture. |
| --- | --- |

3.5.3.1

The Committee welcomes the Fund support for ‘collective actions’ proposed in Article 36 of the EFF. The four wide-ranging lines of action allow for the selection of important objectives for the fisheries sector and for aquaculture.

| 3.5.3.2 | With regard to the ‘Measures intended to protect and develop aquatic fauna’ in Article 37, the EESC is concerned that these are of a purely engineering nature, such as the installation of static or mobile installations intended to protect and develop aquatic fauna or to rehabilitate inland waterways including spawning grounds and migration routes for migratory species. No mention is made of the need for a scientific follow-up and direct restocking is excluded. The EESC calls for Fund assistance for this type of action to specifically require a scientific follow-up and to take account of the need for support for the restocking of certain migratory species. Furthermore, it calls for interested private bodies who could meet the specified objectives to be included in the list of organisations that may implement this type of action. |
| --- | --- |

3.5.3.2

With regard to the ‘Measures intended to protect and develop aquatic fauna’ in Article 37, the EESC is concerned that these are of a purely engineering nature, such as the installation of static or mobile installations intended to protect and develop aquatic fauna or to rehabilitate inland waterways including spawning grounds and migration routes for migratory species. No mention is made of the need for a scientific follow-up and direct restocking is excluded. The EESC calls for Fund assistance for this type of action to specifically require a scientific follow-up and to take account of the need for support for the restocking of certain migratory species. Furthermore, it calls for interested private bodies who could meet the specified objectives to be included in the list of organisations that may implement this type of action.

| 3.5.3.3 | Cofinancing for investments in ‘Fishing ports’ is clearly described. The EESC believes that another line of action, providing for the establishment and upkeep of hostels for EU fishermen returning from sea and not resident in their docking place, should be added to the five lines of action set out. |
| --- | --- |

3.5.3.3

Cofinancing for investments in ‘Fishing ports’ is clearly described. The EESC believes that another line of action, providing for the establishment and upkeep of hostels for EU fishermen returning from sea and not resident in their docking place, should be added to the five lines of action set out.

| 3.5.3.4 | The approach to ‘Promotion and development of new markets’ can count on the EESC's backing since EFF support is mainly concentrated on collective actions intended to, inter alia, use surplus or underexploited species, improve product quality, promote products obtained using methods with low impact on the environment and to improve the image of the fisheries sector through campaigns. |
| --- | --- |

3.5.3.4

The approach to ‘Promotion and development of new markets’ can count on the EESC's backing since EFF support is mainly concentrated on collective actions intended to, inter alia, use surplus or underexploited species, improve product quality, promote products obtained using methods with low impact on the environment and to improve the image of the fisheries sector through campaigns.

| 3.5.3.5 | With regard to the ‘Pilot projects’ of Article 40, the EESC believes that a paragraph providing for the possibility of funding exploratory fishing pilot projects should be included, provided their aim is the conservation of fishery resources and they involve more selective techniques, as set out in the current FIFG. |
| --- | --- |

3.5.3.5

With regard to the ‘Pilot projects’ of Article 40, the EESC believes that a paragraph providing for the possibility of funding exploratory fishing pilot projects should be included, provided their aim is the conservation of fishery resources and they involve more selective techniques, as set out in the current FIFG.

| 3.5.3.6 | In this axis, the EESC believes that the European Commission should also incorporate measures needed to improve scientific advice as proposed in its Communication on Improving scientific and technical advice for Community fisheries management
   (8). With this in mind, the Committee believes that research voyages at sea, socio-economic studies on the impact of the drastic measures taken to recover stocks, a scientific assessment of the sector, and the work of the Regional Advisory Councils should all be funded. Scientists should be funded in the same way as members of the Councils. |
| --- | --- |

3.5.3.6

In this axis, the EESC believes that the European Commission should also incorporate measures needed to improve scientific advice as proposed in its Communication on Improving scientific and technical advice for Community fisheries management
   (8). With this in mind, the Committee believes that research voyages at sea, socio-economic studies on the impact of the drastic measures taken to recover stocks, a scientific assessment of the sector, and the work of the Regional Advisory Councils should all be funded. Scientists should be funded in the same way as members of the Councils.

| 3.5.3.7 | Furthermore, the Committee believes that aid for the establishment and functioning of producer organisations should be continued, as in the current FIFG. |
| --- | --- |

3.5.3.7

Furthermore, the Committee believes that aid for the establishment and functioning of producer organisations should be continued, as in the current FIFG.

| 3.5.4 | The scope of assistance of priority axis 4 ‘Sustainable development of coastal fishing areas’, states that the Fund shall provide assistance, in addition to the other Community instruments, for the sustainable development and improvement of the quality of life of eligible coastal fishing areas. It goes on to clarify that this assistance is part of an overall strategy, which seeks to support the implementation of the objectives of the Common Fisheries Policy, in particular taking account of its socio-economic consequences. |
| --- | --- |

3.5.4

The scope of assistance of priority axis 4 ‘Sustainable development of coastal fishing areas’, states that the Fund shall provide assistance, in addition to the other Community instruments, for the sustainable development and improvement of the quality of life of eligible coastal fishing areas. It goes on to clarify that this assistance is part of an overall strategy, which seeks to support the implementation of the objectives of the Common Fisheries Policy, in particular taking account of its socio-economic consequences.

| 3.5.4.1 | The majority of the measures under this priority axis are designed to regenerate those coastal areas dependent on fishing, given that their development cannot continue to be connected to fishing activities. The EESC believes that the measures for the sustainable development of these areas, intended to promote alternative activities to fishing, should be preceded by a well-grounded scientific analysis carried out in collaboration with both scientists and the fishing sector in the affected area. |
| --- | --- |

3.5.4.1

The majority of the measures under this priority axis are designed to regenerate those coastal areas dependent on fishing, given that their development cannot continue to be connected to fishing activities. The EESC believes that the measures for the sustainable development of these areas, intended to promote alternative activities to fishing, should be preceded by a well-grounded scientific analysis carried out in collaboration with both scientists and the fishing sector in the affected area.

| 3.5.4.2 | The draft Regulation establishes that each Member State ‘shall include in its operational programme a list of the areas eligible for support from the Fund under sustainable development of coastal areas.’ |
| --- | --- |

3.5.4.2

The draft Regulation establishes that each Member State ‘shall include in its operational programme a list of the areas eligible for support from the Fund under sustainable development of coastal areas.’

| 3.5.4.3 | In principle, this approach fits in with the concept of subsidiarity, which is continually invoked by the Commission as a vital element in the correct implementation of the draft Regulation. However, the Commission itself weakens this when it specifies that Member States must define their eligible areas according to various parameters, some of which are not at all realistic, particularly that stipulating that they must have less than 100 000 inhabitants. Therefore, the EESC calls for this requirement to be deleted from the parameters defining the eligible areas. |
| --- | --- |

3.5.4.3

In principle, this approach fits in with the concept of subsidiarity, which is continually invoked by the Commission as a vital element in the correct implementation of the draft Regulation. However, the Commission itself weakens this when it specifies that Member States must define their eligible areas according to various parameters, some of which are not at all realistic, particularly that stipulating that they must have less than 100 000 inhabitants. Therefore, the EESC calls for this requirement to be deleted from the parameters defining the eligible areas.

| 3.5.4.4 | On this issue, the Committee believes that once the eligible measures are set by the Commission, the application of the principle of subsidiarity is vital. The EESC calls on the Commission to grant the Member States the right in the draft Regulation to establish a list of eligible coastal areas according to their own criteria. |
| --- | --- |

3.5.4.4

On this issue, the Committee believes that once the eligible measures are set by the Commission, the application of the principle of subsidiarity is vital. The EESC calls on the Commission to grant the Member States the right in the draft Regulation to establish a list of eligible coastal areas according to their own criteria.

| 3.5.4.5 | Finally, this priority axis provides that actions to assist the sustainable development of coastal fishing areas is to be implemented on a given territory by a group of local public or private partners, called the ‘coastal action group’ (CAG). |
| --- | --- |

3.5.4.5

Finally, this priority axis provides that actions to assist the sustainable development of coastal fishing areas is to be implemented on a given territory by a group of local public or private partners, called the ‘coastal action group’ (CAG).

| 3.5.4.6 | The CAGs are to manage the aid, adhering to various rules of operation that ensure administrative and financial capacity and hence guarantee with total transparency the successful completion of the planned operations. |
| --- | --- |

3.5.4.6

The CAGs are to manage the aid, adhering to various rules of operation that ensure administrative and financial capacity and hence guarantee with total transparency the successful completion of the planned operations.

| 3.5.4.7 | The EESC advises that the composition of the CAGs be subject to prior recognition by the social partners. |
| --- | --- |

3.5.4.7

The EESC advises that the composition of the CAGs be subject to prior recognition by the social partners.

| 3.5.5 | Provisions for EFF assistance are concluded in Priority axis 5 ‘Technical assistance’. This priority axis, at the initiative of and/or on behalf of the Commission, is to finance the measures to be carried out by the Commission for the preparation, monitoring, administrative and technical support, evaluation, audit and inspection of the EFF, and such measures may be proposed by the Member States in their operational programmes for the same purpose. |
| --- | --- |

3.5.5

Provisions for EFF assistance are concluded in Priority axis 5 ‘Technical assistance’. This priority axis, at the initiative of and/or on behalf of the Commission, is to finance the measures to be carried out by the Commission for the preparation, monitoring, administrative and technical support, evaluation, audit and inspection of the EFF, and such measures may be proposed by the Member States in their operational programmes for the same purpose.

| 3.5.5.1 | The draft Regulation limits the budget for technical assistance to 0.8 % of its annual allocation and the support for Member States to 5 % of the amount of each operational programme. |
| --- | --- |

3.5.5.1

The draft Regulation limits the budget for technical assistance to 0.8 % of its annual allocation and the support for Member States to 5 % of the amount of each operational programme.

| 3.5.5.2 | The Committee approves the proposed eligible actions and the limits of funding. |
| --- | --- |

3.5.5.2

The Committee approves the proposed eligible actions and the limits of funding.

4.   General comments

| 4.1 | The draft Regulation presents a series of general provisions on the ‘Effectiveness of and publicity for assistance’, the ‘Financial contribution by the Fund’, ‘Management, monitoring and controls’, ‘Financial management’ and the ‘European Fisheries Fund Committee’. |
| --- | --- |

4.1

The draft Regulation presents a series of general provisions on the ‘Effectiveness of and publicity for assistance’, the ‘Financial contribution by the Fund’, ‘Management, monitoring and controls’, ‘Financial management’ and the ‘European Fisheries Fund Committee’.

| 4.1.1 | The Committee agrees with all these provisions, since they ensure proper operation, management, monitoring and transparency of the Fund. |
| --- | --- |

4.1.1

The Committee agrees with all these provisions, since they ensure proper operation, management, monitoring and transparency of the Fund.

5.   Conclusions

| 5.1 | The draft Regulation on the EFF constitutes a financial instrument that will accompany resource management measures and adjust the sector's production structures in line with the Common Fisheries Policy. Therefore, the proposal presented by the Commission basically has the support of the European Economic and Social Committee. |
| --- | --- |

5.1

The draft Regulation on the EFF constitutes a financial instrument that will accompany resource management measures and adjust the sector's production structures in line with the Common Fisheries Policy. Therefore, the proposal presented by the Commission basically has the support of the European Economic and Social Committee.

| 5.2 | The Committee approves the Regulation's period of implementation, from 1 January 2007 to 31 December 2013, and its review by the Council before the end of this period. |
| --- | --- |

5.2

The Committee approves the Regulation's period of implementation, from 1 January 2007 to 31 December 2013, and its review by the Council before the end of this period.

| 5.3 | Furthermore, the Committee believes that the objectives and general rules on assistance laid down are highly appropriate, although it urges the Commission to extend the principle of subsidiarity as much as possible, giving Member States the authority to decide on the concrete measures on which their economic effort should focus. The Committee also suggests an additional objective for assistance under the Fund to those already set out, namely ‘to safeguard a good quality working environment and to improve living conditions, safety and hygiene in the workplace’. |
| --- | --- |

5.3

Furthermore, the Committee believes that the objectives and general rules on assistance laid down are highly appropriate, although it urges the Commission to extend the principle of subsidiarity as much as possible, giving Member States the authority to decide on the concrete measures on which their economic effort should focus. The Committee also suggests an additional objective for assistance under the Fund to those already set out, namely ‘to safeguard a good quality working environment and to improve living conditions, safety and hygiene in the workplace’.

| 5.4 | The Committee believes the period of three months given to draw up the national strategic plan is too tight, considering the scope of this plan, the difficulties caused by the participation of a ‘partner’ and the number of regions in some coastal countries. |
| --- | --- |

5.4

The Committee believes the period of three months given to draw up the national strategic plan is too tight, considering the scope of this plan, the difficulties caused by the participation of a ‘partner’ and the number of regions in some coastal countries.

| 5.5 | With regard to priority axis 1 ‘Measures for the adaptation of the Community fishing fleet’, the measures being adopted by the Fund are as a result of the text approved by the Council in the reform of the CFP. Nevertheless, the Committee believes that the European Union should continue to maintain an operational and competitive fishing fleet both inside and outside its Exclusive Economic Zone (EEZ) and that this is the Commission's responsibility. Therefore, the EESC calls on the Commission to consider the following improvements to priority axis 1:






  — | Funding for the national fishing effort adjustment plans should last for at least four years. |
| --- | --- | --- |

5.5

With regard to priority axis 1 ‘Measures for the adaptation of the Community fishing fleet’, the measures being adopted by the Fund are as a result of the text approved by the Council in the reform of the CFP. Nevertheless, the Committee believes that the European Union should continue to maintain an operational and competitive fishing fleet both inside and outside its Exclusive Economic Zone (EEZ) and that this is the Commission's responsibility. Therefore, the EESC calls on the Commission to consider the following improvements to priority axis 1:

—

Funding for the national fishing effort adjustment plans should last for at least four years.

| — | Aid for the permanent cessation of fishing activities should cover not only the scrapping of vessels but also their re-assignment to other purposes than fishing and their export to third countries and joint enterprises. |
| --- | --- |

—

Aid for the permanent cessation of fishing activities should cover not only the scrapping of vessels but also their re-assignment to other purposes than fishing and their export to third countries and joint enterprises.

| — | The use of fairer criteria to calculate the level of public aid applicable to scrapping. |
| --- | --- |

—

The use of fairer criteria to calculate the level of public aid applicable to scrapping.

| — | For safety reasons, to include replacement of the main engine as one of the investments on board fishing vessels eligible for funding. |
| --- | --- |

—

For safety reasons, to include replacement of the main engine as one of the investments on board fishing vessels eligible for funding.

| — | These socio-economic measures should include assistance for further training and retraining of those fishermen remaining in sea fishing. |
| --- | --- |

—

These socio-economic measures should include assistance for further training and retraining of those fishermen remaining in sea fishing.

| — | Maintenance of an operational fishing fleet through the renovation and modernisation of fishing vessels as long as fishery resources allow. |
| --- | --- |

—

Maintenance of an operational fishing fleet through the renovation and modernisation of fishing vessels as long as fishery resources allow.

| 5.6 | As regards priority axis 2 ‘Aquaculture, processing and marketing of fishery and aquaculture products’, the EESC believes that the subsidiarity criterion should be incorporated into its implementation, giving Member States the authority to decide on the most appropriate application of the Fund's economic contribution, giving priority to investments presented by micro and small enterprises. The only restriction on this should be that the projects presented must be economically and commercially viable, to improve the competitiveness of businesses. |
| --- | --- |

5.6

As regards priority axis 2 ‘Aquaculture, processing and marketing of fishery and aquaculture products’, the EESC believes that the subsidiarity criterion should be incorporated into its implementation, giving Member States the authority to decide on the most appropriate application of the Fund's economic contribution, giving priority to investments presented by micro and small enterprises. The only restriction on this should be that the projects presented must be economically and commercially viable, to improve the competitiveness of businesses.

| 5.7 | With regard to priority axis 3 ‘Measures of collective interest’, the Committee calls for the Fund to finance collective actions of limited duration proposed by private businesses, and investments necessary to improve scientific and technical advice on Community fisheries management. |
| --- | --- |

5.7

With regard to priority axis 3 ‘Measures of collective interest’, the Committee calls for the Fund to finance collective actions of limited duration proposed by private businesses, and investments necessary to improve scientific and technical advice on Community fisheries management.

| 5.8 | Priority axis 4 ‘Sustainable development of coastal fishing areas’, limits eligible areas to those of less than 100 000 inhabitants. The Committee believes that this requirement should be deleted and the principle of subsidiarity applied, recognising each Member State's right to establish the list of eligible coastal areas according to their own criteria. |
| --- | --- |

5.8

Priority axis 4 ‘Sustainable development of coastal fishing areas’, limits eligible areas to those of less than 100 000 inhabitants. The Committee believes that this requirement should be deleted and the principle of subsidiarity applied, recognising each Member State's right to establish the list of eligible coastal areas according to their own criteria.

| 5.9 | The Committee welcomes priority axis 5 ‘Technical assistance’, believing the proposed eligible actions and funding limits to be appropriate. |
| --- | --- |

5.9

The Committee welcomes priority axis 5 ‘Technical assistance’, believing the proposed eligible actions and funding limits to be appropriate.

| 5.10 | The EESC believes that the EFF should also clearly provide for financial support for fishing activities in inland or continental waters, which in some Member States of the European Union represent key fishing grounds. The Committee recommends that the word ‘lakes’ is replaced by the words ‘inland waters’ in Chapter II, Article 4 point (e) and in any other article of the Proposal for a Council Regulation. |
| --- | --- |

5.10

The EESC believes that the EFF should also clearly provide for financial support for fishing activities in inland or continental waters, which in some Member States of the European Union represent key fishing grounds. The Committee recommends that the word ‘lakes’ is replaced by the words ‘inland waters’ in Chapter II, Article 4 point (e) and in any other article of the Proposal for a Council Regulation.

| 5.11 | The EESC gives its full support to the Fund's management, control and monitoring systems, believing them to be highly appropriate and necessary to the effectiveness of the EFF. |
| --- | --- |

5.11

The EESC gives its full support to the Fund's management, control and monitoring systems, believing them to be highly appropriate and necessary to the effectiveness of the EFF.

| 5.12 | For all the above reasons, the European Economic and Social Committee endorses the draft Regulation on the EFF presented by the Commission, but calls on the Commission to take into account the comments set out in this opinion. |
| --- | --- |

5.12

For all the above reasons, the European Economic and Social Committee endorses the draft Regulation on the EFF presented by the Commission, but calls on the Commission to take into account the comments set out in this opinion.

Brussels, 11 May 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

---

(1)  OJ L 358 of 31.12.2002

1

(2)  OJ L 161 of 26.6.1999

2

(3)  OJ L 161 of 26.6.1999

3

(4)  OJ L 337 of 30.12.1999

4

(5)  OJ L 55 of 24.2.2001

5

(6)  OJ C 85 of 8.4.2003

6

(7)  CESE 1369/2002 (OJ C 85 of 8.4.2003) and CESE 1315/2001 (OJ C 36 of 8.2.2002)

7

(8)  DO C 47 of 27.2.2003

8

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| 27.10.2005 | EN | Official Journal of the European Union | C 267/57 |
| --- | --- | --- | --- |

27.10.2005

EN

Official Journal of the European Union

C 267/57

---

Opinion of the European Economic and Social Committee on the Proposal for a Council Decision on the system of the European Communities' own resources

(COM(2004) 501 final — 2004/0170 (CNS))

(2005/C 267/09)

On 22 October 2004 the Council decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 April 2005. The rapporteur was Mr Burani.

At its 417th plenary session, held on 12 May 2005, the European Economic and Social Committee adopted the following opinion by 118 votes to 2 with 15 abstentions.

1.   Introduction

| 1.1 | Article 9 of the Council Decision on the system of the European Communities' own resources (1) provides that the Commission should proceed to a general review of the System of the European Communities' own resources for 2007-2013 by 1 January 2006. If necessary, the review should be accompanied by appropriate proposals. The European Parliament has explicitly requested a review of the criteria for financial contributions. Consequently the Commission, in agreement with the Council, has submitted the present proposal. The Commission's task in this regard was difficult and technically complex. Moreover, it was politically sensitive in that it concerned relations amongst Member States and between Member States and their citizens. |
| --- | --- |

1.1

Article 9 of the Council Decision on the system of the European Communities' own resources (1) provides that the Commission should proceed to a general review of the System of the European Communities' own resources for 2007-2013 by 1 January 2006. If necessary, the review should be accompanied by appropriate proposals. The European Parliament has explicitly requested a review of the criteria for financial contributions. Consequently the Commission, in agreement with the Council, has submitted the present proposal. The Commission's task in this regard was difficult and technically complex. Moreover, it was politically sensitive in that it concerned relations amongst Member States and between Member States and their citizens.

| 1.2 | The technical part of the document makes difficult reading, even for those who are acquainted with the principles of public finance. Nevertheless, the Commission should be given credit for having done its utmost to ensure that, at least, the document facilitates discussion amongst specialists, and can be understood by the decision-makers. The proposal is in fact accompanied by a report (2) outlining the current situation and evaluating the pros and cons of possible alternatives. A technical appendix (3) outlines the econometric aspects, providing relevant accounting, mathematical, and economic details. |
| --- | --- |

1.2

The technical part of the document makes difficult reading, even for those who are acquainted with the principles of public finance. Nevertheless, the Commission should be given credit for having done its utmost to ensure that, at least, the document facilitates discussion amongst specialists, and can be understood by the decision-makers. The proposal is in fact accompanied by a report (2) outlining the current situation and evaluating the pros and cons of possible alternatives. A technical appendix (3) outlines the econometric aspects, providing relevant accounting, mathematical, and economic details.

| 1.3 | Consequently, the Committee intends to focus on the points that directly concern the fairness of financial contributions and the mechanisms for profit and burden sharing amongst Member States. This choice is made in the knowledge of the fact that obscure technicalities may sometimes cloud the economic and political significance of their implications. Furthermore the concept of a ‘fair’ own resources mechanism is difficult to define in unequivocal terms since it combines subjective and objective factors. For instance, prosperity levels might be measurable, whereas the indirect benefits of belonging to the EU might not. However, the final outcome will depend on the balance achieved when Council negotiations are concluded — which may prove challenging. |
| --- | --- |

1.3

Consequently, the Committee intends to focus on the points that directly concern the fairness of financial contributions and the mechanisms for profit and burden sharing amongst Member States. This choice is made in the knowledge of the fact that obscure technicalities may sometimes cloud the economic and political significance of their implications. Furthermore the concept of a ‘fair’ own resources mechanism is difficult to define in unequivocal terms since it combines subjective and objective factors. For instance, prosperity levels might be measurable, whereas the indirect benefits of belonging to the EU might not. However, the final outcome will depend on the balance achieved when Council negotiations are concluded — which may prove challenging.

| 1.3.1 | The quality of the solutions will be the proof that a fair balance has been struck between two principles. The first principle concerns ‘a fair return’, i.e. each Member State expects its own contribution to be in proportion to the benefits accruing to it: such benefits are not all quantifiable since they derive directly from that country's accession to the EU. The other principle concerns solidarity since it calls for sufficient flexibility to make greater or fewer concessions according to the needs of the community as a whole. It should also be borne in mind that these principles have gained general acceptance but are interpreted according to the values of the individual. Each government strives to protect its own finances and knows that national public opinion often plays a pivotal role in its decisions. Achieving a level of consensus that satisfies each and everyone one of the parties is contingent upon accepting solutions inspired by a true spirit of ‘financial federalism’. |
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1.3.1

The quality of the solutions will be the proof that a fair balance has been struck between two principles. The first principle concerns ‘a fair return’, i.e. each Member State expects its own contribution to be in proportion to the benefits accruing to it: such benefits are not all quantifiable since they derive directly from that country's accession to the EU. The other principle concerns solidarity since it calls for sufficient flexibility to make greater or fewer concessions according to the needs of the community as a whole. It should also be borne in mind that these principles have gained general acceptance but are interpreted according to the values of the individual. Each government strives to protect its own finances and knows that national public opinion often plays a pivotal role in its decisions. Achieving a level of consensus that satisfies each and everyone one of the parties is contingent upon accepting solutions inspired by a true spirit of ‘financial federalism’.

2.   The current situation

| 2.1 | Own resources are a specific feature of the European Union and one of their functions is to emphasise the autonomous personality of the Community. This implies that the Community must have its own financial resources, which are independent of its Member States. They may therefore be defined as revenue granted to the Community to finance its own budget, and to which it is automatically entitled without further decisions by the national authorities. |
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2.1

Own resources are a specific feature of the European Union and one of their functions is to emphasise the autonomous personality of the Community. This implies that the Community must have its own financial resources, which are independent of its Member States. They may therefore be defined as revenue granted to the Community to finance its own budget, and to which it is automatically entitled without further decisions by the national authorities.

| 2.2 | According to the principles underlying the Community's own resources system, as stipulated in the conclusions of the Berlin European Council of 24 and 25 March 1999‘It should be equitable, transparent, cost-effective ... based on criteria which best express each Member State's ability to contribute.’ This declaration, which is clearly self-explanatory, has been disregarded in different respects and on different occasions. |
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2.2

According to the principles underlying the Community's own resources system, as stipulated in the conclusions of the Berlin European Council of 24 and 25 March 1999‘It should be equitable, transparent, cost-effective ... based on criteria which best express each Member State's ability to contribute.’ This declaration, which is clearly self-explanatory, has been disregarded in different respects and on different occasions.

| 2.3 | The Council decision to establish own resources dates back to 21 April 1970. It was subsequently incorporated into and amended by a decision on 24 June 1988 and finally by the Berlin Council of 1999. At the time of writing, own resources may be divided into the following three categories:






  — | traditional Own Resources (TOR): mainly from customs duties and agricultural levies; |
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2.3

The Council decision to establish own resources dates back to 21 April 1970. It was subsequently incorporated into and amended by a decision on 24 June 1988 and finally by the Berlin Council of 1999. At the time of writing, own resources may be divided into the following three categories:

—

traditional Own Resources (TOR): mainly from customs duties and agricultural levies;

| — | VAT-based resources: a levy — initially fixed at 1 % and subsequently adjusted — on national VAT revenues, calculated on a ‘theoretical’ harmonised statistical base, which should not, however, exceed 50 % of Gross National Income (GNI); |
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—

VAT-based resources: a levy — initially fixed at 1 % and subsequently adjusted — on national VAT revenues, calculated on a ‘theoretical’ harmonised statistical base, which should not, however, exceed 50 % of Gross National Income (GNI);

| — | GNI-based resources: a levy proportionate to the GNI of each Member State. There is no limit on this levy for individual Member States. However there is a ceiling that restricts the Community's total own resources to 1.24 % of EU GNI. |
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—

GNI-based resources: a levy proportionate to the GNI of each Member State. There is no limit on this levy for individual Member States. However there is a ceiling that restricts the Community's total own resources to 1.24 % of EU GNI.

| 2.3.1 | In 1996, total TOR and VAT resources made up 70 % of revenue. In 2003, this figure had reached 38 %. According to Commission estimates, this will be further reduced to 26 % for 2004 and the current year. This gradual downward trend explains a corresponding rise in GNI-based resources (the so called fourth resource). |
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2.3.1

In 1996, total TOR and VAT resources made up 70 % of revenue. In 2003, this figure had reached 38 %. According to Commission estimates, this will be further reduced to 26 % for 2004 and the current year. This gradual downward trend explains a corresponding rise in GNI-based resources (the so called fourth resource).

| 2.4 | The fourth resource mechanism was amended by the Council decision of 7 May 1985, which recognised that the United Kingdom's quota exceeded its contributive capacity. It was agreed that the UK would receive a rebate corresponding to two-thirds of its net contributions. This decision subsequently underwent various amendments and the Commission considers that the mechanism has now become increasingly complex and less transparent. |
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2.4

The fourth resource mechanism was amended by the Council decision of 7 May 1985, which recognised that the United Kingdom's quota exceeded its contributive capacity. It was agreed that the UK would receive a rebate corresponding to two-thirds of its net contributions. This decision subsequently underwent various amendments and the Commission considers that the mechanism has now become increasingly complex and less transparent.

| 2.4.1 | The decision to adjust the mechanism had already been taken by the Fontainebleau Council of 1984, albeit expressed in generic terms that seemed to establish a general principle whereby ‘... any Member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction
  at the appropriate time’. The United Kingdom has remained the sole beneficiary of this correction from the year following the Fontainebleau decision to date. The United Kingdom's average annual rebate for the period 1997-2003 was EUR 4.6 billion. The Committee wonders what is meant by the expression ‘at the appropriate time’, which seems to imply a temporary provision, subject to periodic review (which has not been the case). The Committee also wonders whether other States may have been entitled to a similar correction at the time. |
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2.4.1

The decision to adjust the mechanism had already been taken by the Fontainebleau Council of 1984, albeit expressed in generic terms that seemed to establish a general principle whereby ‘... any Member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction
  at the appropriate time’. The United Kingdom has remained the sole beneficiary of this correction from the year following the Fontainebleau decision to date. The United Kingdom's average annual rebate for the period 1997-2003 was EUR 4.6 billion. The Committee wonders what is meant by the expression ‘at the appropriate time’, which seems to imply a temporary provision, subject to periodic review (which has not been the case). The Committee also wonders whether other States may have been entitled to a similar correction at the time.

| 2.4.2 | The concept of ‘excessive burden’ may be attributed in part to the fact that, at that time, the United Kingdom had the lowest gross national income (GNI) per capita in the European Union (4). The European average was 100 whereas the United Kingdom's GNP was 90.6, compared to 92.6 for Italy, 104 for France, and 109.6 for Germany. The situation has in fact been reversed (2003 figures) and the United Kingdom now shares the highest ranking with Denmark at 111.2 %, compared to France at 104.2, Germany at 98.6 % and Italy at 97.3 %. Another point that was given due consideration was the fact that the United Kingdom was obliged to pay contributions that were based on a very high VAT base, whereas it benefited relatively little from agricultural and regional policy contributions. As a result, the United Kingdom emerged as the largest net contributor to the Community budget. The resulting imbalance justified a correction mechanism, which was in fact applied. |
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2.4.2

The concept of ‘excessive burden’ may be attributed in part to the fact that, at that time, the United Kingdom had the lowest gross national income (GNI) per capita in the European Union (4). The European average was 100 whereas the United Kingdom's GNP was 90.6, compared to 92.6 for Italy, 104 for France, and 109.6 for Germany. The situation has in fact been reversed (2003 figures) and the United Kingdom now shares the highest ranking with Denmark at 111.2 %, compared to France at 104.2, Germany at 98.6 % and Italy at 97.3 %. Another point that was given due consideration was the fact that the United Kingdom was obliged to pay contributions that were based on a very high VAT base, whereas it benefited relatively little from agricultural and regional policy contributions. As a result, the United Kingdom emerged as the largest net contributor to the Community budget. The resulting imbalance justified a correction mechanism, which was in fact applied.

| 2.4.3 | The UK rebate was and still is borne by the other Member States, in proportion to their GNP. Needless to say the United Kingdom was excluded from this calculation. The GNP equalisation mechanism underwent another substantial adjustment in 1999, when four of the major net contributors (in relative terms) to the budget (Germany, the Netherlands, Austria, and Sweden) were awarded a 75 % reduction in their contributions towards the correction. As a result of the new contribution system, France and Italy became jointly responsible for financing 52 % of the UK rebate. |
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2.4.3

The UK rebate was and still is borne by the other Member States, in proportion to their GNP. Needless to say the United Kingdom was excluded from this calculation. The GNP equalisation mechanism underwent another substantial adjustment in 1999, when four of the major net contributors (in relative terms) to the budget (Germany, the Netherlands, Austria, and Sweden) were awarded a 75 % reduction in their contributions towards the correction. As a result of the new contribution system, France and Italy became jointly responsible for financing 52 % of the UK rebate.

| 2.4.4 | If the current system were to be maintained, estimated developments for the 2007-2013 period would result in a paradoxical situation, i.e. the UK rebate would rise by an average of 50 % making it the lowest ranking net contributor and substantially raising the burden of other Member States, including the new members (5). The EESC also believes that the proposal to extend the application of this mechanism to other countries (see point 3.6) makes it necessary to amend the rules. It has therefore become apparent that the correction mechanism — if confirmed as necessary (see point 3.6.4) — must nevertheless be reviewed — as indeed the Commission intends — and should be replaced by equitable and transparent solutions that comply with the Fontainebleau criteria. |
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2.4.4

If the current system were to be maintained, estimated developments for the 2007-2013 period would result in a paradoxical situation, i.e. the UK rebate would rise by an average of 50 % making it the lowest ranking net contributor and substantially raising the burden of other Member States, including the new members (5). The EESC also believes that the proposal to extend the application of this mechanism to other countries (see point 3.6) makes it necessary to amend the rules. It has therefore become apparent that the correction mechanism — if confirmed as necessary (see point 3.6.4) — must nevertheless be reviewed — as indeed the Commission intends — and should be replaced by equitable and transparent solutions that comply with the Fontainebleau criteria.

3.   The Commission proposal: comments on the main articles

| 3.1 | Article 2: own resources. (paragraph 1(a)) retains the present system, with a few changes. The revenues of the first type (TOR) — see point 2.3 — are mainly levies, premiums, additional or compensatory amounts, Common Customs Tariff duties and other duties in respect of trade with non-member countries and other duties from markets in sugar. Member States are to retain, by way of ‘collection costs’, 25 % of the amounts due. A deduction of such proportions requires clarification. The percentage was originally set at 10 % and subsequently raised to 25 % in 1999, when it was defined as a ‘collection cost’ for the first time. Needless to say, this was an atypical correction, which mainly benefited the Netherlands and the United Kingdom: an indication that the procedures lack transparency. |
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3.1

Article 2: own resources. (paragraph 1(a)) retains the present system, with a few changes. The revenues of the first type (TOR) — see point 2.3 — are mainly levies, premiums, additional or compensatory amounts, Common Customs Tariff duties and other duties in respect of trade with non-member countries and other duties from markets in sugar. Member States are to retain, by way of ‘collection costs’, 25 % of the amounts due. A deduction of such proportions requires clarification. The percentage was originally set at 10 % and subsequently raised to 25 % in 1999, when it was defined as a ‘collection cost’ for the first time. Needless to say, this was an atypical correction, which mainly benefited the Netherlands and the United Kingdom: an indication that the procedures lack transparency.

| 3.1.1 | TOR revenue is, in percentage terms of total Community revenues, in constant decline, having in fact gone down from 19 % in 1996 to 11.4 % in 2003 (the figures cited under this point are based on a Commission report entitled Financing the European Union (6)). Even with lower customs duties, considerable resources — including financial — would still be required to obtain the necessary statistics on which to calculate the amounts due. |
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3.1.1

TOR revenue is, in percentage terms of total Community revenues, in constant decline, having in fact gone down from 19 % in 1996 to 11.4 % in 2003 (the figures cited under this point are based on a Commission report entitled Financing the European Union (6)). Even with lower customs duties, considerable resources — including financial — would still be required to obtain the necessary statistics on which to calculate the amounts due.

| 3.1.1.1 | The EESC wonders whether there is really any point in retaining this contribution system and whether it would be better to drastically reduce it and replace it by adjusting the GNI rate. Furthermore, the EESC notes that the Commission has adopted the opposite approach, basing itself on the premise that tax revenue belongs to the European Union as a matter of course, and that the Commission does not intend to change this approach, particularly since most Member States would appear to support it. |
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3.1.1.1

The EESC wonders whether there is really any point in retaining this contribution system and whether it would be better to drastically reduce it and replace it by adjusting the GNI rate. Furthermore, the EESC notes that the Commission has adopted the opposite approach, basing itself on the premise that tax revenue belongs to the European Union as a matter of course, and that the Commission does not intend to change this approach, particularly since most Member States would appear to support it.

| 3.2 | Under Article 2(1)(b), a uniform rate valid for all Member States is to be applied to the harmonised VAT assessment bases. The assessment base may not exceed a 50 % ceiling of GNI for each Member State. The uniform rate is fixed at 0.30 % under Article 2(4). The reduction in the relative importance of this revenue for the Community budget — from 51.3 % in 1996 to 14 % (projected) in 2004 and 2005 — is significant. |
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3.2

Under Article 2(1)(b), a uniform rate valid for all Member States is to be applied to the harmonised VAT assessment bases. The assessment base may not exceed a 50 % ceiling of GNI for each Member State. The uniform rate is fixed at 0.30 % under Article 2(4). The reduction in the relative importance of this revenue for the Community budget — from 51.3 % in 1996 to 14 % (projected) in 2004 and 2005 — is significant.

| 3.2.1 | The EESC has often criticised the VAT system, which entails far greater collection, administrative and monitoring costs than TOR. According to OLAF, VAT is also the most widely evaded tax and, as such, has a negative impact on the Community budget, (which is offset by raising the burden on GNI). |
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3.2.1

The EESC has often criticised the VAT system, which entails far greater collection, administrative and monitoring costs than TOR. According to OLAF, VAT is also the most widely evaded tax and, as such, has a negative impact on the Community budget, (which is offset by raising the burden on GNI).

| 3.2.2 | Yet again, the EESC finds cause to question the logic behind retaining this levy, which the Commission would appear to prefer even though it intends to transform it into a real fiscal resource, as originally foreseen. It should be possible to adjust the percentage levy on GNI so that own resources deriving from VAT revenue are replaced by GNI contributions. Given the close correlation between VAT revenue and the size of GNI, this should not result in any significant change in the distribution of contributions between Member States. However, the calculation of statistics and the collection of VAT-based contributions to the Communities' own resources would cease. In the above-cited report on financing the European Union (see point 3.1.2), the Commission did, in fact, consider abolishing VAT-based resources but decided against it. |
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3.2.2

Yet again, the EESC finds cause to question the logic behind retaining this levy, which the Commission would appear to prefer even though it intends to transform it into a real fiscal resource, as originally foreseen. It should be possible to adjust the percentage levy on GNI so that own resources deriving from VAT revenue are replaced by GNI contributions. Given the close correlation between VAT revenue and the size of GNI, this should not result in any significant change in the distribution of contributions between Member States. However, the calculation of statistics and the collection of VAT-based contributions to the Communities' own resources would cease. In the above-cited report on financing the European Union (see point 3.1.2), the Commission did, in fact, consider abolishing VAT-based resources but decided against it.

| 3.2.2.1 | The EESC is aware of the complexities involved but maintains that it would be worthwhile to take a closer look at the nature and numerous shortcomings of this duty and has already carried out several analyses of this nature. In addition to the comments made in the preceding point, it should be mentioned that VAT has been a ‘provisional system’ for decades. |
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3.2.2.1

The EESC is aware of the complexities involved but maintains that it would be worthwhile to take a closer look at the nature and numerous shortcomings of this duty and has already carried out several analyses of this nature. In addition to the comments made in the preceding point, it should be mentioned that VAT has been a ‘provisional system’ for decades.

| 3.3 | Article 2(1)(c) is the most significant component of the proposal since it provides for the application of a rate, ‘to be determined pursuant to the budgetary procedure’, to the sum of all the Member States' GNIs. The procedure is a specialised matter that the Committee does not intend to comment upon. Moreover, the EESC would stress that this levy is outstripping other resources, and is by far the cheapest source of revenue to administer. The Commission reiterates, in its report, that administrative costs are one criterion to be taken into consideration, but not necessarily the main one. The EESC takes note of this and would point out that, in matters pertaining to budget contributions, principles must often give way to economic considerations. |
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3.3

Article 2(1)(c) is the most significant component of the proposal since it provides for the application of a rate, ‘to be determined pursuant to the budgetary procedure’, to the sum of all the Member States' GNIs. The procedure is a specialised matter that the Committee does not intend to comment upon. Moreover, the EESC would stress that this levy is outstripping other resources, and is by far the cheapest source of revenue to administer. The Commission reiterates, in its report, that administrative costs are one criterion to be taken into consideration, but not necessarily the main one. The EESC takes note of this and would point out that, in matters pertaining to budget contributions, principles must often give way to economic considerations.

| 3.4 | The three sources cited above (Article 2(1)(a), (b) and (c) constitute a mix (complemented by ‘revenue from any other new charges introduced’ under Article 2(2)) that could vary considerably from year to year. The Council and the Commission have, for some time, debated whether or not this system should be retained. The abovementioned Commission report (7) on financing the European Union looks at ways of identifying an optimal structure. It examines three options: retaining the current system, adopting an exclusively GNI-based system, and adopting a predominantly tax-based system. It is likely that the matter will be discussed and a final conclusion reached during the forthcoming year. The EESC hopes to be kept abreast of developments but warns against a tendency that has emerged in recent studies, i.e. an unduly technical and accountancy-based approach that overlooks the political aspects of decisions. |
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3.4

The three sources cited above (Article 2(1)(a), (b) and (c) constitute a mix (complemented by ‘revenue from any other new charges introduced’ under Article 2(2)) that could vary considerably from year to year. The Council and the Commission have, for some time, debated whether or not this system should be retained. The abovementioned Commission report (7) on financing the European Union looks at ways of identifying an optimal structure. It examines three options: retaining the current system, adopting an exclusively GNI-based system, and adopting a predominantly tax-based system. It is likely that the matter will be discussed and a final conclusion reached during the forthcoming year. The EESC hopes to be kept abreast of developments but warns against a tendency that has emerged in recent studies, i.e. an unduly technical and accountancy-based approach that overlooks the political aspects of decisions.

| 3.4.1 | The ideas aired in the context of the ‘revenue from any other new charges introduced’ cited under the preceding point, or even as an alternative to VAT resources, included a tax on pollutant energy sources in favour of the Community budget but specifically earmarked for bettering the environment. The EESC is opposed to such a solution insofar as there is no rule authorising the appropriation of contributions for specific purposes. In addition, the international political situation excludes decisions that could have an impact on future dynamics. |
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3.4.1

The ideas aired in the context of the ‘revenue from any other new charges introduced’ cited under the preceding point, or even as an alternative to VAT resources, included a tax on pollutant energy sources in favour of the Community budget but specifically earmarked for bettering the environment. The EESC is opposed to such a solution insofar as there is no rule authorising the appropriation of contributions for specific purposes. In addition, the international political situation excludes decisions that could have an impact on future dynamics.

| 3.5 | Article 3: resources and commitments. This article establishes the ceiling for payments and commitments for own resources at 1.24 % of total GNIs of the Member States. The ceiling for appropriations for commitments is fixed at 1.31 % of total GNIs of the Member States. The balance should be provided by other payments of different types. Regarding commitments, dialogue between Member States reveals the existence of different methods for calculating the maximum ceiling foreseen in the financial perspectives. The outcome will depend on the balance struck between those members who want a stronger Commission and ambitious programmes for socio-economic progress, and those in favour of greater autonomy for the Member States and consolidation policies, i.e. endorsing the status quo or even a reduction of current resources (unlikely). However, particular consideration should be paid to the challenges that face the new Member States. To a large extent, future trends will be determined by global solidarity and global development: concepts that are easy to describe but much more difficult to translate into budgetary terms. |
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3.5

Article 3: resources and commitments. This article establishes the ceiling for payments and commitments for own resources at 1.24 % of total GNIs of the Member States. The ceiling for appropriations for commitments is fixed at 1.31 % of total GNIs of the Member States. The balance should be provided by other payments of different types. Regarding commitments, dialogue between Member States reveals the existence of different methods for calculating the maximum ceiling foreseen in the financial perspectives. The outcome will depend on the balance struck between those members who want a stronger Commission and ambitious programmes for socio-economic progress, and those in favour of greater autonomy for the Member States and consolidation policies, i.e. endorsing the status quo or even a reduction of current resources (unlikely). However, particular consideration should be paid to the challenges that face the new Member States. To a large extent, future trends will be determined by global solidarity and global development: concepts that are easy to describe but much more difficult to translate into budgetary terms.

| 3.6 | Article 4(1): the generalised correction mechanism (GCM). Article 4(1) establishes the Fontainebleau decision concerning the United Kingdom as a general provision. The GCM is thereby extended to all Member States to correct a negative budgetary imbalance exceeding a certain percentage of their GNIs. No threshold has been established in the proposal but its explanatory memorandum mentions the figure –0.35 % of GNI. Furthermore, overall correction should not exceed the maximum available refund volume. The Council will lay down the implementing measures for the calculation of the corrections and available financing in accordance with procedures laid down under Article 279(2) of the EC Treaty. The correction is calculated for each Member State on the difference between overall payments and total amounts received and multiplying the difference by the total allocated expenditure. The result (if positive) is multiplied by a refund rate fixed at a maximum of 66 % of total payments and, if necessary, reduced proportionally to respect the maximum available refund volume. In the final analysis, the formula is difficult to understand and its outcome is even more difficult to verify. If this is not another example of lack of transparency then it is certainly indicative of the need for simplification. |
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3.6

Article 4(1): the generalised correction mechanism (GCM). Article 4(1) establishes the Fontainebleau decision concerning the United Kingdom as a general provision. The GCM is thereby extended to all Member States to correct a negative budgetary imbalance exceeding a certain percentage of their GNIs. No threshold has been established in the proposal but its explanatory memorandum mentions the figure –0.35 % of GNI. Furthermore, overall correction should not exceed the maximum available refund volume. The Council will lay down the implementing measures for the calculation of the corrections and available financing in accordance with procedures laid down under Article 279(2) of the EC Treaty. The correction is calculated for each Member State on the difference between overall payments and total amounts received and multiplying the difference by the total allocated expenditure. The result (if positive) is multiplied by a refund rate fixed at a maximum of 66 % of total payments and, if necessary, reduced proportionally to respect the maximum available refund volume. In the final analysis, the formula is difficult to understand and its outcome is even more difficult to verify. If this is not another example of lack of transparency then it is certainly indicative of the need for simplification.

| 3.6.1 | The EESC notes that the questions raised in point 2.4.1 and the proposals mentioned in point 2.4.4 have in fact been addressed insofar as an albeit justified measure, which was applicable to only one Member State and with no clear expiry date, has been extended to all. Moreover, the GCM has transmuted the concept of ‘excessive burden’ into a mathematics-accountancy approach, which, while it has the advantage of eliminating subjective interpretations, does not take into account considerations that might be described as ‘quasi-qualitative’ such as competitiveness, social protection levels and the hidden economy, in addition to per capita income. It is true that figures alone do not reflect the real situation in a country. Nevertheless, a generalised mechanism that takes into account extraneous assessment factors would risk introducing subjective criteria that would be incompatible with transparency. There is therefore no alternative to applying the GCM as it stands, knowing that it will not always lead to optimum results. |
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3.6.1

The EESC notes that the questions raised in point 2.4.1 and the proposals mentioned in point 2.4.4 have in fact been addressed insofar as an albeit justified measure, which was applicable to only one Member State and with no clear expiry date, has been extended to all. Moreover, the GCM has transmuted the concept of ‘excessive burden’ into a mathematics-accountancy approach, which, while it has the advantage of eliminating subjective interpretations, does not take into account considerations that might be described as ‘quasi-qualitative’ such as competitiveness, social protection levels and the hidden economy, in addition to per capita income. It is true that figures alone do not reflect the real situation in a country. Nevertheless, a generalised mechanism that takes into account extraneous assessment factors would risk introducing subjective criteria that would be incompatible with transparency. There is therefore no alternative to applying the GCM as it stands, knowing that it will not always lead to optimum results.

| 3.6.2 | Article 4(1) has the merit of abolishing direct contributions by Member States to cover ‘correction’ financing and channelling them through the Community budget. This brings to an end, a system that had little to do with logic or, at any rate, transparency. The Commission's explanatory memorandum is thick with calculations that are not always easy to follow and comments that help to shed light on the scope of the proposal for a decision. These helpful clarifications include an explanation of how the application of a –0.35 % threshold of GNI will generate an estimated average volume of gross corrections of around EUR 7 billion. The Commission believes that the application of the GCM, combined with the amendment to the financing provisions, will mean that the correction level within the framework of the current system will not be at all clear. If the system and parameters proposed are adopted, the Commission's calculations will produce quantitative results contained in comparative tables showing the different alternatives, which will be submitted to Member States for assessment and decision. The EESC does not have the resources needed to comment on this complex matter. |
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3.6.2

Article 4(1) has the merit of abolishing direct contributions by Member States to cover ‘correction’ financing and channelling them through the Community budget. This brings to an end, a system that had little to do with logic or, at any rate, transparency. The Commission's explanatory memorandum is thick with calculations that are not always easy to follow and comments that help to shed light on the scope of the proposal for a decision. These helpful clarifications include an explanation of how the application of a –0.35 % threshold of GNI will generate an estimated average volume of gross corrections of around EUR 7 billion. The Commission believes that the application of the GCM, combined with the amendment to the financing provisions, will mean that the correction level within the framework of the current system will not be at all clear. If the system and parameters proposed are adopted, the Commission's calculations will produce quantitative results contained in comparative tables showing the different alternatives, which will be submitted to Member States for assessment and decision. The EESC does not have the resources needed to comment on this complex matter.

| 3.6.3 | The EESC would draw attention to two considerations that might call into question the very mechanism of the GCM. In the first place, the mechanism is inflexible and unrestricted in time. In this regard, it is important to recall the dangers of basing rules on current realities that could undergo drastic changes in the future — the Stability and Growth Pact is a case in point. In the second place, it does not appear feasible to impose contributions that are subsequently adjusted through ‘correction mechanisms’ which, for the sake of transparency, might be better termed as ‘reimbursements’. |
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3.6.3

The EESC would draw attention to two considerations that might call into question the very mechanism of the GCM. In the first place, the mechanism is inflexible and unrestricted in time. In this regard, it is important to recall the dangers of basing rules on current realities that could undergo drastic changes in the future — the Stability and Growth Pact is a case in point. In the second place, it does not appear feasible to impose contributions that are subsequently adjusted through ‘correction mechanisms’ which, for the sake of transparency, might be better termed as ‘reimbursements’.

| 3.6.4 | Finally, the EESC recalls one of its recent opinions, wherein it expresses serious reservations regarding the institutionalisation of the GCM (8) and wonders whether it would not be more appropriate to drastically alter the concept of ‘correction’ by making the GCM an integral part of the criteria for contributions. More specifically, the same GCM parameters should form part of contribution calculations. The Commission has already adopted this procedure in practice and would be well advised to formalise it, in conjunction with a clause for a periodic review, for instance every seven years. |
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3.6.4

Finally, the EESC recalls one of its recent opinions, wherein it expresses serious reservations regarding the institutionalisation of the GCM (8) and wonders whether it would not be more appropriate to drastically alter the concept of ‘correction’ by making the GCM an integral part of the criteria for contributions. More specifically, the same GCM parameters should form part of contribution calculations. The Commission has already adopted this procedure in practice and would be well advised to formalise it, in conjunction with a clause for a periodic review, for instance every seven years.

| 3.7 | Article 4(2)(a): the United Kingdom correction. This paragraph provides transitional measures whereby the United Kingdom, in addition to the corrections resulting from the application of Article 4(1), will retain its rights under the Fontainebleau decision until 2011, on a descending scale: EUR 2 billion in 2008, EUR 1.5 billion in 2009, 1 billion in 2010 and 0.5 billion in 2011. These payments would be decoupled from the GCM. In practice they would continue to be financed under the current financing rules, i.e. the United Kingdom does not participate in the financing, and the share of Germany, the Netherlands, Austria and Sweden is restricted to 25 % of their normal share (see points 2.4.3 and 2.4.4) The Commission considers that phasing in these new measures in four gradual steps will alleviate the financial impact of the GCM for the United Kingdom. In recent years (1997-2003), the UK has received a net average rebate of EUR 4.5 billion per annum, whereas under the GCM it should receive an average EUR 2.1 billion a year. The transitional measures will raise the annual average amount to EUR 3.1 billion (Fontainebleau and GCM). |
| --- | --- |

3.7

Article 4(2)(a): the United Kingdom correction. This paragraph provides transitional measures whereby the United Kingdom, in addition to the corrections resulting from the application of Article 4(1), will retain its rights under the Fontainebleau decision until 2011, on a descending scale: EUR 2 billion in 2008, EUR 1.5 billion in 2009, 1 billion in 2010 and 0.5 billion in 2011. These payments would be decoupled from the GCM. In practice they would continue to be financed under the current financing rules, i.e. the United Kingdom does not participate in the financing, and the share of Germany, the Netherlands, Austria and Sweden is restricted to 25 % of their normal share (see points 2.4.3 and 2.4.4) The Commission considers that phasing in these new measures in four gradual steps will alleviate the financial impact of the GCM for the United Kingdom. In recent years (1997-2003), the UK has received a net average rebate of EUR 4.5 billion per annum, whereas under the GCM it should receive an average EUR 2.1 billion a year. The transitional measures will raise the annual average amount to EUR 3.1 billion (Fontainebleau and GCM).

| 3.7.1 | The proposed provision is clearly a combination of various elements: recognition of developments to date, the need for transparency and political expediency. It is not the first time that derogations from the Common Rules have been introduced. Accession treaties, both old and new, are proof of this. It may be difficult for external observers and those not directly involved to accept the rules under consideration. However the situation that we are obliged to live with could, perhaps, persuade decision-makers to put forward balanced solutions that are, above all, transparent and well substantiated. In this case, the negotiators would not only have to find a compromise between fair return and solidarity mentioned under point 1.4 but also to show particular political sensitivity by taking into account public opinion in Europe, and especially public opinion in the new Member States. |
| --- | --- |

3.7.1

The proposed provision is clearly a combination of various elements: recognition of developments to date, the need for transparency and political expediency. It is not the first time that derogations from the Common Rules have been introduced. Accession treaties, both old and new, are proof of this. It may be difficult for external observers and those not directly involved to accept the rules under consideration. However the situation that we are obliged to live with could, perhaps, persuade decision-makers to put forward balanced solutions that are, above all, transparent and well substantiated. In this case, the negotiators would not only have to find a compromise between fair return and solidarity mentioned under point 1.4 but also to show particular political sensitivity by taking into account public opinion in Europe, and especially public opinion in the new Member States.

| 3.8 | Article 4(2)(b): phasing-in of the GCM. The rules establishing the GCM should be phased in gradually. The maximum refund rate of 66 % mentioned under Article 4(1) (see point 3.6) will not become applicable until 2011. The refund rate will be introduced at 33 % in 2008, will rise to 50 % in 2009 and 2010 and will reach its maximum rate the following year. The Commission considers this measure necessary ‘in order to offset the increased cost brought about by the proposed top-up payments for the UK so as to limit the overall financing cost during the transitional period’. This is a clear indication of the difficult circumstances currently underlying European debate and it would be a grave error to conceal them from the European citizen. The EESC cannot but emphatically reiterate its comments under point 3.7.1. |
| --- | --- |

3.8

Article 4(2)(b): phasing-in of the GCM. The rules establishing the GCM should be phased in gradually. The maximum refund rate of 66 % mentioned under Article 4(1) (see point 3.6) will not become applicable until 2011. The refund rate will be introduced at 33 % in 2008, will rise to 50 % in 2009 and 2010 and will reach its maximum rate the following year. The Commission considers this measure necessary ‘in order to offset the increased cost brought about by the proposed top-up payments for the UK so as to limit the overall financing cost during the transitional period’. This is a clear indication of the difficult circumstances currently underlying European debate and it would be a grave error to conceal them from the European citizen. The EESC cannot but emphatically reiterate its comments under point 3.7.1.

| 3.9 | Article 5: accountancy procedures for the correction. The costs of the correction are to be distributed amongst Member States according to each State's share in the total EU GNI. The correction will be granted to any eligible Member State via a reduction in its payments. The costs borne by

  all

  Member States will be added to their payments resulting from the application of a rate based on the sum of all the Member State's GNIs. The EESC has no comments in this regard: once the mechanism is in place, its implementation cannot be otherwise. |
| --- | --- |

3.9

Article 5: accountancy procedures for the correction. The costs of the correction are to be distributed amongst Member States according to each State's share in the total EU GNI. The correction will be granted to any eligible Member State via a reduction in its payments. The costs borne by

  all

  Member States will be added to their payments resulting from the application of a rate based on the sum of all the Member State's GNIs. The EESC has no comments in this regard: once the mechanism is in place, its implementation cannot be otherwise.

| 3.10 | Articles 6, 7 and 8: non-accountancy procedures regarding own resources. Similarly, these rules do not invite comment insofar as they comply with the general principles of public accountancy: the earmarking of revenue for specific expenditure is not allowed, surplus to be carried over to the following year, arrangements for collecting own resources. |
| --- | --- |

3.10

Articles 6, 7 and 8: non-accountancy procedures regarding own resources. Similarly, these rules do not invite comment insofar as they comply with the general principles of public accountancy: the earmarking of revenue for specific expenditure is not allowed, surplus to be carried over to the following year, arrangements for collecting own resources.

| 3.11 | Article 9: modification of own resources structure. Under this article, if it is approved, the Commission commits itself to presenting a genuinely tax-based own resource that will enter into force on 1 January 2014. |
| --- | --- |

3.11

Article 9: modification of own resources structure. Under this article, if it is approved, the Commission commits itself to presenting a genuinely tax-based own resource that will enter into force on 1 January 2014.

| 3.11.1 | The previously mentioned report on financing the European Union (9), provides a detailed analysis of this issue. Briefly, the Commission proposes to radically reduce the GNI-based resource by substituting it with a corresponding increase in the tax-based resource. Three alternatives may be roughly — and inevitably simplistically — summarised as follows: a tax on energy consumption, a VAT levy based on actual rather than statistical receipts, corporate tax. Partially replacing the fourth resource with a tax-based system would, according to the Commission (point 4.1.3 of the report), have the advantage of making the EU more ‘visible’ for citizens and establishing a direct link with them. Under the current system, which is predominantly based on the fourth resource, Member States, and net contributors in particular, tend to judge European policies and initiatives exclusively in terms of their own national allocations, and with little regard for the substance of Community policies, with the risk of obscuring their ‘value added’. |
| --- | --- |

3.11.1

The previously mentioned report on financing the European Union (9), provides a detailed analysis of this issue. Briefly, the Commission proposes to radically reduce the GNI-based resource by substituting it with a corresponding increase in the tax-based resource. Three alternatives may be roughly — and inevitably simplistically — summarised as follows: a tax on energy consumption, a VAT levy based on actual rather than statistical receipts, corporate tax. Partially replacing the fourth resource with a tax-based system would, according to the Commission (point 4.1.3 of the report), have the advantage of making the EU more ‘visible’ for citizens and establishing a direct link with them. Under the current system, which is predominantly based on the fourth resource, Member States, and net contributors in particular, tend to judge European policies and initiatives exclusively in terms of their own national allocations, and with little regard for the substance of Community policies, with the risk of obscuring their ‘value added’.

| 3.11.2 | The EESC reiterates its previous comments regarding this report, which warrants special attention. However, the EESC believes it to be at an intermediate stage and considers that it warrants further discussion. Without wishing to discuss the three tax proposals mentioned under the previous point (the first of which is apparently to be discarded at the outset (10)) the Committee would draw attention to the Commission's comment mentioned under the previous point, which eminently sets out the premise for Article 9. In the Commission's opinion, introducing a direct ‘European’ tax for citizens would bring the citizen closer to Europe, whilst Europe would gain ‘visibility’. The opposite could prove to be the case. The Commission's criticism — which the EESC endorses — of the Member States' attitude could also be applied, by analogy, to EU citizens. |
| --- | --- |

3.11.2

The EESC reiterates its previous comments regarding this report, which warrants special attention. However, the EESC believes it to be at an intermediate stage and considers that it warrants further discussion. Without wishing to discuss the three tax proposals mentioned under the previous point (the first of which is apparently to be discarded at the outset (10)) the Committee would draw attention to the Commission's comment mentioned under the previous point, which eminently sets out the premise for Article 9. In the Commission's opinion, introducing a direct ‘European’ tax for citizens would bring the citizen closer to Europe, whilst Europe would gain ‘visibility’. The opposite could prove to be the case. The Commission's criticism — which the EESC endorses — of the Member States' attitude could also be applied, by analogy, to EU citizens.

| 3.11.3 | The EESC notes that the Commission does not seek to raise taxes but rather to clearly indicate what percentage of taxes are accruable to national fiscal systems and what should be reserved for EU financing. Nevertheless, this observation fails to dispel the EESC's concerns. Whereas, on the one hand, explicit reference to a ‘European tax’ could result in greater transparency without raising the overall burden for the taxpayer, on the other hand, it is impossible to ignore the fact that some citizens in various countries are still opposed to the ‘European ideal’ or, at best, are ill-informed about it. A ‘European tax’ could, albeit inappropriately, add to the arguments against it. |
| --- | --- |

3.11.3

The EESC notes that the Commission does not seek to raise taxes but rather to clearly indicate what percentage of taxes are accruable to national fiscal systems and what should be reserved for EU financing. Nevertheless, this observation fails to dispel the EESC's concerns. Whereas, on the one hand, explicit reference to a ‘European tax’ could result in greater transparency without raising the overall burden for the taxpayer, on the other hand, it is impossible to ignore the fact that some citizens in various countries are still opposed to the ‘European ideal’ or, at best, are ill-informed about it. A ‘European tax’ could, albeit inappropriately, add to the arguments against it.

| 3.12 | The preceding paragraph concludes the EESC's comments on the Commission document. However, the EESC wishes to contribute to any future re-analysis of this subject by drawing the decision-making bodies' attention to some further considerations. In the EESC's opinion, transparent and readily applicable solutions would consist in:






  — | A gross contribution based on GNI per capita: the EESC has already raised this point in its Opinion on the Communication from the Commission to the Council and the European Parliament — Building our common future: Policy challenges and budgetary means of the enlarged Union 2007-2013 (11). |
| --- | --- | --- |

3.12

The preceding paragraph concludes the EESC's comments on the Commission document. However, the EESC wishes to contribute to any future re-analysis of this subject by drawing the decision-making bodies' attention to some further considerations. In the EESC's opinion, transparent and readily applicable solutions would consist in:

—

A gross contribution based on GNI per capita: the EESC has already raised this point in its Opinion on the Communication from the Commission to the Council and the European Parliament — Building our common future: Policy challenges and budgetary means of the enlarged Union 2007-2013 (11).

| — | A net contribution calculated on the basis of the gross contribution and corrected in accordance with the GCM, which would then become an integral part of the contribution mechanism, thereby avoiding subsequent rebates and adjustments. |
| --- | --- |

—

A net contribution calculated on the basis of the gross contribution and corrected in accordance with the GCM, which would then become an integral part of the contribution mechanism, thereby avoiding subsequent rebates and adjustments.

An approach of this type, whilst remaining open to future adjustments and corrections, would have the advantage of always reflecting the prevailing situation in each country, whilst obviating the need to revise the contribution structure.

4.   Concluding comments

| 4.1 | The EESC realises that the final decision, which will undoubtedly be influenced by political considerations, lies with the Member States. It is in its capacity as representative of civil society, in other words, of those who will ultimately bear the burden of contributions to the European budget, that the EESC puts forward these recommendations and proposals, hoping that they may be taken into consideration. |
| --- | --- |

4.1

The EESC realises that the final decision, which will undoubtedly be influenced by political considerations, lies with the Member States. It is in its capacity as representative of civil society, in other words, of those who will ultimately bear the burden of contributions to the European budget, that the EESC puts forward these recommendations and proposals, hoping that they may be taken into consideration.

| 4.2 | Civil society and, ultimately, the European citizen would point out that the mechanism for contributions to the EU's own resources is little-known, but more importantly, it lacks transparency. A GCM that is designed to reimburse contributions that have already been made, at the expense of other Member States rather than of the Community budget, would appear even less transparent. If we genuinely intend to ‘bring the citizen closer to Europe’, Member States must be aware of their responsibilities in respect of this frequently reiterated and acclaimed objective: communication must be based on clarity and accessible language. This responsibility lies primarily with individual national governments rather than with the Commission. National governments alone are in a position to communicate with their citizens since they understand their mentality and needs. Ultimately, the credibility of the European Union is the specific responsibility of the national authorities. |
| --- | --- |

4.2

Civil society and, ultimately, the European citizen would point out that the mechanism for contributions to the EU's own resources is little-known, but more importantly, it lacks transparency. A GCM that is designed to reimburse contributions that have already been made, at the expense of other Member States rather than of the Community budget, would appear even less transparent. If we genuinely intend to ‘bring the citizen closer to Europe’, Member States must be aware of their responsibilities in respect of this frequently reiterated and acclaimed objective: communication must be based on clarity and accessible language. This responsibility lies primarily with individual national governments rather than with the Commission. National governments alone are in a position to communicate with their citizens since they understand their mentality and needs. Ultimately, the credibility of the European Union is the specific responsibility of the national authorities.

| 4.3 | If the above-mentioned conditions are fulfilled, the proposal to set up a contribution system based on ‘European’ taxation might have some rational foundation. However, failing this, the proposed mechanism seems premature, to say the least. |
| --- | --- |

4.3

If the above-mentioned conditions are fulfilled, the proposal to set up a contribution system based on ‘European’ taxation might have some rational foundation. However, failing this, the proposed mechanism seems premature, to say the least.

Brussels, 12 May 2005

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

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(1)  OJ L 253 of 7.10.2000 p. 42

1

(2)  COM(2004) 505 final

2

(3)  COM(2004) 505 final vol. II

3

(4)  See table 1, page 4 of the Commission document (COM(2004) 501 fin.

4

(5)  See Table 4 of the above-mentioned document

5

(6)  COM(2004) 505 final

6

(7)  COM(2004) 505 final

7

(8)  EESC opinion on the Communication from the Commission to the Council and the European Parliament - Building our common future: Policy challenges and budgetary means of the enlarged Union 2007-2013 OJ C 74 of 23.03.2005 p 32, point 5.5.1.

8

(9)  COM(2004) 505 final of 14.7.2004

9

(10)  A tax on energy would be anachronistic in the light of the current and expected situation. (See EESC opinion on Tax policy in the European Union – Priorities for the years ahead, published in OJ C 48 of 21.2.2002, point 3.1.2.1.1. With regard to a tax on energy to protect the environment, the Committee has pointed out repeatedly that ‘the introduction of eco-taxes must not be allowed to lead to European firms becoming less competitive and to jobs being lost, especially in energy-intensive sectors)’

10

(11)  OJ C 74 of 23.03.2005, p 32, point 5.5

11

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APPENDIX

The following amendment was defeated during the course of the discussion:

Point 3.1.1.1

Delete.

Reason

There will be no change in the calculation of customs revenue or the cost of running the customs service, even if customs duties cease to be part of the EU's own resources. As trade policy falls within EU competence, it seems only natural that EU policy should embrace all aspects of it, including customs collection and customs revenue.

Outcome of the vote

For: 38

Against: 51

Abstentions: 18.

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