COMMISSION OF THË EUROPEAN COMMUNITIES 
Brussels, 30.04.1996 
COM(96) 187 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL. THE EUROPEAN PARLIAMENT 
AND THE ECONOMIC AND SOCIAL COMMITTEE 
AN INDUSTRIAL COMPETITIVENESS POLICY FOR THE 
THE EUROPEAN CHEMICAL INDUSTRY : AN EXAMPLE 

TABLE OF CONTENTS 
pages 
EXECUTIVE SUMMARY I 
table a : Actions enhancing chemical industry competitiveness V 
I. INTRODUCTION 1 
II. THE EU CHEMICAL INDUSTRY 1 
II.A Facts about the industry 1 
II.B Features of the industry 3 
II.C Challenges facing the industry 4 
II.C.l Better and more environmentally sound products 4 
II.C.2 Competitively priced products 4 
III. ACTIONS TO ENHANCE COMPETITIVENESS 5 
III.A Actions to improve the regulatory framework 6 
III.A.l The current framework 6 
III.A.2 Principles for future action 7 
III.B Actions to ensure effective competition 10 
III.B. 1 Effective competition internally 10 
III.B.2 Effective competition externally 12 
III.C Actions to strengthen intangible investment 13 
III.C.l Research and development 13 
III.C.2 Intellectual property 14 
III.C.3 The need for a scientific culture 15 
III.C.4 Training 16 
III.D Actions to develop industrial cooperation 16 
III.D.l Industrial cooperation within the EU 16 
III.D.2 External industrial cooperation 17 
IV. OPERATIONAL CONCLUSIONS AND WORK PROGRAMME 19 
V. ANNEXES 
table 1 : Output, trade in 1994 (Ecu Billion) 21 
table 2 : Top 30 chemical companies in the world (1994) 22 
table 3 : Employment (in thousands) 23 
table 4 : Growth rates ; 24 
table 5a : Most ingenious companies 25 
table 5b : Most ingenious companies 26 
table 6 : Capital spending (% of turnover) 27 
Application of principles for Regulatory Impact Assessment to the problem 
of nickel allergy - an example 28 
/* 
EXECUTIVE SUMMARY 
This Communication, drawn up in consultation with representatives from the European chemical industry, is 
within the framework of the 'Communication on an Industrial Competitiveness Policy for the European 
Union1 (EU). It seeks to identify the industry's main challenges and needs and to define a set of actions2 to 
enhance its competitiveness. 
1. The features of and challenges facing the EU chemical industry 
* The main challenge facing the European chemical industry is to strengthen its long term international 
competitiveness . by supplying its clients, in Europe and abroad, with high quality, environmentally 
sound and competitively priced products* In the light of this challenge and bearing in mind the need to 
maintain a level of profitability sufficient to ensure that investment continues in Europe, several key 
features of the industry have been identified : 
- Chemical products and environmental and health policy 
The chemical industry has a wide range of customers : big industrial sectors (e.g. automobiles and other 
means of transport, food and beverage, pharmaceuticals, textiles, construction); the agricultural sector 
for fertilizers and pesticides; and individual end-users for plastic packaging, paints, detergents, 
cosmetics, etc. Chemical products are closely related with everybody's daily life. Within Europe, there 
is thus a high level of awareness of the related health and environmental implications. This, as well as 
the actual risk and the complexity of the issues have given rise to an increasing number of regulations, 
frequently of national origin: such regulations should be founded on a sound scientific basis and their 
potential economic impact, including on the international competitiveness of this industry must be fully 
taken into account. 
- The European and global dimension of its markets 
In this context it is important to promote a level playing field, at least with the main OECD and newly 
industrialised competing countries, in terms of market access, environmental framework, and, if 
possible,competion rules, fiscal and social regulations. 
- Its dependence on imported raw materials and energy inputs 
Oil and gas, used in the production of petrochemicals and their derivatives, as well as industrial 
minerals required for the production of inorganic chemicals, are in general not endogenous to Europe 
and must be imported. Together with energy sources such as electricity and gas, which are supplied by 
European companies, these represent up to 60% of chemical companies' production costs. Effective 
competition requires that the unit prices for these inputs must not be distorted; whether in the third 
countries that supply them, or within the EU. 
- Its high reliance on capital and RTD 
Net assets higher than 1 Million ECU per employee, for a major part of industry (especially basic 
chemicals) and an average expenditure on research and technological development (RTD) of about 
5% of turnover, compel the chemical industry to seek high capacity utilisation rates in order to 
minimize fixed costs and maximise income. This involves : 
• continuing restructuring . tending towards production in the most efficient facilities and the possible 
closure of the least profitable ones. 
• an effort to ensure the largest possible markets, requiring the consolidation of an effective Internal 
Market within the EU and, access under conditions of undistorted competition to external markets. 
• increased efforts towards co-operative research, both with competing and user companies in more 
"horizontal" fields of RTD (promotion of recycling, greater use of information technology, etc.). 
• the continuous development of innovative new products and manufacturing processes, as a long 
term strategy in order to counter the increasing pressure from newly industrialising countries (e.g. 
Asia, Arabian Gulf states) particularly in products with lower value-added, and' from those 
'COM(94)319 , 
2See also "I able A / A 
industrialised countries (e.g. USA, Canada) benefiting from certain comparative advantages (raw 
material and lower energy prices, etc.) 
* These characteristics represent, by their diversity, complexity and interdependence, a genuine challenge 
for an effective implementation of an horizontal industrial competitiveness policy for the EU chemical 
industry. A number of courses of action and concrete measures have been identified in the context of the 
chemical industry ; these could be used as an example for similar industries. 
2. Basic principles and actions aimed at strengthening the international competitiveness of 
the EU chemical industry. 
In any market economy, each industrial company is responsible for the strategic decisions and initiatives 
it must take in order to maintain or strengthen its medium and long term international competitiveness. 
Nevertheless, public authorities have a role to play in creating the legal and economic framework and 
by adopting, if necessary, accompanying measures for the actions taken by industry. The actions to be 
developed by the Commission, industry and/or Member States are grouped around the four priority areas 
of the industrial Competitiveness Communication : 
2.1. Actions to improve the regulatory framework 
This improvement, in line with the recently adopted "Guidelines for Regulatory Policy", should 
concentrate on : 
- the consolidation, the updating and/or the simplification of the current regulatory framework for 
chemical substances and preparations. Among examples of such activities are the codification of 
the Directives on fertilizers, on limitations for placing on the market, and on detergents; the 
reshaping of the Directive on preparations, the simplification of the Directive on the protection of 
the health and safety of workers from the risks related to chemical agents at work and the 
simplification of procedures for the notification of new chemicals, especially by the SMEs, are 
other examples of such activities. 
- the application of a sound approach for all new possible regulatory initiatives concerning chemical 
products or facilities, involving : 
• a scientific evaluation of the risk that the substance, preparation or type of facility in question 
represents for health, safety and/or the environment and a comparison with the risks associated 
with possible substitute products or alternative processes; 
• an appropriate analysis of the costs and benefits of the options available at EU level, and also of 
possible national measures; 
• whenever possible and relevant, a comparative analysis of similar legislation, in force or under 
elaboration, in the most competitive third countries. 
If the results of these three types of analysis justify a new initiative, be it at international or at EU 
level, this should be implemented by means of the instrument which is the simplest and the least 
costly and which ensures a high level of health and environment protection. A wide range of such 
instruments exists : unilateral industrial initiatives, negotiated agreements at EU or national level 
(for which the Commission is preparing a general framework), economic incentives and regulatory 
initiatives at EU or, if possible and necessary, at international level. 
This approach will also apply, whenever possible, to current cases where, despite harmonization 
measures already taken, the internal market for chemical products is still fragmented: partial 
directives (asbestos); national requests for implementation of article 100A§4 (pentachlorophenol-, 
cadmium, creosote, ..) 
These different actions should be analysed and developed in co-operation with the representatives of 
industry and/or the Member States concerned. 
/o 
2.2 Actions to ensure effective competition 
The global dimension of the chemical industry and the need for the permanent adaptation of its structures 
will be taken into account by the Commission in the application of the competition rules, inside and outside 
the EU, in particular when : 
- analysing possible proposals coming from industry aiming at finding solutions to structural 
overcapacity in certain basic chemical industries, through appropriate actions by the companies 
concerned, provided the existence of such structural over-capacity is proved and the proposed action 
is compatible with the competition rules ; 
- pursuing efforts to liberalize the electricity and gas markets within the EU, which will allow a 
reduction of costs for the chemical industry, being an intensive energy user. 
- pursuing efforts for the effective use of trade instruments, and in particular for the elimination, among 
the members and in certain WTO applicant countries (Arabian Gulf states, China), of non-tariff 
barriers (double pricing systems for certain raw materials, registers of imports, etc); 
- exploring bilaterally, with the main trading partners (e.g. with the USA, through the Transatlantic 
Business Dialogue and the Joint Action Plan), and multilaterally new agreements on competition and 
international trade, in particular on the removal of barriers to international investment. 
2.3 Actions to strengthen intangible investment 
The increasing need for innovation in new, high quality chemical products for diversified markets and for 
the development of more efficient sustainable manufacturing processes, lead industry, the Commission and 
national authorities, to focus their efforts on RTD, education and scientific training, in particular on : 
- the continuation of co-operative research programmes at European level, not only between industries 
with similar characteristics (such as the SUSTECH and PRIMA initiatives for process industries such 
as food, steel and paper), but also with user industries (transport, construction) and with computer 
software suppliers (for greater use of information technologies); 
- a greater integration of the chemical industry in existing or future multi-sectoral initiatives (task 
forces, clusters), which will allow better access to the various Community programmes and an 
optimization of their results through a better coordination; 
- a greater flexibility in the development and revision of the Community-specific RTD programmes; 
- the improvement of patent protection for example for pesticides or products resulting from 
biotechnology; 
- the industrial initiatives aimed at improving young people's chemical education and the scientific 
training of workers which, together with the Community programmes SOCRATES, Leonardo da 
Vinci, certain sub-programmes of the 4th Framework Programme and actions eligible for Structural 
Funds,and with the necessary cooperation of the educational programmes of the Member States, will 
strengthen the essential educational and scientific basis for an innovative chemical industry, which 
must include education in health and safety of workers. 
2.4 Actions to develop industrial cooperation 
The complex and highly diversified structure of this industry - containing not only major multinational 
corporations, but also numerous SMEs - as well as the risks and the opportunities offered by certain 
international markets, require an intensification of actions for industrial co-operation. 
- The importance of the SMEs in a number of sectors and their essential role in the creation of jobs 
and subcontracting , requires the continuation and/or the development, by industry and the 
Commission, of actions such as: 
• the improvement of access by the SMEs to non confidential technical, economic and legislative 
information, through a more computerized communication system being developed by the 
European Chemical Industry Federation (CEFIC) and through the DG III coordinated network 
RISC (Reseau d'Information du Secteur Chimique.). The Bilbao Agency on health and safety 
will also be a source of impartial, validated information. 
• the promotion, among chemical industry SMEs of various Community programmes developed by the 
Commission to facilitate partnerships and subcontracting, to improve management techniques,etc 
Id. 
Ill 
- International co-operation projects, to be developed by industry, with the support of the Commission, 
can reduce the risks and increase the opportunities existing in third country markets : 
• for the countries neighbouring the European market (CEECs. certain NIS and the Mediterranean 
countries), training and technical assistance projects for national administrations and for 
managers within the chemical industry, in order to promote the progressive establishment of a 
regulatory framework (public and occupational health, environment, competition laws, etc.) 
similar to that of the EU, will help those countries which are candidates for accession, but would 
also allow the extension of the EU internal market providing more stable and homogeneous 
conditions of competition; 
• for third countries with fast growing markets (certain CEECs, China, South-East Asia and Latin 
America), training and technical assistance projects combined with other activities more centred 
on technology transfer and investment promotion, will allow better access ; 
• for countries rich in raw materials or energy resources (e.g. Russia, the countries of the Gulf 
Cooperation Council), investment in infrastructure or in industrial minerals will allow better 
access to these resources and perhaps better control over erratic prices. 
3. Conclusions. 
* The Commission considers that the chemical industry of the EU, though among the most modern and 
competitive in the world, faces a set of challenges that must be met if it is to maintain and, if possible, 
strengthen, its international competitiveness. 
* In order to do this, a set of actions to be developed or pursued, by industry, the Commission and 
Member States, has been identified in the present Communication. The Commission will implement, in 
co-operation with representatives from the European chemical industry, a structured follow-up 
programme, and will closely monitor the evolution of the international competitiveness of this sector 
and the adoption of the various measures proposed in this Communication. 
U 
IV 
TABLE A 
ACTIONS ENHANCING CHEMICAL INDUSTRY COMPETITIVENESS 
Actions 
1. Consolidate Internal Market legislative work; resolve 
asbestos, dioxins, PCP cases 
2. In absence of international level regulation, take account of 
competitiveness of EU industry prior to EU regulation 
3. Undertake risk assessment and adequate analysis of the costs 
and benefits for all new regulation or action 
4. Develop and widen Responsible Care initiatives 
5. Establish a Community framework for voluntary agreements 
in MS 
6. Assess rapidly mergers and joint ventures 
7. Continue to increase the transparency of State aids rules 
8. Liberalise energy, especially gas and electricity, markets 
9. Investigate causes of structural and cyclical overcapacity and 
capacity shortage 
10. Seek new WTO members apply tariffs of 0 %, 5.5 %, 6.5 % 
11. Pursue non-tariff barriers, especially double pricing 
(distorting investments incentives) 
12. Reflect the Transatlantic Business Dialogue suggestions to 
harmonize rules on classification, etc of chemicals 
13. Explore multilateral agreements for trade and competition 
14. Improve 4th RTD Framework Programme including Task 
Forces; develop 5th Framework Programme 
15. Promote SUSTECH and PRIMA approaches 
16. Enhance scientific and technological culture 
17. Implement Commission proposal for increased patent 
protection for crop protection products 
18. Develop RISC 
19. Intensify actions for SMEs 
20. Relaunch EASTT 
21. Enhance technical assistance on chemical legislation to 
CEECs 
22. Increase industrial cooperation with China and others Commis­
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I. INTRODUCTION 
1. The Communication will briefly describe the chemical industry and the challenges it faces, 
and will propose a series of initiatives to enhance its competitiveness. The initiatives or 
actions will be either those currently pursued or those to be undertaken by the 
Commission, by Member States and by industry. Those to be undertaken are contained in 
the paragraphs in bold type. The Commission's actions should be seen as part of the 
horizontal industrial competitiveness policy prescribed in the September 1994 
Communication1 which in turn built upon the 1990 Communication2 on industrial policy. 
The actions or initiatives will have particular relevance to the chemical industry but not 
only be applicable to it. The preparation of the Communication has involved consultation 
with representatives of industry from the earliest stages. Significant divergences of views 
between the Commission and industry are made explicit. This approach could be used as 
an example for other similar industries. 
2. Following a description of the industry and the foreseeable challenges it faces for the next 
ten years, the Communication will examine certain measures grouped under the four 
priorities of the industrial competitiveness Communication : improving the regulatory 
framework (there referred to as the modernisation of the role of the public authorities), 
ensuring effective competition, promoting intangible investment and developing 
industrial cooperation. A final chapter will seek to establish overall conclusions and a 
common work programme to ensure that the Commission and industry improve their 
working together to enhance competitiveness. 
II. THE EU CHEMICAL INDUSTRY 
II.A FACTS ABOUT THE INDUSTRY 
3. The chemical industry is very heterogeneous in character. Its principal activity is 
chemically transforming materials into diverse substances with new chemical and physical 
properties. Its main sectors can be grouped into: basic organic and inorganic chemical 
products; fertilizers and nitrogen compounds; basic plastics and synthetic rubber; 
pharmaceutical and medical products; speciality chemicals, which include agrochemicals, 
and specialty polymers; paints, varnishes and coatings; cleaning and polishing 
preparations; perfumes and toiletries; and man-made fibres. The industry is divided into 
two upstream sectors: basic inorganic chemicals and petrochemicals (or basic organics), 
while the rest of the sectors are downstream. The upstream sectors' outlets are almost 
exclusively the downstream sectors. This Communication will generally not cover the 
pharmaceutical sector which is already the subject of a separate Communication3, nor 
man-made fibres, though some of the statistics include data from these two sectors. 
4. The chemical industry is the EU's second largest manufacturing industry, just behind food, 
drink and tobacco, in terms of production, and electrical engineering in terms of value 
added. The EU is the world's most important producer of chemicals, well in front of the 
USA and even further ahead of Japan. Its positive trade balance is also bigger than that of 
chemical industries in the USA or Japan. 15 of the world's top 30 chemical companies 
have EU headquarters (a further three are in Switzerland) and the three largest are German. 
'COM (94) 319 An industrial competitiveness policy for the European Union 
2COM (90) 556 Industrial policy in an open and competitive environment 
3COM(93)718 
The EU chemical industry directly employs 1.65 million people and has a turnover of 
ECU 316 bn. (see tables 1,2) Another three million employees work in sectors using 
output of the chemical industry as direct inputs and thus depend on its competitiveness. 
5. Popular belief sees the typical chemical company as a large firm; this is true for 
petrochemicals, but small and medium sized enterprises (SMEs^) play a vital role in the 
chemical industry as a whole and overwhelmingly characterise sectors such as paints, 
specialty chemicals, cosmetics, basic pharmaceuticals and plastic processing. Eurostat 
data for 1990 show the chemical industry in the EU 12 comprised 32,700 enterprises (this 
excludes the plastics transformers). 87% of the enterprises have less than 50 employees, 
although they only account for 12% of persons employed and 16% of total turnover. 
Medium-sized firms, i.e. those employing between 50 and 249 employees, represent 
nearly 9% of total enterprises or nearly 17% of persons employed, and 16% of total 
turnover. 
6. Employment in the EU chemical industry fell by 4.4% in 1994, a year of good economic 
recovery. 1995 is also likely to have seen a decline though a smaller one. Although 1.65 
million people worked in the chemical industry in 1994, this figure has almost continually 
declined from the 1980 figure of 1.95 million (though with a plateau during the boom 
years 1987-1990). It might be noted that both the USA and Japan saw much smaller 
declines in chemical industry employment (table 3). Declining employment has been 
offset by improved quality of the workforce, e.g. even blue collar staff now require 
advanced education and training to cope with computer-controlled processes. The 
chemical industry has had to continually restructure in the face of global competition; 
declining employment is one indication of this. The basic chemical sectors have been 
especially affected by this : the fertilizer industry has seen its workforce fall from 140,000 
in 1980 to 28,000 in 1995. 
7. Certain parts, especially petrochemicals, are very cyclical, experiencing wild swings in 
prices and profitability. Some people have seen industrial cooperation measures as a 
possible means of avoiding the problems of excess capacity during economic downturns : 
high unit costs, cut-throat price cutting, large financial losses and a lack of investment in 
new technologies. Structural excess capacity is essentially the result of an inability to 
adapt the structure to the cycle, taking the appropriate measures which may include 
shutting down plants. New capacity coming on stream in a depressed market can add to 
the problem. 
8. The EU chemical industry is currently doing reasonably well in terms of profitability after 
several years of depressed earnings. Sustained worldwide economic recovery is certainly 
part of the reason for this. The gross operating surplus rose in 1994 to 13.5%. Real output 
of the industry grew 6% in 1994. 1995 will have seen lower growth but still a satisfactory 
rate, especially compared with the depressed years 1990-1993. But even with those poor 
years the EU chemical industry increased output while all manufacturing industry saw 
output fall in the early 1990s. Between 1985 and 1994 the chemical industry saw output 
increase faster than GDP, which in turn grew faster than total industry output (see table 4). 
The relative decline that has been affecting the EU's manufacturing sector as a whole is 
less prevalent in the chemical sector but the average return on capital employed across 
economic cycles is lower in Europe than in the USA or East Asia. 
9. The European chemical industry owes its current competitiveness to five principal factors : 
flexibility and willingness to restructure; a multinational structure favouring open markets 
and free trade; a heightened sense of responsibility towards the environment; a capacity to 
innovate; and a high quality workforce and management. 
II. B FEATURES OF THE INDUSTRY 
10. The chemical industry is a global industry with many multinational companies, though 
several product markets remain regional. In Europe a sizeable number of factories belong 
to American companies. European companies also have significant investments in the 
USA and other parts of the world. Many sectors benefit from significant economies of 
scale in production and distribution that may lead to global product markets. Trade as 
well as investment is important. 20% of EU chemical output is exported. 
11. In general terms, the industry is both capital and research intensive. Many parts of the 
industry see over ECU lm capital assets per worker employed. This means that there are 
very high fixed costs and a need for substantial cash flows. More than 5% of turnover 
goes on research and technology development (RTD). Intellectual property plays a vital 
role and becomes an increasingly valuable component of competitiveness : therefore the 
chemical industry is especially vulnerable to a lack of protection for intellectual property. 
Patents are a key indicator of efforts to acquire such assets. European-based chemical 
companies are among the world leaders in patent ownership (table 5). However the EU 
chemical industry cannot afford to become complacent in this area. As a whole the EU 
had only 36% of patents in the field of chemicals in 1987/9 period, no better than the EU 
average for all types of technologies. The USA has a higher than average share of patents 
in chemicals. 
12. In terms of capital spending, the European chemical industry appears less well placed 
against the USA and Japan. 1994 saw a slightly higher figure for investment in the 
European chemical industry compared with 1993, but this figure was 25% down on 1990. 
In contrast the US chemical industry significantly increased capital spending in 1994 and 
was spending 40% more than in 1990. Japan saw capital spending fall in 1994, a slight 
reduction from 1990 ( table 6). Different phases of the economic cycle explain some of 
this. 
13. Energy and gas-as-feedstock costs play an important role in the chemical industry as a 
whole, representing between 15% and 60% of manufacturing costs for most products. The 
vital importance of electricity for chlorine products and natural gas for fertilizers are just 
two examples. Much of the primary energy is imported into the EU as are many of the 
raw materials for the industry, especially for basic chemicals. This tends to lead to certain 
input cost disadvantages. 
14. Energy efficiency in the chemical industry has made substantial progress. The energy 
consumption per unit of output fell by 25% between 1960 and 1980 and a further 25% 
between 1980 and 1993. In many sectors energy efficiency is reaching its theoretical 
limits. Lower gas and electricity prices are therefore even more necessary for 
competitiveness. The Paris-based International Energy Agency produces data showing 
that industry in European OECD Members paid $169/toe for natural gas against $127/toe 
in the USA in 1993. Electricity prices to industry were 7.4 c./KWh ($866/toe) in OECD 
Europe and 4.9 c./KWh ($565/toe) in the USA. Furthermore, inside Europe energy prices 
vary by as much as 100% between Member States. 
15. The chemical industry produces products which affect everybody's life. This is part of the 
reason why there are special sensitivities surrounding the public and occupational health 
and environmental aspects of chemical products. Governments and the industry are fully 
aware of and respond to these sensitivities. 
II. C THE CHALLENGES FACING THE EU CHEMICAL INDUSTRY 
16. The EU chemical industry's aim is to retain or improve its place in the global economy and 
achieve a satisfactory return on capital. To this end, its objective is to supply its customers 
worldwide with the highest quality products, at the lowest competitive cost, in a healthy 
and environmentally sustainable fashion and on a long term basis. This requires it to 
generate sufficient profits from current sales to provide for the investment necessary to 
find new products. Furthermore, in a world of highly mobile capital, Europe must offer 
attractive rates of return on capital invested or see a dwindling of investment and a decline 
in activity therein. The objective of the Commission and Member States is to provide the 
best possible horizontal framework . to allow the chemical and other industries to fulfil 
their aims and objectives and ensure that this maintains or increases the level of highly 
qualified employment in the EU. 
II.C.l Better and more environmentally sound products 
17. New and higher quality products require innovation. These are the products that meet 
environmental concerns and consumer preferences, that can reduce car exhaust emissions, 
result in new fabrics or improve skin care. The challenge is to ensure that innovation 
continues to produce better products, with reduced environmental impact through the 
complete life cycle of the product. Innovation may represent an incremental improvement 
or a radically different set of molecules altogether. Innovation requires significant 
spending on RTD. It also requires excellence in the science base and an adequate pool of 
well educated scientists and researchers. 
18. Companies can decide on how much they spend on RTD but the public authorities must 
ensure that the population is well educated and should encourage a rational scientific 
debate over issues such as new products and processes.The authorities recognise the need 
for independent public sector research to address public concerns and perceptions in the 
acceptability of the risks involved. Furthermore, these authorities can inhibit innovation 
with requirements for the testing and registering of new products. Innovation is the key to 
guarantee and enhance the EU's industry competitiveness. There are reports from certain 
segments of the European chemical industry that the number of new products launched per 
year have fallen significantly over the past 15 years; a fall of 50% is reported by the dyes 
industry. There are indications that many of Europe's chemical companies are 
increasingly locating their innovation activities outside the EU - notably in the USA. The 
public authorities and industry must work together to address these worrying trends. In 
particular environmental legislation should encourage innovation while guaranteeing a 
high level of protection of the environment. It can best perform this dual role when 
appropriately integrated into other policies. 
II.C.2 Competitively priced products 
19. Competitively priced products are the only way the EU chemical industry will sell, make 
money, contmue to invest and operate. The challenge is to ensure that Europe can 
continue to produce good products at sufficiently low prices to compete with products 
made in other parts of the world. One way is to concentrate on those products and 
_4_ 
processes where Europe has a comparative advantage. Continual restructuring is 
necessary with the least efficient firms leaving a particular sector and the industry as a 
whole shifting investment from unprofitable sectors to profitable ones. Certain 
impediments to the process exist; barriers to exit, e.g. excessive state aid, are part of the 
challenge. 
20. Efficient resource allocation requires markets to work and as a global industry the EU 
chemical industry benefits from open markets worldwide. Such markets initiate continual 
restructuring but efficient resource allocation and real competitiveness indications can 
only be achieved if competition is effective. The EUshould ensure that foreign chemical 
producers abide by World Trade Organisation fWTO^ rules. 
21. Europe will continue to provide the basis for the EU chemical industry's sales but exports 
are a vital source of earnings. European firms have every interest in being present in those 
markets which are experiencing fast growth, in order to reap the benefits of economies of 
scale and reduce costs Most forecasters see the Pacific Rim as providing the fastest 
growing markets. EU firms are already present in all the Pacific Rim countries but need to 
be more present. China will probably be an important sales area for the next decade and 
the other East and South Asia countries will drive world sales. It is not easy to sell or 
engage in business ventures half way round the world but it is a challenge which must be 
met. This can be helped by ensuring fair conditions for free access to and investment in 
these countries. The Pacific Rim will also pose a major challenge as a supplier of 
chemical products to other parts of the world. 
22. Competing globally and being able to produce competitively through economies of scale 
requires minimum efficient scale sites and companies. Joint ventures or mergers offer two 
of the possible ways of creating companies large enough to obtain these advantages 
provided that such operations do not lead to an appreciable restriction of competition. The 
challenge is for the EU competition authorities to ensure that companies are allowed to 
grow big enough to compete, but not to allow such operations which can impede 
effective competition within the EU. However, SMEs also play an important role, 
especially in some sectors such as specialty chemicals and paints and varnishes where 
sales are made to final consumers. SMEs are often suppliers or customers of the larger 
companies and one key challenge facing the industry is how to improve this complicated 
but potentially highly flexible structure to reduce costs. 
23. The rationale for the Single Market is to allow firms to benefit from the economies of 
scale from a large market . The Single Market has certainly come a long way, but the 
challenge is to ensure that remaining barriers are abolished and that integration is 
improved. Certain specific national regulations for chemicals still exist. As with other 
industries, chemicals suffer from the lack of truly integrated railway or road transport 
networks. The still missing internal market for electricity and gas is a big drawback 
impacting negatively on the competitive position of the chemical industry. The lack of a 
single European currency is a further challenge with currency fluctuations causing major 
complications. 
III. ACTIONS TO ENHANCE COMPETITIVENESS 
24. To meet these challenges, industry, the Commission and Member States need to take 
specific actions. Some actions are currently underway and need reinforcing; but some 
new initiatives are required. The Commission, together with industry and the Member 
States, must act within the four priority areas for industrial competitiveness policy: 
-5-
improving the regulatory framework, ensuring effective competition; promoting intangible 
investment; and developing industrial cooperation. 
III.A ACTIONS TO IMPROVE THE REGULATORY FRAMEWORK 
25. Most of the chemical industry's activities have an impact on public health and the 
environment, and therefore many of the industry's domains of activity are regulated. More 
specifically, regulation covering production processes and products is of paramount 
importance for the chemical industry. Being a highly capital intensive industry, it is most 
important that the legal framework is as stable and predictable as possible. 
III.A.1. The current framework 
26. The legal basis of a Community legislative measure is determined, in accordance with the 
case-law of the Court, in the light of the objective pursued by this measure. Legislation, 
the objective of which is to guarantee free movement of goods within the Internal Market, 
is based on Article 100 A. When the objective of legislation is to protect the environment, 
the legal base used is Article 130 S. Article 118 A provides a mechanism for developing 
health and safety initiatives wich calls for cost effectiveness studies to avoid constraints on 
SMEs, a full scientific base for regulations and a tripartite consultation process. It enables 
Member States to maintain or introduce more stringent measures for the protection of 
working conditions. Article 129 provides the framework for the development of measures 
dealing with public health. 
27. Internal Market issues and environmental protection are closely linked to each other. 
When proposing Internal Market legislation, the Commission must take as a base a high 
level of environmental protection (Article 100 A3), while Member States wishing to 
"apply" (under Article 100 A4), "maintain or introduce" (under Article 130 T) stricter 
envrionmental rules than those in force at EC level must make sure, according to Article 
130 T, that such national measures are compatible with Treaty rules, including principles 
relating to the free movement of goods. 
Free movement of chemicals 
28. Chemical products move freely within the Internal Market. According to the principle of 
mutual recognition which has been derived from the "Cassis de Dijon" judgement4, 
products legally produced and marketed in one Member State must in principle be 
admitted in all other Member States. In order to identify cases in which a Member State 
has refused the free movement of goods, despite the fact that they were legally produced 
and/or marketed in another Member State, an information procedure has been set up under 
which the Commission and the Member States will exchange information, from January 
1997 onwards, on national measures which derogate from the principle of the free 
movement of goods. 
29. Whilst the principle of mutual recognition applies to all types of products, some Member 
State actions may have the effect of fragmenting the Internal Market. This places an 
obligation on the Commission to harmonise, that is, to propose Union-wide regulations 
which deal with the risk to health and the environment while assuring free circulation. A 
comprehensive framework for chemicals control has been created at Union level. The 
Community's direct contribution began with ad-hoc measures. Development of a 
harmonised system for classification, packaging and labelling of dangerous substances 
4 Case 120/78 Court of Justice 20 February 1979 
began with adoption of Directive 67/548/EEC. A harmonised system for limiting the 
marketing and use of dangerous preparations5 and substances6 followed. Harmonised rules 
for the classification, packaging and labelling of dangerous preparations were established 
by Directive 88/379/EEC. In more recent years, controls have been extended in a more 
programmed way to include notification of new substances7 and the systematic evaluation 
of existing substances8. A systematic approval system is to be set up for biocides. 
Moreover, a Community framework has been set up which lays down essential safety 
requirements that have to be met throughout the Community in order to allow for free 
movements of dangerous goods. The Community's legislative action in the field of 
chemicals has been generally appreciated in the sense that a single set of rules at Union 
level is, clearly, more efficient than fifteen different systems at national level. Further 
consolidation is of course possible and is already under way for dangerous preparations, 
fertilizers and detergents. 
30. Environmental conditions are different between the Member States and, for that reason, 
some Member States may wish to apply national rules going beyond Community 
legislation. The major challenge is to balance the need to develop and maintain the nternal 
market with the need for higher levels of environmental protection in those Member 
States. 
31. The Commission will continue to consolidate the internal market rules for chemicals 
to avoid difficulties, such as restrictions of trade, caused by different sets of national 
legislation. 
Environmental regulation and sustainable development 
32. Complying with environmental requirements is sometimes seen by industry as a non­
productive cost. However, environmental leadership can stimulate innovation for new 
technologies and products and thus provide a competitive advantage. Also, good 
environmental performance can bring about important savings in resources and contribute 
to creating a good corporate public image for each company. 
33. A key objective of both public authorities and industry is to enhance the international 
competitiveness of industry in a context of sustainable development. The concept of 
sustainable development involves economic, social and environmental aspects, as was 
concluded in the 1992 United Nations Conference on Environment and Development that 
met in Rio de Janeiro. The Fifth Environment Action Programme9 stresses that these three 
aspects are key elements in developing policies based on sustainable development. 
III.A.2 Principles for future action 
34. The internal "Guidelines for Regulatory Policy", adopted by the Commission on 16 January 
1996, constitute the basic reference for future proposals. The main objective is to make 
sure that the evaluation of policies reflects the common interest. The paragraphs below 
5 Directive 76/769/EEC 
6 Directive 79/117/EEC 
7 By the 6th Amendment to Directive 67/548/EEC 
8 Council Regulation 793/93/EEC 
9COM (92) 23 Final 
-7-
summarise how this could be pursued when legislation affecting the EU chemical industry 
is being prepared. 
35. Once a potential risk to health or the environment has been identified (often in a Member 
State), the Commission should decide whether or not to act. Perhaps no intervention is 
necessary and the matter can be resolved through mutual recognition of Member States 
rules. Article 130R.2 of the Treaty foresees that the precautionary principle is to be applied 
to environmental questions. This application could potentially occur when indications for 
a very high level of danger for the environment or the human health exist and risk 
assessment, for practical reasons, can not be carried out. 
36 A detailed analysis to justify intervention is also needed. In this context a risk assessment 
is first carried out according to Community principles. Then, having confirmed that an 
unacceptable risk does exist, detailed strategies for risk reduction are identified and the 
most cost-effective option is chosen. This process must involve an appropriate analysis of 
the costs and benefits of the options available. (See in annex an example of the proper 
application of such principles in the case of nickel) As far as proposals relating to the 
environment are concerned, Art. 130R.3 of the Treaty requires that in preparing its actions 
relating to the environment, the Community take account of the potential benefits and 
costs of action or lack of action. This is also foreseen in the Fifth Environmental Action 
Programme. The same should apply to Member States in their areas of competence. A 
proper economic and environmental analysis aiming at appraising the net benefit for 
society of a measure, sheds light on its efficiency and helps add more objectivity to an 
otherwise potentially emotional debate. CEFIC has to continue to provide proper 
scientific data (exposure of workers, toxicological studies) in order to facilitate the proper 
legal framework for an improved competitive environment. 
37 The Commission will carry out a comprehensive risk assessment and an adequate 
analysis of the costs and benefits prior to the adoption of proposals affecting the 
chemical industry. In areas where Member States intend to apply stricter rules than 
those in force at EU level, the Commission will encourage them to carry out the same 
analysis. When Member States already apply these stricter rules the Commission 
will, in the framework of the analyses that it carries out as regards the compatibility 
of national measures with Community law, pay special attention to the analysis of 
risks and to the cost-benefit aspects of such national measures. 
38. Deciding on the level at which intervention should take place is important. Will it be at 
international level (OECD, UNEP, PARCOM) or will it take place at EU level? 
Evidently, consideration needs to be given as to whether the risk is one that transcends the 
relevant territorial boundaries. Also, stricter regulation by the EU may affect the EU 
chemical industry's competitive position vis-à-vis the chemical industries in other zones of 
the world. International convergence of policies, one of the central issues of the present 
debate on trade and environment,10 is needed not only to avoid the temptation to use 
environmental and health protection arguments to justify protectionism, but also to prevent 
some countries from exploiting a comparative advantage as 'dirty producers' of chemical 
products. When rules in other industrial economies are less strict than in the EU, 
délocalisation of certain production lines may occur; this may also encourage imports 
from third countries of products whose production is no longer possible within the EU. 
10 See the (draft) Communication to the Council on trade and environment, Section I point 2.3 
39. When agreement at international level is not possible, the implications of new 
European environmental measures on the competitiveness of the chemical and other 
industries will be taken into account. It might be preferable to involve at least the 
OECD countries and advanced developing countries in environmental rules. 
40. The most appropriate type of action must be selected. Besides regulation, voluntary action 
and economic instruments can play a complementary role in achieving desirable health 
and environment targets. Voluntary agreements and economic instruments are more likely 
to be effective in improving environmental performance than in regulating the free 
circulation of chemicals. 
41. Voluntary action can take the form of unilateral industry programmes, such as the 
chemical industry's Responsible Care Programme or the Voluntary Energy Efficiency 
Programme (VEEP). Voluntary approaches and agreements reflect bilateral cooperation 
between public authorities and industry and may serve to achieve Community objectives. 
One high-profile example where voluntary sectoral agreements can play an important role 
is in reducing CO2 emissions, provided that they include quantified reduction targets. 
This approach is favoured by industry instead of a C02/energy tax. Examples of voluntary 
actions concerning products at international and EU level include the reduction of risks 
from brominated flame-retardants (implemented at OECD level) and the labelling of 
detergents (implemented at EU level). Another example of voluntary action is the 
substitution applied by industries in some Member States of some dangerous pesticides by 
less dangerous ones. 
42. Industry will develop and widen Responsible Care initiatives and other 
environmental management systems leading to better overall environmental 
performance. It will develop new processes and products that are more 
environmentally friendly and more resource effective and invest in new equipment 
and facilities which decrease emissions and energy use (Voluntary Energy Efficiency 
Programme (VEEP)) 
43. When preparing voluntary agreements, attention should be paid to conformity with 
competition rules, since voluntary agreements which imply cooperation among firms may 
pose problems with regard to potential anti-competitive practices by participating firms. 
Where such voluntary agreements fall within the scope of Article 85 §1 of the Treaty, they 
may nevertheless benefit from an individual exemption provided that the conditions of 
Article 85§3 are met. 
44. As far as the use of voluntary approaches or agreements is concerned, a Community 
framework is under consideration, aiming at establishing criteria within EU 
environmental policy and at ensuring that such agreements do not fragment the 
Internal Market. 
45. Economic instruments are becoming widely used in the environmental field. In particular, 
public authorities can influence the environmental choices of companies and consumers 
through taxation. As a rule, fiscal instruments e.g. incentives for accelerated depreciation 
are decided at Member State level, taking into account the Commission policy on state 
aids and, in particular cases, specific provisions for fiscal instruments in Council 
Directives11. The CO2 dossier has shown the difficulties of reaching unanimous agreement 
11 [An example is Art. 15 of Directive 94/62/EC on packaging and packaging waste (O.J. n° L 365, 
31.12.94,pl0)] 
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on environmental-related taxes. To date, some Member States (Denmark, Finland, the 
Netherlands and Sweden) have unilaterally proceeded with national schemes, including 
exemptions for certain activities. They think that economic instruments are a cost-
effective way to deal with environmental problems. In order to avoid unfair competition 
and distorted resource allocation, these exemptions must respect the conditions laid down 
in the framework for environmental aids, which was adopted by the Commission in 
December 199312. At the request of the ECOFIN Council, the Commission is currently 
considering the possibility of devising a new approach for the taxation of energy products 
which will deal, at a Community level, with the problem of competition, whilst creating a 
framework within which Member States can, if they so wish, pursue other specific policies 
such as reduction of CO2 emissions. However, the EU chemical industry is not 
convinced that environmental levies are a good way of addressing environmental issues. 
46. In addition, a communication on environmental levies is under consideration by the 
Commission. This Communication will give Member States guidelines on how to 
reconcile the use of economic instruments to achieve environmental targets with the 
requirements of the Internal Market, while strictly observing inter alia the above-
metioned framework for environmental aids. 
III.B ACTIONS TO ENSURE EFFECTIVE COMPETITION 
47. The chemical industry, comprising many firms operating across several Member States 
and indeed operating as multinationals in the global economy, requires effective 
competition inside and outside the EU. 
III.B.1 Effective competition internally 
Competition law, mergers and joint ventures 
48. The competitiveness of the industry as a whole requires that large companies should not 
abuse possible dominant positions, nor engage in anti-competitive practices. The 
competition authorities should allow mergers or joint ventures which do not threaten to 
lead to an appreciable restriction of competition and disallow those which do. In this 
context it is particularly necessary to assess how the partners are placed on the market 
which is increasingly global, especially for certain basic chemicals and advanced 
technologies. 
49. The Commission will ensure that both cooperative and concentrative joint ventures 
are assessed rapidly. The Commission has submitted a Green Paper on the revision 
of the Merger Regulation which is presently being discussed with the Council and 
European Parliament. The Commission is seeking to lower the thresholds for the 
Merger Regulation removing the need for multiple notifications and creating a real 
'one stop shop'. 
Cycles of excess capacity and capacity shortage 
50. Many capital-intensive industries are prone to cycles of excess capacity and capacity 
shortage and the petrochemicals sector is particularly vulnerable. The problem is easy to 
identify, the development of effective mechanisms to address the issue is much harder, 
particularly in a competitive climate where each firm believes it will succeed and even 
capture market share from others. Furthermore, in the petrochemicals sector, the cycles of 
12O.J. n°C72, 10.3.94, p. 8 
-10 
capacity excess and shortage may have causes and consequences outside Europe and a 
global analysis would be appropriate. The industry is providing certain input for the 
Commission work as part of a scenario-planning exercise. 
51. The Commission will encourage restructuring in cases of structural inadaptation and 
will investigate the causes of cyclical and structural capacity mismatches in 
petrochemicals when assessing whether any form of industrial cooperation might 
alleviate the apparent problems without infringing competition rules. 
State aid 
52. State aids should not give unfair advantages to some chemical companies, allowing less 
efficient producers to maintain or even increase market share, lowering the efficiency and 
thus competitiveness of the industry as a whole. The industry should also not face unfairly 
subsidised competition from other sectors. The chemical industry contains many capital 
intensive activities and has an interest in minimising distortions caused by state aid. .In 
determining which State aids are allowed, the Commission will continue to apply 
transparent and objective criteria. Sectoral aid frameworks may discriminate against small 
entreprises and new-comers. The new synthetic fibres framework, for example, has 
reduced this distorting effect,which was present in the former one. The revised framework 
for state aids for SMEs makes it easier for all small companies to invest in intangible 
investment. 
53. The Commission will continue its efforts to increase transparency in the rules on 
State aid and in its administration of State aid cases to reduce the overall amount of 
state aids granted, and to minimise the distortions such aid can cause. The 
Commission will continue to study a horizontal control system for regional aid to big 
investment projects, which would set up a multisectoral discipline. 
Prices of energy and other inputs 
54. Effective competition requires unrestricted access to inputs at world market prices if the 
EU is not to be disadvantaged. Energy is one key input. However, agricultural based 
products, e.g. sugar and starch, which serve as basic products for certain fine chemicals 
and specialties should also be included. 
55. Much work has already been done in identifying the remaining obstacles to the integration 
of energy markets, and some progress has been made in removing barriers. However, it 
has to be recognised that within the energy sector, the markets for electricity and gas are 
still far from being open and competitive. An industry like the chemical industry, being 
exposed to global competition needs to benefit from competitive energy input prices 
which can only be assured through the realisation of internal energy market. Large 
industrial users, will gain particular benefits in terms of lower costs, thus leading to direct 
and indirect advantages to all consumers, increasing global industrial competitiveness. 
56. The Commission will continue efforts to liberalise energy markets in the EU, leading 
to more efficient energy production and distribution and also to cheaper energy 
inputs for the chemical and other industries. Effective third party access for gas and 
electricity is one major element of such liberalisation. 
11 -
III.B.2 Effective competition externally 
57. Externally, effective competition requires the Commission to create a level playing field 
and ensure that the newly-created WTO works effectively. The long term objective of 
both the Commission and the European chemical industry is to eliminate all barriers to 
trade. Tariffs for chemicals in developed countries are relatively low and will decrease 
further and be harmonised at 0%, 5.5% and 6.5% thanks to the Uruguay Round in which 
the industries of the EU, USA, Canada and Japan played a major role. Developing 
countries, especially the richer, more advanced nations such as Malaysia, Thailand, Brazil 
and Mexico and China, should be encouraged to reduce their tariffs to these harmonised 
rates. 
58. The Commission will seek to ensure that new members of the WTO , especially those 
that are relatively advanced, apply the harmonised rates for chemicals, from the 
start. Efforts to reduce others' tariffs will also be made. 
59. Non-tariff-barriers or measures, and in particular double-pricing of raw materials and 
feedstocks, distort trade. The latter is of particular concern to the petrochemical industry 
for whom feedstock double-pricing in certain developing countries causes unfair 
competition. Among the various means available to tackle this problem, countries 
intending to join the WTO should, when possible, be obliged to refrain from applying such 
practices. Double-pricing of natural resources may have a distorting impact on trade-
flows and on investment decisions. Testing and certification problems also frequently 
represent non tariff barriers to trade in chemicals, with China and Poland being recent 
sources of such difficulties for EU exporters. Special registration and mandatory 
declaration procedures that distort trade should be ended. Although not considered illegal 
measures by the WTO, technical rules on the classification, packaging and labelling of 
dangerous chemicals and preparations and on Prior Informed Consent for trade in 
hazardous substances which differ from region to region, also constitute barriers to trade. 
Whilst the United Nations is trying to promote global harmonization of these rules the 
work is proceeding only slowly. There are moves to accelerate this through joint EU/USA 
leadership. 
60. In consistency with its market access initiative, the Commission will seek to address these 
problems firstly by using all available instruments at multilateral level and in particular by 
being vigilant to ensure that the Community's trading partners adhere to WTO obligations 
and respect them. It will also, whenever appropriate, raise market access issues in the 
context of its bilateral relations with third countries as well as pursue other policies such as 
the promotion of international industrial cooperation. 
61. The Community adopted the Trade Barriers Regulation (TBR) in December 1994 to 
address non-tariff-barriers and other trade distortions. It will act upon a complaint 
by a company or industry concerned. Imports into the Community subject to 
injurious dumping and subsidisation will be combated, though a rigorous application 
of the updated commercial policy instruments, further to a valid complaint from the 
company or industry concerned. The Transatlantic Business Dialogue (TABD) 
contains working groups covering inter alia certification, regulation and trade 
liberalisation. If the TABD so recommends, the Commission could reactivate 
bilateral discussions with the USA to harmonise the rules on classification, packaging 
and labelling and Prior Informed Consent, first bilaterally then globally. 
12-
62. The international dimension of competition policy, combined with the lack of international 
rules, also affects competitiveness. This is particularly damaging when the nature of the 
market is global. One example is the export cartel of US rock phosphate producers, which 
prevents EU fertilizer manufacturers gaining access to phosphate at prices low enough to 
compete with US-made phosphate fertilizers. Trade and competition is an important issue 
on the new trade agenda. The Commission will seek a multilateral agreement whose main 
elements would be the creation of a framework based on a set of common rules, a binding 
positive community instrument and a dispute settlement procedure. 
63. Coordination between the competition authorities in the EU and USA is already assured 
via an agreement. Similar arrangements are being considered with other countries, e.g. 
Japan. The Europe Agreements incorporate rules on competition with implementing 
provisions similar to those of the EU/US agreement. Such rules are also included in the 
agreements being concluded with Mediterranean countries. 
64. The Commission plans to explore international agreements on competition law -both 
bilaterally and plurilaterally. The Commission will evaluate, on a case by case basis, 
possibilities and benefits of the incorporation of competition rules in new cooperation 
and association agreements, in order to remove barriers to trade in these countries. 
In addition, within the OECD, work on International Investment might permit the 
reduction of such practices as double pricing. This will tackle export cartels and 
barriers to market access caused by coordinated practices between domestic 
producers. 
III.C ACTIONS TO STRENGTHEN INTANGIBLE INVESTMENT 
65 A company's competitiveness on the eve of the 21st Century depends increasingly on its 
innovative power13 in terms of processes, products, work organisation and the rapid 
dissemination of new technologies. Investment in research and development, intellectual 
property, training, health and safety, data processing and the whole panoply of areas 
covered by 'intangibles', is essential if the chemical industry is to remain competitive. 
Research productivity is a major target, taking into account the contribution of research to 
standards and regulations, the role of RTD in promoting rapid absorption of new 
technologies in particular by SMEs, the need for a more coherent and coordinated public 
intervention and private efforts in RTD. Furthermore, the chemical industry will continue 
to give due attention to education and training issues involving chemistry and chemical 
engineering; and to reinforcing the science base of industry. Innovation in the chemical 
industry also has an important effect on other sectors e.g. vehicles and electronics. 
III.C.l Research and development 
66. The chemical industry has long realised the importance of RTD leading to innovation in 
products and processes as a fundamental source of competitiveness. Until recently it has 
tended to avoid collaboration with its competitors. Although it has been involved in 
previous Framework Programmes, this was relatively low key given the level of its own 
RTD capabilities. However, growing pressure from society to develop 'cleaner' 
technologies and to maintain a competitive position in the global market, coupled with 
high costs and high risks for such RTD, have made participation in the 4tn Framework 
13See 1995 Green Paper on Innovation 
-13 
Programme more attractive and important for the chemical industry. This has led industry 
to launch SUSTECH, an initiative extending beyond the chemical industry, aimed at 
promoting collaborative RTD in technologies for sustainable process industries in Europe. 
The term "sustainable" is used in this context to mean process industries which are 
resource and energy efficient and which generate the minimum of waste and damage to the 
environment. 
67 Within the current 4m Framework Programme, specific programmes such as Industrial and 
Materials Technologies (BRITE-EURAM), Standards Measurement and Testing (SMT), 
Information Technologies (ESPRIT), Environment and Climate and Marine Science and 
Technology and Biotechnologies finance a large number of projects relevant to the 
chemical industry. To take two examples: within ESPRIT, the PRIMA initiative involves 
16 large companies from the chemical, food and beverages, steel, paper and utility 
industries and is designed specifically to strengthen the competitiveness of Europe's 
processing industries by securing the maximum business advantage from information 
technology; within BRITE-EURAM the ADMIRE project involves several chemical 
companies cooperating on new design methods for large scale gas liquid reactors. 
68 The creation of Task Forces has been an important step to promote better coordination 
within industries and European authorities in RTD Programmes : the chemical industry 
can and should participate actively in the car, train and plane of the future projects as well 
as in water technology and healthcare subjects. Concerns over competitiveness mean that 
the structure of the RTD programmes needs to support cross-disciplinary working, to get 
results to market faster and to make processes simpler and more flexible. Part of this can 
be achieved by thematic clusters, whose aim is, through coordination and integration, to 
secure added value by improving synergies, facilitating technology transfer and catalysing 
the dissemination and exploitation of results. Clusters can also be based around particular 
suppliers or user groups, such as the process industries and include demonstration and 
application-oriented actions. 
69. The 4*n Framework Programme will continue to support collaborative RTD 
initiatives of the chemical industry . The research-industry Task Forces combine 
other Community policies with RTD and application projects. This model has 
already proved its worth and could be extended . 
New thematic clusters could arise directly out of industry and user demands, with 
the chemical industry playing a key role as a vital supplier. The Commission is 
seeking industry input on the orientations for the 5th Framework Programme. 
III.C.2 Intellectual property 
70. Intellectual property is a vital asset in the competitiveness of the chemical industry . The 
patent system allows companies to recoup the investment they put into RTD. One threat 
to European competitiveness has been the short effective life of the intellectual property 
protection afforded to pharmaceuticals and, still today, to crop protection products. 
Though the patents themselves last 20 years, their effective life is as short as ten years 
because of the time taken between patent granting and the bringing of these products onto 
the market . This long period is because of the stringent and lengthy testing procedures 
necessary for such powerful chemicals. 
14-
71. Although an additional patent protection term of up to five years has been granted for 
pharmaceuticals via a Supplementary Patent Protection Certificate scheme14 , the same is 
now about to be adopted for crop protection products15 . Its early adoption is important in 
ensuring Europe remains the global leader in RTD and production of crop protection 
products when, as hoped, it is fully adopted by Council in early 1996. 
72. Biotechnology is an important factor for future competitiveness, since it is a technology 
that can provide high added value products, which address people's needs (e.g. drugs to 
fight so far incurable diseases, improved crop plants which allow the application of more 
environmentally-friendly growing methods or which are less affected by severe climate 
conditions -drought, cold-, etc.). Biotechnology is therefore a key part of the activities of 
certain chemical companies, but suffers from a number of shortcomings in its legislative 
framework, among which is the lack of harmonised patent protection in Europe. Without 
a clear and risk-based legal framework, research and production will increasingly take 
place in Japan and the USA, already the global leaders in this field. The European 
Parliament rejected a proposal to harmonise and improve patent protection for 
biotechnological inventions. A new Commission proposal was put forward in December 
199516. It makes a clear distinction between invention and discovery. If accepted, this 
new proposal will contribute to a more innovative climate and will provide a harmonised 
basis for patent protection within the EU It will ensure the patentability of 
biotechnological inventions in Europe while taking into account ethical aspects. 
73. The Commission has also just proposed a modification to the rules on the contained use of 
genetically modified micro-organisms, which without jeopardising the current high level 
of protection for human health and the environment, aims at making the Directive more 
risk-based and at increasing its flexibility. The proposal is streamlining the administrative 
procedures for certain no and low risk activities, thus eliminating regulatory redundancies 
which are not justified by safety reasons and which therefore cannot fail to have a negative 
impact on Europe's capacity to innovate, while maintaining a sufficient transparency for 
the consumers. Furthermore, the recently revised block exemption on technology transfer 
offers the indispendable legal security for agreements on licensing intellectual property 
which is of particular importance for the biotechnology sector. 
III.C.3 The need for a scientific culture 
74. The EU chemical industry is worried about the decline of the scientific culture in Europe. 
To remain a global leader, industry needs a scientifically literate workforce and 
governments which take decisions based on scientific principles. Too many 
schoolchildren and university students believe science is 'too hard' or 'too dirty' for them. 
More must be done by national governments, and to whatever extent possible by the 
Commission to foster an atmosphere which is pro-science. 
75. Industry will intensify efforts to improve the scientific and technological culture in 
Europe. Under the title of "Education, Industry Partnership", CEFIC has already 
launched three actions: 'Chemical Industry and the Young' is a multi-annual 
programme to nurture in the under-18s a better understanding of the fundamentals 
1 Regulation 1768/92 
15COM(95) 456 Final 
16COM(95)661 Final 
-15-
of science and an awareness of the benefits and risks brought by the chemical 
industry and the means used to reduce such risks. The 'Science Education Award' is 
an annual competition to find the best European science teachers. The 'Museums 
Project* is aimed at renewing chemistry exhibitions in Europe's museums. The 
Commission also emphasises the need for a strong scientific and technical base 
within education in its published White Paper, "Teaching and learning : towards 
the learning society"17. The SOCRATES programme funds educational exchanges 
and promotes the use of new technologies in schools. 
m,Ç,4 Training 
76. Training is a major area of Commission activity and can play a role in improving the 
climate for science. Three separate sets of Community financial supports contribute to 
improved training: The Leonardo da Vinci programme seeks to promote actions to 
improve the quality of training policies and practices and to develop new ways of learning 
through pilot projects, exchanges and placements as well as surveys and analyses in the 
context of transnational partnerships. The 4th RTD Framework Programme, already 
referred to, provides specific financial aid for research projects linked with training and 
long distance learning. The fourth activity of the Framework Programme concerns the 
stimulation of mobility of researchers, with the aim of promoting a quantitative and 
qualitative increase in human resources within Europe. The objectives are to stimulate 
training through research and to improve transnational mobility and cooperation. In some 
RTD programmes, specific training is also included as an accompanying measure to 
research projects, as for example the industrial training of young candidates through 
participation in a research project within the BRITE-EURAM programme. One specific 
programme Environment and Climate, also finances projects in socio-economic areas 
including examination of the best way of diffusing innovation and projects to facilitate 
exchanges and further research. The Structural Funds provide financial assistance for 
training and development. Such finance can come either from national programmes or 
Community initiatives. ADAPT and the new Objective 4 programmes are particularly 
focused on training. The incorporation of health and safety within such training 
programmes is equally important as a cost effective approach and a contribution to 
competitiveness. 
77. The future RTD Framework Programmes will provide further opportunities to 
support training through research. The Structural Funds will continue to target 
training as a component to enhance competitiveness. A new call for proposals for the 
Leonardo da Vinci programme for 1996 has been published on 29 February 1996. 
III.D ACTIONS TO DEVELOP INDUSTRIAL COOPERATION 
78. Industrial policy measures involving industrial cooperation have an internal and an 
external dimension. Both sets of measures seek to make businesses more competitive by 
giving them opportunities they would not have as isolated players, by facilitating the 
transfer of non confidential knowledge and experience between companies. 
III.D.l Industrial cooperation within the EU 
Chemical sector information network 
17COM (95)590 
-16-
79. One area of industrial cooperation is in the field of better information and communication. 
The Commission has set up a comprehensive network for the chemical sector: 'Le Réseau 
d' Information pour le Secteur Chimique (RISC)" to allow it and industry to be better 
aware of the activities and desires of the other. The main aim of RISC is to create a 
synergy between the various private and public operators in order to encourage dialogue 
and to allow the exchange of information between the Commission and industry via 
European federations. The current activities within the network are to exchange, collect, 
process and analyse the data in various fields such as economics, foreign trade and the 
legislative area while fully respecting competition laws. 
80 RISC will be further developed including increased integration with industry 
federations, thus gaining maximum benefit from electronic data transmission. RISC 
will also enable other European federations to be better integrated into the policy 
making process. The Commission and industry will continue to devote significant 
resources to improving communications, in particular linked with the means 
provided by the Information Society. Investment in information technology will 
continue to increase. Better links will be created to harness the results of advances in 
information technology to the needs of the chemical industry thereby enhancing its 
competitiveness in concrete terms. 
SMEs 
81. There are numerous programmes and support measures in favour of SMEs under both 
Enterprise policy and other Union policies to improve the business environment and to 
support the creation and development of SMEs. In March, the Commission presented a 
proposal for a Council decision on a new Multi-annual Programme for Enterprise and 
SMEs to cover the period 1997-2000 which will provide the legal and budgetary basis for 
the Community's specific enterprise policy actions18. While these policies are not 
specifically geared towards the chemical sector, there are some which are particularly 
interesting to chemical SMEs. The Euro-Info-Centres, provide a business information 
network and act as a 'first stop shop', the B.C. Net, Europartenariat and Interprise 
programmes provide co-operation opportunities, and there are other measures aimed at 
improving SMEs' management capability, access to finance and technological know-how. 
One specific example of an area for enhanced competitiveness is certification to 
international quality standards. This is difficult for chemical industry SMEs to achieve but 
Quality Assurance Certification is vital for their ability to sell. SMEs should be 
encouraged and assisted to obtain it. The proposed SAFE programme will also contribute 
to supporting improved quality management within SMEs. 
82. Specific action is underway to enhance the competitiveness of chemical SMEs and promote 
better links between SMEs and between them and bigger companies. CEFIC, other 
federations and the Commission are involved in studies to understand better how SMEs 
function in the chemical sector and on what their competitiveness depends. To this end their 
role in subcontracting, employment-creation and exporting will be carefully examined and 
proposals made to enhance their competitiveness. 
III.D.2 External industrial cooperation 
l8COM(96) 98 Final of 20 March 1996 
- 17-
83. The role of the Commission is to set the framework for individual companies to undertake 
investment or other forms of industrial cooperation. It is for individual firms to decide with 
whom and how to cooperate. The Commission has a more direct role to play in cooperation 
involving more state controlled economies. Industrial cooperation benefits the recipient areas and 
European industry. In all areas direct investment by chemical companies will provide much 
needed capital for the host countries and ensure better allocation of resources. It also provides 
opportunities for access to and a presence on new fast growing markets. 
84. No single industrial cooperation strategy is appropriate for all the different regions of the world: 
each region's specificity requires a particular regional orientation within a common set of 
institutional instruments. Outside the Transatlantic Business Dialogue and specific cooperation 
with Japan, three non-mutually-exclusive types of industrial cooperation can be highlighted : that 
with regions close to the EU, including Central and Eastern European Countries (CEECs)^, 
Russia and some Newly Independent States(NIS), and the Mediterranean; that with fast growing 
economies, which includes China, ASEAN and Latin America; and projects which improve 
access to raw materials including energy. Industrial cooperation is a feature within the PHARE 
and TACIS programmes and ECIP (European Community Investment Partners) and AL 
Invest for Latin America, and Med Invest for the Mediterranean. Furthermore, industrial 
actions in favour of the African, Carribean and Pacific (ACP) countries are carried out 
under the "Lomé IV Convention". That Convention has a chapter on "Industrial 
development, manufacturing and processing", that provides inter alia for (i) industrial joint 
ventures between EU and ACP companies, (ii) support to "engineering, metallurgical and 
chemical industries", (iii) transfers of technologies, (iv) external investment in favour of 
ACP industrial companies, (v) training, (vi) research. Under the same Convention, the 
Centre for the Development of Industry (CDI) was established to foster the industrial 
development of the ACP countries. 
Regions in close proximity 
85. The pre-accession strategy, designed to prepare those countries of Central and Eastern 
Europe so desiring it for EU membership, defines the framework for structured dialogue 
between the EU and CEECs and provides a concrete vade-mecum for the exercise in 
legislative compatibility: the White Paper on the preparation of associated CEECs for 
integration into the EU internal market. The chemical industry has a direct role to play in 
the process. The Commission has developed contacts with CEECs in order to clarify 
certification procedures which were incompatible with EU procedures. Cooperation 
between EU and CE EC producers of detergents and cosmetics have allowed certain 
CEECs to better understand certification legislation in the EU and move to adopt similar 
legislation themselves. The Cosmetics Federation (COLIPA) organised a meeting with 
Eastern European national authorities and cosmetics producers in Prague in late 1995. The 
Fertilizer Manufacturers Association (EFMA) has also been involved in a project to 
encourage better fertiliser use in Russia. 
86. The Commission, together with the participation of the federations and companies 
concerned, will continue to provide technical assistance to the CEECs with legislation 
for future membership,in support of investment and development of harmonised 
institutional frameworks . EU industry will cooperate with industry in the CEECs 
and national administrations to ensure that such legislation is operated in such a way 
as to avoid unnecessary administrative burdens or barriers to trade,as well as 
exports from these countries distorted by lower levels of environmental protection in 
their chemical facilities. It will also pursue specific industrial cooperation themes in 
19See the Commission Communication on Industrial Cooperation with the CEECs, COM(95) 71 Final 
-18-
the mixed committees set up with CEECs by the Association Agreements and develop 
industrial cooperation with the Mediterranean. 
87. Cooperative actions in support of management training and other areas for CEEC 
chemical companies in which CEFIC is already involved may continue to be financed 
by PHARE subject to the priorities of theses countries. Industry will relaunch the 
EASÏT technology for environment programme for CEECs with the objective of 
providing the best practice techniques and know-how to ensure environmental 
performance and standards in the pre-accession countries will be compatible with 
EU membership. 
Presence on fast-growing markets 
88. China is a huge market with enormous potential. Many EU chemical companies are 
already investing in China but the Commission has a role to play to ensure China 
continues to welcome such investment. In order to facilitate and to promote investment 
one task of the Commission has been to encourage China to adopt regulation frameworks 
compatible with EU regulations. Some actions in the field of certification and quality 
have already been completed. COLIPA is cooperating with Chinese cosmetic producers 
on regulations for cosmetics. 
89. The Commission will develop industrial cooperation with China and other E. Asia 
countries and Latin America to ensure EU industry is well placed in their 
development and to take advantage of these fast growing markets. The main issues 
will revolve around chemical product legislation (especially for China), technology 
transfers, successful joint ventures and other forms of foreign direct investment. 
Environmental issues will be a growing concern and subject for industrial 
cooperation projects. 
Access to raw materials including energy 
90. Industrial cooperation projects can improve access to raw materials. One possible set of projects 
would be to extend the western European petrochemical feedstock pipelines into Central and 
Eastern Europe and even into Russia. Gas pipelines originating in Russia could also be developed 
specifically to supply European chemical companies. There are ideas to develop gas supplies 
from the Gulf region. Industrial cooperation could involve the Gulf Cooperation Council (GCC) 
and Mediterranean countries, for example to bring such gas overland from Saudi Arabia to a 
North African port. 
91. The Commission will favour projects which improve access to raw materials and energy and 
put in place mechanisms to encourage EU companies to undertake such initiatives. 
IV. OPERATIONAL CONCLUSIONS AND WORK PROGRAMME 
92. The EU chemical industry is the EU's second largest manufacturing industry and the world's most 
important producer of chemicals. It also accounts for 30% of RDT spending by the EU 
manufacturing sector. It must meet many challenges if it is to retain, let alone increase, its global 
competitiveness. The primary responsibility for the chemical industry's competitiveness lies with 
itself. The Commission and the Member States have to provide the adequate framework and, if 
needed, undertake specific actions, to enhance this competitiveness. 
93. Grouped around the four priority areas of the Communication on an industrial competitiveness 
policy for the EU, a set of actions for the industry, the Commission and Member States have been 
identified. The pursuit of those actions will certainly help the competitiveness of the 
-19-
European chemical industry and thus can constitute a model for the implementation of 
such policy in industries with similar characteristics and challenges. 
94. To confront the challenge of improving the regulatory framework, the European Union 
will ensure that the legislative aspects of the Internal Market are consolidated and the 
problems caused by disparate national legislation be resolved. A formal set of principles 
will be applied at Union level for individual cases of classification, limitation or 
authorising schemes governing the marketing of chemicals. The principles will ensure 
that the Community decides whether to regulate, who will regulate and how such 
regulation should be done. In the same vein, environmental regulation will pay close 
attention to competitiveness always involving an analysis of costs and benefits and proper 
risk assessment in line with the Treaty. Where appropriate and feasible, international 
environmental regulation will be preferred to EU level action. Voluntary agreements will 
be studied on a case by case basis and a Community framework for them is being 
prepared. 
95. To confront the challenge of ensuring effective competition, the Commission will analyse 
possible industry proposals to overcome structural overcapacity where this exists, in 
conformity with the rules of the Treaty. It will pursue liberalisation in the electricity and 
gas markets thereby affording the chemical and other industries more competitively priced 
energy. Within the WTO, the Commission will seek reduced tariff and non tariff barriers, 
paying particular attention to the problem of double pricing especially for new WTO 
members. The OECD as well as the WTO will see continued work on Distorting 
Investment Incentives as well as multilateral agreements on trade and competition. 
Chemicals will also feature in the Transatlantic Business Dialogue. The chemical industry 
is invited to convey to the Commission informations regarding the market access problems 
it encounters in third countries so that it can take steps to solve them. 
96. To confront the challenge of assuring more intangible investment, industry, the 
Commission and Member States should concentrate efforts to reinforce innovation, RTD, 
education and the whole scientific culture. , As regards the EU RTD actions, the chemical 
industry will be better integrated into the existing Task Forces and more focused clusters. 
Intellectual property protection will be strengthened: the agrochemicals and biotechnology 
sectors will benefit from specific patenting improvements. Commission programmes 
ranging from the RTD Framework Programme to the Structural Funds, SOCRATES, and 
Leonardo da Vinci will intensify the education and training of scientists in Europe. 
97. To confront the challenge of promoting more industrial cooperation, the Commission and 
industry will further develop the RISC information network and improve knowledge about 
and actions undertaken for SMEs in the chemical industry. Externally, industrial 
cooperation will be reinforced with the USA via the TABD and Japan via specific 
deregulation projects. Actions will also be pursued with chemical companies in : 
countries near to the EU, e.g. CEECs; fast growing economies, e.g. China; and energy and 
raw material rich countries e.g. the GCC and Russia. 
98. Launching and implementing the actions identified in the above text implies a deepening 
and strengthening of the already existing relations between the varied representatives of 
the EU chemical industry (CEFIC, sectoral associations and, sometimes, individual firms), 
Member States and the Commission. A work programme should review initiatives in the 
main areas of action, e.g. internal market rules, environmental actions, internal and 
external competition issues, RTD, education and training, SMEs 
information/communication and cooperation with third countries. 
-20-
Table 1 : Output trade in 1994 (Ecu Billion) 
EU 
USA 
Japan Output 
316 
287 
196 Exports 
67 
43 
20 Imports 
41 
28 
17 Trade 
Balance 
26 
15 
3 
Sources : CEFIC & Eurostat 
350 
Output Exports Imports Trade 
Balance EEU 
BUSA 
DJapan 
21 
Table 2 : Top 30 chemical companies in the World (1994) 
Company 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 HOECHST 
BASF 
BAYER 
DU PONT 
DOW 
CIBA-GEIGY 
RHONE POULENC 
MERCK& Co 
ELF GROUP 
ICI 
MITSUBISHI CHEMICAL 
ASAHI CHEMICAL 
AKZO NOBEL 
SANDOZ 
ROCHE 
SHELL 
SUMITOMO CHEMICAL 
EXXON 
PFIZER 
MONSANTO 
SOLVAY 
ENICHEM 
ZENECA 
HULS 
L'AIR LIQUIDE 
LILLY, ELI 
GENERAL ELECTRIC 
MITSUI TOATSU 
BOC 
HENKEL Worldwide Turnover 
in million ECU 
25 714 
22 625 
22 494 
18 932 
16 827 
13 771 
13 069 
12 586 
11 934 
11 826 
11 021 
10 983 
10 261 
9 760 
9 069 
8 705 
8 046 
8 024 
6 962 
6 955 
6 588 
6 024 
5 765 
5 392 
4 808 
4 802 
4 740 
4 712 
4 482 
4 389 in million US$ 
30 586 
26 911 
26 755 
22 518 
20 015 
16 380 
15 545 
14 970 
14 195 
14 066 
13 109 
13 063 
12 204 
11 608 
10 787 
10 354 
9 570 
9 544 
8 281 
8 272 
7 836 
7 166 
6 857 
6414 
5719 
5712 
5 638 
5 604 
5 331 
5 220 
Sources : Chemical Insight & CEFIC 
22 
Table 3 : Employment (in thousands) 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1988 
1989 
1990 
1991 
1992 
1993 
1994 EU 
1959.90 
1890.90 
1850.00 
1799.50 
1788.30 
1780.40 
1779.20 
1767.60 
1769.50 
1790.90 
1797.40 
1897.90 
1816.40 
1734.10 
1656.90 USA 
1107.40 
1109.00 
1075.10 
1042.80 
1049.00 
1043.50 
1021.00 
1024.60 
1057.30 
1073.90 
1086.10 
1075.80 
1084.00 
1078.40 
1053.90 JAPAN 
409.30 
408.10 
405.00 
402.00 
395.90 
395.70 
396.30 
391.60 
390.60 
393.00 
401.00 
406.00 
415.00 
413.00 
410.00 
Source : CEFIC 
1980 1982 1984 1986 1988 1990 1992 1994 
23 
Table 4 : Growth rates 
F^ 1985-1994 
(% P-a) 
EU Chemicals : 3 
EU Industry 1.7 
EU GDP | 2.4 
Sources : CEFIC & Eurostat 
11935-1994 (%p.a.) 
EU Industry EU GDP 
Chemicals 
24 
Table 5a : Most ingenious companies 
Number of inventions in 1988/1989 (Source : Panorama 1993) 
Worldwide 
Eastman Kodak (USA) 1014 
Bayer (EU) 1198 
Hoechst (EU) 1198 
Bosch (EU) 1229 
Fujitsu (JPN) 1289 
BASF (EU) 1290 
GE (USA) 1306 
Canon (JPN) 1414 
Philips (EU) 1541 
Fuji (JPN) 1545 
IBM (USA) 1623 
Hitachi (JPN) 1723 
Mitsubishi Electric (JPN) 1747 
Siemens AG (EU) 1966 
Toshiba (JPN) 2009 
500 1000 1500 2000 2500 
Toshfca(JPN) 
Semens AG(EU) 
Mtsubshi Bectric 
(JPN) 
Htachi (JPN) 
IBM (USA) 
Fuf (JPN) 
Fhiips (EU) imimmtmmttittfmfttMiattiib 
Canon( 
Bayer (BJ) 
Eastman Kodak V 
(USA) fcàiS&S \ \ { 
sggasapSaiaite 
(JW) JiiifPPnfPffil 
G£(USA) wmfÊm$^ 
*«*<*> mmmm 
hbechst(EU) j^^|§g|^|^j| 
25 
Table 5b : Most ingenious companies 
Number of inventions in 1988/1989 (Source : Panorama 1993) 
From Europe 
Alcatel (FR) 
ABB (CH) 
Rh6ne Poulenc (FR) 
Shell (UK/NL)) 
Unilever (NL) 
ICI (UK) 
Henkel (D) 
Thomson (FR) 
Daimler (D) 
Ciba Geigy AG (CH) 
Bayer(D) 
Hoechst (D) 
Bosch (D) 
BASF (D) 
Philips (NL) 
Siemens AG (D) 339 
367 
382 
424 
475 
490 
553 
557 
685 
738 
1198 
1198 
1229 
1290 
1541 
1966 
26 
Table 6 : Capital spending (% of turnover) 
1980 
1981 
1982 
1983 
1984 
1985 
1986 
1987 
1988 
1989 
1990 
1991 
1992 
1993 
1994 WE 
5.10 
4.70 
4.50 
4.20 
4.20 
4.60 
5.40 
5.90 
5.90 
6.40 
7.00 
6.70 
6.20 
5.30 
4.60 USA 
6.40 
6.30 
6.60 
4.80 
4.80 
5.30 
5.00 
5.20 
5.60 
6.80 
6.70 
8.30 
8.20 
7.60 
7.90 JAPAN 
6.10 
6.40 
6.60 
6.40 
6.40 
6.90 
7.00 
7.90 
8.50 
9.10 
9.90 
9.90 
9.60 
7.40 
6.20 
Sources : ESCIMO & CEFIC 
10.00 
Annex 
Application of principles for 
Regulatory Impact Assessment 
to the problem of nickel 
allergy - an example 
OLP 
1. Introduction 
Many people are allergic to nickel in jewellery products. In other words they suffer from 
soreness and inflammation of the ears when they wear cheap earrings, from soreness and 
inflammation of the arms when they wear cheap bracelets and watch-straps and so on. In 
addition to the effects of direct contact with cheap jewellery, many suffer soreness of the 
hands which keeps them away from work. 
Nobody is allergic to nickel at birth. They usually become sensitised when they have 
their ears (or noses) pierced and nickel comes into contact with the wound. Once 
sensitised they may suffer from nickel allergy whenever they wear cheap jewellery. 
Cheap costume jewellery is very popular especially among adolescents. The annual 
turnover of the industry in the EU is about 850 million ECU and much of this involves 
trade between Member States. It is an industry which is highly competitive and which 
relies on nickel because of its low cost and contribution to quality. 
Because of the widespead use of costume jewellery, the incidence of nickel allergy is 
thought to effect about 30 million people in the EU. Not only does this cause a large 
amount of suffering, it also leads to substantial spending by public authorities in treating 
those affected and to significant costs to the economy as a result of working days lost, 
without including the additional costs arising from occupational exposure. 
There are no rules applied outside the EU to the use of nickel in costume jewellery. 
2. Why act? 
It is necessary to act for a number of reasons. Firstly, there is a need to reduce the risk to 
public health, already affecting 30 million people. Secondly, the Internal Market in 
costume jewellery, worth several hundred million ECU/year, must not be allowed to 
fragment further - national rules on nickel are applied already by Denmark, Germany and 
Sweden and are being discussed in Italy. Thirdly, it is necessary to act for reasons of cost 
- treatment costs for the EU being estimated at 40 million ECU/year and the cost of 
working days lost is also thought to be substantial. 
3. Who should act ? 
Obviously nickel allergy is not an exclusively European problem. It affects the whole 
developed world. This being, so the first choice would be to have the OECD take action. 
There is, however, no consensus on the problem at the OECD level. Unanimity is 
required and at least two countries would oppose (USA, Switzerland). 
Intervention must be at EU level to protect the Internal Market. The Commission should 
take the lead, and has done so (see 6 below) 
-29-
4. What should be done ? 
To decide what needs to be done it is necessary first of all to examine the risks. 
The main risk is associated with the piercing of ears and noses. The use of nickel in 
piercing and healing should be stopped. 
A secondary risk is associated with the wearing of costume jewellery. Research has 
shown that these products provoke an allergic reaction when nickel is released in large 
quantities through the action of sweat on the jewellery. There is no need to stop the use 
of nickel in costume jewellery altogether, though clearly something more than a warning 
label is needed on these products (experience has shown that adolescents often don't read 
labels). 
In short the best way to control risk would seem to be the following: 
to ban the use of nickel for the piercing of ears and noses, and 
to impose a limit on the rate at which nickel is released from costume jewellery 
products 
This is a feasible strategy as safe substitutes for nickel are available. However, before it 
can be adopted it is necessary to check that the advantages of the controls exceed the 
drawbacks. 
The advantages are clear : 30 million people would be protected from the risks of nickel 
allergy, the internal market of several hundred million ECU/year would be preserved, the 
public authorities would save 40 million ECU/year and the economy would avoid the 
loss of many working days. 
There are drawbacks, however, at the levels of consumers, industry and the state. 
Consumers will have to pay up to 15 % more for costume jewellery. EU industry may 
have to bear once-off investments of about 70 million ECU and may suffer increased 
operating costs of about 30 million ECU/year. Finally, the Commission will have to 
invest 150 000 ECU in developing test methods. 
The advantages, however, would seem to more than offset the drawbacks. 
5. How should it be done ? 
An approach involving voluntary co-operation between the Commission and the costume 
jewellery industry would not be effective for several reasons. Firstly, there is no industry 
partner as the costume jewellery industry is not organised at Union level or even at 
national level. Secondly, voluntary controls are unlikely to be effective given that most 
costume jewellery originates outside the Union, there are many importers and there are 
millions of retail outlets. 
The Commission needs to devise binding rules which can be enforced by national 
authorities. There is no need, however, to regulate the detailed design of all the various 
-30-
products which might cause nickel allergy i. e. earrings, bracelets, watches and necklaces 
but also spectacles, buttons, buckles, catches, hair slides, zips etc. 
What is needed is the following: 
firstly, a Directive 
which bans the use of nickel in piercing; and 
which establishes a limit for nickel release for all products which come into direct 
and prolonged contact with the skin 
and secondly, a set of harmonised test methods to enable the national authorities to easily 
and cheaply control these provisions. 
6. Closing remarks 
Directive 94/27 of the European Parliament and Council1, based on the above described 
approach, was adopted unanimously by the Council in July 1994. It will enter into force 
6 months after publication by CEN of three European Standards, incorporating the test 
methods needed for control (latest estimate of entry into force is mid 1997). 
1OJL188,22July 1994, p. 1 
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ISSN 0254-1475 
COM(96) 187 final 
DOCUMENTS 
EN 10 08 15 
Catalogue number : CB-CO-96-212-EN-C 
ISBN 92-78-03857-1 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
32.