Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation amending Regulation (EEC) No 1911/91 on the application of the provisions of Community law to the Canary Islands"

(2001/C 139/17)

On 21 February 2001, the Council decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Economic and Social Committee decided to appoint Mrs M. Lopez Almendariz as rapporteur-general.

At its 379th plenary session of 28 February and 1 March 2001 (meeting of 1 March 2001), the Economic and Social Committee adopted the following opinion by 66 votes to one.

1. Introduction

1.1. The Commission has proposed a new Council Regulation amending Regulation (EEC) No 1911/91 on the application of Community law to the Canary Islands(1).

1.2. In accordance with Articles 5 and 6 of Council Regulation (EEC) No 1911/91 of 26 June 1991 on the application of the provisions of Community law to the Canary Islands, the transitional period for the introduction of the Common Customs Tariff (CCT) and the transitional period during which the Spanish authorities are authorised to impose a tax on production and imports (APIM) on all products entering or produced in the Canary Islands both expire on 31 December 2000.

1.3. In October and November 2000, the Spanish authorities requested that these transitional periods and the measures introduced be extended in accordance with Council Regulation (EEC) No 1911/91.

1.4. The request was supported by documentation showing that, although the economic situation in the Canary Islands has improved during the transitional period, the complete integration of the region would lead to a decline in industrial and commercial activity and an increase in unemployment in the various sectors concerned.

1.5. However, in the limited amount of time available, it was not possible to determine what impact ending or changing existing measures would have on the economic and social situation in the Canary Islands.

1.6. To ensure that the economic players concerned enjoy a degree of continuity in the legal framework in which they operate, it is therefore necessary to extend the transitional periods by one year. This also gives the parties involved in the decision-making process sufficient time to find a solution that is satisfactory for Spain and the Canary Islands and takes account of the objectives of Article 299(2) of the Treaty.

1.7. As stipulated in Article 25(4) of the Act of Accession of Spain and Portugal, the legal basis of the proposal, this amendment must be approved unanimously by the Council.

2. Special provisions applicable to the Canary Islands: a gradual and tailor-made integration

2.1. The Canary Islands became part of the EU with the accession of Spain in 1986.

2.2. The Act of Accession of Spain and Portugal acknowledged the special and difficult social and economic situation in the archipelago(2). In recognition of these particular difficulties, the Canary Islands were initially excluded from the Community customs area, the common commercial policy, and the common agricultural and fisheries policies.

2.3. By virtue of the first paragraph of Article 25(4) of the Act of Accession, at the request of Spain, the Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament, may decide to include the Canary Islands in the customs territory of the Community and define appropriate measures aimed at extending to these islands the provisions of Community law in force. On 7 March 1990, Spain submitted such a request in accordance with this article.

2.4. The integration of the Canary Islands into all the common policies must be a gradual process spanning an appropriate transitional period and must not undermine the special measures that take account of the remote and insular nature of the Canaries and historical economic and taxation arrangements. On 26 June 1991 the Council therefore adopted Regulation (EEC) No 1911/91 on the application of the provisions of Community law to the Canary Islands.

2.5. In application of Regulation (EEC) No 1911/91, these special measures were developed via a programme of options specific to the remote and insular nature of the Canary Islands (Council Decision establishing a programme of options specific to the remote and insular nature of the Canary Islands (Poseican) [91/314/EEC)].

2.6. Since then, and prior to the introduction in the Treaty establishing the European Community of Article 299(2) which recognises the specific situation of the outermost regions and the need to adopt specific measures, many Community provisions have been adopted in response to the specific problems in the Canaries.

2.7. Article 299(2) of the Amsterdam Treaty makes specific provision for the application of the Treaty to the French Overseas Departments, the Azores, Madeira and the Canary Islands and provides that the Council, after consulting the European Parliament, shall adopt specific measures aimed at laying down the conditions for the application of the Treaty to those regions taking account of their structural social and economic situation which is compounded by their remoteness, insularity, small size, difficult topography and climate, and economic dependence on a few products. The specific measures are to take into account areas such as customs and trade policies, fiscal policy, free zones, agriculture and fisheries policies, conditions for supply of raw materials and essential consumer goods, State aids and conditions of access to structural funds and to horizontal Community programmes.

2.8. To further refine the scope of Article 299(2) TEC, on 14 March 2000 the Commission adopted a report on measures aimed at its implementation.

3. The APIM (Arbitrio sobre la producción y sobre las importaciones)

3.1. Article 5(1) of Council Regulation (EEC) No 1911/91 of 26 June 1991 provides that the tax on production and imports ["arbitrio sobre la producción y sobre las importaciones" (APIM)], which has gradually been reduced since 31 December 1996 in application of Article 5(2) and Council Decision No 96/34/EC of 20 December 1995(3), is limited to a period ending on 31 December 2000.

3.2. Council Regulation (EC) No 2674/1999 of 13 December 1999(4), amending Regulation (EEC) No 1911/91, stipulated that the phasing-out of the tax should be suspended between 1 January and 30 June 2000 in the case of certain sensitive products, as this phasing-out could lead to the practical disappearance of the sectors concerned.

3.3. In addition, the aforementioned Commission report of 14 March 2000 pointed out that, where taxation is concerned, Article 299(2) authorises specific measures for the outermost regions, providing requests continue to be justified by the disadvantages suffered by these regions. The future of tax measures that are applicable to the outermost regions will also depend on requests made by the Member States concerned. In each case, the most appropriate instruments must be found to meet the objectives of regional development and aid to these regions, making use of exceptional tax measures which could even be applied over an extended period of time.

3.4. The memorandum submitted by Spain to the Commission on 23 November 1999 provides, as an alternative, for the application of a neutral tax that would take account of the need to see the production of goods in the Canary Islands rise to a certain level.

3.5. By letter of 25 July 2000 Spain provided the Commission with data on the socio-economic conditions in the Canary Islands and a new tax called the "Arbitrio sobre los Importaciones y Entregas de Mercancias en las islas Canarias (AIEM)". This tax would implement Article 299(2) TEC and replace the APIM, due to expire on 31 December 2000. On 25 October 2000 Spain forwarded further information to the Commission on the proposed rates of this future tax. The Commission has begun its discussion and assessment on the basis of this information. Its evaluation considers the impact of tax measures on sensitive products in the most vulnerable sectors and is based on the criteria of necessity, proportionality and the exact nature of the measures. Its aim is to identify the most appropriate specific measures which can be taken to offset the handicaps referred to in Article 299(2).

3.6. By letter of 31 October 2000, the Spanish authorities applied for the transitional period provided for in Article 5 of Regulation (EEC) No 1911/91 to be extended to allow the Spanish proposal to be examined in greater depth.

Such an extension is necessary to safeguard economic activities in the Canary Islands and to ensure a smooth transition up to the introduction of the new tax measures for the Canary Islands under Article 299(2).

3.7. In the aforementioned report of 14 March 2000, the Commission undertook to ensure continuity with existing measures. This implies that, throughout 2001, the rates and exemptions relating to the APIM tax would be maintained at the level applying at 31 December 2000.

4. Tariff suspensions

4.1. Council Regulation (EEC) No 3621/92 of 14 December 1992 temporarily suspending the autonomous Common Customs Tariff duties on imports of certain fishery products into the Canary Islands and Council Regulation (EC) No 527/96 of 25 March 1996 temporarily suspending the autonomous Common Customs Tariff duties and progressively introducing the Common Customs Tariff duties on imports of certain industrial products into the Canary Islands both expire on 31 December 2000. The validity of both regulations is based on the transitional period established in Article 6(1) of Regulation (EEC) No 1911/91.

4.2. In October and November 2000, the Spanish authorities requested that suspensions be maintained in the Canary Islands beyond 2000. Supporting documents were provided.

4.3. Because there has not been sufficient time to assess the documentation submitted and decide whether maintaining the measures is justified or not, it would seem appropriate to respond to this request by the Spanish authorities by extending the application of Council Regulations (EEC) No 3621/92 and (EEC) No 527/96 until 31 December 2001, so as to ensure continuity of treatment.

4.4. Before either of these regulations can be extended, it is a legal requirement that Article 6(1) of Council Regulation (EEC) No 1911/91 be amended and the transitional period extended.

5. Conclusions and recommendations

5.1. The Economic and Social Committee welcomes this opportunity to comment on the proposed amendment to Regulation (EEC) No 1911/91 on the application of the provisions of Community law to the Canary Islands.

5.2. Once again, the Committee recognises that the outermost regions of the European Union merit special consideration in the application of Community policy.

5.3. Developments in recent years show that the economic situation in the Canary Islands has improved in both absolute and relative terms. However, it must be remembered that the disadvantages suffered by the Canaries and the other outermost regions are structural and permanent. Efforts to consolidate the specific arrangements for these regions and enable them to participate on an equal footing in the Community to which they belong must therefore continue.

5.4. The ESC therefore welcomes the agreement reached by the Commission with the Spanish authorities to ensure continuity with existing measures.

5.5. Given that the Commission undertook to ensure continuity with existing measures in order to safeguard economic activities in the Canary Islands, the Committee recommends that in the interests of greater legal certainty, the Commission specify which rates relating to the APIM tax would apply during the extended transitional period. It also recommends maintaining throughout 2001 the rates applying at 31 December 2000.

5.6. The Committee points out that the rates for the APIM tax are currently between 0 and 1,15 %, compared to initial rates of between 0,1 and 5 %. This level is insignificant and means the tax fails to meet its intended objective of protecting the vulnerable sectors of the Canary Islands' economy. The Committee therefore stresses the urgency of adopting an alternative to the phasing-out and total disappearance of the AIPM.

5.7. The ESC therefore trusts that negotiations between the Commission and the Spanish authorities concerning both the new tax (AIEM) and the maintenance of tariff suspensions in the Canary Islands beyond 2000 will progress favourably and lead to the swift adoption of both measures, the legal basis and justification of which is the new Article 299(2).

5.8. The ESC therefore accepts the arguments made for amending Regulation (EEC) No 1911/91 to extend the transitional period established in this regulation for one year.

Brussels, 1 March 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) OJ L 171, 29.6.1991, p. 1.

(2) Act of Accession, Protocol No 2.

(3) OJ L 10, 13.1.1996, p. 38.

(4) OJ L 326, 18.12.1999, p. 3.