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COM (85) 509 
 
 
 
Vol. 1985/0192 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the openi ng to the public of the historical archives of the European Econom ic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), this f ile is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 198 3 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom 27 .9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
INTRODUCTION OF A SYSTEM OF PRODUCTION QUOTAS UNDER ARTICLE 58 
OF THE ECSC TREATY AFTER 31 DECEMBER 1985
(Communication by the Commission to the Council)
COM(85) 509 f i n a l

Cû'W'N
INTRODUCTION OF A SYSTEM O F PRODUCTION aUQTAS UNDER  ARTICLE 58 
OF THE ECSC TREATY AFTER 31 DECEMBER 1985
CURRENT SITUATION -  NEED FO R  MEASURES TAKEN UNDER ARTICLE 58
^ ^  I t s  1025th m eeting on 25th J u ly  1985, which was devoted to  problem s 
in  the  s te e l in d u s tr y , the C ouncil approved the fo llo w in g  c o n c lu s io n s  
re g a rd in g  the  o rg a n is a tio n  o f the s te e l m arket:
The C ouncil :
”  having taken note o f the  Com m ission's views concerning the market 
s u rv e illa n c e  arrangem ents proposed fo r  the years a ft e r  1985;
-  convinced o f th e  need to  re tu rn  as s w if t ly  as p o s s ib le , in  an o rd e rly  
manner, to  a market in  which Community u nd e rtakin g s fr e e ly  compete;
-  being aware, however, th a t the process o f re s tru c tu rin g  is  s t i l l  in  
p ro g re ss and th a t a t r a n s it io n a l p e rio d  lim ite d  to  a maximum o f th re e  
years is  n ecessary;
~ c a lls  on the  Commission to  p re p a re , in  lin e  w ith  the  p r in c ip le s  set 
o ut above, a s p e c ific  document on which the C ouncil w i l l  ta ke  a f in a l 
d e c is io n  on th e  b a sis o f A r t ic le  58 o f the ECSC T re a ty , w ith  th e  aim 
o f c o n tin u in g  market s u rv e illa n c e  arrangem ents.
I I .  The Commission reminds the  C ouncil o f the  co n clu sio n s set out above, 
which remain f u l l y  j u s t i f i e d  in  the  c u rre n t s itu a tio n :
-  The w orst o f th e  s te e l c r is is  is  n e a rly  o v e r: p ro d u c tio n  in  1984 and
1985 was c o n s id e ra b ly  h ig h e r than i t  had been in  the two p re v io u s  
y e a rs . R eductions in  c a p a c itie s  achieved by the end o f the  year are 
c o n s is te n t w ith  the  o b je c tiv e s  fix e d  by th e  C ouncil at E ls in o re . 
C onsequently, the  ra te  o f p la n t u t i l i s a t i o n  has edged back up to  a 
le v e l o f clo se  to  70%. A  re tu rn  to  a market of open c o m p e titio n  
between Community u n d e rta kin g s can thus be expected in  the near 
fu tu r e .

-  2 -
-  However, r e s tr u c tu r in g  in  th e  Community s te e l in d u s try  is  not 
com plete: the average ra te  o f u t i l i s a t i o n  o f 70% s t i l l  does not make 
fo r  a c o m p e titiv e  in d u s try . There is  s t i l l  c o n s id e ra b le  o v e rc a p a c ity  
in  se ve ra l p ro d u ct c a te g o rie s  w hich, in  lin e  w ith  the General 
O b je c tiv e s  S te e l 1990 (an average ra te  o f c a p a c ity  u t i l i s a t i o n  o f the  
o rd e r of 80% g ive n  a fa v o u ra b le  economic c lim a te  being the  o b je c t iv e ) ,  
can be e s tim a te d  at around 20 to  25 m illio n  ton n es. There is  enormous 
o v e rc a p a c ity  w o rld w id e , and s t a b ilis a t io n  in  tra d e , which is  c u r r e n tly  
undergoing s ig n if ic a n t  f lu c t u a t io n s ,  is  s t i l l  some years away.
A  p e rio d  o f t r a n s it io n  is  thus n ecessary. L im ite d  to  a maximum o f 
th re e  y e a rs , i t  w i l l  a llo w  th e  in d u s try  to  move p ro g re s s iv e ly  from  the  
e xtrem ely r ig id  c o n tro ls  c u r r e n tly  a p p lie d  to  a f u l l y  c o m p e titiv e  
market in  com pliance w ith  th e  o b je c tiv e s  o f the  ECSC T re a ty .
-  The Commission thus notes th a t a lth o u g h  the  s ta te  o f m a n ife s t c r is is  
appears to  be e n te rin g  in to  i t s  f in a l phase i t  is  not y e t c o m p le te ly  
o v e r. I t  th u s proposes to  th e  C o uncil th a t th e  t r a n s it io n  p e rio d  
should com prise a s e rie s  o f measures taken under A r t ic le  58 th a t w i l l ,  
on the  one hand, a llo w  th e  in d u s try  to  co n tin u e  the  necessary 
re s tr u c tu r in g  in  an o r d e r ly  market and, on th e  hand, through 
p ro g re s s iv e  r e la x a tio n , not o n ly  h elp  but encourage th e  s te e l in d u s try  
to  adapt g ra d u a lly  to  norm al market fo rc e s .
Combined w ith  s t r i c t  d is c ip lin e  on a id  and in cre ase d  Community funds to  
ta c k le  th e  w o rs t redevelopm ent p roblem s, these measures w i l l  form  an 
e s s e n tia l p a rt o f th e  European s te e l p o lic y  a f t e r  1985, as the  
Commission in fo rm e d  th e  C o u n cil on 25 J u ly  1985.
I I I .  As in d ic a te d  in  th e  Commission’ s Communication to  th e  C o u ncil o f 25 J u ly  
1985 , th e  quota system  proposed from  1  January 1986 w i l l  th u s  have th e  
fo llo w in g  c h a r a c t e r is t ic s :
i t  w i l l  be th e  la s t b e fo re  a re tu rn  to  a c o m p e titiv e  market and should 
prepare f o r  t h i s  re tu rn  from  th e  c u rre n t s t r i c t  c o n tro ls  w ith in  a 
maximum p e rio d  o f th re e  y e a rs ;
~ i t  w i l l  be in  two s ta g e s , th e  f i r s t  c o n s is tin g  o f a marked re la x a tio n  
o f th e  c o n tro ls  a p p lie d  and th e  second, even le s s  r e s t r i c t i v e ,  keeping 
o n ly  the  f i n a l  c o n tro ls  b e fo re  abandoning a l l  c o n s tr a in ts ;
~ i t  w i l l  be p ro g re s s iv e  and w i l l  c o v e r, a t d if f e r e n t  in t e r v a ls ,  a l l  the  
c a te g o rie s  c u r r e n tly  s u b je c t to  the  quota system .
' SEC (85) 1060 f in a l 
C O M  (85) 382 f in a l

-  3 -
Management of the  system d u rin g  t h is  p e rio d  w i l l  of course re q u ire  close 
co o p e ra tio n  between the Member S tates and the u n d e rta k in g s . The 
Commission th e re fo re  in te n d s  to  s ta te  c le a r ly  the  system i t  plans to  
implement and to  keep those a ffe c te d  r e g u la rly  inform ed o f the way in  
which i t  is  managing the system and how the s itu a tio n  is  d e v e lo p in g .
As o fte n  as is  n ece ssa ry, and at le a s t once a y e a r, th e  Commission w i l l  
re p o rt to  the C ouncil on the development o f the c r is i s ,  the re s u lts  
•  o b ta in e d  w ith  the  system and any changes th a t need to  be made to  i t .
I t  w i l l  re p o rt in  p a r tic u la r  on the p e rs is te n c e  of the m a n ife st c r is is  
and the  c o m p a tib ility  o f the  system w ith  re s tr u c tu r in g .
IMPLEMENTATION OF THE SYSTEM
IV . The Commission fe e ls  th a t from  1  January 1986 p ro du cts in  c e rta in  
c a te g o rie s  c u rre n tly  s u b je c t to  the quota system may be exempted. These 
are products th a t a lre a d y comply w ith  at le a s t one o f the  fo llo w in g
c r i t e r i a :
-  o v e rc a p a c ity  in  th e s e 's e c to rs  is  Low, i . e .  th e re  has a lre a d y  been 
c o n s id e ra b le  r e s tr u c tu r in g  in  the case o f the  c a te g o rie s  in  q u e s tio n ;
-  d u rin g  the p e rio d  o f the  quota system the  demand f o r  the  ca te g o ry to  
which the p ro d u cts concerned belong grew and, w ith  the agreement o f 
the  Commission, p ro d u c tio n  c a p a c itie s  in c re a s e d ;
-  th e  vast m a jo rity  o f u n d e rta kin g s in  the  s e c to r are no lo n g e r in  a 
s ta te  o f c r is is .
These c r it e r ia  b rin g  the  Commission to  propose f i r s t  o f a l l  the 
re la x a tio n  o f c o n tro ls  on pro du cts in  c a te g o rie s  IV (w ire  rod) and V  
(c o n c re te  r e in fo r c in g  b a rs) and in  c a te g o rie s  Ic  (g a lv a n is e d  sh ee t) and 
Id  (o th e r coated f l a t  p ro d u c ts ).
V. As regards tong p ro d u c ts , the Commission fe e ls  th a t th e re  has been a 
m ajor s tr u c tu r a l development in  t h is  s e c to r in  recent years th a t has 
g ra d u a lly  tra n s fe rre d  the m ajor p a rt o f p ro d u c tio n  from  in te g ra te d  
ste e lw o rk s  to  e le c t r ic  s te e lw o rk s . By t h e ir  very s tru c tu re  the la t t e r  
are capable o f a d a p tin g  to  a ra p id  re tu rn  to  an open-m arket economy. 
A lthough balance between supply and demand in  th e  w ire  rod s e c to r has 
not been co m p le te ly a ch ie ve d , the s it u a t io n  has improved c o n s id e ra b ly . 
F urtherm ore, a la rg e  number o f e le c t r ic  s te e lw o rk s  p ro du cin g  co n cre te  
r e in fo r c in g  bars are not r e a lly  in  a c r is i s  s it u a t io n  any lo n g e r.

The Commission is  aware t h a t th e se  c r i t e r i a  c o u ld  a ls o  be a p p lie d  in  the  
near fu tu re  to  numerous p ro d u c e rs  of c a te g o ry  VI (m erchant s t e e ls ) .  
However, i t  f e e ls  t h a t r e la x a t io n  of c o n tro ls  in  th e  th re e  c a te g o rie s  at 
th e  same tim e  may leave th e  firm s  and areas m a in ly  a ffe c te d  open to  too 
sharp a change and p re fe rs  to  a c t c a u tio u s ly  in  t h i s  in s ta n c e  (see 
s e c tio n  V I) .
In  th e  case o f f l a t  p ro d u c ts , i t  in te n d s  f i r s t  o f a l l  to  abandon th e  
measures th a t have led to  c o n tr o ls  at s e v e ra l stag e s o f p ro d u c tio n . I t  
is  unrea so na b le  th a t p ro d u c ts  s u b je c t to  quotas under c a te g o ry  la  (h o t 
r o lle d  sheet and s t r i p )  s h o u ld  a ls o  be s u b je c t to  quotas under c a te g o ry  
lb  (c o ld  r o lle d  s h e e t) when th e y  are processed by a n o th e r fir m .
The same problem  a ris e s  f o r  p ro d u c ts  in  c a te g o rie s  l a ,  lb  and Ic  which 
are then processed in t o  p ro d u c ts  in  c a te g o rie s  Ic  o r Id  (co a te d  s h e e t).
T h is  d u a l c o n tr o l means t h a t p ro d u c ts  a re  tre a te d  d i f f e r e n t l y  a c c o rd in g  
to  w hether th e y  a re  p ro cessed e n t ir e ly  w ith in  one and th e  same 
u n d e rta k in g  o r p rocessed s u c c e s s iv e ly  in  d if f e r e n t  p la n ts . The system  
a ls o  makes f o r  d i s t o r t i o n  in  these cases when, g iv e n  d if f e r e n t  abatem ent 
ra te s , p ro c e s s in g  fir m s  t h a t have th e  chance o f s u p p ly in g  th e  m arket in  
accordance w ith  th e  abatem ent ra te s  la id  down f in d  d i f f i c u l t y  in  
o b ta in in g  s u p p lie s . In  th e  p a st the  Commission has t r ie d  to  c o rre c t 
th e se  d is c re p a n c ie s  by way o f A r t ic le  17 o f th e  d e c is io n s  in  fo r c e , an 
a r t i c l e  th a t w i l l  become s u p e rflu o u s  th ro u g h  t h i s  change to  th e  system , 
s in c e  i t  is  o n ly  th e  f i n a l  sta g e  o f p ro d u c tio n  a t which p ro d u c ts  w i l l  be 
s u b je c t to  q u o ta s .
At th e  same tim e , th e  Commission is  concerned a t th e  s it u a t io n  as 
re g ards coated sh e e t w hich is  h ig h ly  v a rie d  b o th  in  th e  ty p e  o f c o a tin g  
and in  th e  a p p lic a tio n s  made o f these p ro d u c ts . C e rta in  typ e s o f coated 
s h e e t, such as t i n p l a t e ,  have never been s u b je c t to  th e  quota system .
O thers form  a somewhat m ixed bag in  c a te g o ry  Id  (te rn e  p la t e ,  
a lu m in iu m -c o a te d , g a lv a n is e d  on one s id e , p la s t ic  c o a te d , e t c . ) ,  and th e  
abatem ent ra te  f o r  t h is  c a te g o ry  does n o t p ro p e rly  r e f le c t  the  
developm ent o f v e ry  d if f e r e n t  m a rke ts.
T h is c a te g o ry  and c a te g o ry  Ic  (g a lv a n is e d  s h e e t) a re  c u r r e n tly  in  th e  
th ro e s  o f c o n tin u o u s  te c h n ic a l developm ent. The a llo c a t io n  o f p ro d u c ts  
between th e  two c a te g o rie s  sometimes p re s e n ts  s e rio u s  p ro b le m s. In  
re c e n t y e a rs th e  demand f o r  coated p ro d u c ts  has grow n, and th u s  s e v e ra l 
firm s  have in c re a s e d  t h e ir  p ro d u c tio n  c a p a c itie s . T h is  s it u a t io n  is  
h ig h lig h te d  by th e  f a c t  t h a t  th e  Commission has had to  f i x  abatem ent 
ra te s  th ro u g h o u t th e  la s t  few ye ars w hich were in  fa c t "g ro w th " ra te s  
and w e ll in  excess o f th e  re fe re n c e s  in  q u e s tio n . On th e  o th e r hand, at 
th e  moment th e re  is  no s i g n if ic a n t  unused c a p a c ity  fo r  th a t p a rt o f th e  
demand covered by c a te g o ry  I c .

-  5 -
For these reasons, the Commission plans to  re la x  c o n tro ls  fo r  these two 
c a te g o rie s  as from  1  January 1986.
The Commission should p o in t out again to  the in d u s try  the in h e re n t 
p o s s i b il it y  of too  much investm ent in  t h is  s e c to r w hich, although 
expanding, is  in  danger of c re a tin g  s u rp lu s  c a p a c ity , i f  a l l  the 
p ro je c ts  c u rre n tly  proposed should be im plem ented.
V I. W e m ust, however, remain v ig ila n t .  The Commission w i l l  th e re fo re  
co n tin u e  to m o n itor the market and p ro d u c tio n  o f the c a te g o rie s  o f 
p ro d u cts which have been d e re g u la te d , c o n tin u in g  it s  p ra c tic e  of 
fo llo w in g  th e ir  development in  it s  q u a rte rly  forw a rd  programmes and 
m a in ta in in g  the s u rv e illa n c e  system a p p ly in g  to stee lm ake rs.
I f  demand should f a l l  s ig n if ic a n t ly  fo r  these p ro d u cts and i f  the 
Commission should judge th a t the  c o n d itio n s  la id  down in  A r t ic le  58 are 
once more f u l f i l l e d  in  these market s e c to rs , the  C ouncil can be 
im m ediately inform ed and a p p ro p ria te  measures can be taken.
The Commission is also aware of the knock-on e ffe c t th a t d e re g u la tio n  of 
c e r ta in  c a te g o rie s  may have on products w ith  s im ila r  p ro p e rtie s  in  o th e r 
c a te g o rie s . This a p p lie s  p a r t ic u la r ly  to  c e rta in  types of merchant 
s te e ls  in  category VI which compete w ith  w ire  ro d . I f  these p ro d u cts 
are kept su b je c t to  quotas fo r  more than a year a ft e r  c a te g o rie s  IV and 
V  have been d e re g u la te d , th e re  may be an a r t i f i c i a l  d is t o r t io n  in  
p ro d u c tio n  and consum ption. At the a p p ro p ria te  moment, the  Commission 
w i l l  take th e  necessary steps to  d e re g u la te  ca te g o ry V I, as w e ll as any 
o th e r p o s s ib le  c a te g o rie s  which meet any o f the c r i t e r i a  d e s crib e d  in  
S e c tio n  IV .
As fa r  as the problems set out in  t h is  p o in t VI are concerned, and in  
o rd e r to  respond s u f f ic i e n t ly  q u ic k ly  to  market developm ents, the 
Commission proposes to ask th e  Counci fo r  the r ig h t  to  decide 
autonom ously, in  accordance w ith  th e  c r it e r ia  s e t out above, which 
c a te g o rie s  w i l l  be in clu de d  in ,  or excluded fro m , the quota system .
V I I .  These changes w i l l  of course a lso  mean th a t adjustm e n ts w i l l  have to  be 
made to  firm s ' re fe re n c e s . The Commission does, however, in te n d  to  make 
more fa i— reaching changes here since the  b asis o f these re fe re n c e s  has 
not been changed since the quota system was f i r s t  in tro d u c e d  and these 
quotas are based on p ro d u c tio n  fig u re s  which d a te  back even f u r t h e r .
Over the  la s t few years th e re  has been such a s u b s ta n tia l s tr u c tu r a l 
e v o lu tio n  w ith in  firm s  and the  market (both in te r n a l and e x te rn a l) th a t 
these references have become d iv o rc e d  from  the r e a lit y  o f p ro d u c tio n  
d e s p ite  the  elem ents o f f l e x i b i l i t y  which have been in tro d u c e d  and the  
exchanges which have been allow ed under the p re se n t D e c is io n .

-  6 -
1) The Commission th e re fo re  in ten d s at the request ot an u n d e rta k in g  to 
p e rm it the p o s s i b il it y  o f changing t h e ir  re fe re n c e s , fo r  the  pro du cts 
rem aining in  th e  quota system , a ccordin g  to  ru le s  based on those 
which have been a p p lie d  under A r t ic le  15 of th e  present D e cisio n  but 
w ith o u t making them c o n d itio n a l on p r io r  p la n t c lo s u re s .
However, in  o rd e r not to  upset the  present market supply s it u a t io n  
th e  Commission would o n ly  a u th o ris e  a djustm e n ts fo r up to  10% of 
s te e lm a k e rs ' o v e r a ll re fe re n ce s and in cre ase s o f up to  50% in  each 
c a te g o ry 's  re fe re n c e s . To ensure th a t mono producers were not 
p en a lise d  (w hich m ight happen i f  these adjustm e n ts caused a 
s ig n if ic a n t  in c re a s e  in  supply in  t h e ir  area) the  Commission would 
a lt e r  t h e ir  re fe re n c e s  to  m a in ta in  r e l a t i v i t y .
F irm s' re q ue sts to  change t h e ir  pro du ct mix must be put to  th e  
Commission in  th e  course o f the f i r s t  q u a rte r o f 1986, and th e  new 
re feren ce s w ould remain in  fo rc e  fo r  the  d u ra tio n  o f the  new 
D e c is io n , a lth o u g h  the  elem ents o f f l e x i b i l i t y  p ro v id e d  fo r  by 
A r t ic le  15 w ould o f course co n tin u e  to  a p p ly .
2) Since th e re  has been a fa i— rea chin g  change in  th e  p a tte rn  o f s te e l 
tra d e  between th e  Community and th e  re s t o f th e  market s in c e  the  
in tro d u c tio n  o f the  quota system , a review  would a ls o  have to  be made 
o f th e  s it u a t io n  o f steelm akers whose r a t io  between th e  p a rt o f 
p ro d u c tio n  quotas which may be d e liv e re d  in  th e  Community and 
p ro d u c tio n  quotas i s ,  f o r  a l l  p ro d u c ts  covered by th e  system , much 
low er than th e  Community average.
These h is t o r ic a l s itu a tio n s  are no Longer in  lin e  w ith  Community 
s te e l p o lic y  o b je c tiv e s  and the Commission in te n d s , in  re sp ect o f 
each f ir m 's  p ro d u c tio n , to  b rin g  down t h is  r a t io  to  no more tha n  10%  
below the  Community average, where t h is  has not been th e  case so f a r .
V I I I .  A nother s p e c ific  measure which the  Commission in te n d s  to  take  in  
a d d itio n  to  these necessary adjustm ents and d e re g u la tio n  measures 
d e s c rib e d  above is  to  in c re a s e  the  in te r n a l elem ents o f f l e x i b i l i t y  in  
th e  system . I t  w i l l ,  f o r  exam ple, ra is e  the  p re s e n t 3%  c e ilin g s  in  
A r t ic le s  11(1) and (2) o f th e  pre sen t D e cisio n  to  5%  from  1  January 
1986. S im ila r ly ,  th e  5%  f l e x i b i l i t y  m argin p ro v id e d  fo r  in  A r t ic le  
11(3a) and 10% f l e x i b i l i t y  m argin in  A r t ic le  11(3e) w i l l  be in c re a s e d  to  
10%  and 20%  r e s p e c tiv e ly .
As and when th e re  is  s u f f ic ie n t  improvement in  th e  market fo r  c e r ta in  
c a te g o rie s , th e  Commission w i l l  ra is e  these c e ilin g s  a f t e r  in fo rm in g  
Member S tate s o f i t s  in te n tio n s  through the  C o u n cil and th e  C o n s u lta tiv e  
Com m ittee.

The Commission a ls o  in te n d s to re ta in  A r t ic le  16 in  it s  D e cisio n  fo r 
Greek and I r is h  steelm akers.
I t  i s ,  however, going to  amend A r tic le  14 to tig h te n  up th e  c r i t e r i a  fo r  
a p p lic a tio n . The c r is is  has been running fo r some years and i t  is  tim e 
th a t th e  r e s tr u c tu r in g  e f f o r t s  made by the in d u s try  s ta rte d  to  produce 
r e s u lts . Firms have had long enough to adapt and m odernise t h e ir  
apparatus of p ro d u c tio n  and i t  is  now in  very few s p e c ia l cases th a t 
stee lm ake rs can cla im  th a t t h e ir  e x c e p tio n a l d i f f i c u l t i e s  are due to  the 
quota system.
The Commission w i l l  also re ta in  the s a fe ty  valve p ro vide d  by A r t ic le  
14C. I t  is  v i t a l  th a t s p e c ia l major e xp o rt o rd ers secured by any firm  
are not hampered by too r ig id  a system which may cause o rd e rs to  be lo s t 
to  non-Community stee lm ake rs.
The Commission w ill,h o w e v e r, continue to  apply ve ry s t r i c t  c r it e r i a t o  
t h is  A r t ic le  so as not to  lay i t s e l f  open to  th e  a c c u s a tio n  th a t i t  is  
e x p o rtin g  i t s  problem s.
F in a lly ,  the Commission in te n d s  to  re ta in  s im ila r  p ro v is io n s  to  those o f 
A r t ic le  8 of D e cisio n  234/84/ECSC but w i l l  adapt them to  make them 
e a s ie r to  im plem ent.
The Commission co n side rs i t  e s s e n tia l fo r  the s te e l in d u s try  to  pursue 
i t s  r e s tr u c tu r in g  e f f o r t s  in  ord er to  e lim in a te  s u rp lu s  c a p a c ity . For 
t h is  reason i t  w i l l  not o n ly  take steps to  ensure th a t the  quota system 
does not put a brake on the  re q u is ite  s tr u c tu r a l e v o lu tio n  but w i l l  a ls o  
in tro d u c e  e x tra  in c e n tiv e s  to  help steelm akers adapt t h e ir  app a ra tu s o f 
p ro d u c tio n  to  th e  market s itu a tio n .
The Commission w i l l  g iv e  e x tra  quotas, e ith e r  under D ecisions 
257/80/CECA, 2320/81/ECSC and 1018/85/ECSC or in  th e  form o f fa v o u ra b le  
o p in io n s  under A r t ic le  54 of the EC SC  T re a ty , to  firm s  which make net 
c a p a c ity  re d u c tio n s  (compared to  re d u c tio n s  which had been d e c la re d  at 
1st January 1980) from 1  January 1986 which go f u r t h e r  than those which 
would have been re q u ire d  by the Commission. These w i l l  be e q u iv a le n t to  
a c e rta in  percentage o f the c a p a c ity  of p la n ts  clo s e d .
However, in  o rd e r to  be f a i r  to firm s  which have c a rrie d  out c a p a c ity  
re d u c tio n s  b efo re  the a p p lic a tio n  of the new D e c is io n , the  Commission 
w i l l  a ls o  co n tin u e  to  g ra n t supplem entary quotas fo r  c lo s u re s  a lre a d y  
c a rrie d  o u t, as p ro vide d  fo r  by A r t ic le  14B of th e  c u rre n t D ecisio n  
a lth o u g h  t h is  A r t ic le  must be recast sin ce  i t  was a reward give n  fo r  
speedy im ple m e n ta tio n  o f c lo su re s but d id  not ta ke  account o f the  s iz e  
o f the  f ir m 's  re s tru c tu rin g  programme.

In o rd e r no-t to  p e n a lis e  any f ir m ,  i t  is  th e re fo re  a p p ro p ria te  to  
c a lc u la te  supplem entary quotas g ranted under t h is  A r t ic le  in  two 
d if f e r e n t  ways: e it h e r  th e  method in  A r t ic le  14B of the present D e cisio n  
o r a method based on the a llo c a tio n  of e x tra  quotas to  firm s  
p ro p o rtio n a l to  th e  c a p a c ity  o f p la n ts  which are clo s e d . The most 
fa v o u ra b le  method w i l l  be a p p lie d  to  th e  firm s  concerned.
T h is in c re a s e  in  re fe re n c e s  would not apply i f  firm s  were re c e iv in g  aids 
under the  p ro v is io n s  o f A r t ic le  4§2 o f th e  proposed new d e c is io n , 
s e ttin g  out Community ru le s  fo r  aid s to  the  s te e l in d u s try .
F in a lly ,  as m entioned in  S e ctio n  V I I ,  th e  Commission w i l l  co n tin u e  to 
a u th o ris e  exchanges of re fe re n ce s between firm s  where p la n ts  have been 
clo se d  and changes to  the  p ro du ct mix w ith in  a f ir m 's  own re fe re n c e s  
a cco rd in g  to  p ro v is io n s  based c lo s e ly  on those o f A r t ic le  15 of the  
p re se n t D e c is io n .
As a lre a d y  announced, th e  Commission does not in te n d  to  in c lu d e  in  the 
next D e cisio n  th e  p ro v is io n s  o f A r t ic le  15B o f D e cisio n  234/84/ECSC in  
t h e ir  pre sen t fo rm . The a tte n d a n t c o n s tra in ts  are no longer j u s t i f i e d  
a t th e  p re se n t s ta te  in  th e  p ro ce e d in g s. M oreover, the  in h e re n t 
lim it a t io n s  in  th e  a p p lic a tio n  o f t h is  A r t ic le  would make i t  e xtre m e ly  
d i f f i c u l t  fo r  th e  Commission to  im plem ent.
On the  o th e r hand, i t  does in te n d  to  c o n tin u e , d u rin g  th e  f i r s t  phase of 
th e  t r a n s it io n  p e r io d , w ith  th e  s t a t i s t i c a l  m o n ito rin g  o f flo w s  o f s te e l 
p ro d u c ts  between Member S ta te s on the  b a s is  o f the  p ro d u c tio n  
c e r t if ic a t e s  and accompanying documents.
These documents w i l l  make i t  p o s s ib le  to  check w hether th e  t r a d it io n a l 
flo w s  between th e  Member S ta te s  are s u b je c t to  s e rio u s  d is tu rb a n c e s . I f  
th e  s t a t i s t i c a l  m o n ito rin g  shows th a t th e  flo w s  are d is tu rb e d , th e  
Commission would im m e d ia te ly examine w hether th e  firm s  concerned have 
launched a d riv e  to  r e c r u it  new custom ers, c o n tra ry  to  the  ru le s  o f the 
T re a ty , in  p a r t ic u la r  th e  ru le s  on p ric e s .
The Commission does not c o n s id e r i t  necessary to  extend the quota system 
to  Spain and P o rtu g a l a t t h is  stage in  th e  re tu rn  to  a co m p e titio n -b a s e d  
m a rk e t.
F i r s t l y ,  th e  T re a ty  of Accession s tip u la te s  w ith  regard to  s te e l th a t 
th e se  new Member S ta te s  s h a ll be s u b je c t, fo r  th re e  ye ars in  th e  case of 
Spain and f o r  f iv e  years in  the  case o f P o rtu g a l, to  a s p e c ia l 
arrangem ent co m p risin g  in  p a r t ic u la r  th e  lim it a t io n  o f t h e ir  d e liv e r ie s  
o f s te e l p ro d u c ts  to  th e  p re se n t ten  Member S ta te s . T h is commitment can 
be a d m in is te re d  by e x te n d in g  e x is tin g  in s tru m e n ts  fo r  m o n ito rin g  
t r a d i t i o n a l flo w s  to  th e  firm s  of new Member S ta te s .

-  9 -
S econdly, the e sta b lis h m e n t of reference fig u re s  fo r  the Portuguese and 
Spanish firm s  would be d i f f i c u l t  given th a t they have not been 
accustomed to  com pleting q u e s tio n n a ire s  on p ro d u c tio n  and d e liv e r ie s  in 
th e  p a s t, and the im p le m e n ta tio n  of the system in  these c o u n trie s  would 
d o u b tle s s  take s e v e ra l q u a rte rs , whereas we are now in  the  f i n a l  phase 
o f th e  a p p lic a tio n  of A r t ic le  58.
F in a lly ,  as d e liv e r ie s  by Community firm s  to  the Portuguese and Spanish 
m arkets have not been s p e c if ic a lly  lim ite d  so f a r ,  the in c lu s io n  o f 
d e liv e r ie s  to  these c o u n trie s  in  th e ir  re feren ce  fig u re s  would 
c o n s titu te  an a d d itio n a l c o n s tra in t which is  not j u s t i f i e d  at a tim e 
when th e  Commission is  t r y in g  to  lead the s te e l in d u s try  p ro g re s s iv e ly  
back to  a co m p e titio n -b a se d  m arket.
The Commission co nside rs th a t i t  ought to  be s u f f ic ie n t  i f  P o rtu g a l and 
Spain re sp ect t h e ir  o b lig a tio n s  concerning d e liv e r ie s  to  the re s t o f the 
Community, coupled w ith  the  u nd e rta kin g  by Spain to  reduce it s  
p ro d u c tio n  c a p a c itie s  by 3 m illio n  tonnes and th e  corre sp on d ing  
u n d e rta k in g  by P o rtu g a l to  lim it  it s  p ro d u c tio n  c a p a c itie s  in  accordance 
w ith  th e  Commission d e c is io n s . During the  years of t r a n s it io n ,  when the 
new Member S tates w i l l  be a u th o rise d  to  g ra nt a id  to  s te e l, the 
Commission w i l l  c lo s e ly  m o n ito r the observance o f these commitments.
X I I .  The Commission does not possess at present adequate in fo rm a tio n  to  
d e fin e  p re c is e ly  th e  second stage o f the t r a n s it io n  p e rio d ; i t  w i l l  
approach the  C ouncil in  good tim e to  examine j o i n t l y  whether i t  is  
p o s s ib le  to  d is c o n tin u e  most o f the r e s t r ic t iv e  measures s t i l l  in  fo rc e  
from  1  January 1988, or w hether, i f  the market has improved beyond 
e x p e c ta tio n  and r e s tr u c tu r in g  has made ra p id  p ro g re s s , i t  w i l l  be 
p o s s ib le  to  d is c o n tin u e  a l l  o f the c r is is  measures from  th a t d a te .
I f ,  as seems most p robable to  the Commission at p re s e n t, a fu r th e r  
t r a n s it io n a l year should prove necessary, the Commission w i l l  propose to  
th e  C o uncil a much more lib e r a l system co vering  o n ly  a sm all number of 
p ro d u c ts  in  ca te g ory I ,  c a te g o rie s  I I  and I I  in  any case being fre e d .
I t  is  too  e a rly  to  g iv e  d e ta ils  of t h is  scheme. However, as a lre a d y  
in d ic a te d , th e  Commission, i f  i t  considers th a t th e  measures taken under 
A r t ic le  58 must be extended one more tim e , w il t  c o n s u lt the  C o n s u lta tiv e  
Com m ittee, and w il l. d u ly  request the assent of th e  C o u ncil re g a rd in g  
t h is  f i n a l  p ro lo n g a tio n  o f th e  system.

-  10  -
SUPPLEMENTARY REMARKS
X I I I .  In p roposing these m easures, the  Commission in te n d s  to  e x e rc is e  in  f u l l  
the  r e s p o n s ib ilit ie s  incum bent on i t  under th e  EC SC  T re a ty . At .3 tim e 
o f c r i s i s ,  the o b lig a to r y  p ro d u c tio n  quotas c o n s titu te , along w ith  the 
r e s t r ic t iv e  measures aimed at the  e v o lu tio n  o f p ro d u c tio n  c a p a c itie s , 
one of the most im p o rta n t to o ls  fo r  c o n tro l and m o n ito rin g  of the 
m arket. Other such to o ls  in c lu d e :
-  th e  p ric e  ru le s  by w hich s te e l p ro du ce rs and d is t r ib u t o r s  are bound; 
as i t  in d ic a te d  to  the  C o u ncil in  i t s  Communication o f 2 5 /7 /8 5 , the  
Commission has the fir m  in te n tio n  o f suspending the minimum p ric e  
r u le s , which a pply to  c e r ta in  s te e l p ro d u c ts , and fo r  which p ric e s  
have im proved. But i t  in te n d s  to  m a in ta in  th e  system of guidance 
p r ic e s , which w i l l  be p u b lis h e d  and p o s s ib ly  amended from tim e to  
tim e . I t  w i l l  co n tin u e  to  e n fo rc e  th e  p ric e  ru le s  o f the ECSC T re a ty  
and to  impose s a n c tio n s  where n ece ssa ry.
~ s t a t i s t i c a l  m o n ito rin g  o f p ro d u c tio n  and d e liv e r ie s ,  and the
m o n ito rin g  o f the  t r a d i t i o n a l flo w s  between Member S ta te s which the  
Commission in te n d s  to  m a in ta in  d u rin g  the  n e xt two y e a rs ;
-  th e  arrangem ents co n clu d e d , and th a t th e  Commission in te n d s  to  renew, 
w ith  the  main non-member c o u n trie s  e x p o rtin g  s te e l p ro du cts to  the  
Community, and the  e s ta b lis h m e n t and p u b lic a tio n  o f b asic p ric e s  fo r  
im p o rts , which w i l l  be p e r io d ic a lly  u pd a te d . The Commission w i l l  
c a r e fu lly  check th a t th e  arrangem ents are respected by i t s  com m ercial 
p a rtn e rs . A lso in  th e  im p o rt f i e l d  th e  Commission w i l l  ensure th a t 
e s ta b lis h e d  re g u la tio n s  are com plied w ith  and i f  an e x p o rte r does not 
re sp e ct the ru le s  o f in t e r n a t io n a l commerce -  whether or not he 
o pe ra tes from  a T h ird  C o u n try , i t  w i l l  use th e  measures p ro v id e d  fo r  
by the  GATT r e g u la tio n s , p r in c ip a lly  a n ti-d u m p in g  a c tio n s ;
-  th e  arrangem ents concluded w ith  th e  USA conce rn in g  Community e x p o rts  
to  th a t c o u n try , th e  f u r t h e r  renew al o f w hich is  c u r r e n tly  b e in g  
d iscu sse d .
XIV. Taken to g e th e r, these measures form  a fram ew ork which should enable the  
s te e l in d u s try  to  c o n tin u e  th e  n ecessary r e s tr u c tu r in g  measures under 
r e la t iv e l y  ordered c o n d itio n s  and in  t h is  way, a fte r  a maximum p e rio d  o f 
th re e  y e a rs , to  o p e ra te  on a m arket based w h o lly  on c o m p e titio n  w ith in  
th e  meaning o f th e  ECSC T re a ty .
The Commission has a ls o  in fo rm e d  th e  C o u n c il o f the accompanying s o c ia l 
measures necessary to  a lle v ia t e  th e  e ff e c t s  on employment o f th e  
c a p a c ity  re d u c tio n s  re q u ire d  by these r e s tr u c tu r in g  measures, 
p a r t ic u la r ly  in  the  s te e l-m a k in g  a re a s , where the  s itu a tio n  is  
p a r t i c u la r l y  s e rio u s .

-  11  -
However, i f  the  s it u a t io n  is  to  re tu rn  to  normal q u ic k ly , and in  o rd e r 
to  avoid any u n c e rta in ty  and d is o rd e r on the market which would 
compromise the e f f o r t s  to  be made and the re s u lts  already a ch ie ve d , i t  
is  e s s e n tia l, as the  C o uncil recognised on 25 J u ly , th a t the  measures 
taken under A r t ic le  58, which alone make p o s s ib le  the a d a p ta tio n  of 
su p p ly to  demand in  the  p re sen t s it u a t io n ,  should be extended under the 
c o n d itio n s  d e scrib e d  above.
C onsequently, the  Commisison, a fte r  c o n s u ltin g  the C o n s u lta tiv e  
Com m ittee, hereby requests the C ouncil to  g ive  i t s  assent to  t h is  
Communication. The Commission w i l l  then as soon as p o s s ib le  ta ke  the  
D e cisio n  concerning the f i r s t  phase o f the quota system , which w i l l  
e n te r in to  fo rc e  on 1  January 1986 and be v a lid  fo r two ye a rs.