Opinion of the Economic and Social Committee on the 'Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee on an industrial competitiveness policy for the European chemical industry: an example` (97/C 56/02)

On 6 May 1996 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 2 October 1996. The rapporteur was Mr Gafo-Fernandez.

At its 339th plenary session (meeting of 31 October 1996), the Economic and Social Committee adopted the following Opinion by 82 votes with one abstention.

1. Introduction

1.1. According to the Commission document, the major challenges facing the European chemical industry are:

- the health and environmental implications of the manufacture and use of these products;

- the global nature of its markets;

- its dependence on imported raw materials and energy inputs;

- its high reliance on capital and research and technological development (RTD).

1.2. Besides these challenges noted by the Commission, the Committee would like, for the purposes of this opinion, to highlight some features of this industry (), namely:

- highly important source of employment in the EU (1,60 million workers in 1994), with a significant number of SMEs (92 % of the 32 700 firms are SMEs, although they account for only 18 % of the total workforce and 21 % of the turnover of the sector as a whole);

- co-existence of a large number of highly distinct sub-sectors, which makes it difficult to devise a single strategy for the sector as a whole;

- the same applies with regard to large, medium and small companies, i.e. it is difficult to develop a single strategy, although they all operate in the same sector and are highly dependent on each other;

- the average level of training of workers is high, which means that they are well prepared to play an active part in the search for competitiveness;

- highly cyclical nature of its activity (especially for the 'upstream` chemical industry) so that good and inadequate, not to say bad, results alternate with some regularity, depending on the sub-sector concerned;

- a degree of external dependence for licences and patents (the EU represents only 36 % of the world total, which is similar to the figure for all industrial technologies);

- a very open market for imports of chemical products from most parts of the world. Unfortunately Community exports are not received with the same openness by some countries (especially the emerging Asian markets);

- public opinion is highly sensitive to activities in this sector as its products are widely used in everyday life; this can even be a determining factor in many investment and marketing decisions.

Due to all these factors, the Commission communication cannot tackle all the specific problems of the various sub-sectors, e.g. pharmaceutical products and artificial fibres. Nevertheless, the observations and measures put forward are applicable to the chemical industry as a whole.

1.3. In the light of these facts the Commission has drawn up a number of guidelines for the following areas:

- actions to improve the regulatory framework;

- actions to ensure effective competition;

- actions to strengthen intangible investment;

- actions to develop industrial cooperation.

The Committee would like to focus its recommendations on these actions.

2. General comments

2.1. With regard to the actions to improve the regulatory framework, the Committee considers that:

2.1.1. The conclusions of the Molitor Report, the European Commission's subsequent actions and the recommendations of the OECD suggested that any proposed new regulations in this sector should be strictly justified by need and be based on a proper cost/benefit analysis of their implications, and in particular on an assessment of the potential risks to health or the environment and on reliable scientific data, in accordance with Treaty Article 130s. The Member States must also ensure that national legislation is compatible and consistent with Community legislation.

2.1.2. Community legislation aimed at completing the single market and protecting health, safety and the environment, especially as regards the classification, labelling and use of chemical products, must be applied fully and effectively by the Member States. Possible national exceptions to Community legislation which lay down stricter rules must be notified beforehand to the Commission and may under no circumstances be incompatible with the single market, as laid down in Treaty Article 100a.

2.1.3. The Committee agrees with the Commission that when it is not possible to reach international agreement on regulating the manufacture and use of a chemical substance, an attempt should be made to apply any new rule at least in all the OECD countries.

2.1.4. In line with its concern to ensure a high level of protection for the environment, the Committee welcomes the establishment of voluntary programmes or agreements on the part of the chemical industry which supplement or go beyond the minimum levels required under existing regulations. It considers that the liberal use of such arrangements, provided that they are compatible with the competition rules, may be a real alternative to greater regulation of the sector and, in particular, the introduction of new taxes supposedly on environmental grounds.

2.2. With regard to actions to improve effective competition, the Committee considers that:

2.2.1. The Community competition rules must be applied in such a way as to improve the competitiveness of the Community economy, as made clear in a recent ESC opinion (). This implies that appropriate thought be given to the special features of this industry, which make it necessary to create competitive industrial groups in both the basic and fine chemicals sectors and in other sectors exposed to global competition. This is needed to respond to the dual challenges posed by the massive capital investments required for the construction of new plant and high RTD expenditure.

2.2.2. It also requires, firstly, the Merger Regulation to be applied effectively and the minimum thresholds for Commission intervention to be reduced. Secondly, a similar debate must be held on the arrangements applicable to cooperative joint ventures.

2.2.3. Community and national support mechanisms should be introduced to create a favourable climate whereby the adverse impact of the cyclical pattern of the petro-chemicals industry can be cushioned. The Committee could recommend some form of cooperation between companies, under the Commission's supervision, so as to ensure compatibility with Article 85 of the Treaty.

2.2.4. In line with its previous opinions on this matter, the Committee could also encourage the effective implementation of the internal market in the electricity and natural gas sectors; this would make it possible both to reduce current differences in the prices of these energy sources for comparable industrial consumers in different Member States, and to align prices on those paid by other competitors in the OECD area.

2.2.5. By the same token the Committee supports the Commission's analysis and statements calling on the emergent countries to reduce the high level of tariff protection for these products (compared with widespread EU dismantlement) and to abolish non-tariff barriers to trade, such as excessive analysis and labelling requirements. Of particular relevance are the distortions caused by different levels of environmental protection; this has also been the subject of a Committee opinion on international trade and the environment. In all these areas the Committee wishes to urge the Commission to implement, as quickly as possible, appropriate measures to ensure fair competition from non-EU countries.

2.3. With regard to the actions to strengthen intangible investment, the Committee considers that:

2.3.1. The new direction of Community RDT policy, aimed at reorienting the horizontal programmes of the IVth framework programme by means of a series of sectoral task forces, must recognize the importance of looking at the needs of this sector specifically, since looking at its activities within a few task forces (be it aviation, the train of the future or viral illnesses) gives only a partial and incomplete picture of its RTD needs, and this at a time when it is vital for the EU to make up for lost time in this area.

2.3.2. The Committee recognizes the crucial importance of biotechnological research in promoting the competitiveness and progress of chemical companies, especially in connection with a whole range of technologies for agriculture, pharmacy and consumer goods. The Committee has adopted an opinion recommending the rapid adoption of the directive on the legal protection of biotechnological inventions ().

2.3.2.1. Particularly in the absence of a stable and satisfactory legal framework, European researchers and companies are falling further and further behind their main competitors.

2.3.2.2. Thus, according to the European Patent Office, the US holds 65 % of the patents arising out of biotechnological research in the pharmaceuticals industry, as against only 15 % for the EU.

2.3.2.3. In the same opinion the ESC recommended improvements aimed at making the directive more precise, both on the public's legitimate right to information and on the conditions under which inventions are disseminated to companies, farmers and livestock breeders.

2.3.3. The need for a scientific culture has just been pointed out by the Committee in its opinion on the Green Paper on innovation (). This should be based on education and ongoing training, but also on encouraging a real social awareness of the importance of this phenomenon. One way of achieving this would be through suitable organizations such as adult education institutes and the like; another appropriate means could be to strengthen vocational training and university research infrastructure, especially by stepping up the programmes developed jointly with industry, using SMEs as a test bed for many of these innovative experiments and facilitating their access to the latest advances in the evaluation and classification of chemical substances as developed by the industry.

2.4. Finally, with regard to the actions to develop industrial cooperation, the Committee considers that:

2.4.1. In line with the philosophy expounded in point 2.2.3, the Committee supports the Chemical Sector Information Network (RISC), which should also be used to strengthen the joint planning actions and joint research.

2.4.2. To ensure the survival and competitiveness of SMEs in this sector they must be given access, on commercial terms and for personal use only, to chemical, physical and toxicological data and to chemicals-impact assessments which are in the hands of the products' manufacturers. Similarly these SMEs could be of enormous use to such manufacturers by passing on the views and experiences of the final consumers whom they supply and advise.

2.4.3. The Committee shares the view that external cooperation should be the responsibility of individual companies. However, the Commission has at its disposal numerous instruments (bilateral cooperation agreements, Tacis, Phare and MEDA programmes) to promote such cooperation both financially and by establishing regulatory frameworks in the countries concerned to facilitate investment and industrial cooperation with their chemical sectors. This is particularly urgent in the case of the CEEC, for whom the White Paper on integration into the internal market could represent a vital step on the road towards the restructuring and modernization of their chemical industries, a process in which the EU chemical sector should play an active part.

2.5. The Committee wishes to highlight the role of the workers in boosting the competitiveness of the chemical industry. Their role is not adequately appreciated in the Commission communication.

2.6. It is also necessary to develop specific programmes and actions for stepping up industrial cooperation between SMEs in various EU countries.

2.7. Finally, the Committee considers that in the title of the communication the word 'example` should be replaced by 'model` so as to reinforce the communication's own conclusions and proposed measures.

3. Conclusions and final recommendations

3.1. The Committee approves the Commission's communication, but would stress that it could serve as a model for similar action in other industrial sectors.

3.2. The Committee shares the philosophy which underlies the document, namely that it is up to the industry to define a strategy for the future, and for the Commission to establish a legal and regulatory framework which facilitates the industry's efforts to achieve competitiveness.

3.3. It is necessary to recognize the major role that the industry's workers and their representatives have to play in this process. The Commission must make adequate use of channels whereby their concerns and priorities can be taken into account and the companies must involve them actively and constructively in this drive for excellence and competitiveness.

3.4. The Committee does not want to establish priorities for the various areas of action (to improve the regulatory framework, to ensure effective competition, to strengthen intangible investment, to develop industrial cooperation) mentioned in the document, considering that they form a harmonious whole which should be developed in coordination.

3.5. The Committee would merely stress that within these areas there are aspects which should be reinforced, namely:

3.5.1. Undertake an in-depth cost/benefit analysis, based on sound scientific data, of all new rules on the classification, labelling and use of these products. Although the Member States must be responsible for ensuring that these rules are applied, this should be done in a manner which is compatible with Community rules and the single market.

3.5.2. Similarly, possible national exceptions to Community legislation should first be notified to the Commission and may under no circumstances be incompatible with the single market in accordance with Treaty Article 100a.

3.5.3. Call for effective liberalization of trade with emergent countries and search for alternatives to correct distortions caused by different levels of environmental protection.

3.5.4. In line with its concern to ensure a high level of environmental protection, the Committee welcomes the establishment of voluntary programmes or agreements on the part of the chemical industry which supplement or go beyond the minimum levels required under existing regulations.

3.5.5. Take sufficient account of the needs and priorities of the chemical sector when drawing up the fifth Community RTD programme. This means strengthening the cooperation between industry, universities and research institutes.

3.5.6. Reinforce the training side, with more cooperation between industry, universities and other socio-economic players.

3.5.7. Make better use of the support opportunities opened up by the bilateral cooperation agreements and regional programmes (Phare, Tacis, MEDA), with the direct participation of the industry and other players in the chemical sector.

3.5.8. The Commission will have to adopt the measures needed to ensure that this communication is followed up effectively through the direct participation of the industry and other socio-economic players.

Brussels, 31 October 1996.

The President of the Economic and Social Committee

Tom JENKINS

() In this respect see the Panorama of EC Industry 1995 in which 11 clearly differentiated sub-sectors are defined.

() OJ No C 295, 7. 10. 1996.

() OJ No C 212, 22. 7. 1996.