3.

The French Government's alternative arguments concern the economic repercussions of the system of aid, in particular the alleged oppression of foreign producers. It attempts to show by these arguments that the method of financing which it chose ‘does not adversely affect trading conditions to an extent contrary to the common interest’, that is, that an essential requirement laid down in Article 92 (3) (c) for taking the contested decision was not fulfilled. In this respect it refers to the low rate of the charge in question and the fact that it can be passed on the French consumers in its entirety, and alleges that it is thereby impossible for foreign producers to be placed at a disadvantage. It claims that this is shown by the fact that textile imports into France from other Member States have considerably increased during the past two years. In addition, the French Government maintains that it should be acknowledged that the aid also has beneficial effects for foreign producers both by promoting research and improving industrial and commercial structures. Finally it says that it must be seen that if the Commission's decision is applied, that is, if the charge is not levied on foreign products, the result is that French undertakings suffer discrimination and that they alone bear the burden of financing the aid, thus producing a system which it is impossible to justify on economic grounds and indeed a situation which is absurd if it becomes general. Now let us look more closely at these arguments and see what is to be made of them. First of all, the proposition that imposing the charge cannot have detrimental effects on foreign producers because the charge can be passed on to French consumers in its entirety seems to me to be extremely doubtful. Certainly the technical legal argument that the charge must be included in invoices, since it supplements value-added tax, cannot be taken into consideration. In fact no opinion in this way can be reached as to its economic effects. However, as regards the repercussions on the economy it could only be said that the charge is being passed on to the consumer in its entirety if there is absolutely no elasticity of demand. However it cannot be supposed that this applies to textiles, especially considering the problems of excess production capacity which face this sector of industry. It follows from this that the result of imposing the charge on foreign products might be a loss of profit or sales for their manufacturers and that there is therefore a danger that trading conditions might be adversely affected. As for the rate of tax imposed, which has now been increased from 0.20 % to 0.44 % because the tax is now assessed on the value of the goods before tax, it must certainly be admitted that the French Government is right when it says that these rates of tax could only cause small increases in price, smaller for instance than those caused by fluctuations in world market prices for raw materials. However it is doubtful on the whole whether the question should be considered in such quantitative terms. Certainly the French and Italian versions of Article 92 could lead to this conclusion, since they use the terms ‘dans une mesure contraire à l'intérêt commun’ and ‘in misura contraria al commune interesse’. However the German and Dutch versions use terms which suggest rather that the question should be considered qualitatively, since they state that trading conditions must not be altered in a manner (‘in einer Weise’, ‘zodanig’) contrary to the common interest. This qualitative method of viewing the problem must however be chosen having regard to what has already been said as to the rigorous character of the Treaty provisions on aid which under Article 92 prohibit even aid which threatens to distort competition. Moreover it should not be forgotten that if the problem were viewed quantitatively this would introduce a factor of considerable uncertainty into the assessment because naturally the determination of what must be regarded as a noticeable or substantial alteration in trading conditions would vary according to market conditions and the time when the question was being considered. In fact in the present case this seems just as intolerable as in the case of the assessment of charges having an effect equivalent to customs duty in respect of which the Court, as you know, expressly ruled out the quantitative method of viewing the problem. ( 2 ) However, if a quantitative method of viewing the problem is adopted, which all these considerations compel one to do, that is, if one asks the question what alteration in trading conditions is intrinsically contrary to the common interest within the meaning of Article 92, I have no doubt that this consists of any method whereby foreign manufacturers are placed at a disadvantage, especially if it is with the help of rules imposing a charge within the framework of a system of aid. Thus the extent to which foreign producers are in fact placed at a disadvantage is quite irrelevant. Consequently there is no need to deal any further with the argument that textile imports into France from other Member States have considerably increased during the last two years. At the most it might be observed, as the Commission has done, that this can be explained by general short-term economic developments which applied to many sectors of the French economy and that, moreover, it is not known how imports would have developed if the charge in question had not been imposed. Further, the following remarks must be made as regards the French Government's argument that imposing a charge on foreign products is justified because the systems of aid thereby financed also have beneficial effects for foreign producers. The applicant's argument might apply, at least in part, to the support given to the Institut Textile de France, since all interested parties are free to use the library and information service, the results of the Institute's research work are published and research contracts are accepted from domestic and foreign undertakings on the same conditions. However, it is impossible to say that there is complete equality of treatment and equal benefit derived from these facilities, not only because foreign subscribers, of whom there are significantly fewer than French subscribers, must pay more for the Institute's publications but also because they have language difficulties and because naturally a certain national bias in the research work, which is more strongly influenced by French undertakings, cannot be denied. It is even clearer that there is no question that the structural measures encouraged by the system of aid has equally beneficial effects for foreign undertakings. In fact it is not confined to eliminating unprofitable businesses, that is, to decreasing production capacity, but it aims to rationalize and increase productivity so that French undertakings can better meet competition from foreign industries, for which structural measures of the same kind have not been arranged. Moreover, against the submission that foreign undertakings benefit to the same degree from the favourable effects of the measures in question, it must be remembered that in a comparable case involving an Italian statistical duty it was pointed out with regard to the submission that there was a consideration which, it was claimed, justified the duty, that this was a general benefit and that the assessment of its scope was uncertain. (Case 24/68 [1969] E.C.R. 202). Indeed the same applies to the promotion of structural measures for the French textile industry and its bearing on foreign producers, on whose products is imposed a charge to finance the system of aid. Chiefly for this reason it seems impossible to justify the imposition of a charge on foreign products. Finally there is not much to be said for the arguments on the part of the applicant that if French undertakings only were taxed they would suffer discrimination and that there is a danger of effects which would be hard to justify on economic grounds. Indeed it is impossible to say that French undertakings would suffer discrimination because they are clearly in a most favourable position since they are the main beneficiaries of the system of aid which is financed by the charge. As regards the danger of undesirable effects from the economic point of view, it must be said that this vague kind of argument certainly cannot do anything to set aside the requirements which can in this case be clearly deduced from the Treaty provisions relating to aid. Quite apart from this, the fundamental consideration is really one of pure theory, that is, the consideration that the application of the system desired by the Commission would deprive the system of aid of its basis because goods would then only be produced for export (which would not attract the charge). Therefore the alternative arguments of the applicant also fail to enable it to justify its application for annulment.