WRITTEN QUESTION E-2193/03

by Glenys Kinnock (PSE) to the Commission

(2 July 2003)

Subject: The future of the steel industry in the UK

Is the Commission aware of the claims from Corus UK Ltd that whilst steel production capacity in other EU Member States has been cut in recent years, much of this capacity was severely under-utilised and actual output levels have changed very little? Furthermore, it is claimed that significant amounts of state aids were used to encourage these capacity changes, many of which were accompanied by new plant investment in the facilities that remained. Does this not contravene state aid rules?

Also, what is the Commission planning to do to encourage the rationalisation of steel production in accession countries? Does the Commission agree that the steel-producing accession countries have failed to act quickly enough in restructuring their capacity? It is Corus UK's opinion that what restructuring will take place before 2007 will be too little, too late.

Answer given by Mr Liikanen on behalf of the Commission

(6 August 2003)

The Commission is not aware of recent claims from Corus United Kingdom Ltd along the lines indicated by the Honourable Member. However, it would like to point out that during the period from the beginning of the 1980s until the mid 1990s, steel production capacity has been reduced by some 60 million tonnes. The fact that output has remained steady at about 160 million tonnes is a reflection of improved productivity linked to continuing investments and technical improvements. All such investments have been carried out within the framework of a specific state aid regime, which has limited eligible aid to clearly defined conditions which are strictly controlled. As part of this process, the Commission, following a unanimous decision by all Member States, authorised national authorities to grant necessary restructuring aid under strict conditions. A strict control regime was set in place to monitor the aid granted. At the time, the Commission and the Council agreed that no further decisions of this nature would be taken to rescue or restructure Community steel firms.

The United Kingdom took part in this exercise at the same level as other Member States. Since 1995, there has been no new restructuring programmes supported by public funds and individual companies must take their strategic decisions in full autonomy. Steel companies have been acting on the market on the assumption that no further restructuring aid was available to them. The Commission considered that if this state of affairs was to change in the future, there was no guarantee that steel firms would not relax their efforts towards cost reduction and increased competitiveness, thereby endangering the enormous efforts already made. This is why on 19 March 2002, the Commission decided that the prohibition of rescue and restructuring aid for steel companies in difficulties should continue after the expiry of the ECSC Treaty on 23 July 2002(1).

The Commission also decided that regional investment aid should continue to be prohibited after the expiry of the ECSC Treaty(2).

The restructuring of the steel industry in the new Member States remains to be completed. This was acknowledged during the accession negotiations by all parties involved. As a result of the negotiations, transitional periods have been agreed for the Czech Republic and Poland until the end of 2006, in order to allow these countries to complete the restructuring of their steel sector and to make the companies that are still publicly owned more attractive for private investors.

The Commission has been actually involved in the assessment of national restructuring plans in the new Member States and will continue its involvement in the future. This has permitted strict conditions to be set concerning the maximum amounts of restructuring aid that may be granted to beneficiary companies, as well as the closure of non-viable and obsolete facilities. The new Member States committed themselves to fulfilling these conditions, which have been enshrined in the Treaty of Accession.

For Slovakia, which privatised its steel industry in 2000, a temporary period has been agreed during which the beneficiary company may benefit from a tax exemption scheme to compensate for maintaining employment. During this period, which will terminate by the end of 2008, Slovakia has made a commitment to respect ceilings for production and sales of steel products into the market of the enlarged Union.

Detailed monitoring conditions are specified in the Accession Treaties and the Commission will report on the progress achieved on a regular basis.

(1) Communication from the Commission on rescue and restructuring aid and closure aid to the steel sector, OJ C 70, 19.3.2002.

(2) Communication from the Commission on the Multisectoral framework on regional aid for large investment projects, OJ C 70, 19.3.2002.