WRITTEN QUESTION E-1573/97 by Amedeo Amadeo (NI) to the Commission (6 May 1997)

Subject: Subcontracting in the textile industry

The Commission has published a communication to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions entitled 'The competitiveness of subcontracting in the textile and clothing industry in the European Union' (COM(96)0210 final).

It is estimated that 800 000 people are employed in subcontracting in the textile industry. Subcontractors face major challenges, and their growth will shape the future of the entire industry.

The aim of the Commission communication is to propose a package of measures and a structure for supporting the efforts made by subcontractors to improve their competitiveness. This will involve developing means of offering greater quality, innovation, reliability and flexibility.

Can the Commission ensure that the burden of taxation and social charges does not fall mainly on labour?

Answer given by Mr Bangemann on behalf of the Commission (12 June 1997)

Subcontracting in the textile and clothing sector is undergoing a number of major developments affecting the entire industry, especially in the low-skilled labour areas. These developments are connected with the internationalisation of production, where there is a growing proportion of countries with low labour costs, with the diversity of demand, with the growth of the role of distribution, and with the changes in customers' adaptation strategies.

In addition, subcontractors have competitive advantages which make it possible to improve the firms' productivity. These are, in particular, advantages as regards qualifications, service, better use of flexible logistics, and product quality systems.

Following its communication on subcontracting, the Commission, with the collaboration of both sides of industry, has created a subcontracting group which is intended to act as promoter and organiser in order to ensure the distribution of information and best practices at the European level in order to increase the participation of the firms concerned in existing Community and national actions by means of specific pilot projects.

As regards labour costs, the Commission considers that they are very high in the industry (direct pay but also social security contributions and taxation) in relation to total production costs, but vary in accordance with the technology used, the subsector and the country. In general in the tailoring sector these costs represent 40% of the total production costs in industrialised countries. There are, however, considerable divergences within the Community not only with regard to pay but also in the area of social charges and taxation on pay.

In December 1993 the European Council in Essen established a common framework for the structural reforms of the labour market to be carried out by the Member States. This framework includes an annual follow-up at the European level based on the national programmes. There is a broad consensus at the moment that in order to promote the competitiveness of firms there is a need to reverse the trend, which has been observed for more than 15 years, towards the concentration of taxation and social charges on salaried employment. Proposed in 1993 by the White Paper on Growth, Competitiveness and Employment ((Doc COM(93) 700. )), this trend reversal has not yet materialised in most Member States.

The Commission considers that it is indispensable to intensify the exchanges of information and experience on the subject. In addition, the Dublin European Council of December 1996 approved the global approach proposed by the Commission as the framework for a structural development of systems of taxation and social charges more favourable to jobs and the environment. In particular it is a matter of limiting tax competition, the uncontrollable growth of which represents an obstacle to the efforts to straighten out the taxation structures.

The Commission stresses, however, that it is for every Member State to find the best methods to reduce indirect labour costs (social security contributions, income taxes) and the means for financing such reductions. However, the way the reductions are targeted must not cause any distortion of competition, which may happen if they are targeted on specific economic sectors.