WRITTEN QUESTION E-1787/01

by Ilda Figueiredo (GUE/NGL) to the Commission

(19 June 2001)

Subject: Ceramics industry in Portugal

In various parts of Portugal (in particular Barcelos, Alcobaça/Caldas da Rainha and Aveiro/Águeda) there is still an important ceramics industry producing household and ornamental items. However, it is facing a variety of problems, particularly where small and very small family-based businesses are concerned.

In the Barcelos area the situation is particularly serious: since 1995, production has been tailing off at an increasingly rapid rate on account of the fact that the Community's internal market is being flooded by products from third countries, in particular China.

In its report of 14 February 2001 the Commission assesses the situation relating to the operation of quota and monitoring mechanisms in respect of non-textile products from the People's Republic of China and proposes (in connection with the current negotiations on China's membership of the WTO) that they should be completely abolished by 31 December 2004.

1. How does the Commission reconcile the measures announced in the above report with the need to achieve social and economic cohesion and to safeguard jobs within the European Union?

2. What support (and, in particular, what financial support) is being considered as a means of assisting the conversion of Portugal's ceramics industry in time to prevent in from collapsing, it being the case that Portugal is the EU Member State with the greatest social and economic problems?

Answer given by Mr Lamy on behalf of the Commission

(6 September 2001)

The Community being the first trade area in the world is bound by its international obligations. As quotas are not allowed under World trade organisation (WTO) rules, the quota on ceramic

products should therefore have been eliminated by the time of China's accession to the WTO. However, the Commission has negotiated for these products a transition period until 1st January 2005 where the quota will remain in place (with a 15 % year on year increase). The opening of the Community market will therefore happen only gradually. The phasing out of the remaining Community quotas vis-à-vis China mirrors the phasing out of Chinese quotas. Therefore the process should bring benefits to both partners.

An appraisal of the consequences of trade liberalization should include positive as well as negative effects. Trade contributes to higher investment, growth and jobs in the Community as well as in Portugal: 20 % of employment in the Community is related to export activities. China's WTO accession will bring new opportunities to the Community producers of ceramic products, since in the framework of the accession China agreed to reduce tariffs on 11 key ceramic products from 24,5-35 % to 10-15 %.

Increased competition can indeed have impacts on particular sectors that may be forced to restructure, with costs in job losses. This negative aspect can be mitigated by the use of appropriate social policies, including education, training, research and development, as well as social security safety nets. Though in this case no particular measure is foreseen at Community level, Portugal is an objective 1 beneficiary of the Community Regional Policy, which aims at addressing the social and economic renewal of regions experiencing difficulties.

Moreover if the ceramics industry believes that it is suffering material injury because of unfair trade practices from its non-Community competitors, such as dumped or subsidised imports, it may submit a complaint to the Commission. The Commission will then launch a formal investigation to establish if remedial action such as trade defence measures is necessary.

Regarding the forthcoming Chinese entry to WTO, a clarification note was distributed by the Commission and discussed with Member States in the Council's C.Q. Group on 31 May 2001 in reply to a number of questions raised by Member States regarding our non-textile quotas (footwear-ceramics-porcelain) vis-à-vis China. It provides background and relevant information regarding present position and developments as soon as China enters WTO. It is available on the Commission web site at: http://www.cc.cec:8082/comm/trade/bilateral/china/cn200601.htm.