WRITTEN QUESTION E-1140/02

by Erik Meijer (GUE/NGL) to the Commission

(22 April 2002)

Subject: Increasing dependence of the Polish economy on agriculture and international road transport following contraction of the steel industry

1. Can the Commission confirm that the conclusion of accession negotiations with Poland on the competition chapter was linked to Poland's willingness to merge the four existing blast furnace undertakings into a single undertaking, Polskie Huty Stali (Polish steel and blast furnaces) in May 2002, then to sell the undertaking to interested parties from EU Member States (Usinor, Thyssen Krupp, Salzgitter or Corus) or India (Ispat) and to shed a quarter of the 40 000 jobs which remain after earlier restructuring, all of which would lead to the Commission having to approve a consolidation plan?

2. Is the Commission aware that the Polish steel industry has already contracted considerably over the past 15 years, that this sector now yields only 1,69 % of national income and that unemployment has risen to about 18 %?

3. Can the Commission confirm that Poland has become increasingly dependent on imports because of the contraction of the steel industry, such that in 2001 40 % of national steel consumption had to be met from imports and it is anticipated that this figure will increase to 50 % in 2002?

4. How can the Commission help to prevent the restructuring and the crisis in the steel industry making the Polish economy increasingly dependent on an outdated agricultural sector, on cheap road transport outside its own frontiers, on the export of prostitutes and on other activities which will increasingly be viewed as problems in the EU?

5. How does the Commission intend to prevent a situation where Poland, because of declining industrial production, high unemployment and insufficient resources for cleaning up massive industrial pollution (e.g. asbestos, unprocessed minerals residues, artificial fertilisers and pesticides) is unable for a considerable period to meet the necessary requirements for membership of the European Union?

6. Is the Commission prepared to support import restrictions on steel, which is how the Polish government wishes to respond to the American import restrictions which have applied since 20 March and which particularly affect Poland as the United States was its third largest export market worth $63,5 million in 2000, and to the influx into Europe of cheep Asian steel which was previously exported to America?

Source: Financieel Dagblad, 25.3.2002

Answer given by Mr Verheugen on behalf of the Commission

(3 June 2002)

1. The Commission can not confirm that the conclusion of the accession negotiation with Poland was linked to Polands willingness to merge the four existing blast furnace undertakings into a single undertaking.

The Commission stresses that the necessity to demonstrate a credible track record of enforcement with respect to competition policy including both anti-trust and state aid is an important element in the negotiations of the competition chapter for all the candidate countries.

A credible record of enforcement includes the respect of Protocol 2 of the Europe Agreement relating to state aid in the steel sector. The Protocol sets out the criteria under which aid may be granted to the sector for restructuring purposes. However, it is for each candidate country to decide whether such aid is necessary and, if so, the best approach to fulfil the criteria set out in Protocol 2. Whether the criteria have been fulfilled is decided jointly by on the one side Poland and on the other the Community and its Member States.

2. and 3. The Commission is aware of the efforts that Poland undertook so far in order to develop a modern and globally competetive steel industry. Moreover the Polish government and the individual steel mills have long been aware of the need to restructure the sector and escape from the legacy of the previous industrial system which left the steel sector ill-equipped to face the rigours of the market economy. In particular, the Polish steel sector faces competition on two fronts: first and foremost from cheaper products from the former Soviet Union at the bottom end of the market and secondly from high quality imports from western producers at the top end of the market.

This challenge has long been recognised within the industry and the sector has, on an ad hoc, firm by firm, basis been undergoing a transition along with the rest of the Polish economy.

The current steel restructuring plan devised by the Polish government is intended to put this ad hoc restructuring on a firmer basis and to develop a clear strategy for the sector. The restructuring of the steel sector is therefore an important element in the ongoing modernisation of the Polish economy, which has undergone a massive transformation in the last decade and which defies the old stereotypes.

4. and 5. The restructuring of the sector has had a social impact: over the last decade the steel sector has seen its direct workforce reduced by around 100 000 workers. Some are now employed in spin off companies, others have found employment in different areas.

The Commission has sought to alleviate the social impact of these reductions, and those in the coal sector, directly through PHARE funding to assist in retraining workers, the creation of business start up funds and the like. Support for these actions amounts to some EUR 60 million.

In addition to this direct assistance to alleviate the social impact of restructuring, the Community, through the Economic and Social cohesion envelope of the PHARE programme, is providing around EUR 120 million annually to assist the most deserving regions in Poland as a pre-cursor to the structural funds. Such funding supports not only job creation initiatives but also small scale environment projects at the local level. At the national level the Instrument for Structural Policies for pre-accession (ISPA) programme is allocated EUR 370 million a year for national environment and transport infrastructure projects in Poland. Also the Special Accession Programme for Agricultural and Rural Development (Sapard) programme, with a total allocation of EUR 170 million, includes substantial assistance for modernisation of rural infrastructure. In total the Community provides almost EUR 1 billion a year to Poland to assist in its preparations for membership of the Union and to ensure that all parties are able to benefit fully from the enlargement of the Union.

6. The United States' steel safeguard measures are unjustified and World Trade Organisation (WTO) incompatible. Their destabilising impact on world steel markets presents a clear risk to the restructuring process that Poland and other candidate countries are undertaking. However, any safeguard measure to counter trade diversions from the United States market must strictly respect WTO rules.