WRITTEN QUESTION E-3213/02

by Margrietus van den Berg (PSE) to the Commission

(12 November 2002)

Subject: European code for the allocation of subsidies to prevent distortion of competition

During a working visit on 19 October 2002 to Sanmina-SCI, a computer company in Heerenveen in the province of Friesland which was set up in about 2000 and is to close down at the end of this year (with the loss of 260 jobs), it became clear that this company had received European subsidies. In an increasingly globalised economy, big brand-name companies are setting up such quasi-independent companies as Sanmina-SCI for the purpose of being able to close down particular divisions often at the cheapest location without damaging the reputation of the brand name. Such businesses as Hewlett Packard and Philips regularly employ this strategy. In many cases, the production unit concerned exists to supply a single customer and has no R & D division of its own, making it highly vulnerable.

It might be desirable for the OECD code to be incorporated in contracts when multinationals directly or indirectly receive European subsidies or other public funding. It might in particular be desirable for this to apply to parent-company multinationals with well-known brand names which use subcontracting units like SCI.

In the Netherlands, Jacques Tichelaar, a Member of the Lower House of Parliament, has asked questions about SCI and has been told in reply that a readiness exists to draw up a code in line with the OECD which would apply to the granting of European subsidies, inter alia. On the basis of the working visit and discussions with the works council and management, I conclude that in order to prevent distortion of competition and a rat race, such a code ought to be adopted at European level rather than nationally in the Netherlands. The Commission is seeking to strike a good balance between a free and fair market and preserving social protection in Europe. Accordingly, employees must not be allowed to become disposable commodities.

1. Will the Commission draw up such a code in cooperation with the Member States and with multinationals which operate in Europe or use subcontractors here?

2. Where demand is expected to change, is it not the very essence of socially responsible business management to seek alternative products or customers and, where necessary, to invest?

Answer given by Mrs Diamantopoulou on behalf of the Commission

(14 January 2003)

The Commission can confirm that in the 1994-1999 programming period the European Social Fund (ESF) co-financed employment subsidies for workers in Sanmina-SCI and the European Regional Development Fund (ERDF) provided co-funding for the development of the IBF Heerenveen Business Park under the regional development programme Friesland Objective 5b. Sanmina-SCI was located on this site.

The Organisation for Economic cooperation and Development (OECD) Guidelines for multinationals provide voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, taxation, and science and technology. The Chapter on Employment and Industrial Relations aims at prior notice and dialogue before the closure of a plant. National Contact Points established in all Adhering countries to the OECD Declaration on International Investment, including all the Member States can help and mediate in this process with all interested parties. The Commission does not therefore intend to draw up a code in addition to the OECD guidelines.

However, the Commission adopted recently a Communication on corporate social responsibility (CSR)(1) after a comprehensive consultation process. In this context, it decided to set up a Multi-Stakeholder Forum to bring together leading European representatives of organisations of employers, employees, civil society, and consumers to strengthen transparency, support convergence of and explore the opportunity of establishing common guiding principles for CSR practices and instruments, taking into account existing Community initiatives and legislation and internationally agreed instruments, including the OECD guidelines referred to.

Finally, it should be noted that several Community Directives in the field of information and consultation of workers may apply in situations like the one mentioned by the Honourable Member: Community Directives on Collective Redundancies(2), Transfers of Undertakings(3), European Works Councils(4) and Information and Consultation(5).

In addition to the above measures, in January 2002 the Commission launched a consultation of the social partners at European level on the opportunity of identifying and developing

a set a basic principles which would apply to corporate restructuring. The Commission welcomes the fact that the social partners have recently decided to include the follow-up of this important issue in their Multiannual Work Programme for 2003-2005.

(1) COM(2002) 347 final.

(2) Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies. (This Directive consolidates Directives 75/129/EEC and 92/56/EEC), OJ L 225, 12.8.1998.

(3) Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses, OJ L 82, 22.3.2001.

(4) Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees, OJ L 254, 30.9.1994.

(5) Directive 2002/14/EC of the Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the Community Joint declaration of the Parliament, the Council and the Commission on employee representation, OJ L 80, 23.3.2002.