WRITTEN QUESTION E-0078/03

by Raimon Obiols i Germà (PSE) to the Commission

(23 January 2003)

Subject: Relocation of enterprises to central and eastern Europe

At a time when the EU is close to completing the negotiations for the accession of the applicant countries, enterprises located in the Member States are relocating to certain central and eastern European countries, attracted not only by low wage levels but also by the considerable tax advantages offered to business by certain countries.

These relocations are likely to result in higher unemployment levels in the Member States, and may also undermine public support for EU enlargement, given the lack of information and transparency on the subject of tax exemptions which has characterised the negotiation process.

Can the Commission indicate how many exemptions, and what type of exemptions, it has proposed for the car industry in the various negotiation processes for the forthcoming enlargement?

Has the Commission proposed any measures to alleviate the possible consequences of the relocation of enterprises from the existing Member States to central and eastern Europe, in the context of the priority European employment objective set by the Commission and the Member States as part of the Lisbon strategy?

Answer given by Mr Monti on behalf of the Commission

(5 March 2003)

The Commission, has consistently taken the view that the Candidate Countries can be regarded to be ready for accession only if their companies and public authorities have become accustomed to a competition and state aid discipline similar to that of the Community well before the date of accession.

In keeping with this strict approach, the Union has put forward three elements that must be in place in a Candidate Country before the competition negotiations can be closed:

- the necessary legislative framework with respect to antitrust and State aid;

- an adequate administrative capacity (in particular, well-functioning state aid and competition authorities); and

- a credible enforcement record of the acquis in both state aid and anti-trust policy.

Consequently, Candidate Countries are required to comply with the criteria of the Community state aid acquis already during the pre-accession period.

The Commission has advocated this strict approach not only to preserve the internal market discipline after enlargement, but also to keep a level playing field between future and existing Member States in the enlarged internal market.

This strict approach applies in particular to such a sensitive issue as aid to the motor vehicle industry. Therefore, the guiding principle remains that lower aid intensities have to be maintained in this sector, regardless of whether the beneficiary is investing in the current or future Member States.

On the basis of this restrictive approach, the Union has agreed to very limited transitional arrangements for aid to one or several car companies in three Candidate Countries, namely Hungary, Poland and Slovakia. The purpose of these arrangements is to ensure that strict maximum ceilings are imposed in relation to the already previously granted tax exemptions and also to avoid the companies concerned from unduly benefiting from the tax exemptions during the period after accession.

These guiding principles are also applied in the case of relocation accompanied by public aid. Furthermore, it is noted that under the Community rules, it is not a condition for granting regional aid that the aid is necessary for ensuring the viability of the company receiving the aid. The main purpose of regional aid is to compensate for the regional handicap of the assisted region.

These arrangements were unanimously accepted by the Member States during the negotiations on the competition chapter with these three countries.

Finally, as for transparency of aid granted in the Candidate Countries, the Commission is pleased to inform the Honourable Member that the Commission recently published a special edition of its State Aid Scoreboard. It is available on the Commission website(1) giving a comprehensive and detailed overview of all aid measures granted in the Candidate Countries, in similar fashion as is already the case as for the Member States.

(1) http://europa.eu.int/comm/competition/state_aid/scoreboard/.