Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) amending Regulation (EEC) No 1911/91 on the application of the provisions of Community law to the Canary Islands'
Date: 1999-09-22
Institutions: European Economic and Social Committee
Subjects: Canary Islands, aid system, application of EU law, customs territory (EU), derogation from EU law, tax relief

17.11.1999

EN

Official Journal of the European Communities

C 329/27

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation (EC)
amending Regulation (EEC) No 1911/91 on the application of the provisions of Community law
to the Canary Islands’

(1999/C 329/09)

On 8 September 1999, the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion which was responsible
for preparing the Committee’s work on the subject, adopted its opinion on 1 September 1999. The
rapporteur working without a study group was Mr John Simpson.

At its 366th plenary session (meeting of 22 September 1999) the Economic and Social Committee
adopted the following opinion by 114 votes in favour with 1 abstention.

1.

Introduction

The Commission has proposed a new Council Regu-
1.1.
lation amending Regulation (EEC) No 1911/91 on the appli-
cation of Community law to the Canary Islands.

The amendment waives until 30 June 2000 a require-
1.2.
ment
for a further scheduled reduction in the scale of
protection to local production of a limited range of products,
offered through a local tax on production and imports (details
below). The existing Regulation calls for annual reductions of
20 percent in this tax starting from 31 December 1996 and
eliminating the tax completely from 31 December 2000 from
which date the Canary Islands will also fully implement the
Common Customs Tariff of the European Community.

2.2.
The Act of Accession of Spain and Portugal acknowl-
edged the special and difficult social and economic situation in
the archipelago (1). In recognition of the particular difficulties,
initially, the Canary Islands was excluded from the Community
customs area and the common commercial policy, and from
the common agricultural and fisheries policies.

In more recent years, measures have been introduced
2.3.
which, in a sympathetic manner, have reduced the scale and
impact of these exemptions.

2.4.
The APIM system of taxation, (see below), was intro-
duced in 1973 and continued after accession to the Com-
munity. This tax has been used to offer some fiscal protection
to the more vulnerable sectors of manufacturing industry in
the islands.

1.3.
Effectively, the amendment would postpone for six
months the reduction which would otherwise have taken
place on 31 December 1999. This postponement will be
accompanied by an examination by the Commission of the
impact of phasing out the tax on the several sectors concerned.
The merits of, and the case for, further special measures in
favour of these vulnerable sectors will be examined and, if
necessary, a further proposal will be made to the Council.

The special problems of the Canary Islands, as one
the outermost regions of the Community, have been

2.5.
of
acknowledged in a number of different ways. These include:

1. Council Regulation (EEC) No 1911/91 sets out the way in
which the provisions of Community law would apply to
the Canary Islands (2);

This amendment requires the unanimous agreement of

1.4.
the European Council.

2. Council decision setting up a programme of options
specific to the remote and insular nature of the Canary
Islands (Poseican) (91/314/EEC) (3);

1.5.
The new arrangements, if any, to be agreed in 2000
will be subject to qualified majority voting in the Council
under Article 299(2) as amended by the Amsterdam Treaty.

3. Commission decision concerning the tax on production
and imports (arbitrio sobre la produccio´ n y sobre las
importaciones, APIM) based on the specific provisions of
Regulation 1911/91 (4);

2. Special provisions applicable to the Canary Islands

(1) Act of Accession, Protocol No. 2. In particular, the Canary Islands
were then excluded from the Common Customs Area and the
Common Agricultural Policy.

The Canary Islands became part of the EU with the

2.1.
accession of Spain in 1986.

(2) OJ L 171, 29.6.1991, p. 1.
(3) OJ L 171, 29.6.1991, p. 5.
(4) OJ L 10, 13.1.1996, p. 38.

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Official Journal of the European Communities

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4. Council Regulation (EEC) No 1601/92 established a spec-
ific supply system and related specific measures, concern-
ing trade in a range of agricultural products to derogate,
temporarily, from the Common Agricultural Policy.

5. Commission decision under the Regis II Community
Initiative for a programme from 1994 to 1999 to acceler-
ate closer economic integration into the Community
involving a commitment
from the Community of
216,9 m.ecu, of which 94 % was from the ERDF and 6 %
from EAGGF, in a total programme cost of 385,5 m.ecu;

6. Support from the Structural Funds which, for the period
1994 to 1999, will have contributed 660 m.ecu in an
expenditure programme including national expenditure
and private financing which totalled 1 052 m.ecu. (1) in
1994 prices. This does not take account of any impact of
allocations from the Spanish multiregional programmes.

3. The APIM (arbitrio sobre la produccio´ n y sobre las

importaciones)

The proposal

3.1.
is that the APIM should continue to
apply to seven groups of products at the present rate until
30 June 2000.

3.2.
These fall within defined groups of products according
to the nomenclature of the Common Customs Tariff. The
detailed classifications are listed as an Annex to the proposal.
The groups are described as:

— miscellaneous foodstuffs

— tobacco

— chemicals

— paper

— textiles

— metalworking industries

— other manufactured goods (as specified).

3.3.
The Commission has come to the conclusion that
employment in the sectors identified in paragraph 3.2 could
be threatened by the elimination of
the APIM. Detailed
estimates have been compiled of the adverse implications for
employment in each sector.

3.4.
A request from the Spanish authorities for the inclusion
of soft drinks and construction materials in the list of products
for which the reduction in APIM would be suspended has not
been accepted by the Commission.

3.5.
If the amendment is accepted then the APIM will
continue to apply to only 10 percent of the value of all imports
to the Canary Islands and the highest rates applied would be a
maximum of 6,9 percent on tobacco and 2,3 percent on the
specified ‘manufactured goods’.

The Commission acknowledges that

the proposed
3.6.
measure, which would derogate temporarily from the prin-
ciples laid down in the Regulation (EEC) No 1911/91, must
form part of the process of integrating the Canary Islands into
the Community and can be aimed only at mitigating the effects
of the economic adjustments that have to take place. (2)

4. The economic and social situation in the Canary

Islands

4.1.
The Canary Islands have a population of 1,6 million
people. They are an autonomous region of Spain with a large
degree of devolved responsibility for the development of
economic policies in the Islands.

The Community has recognised the unusual and
4.2.
particular problems of the Islands and their implications in
securing the integration of the Islands into the Community.

A feature of the Islands is the large degree of depen-
4.3.
dence on revenue from tourism. Over 10 million visitors arrive
each year. This is a critical source of income but also brings,
as a consequence,
the
environmental sustainability of this activity in terms of the use
of natural resources, especially fresh water supplies.

the need for careful planning of

4.4.
The climate of the region gives a comparative advan-
tage for the growing and export of bananas and tomatoes as
well as the production of wine.

4.5.
The most conspicuous factors affecting the economy
of the Islands are the combination of distance from the main
markets of Europe and the relatively small scale of
the
economy based in the several islands. As a partial offset to the
cost of shipping goods to and from the islands, a contribution
to exporters based on the extra transport costs of imports and
exports between the Islands and the rest of the EU is paid.

4.6.
Unemployment is high. More recently, unemployment
in the region (using the NUTS II definitions) was the fourth
highest in the EU. (3)

4.7.
In the ten years from 1987 to 1997, unemployment
fell from over 25 percent to 21 percent. However, it remains
over twice the average for the whole of the EU.

(1) The impact of structural policies on economic and social cohesion
in the Union, 1989-1999 (A first assessment presented by
country, October 1996), European Commission, p. 166.

(2) COM(1999) 226 final; paragraph 7.
(3) Sixth Periodic Report on the Social and Economic Situation and
Development of the Regions of the European Union, European
Commission, Table 43.

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GDP per head, as measured in purchasing power
4.8.
standards by Eurostat, rose from 69 percent of
the EU
average in 1986 to 74,3 percent in 1996. (1) This represents a
significant improvement but is still low enough to qualify for
Objective 1 status which has now been assured for the period
to 2006.

5. Future developments

Article 299(2) of

5.1.
the Amsterdam Treaty [formerly
Article 227(2)] makes specific provision for the application of
the Treaty to the French Overseas Departments, the Azores,
Madeira and the Canary Islands and provides that the Council,
after consulting the Parliament (2), shall adopt specific measures
aimed at laying down the conditions for the application of the
Treaty to those regions taking account of the structural social
and economic situation as described in terms of remoteness,
insularity, small size, topography and climate and dependence
on a limit range of products. Presumably this reference to
products also includes services.

5.2.
The specific measures are to take into account areas
such as customs and trade policies, fiscal policy, free zones,
agriculture and fisheries policies, conditions for the supply of
raw materials and essential consumer goods, State Aids and
conditions of access to structural funds and to horizontal
Community programmes.

5.3.
These special measures are to be adopted ‘without
undermining the integrity and coherence of the Community
legal order, including the internal market and the common
policies’.

For the period 2000-2006,

5.4.
the Commission has
already decided that the Canary Islands qualify as an Objec-
tive 1 region of the Community. This is a continuation of the
position in the years up to 1999. The Canary Island also
continue to qualify under the Cohesion Fund which enhances
the maximum proportion of eligible costs which may be
financed through the Structural Funds.

6. Conclusions and recommendations

6.1.
The Economic and Social Committee welcomes this
opportunity to comment on the proposed amendment to

(1) Op.cit, Table 43.
(2) There is no specific reference in the amended Article 299(2) to
any consultation with the Economic and Social Committee or the
Committee of the Regions.

Brussels, 22 September 1999.

Regulation (EEC) No 1911/91 which applies the provisions of
Community Law to the Canary Islands.

6.2.
The Committee recognises that the outermost regions
of the European Union merit special consideration in the
application of Community policies whilst adhering as closely
as is practicable with the spirit and detail of those policies. The
Committee particularly endorses the requirement of the Treaty
[Article 299(2)] that the integrity and coherence of the Com-
munity legal order should not be undermined.

6.3.
The evidence of recent years is that the economic
position of the Canary Islands has improved in both absolute
and relative terms. Nevertheless, efforts to further enhance this
progress are desirable.

6.4.
The ESC, therefore, welcomes the commitment by the
Commission with the Spanish authorities to examine the
consequences of suspending the phasing-out of the APIM and,
if judged necessary, to present a proposal on possible action.
The objective is to eliminate the tax without jeopardising some
local production activities in vulnerable sectors.

6.5. Whilst the ESC endorses the general thrust of the
proposal by the Commission, there would be merit in using
this opportunity to review not just the impact of the APIM
system of taxation but also the nature and impact of all
Community policies on the development of the Canary Islands
and seeking proposals which will more closely integrate the
Islands into the Community and generate innovative actions
to enhance their development.

6.6.
The ESC, therefore, accepts the arguments made for
the amendment of Regulation (EEC) No 1911/91 to suspend
the phasing-out of the APIM as an appropriate mechanism to
allow a more fundamental review of the methods of enhancing
development in the Canary Islands.

6.7. When the review has been undertaken, the Economic
and Social Committee will have a keen interest in the proposals
which emerge and hopes that the Commission will arrange for
the Committee to have an opportunity to offer its opinion on
their implementation.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI