Opinion of the Economic and Social Committee on the "Proposal for a Regulation of the European Parliament and of the Council concerning protection against subsidisation and unfair pricing practices in the supply of airline services from countries not members of the European Community" (COM(2002) 110 final — 2002/0067 (COD))
Date: 2002-09-18
Institutions: European Economic and Social Committee
Subjects: air transport, anti-subsidy proceeding, provision of services, restriction on competition, tariff barrier, third country

14.3.2003

EN

Official Journal of the European Union

C 61/29

Opinion of the Economic and Social Committee on the ‘Proposal for a Regulation of the European
Parliament and of the Council concerning protection against subsidisation and unfair pricing
practices in the supply of airline services from countries not members of the European
Community’

(COM(2002) 110 final — 2002/0067 (COD))

(2003/C 61/05)

On 3 April 2002 the Council of the European Union decided to consult the Economic and Social
Committee, under Article 80(2) of the EC Treaty, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 2 September 2002. The
rapporteur was Mr Green.

At its 393rd Plenary Session of 18 and 19 September 2002 (meeting of 18 September) the Economic and
Social Committee adopted the following opinion by 130 votes in favour, with four abstentions.

1. Background

1.1.
The Commission notes in its explanatory memor-
the airline industry in the
andum to this proposal that
Community is faced with a critical challenge: the need for it
to compete with third-country airlines which benefit from
generous subsidies, while the Community industry is subject
to strict rules on government aid (1).

1.2.
The EESC opinion on the Commission communication
of 20 May 1999 backed the wish to strengthen the competi-
tiveness of European airlines, particularly vis à vis their US
competitors, and to eliminate their structural disadvantages (2).
The Committee also agreed that the transitional period for the
granting of state aid was now over. State aid should, therefore,
no longer be granted.

1.3.
The EESC opinion saw the need for harmonisation of
European and US competition policy and endorsed Com-
mission efforts to reach an open skies agreement between the
EU and the USA.

The Commission communication on the repercussions
1.4.
of the terrorist attacks in the United States on the air transport
industry (3) notes, among other things, that the US Congress

( 1) Communication from the Commission of 20 May 1999 on the
European airline industry: from single market to world-wide
challenges (COM(1999) 182 final) and 1994 guidelines on state
aid to the air industry (OJ C 350, 10.12.1994, p. 5).

( 2) EESC opinion on the Commission Communication of 20 May
1999 on the European airline industry: from single market to
worldwide challenges COM(1999) 182 final (OJ C 75, 15.3.2000,
p. 4).

( 3) Communication from the Commission to the European Parlia-
ment and the Council — The repercussions of the terrorist attacks
in the United States on the air transport industry (COM(2001)
574 final).

adopted an emergency package of measures on 21 September
as part of an overall programme that could amount
to
$18 billion. The Commission wanted to examine whether the
support given to US airlines could affect markets where
American and European airlines were in intense competition,
i.e. primarily the transatlantic routes.

1.5.
It is also evident from the communication that the
possible distortions of competition caused by direct aid to US
airlines cannot be addressed in the absence of a contractual
framework for relations between the Community and the
United States. The Commission therefore reserves the right to
make proposals where appropriate to offset the loss the
Community airlines might suffer as a result. The Commission
also intends to propose to the United States that a code of
conduct be drawn up in this area.

In terms of relations with non-EU countries,

the
1.6.
communication concludes that the Commission will make
proposals to offset the loss Community airlines might suffer if
support granted in a third country results in unfair advantages
at the expense of EU competitors.

The starting point for the current proposal is that some
1.7.
third countries have instruments to deal with such situations
while, in contrast to the position in the maritime transport
sector, the Community has not provided for redress in case of
unfair pricing practices in the airline sector (4). The only

(4) Council Regulation (EEC) No 4057/86 of 22 December 1986
on unfair pricing practices in maritime transport (OJ L 378,
31.12.1986).

C 61/30

EN

Official Journal of the European Union

14.3.2003

currently available means are bilateral agreements which often
lack, both in terms of coverage and remedies, the potential to
provide swift and comprehensive protection against subsidis-
ation and unfair pricing practices.

routes as the foreign carriers but there are no restrictions
concerning the type of service supplied.

2. The Commission proposal

2.5.
The Community has a right to initiate an investigation
if the duly substantiated complaint is made on behalf of the
Community industry. Additionally, the Commission can open
one ex officio if there is sufficient evidence.

2.1.
The proposed instrument allows action against subsi-
dised or certain unfairly priced and injurious air services
supplied by non-Community carriers on certain routes to and
from the Community.
It contains rules of substance and
procedure but, at the same time, does not require the EC to go
below the tested standards applied to goods (1).

2.6.
Public notice in the Official Journal is given at initiation
and foreign carriers and other interested parties have the right
to be heard. Adverse inferences may be drawn from non-
cooperation.

2.2.
The proposal uses the subsidy definition of the WTO
Agreement on Subsidies and Countervailing Measures. Trade-
i.e.
distorting subsidies granted by foreign governments,
subsidies targeted at certain enterprises or sectors and export
subsidies are actionable. (Generally available subsidies, e.g. to
all service providers including airlines, are considered not to
be trade-distorting). Additionally, the definition covers ‘unfair
pricing practices’ , i.e. charging at fares below those charged by
established and representative carriers (or, if this information is
not available, below the constructed rate, i.e. costs plus profit
of other comparable carriers), but is limited to such practices
conducted by state-controlled air carriers.

The proposal provides for all the steps of a trade-in-
2.3.
goods-type investigation but in a simplified and less binding
manner. An investigation would be defined by two parameters:

— subsidies given by a certain government to eligible foreign
carriers or unfair practices by certain state-controlled
foreign carriers,

— certain routes where the Community air industry faces

problems.

2.4.
The draft introduces a definition of ‘like air service’
which is, however, less restrictive than in trade in goods. The
EC carriers would have to fly on the same or almost the same

2.7. Member States will be consulted at every stage of the
proceedings in a committee under the advisory procedure, in
line with Council Decision No 468/1999/EC of 28 June
1999 (2). The ‘droit de regard’ of the European Parliament is
also ensured in accordance with Article 8 of that decision.

2.8. Measures (duties, undertakings or other appropriate
measures e.g. restriction of landing rights) will be imposed on
a per-carrier basis. The level of the measure is capped at the
amount of subsidy in terms of benefit to the recipient (or the
difference between the actual fare charged by a state-controlled
foreign air carrier and the ‘normal fare’) or at a level which is
sufficient to remove the injury, whatever is the lower. Pro-
visional measures have a duration of six months. Measures
may be reviewed if warranted. In a similar way to the goods
area, there is no provision on how duties are levied. In practice,
the Member State authorities collecting an ‘airport tax’ could
also collect the duty. Duties collected will be remitted to the
Community budget in line with existing provisions applied
within the European Union on redressive and countervailing
duties.

2.9.
The proposal does not replace air transport agreements
with third countries where these can be used to deal effectively
with distortion issues. In cases where a legal instrument exists
which would enable a satisfactory response to be made, that
instrument will therefore take precedence over this regulation,
which will be subsidiary to it (3).

( 1) Council Regulation (EEC) No 2026/97 of 6 October 1997 on
protection against subsidised imports from countries not members
of the European Community (OJ L 288, 21.10.1997).

(2) OJ L 184, 17.7.1999, p. 23.
(3) The English-language version incorrectly refers here to ‘airline

agreements’.

14.3.2003

EN

Official Journal of the European Union

C 61/31

3. General comments

3.1.
The Committee considers it vital to boost European
airlines’ competitiveness, particularly in relation to their US
rivals. Hence, tools to protect the Community industry against
subsidisation and unfair pricing practices in the supply of
airline services from non-member countries can be of key
importance.

Commission instead of the suggested advisory procedure,
should apply the safeguard procedure laid down in Article 6
of Decision No 468/1999/EC. This secures the Member States
more direct influence than the advisory procedure.

3.7.
A determination as to whether the Community interest
calls for intervention should be based on an appreciation of all
the various interests taken as a whole, including the interests
of users and consumers (cf. Council Regulation (EC) No 384/
96). The current proposal fails to make such a specific
reference (1).

3.2.
The Committee has previously also endorsed the
Commission’s efforts to reach an open skies agreement
between the EU and the USA, recognising a need to harmonise
European and US competition policy. As we know, no such
agreement has yet been reached, and there is uncertainty as to
when — potentially — that might happen.

4. Specific comments

4.1. General remarks

3.3.
It is unclear how the proposal stands in relation to the
consultation and arbitration clauses contained in the many
existing bilateral air transport agreements — binding under
international law — that the individual Member States have
entered into with non-member countries, including how to
resolve any clashes that may arise between the proposal
and bilateral agreements of this kind (cf.
inter alia Treaty
Article 307).

In overall

terms, state aid to companies, whether
3.4.
domiciled inside or outside the Community, may be very
damaging for commercial development in the sector or area
concerned. In principle, therefore, the Committee backs the
aims set out in the proposal to counteract such contributions
to airlines from governments in non-EU countries and state-
controlled non-Community air carriers. Attention should focus
on the massive financial aid given to certain companies after
11 September to save them from bankruptcy. Such aid takes
many different forms: compensation for increased insurance
premiums, straightforward federal or state subsidies etc. With-
out having the effect of price-dumping,
the absence of
comparable measures for companies within the EU, especially
in the area of insurance, may eventually lead to their disappear-
ance. On the other hand, it should also be mentioned that, in
some instances, such counteraction may be a double-edged
sword and, at any event, must be seen in conjunction
with overall relations with the countries against which it is
potentially directed.

The Commission proposal does not make clear its
4.1.1.
position in relation to the bilateral air transport agreements
which — it must be assumed — will continue to be applicable
for some time to come and, until then, are binding under
international law.

4.1.2. R e c o m m e n d a t i o n

The proposed regulation should specify its position on Member
States’ competence in relation to the air transport agreements
— binding under international law — entered into with non-
member countries.

4.2. Article 3

4.2.1.
definition thereof appear somewhat vague.

The term ‘normal

fare rate’ and the proposal’s

4.2.2. R e c o m m e n d a t i o n

Instead, the definition of unfair practices could be based on
whether the total ticket revenue on a particular route covers
the average costs of that route over, say, a six-month period.
The term ‘average costs’ must thereby be taken to mean the
costs involved in operating the route in question, but excluding
overhead expenses and a reasonable profit margin.

4.3. Article 12(2)

3.5.
Also, it is very often difficult to establish unequivocally
any impact of damage, particularly in relation to unfair pricing
practices.

Given the very fragmented aviation market in the
4.3.1.
Community and the comments in point 3, and the proposal’s
reference to the advisory procedure, consideration could be

3.6. With that in mind, consideration might be given to
whether the committee proposed in Article 12 to assist the

(1) Council Regulation (EC) No 384/96 of 22 December 1995 on
protection against dumped imports from countries not members
of the European Community.

C 61/32

EN

Official Journal of the European Union

14.3.2003

given to applying the safeguard procedure until such time as
the obstacles in question have been removed even though, all
other things being equal, the advisory procedure can usually
be implemented more quickly — a fact that may be of
importance for the matter in hand.

4.3.2. R e c o m m e n d a t i o n

Consideration should be given to whether the committee
proposed in Article 12 to assist the Commission, should apply

Brussels, 18 September 2002.

the safeguard procedure laid down in Article 6 of Decision
No 468/1999/EC instead of the suggested advisory procedure.

5. Conclusion

In principle, the Committee backs the proposal for a

5.1.
regulation.

5.2.
The proposal should make clear how the new pro-
visions are to operate in accordance with the existing bilateral
and internationally binding air transport agreements between
the Member States and third countries.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Proposal for a Decision of the European
Parliament and of the Council amending Decision No 276/1999/EC adopting a multiannual
Community action plan on promoting safer use of the Internet by combating illegal and harmful
content on global networks’

(COM(2002) 152 final — 2002/0071 (COD))

(2003/C 61/06)

On 12 April 2002 the Council decided to consult the Economic and Social Committee, under Article 153
of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 2 September 2002. The
rapporteur was Mrs Davison.

At its 393rd Plenary Session of 18/19 September 2002 (meeting of 18 September), the Economic and
Social Committee adopted the following opinion by 132 votes in favour and four abstentions.

1.

Introduction

should be reflected by the EU generally. An overall coherent
policy on children’s issues is badly needed in Europe.

1.1.
The European Economic and Social Committee has
given youth policy a special priority (1), one which it believes

( 1) See, for example: Opinion of the Economic and Social Committee
on ‘Exploitation of children and sex tourism’; OJ C 284, 14.9.1998
and Opinion of the Economic and Social Committee on ‘European
Cultural Policy for Children’; CES 250/1996.

1.2.
The EESC has produced several opinions which refer
to the need for child protection on the Internet in particular.
They have helped to pave the way for the Internet Action Plan
(IAP), which reflects many EESC proposals. The first such
Opinion was produced in 1997, with Dame Jocelyn Barrow as