Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the European Parliament and of the Council establishing the European Globalisation adjustment Fund COM(2006) 91 final — 2006/0033 (COD)
Date: 2006-09-13
Institutions: European Economic and Social Committee
Subjects: EU aid, economic and social cohesion, fund (EU), globalisation, industrial policy, job cuts, reintegration into working life

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the Proposal for a Regulation of the
European Parliament and of the Council establishing the European Globalisation adjustment Fund

COM(2006) 91 final — 2006/0033 (COD)

(2006/C 318/05)

On 27 March 2006 the Council decided to consult the European Economic and Social Committee, under
Article 159 § 3 of the Treaty establishing the European Community, on the abovementioned proposal.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 31 August 2006. The rapporteur was Mr van Iersel and the co-
rapporteur was Mr Gibellieri.

At its 429th plenary session, held on 13 and 14 September 2006 (meeting of 13 September), the European
Economic and Social Committee adopted the following opinion by 170 votes to ten with fifteen absten-
tions.

1. Executive summary

the objective of ‘quick reintegration’ of redundant employees into
the labour market is usually a tough job. Evidence shows that
such processes take a lot of time.

1.1
The EESC welcomes the proposal from the European
Commission concerning the setting up of a European Globalisa-
tion Fund (hereafter EGF). The EESC agrees with the objective of
intervening via the EGF in cases where immediate and extensive
social problems for workers arise as a consequence of serious
and unforeseeable economic disruptions.

1.6
Strict coordination between the various existing instru-
ments, particularly between the EGF and the Structural Funds,
should be guaranteed in order to increase effectiveness and
coherence.

1.2
The EESC agrees that the Member States themselves have
primary responsibility and that the EGF should intervene only
at the request of a Member State and after a corresponding deci-
sion of the budgetary authority. The rules have to be clear.

2. The Commission's proposal

1.3
During times of severe disruption, anticipatory policy,
dynamic entrepreneurship, regional responsibility and timely
measures and cooperation by the relevant stakeholders — busi-
ness, the social partners, government, regional authorities and
others — are key. The EGF as an instrument of EU solidarity
has a complementary function. To be credible the expectations
must not be raised too high.

1.4
The specific actions, financed by the EGF, must fit into
the overall planning of all stakeholders concerned. The EGF
should not intervene in areas where the Member States have
exclusive competence. It should be made clear that the Fund is
targeting specific employment opportunities
for people in
urgent economic circumstances.

2.1
In March 2006 the Commission submitted a proposal
for a European Globalisation adjustment Fund (1). It is aimed at
providing specific, one-off support to facilitate the re-integration
into employment of workers in areas or sectors suffering the
shock of serious economic disruption.

2.2
Serious economic disruption can imply economic deloca-
lisation to third countries, a massive increase of imports or a
progressive decline of the EU market share in a given sector.
The major criterion for the EGF is more than 1 000 redundan-
cies in a company or in a group of companies in regions with a
higher than average rate of unemployment.

2.3
Eligible actions under the EGF should create conditions
for a quick re-integration of people who have lost their jobs
into the labour market. The assistance is supplementary to
national provisions and targeted regional programmes. Measures
to be included are: retraining, relocation assistance, assistance
for business start-ups and supplementary income benefits.

1.5
The EESC calls on the Commission to ensure active
involvement of the social partners in processes aimed at creating
redundant. Achieving
employment

for workers made

(1) Proposal for a Regulation establishing the European Globalisation
adjustment Fund, March 2006, COM(2006) 91 final, 2006/0033
(COD).

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The EGF will intervene only at the request of a Member
2.4
State. The amount paid by the EU may not exceed 50 % of the
total estimated cost of the complete set of measures envisaged
by the Member State.

2.5
There is no specific financial provision for the Fund in
the Financial Perspectives. It will be financed through under-
spends and decommitted funds. Each deployment will be
full
decided by the budgetary authority, which means that
responsibility lies with the Council and the EP.

the difference in culture between the US and the EU and the
different criteria involved.

The EGF should function in accordance with the best
3.5
practice identified by OECD, which specifies the need for a clear
identification of groups of
trade-displaced workers and the
provision of assistance for limited periods of time in line with
the principles of cost-effectiveness, transparency and account-
ability.

2.6
A detailed budget procedure is foreseen. The Member
States shall take responsibility for the management of actions
supported by the EGF. The Commission shall have a supervisory
role. In cases where the amount is under-spent reimbursement
shall take place.

3.6
The EGF aims to contribute to the development of a ‘flex-
icurity’ approach in the Union, a balance between flexibility and
employment security and will complement
the multi-annual
strategic priorities and policies of the Structural Funds.

2.7
The Commission shall carry out an ongoing evaluation
on the results, criteria and effectiveness of the regulation as well
as an ex-post evaluation. From 2008 on, the Commission will
present an annual report on the implementation of the Fund,
including evaluations.

4. General comments

3. Background to the EGF

3.1
The proposal, aimed at demonstrating the EU's solidarity
with workers made redundant as a result of sudden changes in
world trade patterns, is based on the conclusions of the Euro-
pean Council of December 2005. As a compromise, it is part of
the deal on the Financial Perspectives. An impact assessment has
been carried out (2) containing relevant information about the
content and scope of the EGF.

The EGF is separate from the Structural Funds and will
3.2
serve as one of the EU instruments needed to further the adap-
tation and competitiveness of the European economy (3).

The Structural Funds aim at

3.3
long-term anticipative
actions based on a multiannual approach, whereas the EGF is
not envisaged for restructuring purposes. It aims specifically to
address individuals in regions affected by serious shocks in
world trade patterns. Such infrequent but critical situations may
require one-off, time-limited individualised support. Some objec-
tives of the EGF are not covered by the Structural Funds.

4.1
The Regulation initially refers to the overall positive
effect of globalisation on growth and jobs in the EU. But the
EESC notes that, at the same time, visible and adverse effects at
sectoral and regional level are quite possible. The EGF will be a
specific instrument in view to enhancing reemployment oppor-
tunities towards workers affected by serious economic disrup-
tion. It is a pity that the impact assessment (4) has not carried
out an analysis of concrete cases.

4.2
Given that the fourth recital of the Regulation requires
that activities of the EGF be ‘coherent and compatible with the other
Community policies and comply with its acquis’,
the proposals
should be closely examined by a range of Commission policy-
makers,
in order to avoid any
unjustified allocation of state subsidies.

in particular DG Competition,

4.3
The EGF represents a concrete step by the European
Union towards tackling the consequences of serious shocks in
external trade and the global market. For the future, a similar
instrument might be considered to mitigate the negative conse-
quences of the internal trade and EU single market (e.g. delocali-
sation within the EU, taxation policy).

4.4 Intervention criteria

3.4
To a certain extent the US Trade Adjustment Assistance
(TAA) programme of 1962 has served as an example. The TAA
aims to correct the asymmetry between the adverse effects of
trade opening and international liberalisation for specific indivi-
dual cases or regions and their overall benefits. A comparison
between the TAA and the EGF, though, is not easy because of

(2) Impact assessment regarding above-mentioned regulation, SEC(2006)

274/2.

4.4.1
Strict intervention criteria are required. However, the
criterion mentioned in Article 1: ‘support for workers made redun-
dant because of changes in world trade patterns leading to a significant
adverse impact on the regional or local economy’, is rather vague.
The Member States have primary responsibility for submitting
applications for Fund contributions. The Commission should
guarantee an equal application of the criteria in all cases and to
all Member States.

(3) EU Competitiveness and Industrial Location, Bureau of European
Policy Advisors to the Commission, BEPA (2005), 26 October 2005.

(4) SEC(2006) 274.

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The burden of proof regarding applications lies with
4.4.2
the Member States. Application will be examined and close
monitored by the Commission, involving the use of guidelines
and financial
support will be allocated by the budgetary
authority on a case-by-case basis. This will involve a process of
learning by doing and by practical experience, for the Commis-
sion, for the Member States and for the budgetary authority
alike. Ambiguities must be avoided:
the same rules and
approach must be valid and applied across the Union.

4.4.3
As regards the minimum level of redundancies in
specific regions, the intervention criteria laid down in Article 2
are clearly defined. The criterion ‘1 000 employees’ is not limited
to one company, but it includes downstream and upstream
producers.

Usually the rationale for

4.4.4
reducing the number of
employees will be based on a range of factors, such as moderni-
rationalisation, change of production methods, and,
sation,
indeed,
trade patterns. Rarely will one specific
international
factor prevail totally.

4.4.5
The American TAA has been taken as an example. But,
again, in the Commission's description of the functioning of the
TAA the link between changing trade patterns and govern-
mental actions aimed at softening their effect on redundancies is
rather vague. Moreover, the criteria and the history of applica-
tion of the TAA are quite different from what is envisaged in
the EU.

GF funding will be sought in the event of economic
4.4.6
shocks and unforeseeable circumstances. However trends of
change are usually already visible before the real impact of this
change is felt. Good business management involves taking pre-
emptive actions in good time.

4.4.7
This means that any planned national and EU support
measures will have to take into consideration the way in which
companies and the social partners themselves have anticipated
change. For instance, how relevant are support measures, if busi-
ness and social partners have neglected to identify in good time
developments which might threaten markets and/or employ-
ment?

4.5 The definition of eligible actions

The difference between the Structural Funds and the
4.5.1
EGF is threefold: a) difference in scale: EUR 44 billion versus
EUR 500 million per year, for the future programming period
2007-2013; b) difference in approach: long-term and anticipa-
tive on broad issues of modernisation versus short-term and
targeted on a quick re-integration of workers in the labour
market; and c) because of their volume and scope the Structural

Funds tend to be bureaucratic, whereas for the EGF a non-
bureaucratic approach is aimed at.

4.5.2
A strict distinction between the Structural Funds and
the EGF must be ensured. The EGF is by definition short-term
and time-limited and is focussed on specific cases. In the longer
run additional commitments of Structural Funds can be foreseen
in the framework of a broader regional context. In cases where
actions are complementary the different philosophy and struc-
ture of each Funds must be respected.

4.5.3
It will not be easy to create conditions for a ‘quick’ rein-
tegration of redundant employees into the labour market, if the
context and circumstances are not favourable, such as in the
case of regions primarily dominated by one industrial activity,
backward regions, or where there is a lack of education and
retraining facilities on the ground, etc. Special attention should
be addressed to middle and senior management in order to
avoid any brain drains. In these particular cases a combination
of EGF and Structural Funds is probably needed, as well as the
best possible use of the EURES network to promote opportu-
nities for mobility across Europe. A lack of effective coordina-
tion might pose problems.
the provision of
Art. 5(3) requires special attention.

In this respect

4.5.4
The eligible actions set out in Art. 3 must be taken
in particular
together with the provisions of Arts. 5 and 6,
regarding the interrelationship and interaction between regional,
national and EU actions. As EU actions are complementary to
regional and national measures, experience gained in the past in
the EU — like those in RESIDER, RECHAR and RETEX — and
in other situations could be helpful, taking into account that the
EGF has not been entrusted with any restructuring role.

4.5.5
approach used in modern industrial policy,
analyses and in determining the use of instruments.

In specific cases it may be useful to employ the sectoral
in examining

4.5.6
It is of particular importance and concern to a number
of Member States that income-related and labour market poli-
cies remain a national responsibility and that the Commission is
prevented from interfering in national competences. Conse-
quently, within the complete set of measures drawn up by a
Member State to address a particular crisis, the EU contribution
must focus explicitly on individuals and on fostering the re-
entry of redundant employees into the labour market. At this
point, the EESC refers to the application criteria of the former
social chapter of the Coal and Steel Community which may
help to avoid institutional overlap and conflicts.

4.6
The budgetary authority has a crucial role to play. We
welcome the fact that the Regulation duly prescribes in detail
the financial procedures to be followed.

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The Regulation is drafted for specific emergency cases,
4.7
which as a rule require fast and effective action. This means that
in applying the rules bureaucracy must, of course, be minimised,
whereas at the same time due caution is required. The objective
should remain the provision of effective support in the shortest
possible time frame.

In the (recent) past,

4.8
in a number of cases, successful
restructuring has been carried out, even in complicated cases.
Although concrete cases are always unique, the broad spectrum
of restructuring shows that concentrated regional efforts of all
stakeholders, often supported by their governments, with a clear
focus on creating conditions for new or reinforced industrial
and service-related business and redeployment, have fostered
success.

4.9
In most cases economic and social plans have been made
in close cooperation between the national government, regional
authorities and the social partners, who have generally organised
round tables and involved all stakeholders in the region.

4.10
Regarding the new EGF, similar procedures need to be
foreseen and implemented in order for the Fund to be a success.
To that end, representatives of the Commission shall have to
participate directly in such gatherings and meetings at regional
and local level.

5. Specific comments

Although the budgetary allocation of EUR 500 million
5.1
for the EGF has been established by the Commission through
statistical simulations based on concrete cases,
its amount
should be assessed and possibly adjusted annually on the basis
of the evolving situation and of the real feedback of the fund
application.

5.2
Article 2 specifies serious economic disruption as the
trigger for EGF intervention. The EESC calls on the Council to
the phenomena mentioned in the
discuss the definitions of
introductory paragraph of this Article, before the Regulation
comes into force. Overly broad definitions may hamper effective
decision-making later on by the budgetary authority. Too
narrow definitions may have the same effect. A Council discus-
sion may help to clarify the dilemma and strike a balance. Such
discussion may also be a useful
input for the Commission's
guidelines.

Brussels, 13 September 2006.

The reasons for such intervention must be clearly stated.
5.3
Anticipative actions by business itself as well as by the social
partners and other stakeholders should be taken into considera-
tion. This could also be included in the Commission's guide-
lines.

5.4
As part of the annual evaluation, and also with a view to
possible modification in accordance with Article 20, an assess-
ment of
the intervention criteria as laid down in Article 2
(number of workers involved, territorial dimension and employ-
ment indicators) should be considered in order to ensure that
the intervention criteria are also flexible enough to cope with
the diversity of specific regions,
in particular regarding small
countries with primarily small and medium-sized companies.

Article 3 sets out in (a) and (b) the actions eligible for
5.5
EGF financial intervention. The EESC notes that income-related
areas such as retirement rights and social benefits are an exclu-
sive competence of
the Member States. The EGF should be
restricted to financing various kinds of education and training
facilities and framework conditions. In specific circumstances
this may include wage-support for individuals, who have a job
or are job-seeking.

5.6
Article 10(1), fixes the maximum contribution by the
EGF at 50 % of the total set of measures envisaged by the
Member State. The EESC does not wish to query the level of
this percentage. It points, however, to the fact that a relation
exists between the level of financial contribution by the EGF
and the number and the dimension of the cases that will be
dealt with.

5.7 With regard to Article 12 the EESC proposes that para-
graph 1(b) read as follows: ‘evidence that the criteria laid down
in Article 2 and the requirements of Article 6’ are met.

5.8
The EESC considers that the social partners and other
stakeholders in the regions have to be involved at every stage of
the EGF procedure. The EESC and the Committee of
the
Regions should also be informed by the Commission.

5.9
From 2008 on the Commission will present annual
reports on the EGF. Such ex-post evaluation may be subject to
debate by the Council. Article 20 provides for a formal review
of the Regulation by December 2013. The EESC recommends
that the Commission also include an assessment of the EGF in
its White Paper ahead of the interim discussion on the EU
budget due by 2009.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND