Proposal for a Decision of the European Parliament and of the Council on the mobilisation of the European globalisation adjustment fund
Date: 2008-02-20
Institutions: European Commission
Subjects: Malta, Portugal, commitment of expenditure, dismissal, fund (EU), globalisation, motor vehicle industry, reintegration into working life

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.2.2008 
COM (2008) 94 final 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the mobilisation of the European Globalisation Adjustment Fund 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

The Interinstitutional Agreement of 17 May 20061 allows for the mobilisation of the European 
Globalisation Adjustment Fund through a flexibility mechanism, within the annual ceiling of 
EUR 500 million over and above the relevant headings of the financial framework. Eligibility 
rules  applicable  to  the  contributions  from  the  Fund  are  laid  down  in  Regulation  (EC) 
No 1927/20062 of the European Parliament and the Council. 

The  Commission  services  have  carried  out  a  thorough  examination  of  the  applications 
submitted  by  Malta  and  Portugal  in  accordance  with  Regulation  (EC)  1927/2006  and  in 
particular with Articles 2, 3, 4, 5 and 6 thereof. 

The most important elements of the assessments can be summarised as follows: 

Case EGF/2007/08/MT/Textiles 

1. 

2. 

3. 

The  application  was  presented  by  the  Maltese  authorities  to  the  Commission  on  
12  September  2007.  It  was  based  upon  the  specific  intervention  criteria  of  Article 
2(c)  of  Regulation  (EC)  No  1927/2006  related  to  small  labour  markets  and  was 
submitted within the deadline of 10 weeks referred to in Article 5 of that Regulation.  

The  application  relates  to  a  total  of  675  redundancies  in  two  manufacturing 
companies  operating  in  the  Maltese  textiles  sector,  namely  VF  (Malta)  Ltd.  and 
Bortex  Clothing  Ind  Co  Ltd.  For  VF,  which  is  part  of  the  multinational  firm  VF 
Corporation,  the  562  redundancies  were  the  result  of  the  decision  of  this 
multinational to close down its factory in Malta with effect from 31 July 2007 and 
move production to sites in Asia. For Bortex, a Maltese firm with production sites in 
Malta  and  Tunisia,  the  113  redundancies  were  caused  by  the  decision  to  reduce  its 
activities in Malta by closing down its sewing line as from 14 September 2007, while 
continuing  with  pressing,  storage  and  distribution  activities  to  clients  within  the 
Community  and  making  prototypes.  The  individual  notices  of  dismissal  to  the 
affected  workers  in  the  two  companies  were  sent  out  between  19  June  2007  and  6 
September  2007.  As  the  application  is  based  on  redundancies  in  a  NACE  2  sector 
(no.  13  textiles)  in  a  NUTS  II  region  (MT00),  the  case  is  assimilated  to  those 
submitted  under  Article  2(b)  of  Regulation  (EC)  1927/2006,  which  requires  a 
threshold of 1,000 redundancies. Malta applied for its 675 redundant workers under 
Art 2(c) of the Regulation, because of the small size of its labour market. 

Analysis  of  the  link  between  the  redundancies  and  the  major  structural  changes  in 
world  trade  patterns  is  based  on  the  following  information.  A  general  trend  of  the 
clothing and accessories industry in the Community to delocalize their production to 
lower cost non-EU countries, such as China, India and Turkey is proven. Before its 
accession, Malta's textile exports went predominantly to the Member States. Due to 
increased competition from outside the EU the textiles sector in Malta has now come 
under pressure. 

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OJ C 139, 14.6.2006, p. 1 
OJ L 406, 30.12.2006, p. 1 

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4. 

The application uses EUROSTAT trade statistics to illustrate the evolution - between 
2000 and 2006 - of trade in clothing and accessories into and out of the Community. 
For reasons of statistical comparability, the figures were adjusted in order to include 
all 27 current Member States for the whole period under consideration.  

The trade position of the Community, measured as the ratio of the volume of clothes 
imported  into  the  Community  to  the  volume  of  clothes  exported  from  the 
Community  to  third  countries,  has  changed  to  the  disadvantage  of  Community 
production. This ratio increased from 2.89 in 2000 to 4.29 in 2006, thus reflecting a 
much  more  rapid  growth  of  imports  compared  to  exports.  The  situation  is  further 
exacerbated by the pressure on prices as illustrated by the terms of trade. Indeed, in 
value  terms,  the  import  /  export  ratio  for  textiles  shows  a  much  more  gradual 
increase, from 2.8 in 2000 to 3.3 in 2006 which, if compared to the import / export 
ratio in volume terms, demonstrates the downward pressure on prices. This has had a 
negative  effect  on  the  financial  position  of  enterprises  in  the  textiles  sector  in 
theCommunity,  in  particular  those  operating  in  the  lower  value  market  segments 
(non-fashion, and non-design clothes). 

Between  2004  and  2006,  the  volume  of  clothes  imported  into  the  Community 
showed an annual increase of about 10 %. This is primarily related to much higher 
imports  from  China,  following  the  expiry  of  the  World  Trade  Organisation 
Multifibre  Arrangement  at  the  end  of  2004.  In  2006,  China  represented  more  than 
one-third of the total imports of clothes into theCommunity. 

In  order  to  illustrate  the  small  size  of  the  Maltese  labour  market,  the  application 
refers  to  indicators  for  the  total  active  population  and  for  the  relative  share  of  the 
redundancies  in  the  total  active  population.  The  active  population  in  Malta  is  the 
lowest of the EU-27. Malta accounts for 0.07 % of the total active population in the 
EU-27. The Maltese authorities claim that 1,000 redundancies in their country would 
represent  0.6  %  of  the  active  population,  whereas  for  Member  States  such  as 
Germany, the United Kingdom, France, Italy, Spain and Poland this would represent 
less  than  0.01  %  of  the  total  active  population.  A  simulation  based  on  the  same 
relative  share  of  redundancies  in  the  total  active  population  indicates  that  the  675 
redundancies  in  Malta  would,  for  instance,  be  equivalent  to  about  170,000 
redundancies in Germany, 125,000 in the United Kingdom and 115,000 in France. 

These arguments are confirmed by the fact that Malta with its 400,000 inhabitants is 
significantly  below  the  threshold  put  forward  in  the  Nomenclature  of  Territorial 
Units  for  Statistics  (NUTS).  For  regions  at  NUTS  II  level  the  relevant  Regulation3 
lays down an average size of between 800,000 and 3 million inhabitants. Malta only 
reaches 50 % of the lowest threshold. 

The application describes the impact of the 675 redundancies on the domestic labour 
market.  Given  the  small  size  of  the  Maltese  labour  market,  these  redundancies 
correspond to 0.4 % of total employment. On the basis of EUROSTAT statistics and 
administrative  records  from  ETC,  the  Maltese  authorities  claim  that  the  675 

Regulation (EC) N° 1059/2003 of the European Parliament and of the Council of 26 May 2003 on the 
establishment  of  a  common  classification  of  territorial  units  for  statistics  (NUTS),  0J  L  154  of 
21.6.2003, p. 1, as subsequently amended 

5. 

6. 

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redundancies  increase  the  number  of  unemployed  persons  by  about  6.3  %  and  the 
unemployment  rate  by  0.4  %  points  from  6.8  to  7.2  %.  It  is  further  estimated  that 
employment in the relevant NACE 2 sector will decrease by 60 % as a result of the 
redundancies  in  VF  and  Bortex.  Simulations  using  an  econometric  model4  indicate 
that  the  closure  of  production  in  VF  and  Bortex  might  result  in  a  reduction  in  the 
growth of the Maltese Gross Domestic Product by 0.2 percentage point.  

7. 

As  regards  the fulfilment of  the  criteria set out in Article 6 of Regulation (EC) No 
1927/2006 the application provided the following elements: Malta has confirmed that 
the  financial  contribution  from  the  EGF  does  not  replace  measures  which  are  the 
responsibility  of  companies  by  virtue  of  national  law  or  collective  agreements  and 
has given assurances that the actions provide support for individual workers and are 
not  to  be  used  for  restructuring  companies  or  sectors.  The  Maltese  authorities 
confirmed that the eligible actions do not receive assistance from other Community 
financial instruments.  

In  conclusion,  for  the  reasons  set  out  above,  it  is  proposed  to  accept  application 
EGF/2007/08/MT/Textiles submitted by Malta relating to the redundancies in connection with 
closing  down  of  VF  (Malta)  and  Bortex,  as  evidence  has  been  provided  that  these 
redundancies result from major structural changes in world trade patterns which have led to a 
serious  economic  disruption,  which  affects  the  local  economy.  A  coordinated  package  of 
eligible personalised services for the amount of EUR 1 362 207 has been proposed of which 
the requested contribution of the EGF is EUR 681 207.  

Case EGF/2007/10/PT/Lisboa-Alentejo 

1. 

2. 

3. 

The  application  was  presented  to  the  Commission  by  the  Portuguese  authorities  on  
9 October 2007. It was based upon the specific intervention criteria of Article 2(b), 
relating  to  NACE  rev  2  sectors  in  NUTS  II  regions,  of  Regulation  (EC)  No 
1927/2006, and was submitted within the deadline of 10 weeks referred to in Article 
5 of that Regulation. 

The application concerns 1,549 redundancies in two companies located in NUTS II 
region  PT18  Alentejo  (Opel  Portugal  and  Johnson  Controls)  and  one  company 
located in the contiguous NUTS II region PT17 Lisboa (Alcoa Fujikura) during the 
9-month period of reference lasting from 20 December 2006 to 20 September 2007. 

Analysis  of  the  link  between  the  redundancies  and  the  major  structural  changes  in 
world trade patterns is based on the following information: The redundancies result 
from  a  rapid  decline  of  the  Community  share  in  world  motor  vehicle  production 
which, according to the International Organisation of Motor Vehicle Manufacturers 
(OICA), was 30.6 percent (for EU-15) in 2001, but had declined to 26.9 percent (for 
EU-25) by 2006, despite the intervening EU enlargement. Motor vehicle production 
in  Portugal  is  concentrated  specifically  in  the  lower  value  segment  of  the  market, 
which  has  been  particularly  affected5,  and  the  resulting  pressure  is  reflected  in 
Portuguese production figures declining from 251,000 vehicles in 2002 to 227,000 in 

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SAMM  model  of  the  Economic  Policy  Division  within  the  Ministry  of  Finance,  used  to  undertake 
economic policy simulations and to provide a framework for medium-term forecasts. 
As was already demonstrated in SEC(2007) 881 and SEC(2007) 882  

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4. 

5. 

2006.  The  decline  in  Portuguese  passenger  car  production  was  even  more 
pronounced during the same period (182,000 in 2002, down to 143,000 in 2006). 

Competitive  pressure  was  also  felt  by  individual  manufacturers.  Thus,  the  total 
production  of  General  Motors  in  Europe  declined  from  2.03  mio  units  in  2000  to 
1.77  mio  units  in  2006,  leading  to  under-utilised  production  capacity  and  the 
subsequent concentration of manufacturing on the most efficient sites. 

It is against this background that the Opel plant in Azambuja stopped production on 
20 December  2006  which  led  to  945  redundancies which constituted about 40% of 
jobs in manufacturing industry in the municipality. Two Portuguese suppliers to the 
motor vehicle industry were similarly affected. Alcoa Fujikura, a producer of electric 
components  for  motor  vehicles  (in  particular  for  Auto  Europa,  whose  production 
declined  from  137,000  units  in  2001,  to  82,000  units  in  2006),  closed  down 
production  at  its  plant  in  Seixal,  leading  to  440  redundancies.  Johnson  Controls 
(supplier of interior systems for automobiles with Auto Europa and General Motors / 
Opel as its main clients) decided to lay off 222 workers from its Portalegre plant. A 
total  of  1549  unemployed  workers  registered  with  the  Job  Centre  during  the 
reference  period  and  are  included  in  this  application.  Registrations  of  unemployed 
persons in the motor vehicle sector in the whole of mainland Portugal during the 8-
month period January to August 2007 where 0.7 % higher than during the same 8-
month period in 2006. As regards the Lisboa-Alentejo region alone, the increase in 
unemployment  over  the  same  period  was  7.5´%,  demonstrating  the  gravity  of  the 
crisis in the sector and region during the first eight months of 2007. 

In  conclusion,  in  these  circumstances,  the  redundancies  can  be  seen  as  having  a 
significantly  negative  effect  on  the  local  economies  of  Azambuja,  Portalegre  and 
Seixal. 

As regards the fulfilment of the criteria set out in Article 6 of the EGF Regulation, 
the  application  provided  the  following  elements:  Portugal  has  confirmed  that  the 
financial  contribution  from  the  EGF  does  not  replace  measures  which  are  the 
responsibility  of  companies  by  virtue  of  national  law  or  collective  agreements  and 
has given assurances that the actions provide support for individual workers and are 
not  used  for  restructuring  of  companies  or  sectors.  The  Portuguese  authorities 
confirmed that the eligible actions do not and will not receive assistance from other 
Community financial instruments. 

In  conclusion,  for  the  reasons  set  out  above,  it  is  proposed  to  accept  application 
EGF/2007/010  PT/Lisboa-Alentejo  submitted  by  Portugal  relating  to  the  redundancies  in 
three companies in NACE rev 2 Division 29 in the contiguous regions of Lisboa and Alentejo, 
as evidence has been provided that these redundancies result from major structural changes in 
world  trade  patterns  which  have  led  to  a  serious  economic  disruption,  affecting  the  local 
economy.  A  co-ordinated  package  of  eligible  personalised  services  for  the  amount  of  
EUR  4 851 350  has  been  proposed  of  which  the  requested  contribution  of  the  EGF  is  
EUR 2 425 675.  

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Financing 

The  total  annual  budget  available  for  the  European  Globalisation  Adjustment  Fund  is 
EUR 500 million.  

The  Commission's  proposed  allocation  under  the  Fund  is  based  on  the  information  made 
available by the applicants. 

On the basis of the applications for support from the Fund submitted by Malta in which the 
textile  industry  was  affected  by  redundancies  due  to  closing  down  of  VF  (Malta)  Ltd  and 
Bortex Clothing Ind. Co Ltd, and by Portugal for redundancies in the automobile sector, total 
estimates of the coordinated packages of personalised services to be funded are as follows: 

Malta: Textiles 
08/2007 
Portugal: 
Automobile sector 
10/2007 
Total 

Personalised services to be funded (in EUR) 
 681 207 

2 425 675 

3 106 882 

In the light of the examination of these applications6, and considering the maximum possible 
amount of a grant from the Fund determined in accordance with Article 10 of Regulation (EC) 
N° 1927/2006 as well as the scope for reallocating appropriations, the Commission proposes 
to  deploy  the  European  Union  Globalisation  Adjustment  Fund  for  a  total  amount  of 
EUR 3 106 882, to be allocated under heading 1a of the financial framework. 

This amount of support will leave more than 25 % of the maximum annual amount earmarked 
for the European Globalisation Adjustment Fund available for allocation during the last four 
months of the year 2008, as required by Article 12 (6) of Regulation (EC) N° 1927/2006. 

By  presenting  this  proposal  to  deploy  the  Fund,  the  Commission  initiates  the  simplified 
trialogue  procedure,  as  required  by  Point  28  of  the  Inter-institutional  Agreement  of 
17 May 2006, in view of securing the agreement of the two arms of the budgetary authority 
on the need to use the Fund and the amount required. The Commission invites the first of the 
two  arms  of  the  Budgetary  Authority  that  reaches  agreement  on  the  draft  mobilisation 
proposal,  at  appropriate  political  level,  to  inform  the  other  arm  and  the  Commission  of  its 
intentions. 

In  case  of  disagreement  by  either  of  the  two  arms  of  the  budgetary  authority,  a  formal 
trialogue meeting will be convened.  

The  Commission  will  also  present  a  transfer  request  in  order  to  enter  in  the  2008  budget 
specific  commitment  and  payment  appropriations,  as  required  in  Point  28  of  the 
Interinstitutional Agreement of 17 May 2006. 

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Communications  to  the  Commission  on  an  application  to  mobilise  the  European  Globalisation 
Adjustment Fund introduced by Malta in the case of VF (Malta) Ltd and Bortex Clothing Ind. Co Ltd 
(SEC(2007) 1657) and of Portugal with regard to the automobile sector (SEC(2008) 102) setting out the 
analysis of the Commission of these requests. 

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Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the mobilisation of the European Globalisation Adjustment Fund 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  Inter-institutional  Agreement  of  17 May  2006  between  the  European 
Parliament,  the  Council  and  the  Commission  on  budgetary  discipline  and  sound  financial 
management7, and in particular point 28 thereof, 

Having  regard  to  Regulation  (EC)  No  1927/2006  of  the  European  Parliament  and  of  the 
Council  of  20 December  2006  establishing  the  European  Globalisation  Adjustment  Fund8, 
and in particular Article 12(3) thereof, 

Having regard to the proposal from the Commission9, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

The European Globalisation Adjustment Fund (the "Fund") was established to provide 
additional  support  to  redundant  workers  who  suffer  from  the  consequences  of  major 
structural  changes  in  world  trade  patterns  and  to  assist  them  with  their  reintegration 
into the labour market. 

The Interinstitutional Agreement of 17 May 2006 allows the mobilisation of the Fund 
within the annual ceiling of EUR 500 million. 

On 12 September 2007 Malta submitted an application to deploy the Fund, in respect 
of  redundancies  in  the  textile  sector,  specifically  for  workers  made  redundant  by 
VF(Malta)Ltd  and  Bortex  Clothing  Ind  Co  Ltd.  The  application  complies  with  the 
requirements for determining the financial contributions as laid down in Article 10 of 
Regulation (EC) No 1927/2006.  

On 9 October 2007 Portugal submitted an application to deploy the Fund, in respect of 
redundancies  in  the  automobile  sector,  specifically  for  workers  made  redundant  by 
Opel in Azambuja, Alcoa Fujikura in Seixal and Johnson Controls in Portalegre. The 
application complies with the requirements for determining the financial contributions 
as laid down in Article 10 of Regulation (EC) No 1927/2006.  

(5) 

The Fund should, therefore, be mobilised in order to provide a financial contribution 
for the applications, 

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OJ C 139, 14.6.2006, p. 1. 
OJ L 406, 30.12.2006, p. 1. 
OJ C […], […], p. […] 

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HAVE DECIDED AS FOLLOWS: 

Article 1 

For  the  general  budget  of  the  European  Union  for  the  financial  year  2008,  the  European 
Globalisation  Adjustment  Fund  shall  be  mobilised  to  provide  the  sum  of  EUR 3 106 882  in 
commitment and payment appropriations. 

Article 2 

This Decision shall be published in the Official Journal of the European Union. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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