Proposal for a decision of the European Parliament and of the Council on the mobilisation of the European Globalisation Adjustment Fund
Date: 2008-09-09
Institutions: European Commission
Subjects: EU aid, Lithuania, Spain, commitment of expenditure, dismissal, fund (EU), globalisation, motor vehicle industry, reintegration into working life, textile industry

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.9.2008 
COM(2008) 547 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  Spain  and  Lithuania  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/2008/02/ES/Delphi 

1. 

2. 

3. 

The  application  was  presented  by  the  Spanish  authorities  to  the  Commission  on  
6 February 2008. It was based upon the specific intervention criteria of Article 2(a) 
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  1 589  redundancies,  of  which  1 521  occurred  in  Delphi 
Automotive  Systems  España,  S.L.U.  (hereinafter  "Delphi")  in  Puerto  Real,  bay  of 
Cadiz, Andalucía (Spain), a manufacturer of components for the automobile industry 
that  belongs  to  the  US-based  Delphi  Automotive  Systems  Holding  Inc.  with 
headquarters in Troy – Michigan, and 68 amongst the suppliers to Delphi during the 
4-months  period  of  reference  of  Article  2(a)  of  Regulation  (EC)  No  1927/2006, 
lasting from 31 July 2007 to 30 November 2007.  

In the case of Delphi, the production of motor vehicle components will be relocated 
to  the  tax  free  zone  of  Tangier  (Morocco).  This  materialised  in  a  Memorandum  of 
Understanding signed the day after the closure of the Delphi factory in Puerto Real 
between  Delphi  (USA)  and  the  Government  of  Morocco  which  provides  for  the 
extension  of  the  production  facilities  in  Tangier  through  an  investment  of  EUR  27 
million and an increase of the workforce by 3 000 workers.  

Analysis  of  the  link  between  the  redundancies  and  the  major  structural  changes  in 
world  trade  patterns  is  based  on  the  following  information.  Spain  states  that  the 
redundancies  result  from  a  trend  in  Community  Member  States  to  transfer  part  of 
their production to third countries. In the specific case of relocation to North Africa, 
Spain  submits  that  this  is  caused  by  differences  in  labour  and  environmental  costs, 
the  existence  of  tax  benefits  and  special  regimes  for  foreign  investment  and  the 
proximity of the EU market.  

In  addition,  Spain  states  that,  according  to  the  International  Organisation  of  Motor 
vehicle production (OICA), the Community share in world motor vehicle production 
decreased  from  30.6%  in  2001  for  EU-15  to 26.9% in 2006 for EU-25, despite the 

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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. 

5. 

enlargement.  The  component  sector  is  affected  by  these  structural  changes  in  trade 
patterns  in  motor  vehicle  production.  Furthermore,  according  to  the  applicant 
Member State, the import of motor vehicle components from third countries into the 
EU-15  as  recorded  in  the  Integrated  Tariff  of  the  European  Community  (TARIC3) 
database, increased by 29% between 2002 and 2006. 

The  Spanish  authorities  claim  that  the  closure  of  the  Delphi  factory  in  Puerto  Real 
could not have been foreseen as the most recent industrial plan4 for Delphi covered 
the  period  up  to  31  December  2010  and  contracts  were  running  until  2012.  The 
Spanish  authorities  confirmed  that  the  68  workers  dismissed  by  the  supplier 
companies, worked  either  in  the premises of the Delphi  factory or in  its immediate 
surroundings and that their specific products/services were inputs for the production 
by Delphi. Delphi itself made 1 521 workers redundant. Andalucía, where Delphi is 
located,  is  the  autonomous  region  with  the  second  highest  unemployment  rate  in 
Spain. In the first three months of 2007 the unemployment rate (as a % of the active 
population)  reached  8.47  %  for  Spain,  12.51  %  for  Andalucía  and  14.82  %  for  the 
Province of Cadiz. Due to the closure of the Delphi factory at the end of July 2007, 
the  registered  number  of  unemployed  people  in  the  industrial  sector  increased  by  
1 449 or 19.4 % between July and August 2007. 

In  conclusion,  in  these  circumstances,  the  redundancies  can  be  seen  as  having  a 
significantly negative effect on the local economy in Puerto Real, Andalucía. 

As regards the fulfilment of  the  criteria set out in Article 6 of Regulation (EC) No 
1927/2006 the application provided the following elements: Spain 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  Spanish  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/2008/02/ES/Delphi  submitted  by  Spain  relating  to  the  redundancies  in  Delphi  and  its 
supplier companies, 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 20 943 557 has been proposed of which the requested contribution of the 
EGF is EUR 10 471 778.  

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TARIC code 8708 "parts and accessories of motor vehicles" 
Expediente de Regulación de Empleo (ERE) Resolución Junta de Andalucía E.R.E. 33/2005, acta final 
25 noviembre, http://usodelphi.es/httpdocs/Seccion%20Sindical/ERE.htm 

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Case EGF/2008/03/LT/Alytaus Tekstile 

1. 

2. 

3. 

4. 

5. 

6. 

The  application  was  presented  to  the  Commission  by  the  Lithuanian  authorities  on  
8  May  2008.  It  was  based  upon  the  specific  intervention  criteria  of  Article  2(a)  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 1 089 redundancies following the closing down of Alytaus 
Tekstile,  a  textile  manufacturing  company  during  the  4-months  reference  period  of 
Article 2(a) of Regulation (EC) No 1927/2006, lasting from 30 October 2007 to 29 
February 2008. 

Analysis  of  the  link  between  the  redundancies  and  the  major  structural  changes  in 
world trade patterns is based on the following information: Lithuania argues that the 
redundancies are the result of a general migration of worldwide textile and clothing 
production  towards  lower-cost  Asian  countries,  in  particular  China.  Before  its 
accession,  Lithuania’s  textile  exports  went  predominantly  to  Community  Member 
States.  However,  since  the  expiration  of  the  Multi  Fibre  Arrangement  (MFA)  on  1 
January  2005,  Lithuania  has  come  under  increased  competition  from  outside  the 
Community, and particularly from low-cost Asian producers. 

The  application  uses  World  Trade  Organisation  (WTO)  and  EUROSTAT  trade 
statistics  to  illustrate  the  rise  -  between  2000  and  2006  -  of  textile  and  clothing 
imports into the Community and its impact on intra-Community trade.  

Following  the  expiry  of  the  WTO  Multi  Fibre  Arrangement  and  the  subsequent 
abolition  of  quantitative  restrictions  on  imports  of  textile  and  clothing  articles, 
imports of Chinese articles into the EU-25 almost doubled, from EUR 11.8 billion in 
2000  to  EUR  22.9  billion  in  2005.  The  comparative  advantage  of  most  Asian 
countries lies in lower production costs: the average cost to spin and weave 1 tonne 
of cotton yarn in Alytaus Tekstilė before its closure was EUR 160, against EUR 40 
in China. The Lithuanian authorities state that, between 2000 and 2006, volumes of 
intra-Community trade in cotton yarns and fabrics dropped by 50% in quantity, while 
imports from China rose by 115%. These major changes in world trade patterns have 
had  a  significant  negative  impact  on  enterprises  like  Alytaus  Tekstilė,  operating  in 
the lower value market segments. 

In  relative  terms,  Lithuania  has  the  largest  textile  and  clothing  industry  among  the 
new Member States. In 2006, the textile and leather sectors contributed 10.4% of the 
value added generated by the domestic manufacturing industry and employed 22.6% 
of  the  total  manufacturing  industry  labour  force.  Besides,  Lithuania  has  a  small 
domestic  market,  which  explains  why  around  80%  of  its  textile  and  clothing 
production  is  export-oriented.  The  closure  of  Alytaus  Tekstile  was  unforeseen  as 
several major customers of the company relocated their low value-added production 
to Asian countries and the company had to face an unexpected rise in energy costs. 

The territory concerned by the redundancies is the whole territory of Alytus County, 
particularly  the  Alytus  city  municipality  which  is  facing  a  faster  decline  in  its 
population and a slower growth of employment than the country as a whole. Almost 
all of the 1 089 dismissed workers live in Alytus city municipality, where the share 
of  the  unemployed  in  the  working-age  population  went  up  from  3%  in  November 

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2006  to  3.9%  in  November  2007  (i.e. after  Alytaus  Tekstilė  had  gone  bankrupt), 
whereas in the country as a whole this figure decreased from 3.3% to 2.9%.  

The  Lithuanian  economy  has  therefore  been  significantly  affected  by  increased 
competition since the liberalisation of the textile trade. 

7. 

As regards the fulfilment of the criteria set out in Article 6 of the EGF Regulation, 
the  application  provided  the  following  elements:  Lithuania  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  Lithuanian  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/2008/03/ 
LT/Alytaus Tekstile submitted by Lithuania relating to the redundancies following closing 
down of Alytaus Tekstile manufacturing company, 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 597 987 has been proposed of which the 
requested contribution of the EGF is EUR 298 994.  

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Financing 

The  total  annual  budget  available  for  the  European  Globalisation  Adjustment  Fund  is 
EUR 500  million.  An  amount  of  EUR  3 106 882  has  already  been  mobilised  for  two 
applications leaving an amount of EUR 496 893 118 available. 

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 Spain in which the 
automobile sector was affected by redundancies in Delphi and its suppliers, and by Lithuania 
for  redundancies  in  the  textiles  sector,  total  estimates  of  the  coordinated  packages  of 
personalised services to be funded are as follows: 

Spain: Delphi 
02/2008 
Lithuania: Alytaus 
Tekstile 
03/2008 
Total 

Personalised services to be funded (in EUR) 
10 471 778 

 298 994 

10 770 772 

In the light of the examination of these applications5, 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 10 770 772, 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.  

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Communications  to  the  Commission  on  an  application  to  mobilise  the  European  Globalisation 
Adjustment Fund introduced by Spain in the case of Delphi (SEC(2008) 2307) and of Lithuania in the 
case of Alytaus (SEC(2008) 2369) setting out the analysis of the Commission of these requests. 

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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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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 
management6, 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  Fund7, 
and in particular Article 12(3) thereof, 

Having regard to the proposal from the Commission8, 

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 6 February 2008 Spain submitted an application to deploy the Fund, in respect of 
redundancies  in  the  automobile  sector,  specifically  for  workers  made  redundant  by 
Delphi. The application complies with the requirements for determining the financial 
contributions as laid down in Article 10 of Regulation (EC) No 1927/2006.  

On 8 May 2008 Lithuania submitted an application to deploy the Fund, in respect of 
redundancies in the textile sector, specifically for workers made redundant by closing 
down  of  Alytaus  Tekstile.  The  application  complies  with  the  requirements  for 
determining 
in  Article  10  of 
the 
Regulation (EC) No 1927/2006.  

financial  contributions  as 

laid  down 

(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 10 770 772 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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