Select Committee on European Scrutiny Thirty-Seventh Report






COM(02) 495







Draft Decisions of the Council and Commission allowing extensions of grace periods under the Europe Agreements with Poland, the Czech Republic, the Republic of Bulgaria and the Republic of Romania.


Revised draft Decisions of the Council and Commission allowing extensions of grace periods under the Europe Agreements with Poland, the Czech Republic, the Republic of Bulgaria and the Republic of Romania.


Legal base:

(a) Articles 133 and 300(2) EC and Article 95 ECSC


(b) Articles 87(3)(e) and 300 EC


Document originated:

(a) 13 May 2002

(b) —

Deposited in Parliament:

(a) 28 May 2002

(b) —


Trade and Industry

Basis of consideration:

(a) EM of 21 June 2002

(b) EM of 15 July 2002

Previous Committee Report:


To be discussed in Council:

Possibly before the end of July 2002

Committee's assessment:

Politically important

Committee's decision:

Cleared, but undertaking to keep the Committee informed


The background

    1. The Europe Agreements, establishing an association between the European Communities and their Member States on the one hand, and, respectively, Poland, the Czech Republic, the Republic of Bulgaria, and the Republic of Romania on the other, allow state aid, to facilitate restructuring, to these countries' steel industries for five years — the grace period — from the date of the association and also allow extensions of those grace periods.
    2. The documents

    3. The draft Decisions of the Council and Commission in document (a) were intended to allow extensions of the grace periods, from the end of the five- year period, of eight years or until accession, whichever is sooner. However the Commission quickly decided that, because of the expiry of the ECSC Treaty, the legal basis and drafting of the drafts was faulty. The revised draft Decisions in document (b) correct these errors.
    4. The extensions to the grace periods would be subject to completion of the Commission's analysis of restructuring plans and the Council's agreement that they meet the criteria of the original agreements. During the summer the Commission intends to assess restructuring plans from Poland, the Czech Republic and Romania and to report back to the Council on the plans by October. Bulgaria has previously said that it will not be granting any further aid to its steel industry, so it is not known when or whether there might be a Bulgarian plan.
    5. The Commission has made these proposals now to facilitate progress on the enlargement negotiations, particularly for Poland and the Czech Republic, as without them it is feared closing the Competition chapter of the Accession Treaty will run into timetable difficulties.
    6. The Government's view

    7. The Parliamentary Under-Secretary of State for Competition, Consumers and Markets, Department of Trade and Industry (Miss Melanie Johnson) tells us:
    8. "These proposals are designed to keep the enlargement timetable on track and this is consistent with Government's policy of wishing to see the enlargement negotiations completed this year, so that the new members are able to participate in the next European Parliament elections in 2004. The Government also supports the Commission position within the negotiations that closure of the Competition chapter of the Accession Treaty (which incorporates the acquis on State aids) should be conditional on action being taken to restructure their steel industry by the affected candidate countries. The Government therefore supports the proposals in principle.

      "In terms of a strategy for the industry the proposals are also consistent with the aim of establishing a level playing field in the enlarged EU steel industry as soon as possible. The proposals set out that these additional grace periods will expire upon accession, at the latest. HMG recognises that limited flexibility on State aid to the sector in the pre-accession phase will be necessary to bring this about and will also help to establish transparency on aid for the future.

      "The Council will have to consider the Commission's assessment of the individual restructuring plans and approve them (under QMV) before the extensions can take effect. At this stage also, how the actual implementation of the restructuring plans is to be monitored will be confirmed. The Council has decided to include the Bulgarian and Romanian proposals, even though these two countries are unlikely to be part of the first wave of enlargement and are not subject to the same timetable pressures as the others. They will however, want to conclude the negotiations in the next two years and need to settle this issue in order to close the Competition chapter".

    9. The Minister has undertaken to keep us informed of progress on the Commission's analysis of and recommendations on the restructuring plans.
    10. Conclusion

    11. We recognise the part the draft Decisions in these documents will have in maintaining the timetable for enlargement. So we are content to clear the documents. But we also recognise the UK steel industry's interest in getting transparency on aid to the sector and in establishing a level playing field in the enlarged EU as soon as possible. Therefore we welcome the Minister's undertaking to keep us informed of developments on this issue.


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Prepared 26 July 2002