21. ENLARGEMENT AND STATE
AID FOR THE STEEL INDUSTRY
| (a)
(23920)
13525/02
SEC(02) 1121
(b)
(23950)
13814/02
COM(02) 593
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Commission staff working paper: Final assessment of the Programme for Restructuring of the Czech Steel Industry.
Draft Council Decision on the fulfilment of the conditions laid down in Article 3 of the Additional Protocol to the Europe Agreement establishing an association between the European Communities and their Member States and the Czech Republic with regard to an extension of the period foreseen in Article 8(4) of Protocol 2 of the Europe Agreement.
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| Legal base: | (a) —
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| (b) Not yet established |
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| Document originated: | (a) 16 October2002
(b) 31 October 2002
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| Deposited in Parliament: | (a) 30 October 2002
(b) 8 November 2002
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| Department: | Trade and Industry
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| Basis of consideration: | EM of 13 November 2002
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| Previous Committee Report: | None; but see (23506) 8969/02 and (23645) —: HC 152-xxxvii (2001-02), paragraph 13 (17 July 2002)
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| To be discussed in Council: | 26 November 2002
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared
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The background
21.1
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 from the date of the association (the grace period),
and also allow extensions of those grace periods.
21.2
In July we cleared draft Decisions to allow extensions of the
grace periods, by eight years or until accession, whichever is
sooner, for the countries concerned. The extensions were to 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.
The documents
21.3
The Czech Government has now submitted its restructuring plan
and document (a) is the Commission's assessment of it. The assessment
is that the requirements of the Europe Agreement are met and that
an extension of the grace period is justified. Document (b) is
the draft Council Decision to allow that extension.
The Government's view
21.4
The Parliamentary Under-Secretary of State for Competition, Consumers
and Markets, Department of Trade and Industry (Miss Melanie Johnson)
tells us:
"Our main objectives concerning the steel sector in Central
Europe have been:
— Bring about transparency on all aid granted
— For aid to cease on accession
— To establish an industry in the area that was viable
without national aid and artificial support.
"The State Aid authorities in the Czech Republic have been
the subject of assistance from UK experts (via an EU 'twinning
project' designed to help candidates prepare for EU membership)
and have acted to ensure no aid is being paid before approval
of the extension of the grace period in the Europe Agreement.
The process is therefore working and together with the accession
negotiations has enabled us to achieve all the above objectives
as regards the Czech Republic.
"The restructuring plan sets out limited levels of aid to
be paid to four companies in the run up to accession, whereupon
all aid will cease. It also identifies aid paid since the expiry
of the original grace period under the Europe Agreement. In return
for agreement to the aid the plan proposes cuts in overall capacity
of the order of 590,000 tonnes per year. This is in line with
previous EU policy and will require the physical destruction of
the production equipment, thereby guaranteeing a global reduction
in capacity.
"The Commission believe the plan gives appropriate attention
to strategy and the prevailing business environment. The assumptions
about the market for steel are considered realistic and the targets
for sales, productivity and so on are achievable. By the end
of 2006 all the companies affected should meet the Commission's
stringent viability criteria, but if they do not there is to be
no further support available.
"The Czech authorities are required to report on progress
and aid paid every six months. In turn, the Commission will be
closely monitoring progress against the plan and will be expected
to report regularly to the Council.
"The UK steel industry has been consulted informally and
are aware of the Commission's positive assessment of the Czech
restructuring plan. The industry agrees that the capacity cuts
specified are commensurate to the amount of aid to be paid. They
are, however, concerned that the plan's implementation be properly
monitored by the Commission and Council."
Conclusion
21.5
When we cleared the earlier documents we recognised the
UK steel industry's interest in securing transparency on aid to
the sector and in establishing a level playing field in the enlarged
EU as soon as possible. So we note the industry's view that the
capacity cuts planned are commensurate with the aid proposed.
But we note also the industry's wish that implementation of the
plan be properly monitored. We are content to clear the documents,
but look to the Government to remind the Council and the Commission
as necessary of the need for proper monitoring.
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