5 European Globalisation Adjustment Fund
| (27356)
7301/06
COM(06) 91
+ ADD 1
+ ADD 3
| Draft Regulation to establish the European Globalisation Adjustment Fund
Impact assessment of the proposal
Rationale for the intervention criteria
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| Legal base | Article 159 EC; co-decision; QMV
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| Document originated | 1 March 2006
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| Deposited in Parliament | 16 March 2006
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| Department | Work and Pensions
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| Basis of consideration | EM of 28 March 2006
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| Previous Committee Report | None
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| To be discussed in Council | October 2006
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
5.1 Article 158 of the Treaty establishing the European Community
(the EC Treaty) sets the Community the objective of strengthening
its economic and social cohesion.
5.2 Article 159 of the Treaty provides that the Community
should support the achievement of that objective through the Structural
Funds, which include the European Social Fund and the European
Regional Development Fund. The Article also authorises action
outside the Funds if it is necessary to strengthen economic and
social cohesion.
5.3 Article 146 of the Treaty provides for the establishment
of the European Social Fund. The Fund's aim is to make it easier
for workers to move between occupations and locations within the
EC and to facilitate their adaptation to change, particularly
through vocational training.
5.4 Article 160 of the Treaty provides that the European
Regional Development Fund is intended to redress the main regional
imbalances in the EC through participation in, among other things,
"the conversion of declining industrial regions".
The draft Regulation
5.5 In October 2005, the President of the Commission
wrote to the Presidents of the European Council and the European
Parliament to propose the creation of a European Globalisation
Adjustment Fund. The Commission has now presented an explanatory
memorandum covering:
- the draft of a Regulation to
set up the Fund;
- a detailed impact assessment of the proposal
(ADD 1); and
- a detailed explanation of the criteria for entitlement
to assistance from the Fund (ADD 3).
ADD 2 is a one page Commission staff working document
about types of action which could receive contributions from the
Fund. It has not been deposited in Parliament because it has not
yet been translated into English. We have, however, obtained a
copy of the French text of ADD 2.
5.6 The Commission notes that global competition
can cause heavy job losses in a region of the EC or smaller area
because local businesses relocate to third countries where production
costs are lower, or because local businesses cannot compete with
cheap imports or because local businesses lose exports. In such
cases, there can be hardship not only for the redundant workers
and their families but also for the local community. The best
course is to help the redundant workers return to employment as
quickly as possible. The Commission believes that people are more
likely to find new jobs if the help is tailored to their individual
needs.
5.7 The purpose of the proposed Globalisation Adjustment
Fund is to meet part of the cost of Member States' activities
to help individuals find employment where there have been large
numbers of redundancies as a result of changes in international
patterns of trade. The Commission says that the Fund would contribute
to economic and social cohesion within the EC. It also argues
that the proposal to set up the Fund is consistent with the principle
of subsidiarity because the Fund would be an expression of solidarity
between Member States which would be beyond what could be achieved
by the Member States acting individually. The Commission also
says that:
"the Community is competent for external
trade policy and thus for decisions that lead to increased trade
liberalisation and market opening. Therefore, it is logical for
the Union to bear the costs of policies that it implements, and
above all, of a trade policy which, while being globally beneficial
for the European economy and for employment, is the triggering
factor of certain redundancies."[8]
5.8 Article 2 of the draft Regulation provides that
the "intervention criteria" for a financial contribution
from the Fund would be as follows:
- has there has been a major
change in world trade patterns?
- has it led to a "massive" increase
of imports to the EC or a progressive decline in the EC's market
share or relocation of business from the EC to a third country?
- has this caused at least 1,000 redundancies in
an enterprise (including its suppliers and any downstream producers)
in a region where unemployment is higher than the EU or national
level? or
- has it caused at least 1,000 redundancies over
a period of six months in one or more enterprises in a business
sector which represents at least 1% of employment in the region?
ADD 3 explains the derivation of these criteria and
offers a justification for them.
5.9 Article 3 of the draft Regulation provides that
the financial contribution from the Fund would be towards the
cost of action "as part of a coordinated package of personalised
services designed to re-integrate redundant workers into the labour
market". Such action would include, for example, help to
search for a job, career guidance, re-training, outplacement,
mobility allowances, income support during re-training and temporary
wage supplements for people aged 50 or more who agree to re-enter
the labour market at a lower wage.
5.10 Article 5 sets out the information a Member
State would be required to supply in support of an application
for a contribution from the Fund. The required information would
include, for example, an analysis of the link between the redundancies
and the major change in international trade patterns which had
caused them;[9] the effect
of the redundancies on local, regional or national employment;
and the action the Member State is taking or will take to help
the redundant workers.
5.11 Article 9 would require Member States to publicise
action taken with a financial contribution from the Fund and to
"highlight the role of the Community and ensure that the
contribution from the Fund is visible".
5.12 Under Article 10, the Commission would be responsible
for assessing the application and deciding if a contribution should
be made. The value of the contribution would be limited to up
to half the cost of the action to be taken by the Member State.
5.13 Under Article 12, if the Commission considered
that a contribution should be made, it would ask the Council and
the European Parliament to authorise it.
5.14 Article 21 provides for the Regulation to apply
from 1 January 2007.
5.15 Paragraph 3 of the Legislative Financial Statement
attached to the draft Regulation says that the Fund's total annual
expenditure should not exceed €500 million; the expenditure
would be financed from underspends on other EC programmes.
5.16 The Commission says that the USA provides a
precedent for the proposal. The US Trade Adjustment Assistance
Programme has been providing financial support for trade-displaced
workers since 1962.[10]
Moreover, the OECD has made recommendations to governments about
good practice in adjusting to changes in trade patterns.[11]
5.17 The Commission has considered whether it would
be better to rely on what it describes as the status quo
— existing EC programmes and the European Social
Fund, in particular — than to set up the proposed new Fund.
It says that the Social Fund is directed towards long-term action
to anticipate and manage change. Indispensable as that is, it
will not always be sufficient to deal with the immediate effects
of massive and unforeseen job losses, and particularly to deal
with the need for urgent action to help redundant people find
new jobs. Moreover, the Commission says that:
"maintaining the status quo would
deprive the Union of an instrument of solidarity benefiting those
individuals who personally suffer the adverse effects of trade
opening and liberalisation. This solidarity effort at EU level
is essential to correct the asymmetry between the adverse effects
of trade openness (visible, immediate and concentrated in specific
individual [sic] or areas), and its overall benefits (intangible,
diffuse, and which usually take time to materialise).
"Maintaining [the] current status quo would
thus result in growing scepticism among the affected workers and
more generally EU citizens of globalisation, trade liberalisation
and its impact on EU labour markets."[12]
The Commission concludes that the proposed Fund would
be preferable to relying solely on existing EC programmes.
5.18 The Commission suggests that, each year, support
from the Fund would benefit about 35,000 to 50,000 redundant workers,
with the contribution from the Fund amounting to between €10,000
and €20,000 for each of those workers.
The Government's view
5.19 The Parliamentary Under-Secretary of State at
the Department of Work and Pensions (Mr James Plaskitt) tells
us that the Government believes that the Globalisation Adjustment
Fund:
"could play a useful role in responding
to the consequences of globalisation, in particular the focus
on funding active labour market measures designed to support redundant
workers to return to work. The UK will want to ensure that measures
supported under the EGF [European Globalisation Adjustment Fund]
do not undermine existing national policies or overlap with other
European Union funding streams such as the Structural and Cohesion
Funds. The UK will also want to ensure that the EGF does not have
a negative impact on member states' own active labour market policies.
"The UK will also seek to ensure that the
intervention criteria, funding and monitoring arrangements are
sufficiently tightly drawn to ensure the effectiveness of the
EGF."
Conclusion
5.20 We recognise that changes in the pattern
of world trade can have a devastating effect on local communities
in Europe. We share the Commission's view that the sooner redundant
workers can find re-employment the better.
5.21 It seems to us unlikely, however, that the
proposed Globalisation Adjustment Fund would make a noticeable
contribution to helping people get back to work. We say this because
of the proposed size of the Fund (not more than €500 million
a year) and the Commission's estimate of how many workers the
Fund might assist (35,000 to 50,000 a year). The Commission says
that the Fund "is an expression of solidarity across and
between Member States".[13]
We wonder if it would not be more of a gesture in that direction
than a significant contribution getting people back to work. Our
doubts stem not only from the amount of money which would be available
to the Fund but also from the requirement in Article 9 for Member
Sates to highlight the role of the Community and to ensure that
the contribution from the Fund is visible.
5.22 The Minister tells us that the Government
will want to ensure that the Fund would not undermine existing
national policies or overlap with funding from other EC sources;
it will also try to ensure that the Regulation is sufficiently
tightly drawn to secure the effectiveness of the Fund. We should
be grateful to know what amendments to the Regulation he considers
necessary for these purposes. We should also be grateful to him
for progress reports on the negotiations.
5.23 Pending receipt of this further information,
we shall keep the document under scrutiny.
8 See ADD 1, page 23. Back
9
The Commission acknowledges "the difficulty of demonstrating
a mechanical link between specific redundancies and changing trade
patters" but considers that "the applicant Member State
should be able to provide evidence and justification of a serious
economic disruption, brought about by at least one of three elements"
(namely, relocation, increase in imports or loss of market share)
- see ADD 1, page 13. Back
10
The US Programme is described in ADD 1, pages 8 to 10, 17, and
20 to 22. Back
11
The recommendations are summarised in Annex 6 of ADD 1. Back
12
See ADD 1, page 16. Back
13
Commission explanatory memorandum, section 3.3, page 6. Back
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