Committee Reports > List of Committees > Joint > 1979 > Committee on the Secondary Legislation of the European Communities > Report No. 59 - Community Aid for Industrial Restructuring and Conversion Operations

REPORT

Introduction

1. The Joint Committee has considered the proposals made by the Commission for—

Council Regulation on Community aid for industrial restructuring and conversion operations [R/2821/79 (ECO 239)], and

Council Decisions on Community aid for restructuring or conversion investments in (a) the shipbuilding industry and (b) the textile industry, particularly in the man-made fibres industry.

The proposals were examined by the Joint Committee’s Sub-Committee on Economic, Commercial and Financial Affairs under the Chairmanship of Senator Noel Mulcahy. The Joint Committee is indebted to Senator Mulcahy and his Sub-Committee for their work. The Sub-Committee consulted the Confederation of Irish Industry and the Department of Industry, Commerce and Energy.

2. The proposal for a Council Regulation is based on Article 235 of the EEC Treaty under which the Council may, acting unanimously on a proposal from the Commission, take appropriate measures “if action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers”. The proposed Regulation would enable Community aid to be given for industrial restructuring and conversion operations to sectors of industry designated by the Council acting by a qualified majority on a proposal from the Commission. The draft Council Decisions submitted by the Commission propose to designate two such sectors.

3. The Joint Committee is informed that the proposals have been discussed at Working Party level, under Council auspices, on a number of occasions over the past ten months and have now been submitted to COREPER.

Proposed Regulation

4. The primary purpose of the Regulation is to assist the restructuring of industrial sectors in the Community in which there is excess production capacity. As already stated, the sectors to be aided would be decided by the Council acting by a qualified majority on a proposal from the Commission. Restructuring programmes, as envisaged by the Commission, would comprehend “rationalisation research, modernisation of equipment and of production and management and sales techniques”.

5. In addition to assisting restructuring within sectors the instrument, if adopted, would also assist conversion operations, i.e. investments to help undertakings to convert to other types of activity or to create in the areas affected by the restructuring and in other fields of activity new jobs intended primarily for workers made redundant by the restructuring process or by the total or partial closure of such undertakings.

6. Aid would be granted to undertakings only on condition that they were already eligible for national aid. Investment projects to be eligible for Community aid “must not have involved the commencement of any construction work”.

7. The types of Community aid envisaged would take the form of investment premia or interest rebates on all or part of the loans raised for restructuring or conversion operations. Interest rebates would, in principle, be granted only to financing operations carried out with the help of loans from Community bodies, i.e. the European Investment Bank or by means of the Ortoli loan facility. The amount of the interest rebate would vary with the undertaking but would be at a higher rate for conversion investments undertaken:

(a) in the least favoured regions or in regions or zones particularly affected by restructuring.

(b) by small and medium sized enterprises.

Investment premia would not exceed the grant equivalent of the maximum interest rebate that could be granted.

8. Applications for aid would be made directly to the Commission by the investors or through the intermediary of the Member States. The Commission would in each case seek the opinion of the Member States concerned. The draft Regulation also envisages the setting up of an Advisory Committee composed of representatives of the Member States and chaired by the Commission. Draft decisions on the granting of aid would be sent to this Committee for an Opinion. If the Committee dissented with the Commission, the Commission would in turn re-examine its draft decision and might withdraw, amend or confirm it.

Proposed Decisions

9. The two Decisions are submitted by the Commission in anticipation of the adoption of the proposed Regulation by the Council. Their purpose is to allow the aid envisaged by the draft Regulation to be granted to enterprises engaged in the shipbuilding industry and in the textile industry, particularly in the man-made fibres industry.

Implications for Ireland

10. The Commission’s view is that aid under the Regulation, if it is adopted, should initially at least be restricted to a small number of sectors and particularly to those where serious overcapacity exists, i.e. shipbuilding and synthetics. The Joint Committee is informed that if aid under the Regulation were to be so confined it would be of little benefit to Ireland’s industrial development efforts having regard to the fact that our only shipyard has recently undertaken a major restructuring programme and to the present state of development of our synthetic fibre sector which is one of the most modern anywhere in the world.

Views of the Joint Committee

11. The Joint Committee agrees that in the present state of the market Community assistance in tackling the structural problems of industry and in dealing with the consequences of restructuring is justified. It believes that such assistance is fully in line with the pronouncements of the European Council on the subject in Brussels in 1977 and in Copenhagen in 1978.

12. The Committee is informed, however, that in the Council Working Party wide differences between the national delegations emerged both on principal and detail and that it is unlikely that the proposed Regulation will be adopted, at any rate in its present form. The Committee notes that in the Community Budgets for 1978 and 1979 a provision of 20 million EUA was included for industrial restructuring and conversion operations presumably in the expectation that an appropriate Regulation would be adopted. The Committee would have thought that by agreeing to these budgetary provisions the Council had accepted in principle the need for Community assistance. If no Regulation is adopted before the end of this year the Committee understands that the budgetary provision made in the 1978 Budget cannot be carried over to next year and will be lost altogether. In the circumstances it seems imperative that some Regulation, even if only temporary in nature, should be adopted to avail of the funds already allocated.

13. The Committee is of the opinion that the Commission’s proposals confining aid to two sectors are too restrictive and would, if accepted, place Ireland at a disadvantage vis-à-vis other Member States. It considers that initially the scope of the aid should be extended at least to the textiles and clothing industries generally and to the leather and paper board industries.

14. Even if aid were to be confined to the shipbuilding and man-made fibres sectors the Committee believes that Ireland should be able to benefit. In its discussions with the representatives of the Confederation of Irish Industry it was pointed out to the Committee that our man-made fibre sector, modern and all as it is, is exposed to very severe competition from third countries, particularly the USA, and that constant adaptation is necessary. In the Committee’s opinion the restructuring programmes envisaged by the Commission are sufficiently wide to allow Irish manufacturers to participate with benefit.

15. As the Regulation proposed by the Commission is based on Article 235 of the Treaty the unanimous agreement of the Council is required for its adoption. However it is proposed that the Decisions to be taken by the Council under the Regulation designating the sectors to be assisted will require only a qualified majority. In effect this proposal is an attempt to circumvent the unanimity rule enshrined in Article 235 and in the Committee’s view it should not be accepted.

Acknowledgement

16. The Joint Committee wishes to record its appreciation of and express its thanks for the considerable assistance it received from the Confederation of Irish Industry in considering this matter.

(Signed) ALEXIS FITZGERALD,

Chairman of the Joint Committee.

19th December, 1979.