Commission rejects French textile plan

In March 1997, the European commissioner responsible for competition policy, Karel Van Miert, rejected as "illegal" a plan by the French Government to support its ailing textile industry by reducing non-wage labour costs. The use of subsidies to help maintain employment has recently become heavily disputed.

The issue of the use of national and European subsidies to support employment in a particular country, region or sector, has come under the spotlight in recent weeks in the context of the controversy which has arisen from Renault's announcement of the closure of its factory at Vilvoorde in Belgium (see Record EU9703108F). Renault's request for subsidies to expand its operations in Spain was blocked by European competition policy commissioner, Karel Van Miert, in order to investigate whether EU funding was being used to transfer employment to a region offering lower wage and social costs.

The use of subsidies to assist ailing domestic industries has long been a European political "hot potato", and in March Mr Van Miert added another twist to the tale, when he issued a statement pronouncing illegal a request by the French government for financial aid to textile companies in France.

The European textiles industry has experienced a period of rapid decline in the 1990s. Eurostat data on employment in the sector show a decrease in employment in the sector by over 20% since 1990 in nine member states. In Spain, such employment has in fact almost halved.

Employment in the manufacture of textiles (1990 = 100) - latest available statistics
EU 70.5 (August 1996)
Denmark 83.6 (1993)
Greece 68.9 (March 1996)
France 73.9 (September 1996)
Italy 77.9 (August 1996)
Netherlands 89.6 (1994)
Portugal 72.3 (May 1996)
Belgium 78.3 (September 1996)
Germany 59.8 (October 1996)
Spain 52.2 (September 1996)
Ireland 90.4 (March 1996)
Luxembourg 115.5 (July 1996)
Austria 71.4 (December 1995)
UK 79.1 (August 1996)

The French "textile plan" was designed to lessen the perceived impact of non-wage labour costs on employment in the industry. The European Commission points out that the granting of such subsidy would be illegal because it is limited to the textile, clothing, leather and footwear sectors. The Commission argues that this could distort competition in relation to industries in these sectors in other member states. The Commission has not yet adopted a formal decision rejecting the plan, but is seeking meetings with the French Government in order to identify possible solutions.

Commissioner Van Miert's statement appears to imply that any scheme aimed at reducing non-wage labour costs across all sectors would meet with the Commission's approval: "The European Commission notes that the French textile plan is, in its current form, incompatible with the European rules on state aid. The Commission does not dispute the objectives in terms of employment pursued in the context of this plan, but its position is justified by the fact that the plan is restricted to a few sectors in crisis, which would have the result of transferring employment difficulties to other EU countries."

The reduction of non-wage labour costs has, in fact, been a Commission priority ever since it was included in the aims laid down at the European Council meeting in Essen in December 1994. The regularly published Tableau de Bord(synoptic table) summarises the progress towards achieving this aim to date in the member states.

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