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Wednesday, 13 April 2005 - Strasbourg OJ edition

23. Fiscal and environmental dumping

  President. The next item is the joint debate on the following oral questions to the Commission on fiscal and environmental dumping, by Mr Ford, on behalf of the Socialist Group in the European Parliament, by Mrs Mann, on behalf of the Group of the European People’s Party (Christian Democrats) and European Democrats and by Mr Watson, on behalf of the Group of the Alliance of Liberals and Democrats for Europe (B6-0172/2005),

- by Mr Jonckheer, on behalf of the Group of the Greens/European Free Alliance (B6-0229/2005).


  Ford (PSE), author. Mr President, as the Commission will be aware, we have almost 300 jobs at risk at the British cellophane plant in Bridgwater in my constituency in the United Kingdom. This plant has been taken over by a company called Innovia, which currently has plants in Kansas, Carlisle and Bridgwater. What is being proposed threatens to rip the heart out of the town of Bridgwater; allowing for suppliers to the company, almost one thousand jobs are at risk in the area.

Tonight we have an almost unprecedented request from all parties – Labour, Conservative and Liberal Democrat – in the region and in the United Kingdom, who are united in their reaction to this appalling decision by Innovia and are asking for the Commission’s help and assistance.

What leads the company to make this decision? The plant in Kansas has never in its history made a profit; the plant in Bridgwater has never in its history made a loss. But we have a proposal to close Bridgwater. Why? Because the State of Kansas, led by a Democratic majority, who, in spite of the opposition of Republicans in the State House of Representatives and the State Senate, has offered Innovia certain things. The first is a bribe of USD 2 million to shift jobs from the European Union to the United States. The second is a five-year tax holiday, which means that all the taxes paid by the workforce will be paid back to the company over the next five years. And, most interestingly, it has offered a suspension of environmental regulations, which will allow the cellophane to be produced cheaply and re-exported back to the European Union.

I should like to ask the Commission whether these financial bribes are allowable under WTO rules. If not, will it raise the issue with the US Government? What will be done when Innovia produces cellophane in Kansas and dumps it back on the European market? How will the Commission tackle that problem? Also, while I agree that at the moment the WTO rules do not forbid environmental dumping, and while we recognise that different countries may have environmental standards that differ from ours, we object to the suspension of those different standards, something we are increasingly likely to see because of the Kyoto Agreement.

In the European scheme of things, this is comparatively small beer. Nevertheless, it is very important for the region. It is also very important in terms of the precedent it sets for the future, because if the United States, its companies and its State governments can get away with this on one occasion, there is absolutely no reason why they will not do it again and again. Therefore, this is an important issue of principle that the Commission needs to take seriously, and I expect some action.


  Jonckheer (Verts/ALE), author. (FR) Mr President, Mr Vice-President of the Commission, my group has decided to join this oral question in order to supplement it. The question raised by Mr Ford relates in particular to compatibility with WTO rules. For my part, I would like to come back to a question that concerns the European Union and the situation within the EU’s borders.

During the last parliamentary term, the Ecofin Council agreed on the designation of around 60 national tax measures within the European Union that were considered to result in harmful competition as understood in particular in the work carried out within the OECD. The provisions of what is known as the Primarolo Code of Conduct – from the name of the official who chaired this working group – related both to standstill clauses and to rollback clauses, in other words to the gradual dismantling of the national provisions thus identified by common agreement within the Ecofin Council.

I have noticed that we no longer talk very much, neither within Parliament nor in the media, about the situation with regard to that dismantling process and I would like to know what the Commission’s opinion is on that process. I am well aware that the issue essentially falls within the competence of the Member States and that there is agreement between the Member States within the Ecofin Council. That said, competition policy is an exclusive competence of the EU and the Commission has a very important mission in that regard. From this point of view, therefore, I believe that the Commission should have a role of monitoring and providing incentives, or at least of warning and providing information, regarding verification of the commitments made within the Ecofin Council.

I will supplement this question by saying – and you know this as well as I do – that we are still a very long way from harmonisation of corporation tax and of the tax base within the EU, which were debated by the Prodi Commission on the basis of its work with regard to a common minimum level for company taxation within the EU. This is a development that my group considers desirable.

We therefore see the decisions taken within the Ecofin Council as a minimum minimorum and I really hope that the Commission will be able to comment on this process this evening and in the coming months. This is because I think that the problems we are encountering in some countries with regard to the draft European Constitution are not helping us, unfortunately, and that there is a legitimate concern that harmful competition will continue and get worse within the European Union. That is why, in my opinion, it is an extremely important policy mission to ensure that, at the very least, the commitments made within the Ecofin Council are met and that the Commission, just like Parliament, plays a part in the development of this process.


  Watson (ALDE), author. Mr President, I rise on behalf of my Group to add my concern to that expressed by previous speakers about this terrible situation in relation to an innovative and, frankly, quite remarkable company in the constituency that Mr Ford and I represent.

Innovia Films is a profitable company, which has developed a process discovered in the United Kingdom in 1898. I suspect that had that process been discovered in Scandinavia in 1998, it would have been viewed as best available technology, plastic packaging would have been banned and cellophane would have been used instead. Sadly, for cellophane, it was discovered rather earlier. However, I welcome the cross-party support that is being shown for the campaign to recognise the problems being caused by the policy of the Americans and to deal with this issue.

This morning we debated the outcome of the European Council meeting held to review the Lisbon Agenda. In the resolution adopted by Parliament with cross-party support, we agreed that there has to be such a thing as industrial policy. If there is industrial policy, then we have to look at how we can support companies like this one. When I wrote to Commissioner Piebalgs on behalf of the company some while ago, in order to see whether any kind of support was available for that company, he replied that there are programmes that support new and innovative systems, but this case would not be eligible for such support. I wonder if we should not be looking again at our industrial policy.

The letter from Commissioner Mandelson to Mel Dando, one of the trade union officers involved, looks at the problems that we have encountered with the policy at the plant in Kansas, as regards declaring a tax holiday and suspending environmental regulations. Mr Mandelson points out that the measures, in the form of tax exemptions, appear to be subsidies but do not fall into the prohibited category. He then goes on to point out that there are no provisions in the WTO agreements that cover environmental dumping and says that, therefore, these measures appear not to be in breach of current WTO rules.

My question to the Commission will be this: if there are no provisions in the WTO agreements that cover environmental dumping, why not? What is the Commission doing to ensure that we have provisions to cover environmental dumping? This incident, affecting, as Mr Ford said, perhaps not a huge number of jobs when viewed on a European scale, but a very large number of jobs when viewed on the scale of a small industrial town like Bridgwater, is one that could be replicated right across the European Union if we found that the policy of different States in the United States of America in this area was about to rob us of jobs in this way.

This is the ugly face of capitalism. We have here a buy-out of a company by a consortium dedicated to asset-stripping and to returning as much money as possible to the investors without looking at the general health of our society and our industries. It is the kind of case on which the Commission should take action. I hope that Commissioner Verheugen, the Commissioner here tonight, and Commissioner Mandelson will raise this case with the Americans and see what we can do to get action to save the plant in Bridgwater and to save potentially many other hundreds of thousands of jobs across the European Union that could be affected by this kind of development.


  Parish (PPE-DE), author. Mr President, I welcome the opportunity to debate fiscal and environmental dumping with regard to British Cellophane in Bridgwater. British Cellophane has had a long and honourable history spanning more than 50 years. It has an enormous background of industrial muscle and might in Bridgwater. Bridgwater is also one of the leading industrial towns in the West Country.

Over the long term, the workforce at British Cellophane has been reduced but it has always had an outstanding productivity level, an outstanding relationship with its employees and has given outstanding help to the town at all levels.

Cellophane is a massively important commodity throughout the world. British Cellophane produces approximately 60 000 tonnes per year. The commodity has been produced in highly productive, motivated and profitable plants. In the past few years the company has changed dramatically: it was bought by Candell Investments and I should like to talk about three of its five plants.

Two plants are in Britain and one is in America. The two in Britain are productive, motivated plants, one in the north and one in Bridgwater. I wish to dwell on the third plant in Kansas.

Kansas State legislators have spent an enormous amount of money to keep the plant there. We are talking about millions of dollars, not a few hundred thousand. They voted publicly to give public money to the plant and they have also been given a five-year environmental holiday to further undermine British Cellophane’s prospects. It does not stop there. The plant is unproductive and does not make a profit. Why would one give money to a plant that does not make a profit and is not productive, whether it is in China, Australia or America?

Three hundred UK jobs in a profitable, highly productive plant are being put under threat by a plant that does not meet the WTO rules. Every year British Cellophane puts approximately GBP 20 million into the economy from wages, direct and indirect goods. We are talking about a profitable and highly productive plant. It has done everything to change and it out-performs the Americans by far. It produces more and better quality goods. The plant has done everything to stay profitable. We should not allow it to be sacrificed simply because an American plant can get away with something that we cannot.

The subsidies are unfair trade, involve unfair dumping and the use of unfair competition against profitable plants. We should not allow this to happen. If this is a world of free trade, the World Trade Organization should be asked to consider this matter. I ask the Commission to take this up urgently. There is cross-party support for this. I believe that the WTO should act. I urge the Commission to take up the case.


  Verheugen, Vice-President of the Commission. Mr President, let me begin by dealing with the specific case at issue. The Commission is aware of the plans for the closure and possible relocation of the Innovia Films plant in Bridgwater and we have asked the services to examine whether the measures taken by the State of Kansas constitute a breach of WTO rules. We will also explore, in cooperation with the Member States concerned, whether any other remedy is available under international law in this situation.

I wish to add that my own political judgement with regard to this case is absolutely the same as that expressed by honourable Members in the debate. If US State aid rules apply in Kansas, that is certainly a practice that is not allowed here. However, fortunately or unfortunately, the State of Kansas is not part of the European Union.

In particular this involves looking at the possibilities offered by the complaint procedure in the context of the OECD guidelines for multinational enterprises, which state that OECD enterprises should refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives or other issues. It should be noted, however, that these guidelines and the recommendations that may result from the complaint procedure are not legally binding.

As regards the WTO, the Commission is evaluating the compatibility of the measures taken in Kansas with the WTO agreement on subsidies and countervailing measures. These rules, while in principle allowing WTO members to decide on their own fiscal regime, prohibit tax exemptions when they directly promote exports. That is the case that we have to examine: whether the measures in Kansas directly promote exports. If so, they run against WTO rules.

I wish to add a few general remarks on the role of the WTO in the area of environmental policy. Let me first stress that WTO members have explicitly recognised the importance of working towards sustainable development and making international trade and environmental policies mutually supportive. The European Union plays a particularly active role in this respect, but the work is not complete. WTO members are free to choose their own environmental policy at national, regional and, in the case of multilateral environmental agreements, global level. This also implies that any action against illegal breaches of existing regional, national or international environmental legislation should be taken at those levels.

The appropriate answer to ‘environmental dumping’ at global level is, therefore, to enhance environmental governance by means of legally binding instruments such as multilateral environmental agreements, and the Commission is very active in that field.

As regards the other question raised, about harmful tax competition in the European Union, all EU Member States are committed to the code of conduct on business taxation. The code aims at combating specific tax measures that affect, or may affect, the location of business within the Community. Almost all the harmful tax measures identified following a peer review process have been or are in the process of being removed. More generally, the Commission’s tax policy aims at promoting the principles of the code towards third countries in order to tackle harmful tax competition on as wide a geographical basis as possible. In this respect, the Commission has already included a reference to the principles of the code in several international agreements with third countries and aims at including this reference in future agreements. Furthermore, the Commission supports the OECD efforts to remove harmful tax practices.


  Mann, Erika, on behalf of the PSE Group. (DE) Mr President, Commissioner, ladies and gentlemen, I would like to follow the four Members who have already spoken by addressing to you another question on the problem under discussion. It was in 1992 that we joined with the United States in adopting the New Transatlantic Agenda, which provides for various dialogues, some of which work well, and others less so. We know that the business dialogue works very well, as does the consumer dialogue, but we have been noticing for many years that there are serious problems with the dialogue that is meant to bring employees together – the labour dialogue, as it is known. There are various reasons for this; to some degree, it has to do with the different traditions in America and Europe.

The next summit is scheduled to be held in the summer, and, as a matter of urgency, I would ask you, when preparing it, to get together again with the Council and, as a Commission, to consider what you can do to support this dialogue. Although this is something that should be left to the trade unions, I have learned from experience that it will be necessary to review what we in the various European institutions can do to really keep this dialogue going or, perhaps, to resurrect it.

I would have thought this example would be a good one for you to refer to in an attempt to revive this dialogue. I would, moreover, recommend that you raise the problem in the context of the business dialogue and talk to the businesses themselves in order to see whether it might not be possible to come to an understanding, so that the OECD guidelines to which you have referred are actually implemented in practice, rather than being set aside by various states – in this case Kansas, although any other might well have done likewise.

That strikes me as enormously important, for, in a global context and with competition at international level certainly not becoming simpler, but rather more difficult, it is only right that the states operating within the OECD framework should actually play the game by the rules. Perhaps you might say where you stand on this point, and say whether or not you can consider including this as an item for discussion.

If I might turn to the second point you addressed, that the Commission and the Council – like, I would add, this Parliament – have for many years been pressing for more intensive discussion within the WTO, and for it to include labour standards, environmental standards and social standards, let me say that it would appear to me to be right and proper – although I know it will be very difficult – to return to this issue during the current round, and I can assure you that this House will again refer to it in a resolution.


  Krahmer, on behalf of the ALDE Group. (DE) Mr President, I would like to discuss this question by the Greens and, potentially punishable offences against the WTO apart, to address a couple of questions to its author.

Mr Juncker, your question expresses the fear that the removal of barriers to trade might result in tax dumping. In it, you also make reference to subsidies undermining the multilateral trade system. Do you not believe that there is a connection between high taxes and high subsidies? Do you assume that, in a world without tariffs – which are barriers to trade – and the competition to which they give rise, social and environmental standards would invariably and inevitably fall? As you never fail to mention competition in the same breath as words like ‘harmful’ and ‘dumping’, are you afraid of it?

What does actually bring prosperity and jobs – the exchange of goods and services in open markets without barriers to trade or, instead, more fragmented markets with high barriers to trade? Do you, like me, take the view that only a competitive national economy is in a position to comply with high environmental standards? If so, should we then not abandon, once and for all, the constant pretence that low taxes and open markets amount to the same thing as low environmental and social standards? I would also be interested to learn what the Commissioner thinks about this.


  Portas, on behalf of the GUE/NGL Group. (PT) Good evening, Mr President. It is a pleasure to have a compatriot in the chair for this evening’s sitting. In the case before us, a British cellophane factory has been enticed to relocate to the State of Kansas, purely on the basis that that State has derogated fiscal and environmental legislation.

Unfortunately, this is not an exception to the rule, because the rule itself has encouraged such action. This case, in common with the Alstom case that was discussed earlier, clearly illustrates a well-known problem, namely that of relocations for reasons of anti-social or anti-environmental competition. I could give you similar examples in Portugal.

Indeed, the day before yesterday, workers came to Strasbourg from Yasaki Saltano, a firm that has two plants in Portugal, and 10 altogether in Europe. This Japanese multinational has employed 7 500 people in Portugal, yet today it employs half that number. Just yesterday the board issued the threat that without further government support 500 more workers would be laid off in August. It should be pointed out that this company was given land and infrastructure free of charge, that it had enjoyed Community funds for years, that the level of work-related diseases, such as arthritis, among its workers is abnormally high and that this is the argument used by the board not to issue redundancies but to persuade the sick to resign.

Mr President, this lie has to come to an end some time. It is sad to see the Commission’s impotence in such cases, which shows that it has given up. The United States and the EU call one day for the end of protectionism at the World Trade Organisation, only the next day to reinstate it or establish comparable benefits based on unfair criteria. The breaking of protectionism must be accompanied by higher levels of social rights and tighter environmental controls. This is the alternative to the neoliberal order in which there will be no more Kansases to complain about.


  Lundgren (IND/DEM). (SV) Mr President, I note with satisfaction that we have this evening debated issues that really ought, in fact, to be debated and decided upon in this House. It is, unfortunately, all too common for MEPs to devote themselves to debates and decision-taking that, according to the principle of subsidiarity, do not belong in this House. In this case, the matter is clear, however.

The EU has a common trade policy. Parliament therefore has strong reasons for monitoring compliance with the rules governing global free trade. Such a system is the most important way of increasing prosperity in both poor and rich countries, but the system presupposes that individual countries and trading blocks will not engage in protectionism, which often takes the form of customs duties and other trade barriers. It may also take the form of subsidies or special rules for certain forms of production, designed to attract or retain activities that would otherwise not cope with international competition.

Such issues are regulated by the WTO. I agree with the other speakers in the House who have demanded that the Commission as soon as possible take measures against countries and EU Member States that breach the WTO’s regulations. It is, however, important to be aware of the fundamental difference between permitted and prohibited instruments, or between production-friendly policy and dumping. It is not prohibited to choose a generally low level of tax in order to promote growth. What is forbidden is to favour selected companies or industries with tax benefits. That is called tax dumping. It is also permitted for a country to have relatively low ambitions in terms of environmental policy during a phase when the country is poor and has to give priority to growth. That is what today’s rich countries did when they were poor. What is prohibited is to allow special dispensations from current environmental requirements with a view to favouring individual companies or industries. That is known as environmental dumping.

I propose that, in its analysis and in the measures it takes, the Commission clearly distinguish between legitimate rules for promoting growth and prosperity, and illegitimate dumping methods.


  Ford (PSE), author. Mr President, in view of the fact that Commissioner Verheugen has stated that the Commission is investigating whether the subsidies are directly promoting exports – which would be illegal – I should like to ask him, on behalf of the Commission, to write to the company to ask it to defer its decision on the plant closure, which is due within 15 days, until that has been established.


  Verheugen, Vice-President of the Commission. I shall pass on that question to my colleague, Mr Mandelson, who is in charge of the file.

I should like to say to Mrs Mann that I take note of and fully accept the recommendations. I will ensure that the issue is discussed at European-American business round tables and in other fora.


  President. The debate is closed.

The vote will take place tomorrow at 12 noon.

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