Verbatim report of proceedings

Monday, 13 March 2006 - Strasbourg

18. Relocation in the context of regional development (debate)

  President. The next item is the report (A6-0013/2006) by Mr Hutchinson, on behalf of the Committee on Regional Development, on relocation in the context of regional development (2004/2254(INI)).

  Alain Hutchinson (PSE), rapporteur. – (FR) Mr President, Commissioner, ladies and gentlemen, the subject of my report – the relocation of businesses – is a sensitive but nonetheless topical one. I realised immediately that it had a delicate side when I presented my first draft report in the Committee on Regional Development. I have rarely witnessed – although I am still a young MEP – such a heated debate in committee. The fact remains that insight often springs from a clash of ideas, and I think that we have succeeded in drafting a good, balanced text, which expresses several interesting ideas and which enables us to demystify, clarify and better grasp the complex mechanisms of a genuine problem in our society. I should also like to take advantage of the time given to me to thank the shadow rapporteurs and all my colleagues who helped draft this report.

Ladies and gentlemen, there are a great many of us in this Chamber – perhaps not this evening, but in general – who were able to note that relocations give rise more often than not to considerable economic consequences for the regions affected. However, a relocation also means job losses and tragedies for the families that are the victims, and that is something that affects us.

Furthermore, an initial observation that I was able to make while preparing this report was that the European statistical tool in this area is weak. I was also able to observe that our Assembly had already addressed this issue in the form of other reports. In an initial resolution of 13 March 2003 on the closure of businesses in receipt of EU financial aid, Parliament put its finger on the major risk that relocations represent with regard to the primary objective of regional policy, namely economic and social cohesion. Then came the resolution of 6 July 2005 by our fellow Member, Mr Hatzidakis, on the reform of the Structural Funds. On that occasion, Parliament had drawn up several proposals regarding relocations.

My report obviously takes up the ideas contained in the resolutions previously voted on by the European Parliament. I have attempted to reproduce the main principals of those resolutions. After having pointed out that regional development policy is aimed at facilitating the development of EU regions and that public aid should not serve to encourage the relocation of economic activities, the report voted on by our Committee on Regional Development goes on to propose the adoption, both at Community and at national level, of measures designed to prevent, on the one hand, the potential negative consequences that relocations might have for economic development and, on the other, the social tragedies caused by these relocations.

Firstly, we are calling for a tool to be made available to us that will allow us access to more precise information. We therefore propose entrusting the Dublin Observatory with the remit of studying, assessing and monitoring the phenomenon of relocation in order to give expression to its social and economic impact and its effect on policy regarding cohesion and regional development. In addition to this tool, and in the absence of better coordination of our national social systems, the Committee on Regional Development considers that it is now crucial to adopt an overall European strategy for averting, managing and monitoring the relocation of companies not only within, but also outside the Union. We propose a number of measures that we address in very practical terms in the report.

Firstly, we call on the Commission to take all the measures necessary in order to fulfil what I believe is one of the crucial requirements of the report: that of preventing European regional policy from being an incentive for companies to relocate.

Secondly, we support the Commission proposal aimed at penalising the companies that have received EU aid and that relocate their activities within seven years. We also request that, in the event of non-compliance with national and international laws, it should no longer be possible for these same companies to receive public aid intended for their new place of production.

We call on the Commission to contemplate measures with regard to the relocations that I would refer to as ‘reverse’ relocations, namely those that, without relocation of the company’s activities, lead to a deterioration in working conditions. We consider that the granting, and continued provision, of public aid to businesses must be conditional on precise commitments in the areas of employment and local development. We suggest that the Commission develop a system designed more severely to penalise companies that, after having received public aid, relocate all or part of their activities outside the European Union. We also call on the Commission to include social clauses in international treaties and request that the implementation of these social clauses be supported by positive measures and incentives to help the countries and the companies that comply with those clauses. We support the Commission proposal aimed at creating a Globalisation Fund designed to avert and deal with the economic and social crises resulting from restructuring and relocations.

Finally, the Committee on Regional Development considers that the consequences of the many relocations must lead us to take an open and constructive approach to the issue of creating a genuine European social area. In this regard, we consider that social dialogue has a major role to play in terms of preventing relocations and of dealing with their effects.

Ladies and gentlemen, as we all know and as has been said often enough, the European Union has been going through a significant crisis of late. What is serious about this crisis is the fact that Europeans have undoubtedly lost confidence and interest in this fantastic project that is European integration. Whether it be by means of this resolution on relocations or by means of other texts, we, the Members of the European Parliament, who are elected by the people of Europe, have a duty to listen to these worries. I believe that the report on which we voted in committee contains some interesting areas for further reflection and that it responds to the legitimate questions posed by our fellow citizens on this matter.

  Stavros Dimas, Μember of the Commission. (EL) Mr President, I should like to congratulate and thank the rapporteur, Mr Hutchinson, and the Committee on Regional Development for this exceptional report, which concerns a sensitive issue which has been the subject of extensive debate in the various Member States over recent months.

Without underestimating the sensitivity of the issue, I should like to remind you that the right of establishment anywhere in the Community is a fundamental freedom and cornerstone of the single market. It is detrimental to encourage or ban investment decisions. Specialisation and changes to the location at which economic activity is exercised form part of economic development and are needed if we want growth and more and better jobs.

However, the Commission knows full well that company relocations, as Mr Hutchinson stressed earlier, and the loss of jobs within the Union are very worrying phenomena. Of course we cannot intervene in decisions by companies or undertakings in their work; however, we are resolved to combat the social consequences of such decisions.

The objective of the Structural Funds, during both the current and the next programming periods, is job creation, growth and further economic progress. They are flexible and perfectly able to mitigate and limit the difficulties created in the regions and for citizens by a company's decision to close and relocate all or part of its economic activity to another Member State or outside the European Union.

Both current and future regulations which have not yet been finalised make provision for any company financed by the Structural Funds of the European Union which relocates within five years of receiving a subsidy to repay the subsidy. Thanks to this rule, companies will stop taking recourse to subsidy hopping.

To close, I should like to assure you that the Commission will examine carefully every specific proposal which Parliament may present within the framework of debates on future regulations.

  Ilda Figueiredo (GUE/NGL), draftsman of the opinion of the Committee on Employment and Social Affairs. – (PT) Mr President, Commissioner, ladies and gentlemen, we are all aware of the terrible consequences of company relocations in various EU countries, namely increased unemployment, poverty and social exclusion. Development across vast areas is also hampered, especially in countries with weak economies such as Portugal, which are dominated by the ‘traditional’ industries of textiles and clothing, footwear and cable-manufacturing.

Relocations, according to the opinion delivered by the Committee on Employment and Social Affairs, affects not only these ‘traditional’ industries, but also highly capital-intensive industries such as steel-making, aviation, mechanical engineering and electronic components, not to mention large parts of the service sector, for example software development and financial, logistics and information services.

It is good news that the Committee on Regional Development, through its rapporteur Mr Hutchinson, has welcomed most of the opinions expressed by the Committee on Employment and Social Affairs, in particular the inclusion of the social clauses in international treaties based on the International Labour Organisation conventions, thereby ensuring that countries and businesses comply with them, although I personally do not feel that these measures go far enough. Nevertheless, as we stated in the debate and vote on Parliament’s resolution of 13 March 2003 on closure of undertakings after receiving EU financial aid, the Commission and the Member States must take action to put a stop to this economic and social scourge, which leads only to greater profits for multinationals and economic groups that do not demonstrate any social responsibility.

This debate must produce practical results, whereby the rights of workers are safeguarded and the economic groups with a history of relocations and unemployment no longer receive aid in any Member State.

The Commission, in conjunction with the Member States, must, as a matter of urgency, take on board the opinions of the European Works Councils, draw up and publish a blacklist of businesses and economic and/or financial groups that have used relocations for the purpose of increasing their profits and demand the return of any aid granted. More stringent requirements must also be in place with regard to defending jobs and regional development in forthcoming regulations on Community funds.

  László Surján, on behalf of the PPE-DE Group. – (HU) Mr President, the Committee on Regional Development supported this report with a large majority. The rapporteur had to harmonise completely opposing opinions, and deserves our thanks.

The Group of the European People’s Party (Christian Democrats) and European Democrats has never supported the restrictions on freedoms, such as, in our case, the free movement of capital. Our compromise was based on this principle, and in the future, too, we must continue to refuse to expect solutions to local problems on the restrictions on freedoms. Unfortunately, we have already seen an alarming example of this, not too long ago, in relation with the Services Directive.

Protectionism induced by selfishness and fear will always have undesirable consequences. There has been a growth in production in countries where the labour market was opened to workers from new Member States, and unemployment levels have actually dropped. In other areas, some companies relocated to regions with cheaper wages. Company relocations raise many concerns. If company owners are only concerned with the profit, they may succeed in increasing their profit levels, but they would cause damage to others. Increasing shareholder revenues are no consolation to employees who lose their jobs because their company relocated to the developing world, or even just to a different region of the European Union.

Therefore we must identify the appropriate methods to enforce the common good, but I am afraid that no law can ever replace the feeling of mutual responsibility between owners and employees, for the welfare of the other. The owner-employee relationship will only have a ‘human face’ if it is based not only on economic, but also on ethical considerations. Therefore, I am certain that while we are searching for new routes and new solutions, we will have to return to the issue of company relocations.

  Constanze Angela Krehl, on behalf of the PSE Group. – (DE) Mr President, I am glad that the rapporteur – after what were at first considerable differences of opinion in the Committee – has succeeded in achieving such a broad compromise on this report. It is a compromise of which I am very much in favour.

There are three points that I would like again to highlight. Firstly, I was interested to learn that only a very few companies that relocate actually get European aid, that is to say, aid from European tax revenues, and, as cohesion and structural policy are founded on solidarity with more vulnerable regions, I do not think that anyone here in this House will be undermining them.

Secondly, there needs to be more transparency as regards which companies get which aid, in order to make it clear to our electorate what we in the European Union are actually doing and what we are supporting. In any case, we will not stand for any ‘subsidy hopping’.

Thirdly, where relocations result in job losses, there is a need for an instrument to help those affected, and that is what the globalisation fund could be.

  Jean Marie Beaupuy, on behalf of the ALDE Group. – (FR) Mr President, ladies and gentlemen, I am delighted to see that, after the long hours of work devoted to the report by our fellow Member, Mr Hutchinson, we have reached, as my two fellow Members have just said, if not a full consensus, then at least an agreement on most of the elements.

Coming back to the initial report and to the observation made, I believe that we must of course take into account what motivated Mr Hutchinson, namely the shock that a relocation represents for the employees and the region concerned, since any relocation of a large workforce is a genuinely traumatic experience, both for the employees and for the region.

As the rapporteur also said, it is not acceptable that certain business executives should use blackmail. We must, however, note that, in a free economy, there are, within our very own regions – since relocations sometimes take place within our own countries – differences in wages and technical competitiveness that mean that a company might in fact be led to relocate some of its production plants, whether it is goods or services that they produce.

Finally, let us not forget that, in accordance with the Single European Act of 1986, we have to facilitate the free circulation of goods, persons and services in our Member States. Before talking about relocation, we need to ask the following basic question: if a company that has to face up to competition and that has to provide a service to its customers does not relocate, then what does it do? I am not talking about crooks here. I am talking about a number of companies that have been faced with this decision. The fact is that a number of them have managed perfectly well by creating and developing their Research and Development service, by creating new markets and by managing to relocate part of their activities.

To conclude, then, I should like to stress that, as Mrs Krehl said, it is important that our European Union does not use its funds improperly to support relocations. Rather, we must use the available funds to support the employees and the regions that run into difficulties when such relocations do take place.

   Elisabeth Schroedter, on behalf of the Verts/ALE Group. – (DE) Mr President, subsidy hopping is a popular game of extortion in the European Union, and it is quite clear that it is the taxpayer who foots the bill for it. This game has not been played only since the accession of the ten new Member States; on the contrary, as soon as Sweden joined, a business was enticed away from Bremen to the new Swedish ‘Objective 2’ area, having just received a subsidy. The effect of that was to frustrate public measures against unemployment in Bremen.

That example shows what is at issue here. This is not about restricting freedom of establishment, but rather about the need for companies that receive public funds to commit themselves to creating jobs in the region, and for this to be laid down in a binding way.

The Commission has proposed a period of five years, which I do not think is enough. It is no more than symbolic and is quite utterly ineffective. In view of the fact that the companies’ investments are subsidised by up to 50% from public funds, this period must be longer – at least seven years, which is what the previous Commission had proposed. Five years amounts to a considerable reduction; even a period of seven years is not very much at all in this instance. If we really want to restrict subsidy hopping, it is this longer period that we need.

I think Mr Hutchinson’s report addresses essential issues, and that it is an important one. What I expect of the Commission is that it should reconsider this five-year period, which, with this amount of subsidy, distorts competition; that it should incorporate the period of five years as recommended by this House into its regulation on subsidies, and, moreover, that it should monitor more closely those companies that engage in this sort of subsidy hopping and blacklist them in the way the rapporteur has suggested.

  Pedro Guerreiro, on behalf of the GUE/NGL Group. – (PT) Exactly three years ago, following a long struggle by the workers to defend jobs and the viability of companies such as CG and Clark in Portugal, Parliament adopted a resolution on 13 March 2003 with a range of recommendations on the closure of undertakings after receiving EU financial aid.

Three years on, and what has the Commission done to implement these recommendations? What has it done to make Community aid contingent on long-term agreements on employment and local development? Has the Commission published the register of breaches of contract by businesses that have relocated and have benefited directly or indirectly from public money? How many times has the Commission refused to grant Community aid to businesses that have failed to comply with the contracts they have signed, or demanded the return of that aid? What practical measures has it adopted to support the workers and economic recovery in areas affected by relocations? Has the Commission drawn up the proposed code of practice to prevent company relocations?

The answer to these questions is clear for all to see in the report before us, which, after three years, simply lists the same recommendations to the Commission. Companies tend to view relocations as an investment. By obtaining the various public incentives and aid and exploiting cheap labour deprived of rights, the company is looking to gain maximum profit in a short space of time. This is until it finds a more cost-effective place in which to relocate, thus going back on all of its undertakings and overlooking the appalling social and economic damage that they leave behind.

Company relocations act as a form of constant blackmail hanging over the workers, a form of pressure to reduce salaries, increase working time, increase the flexibility of the labour markets and to reduce workers’ rights. We therefore propose the adoption of a regulatory legal framework to combat company relocations, so that in three years’ time we will not be holding the same debate.

  Graham Booth, on behalf of the IND/DEM Group. – Mr President, I wish to focus on the concept of direct state aid as a tool of regional development, to which Mr Hutchinson alludes in his report. It is a concept very closely allied to the idea of structural funds and regional cohesion and my country, the United Kingdom, is paying a heavy price within the EU as a result.

The rapporteur called for companies that have received public aid and have then relocated within the EU to be blocked from receiving state aid or structural funding for seven years. But what of respected companies that have applied quite properly for state aid, received no answer from the British Government due to delays from the Commission in giving the green light, and have then relocated to another part of the EU, which fits in better with Brussels’ idea of cohesion and is, therefore, completely free of the same obstructions?

In 2002 Peugeot asked the European Commission to approve a state aid package to build the new 207 model at Ryton in the English West Midlands. More than two years later, with still no answer forthcoming from the Commission, Peugeot gave up and announced that the 207 would be built in France and Slovakia. No doubt Brussels saw that as an economic mission accomplished. Meanwhile, Ryton faces an uncertain future. Once production ceases on the 206 model – built there so well and so competitively up until now – if this factory then closes after many years of production under various owners, I suppose one could describe that as a kind of relocation; but it is hardly Peugeot’s fault. Perhaps instead the Commission should be banned for seven years from pronouncing on state aid and from over-regulating the business sector. That would certainly be cheered in the English West Midlands, where skilled workers are suffering at the hands of EU economic policy.

Rubbing salt into its workforce’s wounds, we now have the news that Peugeot has reached an agreement with Kia Motors to build the 206 in Indonesia, along with unconfirmed reports that the 207 will be built there too. Nothing could better illustrate the illiteracy of EU economics. If we want an increase in employment we should strike the right balance between regulation and flexibility for business. Over-regulation creates artificial jobs, which are not economically justified.

  Seán Ó Neachtain, on behalf of the UEN Group. – Mr President, I welcome this report by Mr Hutchinson on relocation in the context of regional development. It highlights the importance of EU cohesion policy as a means of alleviating disparities in regions that are lagging behind.

I come from a country that has benefited from the EU’s structural funds. I therefore welcome this from an Irish point of view, but particularly for my own region – the west and north-west of Ireland. Being a predominantly rural region – 70% of the people live in rural areas – it is more vulnerable than most to the effects of relocation. Europe must protect regions like the west and north-west of Ireland, particularly as regards the settlement pattern, which can only be sustained by balanced regional development. Europe must insist on infrastructure deficits being addressed, especially in areas like transport, energy and modern broadband communication. These deficits inhibit regional competitiveness.

In this regard, I warmly welcome the European Commission’s approval last week of the Irish Government’s decision to spend EUR 170 million to extend the broadband network over 70 towns across the state. Measures such as this will assist the competitiveness of regions, attract mobile investment and hopefully offset the tendencies for companies to set up in locations that are already congested. This is the strongest defence against relocation and in favour of strengthening the regions that need that help most.

  Jana Bobošíková (NI). – (CS) Mr President, I naturally do not want EU taxpayers’ money to fund the development of businesses that relocate outside the EU or that do not play by the rules. Nevertheless, I entirely reject this report, as I believe that to impose a seven-year freeze on businesses, during which time they may not relocate their operations, displays a deep misunderstanding of the global economy.

Likewise, I fail to understand why a business in the EU should not be cleared to move to another territory, if there is competition between the types of State aid granted by individual Member States. A freeze on businesses moving will not ensure the protection of sustainable employment; it will only succeed in overloading an already inflexible employment and high-taxation system with further immobility. This will give rise to more pointless bureaucracy and the further spread of the nonsensical strategy of fighting against company relocations. Civil servants are engaged in a futile struggle, tilting at windmills with EU taxpayers’ money. In other words, capital is always channelled where it is best appreciated, and will not follow the instructions laid down by Parliament or the Commission.

  Konstantinos Hatzidakis (PPE-DE). (EL) Mr President, the European Parliament obviously does not want in the Hutchinson report to prohibit companies from relocating to other countries. This would be restrictive and anti-democratic. We, at least the Group of the European People's Party (Christian Democrats) and European Democrats, know that a company needs to be competitive in order to survive and the individual Member States will need to have a fiscal and general economic environment that attracts investment in the individual Member States.

Nonetheless, it is not right for the European Union to encourage the continual relocation of companies with resources from the European budget. That is why the Hutchinson report proposes, once again, that penalties should be imposed on companies which have received financial aid from the European Union and relocate their activities within seven years of the granting of the aid. It also proposes that companies which received state aid, especially those which failed to comply with all the obligations connected with such aid, should not qualify for state aid for their new location and should be blocked from receipt of future Structural Fund aid.

The Hutchinson report also points out that we need to be even stricter with companies that relocate outside the European Union. I think that the European Parliament's proposals are realistic and respond in a balanced manner to an existing problem. I also wish to highlight the proposal made in the Hutchinson report in connection with the globalisation fund. We welcome the proposal by the European Commission and believe that the globalisation fund will soon become a reality in order to address the negative consequences of this modern situation which offers opportunity to everyone but also contains risks which need to be addressed in an effective manner.

  Gábor Harangozó (PSE). – (HU) Mr President, earlier on it seemed that many intended to use this debate to create yet another divide between the old and the new Member States of the European Union. Our task is to create regulations that are able to ensure a better, safer and expanding Europe in each Member State and for each citizen. If the regulations are not good, then there is a possibility that the cohesion policy, which is based on solidarity, one of our greatest fundamental values, will help the most underdeveloped regions, but it may create uncertainty and vulnerability in others.

The author of the report had the difficult task of ensuring that the issue of company relocations does not become a further divide between East and West, but a new step towards the unification of Europe. The work of the rapporteur has led to more balanced proposals, which are mostly able to ensure that the goals of regional policy are met, and they strengthen social and economic security for workers in all twenty-five Member States. My congratulations to the rapporteur.

  Alfonso Andria (ALDE). – (IT) Mr President, ladies and gentlemen, I too should like to congratulate Mr Hutchinson on the excellent work he has done: there is clearly a need to implement effective policies designed to counter fiscal dumping among the various Member States.

The decision to relocate production within the Union – if it is justified by one territory being more competitive than another – can nonetheless benefit the European economy as a whole. On the contrary, it is something quite different – and worrying – when, usually as a result of rather permissive labour laws in many non-EU countries, relocations take place outside the European Union.

It is clear that the European social model is costly, and it is primarily the competitiveness of our businesses that suffers as a consequence. However, that does not mean that we can accept cut-price compromises. Firstly, we need to stimulate European production in terms of quality and specialisation. Secondly, we need to introduce measures aimed at lessening the social costs of a relocation through actions designed to promote the training and reskilling of workers in the regions hit by restructuring.

We covered a subject of this kind in detail in the past, when this Parliament debated the steel crisis with specific reference to the Thyssen Krupp affair in Terni, Italy. I agree with imposing severe penalties on businesses that, after having received European or national public aid, decide to relocate part of their production outside the Union.

That is all I have to say, Mr President. I should just like to take up the proposal to create a European trademark for goods produced entirely on EU soil: I believe that this is an important incentive to produce within the European Union.

  Kyriacos Triantaphyllides (GUE/NGL). – (EL) Mr President, last month Commissioner Danuda Hubner stated during an interview with a French financial newspaper that we need to facilitate relocation within the European Union. For the Commissioner, this is one of the fundamental principles of the internal market and the application of artificial rules designed to restrict it will have negative consequences on the competitiveness of Community undertakings.

If, however, the European Commission wants to develop a competitive European economy, it would be a good idea to make sure that it does not destroy the European social model in the process, that it does not destroy workers' rights or, at the very least, that it does not create an environment which encourages companies to violate them. A competitive European economy is not a bad development for European workers, but the means of achieving this objective, and the planning philosophy have unquestionably caused nothing but problems for the workers.

The Hutchinson report is without doubt a positive step forward. I must welcome and support the report, given that I agree with most of it, but I would also comment that it is one of the few reports which I have seen by a socialist member of the European Parliament recently which, at long last, appears to have been written by a true socialist.

  Zbigniew Krzysztof Kuźmiuk (UEN). – (PL) Mr President, as I take the floor in this debate I should like to draw the attention of the House to two important issues.

Relocation, or the process of transferring economic activity abroad, is an objective economic process. It is a consequence of the need to respond to ever-fiercer competition that goes hand-in-hand with the need to reduce manufacturing costs. It is true that relocation results in job losses in certain countries, but only in the short term. Research has shown that, in the long term, additional jobs are created following relocation.

Research undertaken amongst 600 German undertakings by McKenzie, a firm of consultants, has confirmed that transferring jobs to Eastern Europe promotes the creation of additional jobs in Germany. For 40% of the undertakings studied the creation of one job abroad meant that three new jobs were created in Germany at the same time. The same is true of British and French enterprises investing abroad.

This being the case, setting up administrative barriers and imposing financial sanctions on enterprises wishing to relocate or on local authorities making public aid available to attract investors simply dos not make economic sense. I shall therefore be voting against Mr Hutchinson’s report.

  Carl Lang (NI). – (FR) Mr President, as an elected representative of the French region of Nord-Pas de Calais, whose industries – particularly the textile industry – lose thousands of jobs each year, I obviously approve of the proposal designed to demand the repayment of the European aid granted to companies that relocate their factories.

This is a sensible economic and social proposal, which the Front National had made during the 2004 regional elections with regard to the subsidies paid by the regional councils.

This measure, crucial as it is, will not, however, be any more adequate than was the creation, on 1 March, of a European Globalisation Adjustment Fund. As far as this matter is concerned, the European Commission is only repairing with its one – ostensibly social – arm the damage done by its other, ultraliberal, arm.

Relocations are not inevitable, but are the consequence of the European Union’s commercial ideology. By destroying economic borders, this ideology exposes our businesses to competition from groups with extremely low labour costs. This social dumping is not only to the advantage of non- European countries, but also takes place within Europe itself. Thus, there are many European directives that give de facto support to relocations between Member States and to the levelling down of social legislation.

In order to have any hope of preserving our jobs and our way of life, we will have to re-establish our commercial borders and introduce a social VAT on imported goods. We will indeed have to choose one day between the re-introduction of a national and European protection policy and your policy of liberal fundamentalism, which leads to widespread social decline.

  Rolf Berend (PPE-DE). – (DE) Mr President, Commissioner, ladies and gentlemen, as we know, the European Communities Treaty established free movement of persons, goods and capital within the EU, and so it would hardly be possible to call for the free choice of location to be banned outright, since that would harm European businesses by making them immobile. What is needed, though, is the introduction of something to accompany the principles of free circulation, which must remain within the cohesion policy framework, and the reforms of the structural funds and of the law on subsidies present themselves as opportunities for doing this. What that means is that it is urgently necessary that the Commission should, in awarding subsidies and also funding from the Structural Funds, ensure that the granting of such aid should be conditional upon medium-term guarantees of permanence and employment. That is indeed something that Europe must deal with.

What Mr Hutchinson’s report – albeit not without its being the subject of lively debate in the Committee – makes clear is that the companies receiving the aid are obliged to implement the policy of economic, social and territorial cohesion. Put in plain terms, that means that the consistent way to put the proposal made by the Commission with reference to the Structural Funds is to specify that companies that fail to comply with the conditions attached to public aid, should be required to repay it, without, however, being allowed under any circumstances to receive public subsidy for the new locations and to be barred from support from structural funds or in the form of State aid for a period of at least five years – although seven would be better – from the date of relocation.

This report is intended to stress the need for every necessary step to be taken to prevent the offering, under European regional policy, of incentives for business relocations that result in job losses. Mr Hutchinson’s report, in its present form, is an even-handed one and deserves to be endorsed.

  Jacky Henin (GUE/NGL). – (FR) Mr President, under the pressure of the French and Dutch ‘No’ votes on the Constitution, Parliament is finally concerning itself with relocations. I can only approve of the measures proposed. There is an urgent need to implement these measures because each day that goes by brings with it the destruction of thousands of jobs. I regret that, in this area, we have only got as far as providing support in small doses, when what is required is a drastic remedy.

Nevertheless, the relatively tentative approach of the report illustrates the major contradiction running through the Union’s economic policy: competition can never be both totally free and undistorted. Businesses use blackmail, threatening to relocate in order to force employees to accept social conditions that fall short of what is required by their countries’ laws. This social blackmail is coupled with fiscal blackmail. The threat of relocations is systematically used to obtain tax relief.

Successfully combating relocations entails the swift, upwards harmonisation of taxation and social laws within Europe. Furthermore, we have to put an end to the independence of the European Central Bank, which always promotes the interests of public borrowings to the detriment of those of the job market.

  Zdzisław Zbigniew Podkański (UEN). – (PL) Mr President, Poland supports the relocation of enterprises within the European Union. In our view, penalising enterprises which have transferred their activities with a ban on receiving EU aid for a period of seven years is unduly restrictive and cannot be justified. It is hard to understand why EU enterprises are to be prevented from reacting to the needs of the market, when this is in the interests of both consumers and producers.

We are opposed to the drawing up of special lists of enterprises that have relocated, as this runs counter to the fundamental principles of the EU. We call on all Members of the House to reject such unjust provisions. They infringe free market principles and are particularly damaging to the new Member States.

  James Hugh Allister (NI). – Mr President, relocation of industry to cheaper wage economies leaves in its wake economic and social hardship which divides rather than unites the regions of Europe. Within the EU, of course, it is in part a product of the free movements guaranteed under the Treaty and it has come into focus as a real issue because of the precipitous speed and scale of enlargement.

With cohesion funding targeted on the new Member States, the situation is set to worsen. This will lead to a development deficit in other European regions. Policy which facilitates relocation thus damages social cohesion. What is urgently required is a stronger policy of denial of EU funds and a facility to recoup them in respect of any company which relocates production to another Member State.

Five years is far too short a period. There is no future in robbing the old Member States of jobs in order to develop the new Member States. EU funds should play no part in that, nor should we facilitate opportunities for companies to soak up grants and then move on.

  Oldřich Vlasák (PPE-DE). – (CS) Mr President, ladies and gentlemen, the reason why we are addressing the issue of relocations is an understandable attempt to balance, on the one hand, the impact of the rules of the internal market, with, on the other, support for cohesion policy and ensuring a level playing field for Europe's regions. Let us not forget, however, that we would not have to worry about this problem if all EU principles, including the free movement of services and labour, were being upheld. The fact that basically only the free movement of goods and capital are possible today more or less encourages the relocation of production to areas where costs are lower.

Indeed, regional aid must not distort the rules of the internal market, and European regional policy must not encourage company relocations. This is where the intervention of the EU in Europe’s economy should end, however. I do not accept the idea of protecting inflexible businesses and workers. In my view, to block the relocations of companies represents a breach of free movement, which is one of the basic freedoms of the European Community. I disagree with Mrs Schroedter out of principle, and take the view that a five-year period for maintaining operations supported by the Structural Funds is already long enough and that there is no reason to extend it. This period should be tied to the objective of investment for which resources have been earmarked, and should not exceed the real life of the project and its scope. It is wrong to prevent entrepreneurs who want to move to where they have a cheaper, better educated and perhaps better quality workforce. It is also not possible to hold back national governments from trying to attract foreign investment, just as it is impossible to dictate to Member States the level at which they are to collect direct taxes.

Ladies and gentlemen, if we attempt to suppress this trend, it will lead to indolence and waste in the EU economy. This is about the free market, and the principles of the free market would trickle away in the face of more stringent regulations on company relocations. As far as relocations are concerned, we should in my view concentrate on company relocations outside the EU, which are the real nightmare scenario.

  Andreas Mölzer (NI). – (DE) Mr President, more and more entrepreneurs are enticed eastwards by the prospect of low payroll costs and what appear to be better production conditions, and, since such a relocation costs a great deal of money, it is understandable that they want this decision to earn them funding from the EU.

To date, this has mainly affected the sectors that are labour-intensive and need little technology. There is now evidence of an increasing tendency for research and technology to do likewise, and so now, of course, we can no longer shut our ears to the sound of alarm bells going off. It must be dawning on even the most optimistic among us that the multinationals do not care whether they exploit the environment, force small and medium-sized businesses into bankruptcy, or leave mass unemployment in their wake. EU funds and national aid can do no more to change that fact than can guarantees of seven-year permanence that are scarcely worth the paper they are written on.

Whether Member States should be in solidarity or competition with each other is no longer the issue. What is now at stake is the mere survival of our European economy, which is made up of more than just big businesses, whose various relocations we are supposed to fund, but also of small and medium-sized enterprises, that are equally in need of promotion and support, and have been waiting for it for too long.

  Jan Olbrycht (PPE-DE). – (PL) Mr President, the text of the resolution we are to vote on has been the subject of difficult concessions and compromises. Nonetheless, I would like to draw the attention of the House to a couple of important issues in the course of this debate.

Firstly, the text rightly points out the danger of inappropriate use of European funds if they are used in order to transfer production, when the funds are linked to structural intervention areas in a specific region. In a sense, therefore, the funds are linked to that region.

Secondly, the text is interventionist in nature and amounts to a set of preventive or repressive proposals.

Thirdly, in this text relocation is perceived as a real threat, even though the references are only to potentially negative consequences. Only at the start of the resolution is it stated that there can be many reasons for relocation, and that these might be linked to efficiency and profitability. Thereafter, the focus is exclusively on negative mechanisms. The text makes only a brief mention of the difference between internal and external relocation, and does not pay sufficient attention to the promotion of positive mechanisms that would encourage investors to remain in the EU. The text also fails to distinguish between smaller and larger enterprises in the various categories, which is the case for public aid. In future, texts of this nature should be accompanied by detailed economic analyses highlighting economic conditions and the duration of the production cycle.

  Ambroise Guellec (PPE-DE). – (FR) Mr President, the phenomenon of relocation worries the European Union as a whole but, more specifically, the old Member States. Moreover, we know the reasons why, as they have been pointed out by our fellow Members: economic globalisation, distortions of competition both in social and in fiscal terms and so on. It is clear that this issue has had an unquestionable influence on the recent constitutional debate, and we, in our country – France – are aware of the consequences.

This report is therefore very timely, and I, for my part, should like to pay tribute to the work done by our rapporteur, as well as to the improvements made by the Committee on Regional Development. We now have a balanced text. It can genuinely enhance the measures designed to combat relocations and to prevent the negative effects that they may have.

I, for my part, should like to emphasise a particular point, and we are clearly talking here about regional development: the report stresses the importance of properly using the Structural Funds in order to prevent the risk of short-, medium- and long-term relocations. We are mainly concerned here with the aid granted directly to those economic sectors in need of support, but it is clear that one crucial factor in danger of inducing companies to relocate has to do with the isolated location and poor accessibility of production units. It is therefore important that the new generation of Structural Funds allocated to competitiveness and employment gives priority to, among other areas, improving the accessibility of regions that are at a significant disadvantage in this regard. This would be the best way of ensuring that economic activities continue in these regions.

I, for my part, hope that, in addition to considering the requests and recommendations contained in the report, the Commission will also welcome this specific appeal, which will most certainly be forthcoming when the new regional development programmes are drafted.

  Hynek Fajmon (PPE-DE). – (CS) Mr President, ladies and gentlemen, I should like to voice some criticisms of the report before us on relocation in the context of regional development. Throughout its history, Europe has been well acquainted with the phenomenon of what is referred to as company relocations. We are currently observing it, and it will certainly happen again in the future. In short, people and companies look for the best place in which to realise their ideas, services and products, and there is, was and will be nothing wrong with that. This is in fact the expression of rational behaviour that lies at the core of European civilisation. Fighting against economic rationality is the path of European poverty. Since its inception, the EU has been built on room for manoeuvre for the free movement of people, goods, services and capital, and that includes room for manoeuvre for European companies. Thanks to that liberalising policy, Western European countries have attained a very high standard of living; not by blocking their markets but precisely because they opened them up.

This report is proposing the complete opposite, a policy based on fresh barriers against the movement of capital, and that is something I cannot accept under any circumstances. The issue of European aid versus the free movement of capital within the EU really exists. The solution, however, is not to tighten the conditions for granting aid to businesses or to tie aid to the place in which the company operates. What we need instead is to put a definitive stop to European aid for businesses. Such investment has no economic justification and will only lead to the distortion of the European market. If the Commission is under the impression that ‘relocation’ poses a problem, it should pay much greater attention to improving conditions for entrepreneurs and businesses. It should think carefully whether businesses are not being driven out of Europe by the Commission’s own over-regulation. In my view, this is certainly what is happening at the moment. The European legislative burden is too great and should be cut back at the earliest opportunity. We will then see a flood of companies entering the EU and the growth of employment in the EU.

  Markus Pieper (PPE-DE). – (DE) Mr President, ladies and gentlemen, the framework conditions for European structural policy are undergoing dramatic change; globalisation is accelerating structural change, and businesses are facing ever-tougher competition. While the global market economy continues its triumphant progress, the choice of potential production sites increases. The logical consequence of this is that locations change with ever-greater speed, and that is when industry acts, with new sites opening up new markets in which it can sell its products, and the pressure of cost forcing it to move to countries where costs are lower – not only within the European Union but also to Asia or to Ukraine.

These business relocations are happening; they are a normal outward sign of structural change, and the EU should put no legal obstacles in their way. It is, however, no less clear that we cannot subsidise things that were decided long ago as a matter of business policy. No entrepreneur will move to another location just for the sake of a single grant; he will do it only if the long-term conditions in the new location are right, and that is why these relocation subsidies result in steering effects, which are precisely what we have to prevent in future, for European structural funds are too valuable for that.

There is another argument against helping firms to relocate. It does have an effect on people’s acceptance of the European idea if workers in a place from which a company has moved see their taxes used to pay for their jobs to go somewhere else.

We find it regrettable that both the Commission and the German Social Democrats deny that this sort of relocation support is going on. It is of course the case that European regional support gives incentives for these unnecessary steering effects. The simple reason why so few examples are known about is that the threshold for them to be reported is set far too high. We therefore call on the Commission to at last take seriously the suggestions from this House and from the Council of Ministers. What we are demanding is a regulation, enforceable at law, which would once and for all make it impossible for European funds to be wasted so pointlessly.

  Stavros Dimas, Μember of the Commission. (EL) Mr President, I thank both you and the members of the European Parliament for your very positive interventions. The European Commission recognises and endorses the fact that the problem of relocation and the loss of the relevant jobs is a seriously worrying issue.

The Commission, in agreement with the Member States, made it clear at the last summit at Hampton Court that social protection and the protection of workers' rights are an integral part of European values. In a global environment, every undertaking takes the final decision to locate or relocate its business activities in an independent manner.

This sort of decision is determined by numerous factors. For example, according to the information available, it would appear that a decisive factor is often whether or not there is specialised labour available, the possibility of accessing various infrastructures and the level of administrative, bureaucratic formalities. The proper functioning of the internal market allows companies to adapt their productive process to the opportunities available on each occasion. This dynamic aspect of the internal market results in long-term benefits for all regions.

As I stressed earlier in my opening speech, the Commission has proposed and applied measures designed to restrict any use of the Structural Funds for purposes unconnected with the sustainable development of each area. In addition, the Commission is proposing to create a fund for adapting to globalisation, a proposal supported by the European Council last December.

Finally, I should like to emphasise that the Commission is encouraging better collation of the relevant statistics and the drafting of additional studies into the benefits and cost of relocation.

IN THE CHAIR: MR McMILLAN-SCOTT
Vice-President

President. – The debate is closed. The vote will take place tomorrow.

Written statement (Rule 142)

  Francesco Musotto (PPE-DE). – (IT) We must always remember the objectives of regional development policy: economic, social and territorial cohesion, full employment and social progress.

Within the Union, the free movement of goods, capital and persons is enshrined by the EC Treaty, and it is therefore difficult to support a complete ban on the choice of where one establishes one’s own place of business, all the more so since such a ban would lead to an immobilisation that would be detrimental for the European economy.

The economic and social cohesion policy is crucial for safeguarding the citizens’ approval and support of the European Union. The policy is based on the harmonious and unified development of all the regions of Europe. To make good the economic and social development gaps in some regions by promoting methods that could cause a lack of development in other regions of Europe would therefore run counter to such an objective. Relocation processes such as these do not correspond to an overall increase in investments on a European scale, but merely to the re-allocation of these investments in order to gain, as the explanation goes, a temporary cost advantage. For this reason, businesses that are based in a Member State and that decide to relocate their activities to another Member State should be unable to take advantage of contributions from the Structural Funds.