Friday, 26 December 2008

EU Law: Industry

Is industry a cuckoo among the policy areas of the European Community (European Union), laying its eggs in the nests of industrious builders of the internal market and sound competition rules?

Should the European Union have more or less industrial policy?

Take a look at what the current and future treaties say, before taking a dogmatic stand.

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Article 157 TEC

Article 157 TEC (ex Article 130) is the result of difficult rounds of treaty negotiations between proponents of dirigisme and supporters of undistorted competition.

In addition, the contours of “industry” or “industrial policy” are less than clear, because a number of existing European Community (European Union) policies affect industrial enterprises: the internal market, the competition regime including state aid, research and development etc.

To the extent that we speak about a European level industrial policy, its aim would arguably have to seen in the context of global competition, aiming at adaptation to structural change.

An environment favourable to initiative has as its objective to promote entrepreneurship, a somewhat scarce European commodity.

From the beginning of 2005 small and medium-sized undertakings (enterprises) are defined according to Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ 20.5.2003 L 124/36).

The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.

This environment favourable to initiative (entrepreneurship) and development should be encouraged aiming particularly at the SMEs, which constitute 99 per cent of the businesses in the European Union.

Cooperation between businesses can be encouraged by suitable (European) companies as well as information and partner search.

Innovation, research and technological development are other worthy causes, although covered by their own, more specific treaty provisions.

The Commission can act as a catalyst to consultation and cooperation between member states.

The horizontal nature of “industrial policy” is seen in paragraph 3.

Supporting action can be launched according to the co-decision procedure, after consulting the Economic and Social Committee (ESC).

The last subparagraph serves as a reminder of the delicate balancing acts, which have led to the current Article. Open market member states demanded clear guarantees that the industry Article 157 TEC would not become a back door to “colbertist” dilution of competition or harmonisation of provisions on tax or pay and other employee benefits.

Thus, this title shall not provide a basis for the introduction by the Community of any measure which could lead to a distortion of competition or contains tax provisions or provisions relating to the rights and interests of employed persons.


Here is the current Article 157 of the Treaty establishing the European Community (TEC), as published in the latest consolidated version of the treaties, OJ 29.12.2006 C 321 E/117–118:

TITLE XVI
INDUSTRY

Article 157 TEC

1. The Community and the Member States shall ensure that the conditions necessary for the competitiveness of the Community's industry exist.

For that purpose, in accordance with a system of open and competitive markets, their action shall be aimed at:

— speeding up the adjustment of industry to structural changes,

— encouraging an environment favourable to initiative and to the development of undertakings throughout the Community, particularly small and medium-sized undertakings,

— encouraging an environment favourable to cooperation between undertakings,

— fostering better exploitation of the industrial potential of policies of innovation, research and technological development.

2. The Member States shall consult each other in liaison with the Commission and, where necessary, shall coordinate their action. The Commission may take any useful initiative to promote such coordination.

3. The Community shall contribute to the achievement of the objectives set out in paragraph 1 through the policies and activities it pursues under other provisions of this Treaty. The Council, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee, may decide on specific measures in support of action taken in the Member States to achieve the objectives set out in paragraph 1.

This title shall not provide a basis for the introduction by the Community of any measure which could lead to a distortion of competition or contains tax provisions or provisions relating to the rights and interests of employed persons.



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Original Lisbon Treaty (ToL)

Although the Treaty of Lisbon is unreadable on its own, it spells out how or if the current treaties are amended.

Sometimes there are no specific amendments, although most of the times one or more of the horizontal amendments apply.

Article 2, point 129 of the Lisbon Treaty amended Article 157 TEC (OJ 17.12.2007 C 306/84):

INDUSTRY

129) Article 157 shall be amended as follows:

(a) at the end of paragraph 2, the following shall be added: ‘, in particular initiatives aiming at the establishment of guidelines and indicators, the organisation of exchange of best practice, and the preparation of the necessary elements for periodic monitoring and evaluation. The European Parliament shall be kept fully informed.’;

(b) in paragraph 3, first subparagraph, the following phrase shall be added at the end of the second sentence: ‘, excluding any harmonisation of the laws and regulations of the Member States’.


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Renumbering ToL

The Table of equivalences of the original Treaty of Lisbon tells us that Title XVI first became Title XVI in the TFEU (ToL), but renumbered Title XVII Industry in the consolidated version.

Article 157 TEC initially became Article 157 TFEU (ToL) before the renumbering of the treaty made it into Article 173 TFEU in the consolidated version (OJ 17.12.2007 C 306/217).


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Lisbon Treaty consolidated

Article 173 TFEU

The Title and the Article have been renumbered. The customary (horizontal) replacement of the procedure referred to in Article 251 by the ordinary legislative procedure has been made and the Community has been replaced by the Union. The specific amendments have been inserted.
Article 173 TFEU appears like this in the consolidated version of the Treaty of Lisbon (OJ 9.5.2008 C 115/126):


TITLE XVII
INDUSTRY

Article 173 TFEU
(ex Article 157 TEC)

1. The Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union's industry exist.

For that purpose, in accordance with a system of open and competitive markets, their action shall be aimed at:

— speeding up the adjustment of industry to structural changes,

— encouraging an environment favourable to initiative and to the development of undertakings throughout the Union, particularly small and medium-sized undertakings,

— encouraging an environment favourable to cooperation between undertakings,

— fostering better exploitation of the industrial potential of policies of innovation, research and technological development.

2. The Member States shall consult each other in liaison with the Commission and, where necessary, shall coordinate their action. The Commission may take any useful initiative to promote such coordination, in particular initiatives aiming at the establishment of guidelines and indicators, the organisation of exchange of best practice, and the preparation of the necessary elements for periodic monitoring and evaluation. The European Parliament shall be kept fully informed.

3. The Union shall contribute to the achievement of the objectives set out in paragraph 1 through the policies and activities it pursues under other provisions of the Treaties. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, may decide on specific measures in support of action taken in the Member States to achieve the objectives set out in paragraph 1, excluding any harmonisation of the laws and regulations of the Member States.

This Title shall not provide a basis for the introduction by the Union of any measure which could lead to a distortion of competition or contains tax provisions or provisions relating to the rights and interests of employed persons.



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Main changes

The main amendments are taken over from the Constitutional Treaty, the guidelines and indicators etc. from Article III-279(2).

The first five years of the Lisbon Strategy were a disappointment, but the re-launched Lisbon Strategy for Growth and Jobs offers at least the opportunity of a coherent policy framework for the Commission and the member states.

The powers of the European Community (European Union) are fairly weak, but the open method of coordination (OMC) is ‘institutionalised’ in the Treaty of Lisbon, and in the long run it may contribute to progress in the member states and the European Union at large.

Although supporting activities generally exclude harmonising measures (see below), the Lisbon Treaty adopts the style of the Constitutional Treaty to mention the exclusion of any harmonisation of laws and regulations of member states specifically in each provision. Here the Lisbon Treaty adopts the wording of Constitution Article III-279(3).


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EU powers in general

The powers of the European Union are attributed or conferred by the member states through the treaties (including their aims). The Treaty of Lisbon makes an effort to present the different categories of competence (as they are modestly called) in a systematic manner.

The taxonomy of EU competence is set out in Article 2 TFEU. The three main or general categories are exclusive competence in 2(1), shared competence in 2(2) as well as supporting, coordinating or supplementing competences in 2(5), although the exact scope and arrangements are laid out in the various treaty provisions as stated in 2(6):

Article 2 TFEU

1. When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts, the Member States being able to do so themselves only if so empowered by the Union or for the implementation of Union acts.

2. When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area. The Member States shall exercise their competence to the extent that the Union has not exercised its competence. The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence.

3. The Member States shall coordinate their economic and employment policies within arrangements as determined by this Treaty, which the Union shall have competence to provide.

4. The Union shall have competence, in accordance with the provisions of the Treaty on European Union, to define and implement a common foreign and security policy, including the progressive framing of a common defence policy.

5. In certain areas and under the conditions laid down in the Treaties, the Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States, without thereby superseding their competence in these areas.

Legally binding acts of the Union adopted on the basis of the provisions of the Treaties relating to these areas shall not entail harmonisation of Member States' laws or regulations.

6. The scope of and arrangements for exercising the Union's competences shall be determined by the provisions of the Treaties relating to each area.



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Article 3 TFEU: Exclusive competence

Because industry is at a cross-road of other aims and policies, with more distinct powers, we can mention the customs union and the common commercial policy as well as the competition rules among the areas of exclusive competence.

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Article 4 TFEU: Shared competence

The internal market (outside the competition regime), as well as the transport and energy sectors are among the competences listed as shared in Article 4 TFEU. The area of research, technological development and space is mentioned specifically in paragraph 3:

Article 4 TFEU

1. The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6.

2. Shared competence between the Union and the Member States applies in the following principal areas:

(a) internal market;

(b) social policy, for the aspects defined in this Treaty;

(c) economic, social and territorial cohesion;

(d) agriculture and fisheries, excluding the conservation of marine biological resources;

(e) environment;

(f) consumer protection;

(g) transport;

(h) trans-European networks;

(i) energy;

(j) area of freedom, security and justice;

(k) common safety concerns in public health matters, for the aspects defined in this Treaty.

3. In the areas of research, technological development and space, the Union shall have competence to carry out activities, in particular to define and implement programmes; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.

4. In the areas of development cooperation and humanitarian aid, the Union shall have competence to carry out activities and conduct a common policy; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.

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Article 6 TFEU: Supporting competence

Article 6 TFEU mentions areas of action at European level, where the Union can support, coordinate or supplement member states’ actions. Industry is mentioned among them:

Article 6
The Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States. The areas of such action shall, at European level, be:

(a) protection and improvement of human health;

(b) industry;

(c) culture;

(d) tourism;

(e) education, vocational training, youth and sport;

(f) civil protection;

(g) administrative cooperation.


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Summary of legislation: Industry


On the Commission’s Scadplus web pages with summaries of legislation, the page Industry offers links to pages on general activities and actions concerning particular sectors of industry:

http://europa.eu/scadplus/leg/en/s25002.htm

The approach is broad enough to include agriculture, fisheries and tourism among sectors of “industry” or at least the links, making the industry concept even more amorphous.

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Commission activities

Commission activities and news can be approached through the web page Industrial policy of the Directorate-General Enterprise and Industry:

http://ec.europa.eu/enterprise/enterprise_policy/industry/index_en.htm


Taking into account the political and rhetorical importance attributed to small and medium-sized enterprises, there is cause to mention the new European portal for SMEs:

http://ec.europa.eu/enterprise/sme/index_en.htm


The latest Commission decision on the Lisbon Growth and Jobs Strategy (16 December 2008, IP/08/1987) can be found here:

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/1987&format=HTML&aged=0&language=EN&guiLanguage=en

The financial turmoil, the economic recession and the national stimulus packages affect both the Stability and Convergence Programmes and the Lisbon National Reform Programmes of the member states.


Ralf Grahn