Communication from the Commission - Executive summary
This Communication, drawn up in consultation with representatives from the European chemical industry, is within the framework of the Communication on an Industrial Competitiveness Policy for the European Union (EU). It seeks to identify the industry's main challenges and needs and to define a set of actions to enhance its competitiveness.
1. The features of and challenges facing the EU chemical industry
The main challenge facing the European chemical industry is to strengthen its long term international competitiveness, by supplying its clients, in Europe and abroad, with high quality, environmentally sound and competitively priced products. In the light of this challenge and bearing in mind the need to maintain a level of profitability sufficient to ensure that investment continues in Europe, several key features of the industry have been identified:
- Chemical products and environmental and health policy
The chemical industry has a wide range of customers: big industrial sectors (e.g. automobiles and other means of transport, food and beverage, pharmaceuticals, textiles, construction); the agricultural sector for fertilisers and pesticides; and individual end-users for plastic packaging, paints, detergents, cosmetics, etc. Chemical products are closely related with everybody's daily life. Within Europe, there is thus a high level of awareness of the related health and environmental implications. This has given rise to an increasing number of regulations, frequently of national origin: such regulations should be founded on a sound scientific basis and their potential economic impact, including on the international competitiveness of this industry must be fully taken into account.
- The European and global dimension of its markets
In this context it is important to promote a level playing field, at least with the main OECD and newly industrialised competing countries, in terms of market access, environmental framework, and, if possible, competition rules, fiscal and social regulations.
- Its dependence on imported raw materials and energy inputs
Oil and gas, used in the production of petrochemicals and their derivatives, as well as industrial minerals required for the production of inorganic chemicals, are in general not endogenous to Europe and must be imported. Together with energy sources such as electricity and gas, which are supplied by European companies, these represent up to 60% of chemical companies' production costs. Effective competition requires that the unit prices for these inputs must not be distorted; whether in the third countries that supply them, or within the EU.
- Its high reliance on capital and RTD
Net assets higher than 1 Million ECU per employee, for a major part of industry (especially basic chemicals) and an average expenditure on research and technological development (RTD) of about 5% of turnover, compel the chemical industry to seek high capacity utilisation rates in order to minimise fixed costs and maximise income. This involves:
- continuing restructuring, tending towards production in the most efficient facilities and the possible closure of the least profitable ones.
- an effort to ensure the largest possible markets, requiring the consolidation of an effective Internal Market within the EU and, access under conditions of undistorted competition to external markets.
- increased efforts towards co-operative research, both with competing and user companies in more "horizontal" fields of RTD (promotion of recycling, greater use of information technology, etc.).
- the continuous development of innovative new products and manufacturing processes, as a long term strategy in order to counter the increasing pressure from newly industrialising countries (e.g. Asia, Arabian Gulf states) particularly in products with lower value-added, and from those industrialised countries (e.g. USA, Canada) benefiting from certain comparative advantages (raw material and lower energy prices, etc.)
These characteristics represent, by their diversity, complexity and interdependence, a genuine challenge for an effective implementation of an horizontal industrial competitiveness policy for the EU chemical industry. A number of courses of action and concrete measures have been identified in the context of the chemical industry; these could be used as an example for similar industries.
2. Basic principles and actions aimed at strengthening the international competitiveness of the EU chemical industry.
In any market economy, each industrial company is responsible for the strategic decisions and initiatives it must take in order to maintain or strengthen its medium and long term international competitiveness. Nevertheless, public authorities have a role to play in creating the legal and economic framework and by adopting, if necessary, accompanying measures for the actions taken by industry. The actions to be developed by the Commission, industry and/or Member States are grouped around the four priority areas of the industrial Competitiveness Communication :
2.1. Actions to improve the regulatory framework
This improvement, in line with the recently adopted "Guidelines for Regulatory Policy", should concentrate on:
- the consolidation, the updating and/or the simplification of the current regulatory framework for chemical substances and preparations. Among examples of such activities are the codification of the Directives on fertilizers, on limitations for placing on the market, and on detergents; the reshaping of the Directive on preparations, the simplification of the new Directive on the protection of the health and safety of workers from the risks related to chemical agents at work and the simplification of procedures for the notification of new chemicals, especially by the SMEs, are other examples of such activities.
- the application of a sound approach for all new possible regulatory initiatives concerning chemical products or facilities, involving:
If the results of these three types of analysis justify a new initiative, be it at international or at EU level, this should be implemented by means of the instrument which is the simplest and the least costly and which ensures a high level of health and environment protection. A wide range of such instruments exists : unilateral industrial initiatives, negotiated agreements at EU or national level (for which the Commission is preparing a general framework), economic incentives and regulatory initiatives at EU or, if possible and necessary, at international level.
This approach will also apply, whenever possible, to current cases where, despite harmonization measures already taken, the internal market for chemical products is still fragmented: partial directives (asbestos); national requests for implementation of Article 100A§4 (pentachlorophenol, cadmium, creosote, ...).
These different actions should be analysed and developed in co-operation with the representatives of industry and/or the Member States concerned.
2.2. Actions to ensure effective competition
The global dimension of the chemical industry and the need for the permanent adaptation of its structures will be taken into account by the Commission in the application of the competition rules, inside and outside the EU, in particular when :
- analysing possible proposals coming from industry aiming at finding solutions to structural overcapacity in certain basic chemical industries, through appropriate actions by the companies concerned, provided the existence of such structural over-capacity is proved and the proposed action is compatible with the competition rules ;
- pursuing efforts to liberalize the electricity and gas markets within the EU, which will allow a reduction of costs for the chemical industry, being an intensive energy user.
- pursuing efforts for the effective use of trade instruments, and in particular for the elimination, among the members and in certain WTO applicant countries (Arabian Gulf states, China), of non-tariff barriers (double pricing systems for certain raw materials, registers of imports, etc);
- exploring bilaterally, with the main trading partners (e.g. with the USA, through the Transatlantic Business Dialogue and the Joint Action Plan), and multilaterally new agreements on competition and international trade, in particular on the removal of barriers to international investment.
2.3. Actions to strengthen intangible investment
The increasing need for innovation in new, high quality chemical products for diversified markets and for the development of more efficient sustainable manufacturing processes, lead industry, the Commission and national authorities, to focus their efforts on RTD, education and scientific training, in particular on :
- the continuation of co-operative research programmes at European level, not only between industries with similar characteristics (such as the SUSTECH and PRIMA initiatives for process industries such as food, steel and paper), but also with user industries (transport, construction) and with computer software suppliers (for greater use of information technologies);
- a greater integration of the chemical industry in existing or future multi-sectoral initiatives (task forces, clusters), which will allow better access to the various Community programmes and an optimisation of their results through a better co-ordination;
- a greater flexibility in the development and revision of the Community-specific RTD programmes;
- the improvement of patent protection for example for pesticides or products resulting from biotechnology;
- the industrial initiatives aimed at improving young people's chemical education and the scientific training of workers which, together with the Community programmes SOCRATES, Leonardo da Vinci, certain sub-programmes of the 4th Framework Programme and actions eligible for Structural Funds, and with the necessary co-operation of the educational programmes of the Member States, will strengthen the essential educational and scientific basis for an innovative chemical industry, which must include education in health and safety of workers.
2.4. Actions to develop industrial co-operation
The complex and highly diversified structure of this industry - containing not only major multinational corporations, but also numerous SMEs - as well as the risks and the opportunities offered by certain international markets, require an intensification of actions for industrial co-operation.
- The importance of the SMEs in a number of sectors and their essential role in the creation of jobs and subcontracting, requires the continuation and/or the development, by industry and the Commission, of actions such as:
- International co-operation projects, to be developed by industry, with the support of the Commission, can reduce the risks and increase the opportunities existing in third country markets:
The Commission considers that the chemical industry of the EU, though among the most modern and competitive in the world, faces a set of challenges that must be met if it is to maintain and, if possible, strengthen, its international competitiveness.
In order to do this, a set of actions to be developed or pursued, by industry, the Commission and Member States, has been identified in the present Communication. The Commission will implement, in co-operation with representatives from the European chemical industry, a structured follow-up programme, and will closely monitor the evolution of the international competitiveness of this sector and the adoption of the various measures proposed in this Communication.