EUROPEAN PARLIAMENT HEARINGS ANSWERS TO QUESTIONNAIRE FOR COMMISSIONER DESIGNATE. Mr Günter VERHEUGEN (Enterprise and Industry)

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1 EN EUROPEAN PARLIAMENT HEARINGS ANSWERS TO QUESTIONNAIRE FOR COMMISSIONER DESIGNATE Part B Specific questions Mr Günter VERHEUGEN (Enterprise and Industry) INDUSTRIAL POLICY 1. The 2004 Spring European Council concluded that 'Deindustrialisation remains a risk' for the European social model, and asked the Commission to propose 'concrete steps aimed at increasing the competitiveness of European industry', implying the need for economic reforms. How should such reforms be financed, and what effects would a policy of national or even EU champions have on competition policy, innovative sectors and optimum market conditions for industry? The Lisbon Strategy combines broad policy goals such as sustained growth and higher employment rates with a certain number of concrete sectoral policies. The competence for action in these different areas varies and involves both the European and the national level. Combining different policy goals and different levels of responsibility in one single strategy should enable us to improve consistency of Community action, reinforce coordination between EU and national level and to build synergies. Instruments range from legislative action to non-legislative activities and the Open Method of Coordination, but also include Community funding. The implementation of policy reforms aiming to increase the competitiveness of industry does not, in general, imply the mobilisation of additional financial resources. Such is, in particular, the case where the increase in competitiveness implies the completion of the internal market, better regulation and the use of enhanced impact assessments. In other cases, it is the reorientation of existing financial instruments that will make it possible to improve competitiveness; as is the case of the cohesion policies, which will in future be directed more towards the improvement of competitiveness at regional level. The competitiveness objective is at the heart of the Commission's proposals for the new Financial Perspective, which call for an increase in the resources assigned to knowledge, and in particular to research. A new competitiveness and innovation programme would concentrate resources on actions offering a real European value added to competitiveness.

2 Moreover, generally, it will be necessary to improve the contribution of all Community policies to the fulfilment of the objective of industrial competitiveness. With regard to the issue of national or European 'champions', the Commission does not intend to encourage arbitrarily the emergence of one or other company or group, national or transnational, to the detriment of others. Instead, it will use all the instruments available to set up a favourable environment to make it possible for European companies to develop and reach a global dimension. The conditions in the EU must be set to further facilitate the process of structural change while ensuring the necessary fluidity of markets. Such an approach involves a rigorous competition policy that is geared to the development of innovation and which fully takes into account the dynamic and evolutionary nature of the knowledge economy and the global environment. It also implies renewed efforts to improve the operation of the internal market, in particular in the sector of financial and other services. Furthermore, an innovation policy that meets the technological or non-technological needs of companies is also of great importance. 2. At the 2000 Lisbon European Council, the objectives, criteria and strategy were agreed. A renewed emphasis on SMEs, innovation and liberalisation of markets were also agreed. Yet after four years, there has been little progress in the field of SMEs, the main vehicle for creating 20 million new jobs by What package of measures (financial in the context of Basel II, taxation, export-aid, specialisation, entrepreneurship, skills, mobility, better regulation, etc.) would the Commission envisage in order to create an attractive environment for SMEs? And what future roles does the Commission favour in this context for the EIB and the EIF? In my view SMEs are crucial for innovation and employment. SME policy, in particular improving the environment for SMEs, requires parallel efforts at European and national level. Since June 2000, the adoption of the European Charter for Small Enterprises, as a follow-up to the Lisbon European Council, has provided Member States and the Commission with a framework for action and objectives for improving the situation of SMEs and improving their competitiveness. The Charter confers on the Commission an important role in co-ordination, monitoring of progress and developing exchanges of good practices at European level. The Multiannual Programme for Enterprise and Entrepreneurship, and in particular for SMEs, provides for financial support to the tune of 450 million between 2001 and 2005, for actions designed to achieve the objectives of the Charter, improve the environment for enterprises, and provide SMEs with access to tools such as information and support networks and financial instruments. The new competitiveness and innovation programme, foreseen in the context of the new Financial Perspective will build upon and further develop the best practice of the previous SME Multiannual programme as an integral component. In order to go further and to bridge the entrepreneurial gap identified in Europe, the Commission adopted in early 2004 an Action Plan for Entrepreneurship, which provides a strategic framework for stimulating entrepreneurial dynamism in the EU. Nine key actions have been identified in order to promote an entrepreneurial spirit, stimulate co-operation between enterprises, facilitate enterprise transfers, establish a more enterprise-friendly regulatory environment, and improve access to finance. In this respect, the Commission will publish a guide and organise a series of seminars in the Member States in order to prepare enterprises for the changes in their financial environment, particularly as a result of the 2

3 modification of banking regulations (Basel II). The Commission also intends to foster good practices in financing and, in the framework of financial instruments put in place by the European Investment Fund (EIF), to promote the availability of risk capital and other sources of finance (loans, quasi equity, micro credits, etc) for enterprises. The co-operation with the European Investment Bank (EIB) should also be reinforced in the fields of innovation and support services for SMEs. Moreover, the Commission will carefully analyse the findings of the High Level Group on the Lisbon Strategy, chaired by Wim Kok, with a view to achieving further progress in the field of SMEs. 3. How will the Commission work to encourage Member States to participate in the improvement of the competitiveness of European enterprises, and how will the Commission initiate or further the debates on matters such as cutting national legislation and unnecessary red tape (as proposed in the Mandelkern Report), and possibly a single administrative document for EU enterprises established in the EU? Member States have a decisive role to play in improving European competitiveness, not least since a considerable number of factors affecting competitiveness remain in the competence of Member States. It is encouraging that the 2004 Spring European Council put a strong emphasis on improving European competitiveness. The new Commission will make the Lisbon strategy and improving European competitiveness one of its core projects for its mandate. With this objective in mind, working groups of Commissioners will be created under the authority of the President and the Vice-President for Industry and Enterprise. Particularly in areas where competencies of Member States are affected, the Commission will promote the awareness of successful policies across the Member States and encourage the Member States to learn from each other s experience since the potential of transparency and exchange of information on best practices still remains to be fully exploited, notably after the recent enlargement of the European Union. A reinvigorated open co-ordination must enhance this process. The Commission will also continue to provide analysis and information on competitiveness through, among others, the European Competitiveness Report, the Enterprise Policy Scoreboard and the Innovation Scoreboard. The Commission will further continue to invite Member States to voluntarily agree and commit themselves to targets for their enterprise policies, which will build on best practices and benchmarking and should be monitored. The Commission has also launched other actions which seek to improve European competitiveness, such as the eeurope Action Plan or the annual review process of the Charter for Small Businesses, in which Member States are involved. In addition, the Commission will continue to play an active role in streamlining the EU s regulatory environment which remains a fundamental condition to creating efficient level playing fields for businesses to grow and compete in open markets. 3

4 Better regulation is another important area where the Commission as well as the other European Institutions and the Member States are committed, in a concerted effort, to put in place the necessary actions to improve the quality of EU s legislative frameworks. 1 The new College will actively pursue the reforms that were launched by the previous Commission, in particular in the areas of transparency, enhanced impact assessment, consultation and simplification of the existing acquis. Excessive administrative burden can have an impact on the overall growth of the economy. In addition, Research and Development within the Framework Programme will have an impact on the competitiveness and will benefit from closer integration with other Community activities such as regulation, standards, and other elements that provide the necessary environment for innovation. 4. Does the Commission consider that the proposed regulation on Chemical Policy (REACH), which introduces a number of innovative ideas such as the reversed burden of proof, the establishment of a central European Chemicals Agency, two kinds of evaluation, etc., is unique in requiring a comprehensive impact assessment and cost benefit analysis? Should the REACH impact assessment be considered a model for EU legislation? Would the proposed Authorisation of problematic substances in REACH, to be granted by the Commission, add to red tape and delay? What would the contribution of REACH be to the competitiveness of the EU chemical sector? REACH is a major legislative proposal, which impacts on a wide range of policy goals, including business competitiveness, health and safety and environmental standards. Because of its complexity and the significance of the likely impacts, the preparation of REACH was very thorough in terms of analyses carried out and stakeholder consultation. The Commission has followed its existing policy on Better Regulation by undertaking an extended impact assessment on REACH and is now engaged in further work, involving all stakeholders, to explore certain implementation aspects in more detail. Carrying out impact assessment in the preparatory stage of the Commission s proposals is not unique for REACH. Since the introduction of new impact assessment requirements in 2003, such analyses have become standard practice for all major Commission proposals, although of course the methodology and nature of any impact assessment would vary from case to case (with the scope and depth of the analysis being proportionate to the significance of the likely impacts). However, the continuation of impact assessment work following the adoption of the Commission s proposal reflects the particular complexity of this case. 1 This is being done on the basis of the Commission s 2002 Better Regulation package which is mainly composed of an Action Plan on Simplifying and Improving the Regulatory Environment and a Multi-annual Programme on the Simplification of the Acquis. It is completed by an Interinstitutional Agreement on better lawmaking, concluded in 2003 with the Council and the European Parliament to ensure that the reforms undertaken by the Commission would be mirrored by similar moves through the entire legislative process. The agreement now needs to be implemented. 4

5 The authorisation system proposed in REACH is intended to handle the substances of highest concern to human health and the environment. These include substances that may cause cancer, birth defects or loss of fertility, or are toxic and persist in the environment. It is therefore appropriate for Community resources to focus on ensuring their safe handling. The authorisation system is planned to be more efficient than the current system for handling such chemicals, by requiring industry to undertake targeted assessments of the uses to which these substances are put, rather than asking authorities to undertake comprehensive risk assessments, as at present. Where industry can demonstrate that their use of the substance is adequately controlled, authorisations will be granted. The Commission will have to carefully monitor the competitiveness issue throughout the whole legislative process. At this stage the Commission believes that there is a potential risk of some loss of export market share for the chemical sector in the short run, if the price of EU chemicals production rises due to REACH. Effects on domestic market sales are expected to be limited, since importers will also need to meet REACH requirements. These impacts on competitiveness will be spread out over time, since it is expected that the initial higher direct and indirect costs to businesses of the new system will be compensated by commercial benefits that come from reduced costs for bringing new substances onto the market, reduced liabilities from the use of unsafe chemicals, and greater market opportunities for new and/or safer chemicals. The longer term effects on competitiveness will depend on the extent to which the REACH regime is successful in establishing itself as a new international standard. This would give the EU chemicals industry a substantial competitive advantage. ENVIRONMENT Environmental pillar of Lisbon process 5. How do you envisage the integration of the environmental criteria in the Lisbon process? Will you be ready to support a balanced approach between the economic, social and environmental pillars? How will you promote an integrated approach within the Commission? In your view, what are the organisational changes needed in the Commission in order to make sure that the sustainable development priority would be better reflected? My position is that the linkages between the Lisbon Agenda and the pursuit of environmental objectives can and should be improved. - It is my firm belief that a competitive and innovative economy remains a key prerequisite for effectively tackling environmental concerns, both at the level of individual companies and sectors, and at an aggregate level. Flourishing businesses and economic growth are essential elements in generating sufficient resources to address environmental challenges and in maintaining the political will necessary to further improve the quality of our environment. 5

6 - I will step up efforts to maximise the mutual reinforcement of the economic and environmental pillars, where such synergies exist. This requires a policy framework that helps businesses and other stakeholders identify opportunities for environmental improvements that yield parallel economic benefits, e.g. through greater resource efficiency. Innovation and research policy play a crucial role in this respect alongside more specific initiatives such as the Environmental Technologies Action Plan launched in January I intend to prepare a Commission Communication on Sustainable Production to further encourage activities in this area. - Third, I will ensure that where trade-offs between environmental, social and economic objectives are inevitable, they are minimalised as much as possible. An essential way to do this is to further improve the way in which we make and implement policy, notably on the basis of the three components of our Better Regulation Action Plan: promoting a culture of dialogue and participation, systematising ex ante impact assessment to better identify expected costs and benefits as well as simplifying the regulatory environment. - Finally, I also believe that the external dimension of community policies has an important role to play in ensuring a proper balance between all pillars of sustainable development. Stepping up our efforts along these lines will duly take account of environmental imperatives and thus ensure the balanced, integrated approach to sustainable development that the Lisbon Agenda calls for. There is a clear need for continuous co-ordination between responsible Commissioners and their services and for a permanent dialogue with all stakeholders, in the interest of maximum policy coherence. Extended Impact Assessment 6. As part of the "Better law-making", the Commission has engaged to carry out "extended impact assessments" on major legislative proposals. According to a recent study by the Institute for European Environment Policy of all extended impact assessments conducted by the Commission in 2003, most attention is paid to economic impacts, while the treatment of environmental and social impacts is limited. Moreover, when quantification was attempted, the study found that most attention was given to short-term economic costs. How will you ensure that "price tags" are attached to any future proposal? What will you do to ensure that ongoing and future impact assessments, in particular extended impact assessments, will firstly be balanced with regard to their assessment of economic, social and environmental impacts, and secondly not limited to short-term considerations? How will you develop effective and independent environmental impact assessments? I would firstly like to recall that it is precisely because the Commission wants to conduct its impact assessments on the basis of the three pillars (economic, environmental and social) of the Sustainable Development Strategy, that the current integrated impact assessment 6

7 methodology was adopted. An integrated approach to such analysis is a fundamental condition to ensure quality in the EU s political decision making process, especially when we are dealing with proposals which may involve trade-offs between complementary policy objectives. As a member of the future College and in my role as Commissioner in charge of Enterprise and Industry Policies, I will of course attach great importance to full and complete evaluations, notably covering competitiveness implications. It is however my firm belief that these competitiveness evaluations only have real value when they are looked at within the overall impact assessment system and this means that the integrality of the three pillar approach must be preserved and further enhanced. As regards opinions expressed on the quality of our 2003 record, I believe it is premature to draw conclusions considering the limited number of assessments that have so far been completed. Indeed, 2003 was the launch year of the Commission s impact assessment tool for which we are still in a learning phase. In addition, the analytical work involved by the examples that were made available had often started long before the new methodology was adopted. In so far as future work is concerned, the new Commission will continue to actively pursue the implementation of the methodological and organisational structures that were adopted in the 2002 Communication and subsequently completed by Internal Impact Assessment Guidelines. These include, in particular, ensuring the transparency of the process through early consultations and the setting up of inter-departmental steering groups which will ensure coherence, relevance and comprehensiveness during the analytical phases. Current work on refining the impact assessment method, which includes strengthening both economic (competitiveness impacts) and social and environmental impacts, is intended to ensure a harmonious balance in the assessment of all three pillars of the impact assessment system. I intend to pursue a policy of continuous adaptation of the Commission s standards to best practices found in other Member States or trading partners systems. Medicinal products 7. In your view, what will be the greatest challenges in the field of medicinal products policy over the next five years? Industrial policy in the pharmaceuticals sector aims to maintain a balance that will guarantee a high level of protection for public health while promoting the competitiveness and dynamism of the pharmaceutical industry including the biotechnology sector in order to ensure that the pharmaceuticals sector in Europe makes a significant contribution to the achievement of the Lisbon objectives. The sector is important as a source of high-quality jobs, an investor in R&D, and a significant positive contributor to the EU s trade balance. This position is being eroded, however, since the sector in Europe is losing ground to its competitors at world level. As for the economic aspects of medicinal products, the Commission could, following deliberations on pricing and reimbursement methods, play a part in developing alternative approaches aimed at promoting innovation and making it financially rewarding. Similarly, questions concerning national procedures for determining the therapeutic value of new 7

8 medicinal products must also be tackled. The Commission will also have to ensure that it has a means of regularly evaluating the impact of these measures. Following an initiative by the high-level group on innovation and provision of medicines ( G10 Medicines), the Commission has developed competitiveness indicators, which will be updated annually and form the basis for a report to Parliament and the Council of Ministers. Other initiatives will concern information aspects with a view to placing the patient at the centre of policy on medicinal products. The chief legislative challenges will be to introduce the measures needed to permit the correct and efficient application of the new legislation on medicinal products adopted by the European Parliament and the Council in March There will be other initiatives to complete this legislative framework, particularly in the field of paediatric medicinal products and in connection with new types of treatment. As long ago as in 2000, the Council of Ministers and the European Parliament established that there was an urgent need for the adoption of special rules to guarantee the safety of medicinal products to be administered to children. Will you undertake to submit the appropriate proposal within a very short time of your taking up office? The Council Resolution of 14 December 2000 did indeed call on the Commission to make proposals to ensure that medicinal products for children are fully adapted to the specific needs of children. Parliamentarians have also been highlighting the need for regulation to improve the research, development and authorisation of medicines for children. A proposal for a regulation on medicines for children will be shortly submitted to the Commission. It will be based on extensive research and consultation conducted by the Commission and has been the subject of an extended impact assessment. Through this work I am confident that the measures included in the proposed regulation will lead to better medicines for children and, therefore, better health for the children of Europe. Chemicals 8. The new chemicals policy called REACH is largely considered being "the biggest challenge the Commission has faced in meeting sustainable 8

9 development goals". The implementation date foreseen in the interim strategy is spring The former Environment Commissioner Margot Wallström considered REACH to be a "groundbreaking proposal" that will "create a win-win situation for industry, workers and citizens, and our ecosystem". Do you share that view? How firmly are you committed to REACH? Will you keep up the Commission's commitment to the new chemicals legislation, and will you continue the work so that the target of its implementation in spring 2006 can be met? One of the key objectives of the Commission s REACH proposal, which has been formulated within the framework of the Union s sustainable development strategy, is to ensure the competitiveness of European enterprises, and to improve health and environment to the benefit of Europe s citizens. I believe that these essential goals can be achieved. The decision on the proposal, including the timing of the introduction of REACH, now rests with Parliament and the Council. I shall continue to work closely with Parliament to bring to a conclusion the legislative process of REACH. I shall also support the Commission s current efforts aimed at completing the necessary preparatory measures in good time to ensure that systems will be in place to guarantee efficient management of the new requirements once they are decided. TOURISM 9. Tourism is a major contributor to the EU economy. What measures could the Commission envisage to encourage sustainable tourism, which does not threaten the environment, cultural heritage or local communities? The Parliament has called on successive occasions for the creation of a budget line for this purpose. Would the Commissioner designate support this? I fully recognise the importance of tourism within the EU for its economic, environmental and social aspects and welcome the Constitutional Treaty where tourism is among the areas where the Union may take coordinating, complementary or supporting action. While fully recognising that the main competencies for tourism remain with the Member States, I believe that the Commission can play an active role in the future. The Commission is aware of the importance of the tourism within the EU for its economic, environmental and social aspects. As foreseen in the Communication on Basic orientations for the sustainability of European tourism, the Commission intends to: - reinforce the consistency of various Community policies and measures affecting the sustainability of tourism and the competitiveness of the industry; - encourage the creation of a favourable environment for the sustainable development of the sector; - promote cooperation between the Member States, particularly by the exchange of good practices. 9

10 Therefore, the Commission will establish a Tourism Sustainability Group, in which representatives from all territorial and administrative levels, from the tourism industry as well as other stakeholders, will set out guidelines for the sustainability of this activity within the EU and in developing countries. The Committee on Transport and Tourism has proposed on several occasions since 2000 the creation of a specific budget line for tourism, although it is my understanding that the EP has not yet endorsed these proposals. It is thus important to underline that a number of existing financial instruments and budget lines (Structural Funds, Research Programmes, Multiannual Programme for Enterprises and Entrepreneurship, Competitiveness etc.) are able to support any tourism initiative of a European dimension. 10. In the "tourism and employment" process five key issues for European tourism have been defined: information, training, quality, sustainable development, and new technologies. Where do you envisage further important steps in a coherent European approach on tourism? Following the five key issues identified in the Tourism and Employment process, the Commission has developed, as foreseen in its November 2001 Communication Working together for the future of European Tourism a set of concrete initiatives during the last three years and foresees completing them in the coming months and years with the following ones: - Information and Communication: contribution to the organisation of the Annual European Tourism Forum; consolidation of the Tourism Satellite Accounts in all Member States; - Training: publication and implementation of a manual on Learning Areas ; - Quality: implementation of Integrated Quality Management Indicators for destinations; preparation of an eco-label system for campsites; - Sustainable development: implementation of the measures included in the Communication of 21 November 2003, concerning the process towards a European Tourism Agenda 21, which is foreseen for 2007; - New technologies: forthcoming creation of a Portal for the promotion of Europe as a set of diverse tourist destinations, being financed by the Telematics Interchange of Data between Administrations -IDA- programme. These initiatives will be developed and implemented with the proactive involvement of all relevant stakeholders (Member States, including Regional and Local Authorities, the Tourism Industry Trade Unions and Civil Society NGOs ). EUROPEAN DEFENCE INDUSTRY 11. How do you consider the relationship between the Commission's 10

11 preparatory action on security related research and the newly created European Armament Agency? How will the Commission participate in the work of the Armament Agency? Which role do you see for the European Parliament with regard to the creation of a European defence market and to security related Research and Development? With particular regard to the preparatory action for security research, it will be important to ensure coordination with the Agency and avoid unnecessary duplication of work. Instead, the Commission and the Agency should seek to identify potential synergies between the projects receiving Community funding and those carried out through intergovernmental cooperation in order to maximise their benefits. That type of coordination should be extended to the more substantial European Security Research Programme which the Commission envisages as part of its 7 th Framework Programme where the EP will be fully consulted and involved in the definition of the activities to be financed. Turning more generally to the overall relationship with the Agency, the Commission is a member of the Steering Board, and is thus fully associated with the work of the Agency (in line with Article 24 of the Joint Action creating the Agency). Moreover, prior to the creation of the Agency, the Commission had already made several proposals and begun implementing actions aimed at the creation of a European defence equipment market and at promoting security research. The Commission considers the establishment of the Agency as another important step towards stimulating defence industrial competitiveness in support of the ESDP. The building of a true European defence equipment market will require a range of dedicated instruments and policies and, while the Commission has the competence and responsibility for some of those, the future Agency will be responsible for others. All those actions will require close coordination and with that in mind, the necessary administrative arrangements will be established to ensure efficient working relations, in particular with a view to exchanging expertise and advice in those areas where the activities of the Community have a bearing on the Agency's missions and where the activities of the Agency are relevant to those of the Community. In that framework, the European Parliament has an important role to play both in terms of policy making and in terms of public communication. In particular, I would welcome the support and input of Parliament to the creation of a European defence equipment market and favourable conditions for the development of a European defence equipment industry which is both competitive and viable. 11

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