Meeting Europe - November 2015 - ENG

Meeting Europe

November 30, 2015

Editorial

The Single Market:

reality or utopia?

The majority of Belgian industries, as in the rest of Europe, consist of small to medium-sized enterprises (SMEs). Growth requires access to new markets. The closest foreign markets for SMEs are their neighbouring countries, and by extension other European Union member states. The existence of a single market ought to be a miracle cure for tariffs and administrative or technical barriers... a perfect world?

Fa Quix and Filip De Jaeger

Summary » Pan-Euro-Med rules of origin

Enhancing textile production in the EU instead of undermining it

» Circular economy

Stimulating voluntary initiatives

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» Review of ETS directive

No extra cost handicap for textile and woodworking sector

» The European Timber Regulation A need for consistent application

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» Transatlantic Trade and Investment Partnership Preferential rules of origin based on added value are not an option

» European ‘furniture passport’ Only on a voluntary basis

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Fedustria is the Belgian federation of the textile, woodworking and furniture industries.

We represent about 1,950 companies in Belgium (of which over 90% are SMEs), together creating over 39,200 direct jobs and generating a turnover of 10.7 billion Euros, of which 70% is derived from export. The textile industry represents a turnover of 5.7 billion Euros with about 680 companies and some 20,150 employees. The woodworking and furniture companies generate a turnover of 5 billion Euros and employ about 19,000 employees in 1,286 companies.

Unfortunately, the reality is different. Yes, there is no longer any import or customs duty between EU member states... but tariffs are not the only kind of barrier. Other barriers have been popping up more and more often in recent years. Well-organised local or national lobbies are demanding extra technical requirements and standards or additional testing, even when this runs counter to European regulations and when there is harmonised legislation in place. This is pure protectionism that detracts from the noble aims of the single market.

If Europe wants to stimulate industry growth within the EU, it will need to oppose the many, often subtle but always harmful internal barriers within the single market. The European Commission has recently published an overview of the initiatives it will be taking in the course of 2016 and 2017 to unleash the full potential of the single market. Deepening the single market is likely to be the best growth strategy for Europe to adopt. It is, after all, through the advantages of scale it offers to SMEs that they are able to grow.

Fa Quix, general manager, and Filip De Jaeger, deputy general manager

Fedustria-Meeting Europe

November 30, 2015

Pan-Euro-Med rules of origin

Enhancing textile production in the EU instead of undermining it

The European Commission is currently negotiating a reform of the preferential rules of origin for the pan-Euro-Med zone. This zone consists of the EU member states, the EFTA countries, the Mediterranean and the Balkan region. The textile and clothing sector generally requires a double transformation (such as spinning and weaving) so that inputs that are not of preferential origin can obtain origin status. As of today only diagonal cumulation is permitted, which means that this double transformation must take place in the same country (whereby the EU is viewed as a single country). Total cumulation is currently only possible in the case of Tunisia, Morocco and Algeria.

Total cumulation means the two transformations can be split up between different countries in the pan-Euro-Med zone.

Fedustria – like Eurocoton – is opposing the possibility of extending the use of total cumulation to the whole zone, as it would have profound consequences for European spinners and weavers. It would mean that clothing produced in Macedonia, using fabrics woven in the EU made of Chinese yarns, would be of preferential origin and therefore could be imported into the EU duty-free, while this is presently not the case. In order for such clothing to be of preferential origin today, both the spinning and weaving must have taken place in the EU. The extension of total cumulation to the whole zone would therefore lead to a rise in the use of Asian yarns and would be detrimental to European spinners.

But European weavers would stand to lose too. If total cumulation is extended to the whole zone, clothing made from Chinese yarns, woven in Turkey and produced in Macedonia will be of preferential origin when imported into the EU. In short, it would become easier to import clothing duty-free in the EU, even though no single transformation (spinning or weaving) has taken place in the EU. This would be inconceivable, particularly at a time when everyone is talking about the need to bolster industrial activity in the EU! 

elizabeth.dewandeler@fedustria.be

Circular economy

Stimulating voluntary initiatives The aim of the circular economy is to keep materials in use within closed loops for as long as possible. Engaging with the circular economy not only addresses the rising problem of scarcity and competition for raw materials, but also encourages the development of sustainable products. Furthermore, the circular economy creates economic, social, innovative and competitive opportunities.

Fedustria supports the transition from the ‘linear production model’ towards a circular model and recognises the important opportunities that it brings for the textile, woodworking and furniture sector. The European Commission launched a public consultation on the circular economy just before the summer, to which Fedustria responded.

More in particular, Fedustria stressed that: • the transition to a circular economy should be harmonised at a European level, which necessitates a level playing field between the various member states;

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ingrid.hontis@fedustria.be

• switching to a circular model is clearly not an overnight change. In order to ensure a realistic and sustainable transition, a step-by-step approach will be required; indeed, companies and sectors will need time to develop themselves further within the circular economy; • initiatives should be taken gradually and on a voluntary basis; • companies that do take steps to engage with the circular economy should nonetheless be stimulated to do so, for example through support for research and development.

Fedustria-Meeting Europe

Selected key European figures

Review of ETS directive

No extra cost handicap for

textile and woodworking sector

The EU Emissions Trading Scheme (ETS) has been the cornerstone of Europe’s climate policy since 2005. Companies within the scope of the ETS directive are required to hand in annually an amount of allowances that corresponds to the volume of their emissions of the previous year. Allowances are being granted to manufacturing companies partially for free on the basis of benchmarks. Companies who receive fewer allowances than they need, can either reduce their emissions or buy allowances to cover the difference.

November 30, 2015

The textile, woodworking and furniture industries are a major source of prosperity and employment in Europe. Here are a few telling figures: (Figures for the EU-28)

Textile and clothing

Woodworking and furniture

Turnover (in billion €)

165.31

210.1²

Employment (people)

1,634,000

Export out of EU (in billion €)

43.01

1

1,931,079² 24.952

1

estimates for 2014 2013 Source: Euratex and CEI-Bois

²

Companies at risk of carbon leakage, however, receive all the allowances based on the benchmark for free. Carbon leakage is the phenomenon whereby companies that are exposed to international competition no longer invest and produce in Europe, but instead move their production facilities to regions with a less ambitious climate policy.

In response to the European Council’s resolve to reduce greenhouse gas emissions by at least 40% by 2030, the European Commission presented a review of the ETS directive on 15th July 2015. This proposal amends amongst others the carbon leakage criteria. The result would be that a number of textile subsectors would no longer be considered ‘at risk of carbon leakage’.

Such a change would be inconceivable considering these sectors are genuinely subject to intense international competition. Fedustria is therefore arguing to retain the intensity of trade as a unique criterion for carbon leakage. Moreover, the possibility to add further sectors to the carbon leakage list by means of a qualitative assessment should be maintained. Finally, Fedustria insists that the ETS directive takes account of the unique property of wood to retain CO2 for a long time. Companies that make use of this property by manufacturing wooden products, such as the wood based panel sector, should see this acknowledged in their carbon credit allocation. 

bruno.eggermont@fedustria.be

The European Timber Regulation

A need for consistent application

The European Timber Regulation, or EUTR, came into force in early 2013 and introduced a ban on introducing illegal wood or illegal wood products into the European market. ‘Illegal’ is defined as wood that is harvested, transported, bought or sold in contravention of national legislation in the Fedustria, along with 6 other federations and 64 comcountry of origin. The EUTR imposes several obligations panies across Europe, has signed the industry statement firstly upon “operators” (i.e. those who first bring the wood released by the World Wildlife Fund (WWF). With this or wood product to the European market) to exercise due declaration we are adding our voice to the demand for diligence, and secondly upon “traders” further down the a better implementation of the regulation and this in all chain to report on whom their wood is bought from and member states, along with an extension of the scope of sold to. This regulation is to be evaluated for the first the EUTR. Indeed, the battle against illegal wood can time over the course of 2015, which is likely to lead to a only succeed when all wood and wood products are asrevision. sessed in the same manner regardless of the member  ingrid.hontis@fedustria.be state concerned.

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Fedustria-Meeting Europe

November 30, 2015

Transatlantic Trade and Investment Partnership

Preferential an option

rules of origin based on added value are not

In the context of the Transatlantic Trade and Investment Partnership (TTIP), the rules of origin, which will determine whether a product may benefit from the preferential import duty, are of particular importance. As regards textile products, the EU generally uses product-specific rules based on the double transformation in its free trade agreements whereas the US applies the “yarn forward” rule, which sometimes leads to triple transformation.

Expo “Design Derby Belgium/Netherlands (1815-2015)”

© Phile Deprez

Running until 13 March 2016, Design museum Ghent

The expo offers an overview of 200 years of design in Belgium and the Netherlands. The 500 design objects, ranging from silver, glasswork and ceramics to modern furniture, fashion and graphic design, are displayed parallel to one another in chronological order. You can see both striking similarities and surprising differences between the styles in both countries.

Info: www.designmuseumgent.be

Fedustria, Non-profit organisation Rue Montoyer 24, b1 B-1000 Brussels T + 02 528 58 11 www.fedustria.be

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Euratex has made a tremendous effort in recent years to make the productspecific rules more flexible and adjust them to suit technological evolutions and market developments. Fedustria stands with Euratex in advocating for the EU to maintain these new rules, whereby double transformation remains the basis but with more flexibilities, when exporting its products to the US. The US can use the “yarn forward” rule when exporting its products to the EU. Applying an added value rule is not an option for textiles. The European textile and clothing value chain is highly fragmented in terms of markets and 

production structures. The variability in value of the originating and nonoriginating materials used means that one single tariff line within the combined nomenclature may comprise a wide range of products with highly variable added value percentages, making the introduction of a single added value rule unworkable. Furthermore, an added value rule would be difficult to verify as the added value may be influenced by a range of factors, including the cost of raw materials, exchange rate fluctuations etc. Finally, in case of an added value rule fraud is easier as any component used to calculate the added value can be easily manipulated.

sylvie.groeninck@fedustria.be

European ‘furniture passport’

Only on a voluntary basis

The European Commission conducted a study of the European furniture industry last year, which analysed amongst others whether a ‘furniture passport’ should be introduced at a European level to provide consumers with information on the properties of the furniture, such as the materials used, the place where it was made and various technical details.

Quality and sustainability are among the strong points of European furniture production, yet these advantages are not always apparent when making a purchase (the foam used in a seat, for example), which may cause European furniture to be downplayed in favour of foreign competitors. A ‘furniture passport’ providing information on some of these properties could help to remedy this. Fedustria is arguing for a voluntary – not mandatory – ‘furniture passport’. The information that will have to be mentioned should be relevant. Furthermore, furniture manufacturers must be able to provide the requested data with a minimum of administrative burden and without considerable costs. 

elizabeth.dewandeler@fedustria.be Publisher: J.F. Quix Allée Hof-ter-Vleest 5 b1 B-1070 Brussels

Copyright Fedustria: Fedustria members may use the information included in this newsletter as they wish; any third parties are requested always to mention the source of the information.

Note Euratex: the European apparel and textile confederation, www.euratex.eu; Eurocoton: European cotton and allied textiles federation.