INSIGHT: The challenge is to streamline policy

16 March 2009 14:27  [Source: ICIS news]

By Nigel Davis

Jose Manuel Barosso and Gordon Brown met in London on MondayLONDON (ICIS news)--Industrial policy is at a crossroads, the European Commission admits, and requires strong action. Not surprisingly then, ahead of a key meeting in Brussels on 17 March, Europe’s big industries have asked for more funding.

They want immediate assistance to help cope with the current economic crisis and further long-term policy support.

For the chemicals sector, this has been distilled down to a call for accelerated payment of VAT (value added tax) and tax credits for R&D, deferred registration payments on the expensive Reach chemicals control system and more efficient innovation funding.

These are issues that could have been worked out in the fullness of time but now need much more urgent attention.

“The economic crisis has had an unprecedented impact on Europe's chemicals industry, particularly hitting base chemicals, polymers and specialty chemicals due to collapsed demand from end-users such as automotives and construction,” the chemicals trade group Cefic said on Monday.

“SMEs in particular, already facing increased costs stemming from the implementation of Reach, are seriously affected,” it said in the joint industries statement.

The chemicals sector does not so much want support as an oiling of the wheels that drive European commerce. It is also seeking a more industry-friendly approach to Reach and the EU’s climate control plans enshrined in the Emissions Trading Scheme (ETS) and in worrisome Integrated Pollution Prevention and Control (IPPC) legislation proposals.

The proliferation of EU legislation would be an additional burden on companies struggling to cope with the credit crunch and the deep recession. It pushes harder the notion of smarter regulation from Europe.

Put into some perspective, chemicals production dropped by more than 15% in December. Output in January and February is likely to have been no better and was probably worse. EU chemicals output is expected to shrink by about 6% in 2009.

Companies need to better manage working capital in such difficult times but are facing an uphill battle. They could do with more VAT relief. It would also help, as Cefic points out, if public authorities (and others) paid their bills on time. The credit squeeze hurts and continues to strangle business 

The great fear is that protectionism could surface within Europe as the credit crunch and recession bite harder.

Ahead of the G20 summit in April, European Commission president Jose Manuel Barroso was in London on Monday for talks with the British prime minister, Gordon Brown. Both politicians warned against protectionism, while Barroso suggested the EU would present a united front at the G20 meeting.

“We must tackle protectionism head on and make sure that we don’t risk a spiral of trade collapse through the protectionism that is obviously a possible reaction to this crisis,” Brown said. “We will be seeking agreement on rules and best practice and on a stimulus for trade around the world, a move from beggar-thy-neighbour policies to support-thy-neighbour policies.”

The world must go further in stimulating global demand, Brown added.

Barroso will open the industrial competitiveness meeting in Brussels on 17 March, which will be the big industry event of the week.

The event, according to the Commission, brings together European and national policy leaders to look at the ways ahead and to analyse the division of tasks between European and national policy bodies.

The EU faces not only the potential rise of protectionisms but also the lack of policy coordination and a more interventionist attitude from some member states.

Europe’s bureaucrats have an opportunity to help refine policy-making and streamline some of their ideas to better suit troubled times.

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By: Nigel Davis
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