Summary» Pan-Euro-Med rules of origin

Enhancing textile production in the EU instead of undermining it 2

» Circular economyStimulating voluntary initiatives 2

» Review of ETS directiveNo extra cost handicap for textile and woodworking sector 3

» The European Timber RegulationA need for consistent application 3

» Transatlantic Trade and Investment PartnershipPreferential rules of origin based on added value are not an option 4

» European ‘furniture passport’Only on a voluntary basis 4

The Single Market: reality or utopia?The majority of Belgian industries, as in the rest of Europe, consist of small to medium-sized enter-prises (SMEs). Growth requires access to new mar-kets. The closest foreign markets for SMEs are their neighbouring countries, and by extension other Euro-pean 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?

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 re-quirements 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 sin-gle market. The European Commission has recently published an overview of the initiatives it will be tak-ing 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 strat-egy 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

Editorial

Fa Quix and Filip De Jaeger

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 com-panies generate a turnover of 5 billion Euros and employ about 19,000 employees in 1,286 companies.

Meeting Europe November 30, 2015

Fedustria-Meeting Europe November 30, 2015

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, in-novative and competitive opportunities.

ingrid.hontis@fedustria.be

Fedustria supports the transition from the ‘linear produc-tion model’ towards a circular model and recognises the important opportunities that it brings for the textile, wood-working 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 harmo-nised at a European level, which necessitates a level playing field between the various member states;

• 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; in-deed, companies and sectors will need time to develop themselves further within the circular economy;

• initiatives should be taken gradually and on a volun-tary basis;

• companies that do take steps to engage with the cir-cular economy should nonetheless be stimulated to do so, for example through support for research and development.

Stimulating voluntary initiativesCircular economy

The European Commission is currently ne-gotiating 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 gen-erally 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 trans-formation must take place in the same country (whereby the EU is viewed as a single coun-try). Total cumulation is currently only possible in the case of Tunisia, Morocco and Algeria. Total cumulation means the two transforma-tions can be split up between different coun-tries in the pan-Euro-Med zone.

Fedustria – like Eurocoton – is opposing the possibility of ex-tending 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!

Enhancing textile production in the EU instead of undermining it

Pan-Euro-Med rules of origin

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elizabeth.dewandeler@fedustria.be

The EU Emissions Trading Scheme (ETS) has been the corner-stone 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.

Companies at risk of carbon leakage, however, receive all the allowances based on the benchmark for free. Carbon leak-age 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 Eu-ropean 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’.

bruno.eggermont@fedustria.be

Such a change would be inconceivable considering these sectors are genuinely subject to intense international competi-tion. 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.

No extra cost handicap for textile and woodworking sector

Review of ETS directive

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 country of origin. The EUTR imposes several obligations firstly upon “operators” (i.e. those who first bring the wood or wood product to the European market) to exercise due diligence, and secondly upon “traders” further down the chain to report on whom their wood is bought from and sold to. This regulation is to be evaluated for the first time over the course of 2015, which is likely to lead to a revision.

ingrid.hontis@fedustria.be

Fedustria, along with 6 other federations and 64 com-panies across Europe, has signed the industry statement released by the World Wildlife Fund (WWF). With this declaration we are adding our voice to the demand for a better implementation of the regulation and this in all member states, along with an extension of the scope of the EUTR. Indeed, the battle against illegal wood can only succeed when all wood and wood products are as-sessed in the same manner regardless of the member state concerned.

A need for consistent applicationThe European Timber Regulation

Selected key European figuresThe textile, woodworking and furniture industries

are a major source of prosperity and employment in Eu-rope. 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) 1,634,0001 1,931,079²

Export out of EU (in bil-lion €)

43.01 24.952

1 estimates for 2014² 2013Source: Euratex and CEI-Bois

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Fedustria-Meeting Europe November 30, 2015

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

Publisher: J.F. Quix Allée Hof-ter-Vleest 5 b1B-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.

In the context of the Transatlantic Trade and Investment Partner-ship (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 gener-ally uses product-specific rules based on the double transforma-tion in its free trade agreements whereas the US applies the “yarn forward” rule, which sometimes leads to triple transformation.

Euratex has made a tremendous effort in recent years to make the product-specific 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 re-mains the basis but with more flex-ibilities, when exporting its products to the US. The US can use the “yarn forward” rule when exporting its prod-ucts to the EU.

Applying an added value rule is not an option for textiles. The European textile and clothing value chain is high-ly fragmented in terms of markets and

production structures. The variability in value of the originating and non-originating materials used means that one single tariff line within the com-bined nomenclature may comprise a wide range of products with highly vari-able added value percentages, mak-ing 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 in-fluenced by a range of factors, includ-ing 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.

Preferential rules of origin based on added value are not an option

Transatlantic Trade and Investment Partnership

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.

elizabeth.dewandeler@fedustria.be

Quality and sustainability are among the strong points of European furniture pro-duction, 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 ar-guing 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.

Only on a voluntary basisEuropean ‘furniture passport’

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Fedustria-Meeting Europe November 30, 2015

Expo “Design Derby Belgium/Netherlands

(1815-2015)”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, fash-ion and graphic design, are displayed parallel to one another in chronologi-cal order. You can see both striking similarities and surprising differences between the styles in both countries.

Info: www.designmuseumgent.be

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

sylvie.groeninck@fedustria.be