UK complaints fuel coal subsidies debate

Date: 20/11/1997

By Chris Johnstone

A FRESH wave of complaints about alleged anti-competitive practices, subsidies and dumping by the Polish, German and Spanish coal industries is being prepared by the British government The new move marks a significant widening of UK action aimed at salvaging the remnants of its coal industry, which competes at world market prices without significant government subsidies. It will provide a fresh test of how the European Commission interprets the coal subsidy rules enshrined in the European Coal and Steel Community (ECSC) Treaty.

Germany's biggest coal producer, Ruhrkohle, is top of the British government's hit list.

Trade and Industry Secretary Margaret Beckett reminded Energy Commissioner Christos Papoutsis how strongly the UK felt about subsidies at a meeting of industry ministers last week, urging him to force Bonn to halt or substantially reduce its payments.

London is currently putting the final touches to a complaint to the Commission about a new package of subsidies for Ruhrkohle's steam coal production which is being pushed through the German parliament.

The UK will argue that the aid is aimed at mines which have no hope of becoming economically viable, with the subsidised production threatening to keep British exports out and to overspill into other markets outside Germany.

Meanwhile, discussions are continuing between UK and Commission officials over British attempts to map out the best way of stopping alleged Polish dumping of coal at prices below production costs.

An anti-dumping complaint is one possible avenue, but the UK government also wants to investigate what powers the Commission has to tackle the subsidised exports under the long-standing Europe Agreement between the EU and Poland. Question marks remain over whether the accord enables the Commission to take action against such subsidies.

Around half a million tonnes of Polish coal are being imported into the UK every year for domestic use and for power stations. The coal is being sold at world market prices of around 36 ecu per tonne, even though production costs are higher and transport costs to the UK are estimated at around 18 ecu per tonne. "Export prices are below those on the Polish market," said one British official.

The recent fall in the value of the Polish zloty is one factor which has forced London to look again at is calculations before finalising its case.

Two formal complaints have already been lodged by the UK against Spain. The first targets Spanish regulations which ban imports of coal with a sulphur content of more than 1%, while Spanish coal with a sulphur content of up to 6% is allowed on the local market. "This is a clear case of discrimination," said a British official.

Subsidies to a handful of Spanish producers are also being contested. The UK claims the aid package is illegal because it will last beyond the July 2002 cut-off date for the ECSC treaty and is not linked to any programme aimed at making mines economically viable or correcting short-term problems.

The Commission is still considering its final verdict on British complaints of 'unfair' subsidies to German producers of high-quality anthracite coal which allowed firms to export to the UK.

Bonn claims it has no case to answer, but the Commission ruled before the summer that German subsidies appeared to have been misused and were distorting competition.