Establisment of the common market for steel
Report
| Doc. 154
| 22 May 1953
Introduction
1. The Common Market for coal,
iron ore and scrap was established, 'as provided for in the Convention, six
months after the commencement of the High Authority's activities,
i. e. on 10th February. It was the subject of the greater part of
the General Report of the High Authority, published on 12th April.
In accordance with the Convention containing the transitional provisions,
the Common Market for steel was t o be established two months after
the opening of the Common Market for coal, iron ore and scrap, unless
an extended time-limit was fixed by the Council of Ministers on
the proposal of the High Authority. This extension was necessary.
For, on 5th March, the High Authority had convened a Committee of
independent experts who had been instructed to assemble data on
the practices adopted in the different countries in respect of the
taxes to which products sold outside their country of origin are
liable. In order to give this Committee adequate time for conducting
this inquiry, the High Authority had fixed 10th April as the date
on which the experts' report was to be submitted. Consequently,
the establishment of the Common Market for steel was postponed until
1st May, 1953.
2. Thus, as soon as the free circulation of the raw materials
used by the iron and steel industry, i. e. coal and coke, iron ore
and scrap, was assured, the steel industries found themselves in
direct competition with one another. However, whether it be a question
of steel or of raw materials, the general objectives pursued in connection
with the establishment of the Common Market are identical. The object
is to bring the industries into competition with one another on
one vast Common Market comprising 159 million consumers, in order
to promote economic expansion, the development of employment, and
the improvement of the standard of living in the member countries.
3. While the general principles involved are the same, the technical
problems to be resolved are of various kinds. None of these six
countries has been imposing import duties on coal, iron ore and
scrap, with the exception of Italy, which has done so on imports
of coke. In the case of steel, customs barriers and quota restrictions
existed and had to be abolished on 1st May, 1953 : the circulation
of these products within the Community is now unrestricted. However,
there remained the danger that imports from third countries would pass
in transit through those countries of the Community which apply
the lowest tariff rates in their relations with these third countries;
special arrangements had to be made, in agreement with the Benelux
countries.The position of the Community's iron and steel industry
on the world market differs fundamentally from that of the coal
and iron ore industries ; in coal, the Community is almost self-sufficient;
the volume of its import trade with the other countries is approximately
the same as that of its export trade. For supplies of iron ore,
the Community depends largely on imports from Sweden and North Africa.
On the other hand, the Community's iron and steel industry is, to
a large extent, an exporting industry; that is why this industry
and the coal and iron ore industries react differently to variations
in trade conditions. In the case of coal and iron ore, price-fluctuations
develop rather slowly and to a moderate extent. In the case of steel,
however, price fluctuations on the world market make themselves
felt directly, quickly, and very strongly. Coal was subject to a
complicated system of discriminations and subsidies which necessitated
a separate inquiry for each individual country. In the steel sector,
on the other hand, Government intervention was in most cases confined
to the fixing of maximum prices within each country. These measures
were abolished with the establishment of the Common Market, and
only Italy was allowed, under the Convention containing the transitional
provisions, to retain a special system during the transition period.
The competitive conditions also depend, in the one industry as in
the other, on widely different factors. In the case of coal, the
output capacity is influenced essentially by the nature of the deposits whose
location and character are unchangeable. The enterprises of the
iron and steel industries, however, can choose their own locality
according to supply facilities, production conditions, and markets;
moreover, the factors involved in their cost price are determined
by the technique and methods of production, the available plant,
the degree of specialization, the extent of mass production, as
well as the location of the enterprises. Finally, transport plays
a very important role in the relative price situation between the
individual coal-mining areas. The value of coal is relatively small
in relation to its weight, so that the pithead price of coal increases rapidly
with the distance over which i t is transported from the mine. In
the case of iron and steel products, transport charges represent
a much smaller portion of the “delivered” price and, therefore,
afford less protection against competition. On the other hand, transport
charges are an essential element of the cost price because of the
important part played by raw materials in the manufacture of these
products. As for the products themselves, they also embody a much
larger variety; true, coal comprises a large number of categories
and grades, but these can, to a certain extent, be interchanged
and utilized largely for the same purposes. The production of iron
and steel, on the other hand, involves numerous manufacturing stages,
and there are many different qualities of steel with an extensive
range of products which are different in profile and dimensions.
4. These characteristic features of the iron and steel industry
lead to certain conclusions concerning the pre-requisite conditions
for the establishment of the Common Market for steel. Above all,
competition between the industries is likely to be much more intense
than in the case of coal. With coal, the varying distances counterbalance
differences in price; the present production capacity is fully needed
to cover requirements, and the development of new facilities for
replacing one production by another is a long-term job. The products
of the iron and steel industry, however, can be transported over
great distances. It is found, in practice, that, in view of the
variety of its products and the importance of its exports, this
industry has nearly always an unused margin of productive capacity.
However, though competition is more intense, the industrialists
have many more means at their disposal for meeting such competition.
The economic advantages offered by one vast market are considerable
for the iron and steel industry, because its production, which is
industrial in the fullest sense, has much greater scope for improving
the quality of the products and lowering the cost of production
through greater specialization and extensive mass production. The
variety of products makes the problem of the structure of the different
prices particularly acute. There are price differences between the
various profiles and dimensions which are, no doubt, accounted for
by the cost of production of the demand, but partly also by factors
which are peculiar to each one of the closed markets. Competition
must adjust the price-range, much more than it has done hitherto,
to actual production conditions, for the greater benefit of the
consumers and in the interest of a more rational division of the
resources. Finally, the diversity of the factors which play a role
in the competition between the steel industries, the multiplicity
of the means of adjustment at the disposal of the enterprises, as
well as the changeability of the level of activity, explain why
the precautionary measures are totally different from these provided
for the coal mining industry. There can be no question of plans
laid down in advance for definite measures of application with fixed
time-limits, such as the péréquation measures adopted in respect
of Belgian coal. The measures to be adopted in the steel sector
must be infinitely more varied in detail and more flexible. It is
essential to watch the development of the market constantly, and
to take action at a moment which cannot be foreseen; but the type
of action must be adapted to the difficulties as and when they do
arise. The main problems connected with the preparation of the Common
Market for steel were the following : Deciding on a customs tariff
policy to be adopted in relations with third countries; comparing price-scales;
settling the technical criteria concerning the application of precautionary
measures. The industrialists remain responsible for carrying through
the necessary measures of adaptation, and can in no way be relieved
of this responsibility. In short, the attainment of the economic
and social objectives pursued with the establishment of the Common
Market depends very much on the industrialists' conduct under the
influence of the competition.
5. Following a brief outline of the recent development of the
steel market, this report contains an exposé of the measures taken
prior to the establishment of the Common Market, particularly in
custom matters, as well as an analysis of the decisions taken by
the High Authority in connection with the establishment of the Common Market.
Finally, this report examines the general problems connected with
the operation of the Common Market : precautionary measures, the
system of special steels, turnover taxes, cartels and combines,
technical research and improvements in workers' safety.
2 Chapter I - The development
of the steel market
6. One of the main features of
the development of the market has been the drop in exports during
the past year. As far as volume is concerned, exports of crude steel,
semi-finished and finished products dropped by 15 per cent from
1951 to 1952 :
Table No. 1 - Crude iron and steel exports of the Community
countriesNote(in
thousand tons)
|
Year
|
Crude iron
|
Crude steel semi-finished
products finished products
|
|
1948
|
487
|
3.782
|
|
1949
|
554
|
5.407
|
|
1950
|
1.099
|
7.671
|
|
1951
|
1.113
|
9.399
|
|
1952Note
|
904
|
7.957
|
7. At the same time a perceptible
fall in prices occured in the major export markets. Within less
than a year, the prices of merchant steels dropped from $ 130 per
ton (February 1952) to $ 84 (at the beginning of 1953), i. e. a
drop of nearly 40 per cent. The overall development since 1950 reflects
not only the speculation and excessive stock-piling during the boom
which followed the outbreak of war in Korea, but also the attitude
of reserve adopted by the importers, an attitude which was strengthened
by their expectation that the American iron and steel industry would
again play an important role before long.
Table No. 2 - Development of export prices for merchant
steel [in S per ton) Note)
|
Périod
|
Price
|
Périod
|
Price
|
|
June 1949
|
96
|
July 1952
|
110
|
|
December
|
58
|
August
|
110
|
|
June 1950
|
53
|
September
|
110
|
|
December
|
120
|
October
|
110
|
|
June 1951
|
150
|
November
|
100
|
|
November
|
145
|
December
|
96
|
|
January 1952
|
140
|
January 1953
|
90
|
|
February
|
130
|
February
|
82Note
|
|
March
|
125
|
March
|
84
|
|
April
|
120
|
April
|
84
|
|
May
|
115
|
|
|
|
June
|
110
|
|
|
However, these expectations did not materialize as a result
of the prolonged strike which broke out in the American iron and
steel industry in the middle of 1952. The loss of tonnage caused
by this strike led to expectations of a hardening of prices. As
can be seen from the above table, however, this strike has at the
most merely checked the falling of prices. For the loss of production
was counterbalanced by withdrawals from stocks.
Alongside these events, two other factors have influenced
the development of world market prices : the economic difficulties
experienced by certain overseas countries which have always been
importers of steel, and the re-appearance of Japanese steel on the
world market ; Janapese steel has on occasions entered into competition
with the iron and steel industry of the countries of the Community
in their own national markets.
During March and April, 1953, the price of S 84 represented
a level at which – with but few exceptions – the export prices were
on the whole able to maintain themselves. This limit constituted
the basis for the agree merit concluded between the producers. At
the moment, the High Authority is examining whether this agreement
is compatible with the provisions of the Treaty.
At the beginning of 1953, export prices had reached, and even
exceeded, the level of the French, Belgian, Dutch and Luxembourg
home-market prices, while the German home-market price was still
above this limit.
8. On the home markets of the
Community, the reserve of the buyers, in anticipation of the establishment of
the Common Market for steel, contributed to the shrinking of the
demand. In France, both consumers and dealers held back with orders,
although the seasonal industries (motorcars, agricultural machinery,
building trade) reported a certain revival of trade; requirements
have partly been met by withdrawals from stocks. A similar reserve
on the part of the buyers is also noted in Belgium and Luxembourg;
but they are demanding very short delivery times, so that one can
assume that their stocks are exhausted. In Italy, too, the situation
is marked by reduced stocks ; the maximum prices which were officially
fixed in April, 1951, have not been attained for some months past.
The German home market still shows signs of a lively demand ; stocks
are low. The traditional flow of trade between the countries of
the Community has been maintained. Italy and the Netherlands have
been able to import the quantities of which they have been short
from the countries of the Community. France and Belgium have found
additional outlets on the German market, while Germany was mainly
able to sell certain classes of products, such as special steels
as well as large forgings and castings, in the Benelux countries.
Delivery times are not so long as they were in 1952. They are kept
within reasonable limits; from four to eight weeks in France, Belgium
and Luxembourg, and from two to three months in Germany. Delivery
times are, however, longer for heavy plates. The following table
shows the position of the foreign trade in finished products in
the countries of the Community in 1952.
Table No. 3 - Tableau n° 3 Foreign trade in finished
products in 1952Note
|
Country
|
Exports to third countries
|
Exports to countries of
the Community
|
Imports from third countries
|
Imports from countries
of the Community
|
| |
In per
cent of production
|
In per
cent of market requirements Note
|
|
Germany
|
8,6
|
1,6
|
0,3
|
6,2
|
|
Belgium
|
44,0
|
18,2
|
0,3
|
31,8
|
|
FranceNote
|
17,7
|
4,0
|
0,3
|
0,2
|
|
Italy
|
0,5
|
|
4,6
|
5,7
|
|
Luxembourg
|
51,6
|
45,6
|
|
|
|
Netherlands
|
14,8
|
2,9
|
7,0
|
61,1
|
9. In spite of the falling off
of exports, the production of the iron and steel industry of the
Community countries has been maintained at a high level.
Table No. 4 - Tableau n° 4 Production of crude iron
and steel in the countries of the Community (in million tons)
| |
Fonte et ferro-alliages
|
|
Crude steel
|
|
|
Year
|
Tons
|
Increase over preceding
year %
|
Tons
|
Increase over preceding
year %
|
|
1938
|
28,8
|
|
32,8
|
|
|
1949
|
24.1
|
|
28,7
|
|
|
1950
|
26,1
|
8,3
|
31,8
|
10,8
|
|
1952
|
34,8
|
10,8
|
41,8
|
10,9
|
|
1st quarter 1952
|
8,5
|
|
10,3
|
|
|
lst quarter 1953
|
8,7
|
2,8
|
10,7
|
3,1
|
During the first quarter of 1953, the production of crude
iron and ferro-alloys in the Community increased by about 2.8 %,
compared with the production during the first quarter of 1952. In
the case of crude steel, the increase during the same period amounted
to 3.1 %. Compared with the preceding years, this development amounts
to a perceptible straightening of the hitherto ascending production
curve.
The increase of production as shown in the above table No.
4 is the result of divergent movements in the individual countries.
At the beginning of 1953, the production of crude steel in
Belgium, Luxembourg and Italy is slightly below that for the corresponding
period of the preceding year; production has increased in France,
the Netherlands and Germany.
10. As stated in the General Report
on t he activities of the Community
Note, the supply situation
as regards raw materials for the iron and steel industry, has lately
improved. In the immediate future, the iron and steel industry's
supply situation will depend largely on the development of the industries'
own production. If the production of crude steel is maintained at
its present level for some time to come – and there are indications that
this will be the case – the supply of factories with raw materials
will be assured without difficulty.
Chapter II - The Establishment
of the Common Market for steel
1. The measures adopted
prior to the establishment of the common market for steel
11. The establishment of the Common
Market for steel had to be preceded, as had been the establishment of
the Common Market for coal, iron ore and scrap, by the abolition
of the customs barriers and quantitative restrictions on the circulation
of goods within the Community. On the other hand, the establishment
of the Common Market for steel did not call for any fresh action
in respect of transport rates. As a matter of fact, the most flagrant
discriminations occasioned by the transport rates applying to steel
had already been eliminated with the establishment of the Common
Market for coal, in the manner set out in the General Report on
the activities of the Community
Note. The need
for further measures to be taken by the High Authority in the field
of transport will not arise until much later. The present position
does not yet enable us, at this stage, to give any details concerning
the effect of the measures taken in respect of the transport of
iron and steel products.
Abolition of customs barriers
and quantitative restrictions
12. Under the terms of the Treaty,
the establishment of the Common Market for steel required the abolition and
prohibition, within the Community, of import and export duties,
or charges of equivalent effect, as well as of quantitative restrictions
applied to the trade in these products within the Community. The
practical solutions which had been worked out by agreement between
the High Authority and the Governments for the purpose of enabling
the latter to take the necessary measures in good time, had been
adapted in their entirety by the time the Common Market for steel
was set up. A Committee of experts was, nevertheless, convened to
make sure that no detail had been overlooked. It was found that
the regulations which had already been laid down for the automatic
allocation of licences and currency to buyers of Community countries
importing from another Community country, did not require to be
modified in any way. On the other hand, although all the member countries
had accepted the principle, and the wording, of the "free entry
certificate" ("certificat de libre pratique") – a document which
accompanies the goods on their passage across the frontier, and
certifies that these goods are not liable to duty – none of the
countries had as yet made use of it, as its form had not yet been
finalized. It was unanimously decided that a strictly uniform document
was to be drawn up in the four official languages of the Community
and, moreover, that its use was to be restricted to those products
which are liable to duty in transactions with third countries.
13. Some peculiarities of the Common Market for steel called,
however, for special customs measures, such as agreement on a detailed
list of the products entering the Common Market, which is a prerequisite
for the application of another measure provided for in Section 15
of the Convention, namely the institution of tariff quotas for the
Benelux countries.
a As regards
this common list, a group of tariff experts of the member countries,
who had held several meetings, had worked out a uniform nomenclature
which the governments had agreed to adopt, with the exception of
a very small number of tariff headings. As for these exceptions,
the High Authority requested the governments which had sought its
opinion, to follow provisionally the advice it had given. The governments
accepted this proposal.
b The experts on customs matters and commercial policy also
met for the purpose of clarifying in agreement with the High Authority,
the question concerning the tariff quotas of the Benelux countries and
examining which would be the best solution to adopt in regard to
the "suspended duties".
It must be pointed out
that, according to Section 15 of the Convention, the Benelux countries
will continue to enjoy, in respect of imports from third countries
for their own market under their tariff quotas, the benefits of
the duties which they applied before the Treaty came into force.
They are, however, obliged to subject imports over and above these
quotas, and which are assumed to be destined for trans-shipment
to other countries of the Community, to duties equal to the lowest
rates applied in the other member countries in transactions with
third countries. In view of the fact that the Benelux countries
have, for all steel products, lower duties than the other member
countries of the Community (duties which will remain in force in
transactions with countries outside the Community after the establishment
of the Common Market), it is the purpose of this provision to obviate
the diversion of trade across the territory of the Benelux countries
to the territory of the other member countries. However, one difficulty
arose from the fact that at the time the Treaty was signed, certain
countries of the Community suspended their duties while at the same
time keeping in force the quantitative restrictions. If the suspension
of duties were maintained within the Common Market, there would
be a danger of the diversion of trade, which Section 15 of the Convention
aims to eliminate, taking place across those countries whose duties remained
in suspension. It was, therefore, found to be advisable that these
suspended duties should be restored in all the countries of the
Community at the highest level provided for in their respective
tariffs. It was, however, decided that the countries concerned,
with the exception of the Benelux countries, whose decidedly lower
customs tariffs could not be applied by the other countries for
the time being, should endeavour to bring their own rates of duty
in line with the lowest rates applied in the countries of the Community.
The Governments have agreed to these proposals the significance
of which must be underlined : In doing so, the first step has been
taken to harmonize the duties with the aim of lowering them; At
the same time, the system of the quantitative restrictions was rendered
less rigid in its application to third countries.Hitherto, some
of the countries of the Community had applied quantitative restrictions
to imports of steel products, while the Benelux countries had freed
these products from restrictions within the framework of the liberalization
of trade by the Organization for European Economic Co-operation
(O.E.E.C). The disappearance of quantitative restrictions within
the Community as from 1st May thus enables the Benelux countries
to import products (at a duty outside their tariff quota) for re-export
to other countries of the Community. The tariff quota system of
these countries is thereby rendered completely ineffective. Under
these circumstances, the restoration of the hitherto suspended duties
constitutes merely the counterpart of the de facto removal of the
quantitative restrictions in relations with third countries.
14. In accordance with Section 15 of the Convention containing
the transitional provisions, the Governments of the Benelux countries
submitted drafts of tariff quotas for approval by the High Authority.
In a letter dated 29th April
Note, the
High Authority gave its approval to these proposals, while reserving
the right to make certain modifications in respect of the volume
of imports of a small number of products. In accordance with the provisions
of the Convention, these quotas have, in principle, been fixed for
one year; they are, however, to be reviewed within three months
NoteTo
make sure that the products imported under the tariff quota are
not reexported to other countries of the Community, the governments
of the Benelux countries informed the High Authority that they would
institute a dual control system : one at the time of importation,
in the form of a definite undertaking not to re-export the products;
the other at the time of exportation by demanding a certificate
issued by the works, or production of the receipt showing that duty
has been paid outside the tariff quota on importation of the products
into the Benelux territory.
15. The Governments of the six member countries have made all
the necessary arrangements to ensure that the measures adopted will
be put into effect, in their entirety, on 1st May. The necessary
decrees, orders or instructions were published as follows :
- in Germany, in the "Bundesgesetzblatt"
of 24th April, 1953;
- in Belgium, in the "Moniteur Officiel" of 27th April,
1953;
- in France, in the " Journal Officiel de la République
Française" of 27th April, 1953;
- in Italy, by administrative instructions ;
- in the Netherlands, in the "Nederlandse Staatscourant"
of 28th and 29th April, 1953.
2. Decisions concerning
the establishment of the common market for steel
16. By its letter dated 29th April
Note, the High Authority
officially notified the six governments that in accordance with
the Convention and the decision taken by the Special Council of
Ministers, the establishment of the Common Market would become effective
on 1st May, 1953. From that date, the High Authority assumes in respect
of steel the functions conferred upon it by the Treaty, and exercises
the powers hitherto exercised by the national governments. It immediately
issued its decisions concerning the publication of the price-lists
and terms of sale, and those concerning the prohibition of discriminatory
practices.
17. In all relevant fields, whether it concerns the system of
prices, the publication of prices, methods of quoting, or regulations
concerning non-discrimination, the High Authority proposes to follow
the development of the Common Market very closely in conjunction
with all parties concerned, and to take, as the occasion arises,
such measures as experience may prove to be necessary.
System of prices
18. During the months preceding
the establishment of the Common Market for steel, each of the six countries
of the Community had its own special regulations concerning prices
and the trade in iron and steel products. In Germany, producers
and consumers had, in the summer of 1952, come to an agreement on
prices under the supervision of the Government; in January, 1953,
the prices were freed from government control. The free movement
of steel was left completely unhampered both in respect of imports
and exports. In Belgium, the price-level had been fixed, for the
home-market, by agreement between the producers and the principal consumer
("Fabrimétal"), with government approval. In France, maximum prices
were fixed by the government for all merchantable iron and steel
products, while crude iron was subject to a system of a controlled
price-freedom. Imports were prohibited, except for a few special
products which are not manufactured in France in sufficient quantities.
Exports were subject to a licensing system. In Italy, maximum prices
had been fixed since the spring of 1951, but actual prices remained
below these. Luxembourg applied the system adopted in Belgium. In
the Netherlands, the iron and steel industry fixed its own prices.
There were no quantitative restrictions on either imports or exports.
Thus, with the exception of Germany and the Netherlands, the regulations
in force before the establishment of the Common Market included,
in the majority of the member countries, a more or less strict control
of the price-level by the authorities. In respect of exports, dual
pricing was practised, which at times revealed considerable discrepancies
between the two prices. This system of dual pricing had to disappear
throughout the Community on the establishment of the Common Market.
19. With regard to the new price-system to be set up for the Common
Market, the High Authority, after consulting the Council of Ministers
and the Consultative Committee and taking into account the present situation
of the steel market, decided in favour of the freedom of prices
and competition between the producers. Thus, on the opening of the
Common Market, it fixed neither minimum nor maximum prices. It has,
however, held formal consultations with the Council of Ministers
and the Consultative Committee concerning the advisability of price-fixing
measures and the level of prices so as to be able to intervene,
should circumstances arise to call for such intervention. Henceforth,
prices must find their own level in accordance with supply and demand.
Should it be found that as a result of the establishment of the
Common Market, prices which had hitherto been different were aligning
themselves at a level which would mean an increase for many producers, the
High Authority would have to review its position, and resort to
various measures which are open to it under the Treaty. The High
Authority appreciates only too well that for the past 15 years or
more, steel prices have been government-controlled in all countries,
and that enterprises as well as consumers must learn from the beginning
how to make use of their newly-won freedom. The High Authority also
knows that powerful involuntary reactions and old memories may
cause quite a number of people to seek protection against the effects
of free competition in more or less rigid price or market agreements.
Such an agreement has been concluded between producers in respect
of sales to export markets; the High Authority is at this moment examining
the compatibility of this agreement with the Treaty. The High Authority,
as guardian of the rules set up by the six countries which have
signed and ratified the Treaty, cannot remain blind to the conclusion
of agreements which run contrary to the provisions of the Treaty,
nor can it remain inactive in the face of the repercussions of such
agreements. The development of steel prices and trade following
the establishment of the Common Market will be the High Authority's
decisive criterion concerning any action it might have to take in
order to ensure that the rules laid down by the Treaty are duly
observed. To this end, the High Authority is convening, for the
end of May, a large committee composed of consumers of steel in
the Community, for the purpose of obtaining from them information
on the initial effects of the existence of the Common Market for steel,
how trade is developing, and how prices are reacting; it also wants
to hear their comments on the difficulties which have arisen and
the problems which remain to be solved.
20. The freedom and vitality of the enterprises, so essential
to the development of the market and to economic progress, do not
only affect the basic prices, but also the various "surcharges",
which must be added to the basic prices according to the dimensions
and qualities of the products. This is the problem of the "surcharges".
Steel is produced in a great variety of shapes and forms and in
a large number of different dimensions. According to the requirements
of the consumers, it can be rolled with greater or smaller tolerances. The
tonnage to be supplied of any one particular type is also taken
into account. To all these various factors which make up the end-price
must be added the specific qualities or features which the steel
is to embody to the purpose for which it is to be used or according
to the specifications or terms of delivery prescribed by the buyer.
The producers found themselves compelled – each from his point of
view – to compile a classification of the qualities and types of
steel, and to set up a nomenclature, i. e. to establish a technical
framework. In the course of years, the iron and steel producers
in each of the six countries of the Community had arrived at a standardization
of existing nomenclatures on a national basis thereby establishing
a uniform technical framework. It thus follows that at the opening
of the Common Market for steel, there existed five national classifications
of products (Belgium and Luxembourg having the same classification),
which revealed not only considerable deviations from each other
in certain details but also differences in basic conceptions. The consumers,
for their part, had also laid down definitions of quality which
for similar or even identical uses presented differences in values
and even in conception, not only as between one sector of application
and another, but sometimes even between one user and another. This
was particularly the case with public utility organizations, such
as the railways, tramways, public works, etc. For many years, the
interested parties had endeavoured to rationalize and harmonize
the conceptions of the consumers regarding the quality of steel.
The efforts made went further than that : standardization organizations
took the welcome initiative of establishing standards which have
been widely adopted during the past 30 years. However, many organizations
– especially the public authorities and large consumers – have continued
to adhere to their own specifications which suit their own particular
needs. This situation provides an explanation for the peculiar structure
of steel prices for each individual category of this product; the
producers are fixing so-called basic prices which facilitate comparison
on a competitive market and relate to the most current profiles
and dimensions of normal production. To these basic prices they
add so-called "extras" or "surcharges" for deviations from the standard product,
and for the various types of additional work which the buyer may
demand from the producer. In some cases, however, there are price
reductions, especially in respect of quantities bought in excess
of the minimum quantities laid down for each individual product;
on the other hand, if this minimum quantity is not reached, extra
charges may be added. Consequently, the final selling price of steel,
based on the producer's point of dispatch, is calculated for each
individual type of steel by taking the basic price and adding the
various "surcharges" or deducting any allowances that may be due.
According to the type or size of the orders, the "surcharges" may
constitute a considerable proportion of the end-price, although,
in the case of rolled steel products, they may amount to only 10 %
on the average. At first, these "surcharges" were fixed by each individual
producer in relation to his particular costs of production. Later,
however, the various lists of "surcharges" in use in each of the
six member countries of the Community were standardized on a national basis.
Thus shortly before the establishment of the Common Market for steel,
the producers appeared not only with five different technical classifications,
but also with five more or less voluminous "surcharge" lists which deviated
widely from one another in a number of points, especially as regards
the choice of the basic product exclusive of "surcharge" and the
amount of the various "surcharges" to be added. Prior to May 1st,
every consumer, within his own closed home-market, had to deal with
only the one particular tariff in force in his country. On the establishment
of the Common Market, however, he would have had to deal with five
different price-lists which would have been different in both form
and content, making a comparison most difficult in many cases. This
aspect of the price problem on the Common Market has not escaped
the attention of the High Authority upon which devolves the duty
under the Convention (Section 2, para. 5) to examine, in consultation with
the governments, the enterprises and their associations, the workers,
consumers, and dealers, means and ways for making comparable the
price-scales practised for different qualities of products based
on the average price for such products, or for the successive stages
of processing such products.
21. On this question of "surcharges" the High Authority has held
extensive consultations which have resulted in the following conclusions
: With the exception of certain reservations concerning methods
of application, all the parties consulted agreed unanimously with
the High Authority that it would be desirable, if not necessary, to
adopt a standardized and readily comprehensible, nomenclature for
all the six countries of the Community. Study groups set up by the
members of the iron and steel industries of the six countries have
started on the difficult task of bringing the frequently widely
diverging conceptions into line. If on the conclusion of this work there
should still be discrepancies as between individual countries or
individual producers, these will be confined to special cases, such
as products in rare demand, or products of a special type whose
use is relatively restricted.
22. The question as to whether it would be advisable to establish
standard rates of "surcharges" to apply throughout the Community,
produced diverging opinions. The producers, dealers and certain
consumers stressed the advantages of a standard "surcharge" list;
others insisted on maintaining the principle of free competition
to apply to the end-price and not only to the basic price. The High
Authority was of the opinion that while a single nomenclature and
common technical definitions would mean considerable progress and constitute
one of the conditions for a free and enlightened choice on the part
of the buyers from among the different quotations submitted to them,
the application of a standard amount of "surcharges" by all the enterprises
would remove a very essential element of competition. By deciding
in favour of the principle of price freedom in competition, the
High Authority has left it to the enterprises to fix their own "
surcharges " in accordance with supply and demand. This solution
enables the more modern and better equipped enterprises as well
as those which specialize in certain types of products, to fix their
"surcharges" on their most favourable production costs and thereby
engage in a healthy competitive activity on the Common Market.
Publication of the prices
23. The freedom of competition
on which the Common Market is based, in accordance with the Treaty,
does not imply that the seller is at liberty to apply any price
he likes in his dealings with any particular buyer. The fundamental
rule of the Common Market is the rule of non-discrimination. Publication
of the prices is to ensure that in all cases of comparable transactions
the same terms are applied, both from the producer's and the consumer's
point of view. One of the decisions which the High Authority has
issued in connection with the establishment of the Common Market
for steel aims at defining in what form and to what extent the price-lists of
the steel industry are to be published. A similar decision had already
been issued in respect of the coal-mining and iron-ore industries.
In accordance with Article 60, para. 2 of the Treaty, the High Authority
has laid down the methods and time-limits for the publication of
the price-lists and terms of sale by the enterprises of the steel
industry, as well as the minimum data to be embodied in these publications
NoteThis
decision would have lost some of its effectiveness if it had not
been applied at the same time to the intermediaries through whom the
producers sell their products. This has been counteracted, in accordance
with the Treaty, by laying down that the intermediaries – dealers,
agents, sales organizations and commission agents – must either
publish their own price-lists and selling terms in the same form
as the enterprises, or if they apply the same conditions as the
enterprises wholly or in part, make known which elements of these
price-lists and selling terms apply to their own transactions. As
it is left open to the enterprises to bring their quotations in
line with the price-list of another enterprise, it is essential
that these price-lists concern only those products which definitely
form part of the range of production of the enterprises concerned.
If this rule were not applied, fictitious price-lists set up by
one enterprise would enable another enterprise, acting in agreement
with the first, to carry out discriminatory practices with quotations
based on a fictitous price-list. Finally, it follows from this decision
that for all quotations calculated on the basis on his own free
choice
Note, every enterprise is under an obligation
to adhere to its published price-list and selling terms for as long
as these prices and selling terms remain in force. Should an enterprise,
for reasons of its own – and provided that its decision conforms
to the letter and spirit of the Treaty – decide to alter its prices
and selling terms, such new prices and selling terms cannot be put
into effect until after they have been published in the prescribed
form and within the prescribed time limit.
Methods of quoting
24. Until the Common Market was
established, the methods of quoting were different in every country
of the Community :
- ex-works
in Italy, the buyer bearing the actual transport charges from the
works to the point of delivery;
- carriage paid to any point of delivery in Belgium and
in Luxembourg, the average transport charges being included in the
price which thus was the same for all buyers irrespective of their
geographical location;
- on the basis chosen by the enterprises in the other countries
of the Community the buyer ultimately bearing the transport charges
from the selected point of dispatch to destination.
25. This system of specified points of dispatch was, however,
subject to special conditions. In Germany, the transport charges
invoiced to the buyer were limited to an account corresponding to
the transport charges for a maximum distance of 220 km. Consequently,
all consumers located at a distance of more than 220 km from the
specified point of dispatch of the work were, without exception,
charged the same price, e.g. the price ex Oberhausen plus transport
charges for 220 km, irrespective of their particular geographical
location. Since the last war, in Western Germany the processing
industries located in districts far removed from the Ruhr, as for instance
in Bavaria, Hanover and Schleswig- Holstein, had lost their natural
markets in eastern Germany. They were thus compelled to make efforts
to sell their products in Western Germany and found themselves at
a disadvantage through the fact that their products had to bear
the return freight. The limitation of transport charges to 220 km
for steel destined for these distant districts was meant to make
things easier for the processing industries in these districts.
However, this measure had yet another purpose; some of these distant districts
had become reception areas for refugees from the east and, therefore,
found themselves in a more difficult economic position than the
districts closer to the Ruhr. The limitation of the transport charges
was, therefore, also looked upon as a measure of compensation for
the additional burden which these distant districts have to bear
in connection with these large numbers of refugees. In France, the
system of specified points of dispatch was not applied rigidly,
but coupled with flat rates of transport charges constituting a
definite supplementary charge on the price ex Thionville and resulting
in a system of " delivered " prices for each zone. The establishment
of the common market places the enterprises from now on under an
obligation to adjust their methods of quoting to the new conditions,
in order to observe the fundamental rule of the Treaty — the rule
of non-discrimination.
26. The Treaty provides the facility of applying the system of
multiple specified points of dispatch under which every seller can
apply the same " delivered " price as an enterprise which bases
its quotation on another point of dispatch, provided that the adjustment
is made with the aim of lowering the price. (Article 60, para. 2.b.) It
is the object of this system to extend competition to the whole
territory of the Common Market, each enterprise having the opportunity
of selling in the zone of another enterprise by lowering its quotation
through aligning it with another point of dispatch, so that no one
enterprise will have a monopoly. Under the Treaty, however, the
High Authority is empowered to intervene for the purpose of limiting
the discount which an enterprise can allow in order to secure sales
in the traditional selling zones of its competitors, or for the
purpose of maintaining its business in the zones where its competitors
might in the future operate with lower prices, by basing its prices
on their particular points of dispatch. This limit on discounts
would compel the enterprises either to abandon cert a in markets
which are far removed from their own point of production or to gain
access to these markets by lowering their list-prices. On the strength
of an opinion given by the Consultative Committee, the High Authority
took the view that it was no expedient, at this stage, to fix such
a limit for discounts. Adopting the same attitude as it has done
with regard to the fixing of prices, the High Authority will watch
closely the development of the Common Market and will, in the light
of experience, intervene as and where necessary.
Rules concerning, non-discrimination
27. According to Article 60, para,
1 of the Treaty, the High Authority after consulting the Consultative Committee
and the Council of Ministers had to define the discriminatory practices
which are prohibited on the Common Market. This was done in a decision
which applies to coal and iron-ore as well as steel
NoteThe
first rule prescribes the uniform application of the selling terms
laid down in the price-list, without it being possible to circumvent
this rule by granting abnormal terms of payment without extra charge.
This second rule prohibits any differentiation in the selling terms
according to the nationality of the buyer domiciled in the Community
or according to the locality in which he is established within the
Community. It was not for the High Authority to give preference
to, and prescribe, any particular form of selling organization.
On the contrary, it took the view that each type of selling organization
would benefit from its contact with another. Nor did it feel justified
to prevent the enterprises from granting special terms to buyers
who place an order, or a series of orders, for large quantities.
However, it had to make sure that discriminations arising from systems
which had hitherto been operating on a national basis would be eliminated.
The High Authority has made sure of this, in particular by deciding
that the quantities or values which are taken into consideration
as a basis for granting a discount, must no longer be the quantities
and values which the buyer domiciled within the Community has agreed
with the enterprises of a particular country; they must be the quantities
and values agreed with all the enterprises supplying the product
or class of products involved, within the Common Market, irrespective
of the market on which the buyer has re-sold these products. As
regards the financial measures which, in Germany, permit the reduction
of freight charges for consumers in certain districts, the High
Authority has also made it known that, from social considerations,
it raises no objection to the retention of the system even if the
necessary compensation funds are derived from a levy on the total
consumption, provided that the manner in which refunds are made
does not distort the competitive situation between the enterprises
of the Common Market. As regards the taxes which the seller may
include in the price quoted to the buyer, the rule laid down by
the High Authority prescribes that the amount equivalent to these
taxes should not be demanded from the buyer if the seller is entitled
to exemption or refund
Note.
28. Further discriminations may be revealed in practice or may,
on the other hand, disappear under the influence of competition.
The High Authority will, if necessary, intervene by successive stages.
Special provisions for Italy
29. Under Section 30 of the Convention
containing the Transitional provisions, the High Authority is empowered,
in consideration of the particular situation of the Italian iron
and steel industry, to authorize the Italian government to maintain,
during the transition period, customs duties on iron and steel products
imported from other member countries to the extent it may deem necessary.
However, during the first year of this five-year period these customs
duties must not be higher than those laid down in the Annecy Convention
of 10th October, 1949. This ceiling will be reduced by 10 per cent,
in the second year, 25 per cent, in the third, 45 per cent, in the
fourth and by 70 per cent, in the fifth year, so that at the end
of the transition period the duties will have been completely abolished.
On 1st April, 1953, the Italian government applied to the High Authority
for authorization to put into effect, as from 1st May, 1953, the
duties laid down in the Annecy Convention. In support of this application,
the Italian government put forward that in view of the demographic
situation of the country, it was necessary for Italy to continue
with her industrialization programme and the modernization of existing
plant; it stressed the disadvantages regarding the supply facilities
of the Italian iron and steel industry which arise from the geographical
position of its works within the Common Market. An examination of
all these submissions revealed, that these contentions are justified.
It is true that the production costs of the Italian iron and steel
industry have been reduced as a result of the recent decisions of
the High Authority in respect of scrap, but the elimination of double
prices hitherto applied to exports by the other countries of the
Community and the lowering of prices on the national markets are
creating conditions which the Italian iron and steel industry, in
its present stage of modernization, is unable to meet without some
measure of protection. The High Authority arrived at the conclusion
that no definite decision could be taken until a new price equilibrium
had been established which would make it possible to assess the
degree of tariff protection which the Italian iron and steel industry
could claim for itself. It authorized the Italian Government, provisionally
for the period from 1st May to 1st August, 1953, to apply the customs
duties laid down in the Annecy Convention of 10th October, 1949
Note, to the iron and steel products
imported from other countries of the Community. The High Authority
took the view that this measure of protection corresponded to the
difference between the prices of the products of the Italian iron
and steel industry and those of the other countries of the Community
at the time of the establishment of the Common Market. However,
the High Authority did not want to be content with a purely temporary
solution which would leave the Italian iron and steel industry and
its customers in suspense. It has already announced the principles
on which it proposes to open discussions with the Italian government
for the purpose of finding a permanent solution. When the situation
is in due course reviewed, and in the decision which it will be
called upon to take, the High Authority will endeavour to give the
Italian iron and steel industry, in conformity with Section 30 of
the Convention, the security which is indispensable for the development
of its investments, while at the same time fixing, to the extent
t ha t may be necessary, the rates of the customs duties which are
contrary to the provisions of the Treaty. The application of maximum
rates of duty would, in fact, no longer be of any interest to the
Italian iron and steel industry and would be detrimental to the
interest of the Italian consumers if the prices against which the
Italian iron and steel industry seeks protection, were to be increased.
Moreover, the application of maximum rates of duty would also be
detrimental to other industries of the Community, if these were
compelled to reduce their prices in order to bring them into line
with quotations of enterprises in third countries which they would
be authorized to do in accordance with the last paragraph of Section
30 of the Convention.
3. General problems concerning
the operation of the Common Market
30. Independently of the special
measures which had to be taken in connection with the establishment
of the Common Market, there has arisen – as already pointed out
in the General Report on the activities of the Community – a number
of problems connected with the operation of the Common Market. The
problems outlined below concern partly the steel market (precautionary
measures in accordance with Section 29 of the Convention, concerning
special steel) and partly all the products of the Common Market
(turnover taxes, cartels and combines, technical research and workers'
safety).
Precautionary measures
31. In Section 29 of the Convention,
it is recognized that special precautionary measures may be necessary for
the steel industry to prevent the diversion of production which
may result from the establishment of the Common Market. This Section
empowers the High Authority to resort to special measures to the
extent that it deems that the provisions of the Treaty cannot be
applied. According to para. 2 of this Section it was incumbent upon
the High Authority to fix, during the preparatory period, the technical
criteria for the application of these precautionary measures. In
other words, the High Authority had to determine, in consultation
with the producers' associations, the Consultative Committee and
the Council of Ministers, what are the technical criteria that would
make it possible to judge whether these precautionary measures had
become necessary. In denning these technical criteria, it was necessary
to preserve an adequate degree of flexibility, so as to be able to
adapt oneself to all possible situations and avoid a too rigid strict
procedure. Moreover, Section 29 of the Convention lays down limits
and conditions for the application of the precautionary measures.
32. In consideration of these circumstances, the High Authority
has adopted the following definition of the technical criteria which
will make it possible to judge when the application of the precautionary
measures becomes necessary
Note
32.1 In regard to diversions of production
:
a a perceptible falling off, due
to the establishment of the common market, in the production of
a country, a district, a group of enterprises, a single enterprise,
or an important section of an enterprise, whose slackening or stoppage
may upset the equilibrium of the territory or organization concerned;
b this decline in production must relate to a normal production,
taking into account the development of the overall production situation
in the Community;
32.2 in regard to the difficulties of enterprises which, following
the adaptation provided for in Section 1 of the Convention, would
be in a position to stand up to the competition : difficulties which
are likely to jeopardize the continuance of the activity of these
enterprises. It is necessary to take into account not only the technical,
economic and financial considerations, but also the social aspects,
and particularly the direct repercussions on the workers.
32.3 In regard to the displacement of workers caused by the
diversion of production : displacement of workers in larger numbers
than those Avho would be able to benefit from the provisions of
Section 23 of the Convention. Furthermore, the High Authority has
adopted the view expressed by the Consultative Committee and the
Council of Ministers, that it is difficult to apply the same criteria
indiscriminately to all enterprises, on account of the unequal susceptibility
of the enterprises to changes, the different technical structure
of plant, as well as for other, more general, reasons, and that
each individual case would have to be reviewed separately.
Special steels
33. The measures adopted in connection
with the establishment of the Common Market for steel apply to all the
categories of products made of ordinary steel, which are listed
in Annex I of the Treaty. As regards the same products supplied
in special steels, Annex III of the Treaty subdivides these into
three groups. The first two of these come within the jurisdiction
of the High Authority, but as the results of an inquiry into the
methods of applying the Treaty are not yet known, and in consideration
of the special conditions involved in the production of steel and
the steel trade, the customs duties and the quantitative restrictions
to which they are at present liable, will not be abolished until
1st May 1954. The High Authority will, therefore, have to proceed
with this inquiry. As regards the third group of special steels,
the inquiries conducted by the High Authority will also have to
determine the methods of applying the provisions of the Treaty to
these steels. As and when these inquiries are completed, but not
later than 1st May, 1956, the High Authority will submit relevant
proposals to the Council of Ministers who will have to pass a unanimous
decision.
Turnover taxes
34. This problem is dealt with
in the General Report of April, 1953
Note : it concerns the selling
terms, on the Common Market, of the producers of the various countries
in which different systems of taxation are in force. In spite of
the removal of the customs barriers, the products of the Common
Market continue to pass from one taxation system to another as they
circulate from one country of the Community to another. It was,
therefore, necessary to find a solution which will obviate the superposing
of taxes of the same kind and permit unhampered circulation of the
products throughout the Community. With the object of finding this
solution in conformity with the provisions of the Treaty, the High
Authority set up a committee of independent experts under the chairmanship
of Prof. Tinbergen. This committee has submitted its report to the
High Authority which has published it.
35. Since then, the High Authority has issued a decision which
defines discriminatory practices. In this decision – and in view
of the taxation systems at present existing in the different member
countries – the High Authority considers it incompatible with the
application of the Treaty that taxes or dues for which the seller
is entitled to exemption or refund are included in the price quoted
to the buyer
Note. In taking this decision,
the High Authority issued at the same time a declaration to the
effect that it had decided to examine forthwith, in conjunction
with the governments concerned, and in accordance with the procedure
laid down in Section 2, para. 4 of the Convention containing the
Transitional Provisions, the effect on the coal and steel industries
of the provisions concerning turnover taxes with a view to improving
on the system of exemptions and compensation payments in force at
present. In a letter which the High Authority addressed to the governments on
this subject on 1st May, 1953, it requested the governments to carry
out this examination within as short a period as possible, and to
complete it not later than 31st December, 1953. Should the conclusions
of this examination cause the High Authority to adopt the view that
the present system must be improved upon, i t will submit the necessary
proposal to the governments which have retained jurisdiction in
matters of taxation.
Cartels and combines
36. The problem of cartels and
combines is one of the most important among the problems with which
the High Authority has to deal. The establishment of the Common
Market bursts open the national framework within which cartels have
been existing. Moreover, the relevant provisions of the Treaty do
not enter into force until the Common Market has been established.
During the coming months, the High Authority will give its special
attention to this problem because of its fundamental importance
to the operation of the Common Market. Later on, the High Authority
will submit a special report on the development of this question,
dealing particularly with the measures taken, in accordance with
the Treaty, for the elimination of agreements and practices which
are likely to hamper, restrict or distort normal competition.
Technical research and workers'
safety
37. It is incumbent upon the High
Authority to promote technical and economic research in respect
of the production and the development of the consumption of coal
and steel, as well as in respect of the safety of the workers in
these industries. In accordance with the provisions of Article 55
of the Treaty, the High Authority convened meetings of special committees
in Luxembourg on 29th and 30th April, for the purpose of establishing
the appropriate contacts between the existing research organizations.
The research organizations of the coal-mining industry, the iron-ore
industry and the iron and steel industry of the countries of the Community
were represented at these meetings. The High Authority also invited
members of the British industrial research organizations and a member
of the United Kingdom Delegation in Luxembourg to take part in its
work. Three sub-committees were set up to deal with the technical
side of production :
- one for
mining technique (cutting, loading, transport from the coal-face,
and gobbing) ;
- the second for coking ;
- the third for technical research in the iron and steel
industry.
As the problems dealt with in research
in the field of workers' safety concern only the coal and iron-ore
mines, no special sub-committee was appointed. In these various
fields as well as that of workers' safety and hygiene, a working
programme has been set up covering, inter alia, the collection of
publications, research reports and information on practical applications
of research findings. As soon as the work of these committees has reached
an advanced stage, the High Authority, in accordance with the provisions
of the Treaty, will be able to consider the continuance and encouragement
of this research work, in particular by providing financial assistance.
In conformity with the provisions of the Treaty, the results of
research financed by the High Authority will be made available to
all parties concerned in the Community.
