Duty free sales

Since the EU finance ministers have refused to reconsider the abolition of duty free sales and also refused to carry out another study into the social and employment impacts of abolition, it seems now rather certain that duty free sales on intra EU flights will be ended June 30st 1999. The duty free lobby has now changed its strategy and only hopes for another extension of the period that duty free sales are still allowed.

DUTY FREE SALES

Background:

In 1992 the Ecofin Council set the date for abolition of intra-EU duty-free sales: June 30, 1999 (see Directive 92/12/EU). Their argument is that this is a hidden form of subsidy. The duty-free industry (International Duty Free Confederation) has set up an enormous lobby to stop this ban. March 17 the Transport Council asked for a new study into the economical impact of this measure (if it would result in a loss of jobs). Duty-frees were actually meant to be abolished with the coming of the European single market in 1993. But a number of EU member states, led by Britain, managed to win a six-year reprieve.

Commission Directorate responsible:

DG XXI (Finances).

Parliament:

At the EP plenary session end March/beginning April, a large number of MEPs voted in favour of a resolution calling for the Commission to order an independent study of the social, economic and regional consequences. The Resolution was supported by all political groups, and noted the Transport Ministers' March 17 request for such a study, and for the Finance Council to take the issue forward.

Developments:

On April 1, Ecofin Council President Douglas Henderson had conceded in a question-and-answer session with the European Parliament that Finance Ministers had not yet taken a decision on whether or not to respond to the latest requests from Transport Ministers to put the issue once again on the agenda and carry out an impact assessment. But he said he was not convinced of the merits of a new study.

Commissioner Monti (DG XXI) reiterated during the above EP plenary that abolition of duty free would not be reconsidered. Mr Monti said the Commission does not intend to carry out a study of the implications. The Commission does not intend to give any signals which might encourage the duty-free trade to think they could find any way of delaying the inevitable', he said. Furthermore, the Commissioner dismissed the significance of questions raised in some Member States' - which Euro-MPs had offered as evidence of the need for a Commission rethink. You also appreciate that the Commission is aware that the large majority of Finance Ministers have declared twice, in November 1996 and very recently in March 1998 that the decision taken in 1991 to end intra-Community duty-free sales will not be reconsidered.' The Commissioner repeated the point he made last Autumn on the occasion of a major Brussels conference on duty-free sales that the transitional period of more than seven years granted to the duty free sector was sufficient to meet the duty-free trade's legitimate concern about the phasing out'. The transitional period largely overcomes the need for a study' he said, because the Council took into consideration the socio-economic dimensions when it adopted its 1991 Decision.

The Ecofin Council meeting in Luxembourg on 21st April was reported to have ducked the issue. Any decision to overturn the abolition requires unanimity of all 15 EU Finance Ministers.

Next Steps:

The issue seems to have ended successful for us and there doesn't seem to be a reason to focus any activities on it. Still, the duty-free lobby seems to gain ground with - for example - Germany's chancellor Helmut Kohl fully supporting them. Also, the issue might be an strategic opportunity for groups fighting against growing air traffic, since for once we are actually having the same point of view as the finance ministers.

Update

Supporters of the campaign to save duty-free sales believe that their best hope of success is to win a further extension from June next year when the regime is due to be abolished. This modification of the campaign's stance follows the refusal of EU finance ministers to sanction a study into the social and employment impact of abolition. This effectively killed off any hope that duty-frees could be saved permanently.

It is estimated by the duty free lobby that up to 150,000 direct and indirect jobs could go throughout Europe when duty-frees are abolished. This number is misleading though, since people will buy elsewhere, if they don't buy at duty free shops (thus creating jobs somewhere else).

French Prime Minister Lionel Jospin has expressed concerns about the economic impact of an abrupt abolition of duty free sales. Jospin's office issued the statement after the Prime Minister received a report from Socialist parliamentarian Andre Capet recommending a gradual phasing out of duty free sales within Europe to avoid an economic shock. French shipowners have called on their government to press the European Commission for an eight to ten year transition period before final abolition of duty-free sales.