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Treaty establishing the European Coal and Steel Community, ECSC Treaty

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Treaty establishing the European Coal and Steel Community, ECSC Treaty

 

SUMMARY OF:

Treaty of Paris setting up the European Coal and Steel Community (ECSC)

WHAT WAS THE AIM OF THE TREATY?

  • It set up the European Coal and Steel Community (ECSC) which brought together 6 countries (Belgium, Germany, France, Italy, Luxembourg and the Netherlands) to organise the free movement of coal and steel and to free up access to sources of production.
  • An important feature was the setting up of a common High Authority to:
    • supervise the market;
    • monitor compliance with competition rules; and
    • ensure price transparency.
  • The ECSC Treaty was the origin of the EU institutions as we know them today. Created in 1951, in the aftermath of World War II, the ECSC represented the first step towards European integration.

KEY POINTS

Objectives

The aim of the treaty, as stated in its Article 2, was to contribute, through the common market for coal and steel, to economic expansion, employment and better living standards. Thus, the institutions had to ensure an orderly supply of coal and steel to the common market by ensuring equal access to the sources of production, the establishment of the lowest prices and improved working conditions. All of this had to be accompanied by the growth in international trade and the modernisation of production.

In creating a common market, the treaty introduced the free movement of products without customs duties or taxes. It prohibited discriminatory measures or practices, subsidies, state aids or special charges imposed by states and restrictive practices.

Structure

The treaty was divided into 4 titles:

  • 1.

    the European Coal and Steel Community;

  • 2.

    the institutions of the Community;

  • 3.

    economic and social rules; and

  • 4.

    general rules.

It also included:

  • 2 protocols, one on the Court of Justice and the other on the ECSC’s relations with the Council of Europe, and
  • a convention on the transitional rules, which dealt with the implementation of the treaty, relations with non-ECSC countries and general safeguards.

Institutions

The treaty established a High Authority, an Assembly, a Council of Ministers and a Court of Justice. The ECSC had legal personality.

  • The High Authority, the forerunner of today’s European Commission, was the independent collegiate executive with the task of achieving the objectives laid down by the treaty and acting in the ECSC’s general interest. It comprised 9 members (of whom not more than 2 could be of the same nationality) appointed for 6 years. It was a truly supranational body with power of decision. It supervised:
    • the modernisation and improvement of production;
    • the supply of products under identical conditions;
    • the development of a common export policy; and
    • the improvement of working conditions in the coal and steel industries.

The High Authority took decisions, made recommendations and delivered opinions. It was assisted by a Consultative Committee (the forerunner of today’s European Economic and Social Committee) made up of representatives of producers, workers, consumers and dealers.

  • The Assembly, the forerunner of the European Parliament, was made up of 78 members, who were representatives of their national parliaments. There were 18 each for Germany, France and Italy, 10 for Belgium and the Netherlands and 4 for Luxembourg. The treaty assigned supervisory power to this Assembly.
  • The Council, the forerunner of today’s Council of the European Union, consisted of 6 representatives of the national governments. The Presidency of the Council was held by each ECSC country in turn for a period of 3 months. Its role was to harmonise the activities of the High Authority and the general economic policy of the governments. Its approval was required for important decisions taken by the High Authority.
  • The Court of Justice, the forerunner of the Court of Justice of the European Union, consisted of 7 judges nominated for 6 years by common agreement between the governments of the ECSC countries. It ensured that the treaty was interpreted and implemented correctly.

Tasks

  • To pursue its goals, the ECSC:
    • collected information from coal and steel companies and associations;
    • consulted with the various parties (coal and steel companies, workers, etc); and
    • had powers to carry out checks to check the information with which it was provided.
  • When coal and steel companies did not respect these powers, the High Authority could impose fines (maximum of 1% of annual turnover) and penalty payments (5% of the average daily turnover for each day’s delay).
  • On the basis of the information it gathered, the High Authority prepared forecasts to guide the activities of those involved and determine how the ECSC would act. To supplement the information received from companies and associations, the ECSC carried out its own studies on price trends and market behaviour.

Funding aspects

  • The ECSC’s budget was funded by levies on coal and steel production and by contracting loans. The levies were intended to cover administrative expenditure, non-repayable aid towards retraining workers, and technical and economic research (which needed to be encouraged). Money received from borrowing could only be used to grant loans.
  • In the field of investment, in addition to granting loans, the ECSC could guarantee loans contracted by companies with third parties. The ECSC also had the power to provide guidance on investments which it did not fund.

Production

The ECSC played a mainly indirect, subsidiary role through cooperation with governments and intervention in relation to prices and commercial policy. However, in the event of any decline in demand or shortage, it could take direct action by imposing quotas with the aim of limiting production in an organised manner or, for shortages, by drawing up production programmes setting consumption priorities, determining how resources should be allocated and setting export levels.

Price-fixing and competition

  • The treaty banned practices which created prejudice according to price, unfair competitive practices and discriminatory practices involving the application of dissimilar conditions to comparable transactions. These rules also applied to transport.
  • Furthermore, in certain circumstances, such as a manifest crisis, the High Authority could fix maximum or minimum prices either within the ECSC or in relation to the export market.
  • To ensure that free competition was respected, the High Authority had to be informed of any action by ECSC countries which was liable to endanger it. Furthermore, the treaty dealt specifically with the 3 cases which could distort competition:
    • agreements,
    • concentrations and
    • abuse of dominant positions.

Agreements or associations between undertakings could be cancelled by the High Authority if they directly or indirectly prevented, restricted or distorted normal competition.

Worker aspects

  • Although workers’ wages remained within the jurisdiction of the ECSC countries, the High Authority could intervene, under certain conditions, in the event of abnormally low wages and wage reductions.
  • The High Authority could grant financial aid to programmes to offset the possible negative effects of technological advances in the industry on the workforce (compensation, allowances and vocational retraining).
  • As far as the movement of skilled workers was concerned, the ECSC countries had to remove restrictions on employment based on nationality. For the other categories of workers, and in the event of shortages of that type of labour, the countries were called upon to make the necessary adjustments to immigration rules to enable workers from other countries to be employed.

Commercial policy

  • The treaty also dealt with the commercial policy of the ECSC towards non-ECSC countries. Although the powers of national governments remained in place, the ECSC had a number of powers such as setting maximum and minimum rates for customs duties and supervising the granting of import and export licences. The ECSC also had the right to be kept informed of commercial agreements relating to coal and steel.
  • The High Authority could also intervene in the event of dumping, i.e. the use by coal and steel businesses outside the jurisdiction of the ECSC of means of competition contrary to the treaty and substantial increases in imports which could seriously threaten ECSC production.

FROM WHEN DID THE TREATY APPLY?

The treaty applied from 1952, it was valid for 50 years and expired in 2002. The common market created by the treaty opened on 10 February 1953 for coal, iron ore and scrap and on 1 May 1953 for steel.

BACKGROUND

  • Before its expiry, the treaty was amended on various occasions by the following treaties:
  • When the ECSC Treaty expired, rules on the coal and steel sectors were integrated in the treaties establishing the European Community, the Treaty of Rome.
  • A protocol on the financial consequences of the expiry of the ECSC Treaty and on the research fund for coal and steel is annexed to the Treaty of Nice. This protocol provides for the transfer of all assets and liabilities of the ECSC to the European Community and for the use of the net worth of these assets and liabilities for research in the sectors related to the coal and steel industry.
  • Some decisions of February 2003 contain the necessary measures for the implementation of the articles of the protocol, the financial guidelines and the articles relating to the research fund for coal and steel.

MAIN DOCUMENT

Treaty establishing the European Coal and Steel Community

last update 11.12.2017

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