As Member States Roll out Different Support Schemes, Single Market Gets Fragmented

On Tuesday, EURATEX, in a statement, described the European Commission’s hesitation to adopt a European price cap on natural gas, accompanied by massive national spending programmes to subsidise domestic gas consumption as a dereliction of duty. EURATEX Director-General Dirk Vantyghem tells texfash.com about the need for a plan at EU level, and not a situation where single member states compete with each other in launching national support programmes.

Long Story, Cut Short
  • EURATEX, most member states along with other sector associations, is asking for a price cap on gas, but the European Commission is hesitant to move forward with this.
  • The energy price rise is threatening the textiles industry, especially SMEs, which struggle with tight marginalities while being at the beginning of the supply chain.
  • Companies are absorbing the price increases but in some cases the production costs are creating high losses, forcing them to reduce production, temporarily closing down or moving production abroad.
Last week, EU energy ministers approved a Council Regulation proposal to address high energy prices. The regulation focuses on the electricity prices and electricity demand reduction. They, according to EURATEX, miss the point of bringing gas prices down—the one measure that would bring the biggest impact on European industry.
Gas-Tritis Last week, EU energy ministers approved a Council Regulation proposal to address high energy prices. The regulation focuses on the electricity prices and electricity demand reduction. They, according to EURATEX, miss the point of bringing gas prices down—the one measure that would bring the biggest impact on European industry. Erich Westendarp / Pixabay
  • I draw your attention to a sequence of calls made by EURATEX. On 31 January, EURATEX pointed out how the current energy crisis was impacting the competitiveness of the European textile and clothing industry. On 2 March, EURATEX highlighted that companies were at risk of stopping their production if energy and gas prices continued to rise. On 26 August, EURATEX called for a single European strategy to tackle this energy crisis.
  • So, EURATEX has been expressing concern about the energy impact on the European textiles industry since the beginning of the year. However, the situation apparently continues to worsen. If things don't improve, and the EU or national govts can't do much beyond a point, what is the EURATEX solution to the current crisis?

EURATEX, in the name of the textile industry, along with other sector associations, is asking for a price cap on gas; most member states are asking the same, but the European Commission is hesitant to move forward with this. EURATEX also believes in the need to revise the price setting mechanism for electricity; the current production cost for electricity is around 10% of the sales price, which is not acceptable. Most importantly, we need a plan at EU level, and not a situation where single member states compete with each other in launching national support programmes.

Has EURATEX done any survey on the rise in energy prices? How much have prices increased in the last one year? But obviously, prices would be different in each country. How much are companies absorbing the prices, and how much are they passing on to consumers?
We know from our member associations that in some countries, such as Italy, the prices have gone up 400% (interview of Sergio Tamborini, SMI President). Companies are mainly absorbing the price increase but in some case production costs is creating too high losses forcing them to reduce production, temporarily closing down or moving production abroad.

Across Europe, governments are introducing measures limiting energy usage. What are textile companies themselves doing in this regard? Is EURATEX planning to issue guidelines on what companies can / should do to manage energy consumption?
In the short run, not much can be done. The industry is already trying to reduce the use of gas and electricity as much as possible, but the low hanging fruits are gone. Further increase in energy efficiency requires investment in new technology and machines, and this will take time. In today’s crisis, there is no time left.

The energy price rise is threatening the textiles industry by a possible reduction or even suspension of production, with some companies considering moving production outside of the EU with a loss of jobs. This is especially true for SMEs, which struggle with tight marginalities while being at the beginning of the supply chain.

Dirk Vantyghem
Director-General
EURATEX
Dirk Vantyghem

Many energy experts have expressed the opinion that this is probably a good time for Europe to switch over from fossil fuels to renewables. Is EURATEX thinking the same too? Could you kindly elaborate?
Some parts of the textiles supply chain are especially energy-intensive, such as finishing and dyeing or spinning. The European textile industry welcomes the use of renewable energies, and the future is surely moving in that direction. Nevertheless, the energy crisis is affecting the industry now and solutions must be found now to ensure the future of the European textiles sector.

The textiles industry is made up of countless small players as well, who do not have the cushioning luxury to absorb shocks. What do you think such companies ought to be doing?
The energy price rise is threatening the textiles industry by a possible reduction or even suspension of production, with some companies considering moving production outside of the EU with a loss of jobs. This is especially true for SMEs, which struggle with tight marginalities while being at the beginning of the supply chain.

EURATEX has many national associations as members. How are you coordinating with them? How can one single strategy tackle this crisis if ground situations are different in member countries?
We see different member states rolling out different support schemes, which leads to a fragmentation of the Single Market.

Subir Ghosh

SUBIR GHOSH is a Kolkata-based independent journalist-writer-researcher who writes about environment, corruption, crony capitalism, conflict, wildlife, and cinema. He is the author of two books, and has co-authored two more with others. He writes, edits, reports and designs. He is also a professionally trained and qualified photographer.

 
 
 
  • Dated posted: 5 October 2022
  • Last modified: 5 October 2022