The big announcement finally came. The European Commission will investigate whether China’s electrical vehicles (EV) industry has benefitted from over-generous state support in order to price-cut European competitors. A few days ago, the acting competition commissioner hinted that a similar move might follow on Chinese wind turbines. China’s EV and wind turbine manufacturing sector (similar to battery and photovoltaic production) has followed the same ruthless blueprint on state subsidies, preferential loans and intellectual property theft.
The EU probe on illicit Chinese state subsidies is not only the right move, but is actually long overdue. More importantly, the belated reaction on taming Beijing’s notorious dumping strategy is vital as it goes beyond potential tariffs. This is a much needed wakeup call for the EU to focus on its own long-term competitiveness in key sectors and recognise the shortfalls of its current industrial and climate policy.
China’s Dirty Playbook on Clean Technology
Since the 2000s, the Chinese Communist leadership has provided massive state support to a number of key sectors in order to upgrade its manufacturing base and shift towards high-tech products. This turned into a selective breeding programme for national champions in telecommunications (Huawei, ZTE), semiconductor manufacturing (SMIC) and advanced lithium-ion batteries (CATL), among others. The generosity in supporting EVs has become obvious – five of the top 10 subsidy recipients in 2023 are electric vehicles or batteries producers. The overall subsidy spending for the whole EV sector is estimated to more than $125bn between 2009 and 2021.
Additionally, numerous state-owned enterprises and favoured companies have received huge indirect benefits. The IMF calculates that at least 3 % of Chinese GDP is allocated for implicit support to China’s valuable industrial offspring. Dozens of ‘private’ companies have received huge tax breaks, free land use or preferential loans from local governments. Protectionist localisation policies also mean that foreign automotive manufacturers could only enter China’s massive market if they form a joint venture with a Chinese company, which in turn has full access to intellectual property (IP) and a strong stake in decision-making.
The final ingredients to China’s special sauce are the extremely cheap energy prices for industrial manufacturing (usually from dirty coal) and the abundance of natural resources. International leaders are obsessed with China’s dominance in minerals and rare earths, but many are embarrassingly silent on the tragic but simple fact that Uighur slave labour is a large part of the story.
Tariffs are coming. Then what?
Cutting to the chase, yes, China is massively subsidising its clean tech industry. The EU probe on EVs will most likely confirm this in 2024 and the European Commission will suggest raising existing tariffs on imported cars from China. However, even if the EU doubles its current levies, most of the small-scale Chinese EVs, which currently hover around 20 000 euros, will remain cheaper than all other European brands. Even though there is a sense of media panic about Europe’s auto sector, the situation is far from grim. Close to 90 % of the new cars sold globally remain classic internal combustion engine vehicles or hybrids. European cars continue to be among the best when it comes to the mid and high end of sold vehicles.
The rumours of Europe’s car producers’ death are greatly exaggerated, but the clock is ticking as the EV share is growing. Ironically, the raised EU tariffs will cause more damage to Western brands, rather than Chinese ones. Most of the current European demand for imported EVs is for Shanghai-made Teslas and Sino-European joint ventures, such as the Dacia Spring and BMW iX3. Tariffs also won’t solve the problem of competing with China in third countries, where European manufacturers will also be squeezed on price.
Europe must indeed retaliate against Beijing’s international dumping, but this comes too little, too late. The hard truth is that Chinese-made EVs will remain dominant in the low-mile range, low-cost segment and continue to benefit from an efficient, vertically-integrated strategy which simply produces cars at scale. This is definitely a red flag for many European producers who struggle with legacy costs or their own inability to optimise production.
Greener, Protectionist and Poorer?
The EV scare is just another addition to the EU’s growing list of technological and industrial concerns. Europe is suffering from high labour costs, low digital intensity within enterprises, volatile energy prices and mounting regulatory requirements. Fortunately, the EU (and European car-makers) continue to benefit from a highly specialised workforce in key sectors and is essential to global value chains. However, the tormenting question remains: What will be the EU’s long-term comparative economic advantages?
This conversation is essential, as it will finally push the EU to confront its biggest international competitor on trade. There is still a persistent hangover in Brussels about the US Inflation Reduction Act (IRA) and European angst on the American attempt to attract global clean tech investment in the US. For all the fuss, the IRA remains mostly a programme for corporate and consumer tax incentives. The freshly committed grants and loans sections of the IRA pale in comparison to the galvanising, decades-long effort by the Chinese to subsidise, protect and promote their own industries.
Brussels is slowly beginning to realise that its own recent efforts are mostly about burning money and trying to re-imagine global markets. The billions of Euros committed to green growth through the European budget or the ambitious Recovery and Resilience Fund risk becoming a one-off Keynesian injection to keep European companies liquid, but not provide the much needed breakthroughs and industrial advancement. We are neither decarbonising nor upgrading the European economy at the necessary pace.
The EU needs to urgently recalibrate its Green Deal and industrial focus so it can actually boost European growth and mobilise large-scale private investment. In parallel, we need a viable strategy for economic security and respond to all the investment and trade risks we face in dealing with the Chinese. Not to mention the fact that our astronomical trade deficit with China keeps rising while European companies suffer from lack of market access or discriminatory restrictions.
The upside here is that the EU is finally moving away from its naiveté towards the Asian hegemon and will develop the much needed tools and incentives to solidify its geopolitical standing. Competitiveness, economic clout and deterrence will be the name of the game; not soft power and aspirational international commitments.Dimitar Lilkov China Environment Trade
Who’s Afraid of Chinese Electric Vehicles and Clean Tech?
17 Oct 2023
Peter Hefele China Digital Technology Trade Ukraine
Thinking Talks Ep.6 with Ming-Yen Tsai, Ambassador, Taipei Representative Office in the EU & Belgium
Multimedia - Thinking Talks - Ukraine
27 Jul 2022
With Simona Popa, Vice-Chair, European Parliament Outreach Task Force, AmCham EU, and hosted by Margherita Movarelli, Head of Communications and Marketing, Martens Centre.Margherita Movarelli Trade Transatlantic relations
How Will Trade Shape the Future of Transatlantic Relations?
Multimedia - Other videos
31 May 2022
In recent decades, never has a country been isolated faster than Russia as a consequence of its war on Ukraine. But there is another case of a nation whose continuous closing-off from the world in many fields (mainly the Western world) is of much bigger concern: the People’s Republic of China. Scientific cooperation, cultural exchanges, city partnerships – all these “people-to-people” exchanges are now just a shadow of what they had been ten years ago. This development stands in sharp contrast to an unwavering and remarkable increase in Foreign Direct Investment (FDI) and trade exchange with the country, which has grown despite COVID-19. On the other side, perhaps paradoxically, the number of foreigners in China (in particular from OECD countries) is in steady decline and they are nearly invisible in Chinese society. China itself has actively contributed to this “decoupling”, by the ideologically-driven promotion of its development model, as well as through its concept of a “dual circulation economy”. The “reform and opening policy” which began in the 1980s has, at least for the foreseeable future, come to an end – and with it many hopes and illusions in the West on what to achieve in China and how to engage with the country.
This deterioration of mutual exchange, both in quantity and in quality, began long before the current COVID-19 pandemic, which has almost completely closed off China from the rest of the world. This “sealing off” happened intentionally and in many ways: by localising management positions in international companies; by censoring and massively shutting down academic exchange programmes; by tightly controlling financial flows; and not least by the notorious and now almost impenetrable “great firewall” which led to total information control within the country.
These developments will have a substantial, detrimental impact on our relations with China: it will shape mutual perceptions; shrink opportunities for joint efforts on global challenges; and decrease the comparative advantages of international trade. It is not difficult to predict that Sino-European relations will not change for the better. Even economic ties might get looser as voices for a stronger decoupling in key technologies get louder and China’s positioning in the current Ukraine war sows further distrust.
Over the last years, most of the Western-style democracies have developed, sharpened, and specified their concepts and instruments in dealing with China. The European Union has revised its China strategy several times over the last years. The current concept from September 2021, which some refer to as the “trinity”, considers China as a partner, a competitor, and a systemic rival. It sounds prima facie a pragmatic and flexible approach towards the rising “Middle Kingdom”. But what are some concrete fields where it is worth putting effort on further cooperation to break through the “Great Wall” and once again open windows and doors for exchange?
- Future value-creation is largely knowledge-based. It is almost impossible not to cooperate with China given the tremendous progress Research and Development (R&D) has made over the last decade in the People`s Republic. But this requires a stable regulatory framework, especially in the field of Intellectual Property Rights (IPR) to adequately share the benefits.
- The existing framework of World Trade Organization (WTO) regulations haven’t kept up with recent developments, i.e., in the data economy. There is an urgent need to adjust the existing regulatory framework. Europe should align with other regions, such as Southeast Asia, to convince China to join common efforts and prevent further fragmentation of international rules.
- For the time being at least, China is still interested in the EU’s massive common market, and Europe is stepping up its efforts to become the third global digital power. But the benefits from this can only be reaped when both partners stick to the principle of reciprocity and fair access to markets is guaranteed.
Europe must be aware that future exchange with China will happen under completely different circumstances than it did over the last thirty years. The following requirements should be met as the “Age of Innocence” is over:
- Europe must prevent the growing knowledge gap about China. The body of expertise on China in Europe is substantial and strong but also fragmented, and influence on policymaking is below its potential. Better coordination and exchange of China-related research and policy consulting must be fostered. The new Horizon Europe programme has acknowledged this deficit and supports the creation of independent knowledge networks. Europe must protect our intellectual core infrastructure from any pressure or dependency on Chinese funding. Keeping independent and free spaces of scientific and intellectual debate is key and the litmus test in any further engagement with Chinese institutions. There is still a need for higher awareness in our academic institutions as well as in political consulting and media.
- Authoritarian regimes such as China (but also Russia) are actively seeking to inject their definition of democracy into the international political discourse. Europe must resolutely defend its political concept and semantics against any attempts to redefine and blur the political core of our identity, such as democracy or our understanding of citizenship. The recent EU guidelines on foreign interference in research has long been overdue.
- Europe is not actively aiming at fundamental regime change in China. But we should not simply buy into the official Chinese narrative that there is only one – communist – way for China’s future. We must broaden our exchange with Chinese thinkers and voices others than those of the Chinese Communist Party. As strange as it might appear these days and difficult as it is, we must better understand long-term trends and be prepared for alternative developments in China.
To continue the dialogue with China is necessary, despite many discouraging experiences in the last years. But clear conditions have to be set from the European side – so as to not just be an exercise and end for itself.Peter Hefele China Technology Trade
Breaking the “Great Wall”: How Europe can Deal With an Isolating China
14 Mar 2022
After years of political tensions, representatives from the United States and the European Union are trying to mend the transatlantic partnership and leverage it to address major global challenges. The inaugural joint meeting between the EU and the US on the Trade and Technology Council (TTC) took place in September 2021 and raised the bar of future expectations.
They say love is in the eye of the beholder, and many in Brussels saw such a high-level policy forum as a testament to a rekindled transatlantic relationship. The EU sees this as an opportunity with potential spillovers in the areas of climate change, upholding democracy, and reducing trade and defence tensions. For Brussels, the TTC is as an open platform for transatlantic cooperation and global engagement.
However, for the time being, Washington’s eyes are mostly on China. All of the ten joint working groups established under the TTC have a direct bearing on the most pressing challenges coming from Beijing. From technology standards and secure supply chains to investment screening and export controls, one can clearly see what whets the appetite of the US administration. For Washington, the TTC is a specific tool mainly for transatlantic cooperation on China containment.
China’s rise, of course, is an acute concern for the European Union, as well. The economic onslaught of state-backed Chinese digital companies internationally and Beijing`s aggressive posturing on trade, investment, and military-related issues is raising red flags in European capitals. The US fixation on China might seem a bit over the top for some more dovish European leaders who want to navigate the situation aptly and avoid confrontation; however, the TTC is a chance that must be seized for overlapping trans-Atlantic interests.
How should the EU position itself in the upcoming TTC meetings? On which fronts should we press ahead and on which should we stand our ground when negotiating with the US?
The TTC needs to be part of a comprehensive effort to contain China and also secure vital European interests internationally. When it comes to China, we need to oppose the Chinese Communist Party, whose authoritarian leadership is becoming a threat to NATO Allies and other like-minded partners. Rigorous foreign investment screening needs to saw off corrosive capital channelling from Beijing which aims to buy positive narratives, influence, and economic dependencies. Joint EU-US export controls on our advanced technologies, which end up in the hands of autocrats, is extremely needed, if it isn’t too late already. Moreover, common technological standards should protect European and American citizens from foreign technology riddled with vulnerabilities and personal data scrapers. These tools should act as a deterrent and help us consolidate a joint tech front.
The EU should ensure that the long-term success of the TTC also entails raising the bar of personal data protection within the US. It is embarrassing to remember that in 2020, the European Court of Justice invalidated the EU-US Privacy Shield Framework under which data was shared across the Atlantic. The American personal data regime doesn`t provide sufficient safeguards that European data flows are handled adequately, due to official US government surveillance. If the two economic blocks are to stand united on trade and technology, fixing data flows is the basic pre-condition for a successful Tech Alliance.
The linkage with climate change is more nuanced and uncertain. The only pertinent point from the first TTC meeting is the reference to ‘climate and green tech’. Again, this is covertly aimed at China as the country dominates solar panel and battery cell production. The Asian hegemon is also in a leading position for the extraction and processing of critical raw materials essential to renewable infrastructure. For the time being, investing heavily in renewables, batteries, and clean tech effectively means directly subsidising China. The TTC should alter this trend. If Brussels plays its cards right, the TTC could also become a potential springboard to convince Washington on the future implementation of a transatlantic carbon border adjustment mechanism (CBAM) that negates carbon leakages to global polluters with lower environmental standards such as Russia, China, India, Turkey, and Mexico. This would be a hard sell to the Americans, but the EU should pursue it nonetheless.
The EU should make sure that the TTC isn’t exploited as a forum where the US government tries to apply pressure to water down existing European tech regulation. Issues such as competition law in the digital realm, personal data rights or content regulation concern our internal market of 450 million Europeans. Actually, the US Department of Justice and many American lawmakers on both sides of the aisle share some of the serious issues we are trying to address in the digital domain. European member states already folded on the question of a fair digital tax across the EU under severe pressure from the US. The EU has to stand its ground on digital issues within the TTC.
On the trade front, the TTC shouldn’t be an excuse for the EU not to strengthen its own arsenal on responding to external pressure. In a best-case scenario, the joint EU-US forum would be an insurance policy for Brussels that we can react jointly on global trade challenges or threats to our supply chains. However, wounds are still fresh from the steel and aluminium tariff disputes between the EU and the US, which were imposed by Washington on extremely shaky ‘national security’ grounds. China’s ban on Lithuanian exporters and targeted economic sanctions on the Baltic nation are an additional case in point. The EU needs to be able to respond and deter such whims with unilateral instruments at its disposal. The recently unveiled anti-coercion trade tool by Commissioner Dombrovskis is an extremely positive sign that the EU is not dragging its feet while others are sharpening axes.
This is not a trade negotiation but the EU should pay attention that it doesn’t repeat some mistakes from the past, which derailed the TTIP agreement several years ago. There should be maximum transparency of the whole TTC process and active engagement with all related political, business, industry, and civil stakeholders from across the Atlantic.Dimitar Lilkov Technology Trade Transatlantic
The EU-US Trade & Technology Council: Red Light & Green Light
20 Dec 2021
Dimitar Lilkov Technology Trade Transatlantic relations
Trade & Technology Council: Renewing the Transatlantic Partnership
Live-streams - Multimedia
10 Dec 2021
The excitement of in-person diplomacy ahead of the G20 summit in Rome (30-31 October) may put geopolitical tensions, epitomised by the US–China clash, on hold. However, a few days later (8 November), things may be different at the Asia-Pacific Economic Cooperation (APEC) summit.
In order to understand the reasons for this guess, let us make an overview of this intergovernmental forum that, though many miles from rond-point Schuman, is relevant for the Old Continent.
The majority of countries bordering the Pacific Ocean meet regularly at the APEC since 1989, with the aim to ease trade in the region. APEC countries, of which there are currently 21, represent nearly 62% of world GDP thanks to the participation of heavy-weights like the United States, China, Japan, and Canada, which together represent 80% of APEC’s economy.
The efficacy of APEC is attested to by the decisions made during the COVID-19 emergency (e.g., members pledged to facilitate trade of vaccines and other essential medical devices), but also by the progress achieved towards reaching broader agreements.
In November 2020, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP), with China as the reference country. The RCEP was born in response to the Trans-Pacific Partnership (TPP), the agreement endorsed by President Barack Obama to stem Beijing’s economic growth and political influence. The TPP was then abandoned by Obama’s successor, Donald Trump, but relaunched by Japan and enriched with the must-have adjectives “Comprehensive” and “Progressive”, to become CPTPP in March 2018.
The two agreements – RCEP and CPTPP – share the objective of liberalising trade in the region; six APEC members are signatories to both (see Table 1). The RCEP is larger than the CPTPP (Cambodia, Laos, and Myanmar participate in the agreement alongside 11 APEC countries) and is the first regional agreement that includes China, Japan, and South Korea. Compared to the RCEP, the CPTTP is more ambitious on tariffs and investments, on State-Owned Enterprises (SOEs), especially with regard to public subsidies, on workers’ rights, on privacy, and on data transfer between member countries.
The UK, China, and Taiwan all recently applied to join the CPTPP. Existing members of the agreement decided to open negotiations with the UK, for whom ‘Pacific’ is the manifestation of a certain post-Brexit horror vacui regarding trade agreements. Taiwan applied on 22 September, six days after China did, probably hoping to join the partnership before Beijing, thus avoiding its likely veto as a member.
China’s candidacy to the CPTPP raised some eyebrows as the country remains far from the agreement’s objectives, such as in the field of SOEs and state interventionism. It is unlikely that CPTPP members will welcome China, as the nation was welcomed 20 years ago when it joined the World Trade Organization: the expected transition to a market economy has proven to have been wishful thinking.
China being granted membership is rendered even more unlikely considering the position of some CPTPP members, especially Australia. The already tense relations between those countries have certainly not improved after the AUKUS agreement (where collaboration with the UK and US will equip Australia with nuclear-powered submarines), after President Xi Jinping’s commitment to a reunification with Taiwan, and after the test of a Chinese nuclear-capable hypersonic missile. The US, even if it is not a member of the CPTTP, can exert its anti-China influence in the Pacific area. However, American influence in the Pacific as it existed in 2008, when the TPP was launched, is now fading as Pacific countries have intensified economic relations with China, conversely reducing links with the United States.
Table 1: APEC members and their participation in CPTPP and RCEP
How might the APEC summit turn sour?
The rich agenda of the forthcoming APEC summit, to be discussed across eleven time zones, may cool American and Chinese hearts. In addition to issues directly related to the COVID-19 pandemic, it will actually be necessary to discuss how to strengthen value chains and how to make trade more sustainable.
However, unlike the G20 in Rome, the APEC summit will see the empathy of in-person meetings replaced by physical distancing: being in one’s stronghold, connected through high-quality video, may increase one’s ease to lift the drawbridge in case of a clash. Moreover, since physical geography cannot be altered, European countries won’t participate to the APEC summit.
The EU has found itself equidistant between China and the US and could have stood in the way of a direct confrontation. The EU and China reciprocated bilateral sanctions after a European Parliament resolution condemning China’s policy in Xinjiang and in Hong Kong, thus freezing the Comprehensive Agreement on Investment. As far as transatlantic relations are concerned, President Joe Biden has barely improved the legacy of his outspoken predecessor, as demonstrated by the nominal progress on tariffs on EU steel and aluminium and the AUKUS agreement. It is an odd coincidence that, after months of patience, the Commission and the High Representative publish the new strategy for the Indo-Pacific the day after the announcement of the AUKUS agreement, which does not include any EU nation.Stefano Riela China Trade Transatlantic relations
The APEC Summit and the Global Reflection of Pacific Issues
26 Oct 2021
Though bound by a strong relationship and a shared history, New Zealand (NZ) and Australia are demonstrating a different approach towards a critical economic partner. Australia and China have recently reached high levels of diplomatic friction. In April 2020 came the casus belli: the Australian Foreign Minister calling for an international investigation into the origins of the COVID-19 pandemic and China’s handling of the initial Wuhan outbreak.
The response came a few weeks after when Chinese authorities imposed tariffs on Australian barley, meat, and wine. In the following months, the list of products affected extended to cotton, coal, sugar, lobster, copper, and lumber. In addition to anti-dumping duties, the Chinese tools also included non-tariff barriers and calls to boycott Australian products. Adding to commercial retaliation, some Australian journalists were expelled from China, another journalist was placed under house arrest on espionage charges, and a tweet by a China’s Foreign Minister’s spokesperson showed a forged photo of an Australian soldier with a pointed knife to an Afghan child’s throat.
Even before the request for the COVID investigation, relations between the two countries turned sour soon after the declaration of friendship by China’s President Xi Jinping to the Parliament in Canberra in 2014. Australia, in fact, expressed mounting concerns about Chinese authorities’ interference in the both political and academic institutions, and about risks posed by Huawei’s and ZTE’s 5G and Victoria State’s participation in the Belt and Road Initiative. These are some of the 14 grievances against Australia drawn up last November by China’s ambassador in Canberra. And this list can be updated to include the revision, by the Australian government, of the concession given in 2015 to the Chinese company Shandong Landbridge Group for the management of the port of Darwin.
Not short of having demonstrated its fearlessness, Australia has nevertheless preferred not to escalate the confrontation by labelling as ‘genocide’ the discrimination against Uyghurs in the Xinjiang region, as done previously by other strategic partner of the ‘Five Eyes’ alliance.
Even NZ has been wary of including ‘genocide’ in its official documents when referring to Uyghurs in China. On 5 May 2021, the Parliament in Wellington approved a motion “concerning the serious violations of human rights taking place against Uyghurs and other ethnic and religious minorities in the autonomous region of Xinjiang” and, during the debate, the Foreign Minister recalled that NZ had not previously made an independent determination of genocide, since only international courts can prove a genocide is taking place following a rigorous assessment. China rejected the allegations as unfounded and – in Pavlovian style – threatened, but did not adopt, sanctions. NZ, in fact, is less vocal in criticising China’s authorities. The Foreign Minister herself explained that NZ is not willing to give up an independent foreign policy, and wants to develop a more mature relationship with China.
Notwithstanding the ability of Australian exporters to find alternative markets to a now-harder-to-penetrate China (except for a few products such as the hard-hit wine), the resentment against New Zealanders has become palpable. NZ is accused of going soft on China to avoid retaliations and to profit from relatively better economic relations. For both Oceanian countries, in fact, China is a significant partner for the export of products, but also for the export of non-tradable services such as tourism and education.
This trans-Tasman clash is the subject of an Australian documentary titled “Dollars VS Decency: Is China taking over New Zealand?”, released on the day Australia’s Prime Minister met New Zealand’s peer (30 May 2021). The summit was meant to reaffirm the solidity of the alliance with a joint statement expressing serious concern over developments in the South China Sea, in Hong Kong, and in the Xinjiang region.
In November, NZ will sit China’s and Australia’s leaders down around the same (virtual) table, during its Presidency of the Asia-Pacific Economic Cooperation (APEC). Bilateral economic links are too strong to be handled in a tug-of-war game. China is the largest trading partner for both Australia and NZ; however, even the gigantic China is not self-sufficient, as shown by its insatiable appetite for Australian iron ore, a key ingredient for steel, at the base of many planned infrastructures.
Considering the outcome of the last G7 and NATO summits – where China has been regarded as a challenge to the rules-based international order – Australia and NZ cannot be left alone in playing what looks like a ‘good cop / bad cop’ strategy. The European Union can help the two like-minded countries by speeding up the negotiations of EU-Australia and EU-NZ free trade agreements launched in 2018. If Australia and NZ develop stronger economic ties with the EU that, among others, offer a potential diversification of trade, they may reduce their unilateral dependency with China and gain bargaining power in a negotiation whose repercussion will go beyond the Asia-Pacific region.Stefano Riela China Globalisation Trade
Australia, New Zealand, and China: a Bumpy Ride Towards a Dialogue
29 Jun 2021
Angelos is back from London with another Brexitometer episode! This time, he speaks about the UK going back to normal, Dominic Cummings’ testimony, the UK-Australia Free Trade Agreement, the Switzerland-EU relation, and even Eurovision.Angelos Chryssogelos Brexit Trade
Brexitometer June 2021
Bridge the Channel - Multimedia
03 Jun 2021
Antonio López-Istúriz White Siegfried Mureşan Stormy Mildner Eoin Drea Trade Transatlantic Transatlantic relations
Putting Trade at the Heart of a Global Transatlantic Relationship
Live-streams - Multimedia
26 May 2021
Angelos Chryssogelos Brexit Trade
Brexitometer April 2021
Bridge the Channel - Multimedia
30 Apr 2021
As the loss of sea ice accelerates throughout the Arctic, as a direct result of the global climate emergency, so too does the opportunity for harnessing its potential. Although its fluctuation is well documented, each decade the ice further recedes by an average of 13.1%, making its riches increasingly accessible.
According to estimates, the Arctic Circle is home to roughly 90 billion barrels of untapped oil – an enormous 13% of Earth’s total reserves – and roughly one quarter of global gas reserves, in addition to vast deposits of minerals. So far, extraction has transpired only on land, due to obvious logistical obstacles and associated high costs. But the push for offshore development is accelerating, effectively firing a proverbial starting pistol for Arctic nations to mark their territory.
Comprised of eight states (Norway, Sweden, Finland, Russia, the United States via Alaska, Canada, Denmark via Greenland, and Iceland), the race for geopolitical dominance in the Arctic region is being driven predominantly by one country, Russia. Although territorial disputes among the five coastal nations (Norway, Denmark, the US, Canada and Russia) are largely settled by UNCLOS or ad hoc via other fora, Russia has been fast-tracking its Arctic agenda as of late, framing the Northern arena as one of its primary great-power ambitions.
In contrast, however, the EU appears to be struggling to find its footing. Since its 2016 Joint Communication laying out its Arctic policy, notwithstanding a few sporadic declarations, it has paid insufficient attention to the region and its fast-paced developments. Although the Commission is scheduled to deliver an updated policy later this year, questions loom as to how assertive and tangible its objectives will be.
In line with the very real challenges posed by developments in the region, the EU’s updated Arctic policy needs to avoid the typical EU folly of being as convoluted as the challenges themselves.
Meanwhile, as the EU remains in the planning phase, Russia is constructing and refitting military bases at an alarming rate, developing new high-tech weapons (like the Tsirkon hypersonic anti-ship cruise missile) and holding regular drills in the region to strengthen its grip. Satellite images over the past five years confirm this steady build-up along its Arctic coastline. This includes new facilities on the Kola Peninsula, air bases on the islands of Novaya Zemlya, Alexandra Land and Kotelny, each equipped with their own array of bombers and/or fighter jets, as well as new radar systems and quick-reaction forces off the Alaskan coast.
Experts have expressed particular concern about one Russian development, the Poseidon 2M39 torpedo, believed to be stored at its Kola site as it awaits further testing and deployment in the region. This new super-weapon is no joke, having the potential to sneak past the most advanced radar systems and launch “radioactive tsunamis” of contaminated water that could devastate large coastal cities and their surrounding environment for decades.
For Russia, the Arctic has always been of strategic importance. Hydrocarbon Arctic resources have played an essential economic role since the fall of the Soviet Union. As such, Russia’s heavy-handed Arctic strategy is keeping it afloat not only economically and thus facilitating Vladimir Putin’s stranglehold over the country, but it has helped preserve Russia’s position as a major player on the world stage for decades.
Another integral component of the Arctic puzzle is the potential for new global shipping lanes, namely Russia’s fabled Northern Sea Route, which has the potential to circumvent the Suez canal and cut shipping times from Asia to Europe by 10-32%. Although serious doubts have been raised about its viability, due predominately to high costs associated with climactic obstacles, it is rather a matter of when these routes will become viable, not if, giving Russia a monopoly on the management of a significant proportion of global shipping.
The exact cause of Russia’s recent sabre-rattling in the Arctic is debatable. Flexing its might in the region has, since the Cold War, been a key component of its nuclear deterrence strategy. It could therefore be an effort to further buttress its Northern Fleet, both conventional and nuclear. Its accelerated testing of its super-weapons in the region this year could be part of a larger Kremlin strategy to test the Biden administration, bolstering support for Putin as he grapples with domestic unrest. Conversely, the multifaceted build-up could simply be an attempt to stake its claim ever-closer to the North Pole and its many opportunities, coinciding with the melting ice. Ultimately, its rationale is likely a combination of some or all of the above-mentioned factors.
In line with the very real challenges posed by developments in the region, the EU’s updated Arctic policy needs to avoid the typical EU folly of being as convoluted as the challenges themselves. It needs to be direct, action-oriented and account for each of the developing challenges, from environmental and economic to addressing the Arctic ambitions of Russia and even China, who in 2018 announced itself to be a “near-Arctic state” and “an important stakeholder in Arctic affairs.” The EU must additionally consolidate its revised Arctic policy with pre-existing agreements, like the Green Deal and EU defence initiatives. It should also lay out how it intends to work with its three Arctic member states (plus Norway and Iceland) to pursue mutually inclusive objectives.
Importantly, the Commission should dedicate part of its Arctic policy to strengthening multilateral co-operation with its allies for security and strategic deterrence against Russia, balancing resolve and restraint, through NATO but also on a bilateral basis with other Arctic states, especially the US. Both could serve as a much needed stepping stone to reinforcing the strained transatlantic relationship and show Russia that it’s not the only player in the region.
After all, this so-called “geopolitical” Commission needs to assert itself and, in practical terms, lay out the roadmap for becoming a legitimate Arctic player. Otherwise, the EU risks letting another significant international event play out while it watches helplessly from the sidelines.Gavin Synnott Energy EU-Russia Trade
Walking on Thin Ice: The EU Must Define its Arctic Strategy or Risk Getting Left Out in the Cold
20 Apr 2021
The last two US presidents have not been keen to pursue trade liberalisation with long-time partners in Europe. The EU, in turn, has progressively developed an independent trade policy. Numerous irritants over the last decade have sapped any impetus to expend domestic political capital in major expansion of transatlantic free trade measures. On the US side, steel, aluminium, white goods and threatened auto tariffs, criticising the World Trade Organization (WTO), and a more aggressive policy toward China are among the sources of EU criticism. On the EU side, unwillingness to renegotiate long-standing asymmetries in tariff and investment restrictions, such as in agriculture, aggressive use of competition and tax policy targeted at US technology giants, flirtation with industrial policies, and tepid responses to Chinese mercantilism dampen any US enthusiasm for working together on larger issues like WTO reform or a transatlantic free trade agreement.
Presidential candidate Joe Biden has professed a preference to work more closely with allies, often citing the EU, on major trade issues. Yet he competes with Trump on means to punish China for its trade and human rights transgressions. His campaign also competes with Trump on how best to use industrial policy to achieve the reshoring and strengthening of US manufacturing. The experience of the 2020 pandemic has only reinforced these tendencies. Any change in trade policy in a Biden administration therefore is almost certainly to be of degree and not of fundamental direction.
The best hope for lowering tensions between transatlantic partners is through constructive cooperation on limited but important issues. Both sides have an interest in finalising plurilateral agreements within the WTO structure. Negotiations have languished for years on trade in services, including digital services, even though there has been some progress and differences are not fundamental. The IMF and World Bank have long argued that progress on services liberalisation is among the best ways to reinvigorate the WTO and give impetus to much-needed modernisation of that institution. Transatlantic negotiators are being pushed by their business communities to solve the problems with transnational data flows occasioned by the EU’s privacy laws, especially the increasingly important flow of business data which is driven by the growth of the Internet of Things.
Both sides have also shown strong interest in preventing China from dominating international standards making for existing technologies like telecommunications or robotics and for emerging technologies like autonomous vehicles and quantum computing. Transatlantic partners have also shown interest in finding alternatives to Chinese dominance of supply chains for key raw materials that are important for defence applications, semiconductors, environmental goods, lightweight metals, and lithium ion batteries. Finally, there have been encouraging signs of transatlantic cooperation, in both the private and public sectors, for ensuring supplies of pharmaceuticals and other vital medical equipment whose shortages and dependence on unreliable suppliers have become more visible because of the pandemic.
In recent months some encouraging signs have emerged that views in the US and EU may be converging. A recent Business Europe report on “How to Build a Positive Agenda” for transatlantic trade has numerous ideas to meet the economic and political needs for better cooperation. And the EU decision in October to try negotiating a solution to the Airbus-Boeing dispute at a minimum prevents a downward spiral of increasing tariffs. It is worth noting that even Trump has backed away from the threats to impose auto tariffs, and USTR Lighthizer has signalled openness to a negotiated settlement on the Airbus case, while limiting tariffs at a level below that authorised by the WTO in that case.
There has also been some convergence on the benefits of concerted action on China, with major European nations, for example, taking a more guarded approach to Chinese participation in the important 5G infrastructure market. Finally, many in the US have recognised that, because China is largely pursuing a policy of decoupling and autarky in its growing economic sphere, those nations committed to a more open, market driven economic systems will need to work more closely together. The reality of achieving the economic scale needed to compete with a more closed but huge Chinese sphere supports this approach. And in the US, the political reality of Chinese resistance to unilateral US efforts to convince the Middle Kingdom to be a more “responsible stakeholder” in the WTO and other Bretton Woods institutions supports the need for a more collaborative approach with allies.
It will take many months for the US to get past the animosities of the 2020 election cycle, and a focus on trade policy is not likely until the administration (whichever party is in power) has addressed other issues, especially those involved with the pandemic and recovery from its economic consequences. Yet it would be wise for trade policy leaders on both sides of the Atlantic to take small steps as outlined above to rebuild the confidence needed to tackle the larger issues facing the world trading system.Thomas J. Duesterberg Trade Transatlantic
Thomas J. Duesterberg
Rebuilding US-EU Confidence for Joint Work on Trade Relations
02 Nov 2020
Tomi Huhtanen Economy Macroeconomics Trade
EIF 2020 – Panel 2: Global Trade
Live-streams - Multimedia
27 Oct 2020
Amid -at times- stringent lockdown measures taken all over Europe, it seemed almost providential that one of our main platforms for home entertainment proposed a very bizarre show.
As we all guiltily binge-watched Netflix’s hit ‘documentary’, “Tiger King: Mayhem, Murder and Madness”, and revelled in its larger-than-life characters, we must be serious for a moment: the trade of exotic animals is a highly lucrative and unregulated business. In Europe, we have our own Tiger Kings.
Where does regulation stand at the EU level? The EU mostly settles for the current CITES regulation. The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international norms system that began in the 1970s, that regulates international trade in over 35,000 species of plants and animals, including their products and derivatives. It ensures their survival in the wild with benefits for the livelihoods of local people and the global environment.
Illegal wildlife trade is a flourishing business, comparable to the traffic of drugs and weapons, and amounts to 7 to 23 billion dollars annually, according to a UNEP-Interpol report. Therefore, it was a welcome announcement when the European Commission pledged in its EU Biodiversity Strategy for 2030, published on the 20th of May, that it “will take a number of steps to crack down on illegal wildlife trade”. The Commission said that, among other things, it will revise its EU Action Plan against Wildlife Trafficking in 2021.
This communication was initially scheduled to be released two months ago, but due to the current pandemic that has been shaking the continent and the world, it could only come out now. COVID-19 can, in fact, be directly linked to the necessity of strengthening the future Action Plan against Wildlife Trafficking.
The COVID-19 outbreak has dramatically shone a light on how wildlife markets, as well as the use of wildlife for traditional medicine, represents severe risks for zoonotic disease transmission. The proximity with humans provides a path for the transmission of dangerous pathogens. Wildlife markets, like the one in Wuhan from where COVID-19 is supposed to have originated, exist all around the world, and the European continent is a central hub of transport and trade for the lucrative business of wildlife trade. Besides wet markets, it is not uncommon to come across monkey meat in Brussels, or European baby eels in Asia.
Zoonoses do not have to stem from direct contact between wild animals and humans, it can also spread from wildlife to parasites (ticks, mosquitoes, fleas) or to domestic animals, before eventually spreading to humans. COVID-19 had a zoonotic origin, but is now mostly contracted from other human beings. 61% of new and re-emerging diseases are of zoonotic origins, and although they can originate from the world over, some parts of the world are more prone to develop them due to larger biodiversity, a high density of humans and animals, and the international mobility of these humans and animals. The EU is both a vital marketplace and storage space for exotic animals that could represent a risk for zoonoses.
It comes as no surprise that, with the emergence of the pandemic, members of the European Parliament have demanded a stronger clampdown on both the legal and illegal trade of exotic animals in the EU, where favourable conditions for the outbreak of diseases like COVID-19 are also rife. The difficulty lies in the effective differentiation between the legal and illegal trade of wildlife, since they are very closely intertwined, as this 2016 report by the European Parliament’s trade committee states.
This is where a positive list can step in. French MEP Agnès Evren, from the EPP Group, is hopeful the EU will include a more restrictive positive list in tradeable species in its European Green Deal plan for the environment. A positive list sets into legislation what can be brought into the EU, and everything not on the list cannot come in. This method would considerably reduce regulatory bureaucracy at the government level, and facilitate custom officers’ work when distinguishing what is legal versus what is not. Currently, the limited, legal and regulated trade often acts as a cover for illegal trade of the same species.
Criticism has been levelled against positive lists, invoking subsidiarity, and putting into question whether the EU even has competence on wildlife trade. In fact, some member states have adopted their own methods for tackling wildlife trafficking through positive lists. Others resort to negative lists which, contrary to positive lists, state which species are forbidden from trade, but where permits can be granted following a strict set of rules. Some member states barely have any regulation at all. Once an animal is inside the EU, it becomes harder to track its progression, and transportation is an even bigger headache when following every member states’ individual regulatory mechanisms. Here, EU regulation can create a level playing field for all actors, and reduce cumbersome bureaucratic efforts for national governments.
Another benefit of further regulating what comes into the EU is the possibility of checking each animal for known pathogens, such as the one which has stemmed from SARS-CoV-2. Checks would allow for closer inspection of animals that are meant for food consumption, but also those that are intended to be kept as pets, as they too can contract the virus.
The discussion on zoonotic diseases has indicated that poor regulation of wildlife trade can have serious consequences, the likes of which should not be ignored. COVID-19 is not the first and will not be the last pandemic to occur on our continent. EU regulation on this trade should, therefore, be adopted with the view of protecting the health of EU citizens.
The EU Biodiversity Strategy, which will be an integral part of the European Green Deal, offers the perfect opportunity to take immediate action in preventing the rapid spread of diseases. We should not lose sight of the bigger picture either, which is to avoid future pandemics from happening in the first place. An EU positive list for species and pets is one way to bring much-needed regulation into a trade that has proven dangerous for the safety and health of European citizens.
So no, don’t hit play on that follow-up meta-documentary about the hit documentary series. Instead, “Think Positive”.Anna van Oeveren COVID-19 Crisis European Union Trade Values
Anna van Oeveren
Animals in the time of Coronavirus: Why it’s time to think positive
27 May 2020
The Coronavirus epidemic is spreading quickly through the planet. Its full impact on societies, on our economies, and simply on people’s lives is still unknown. Nevertheless, chances are that the economic impact of the epidemic alone will be greater than any crisis since the end of the Second World War.
But contrary to an earthquake or a massive tropical storm, the current crisis was not a surprise, nor was it unpredictable. In fact, the risks associated with wild animal markets and their link to potential virus outbreaks were widely studied and debated, including in China, after SARS – the severe acute respiratory syndrome in 2002-3, caused by a very similar coronavirus to the one which recently appeared in China.
As early as 2007, a study by the University of Hong Kong stated that: “The presence of a large reservoir of SARS-CoV-like viruses in horseshoe bats, together with the culture of eating exotic mammals in southern China, is a time bomb.”[i] After SARS, wild animal markets were temporarily banned. Various Chinese scientists wrote about the risks related to the trade and the risks of eating wild meat.
As a result, the Chinese Communist Party and the Chinese government did take measures to control the wild animal markets and limit the risk. However, prohibiting wild animal markets is challenging, due to the fact that many of these markets, and their use of wild animal ingredients, were not only economically important, but also a part of the local culture. Thus, for political reasons, the Chinese Communist Party decided to ignore the risk and the bans were eventually gradually lifted.
But the Chinese Communist Party did not take risks solely on behalf of the Chinese people. The risk was shared by the entire global community. As a result, today, more than 4 billion people are living in some type of quarantine, afraid for their own health, their loved ones’ health, and the future of their livelihood.
Now China has made eating wild animals illegal after the current Coronavirus outbreak. But the fear is that the exceptions will keep the markets functioning and, after some time, the wildlife markets will be fully opened again – just like after the 2003 SARS epidemic.
China has been trying to avoid the question of responsibility related to the Coronavirus epidemic by supporting conspiracy theories that the US army has brought the virus to China and spreading fake news in Europe related to the epidemic.
If, as the Chinese government argues, wildlife markets were not the real source of the current crisis, then there is less reason for China to ban the markets. Therefore, it is the responsibility of the international community to make sure that wildlife markets will be banned, not only in China, but also in Vietnam and other parts of south-east Asia. We were not able to avoid the current Corona crisis, but we need to be able to stop the next global epidemic.
[i] Cheng, Lau, Woo, and Yuen, ‘Severe Acute Respiratory Syndrome Coronavirus as an Agent of Emerging and Reemerging Infection’, 2007, Research Centre of Infection and Immunology, The University of Hong Kong, Hong Kong https://cmr.asm.org/content/cmr/20/4/660.full.pdf, Vol. 20, p 683.Tomi Huhtanen COVID-19 Crisis Globalisation Trade
Could China have avoided the Coronavirus outbreak?
06 Apr 2020
Although the final number of seats obtained by each political party won’t be finalized for several days, the results of the Irish election indicate a marked shift in Ireland’s staid political landscape. Dominated by two centrist political parties since the foundation of the state in 1922 – Fine Gael (EPP) and Fianna Fáil (Renew Europe) – the recent election marks a significant milestone in Irish politics.
Although Europe was almost entirely absent from the recent campaign, Sinn Féin (GUE/NGL) represents a clear challenge to Ireland’s traditional, pro-European stance at a policy and decision-making level. While Sinn Féin’s historic “anti-Europe” policy has moderated in recent years, this is mostly attributable to very high Irish public support for Brussels and to the EU’s support for Ireland during the Brexit process. However, Sinn Féin remains a deeply Eurosceptic party far removed from positions of influence in the European institutions. After a very disappointing European election campaign in 2019, Sinn Féin retains only one MEP in the European Parliament. Their 2020 election manifesto retains a commitment to “radically reform” the EU.
The policies of Sinn Féin in power – likely as an equal partner (almost) in coalition with the more centrist Fianna Fáil – sets an uncertain context for Ireland’s future relationship with the EU. In particular, there are three areas – the Eurozone, taxation and trade – where Sinn Féin’s priorities could seriously impact on Ireland’s traditional national consensus (and relationship with Brussels).
Sinn Féin’s policies regarding the Eurozone are copied from the standard hard left response to the global financial crisis starting in 2008. They are based around vague notions of ending “the Eurozone straitjacket” through flouting European fiscal rules and reforming the European Central Bank. The overall objective appears to be the “direct transfer of newly created money to governments so they can engage in green investment and by quantitative easing for the people”. These proposals highlight a party completely out of touch with both the realities of Brussels based decision making and the operational structure of the Eurozone (not to mention the pro-market economics which underpin it). They also evidence scant understanding with the complexities of Ireland’s existing public debt and its obligations under existing agreements.
It is in the areas of the Eurozone and Trade policy that Sinn Féin’s policies have the potential to seriously undermine Ireland’s position in Brussels
On taxation, Sinn Féin’s positions are more nuanced and not completely out of tune with the Brussels establishment or companies investing (or invested) in Ireland. Although, they call for the continuation of national vetoes on taxation matters in the European Council and the retention of the 12.5% Corporation Tax rate, they support global efforts (presumably at OECD level) to update the global tax system. Sinn Féin wants Ireland to adopt a more transparent approach to dealing with foreign multinationals including ending the appeal against the European Commission’s Apple ruling on alleged unlawful tax arrangements with Ireland.
In recent years Sinn Féin’s policies on the Irish economic model (and its attraction of FDI) has moderated considerably. As noted, they now support both national tax vetoes at EU level and Ireland’s present rate of Corporation Tax. Their focus lies more on their traditional wish to create a state agency “to support the growth of indigenous small businesses”. Sinn Féin’s policies, in this area, will continue the longstanding Irish consensus of advocating for national competence on tax matters (including Corporation Tax) while helping to alleviate some EU (predominantly French) concerns regarding the transparency of the Irish tax system.
On trade, Sinn Féin’s policies conflict directly with both EU objectives and traditional Irish policymaking. Their plan to veto the EU-Canada Comprehensive Economic and Trade Agreement (CETA) follows the example of other hard-left movements throughout Europe. As with their disjointed Eurozone policies, their promise to promote “fair global trade rules and policies” seems to deliberately ignore the fact that the EU has emerged as the global leader in delivering transparent and accountable trade deals since 2014. Sinn Féin’s stance could also prove problematic given the ongoing negotiations between the EU-UK on future trading arrangements given that it’s Sinn Féin’s raison d’être to achieve a United Ireland.
This brief analysis highlights that it is in the areas of the Eurozone and Trade policy that Sinn Féin’s policies have the potential to seriously undermine Ireland’s position in Brussels. However, a number of factors mitigate these dangers.
First, Sinn Féin will, at best, form just half a coalition government. Its ability to deliver its more extreme policy pledges will be significantly constrained by the political realities. Second, and as noted, Sinn Féin’s overarching objectives are national – namely trying to attain a United Ireland and increasing public involvement in housing to remedy the current domestic crisis – so its primary gaze will be fixed in places other than Brussels. Third, Ireland remains a very pro-EU country and Sinn Féin understands this explicitly. This limits their potential to adopt anti-Brussels positions consistently. Fourth, the recent example of Syriza in Greece highlights the real constraints imposed on radical left parties that assume political power. The compromise of power will challenge directly Sinn Féin’s mantra of being the radical alternative.Eoin Drea Brexit Centre-Right Elections EU Member States Eurozone Trade
Much ado about nothing? What Sinn Féin in power will mean for Ireland in the EU
11 Feb 2020
If Europe’s punditry is to be believed, we’re in the middle of a trade war and the EU is under attack from Donald Trump who hates us for our trade surplus, our great automobiles and the European Social Model.
And indeed, a US President who defines trade in zero sum terms, where one side’s gain is the other side’s loss, is a problem. But before we go further in belligerent rhetoric and hit back hard with retaliatory measures, let’s stop and keep things in perspective.
First of all, Donald Trump is not the first American president to introduce trade tariffs. A recent example of a former US president attempting the same still resonates in everyone’s minds: Bush in 2002. At the time, the World Trade Organisation had deemed the new US tariffs on steel illegal, after complaints brought by the EU in March 2003.
Though we all hope that it will not come to that, the EU through Commissioner Malmström has already stated that it will not hesitate in once more engaging with the WTO to get the United States to back down on the tariffs.
Secondly, it’s worth reminding ourselves that steel and aluminium make up only 2 % of EU exports to the US, and that it’s a bit premature to speak of a trade war. This is even if, on 23 March, Trump’s punitive tariffs come into effect. The first consequence will be the even more acutely felt Chinese surplus on European markets.
This brings us to our third point: China. As China’s factories are usually state-owned and heavily subsidised, the country has been capable of keeping them open despite there being no global appetite for steel and aluminium. This has resulted in an excess capacity and, subsequently, the laying off of steel workers around the world, incapable of keeping up with the decrease in prices imposed by the Chinese factories.
It is Trump’s binary vision of international trade which has made him overlook how the trade tariffs, by not excluding the EU, will further affect the European continent as its markets will be flooded with Chinese metals. The latest developments on the part of the Trump administration demonstrate a positive twist: from further conversations on March 12, it appears the EU will be exempted from the tariffs on the condition that the EU is a reliable partner in fighting over-capacities.
That proves what has been clear all along: US and EU cooperating to fight China’s questionable trade practices has become an avenue out of the transatlantic trade crisis.
Fourthly, it is important to understand the very specific domestic circumstances in which Trump is beginning to apply ‘America First!’ to trade (which, next to migration and foreign entanglements, had been one of his three core campaign promises all along). The White House is in chaos and this week he hopes for a Republican victory in a by-election in Pennsylvania – in the heart of the Rust Belt in which steel production still plays a vital role.
US and EU cooperating to fight China’s questionable trade practices has become an avenue out of the transatlantic trade crisis.
Moreover, we should note how unpopular Trump’s trade rhetoric, and the announcements of new tariffs, are among Republicans (whereas they seem to go down well with the unions). While this doesn’t excuse what the President is doing, all of this is a strong indication that neither he nor the Republicans are ‘attacking the EU’ or the European Social Model.
Five, we might also be surprised at who, among Socialists and Greens, have recently become vocal advocates of global trade. At the peak of the anti-TTIP and anti-CETA campaigns, trade had become something of a taboo among these segments of the political sphere. It is refreshing to see them now condemning protectionism in such clear terms.
Ultimately, here is what Europeans should do: calmly engage with our American partners and have a frank discussion on bilateral as well as global trade; discuss how we can pressure China into being a fairer player on world markets, and resolve our bilateral problems on the way. If the US President is unhappy about the trade tariffs that the US and EU negotiated decades ago, let’s negotiate new ones.
This would, incidentally, bring us back to a transatlantic trade deal which would work even better if it included some regulatory convergence. Of course, we couldn’t call it TTIP. But we should use the momentum to take all those newfound friends of Transatlantic trade by their word, and strengthen the argument that if people sell and buy goods and services, we may discuss the parameters, but it’s first of all a good thing and a pillar of our civilisation.Roland Freudenstein Anna van Oeveren EU-US Globalisation Trade Transatlantic
Anna van Oeveren
Keep calm, trade fairly and tackle China
13 Mar 2018
First seen as a walk through, then seen as complicated and difficult, and finally viewed as a disaster, the trauma of the Transatlantic Trade and Investment Partnership (TTIP) negotiations still influence the dynamics of EU-US trade relations, or rather their future.
A less than perfect management of the post-2016 European public debate on TTIP, coupled with vocal anti-TTIP voices and the rhetoric of United States President Trump have all created a situation where very few people are considering the possibility of a Free trade Area between the two transatlantic partners.
There is concern that the disruption of EU-US dialogue is creating a backlog of commerce and trade related issues and that there is a negative spill over from politics to commerce.
Apart of the bilateral trade dialogue, the EU and US administration view the future of the World trade organisation (WTO) and global trade framework differently. However, though a comprehensive EU-US Trade Agreement is not realistic at present, the EU and US must develop their trade relations in any way they can.
There is concern that the disruption of EU-US dialogue is creating a backlog of commerce and trade related issues and that there is a negative spill over from politics to commerce, which could ultimately adversely affect EU-US trade relations.
Meanwhile, President Juncker and his Commission are unwavering in their support of free trade and the EU is now negotiating new trade deals with other parts of the world: the Commission is submitting the Japan trade agreement for the approval of the European Parliament and EU Member States, aiming for it to be introduced before the end of its current mandate in 2019. The EU is also negotiating a trade deal with Argentina, Brazil, Paraguay, and Uruguay, as part of a broader Association Agreement between the two regions.
Nonetheless, EU-US trade relations should not be forgotten. Together, the EU and US are still the largest economic entity on the planet and cross-continental investments are increasing. Even seemingly small improvements in that flow will create added economic value, and as pointed out several times by Commission Vice President for Jobs, Growth, Investment and Competitiveness, Jyrki Katainen, it is not normal that we negotiate with the whole world on promoting trade whilst not seeking to improve on the current trade relationship with the US.
In addition, on both sides there are strong pro-trade actors. The majority of the European population remains positive about trade and in the US Congress there are strong forces that wish to relaunch the free trade agenda whenever the opportunity arises.
Luckily, the EU and US are still negotiating on sectoral obstacles of trade. The Commission DGs for Internal Market, Industry, Entrepreneurship and SMEs, Health and Food Safety and Agriculture and Rural Development are currently in talks with their US counterparts with the view to future cooperation on cars, pharmaceuticals, medical equipment and tests amongst others. The legal framework for EU and US sectoral cooperation could focus on mutual recognition agreements: focusing on active and regular dialogue in order to adopt common standards.
The majority of the European population remains positive about trade and in the US Congress there are strong forces that wish to relaunch the free trade agenda whenever the opportunity arises.
This has already yielded some positive results. For example, the EU and US have achieved a mutual recognition of test results for pharmaceuticals, which can increase efficiency by reducing paperwork and the duplication of tests. Furthermore, EU and US dialogue being conducted on space-related issues is also showing early signs of success.
Sectoral cooperation is an EU proposal to which the US has previously agreed. Unfortunately, there has been very limited follow-up. The two sides have yet to accumulate enough political capital to advance sectoral cooperation further.
Sectoral cooperation is less controversial than a comprehensive trade agreement and there is the possibility to extend it so long as there is common interest. Even though sectoral cooperation does not sound very ambitious, it gives real economic benefits and keeps the channels of communication open on issues of trade.
However, sectoral cooperation still requires political support and industry pressure. And, of course, commitment from the European political leadership. The steps towards sectoral cooperation may seem small, but they will maintain the badly needed positive momentum and pave the way towards more comprehensive future trade negotiations between the EU and the US.Tomi Huhtanen EU-US Trade Transatlantic
Sectoral cooperation or how to get back on track after TTIP
21 Feb 2018
Today being pro-trade and defending globalisation seem to be out of fashion. After Trump crushed the Trans-Pacific Partnership (TTP), and put the North American Free Trade Agreement (NAFTA) under his hammer, it does seem that the tide has turned against global trade and globalisation.
In Europe this is seen through the fall of the TTIP agreement, which in fact was already in trouble before the election of President Trump. Anti-trade sentiments are labelled as partly responsible for the rise of populism in Europe, and nationalist parties have adopted a soft-anti trade stand.
Setting the numbers straight
But the fact is that the mainstream held assumption that there is strong anti-trade sentiment in Europe is a fallacy. The majority of Europeans support free trade and want more of it, as the Eurobarometer study shows. 73% of EU citizens view free trade as positive. There is national differences of course, with 85% of Danish citizens seeing it as positive at the higher end of the spectrum and 58% of Greeks seeing it positively.
Furthermore, according to the Eurobarometer, respondents increasingly see globalisation as positive and important for economic growth. More than half of all respondents consider globalisation to be positive (54%), an increase of six percentage points since autumn 2016 and a 17-point increase since spring 2005. More than six in ten (62%) agree that globalisation is an opportunity for economic growth, and more than half (51%) agree that globalisation represents a good opportunity for companies in their country by opening-up new markets.
How do you explain these results, despite all of the negative spin in the media? The fact is that Europe and the EU are made up of mainly small and medium sized countries, which understand that political and economic isolation will not bring them strength and prosperity. Many of the countries have well known success stories of citizens’ companies being successful in global markets. Those companies could not have made it if they only had access to the market of their home country.
When the minority is loud and the majority remains silent
If trade is such a popular topic, what then explains the unpopularity of TTIP in Europe? Firstly, a loud minority together with anti-globalist networks, who managed to dominate the debate. Secondly, for the large majority of the political actors in EU capitals and Brussels, TTIP was important, but not important enough to fight and go public in defending. And thirdly, as Matthias Bauer of ECIPE points out, the anti-TTIP movement was not a bottom-up movement but clearly a top-down one:
“The widespread aversion to TTIP in Germany is the result of an orchestrated, top-down campaign initiative launched by a small number of long-established, well-connected and, thus, highly influential politicians of Germany’s Green and left-wing political parties and associated NGO campaign managers masquerading and operating under the guise of pro-democracy, pro-environment and pro-Christian civil society.”
In addition, we are only beginning to understand how Russian-related media played strongly against TTIP.
What should pro-trade forces do?
A major difficulty with debating trade agreements is that when anti-trade actors criticise trade agreements, they usually speak hypothetically about what the trade agreement could contain. The problem, for example, with TTIP was that there was no official text since the negotiations were still ongoing. It is difficult to refute obnoxious claims on the details of the agreements on a fact-basis, when the official agreement paper has not yet been drafted.
In this case, what should pro-trade forces do? Firstly, as the European Commission has already emphasised, as part of underlining the economic benefits and positive impact on growth, we need also need to make it clear that rule-based trade agreements can play a strong role in developing a rule-based framework for the global economy. Trade agreements aim to eliminate distortions and unfair practices on a global scale. They are a tool for promoting European values.
Secondly, we need to continue to find new partners for trade and work on respective trade agreements. The Commission’s intention to examine the possibilities with Mercosur is a good example of the direction we should be going in. Also, we should build on where we left off with TTIP, especially in our trade relationship with the United States.
Despite the political situation in the US, we must work on sectoral cooperation, as Vice-President of the European Commission Jyrki Katainen mentioned during a recent keynote. If an overall agreement with the United States is not possible, we should work on sectoral agreements. Despite the White House statements, there are still very important Republican and Democrat Congress members who are very much in favour of re-launching the trade agenda.
Lastly and perhaps most importantly: we must change our mindset and understand that trade is not an underdog topic, but it is a topic which the majority of voters (at least centre and centre-right ones) feel positive about. If trade is supported by more than 50% of European citizens, it must not become a “no-go area” for centre and centre-right politicians.
In conclusion, if the majority of European voters are in favour of both trade and globalisation, thus showing that the commonly held assumption about anti-trade sentiment in Europe is a fallacy, centre and centre-right politicians have an important mission to keep defending, pursuing and explaining the benefits that trade brings.Tomi Huhtanen Economy EU Member States EU-US Globalisation Trade
The European anti-trade sentiment: a fallacy, not a fact
15 Nov 2017
In these heady days of the early Trump era, one may be forgiven for thinking that for Europe, none of the old certainties hold true anymore. Consequently, to many European pundits, it is obvious that whether we want it or not, we are forced to rethink our strategic posture from scratch. Some advise that we now have to become self-sufficient in security – because the new US President has, at least in interviews and tweets, sown doubt about the 70 year old US security commitment to Europe.
Some have argued that we should kiss and make up with Russia because under Trump, the US risk to overtake us in the race of who’ll be Putin’s darling – at least until recently. And some claim that the best thing we can do now is to replace the US by China as a strategic partner, because they seem to have so much to offer economically and, let’s be honest, also just to spite the new occupant of the White House.
President Xi’s chiseled words don’t match the bleak reality of what China is doing.
Quite frankly, this type of knee-jerk ‘Europe First’ strategy can only backfire because it is built on false premises. It is true that, while Donald Trump’s tweets continued to haunt us, President Xi Jin Ping held a remarkable speech at the World Economic Forum in Davos. In it, he sang the praise of socially conscious globalisation, open borders and global governance – just as the new US President was shouting ‘America First!’ from our TV screens.
Rhetorically, China has also been an advocate of a strong EU for some time. And last but not least, the grandious project of a ‘New Silk Road’ linking Asia to Europe might come to symbolise not only stronger economic but also strategic links. But one thorough look at China and the world today is enough to see that President Xi’s chiseled words don’t match the bleak reality of what China is doing as we speak.
The Chinese Communist Party has never stopped considering ‘Western’ ideas about human rights a threat.
First, in the South China Sea, the Beijing government is continuing its expansion against all global rules, to the great worries of its neighbours in the region, and rejecting the consultation and arbitration mechanisms foreseen in the UN system and the International Court of Justice. This is all the more dangerous because Russia has, in recent years, begun doing exactly the same in Georgia, Moldova and Ukraine: undermining the global liberal order, not only with words, but also deeds.
Second, China does not really seem to favour a strong European Union. Its ’16 + 1’ initiative, comprising 16 cash-strapped countries inside and outside the EU, is clearly designed to create a generic grouping of countries that share a communist past as well as financial dependency on China turning into some degree of political subservience.
Hungary is a case in point – its breaking ranks with the rest of the EU on condemning Chinese expansionism in Asia is exemplary of Beijing’s divide et impera strategy. Chinese support for sub-EU regional groupings now also seems to extend to the Mediterranean members and even to the Nordics.
Third, President Xi’s lofty appeals to global governance eclipse China’s peculiar ideas about national governance, as they come out in its unconditional support for corrupt, dictatorial regimes in Africa, and even more in its crackdown on freedom of expression and the first buds of civil society in China itself. The increasing suppression of previously assured civic rights in Hong Kong, and especially the kidnapping of EU citizens (Chinese with double nationalities) from South East Asia, are examples of what is really going on.
The Chinese Communist Party has never stopped considering ‘Western’ ideas about human rights a threat. All this is not to mention the regular military threats against democratic Taiwan. Finally, one has to mention Chinese state-sponsored criminal activity, as in the systematic violation of copyright law and the organised hacking of American and European technology firms.
All this does not mean that Europe should not seek cooperation with China on issues of global importance, such as trade and climate change. But let’s remain realistic as to the prospects of a strategic partnership with a country whose governing elite and many of its citizens have such a different outlook on our world.
Making America great again is not possible without friends and allies.
Instead of flirting with China, we’d better try to convince the US administration that making America great again is not possible without friends and allies, and that the most natural members of that group will always be found in Europe. The President’s State of the Union speech on 28 February, though mainly focused on domestic affairs, should be read as a sign that the administration is thinking along those lines now.
Given America’s old and strong democracy, Trump, even if he tried, would have a hard time overturning the global liberal order against America’s own creation – a system of value-based alliances that has been developed for over a century. For Europe, it’s time to get real and start working with what we still have, instead of relying on what we’re supposed to hear in Davos and other places.Roland Freudenstein Democracy EU-US Foreign Policy Trade
Why China is still a threat and America still our ally
03 Mar 2017
The 2010s are becoming a decade of geopolitical paradoxes, even tectonic shifts. Donald Trump’s electoral victory may create a new and outrageous alliance between the US and Russia at the expense of the EU. And Trump may take the US out of the global agreements that Obama government promoted to make banks more resilient to storms on financial markets.
In the UK, Scottish nationalism that two decades ago could not boast even a weak Scottish assembly, has by mid-2010s contributed to the rise of English nationalism. It was the latter force that ripped the UK out of the EU through the 2016 independence referendum.
It seems that leaving the EU will not satisfy the mighty centrifugal momentum that is pushing the UK polity away from the continent. The possibility that the UK would stay in the single market is no longer there. Among the West European prime ministers at the time, UK’s Margaret Thatcher took the political lead in the efforts to dismantle barriers to trade inside the common market (see this Thatcher speech from 1988).
Theresa May’s historic speech on 17 January 2017 made it clear that the UK would be leaving the single European market, the joint product of British free market ideas and French and German efforts for the unification of (West) European economies. All that as a price for the ability to stop the free movement of people.
The Brits are leaving the single market, but all of us will suffer the consequences, economically speaking. It’s a lose-lose situation for everyone, from whichever angle you look at it. A reintroduction of tariffs for trade between the E-27 and the UK is almost inevitable. Tariffs will lead to a decrease in trade. This will leave the average European and UK citizen a little poorer.
The paradox of paradoxes is that if they want to trade with the EU, the Brits will not only pay tariffs on EU goods (the same will of course also apply to UK goods in the EU) but will also have to abide by EU industrial standards.
The despised EU-wide regulations in fact allow British firms to trade on equal terms with European companies and maintain supply chains across the continent. Leaving the single market will entail delays on the border, not least due to technical, health and safety inspections of goods, unless enlightened negotiators on both sides agree mutual recognition clauses for one another’s products (the UK government is planning to retain the existing EU regulations en bloc, and abolish individual pieces of EU legislation one by one after it officially leaves the EU, and as needed; this is a good sign and should make such mutual recognition easier).
London will almost inevitably lose its status as a European banking centre. The City will inevitably lose the ‘passporting rights’ that allow UK financial firms conduct business on the continent without bureaucratic barriers.
Among the tectonic political shifts, continental Europeans should remember that they need to stay united not only vis-à-vis Putin, but also vis-à-vis the UK government, which remains a crucial security ally. During Brexit negotiations, the UK may try to cut deals with individual member states to gain advantage on the shape of the future EU-UK economic relationship. It is a lose-lose situation for the EU-27 and the UK, but how much each side loses, depends on how unified and clear-sighted that side is.
We live in strange times.Vít Novotný EU Member States Macroeconomics Trade
Britain is leaving its own creation, the single market
21 Feb 2017
‘Since the start of my academic career, I have never had a student critical of international trade. Only until recently has this positive opinion changed,’ stated Anu Bradford, Professor of Law and International Organization at Columbia University. The prolonged economic stagnation, she claimed, has played a role in changing attitudes, along with a failure of elites to recognise citizens’ legitimate concerns and promote an inclusive globalisation.
As a panellist of the event ‘Does global trade have a future?’ hosted by the Martens Centre on 11 January 2017, Prof. Bradford gave her opinion on the current state of play in international trade and the potential ways forward. The Executive Director of the Wilfried Martens Centre, Tomi Huhtanen, invited panellists to reflect on how the current backslide against international trade agreements could be stopped.
The Transatlantic Trade and Investment Partnership (TTIP) formed an important part of the discussion. Up to this date, no agreement has been reached and the deadline for its conclusion has passed. Christofer Fjellner MEP (EPP, Sweden), however, expressed some hope that it could be finalised at some point in the future, when the new US administration may be open for business again – provided that Europe will solve its internal difficulties.
At the moment, European leaders should not focus on blaming the new president Donald Trump for the failure of TTIP but show their own willingness to continue negotiations.
André Sapir, Senior Fellow at Bruegel and Professor at Université Libre de Bruxelles, stated that the economic case for trade and trade liberalisation remains strong and holds the promises of improving allocation of resources globally and nationally.
It is important, however, to distinguish between trade agreements for which the EU has exclusive competence and mixed agreements that are broader and involve national regulatory issues such as consumer and environmental protection. Citizens should have been more engaged in the process of negotiating TTIP, an agreement of the second type.
In order for EU trade policy to have a future, Prof. Sapir and Prof. Bradford emphasised the need for more transparency and an unambiguous commitment from the EU towards its trading partners. The recent difficulties with the ratification of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) sent a negative signal and it will be necessary to rectify and learn from the mistakes that the EU made on this occasion.Macroeconomics Trade Transatlantic
Does global trade have a future?
12 Jan 2017
In Germany and Austria, an unprecedented political communication campaign orchestrated by a small group of well-connected politicians, green and left-wing political parties, and associated civil society organisations has evoked strong aversion among the population to the negotiations for the Transatlantic Trade and Investment Partnership Agreement (TTIP) between the EU and the US.
Germany’s anti-TTIP groups want nothing less than to take their protests to other European countries. The network’s campaigns are largely driven by myths and fears evoked by emotive narratives and powerful metaphors. Their reasoning has strong persuasive power though. This article sheds light on who the campaign movement’s major protagonists are, the messages they spread, their objectives, and how their deceptive argumentation threatens social interaction, pluralist societies and individual economic freedom.
Read the full article in the December 2016 issue of the European View, the Martens Centre policy journal.Matthias Bauer EU Member States Trade
The political power of evoking fear: Germany’s anti-TTIP campaign movement
20 Dec 2016
As the shock waves continue to pass through Europe following the UK referendum, it is easy to draw a long list of mistakes that UK leading politicians have made. It is equally simple for continental Europeans to place the blame solely on the British and shake their heads at the referendum results.
Already before the referendum, there was a school of thought within the EU that if Brexit happened, the separation should be as painful as possible in able to make sure that no other member states would follow suit. The more isolated the UK would be, the better it would be for European unity, or so the logic goes. However great the temptation towards an angry response, to punch back even, is, it will not help Europe or the EU – nor is it justified.
First of all, the dynamics that led to the disappointing result of UK referendum exist in other EU member states. In fact, there is no guarantee as to how other member states would vote if they held similar referenda. The UK referendum result is mainly a responsibility for UK politicians, but obviously EU leaders and all of us working in promotion of the positive European development have a fair share of responsibility of not being able to show the EU for what it is – a necessity for our continent.
Secondly, even with a strong desire from both the UK and EU sides to have as smooth negotiations as possible, the negotiations will not be easy. The two year timetable set for the completion of an exit is extremely short by any standards. Both in the EU and the UK only general emergency plans were made in case of Brexit, but detailed plans are yet to emerge.
In other words, the challenge today is that we don’t even know all the challenges. 27 member states promoting their individual set of interests and the UK trying to guarantee the best possible deal while undoing 42 years of institutional cooperation will be a painful experience for everybody, even without additional hostility from the EU side.
As a third point of consideration, despite the UK referendum result, the UK is an essential part of the western world and will stay that way. We should not forget that 48.1 % of the UK voters voted in favour of staying in the EU, despite the brutal campaign of misinformation and, at times, plain lies. Reading the text of UK citizens in social media and the articles and op-eds of journalists one understands that very large proportion of UK citizens are not only disappointed or sad, but heartbroken by the direction their country has taken.
“Already before the referendum there was a school of thought within the EU that if Brexit happened, the separation should be as painful as possible in able to make sure that no other member states would follow suit.”
Young people in the UK reacted to the referendum results with deep disappointment. Among citizens 50 years old and under, the Remain option had clear overwhelming support and among 18-24 years old 75% of voters were in support of staying in the EU. The generational divide is evident. Should the UK referendum have taken place ten years later, the Remain side could have had a clear victory.
A very large part of UK sees the importance of European unity, globalisation and openness. That part of the population is an important part of the future make-up of Europe, even if for a couple of years the relation between the UK and the EU will be reflected by this referendum result.
The UK voters have decided the course of their country and we will respect the results. In consequence, we will conduct the exit negotiations with the UK aiming for the most advantageous result for the EU and its 27 member states. In this negotiation, the UK will be considered as an external 3rd country.
However, when those negotiations are over, our goal needs to be to enhance and strengthen the relations with the UK as much as we can, because the values UK holds dear are still the same as those of the 27 member states. We should not discard decades of friendship and trust just because of one unfortunate referendum.Tomi Huhtanen Brexit EU Member States European Union Leadership Trade
Brexit: Revenge on the British will not help Europe
27 Jun 2016
“We have stabilized the Euro and carried out reforms. Now we need to focus on innovation for growth and the digital economy.”
These are the words used by Manfred Weber, leader of the European People’s Party (EPP) Group in the European Parliament during his opening of the Economic Ideas Forum that was held in Brussels on December 2nd 2015.
The Economic Ideas Forum (EIF) is an annual high-level conference that brings together economic experts, decision makers and business leaders to discuss and consider innovative ideas and solutions to the economic challenges facing the EU today. The Forum has so far been a roadshow affair, with previous editions successfully held in Bratislava, Helsinki, Dublin, London and Madrid. Organized by the Wilfried Martens Centre for European Studies, the official think tank of the EPP, the EIF’s aim is to act as a laboratory for policy-oriented ideas.
Here are the seven key takeaways from the one day discussions:
- Digital Single Market (DSM): You snooze, you lose
The Commission’s plans for a Digital Single Market featured prominently in the discussion and all speakers agreed that their successful implementation could be agame-changer for the future of the digital economy in Europe. According to one speaker, some EU member states still need to wake up from their “digital snooze”, otherwise the EU will continue to lag behind in digital innovation, most notably in comparison with the US. One big market, rather than 28 different ones will make Europe an investment and digital-friendly continent.
- Industry 4.0: Embrace, don’t erase
As the birthplace of the industrial revolution, Europe has long relied on its industrial eco-system as a core economic strength. But the relative contribution of industry to the EU economy is declining. In response, we need to activate a new industrial revolution: we need to transform industrial production through the merging of digital technology, the internet and conventional industry.
In an era where users take the driving seat, and the economy becomes an “on demand” one, including the personalization and digitalization of products, the EU needs to provide a co-ordinated response on how to embed innovation at the core of Europe’s industrial sector.
- Collaborative economy: Disrupt yourself
Revolutionising our economies and work habits, that’s no modest ambition set out by the new, dynamic players that are part of the so-called collaborative economy. How about the more traditional players that are challenged in the process? They can use this as an opportunity to disrupt their own business models by adapting and borrowing practices from the newer players. This will lead to growth, lower prices for the consumer and increased efficiency in the utilization of resources.
- It’s the (data-driven) economy, stupid!
All the digital innovations discussed raised complex issues of data treatment, storage and protection. There was a general agreement that a balanced deal on data protection is a necessary prerequisite for the digital economy to fully accelerate in Europe. On the issues of data flows and “safe harbor” the temptation to build walls around Europe should be avoided.
- Energy Union: Don’t rush to Russia
In the energy field, speakers agreed that the objectives are security of supply, climate protection and the reduction of energy costs. The EU has gone a long way towards having a common policy to achieve these goals, but further steps will still be needed. Tackling the overreliance of some EU countries on external supply (i.e. Russian gas) can be achieved through a better connected European energy market, a stronger energy union and intelligent diversification.
As for the latter, agreement on the importance and role of renewable energy sources was mixed with an acknowledgement that other complementary solutions should also be considered, including nuclear power.
- COP21: Leader, not lonely front-runner
With the EIF taking place just before the Climate Change Summit, the timing was right to underline that what was at stake in Paris was the future of Europe as a leader in clean energy. If an agreement was not reached, Europe could turn into a “lonely front-runner”, shouldering a disproportionate part of the burden in fighting climate change and losing its competitiveness to countries with laxer standards.
- Ukraine: Remain Calm – now reform and support
The need for diverse and comprehensive reforms in Ukraine was best summarized by a speaker that urged for a “Maidan in government structures”, as well as de-regulation, privatization and an independent judiciary. In this, Ukraine should value the experiences of centre-right reformers from Central and Eastern Europe during the 1990s. In turn, Europe needs to avoid that Ukraine falls off the EU agenda and offer concrete rewards to encourage the reform process in the country, such as the concrete prospect of visa liberalization.
Closing the event, Martens Centre Executive Director Tomi Huhtanen told the audience how, in previous years, “financial crisis” and “economic recovery” were the topics dominating the EIF discussions. This time around, new buzzwords such as “collaborative economy”, “industry 4.0” and “data-driven economy” took over the conversation.
In a world where change seems to happen at an exponentially growing pace, 2016 is no doubt going to bring new, disruptive trends for the European economy. The Martens Centre will be there to discuss them as they happen, with a continued appetite for new ideas and concrete policy recommendations.Economy Energy Growth Innovation Trade
Economic Ideas Forum, inspiring ideas into policy action: 7 key takeaways
10 Dec 2015
In June 2013, Presidents Obama, Barroso and Van Rompuy launched negotiations on a Transatlantic Trade and Investment Partnership (TTIP), an agreement meant to create growth and jobs in both the US and Europe by stimulating trade and investment flows between them (The White House 2013). The agreement was also widely heralded as having geostrategic implications, bringing the two largest supporters of democracy and the rule of law closer together.
Instead, several years on, TTIP seems to be pushing them apart. One of the main reasons for this is the public outcry in Europe against investor–state dispute settlement, or ISDS. Indeed, the criticism of ISDS is so heated that many, sick of the topic, will not read beyond the title of this piece—few in Europe want to hear about ISDS again if they can help it. But ignoring the issue does not help. The opposition to ISDS, in TTIP and beyond, has weakened and indeed possibly insidiously undermined support in Europe for the rule of law.
In fact, the reaction in Europe against ISDS has been so strong that in January 2014 the Commission suspended negotiations on the investment pillar of TTIP (European Commission 2014a) and launched a public consultation about it—a consultation in which over 98 % of the 150,000 or so respondents condemned ISDS, and opposed its inclusion in TTIP (European Commission 2015b). I
n July 2015, the European Parliament responded to this by adopting a resolution on TTIP that, among other things, called for a wholesale reform of ISDS (European Parliament 2015). ‘ISDS as we know it is dead,’ the President of the Socialists and Democrats Group in the European Parliament, Gianni Pittella, proclaimed (Euractiv 2015). Then, in September 2015, the European Commission proposed a new ‘court system’ for investment disputes under TTIP that it argued would spell the end of ISDS (European Commission 2015a).
In so doing, the Commission has unwittingly reinforced unfounded concerns about ISDS, at the same time causing many to ask whether the fuss is about ISDS, TTIP, the US or, more fundamentally, the rule of law in international relations. This, more than the strife about TTIP, is where the debate in Europe over ISDS threatens to increase the divide between the US and the EU. If the EU walks away from ISDS, an important component of the rule of law, the US will not follow.
Those who see the benefits of bringing the US and the EU closer together, who share the vision of the world’s two largest economies working together to strengthen the rule of law, need to better understand what ISDS is, so that they can respond to the concerns people have about it. That is the purpose of this piece: to bring this conversation back to where it belongs—the importance of the rule of law, a principle that citizens on both sides of the Atlantic support.
Read the full FREE article published in the December 2015 issue of the European View, the Martens Centre policy journal.Peter Chase EU-US Trade Transatlantic
TTIP, ISDS and the rule of law
01 Dec 2015
The US and the EU began negotiations on the Transatlantic Trade and Investment Partnership (TTIP) in July 2013. The resulting deal will affect almost 40 % of world GDP and have a significant impact on market access for goods, services and investments (European Commission 2015). It will therefore create benefits for citizens and businesses—including SMEs, which are the backbone of economic activity in many European regions.
It is estimated that TTIP will save companies millions of euros and create hundreds of thousands of new jobs on both sides of the Atlantic. According to official estimates from the European Commission (2013), the average European household could save €545 per year and European GDP may increase by nearly 0.5 %. These are welcome forecasts as many Europeans have yet to see the effects of economic recovery following the financial crisis.
Given the extent of the deal and its impact on citizens, democratic control of the negotiations must be guaranteed at all times. The TTIP negotiations have been met with severe criticism as lacking transparency. Moreover, anti-TTIP campaigners claim the deal will lead to a lowering of environmental, food safety and other standards. The speed and power of the Internet and social media mean that these fears, misconceptions and myths have been spread amongst citizens.
Whilst both the EU and the US have underlined the need for confidentiality, efforts have also been made to improve transparency by including relevant stakeholders in discussions, dialogues and open meetings. More specifically, the European Committee of the Regions (CoR), the EU’s Assembly of Regional and Local Representatives, welcomed the decision by the Council of the EU on 9 October 2014 to publish the negotiating directives for talks on TTIP (European Committee of the Regions 2015b; Council of the European Union 2014a). This decision has been hailed as a step in the direction of greater transparency. However, the CoR also noted its regret that this took place several months after the text had already been leaked online.
It is also widely accepted that member states and the European Commission should step up their efforts to communicate the benefits of TTIP and that the need for transparency and dialogue with civil society should be embraced (European Council 2015). Whilst the Information Working Party’s proposal on how the EU’s communication strategy on TTIP could be enhanced is still eagerly awaited, the CoR believes this strategy should go one step further and incorporate the EU’s local and regional authorities. Unless this happens, it will be difficult for citizens to see—and to have confidence—that the EU is working towards economic growth and job creation across Europe whilst maintaining a high level of protection for the environment, health, safety, consumers and data privacy.
With this in view, the EPP Group in the CoR would like to propose a communication strategy that is focused on stories of real-life experiences from local communities, stories that address the concerns of citizens and show how TTIP will offer significant benefits. This strategy needs to be both transparent and balanced to counterbalance the unsubstantiated negative view which is prevalent in the media in many EU member states.
Read the full FREE article published in the December 2015 issue of the European View, the Martens Centre policy journal.Michael Schneider Democracy Trade Transatlantic
Mobilising the masses: a grassroots communication strategy for TTIP
30 Nov 2015
The Transatlantic Trade and Investment Partnership, better known as TTIP, is a trade deal between the world’s two biggest economies—the EU and the US. By lowering non-tariff barriers and setting common rules, it promises to bring a post-crisis boost to Europe and refresh the old alliance. But this Euro-Atlantic partnership also has its detractors. The critics are few but they have been making their voices clearly heard ever since the European Commission received the mandate for negotiations in July 2013.
Despite the Commission’s hard work to bust the myths surrounding the agreement, it seems to be easier for people to unite in opposition to it. This year dozens of protests have taken place across Europe and anti-TTIP campaigns have mushroomed on social media. In addition, Julian Assange’s Wikileaks has publicly claimed that the deal lacks transparency. The news leaks organisation has launched a campaign to crowd-source a €100,000 reward for ‘Europe’s most wanted secret’—the prize will go to anyone who can secure information on TTIP (Wikileaks 2015).
The reasons for such criticism of the deal are eclectic—from a general anti-US attitude, to claims that the deal will empower multinational corporations and fears of losing control over the high standards of food on the European market. Scaremongering and misinformation are unavoidable obstacles when discussing far-reaching supranational agreements—and the bigger the agreement, the greater the fear. With the US and the EU accounting for almost 45 % of global trade and 60 % of global investment flows (Berger 2014), TTIP would become the biggest trade deal of its kind.
There are three broad areas being negotiated under the EU–US trade deal: market access for businesses, regulatory cooperation and international rules to address global challenges. The two economic super-blocs have one of the most integrated markets in the world and tariffs between them are already very low at less than 3 % (European Commission 2015a). The crucial part of the agreement is therefore its second pillar, which aims to reduce non-tariff barriers and standardise regulations.
Coherence in standards on both shores of the Atlantic would increase efficiency, cut bureaucratic costs and have major economic benefits. It would also become a powerful tool to ensure that such standards are advanced globally, thus helping to promote the spillover of Western-style trade rules. But neither ‘regulatory cooperation’ nor ‘liberalising trade’ seem to be popular enough topics to take the lead in public discussions.
There is a shortage of empirical data available to help European Trade Commissioner Cecilia Malmström get the detractors of TTIP on her side. Its critics say there is a lot to lose and little to gain (The Economist 2015). Instead of an economic narrative, those advocating a comprehensive deal should focus on storytelling that makes it easier to understand what is at stake and gives the potential geopolitical impact of the agreement a prominent role.
Read the full FREE article published in the December 2015 issue of the European View, the Martens Centre policy journal.Pavlina Pavlova EU-US Trade Transatlantic
Beyond economics: the geopolitical importance of TTIP
30 Nov 2015
A crucial negotiating session will take place in Miami, Florida from 19 to 23 October on the terms of a possible US-EU trade and investment pact. An independent study by Copenhagen Economics has calculated that a Transatlantic Trade and Investment Pact (TTIP) would add 1.1% to Ireland’s GDP. This is twice the rate of gain that would be experienced by the European Union as a whole.
I spoke recently at a seminar organised by the European Ideas Network (EIN) which is a think tank associated with the parliamentary group of the European Peoples Party, the biggest party in the European Parliament. I said that TTIP would be good for Europe because:
- It would reduce the cost of regulation by eliminating the necessity for duplicate standard setting and inspection regimes, the cost of which has to me met by the consumer without any compensating benefit
- The reductions in the cost of regulation would disproportionately help small and medium sized businesses to break into the transatlantic market. The present duplicative system acts as a barrier to entry and helps bigger well established companies keep markets to themselves
- It would open the US Federal, State and local government market to European tenders, who are now discriminated against by “buy America” rules, which deliver poor value to US taxpayers
- It would help high tech start up businesses on both sides of the Atlantic by creating a single market of almost 1 billion consumers
- It would help to keep Britain in the EU, in order for it to access this market. A failure to conclude TTIP could, on the other hand, push the UK towards the exit, on the supposition that it might be able to negotiate better on its own
- It would give a confidence boost to the global economy at a time when the burden of debt precludes other forms of stimulus
There is, unfortunately, quite a bit of opposition, in Germany and Austria in particular, to the conclusion of TTIP. This seems to be linked to a general suspicion of globalisation and a perception that it adds to inequality. Austrians are 53% to 35% against, Germans 41% to 39% and Luxembourgers 43% to 40% against. The rest of the EU is pretty overwhelmingly in favour with the biggest favourable votes in Ireland and Denmark, at 71%.
On the far side of the Atlantic, trade is not a big concern of Americans. Their big concerns, according the Pew Research Centre, remain international terrorism and building up their own economy. 69% of American under 28 believe trade deals are good, as against only 50% of over 65s.
Interestingly, 59% of Democrats favour concluding TTIP, whereas only 45% of Republican voters do so. This is opposite to the traditional position in the US Congress, where Republican Congress members generally favoured freer trade, and Democrats often did not. US public opinion will be less willing to accept European standards until the trust, damaged by the Volkswagen and LIBOR scandals, is repaired.
It is also important to recognise that differing standards sometimes reflect genuine differences in priorities among populations. For example, Europeans put a higher value on data privacy. Americans probably put a higher value on national security. So the negotiations will be intensely political..John Bruton Business Economy EU-US Trade
Why TTIP is good
12 Oct 2015
Engagement, involvement and empowerment—these are the political buzzwords often linked to modern forms of participation via the Internet. For many citizens the Internet has emerged as an indispensable medium that provides powerful digital tools for learning, networking and communication. Since the Internet is open and transparent, it easily facilitates collaborative action in innumerable respects. As a result, Internet users generally benefit from shared information that is local, bottom-up and easily accessible worldwide.
Because of these characteristics, many civil rights campaigners, political commentators and politicians have been calling for a stronger role for the Internet in formal politics and the formation of political opinion. According to their reasoning, e-participation—that is, a greater use of information and communication technologies (ICT) in governance and law-making—encourages more people to engage in political processes, helps to overcome prevailing democratic deficits and increases trust in politicians and governments.
Most EU member states already employ various e-participation tools, which help to facilitate public policymaking at local, regional and federal levels. E-voting tools, e-petitions, online stakeholder surveys and online public consultations are frequently applied to involve citizens in political decision-making. At the EU level, the European Commission and the European Parliament have incorporated similar tools to encourage citizen ownership and inclusion.
For EU institutions, online public consultations represent a key tool for transparent and accountable policymaking. By means of online questionnaires, both the European Parliament and the Commission aim to encourage multiple stakeholders to provide input on legislative processes in ways that go beyond traditional consultations, which are sometimes aimed exclusively at stakeholders. The EU explicitly aims to give ordinary citizens, civil society organisations and other organised interests the opportunity to express their opinions.
Read the full FREE article published in the June 2015 issue of the European View, the Martens Centre policy journal.Matthias Bauer Internet Trade Transatlantic
Campaign-triggered mass collaboration in the EU’s online consultations: the ISDS in TTIP
09 Sep 2015
Germany runs a current account (trade) surplus which is almost twice that of China. (The actual figures are USD 278.7 bln USD for Germany and 164.8 bln USD for China according to latest official data). Although this may be viewed as a sign of growth and competitiveness of the German economy, one should go beyond the headline reading and look at both the causes of this performance and its long term implications.
In very simple terms, a trade surplus is defined as the difference between a country’s exports and imports – in other words, it is the difference between consumption of the country’s goods and services by citizens of other countries less the consumption by citizens of the country of imported goods and services.
A beautiful summary of this phenomenon had been provided by Martin Wolf in the Financial Times who wrote that “Export surpluses do not reflect merely competitiveness but also an excess of output over spending”. (Martin Wolf, “Germany is a weight on the world”, Financial Times, November 5th, 2013). At the same time, there is significant room for expanding investment in Germany. At the moment, German government spending as a % of GDP is well below the European average. This is accompanied by limited real earnings growth (salaries and wages) combined with relatively high levels of taxation. This mix leads to a decline in spending – thus harming consumption – including consumption of imported goods – and increasing further the trade surplus. The latest set of macroeconomic statistics which showed a decline in German industrial production by 4% in August and a decline in GDP by 0.2% in Q22014 are definitely a cause of concern.
Trade surpluses can be viewed as an example of “beggar thy neighbour” policy. Surplus countries hide their weak domestic demand via strong demand for their products elsewhere in the world, i.e. exports.
It is common sense that this is not a situation that can be sustainable in the long term. Competitiveness is a relative term. A competitive economy comes hand in hand with a non-competitive economy on the international level.
As the situation stands, over-reliance in export driven growth renders the German economy vulnerable to external shocks – primarily a decline in global demand. For long term equilibrium, domestic demand has to pick up. Increased domestic demand will insulate the German economy from the risk of external shocks, but will also benefit the Eurozone as part of the increased spending will be spread to goods and services in the rest of the EU.
Should the picture painted by the last set of macro figures prove to be permanent rather than seasonal, Germany runs the risk of running into a difficult to escape recession spiral. Germany’s “Wirtschaftwunder” of the past decade was based on high investment and productivity growth. A continuing low level of investment in Germany could become a counter factor for the long term competitiveness of the German economy. Most importantly, it could become a counter-factor for the revival of the Eurozone economy.
Increased government spending combined with incentives for investments is the right policy mix to minimise the risk of running into a recession spiral in the medium-long term.Maria Spyraki Economy EU Member States Macroeconomics Trade
Is it time to talk about the surplus?
23 Oct 2014
I have been in Hangzhou in the past week attending a Global Investment Conference organised by Euromoney. Hangzhou was for a time the capital of China and the biggest city in the world. It is about 200 km from Shanghai, or an hour’s journey on the high speed train, a trip that I was told costs only 10 euros. Hangzhou was a centre of the silk business and was visited by Marco Polo. Silk from Hangzhou went along the ancient Silk Road all the way to Europe, thereby making Hangzhou one of world’s first globalised economies.
I spoke in Hangzhou just as the Asia Europe Economic Meeting (ASEM) of heads of Government was taking place in Milan. As the President of the European Council, I attended the first ever ASEM meeting in Bangkok in 1996. I met the Mayor of Hangzhou and key commercial and political figures.
Since 2010 there has been a huge surge in outward investment from China in the rest of the world, jumping from 6.1 billion euros to 27 billion euros in just three years. This investment is going into buying high tech companies, companies with globally known brands, and tourist resorts (like Fota in Cork). Just as China’s export drive enabled it, not only to gain income but also to gain market knowledge, this wave of investment is also designed to strengthen China’s global competitiveness and sophistication.
Children in the Shanghai are getting the highest test results in Maths, Science and Reading comprehension in the global PISA tests, which shows that they will provide strong competition for European and Irish children in the global economy. Irish Universities are accepting Chinese students and also investing in developing University facilities in China. This will help China to become a high income economy, its people enjoying lifestyles that will make similarly exorbitant demands on global resources, to the ones already being made by European and American lifestyles consumers.
Wage levels are rising fast in China, as demand for workers is beginning to exceed supply, partly thanks to the one child policy. China is losing low cost jobs to Vietnam and Mexico, so it has no choice but move higher up the value chain.
There is a shift in the allocation of credit away from big, relatively inefficient, state owned heavy(and often polluting) industries, towards privately owned businesses in the consumer goods sector. While the raw GDP growth rates in China may decline as a result, the life style enhancing quality of future GDP will improve.
China is becoming a middle class country, with middle class tastes and material aspirations. With wealth has come anxiety, with many Chinese wanting to invest some of their savings overseas. This provides opportunities for the Irish international financial services industry.
While I was in Hangzhou, the protests in Hong Kong were still under way. The protesters wanted anybody to be eligible for election, not just candidates approved by a single nomination committee. I read an article on this controversy in the “China Daily”, by an Indian Professor, M D Nalapat, entitled “Hong Kong must avoid the democracy trap”, which challenged the notion that, at every level of economic development, democracy is a guarantor of economic success.
He also said: “ Political chaos can act as a speed breaker for rising Asian economies, dampening the challenge they pose to western counties. Iraq, Egypt, Libya and Ukraine are examples of countries where hundreds of thousands of youths believed that replacing of existing structures through street protest would result in a better life. Instead what they have got are deteriorating living standards and increasing insecurity.”
This is unfortunately a fair comment, and demonstrates the danger of making exaggerated claims of automatic economic advantages from any change of governmental system. Democracy requires patience and self restraint, sometimes absent in recently liberated societies.
Professor Nalapat went on: “Hong Kong is still moving upward, when the present generation in the US and the EU are worse off than the generations preceding it”
This is a superficial comment. Mature economies will never have, or need to have, the same rates of economic growth as economies, like China, which are in the “catch up” phase. Indeed, there is a case to be made that, beyond a certain level of economic development, diminishing returns in human wellbeing and environmental quality set in. 5% plus annual growth rates cannot continue to infinity…..anywhere in the world.
It is not surprising that an article like Professor Nalapats’ should appear in the “China Daily”, but is troubling that it should be written by an Indian, an inhabitant of the world’s largest democracy, a country in which there are 3 million freely elected legislators at differing levels of government, with real competition between parties unlike the tightly controlled system obtaining in China.
But Professor Nalapat is showing that people in the developing world are watching European and North American democracies, as we squabble about how to restore dynamism and optimism in the wake of the 2008 economic crisis, and are drawing conclusions about our systems of government, and the capacity of those systems to enable us to get our economic act together, and democratically to reconcile citizens expectations with economic realities.John Bruton Democracy Development Economy Education Trade
Reflections from the Silk Road
20 Oct 2014
The relationship between our two continents is not a new one. Our people are intertwined in a long and complex history, one which is steeped in mutual respect, assistance and friendship. Our history of course was not always idyllic, nor have we always seen eye to eye. But as is always the case with old friends, we have worked through our troubles, and have always been there for each other in times of need.
Today, all eyes are firmly locked on the economic and trading aspect of our relationship. This, of course, is in no small part due to the recent launch of negotiations of the Transatlantic Trade and Investment Partnership. The scope and potential of this agreement is immense, and I will return to it later. But first I would like to examine the essential nature of our special transatlantic friendship, from the perspective of stability, democracy and an enduring peace.
Two summers ago, I holidayed with my husband in France. We spent 10 days driving around Normandy, visiting the beaches, graveyards and landmarks associated with the World War 2 “Normandy landings” of 1944. These sites, where countless lives were lost, in defense of truth and democracy, reminded me of the special connection between our two great continents. Standing at Pointe du Hoc, I was particularly conscious of the words of Ronald Reagan, when he stood on that same headland on the 40th anniversary of the DDay Landings. The very spot where the allied troops had stormed to liberate Europe from the tyranny of Nazism. He said:
“Today, in their memory, and for all who fought here, we celebrate the triumph of democracy. We reaffirm the unity of democratic peoples who fought a war and then joined with the vanquished in a firm resolve to keep the peace. From a terrible war we learned that unity made us invincible; now, in peace, that same unity makes us secure. We sought to bring all freedom-loving nations together in a community dedicated to the defense and preservation of our sacred values. Our alliance, forged in the crucible of war, tempered and shaped by the realities of the postwar world, has succeeded. In Europe, the threat has been contained, the peace has been kept.”
Whatever about conjuring up the savagery of that war today, it must have been chilling, yet exhilarating for President Reagan to stand there, just 40 years after tens of thousands of men had lost their lives in that very place, realizing the scale of the tragedy which occurred, but also knowing that out of that tragedy, had grown a real and enduring common purpose.
That purpose, on both sides of the Atlantic, was to leave behind a redundant skepticism and nationalism borne out of suspicion and fear. It was to understand that by building trust, and forging close and intense relationships, both within Europe and between Europe and the United States, we could ensure a much brighter future for our people. And this we have done.
My family lost two members fighting Flanders Fields during World War 1, they would be great grand uncles of mine. In the first half of the last century, countless families the continent of Europe were touched by war, as they were all over the United States of America. We resolved to end the bloodshed and pool our might to create something much stronger, much more satisfying. And we have succeeded, with democracy and peace flourishing on both sides of the Atlantic. This is no mean feat.
But of course, we must do more. I firmly believe that if we are not moving forward, we always risk slipping backwards. Europe and America must now explore new and dynamic ways of moving forward together. We must, of course, always defend and promote our values. These are the shared values which we believe integral to the protection and respect of mankind. Values, based on essential freedoms – freedom of expression, freedom of association, freedom of religious practice, freedom of conscience. These are the values which underpin our shared respect for human rights, and which bind our democracy together.
These values are the threads that weave together the magnificent transatlantic tapestry of Europe and America. They are strong and durable, yet need careful attention, lest any of the carefully woven threads come loose. Building on these shared values, we see the immense potential that exists to do more – to weave Europe and America ever closer together. This is where the trading partnership presents such a vital opportunity.
We know our citizens are hurting. We know that since the shock of Lehman Brothers crossed the Atlantic like a tsunami, things have been difficult for both of us. In Europe we have a banking crisis that is not over, we have a significant debt crisis, and most worryingly of all we have a major unemployment crisis. We know that things are difficult Stateside too. You share many of these problems. To solve these enormous economic challenges, we must work together. There is no alternative.
In Europe we know we need to grow our economy, and we recognize that in the years ahead as much as 90% of future growth across the globe will be generated outside of Europe. Enhancing trade is one of the few ways to bolster much needed economic growth without drawing on severely constrained public finances. Advancing the external trade agenda therefore featured prominently on the Irish Presidency programme for the first 6 months of 2013, and it is no secret that Ireland has prioritised the EU-US trade relationship. This relationship simply makes sense for Europe and for the US
I don’t need to bore you with statistics, but it is a fact that the EU and the US enjoy the most integrated economic relationship in the world. Our economies account for about half the entire world GDP and for nearly a third of world trade flows. EU investment in the US is around eight times the amount of EU investment in India and China put together. Total US investment in the EU is three times higher than that in all of Asia. In other words: The transatlantic relationship defines the shape of the global economy as a whole. Either the EU or the US is the largest trade and investment partner for almost all other countries in the global economy. So we have already achieved much in terms of deepening our economic ties, but there is still much more to do.
It logically follows, that releasing the further untapped potential of the EU-US trade relationship, would provide significant benefit in terms of growth and jobs, on both sides of the Atlantic. Such deepening of our ties is both timely and very necessary. Our trade relationship has an enormous potential, which is far from being fully exploited. Currently 15 million jobs depend on EU-US trade. That is 15 million people either employed by European companies in the US or by American companies in the EU. Last year an OECD study demonstrated that the elimination of non tariff barriers to transatlantic trade and investment would boost US GDP by 2.5% and EU GDP by 3% annually.
There are also long-term benefits to unleashing the full potential of transatlantic trade: our mutual competitiveness in the global economy. As more and more production flows from the US and the EU to emerging economies we must face facts. In order to remain competitive in the global economy Europe and the US must innovate. Long-term evidence shows that the flow of trade and investment help spread new ideas and innovation, new technologies and the best research, leading to improvements in products and services. By investing in the EU-US trade potential, we are not only releasing short to medium-term economic and jobs growth, we are also ensuring the long-term sustainability of our economies’ competitiveness.
Given these enormous benefits, both in the medium and the long-term, I am delighted that a real momentum to advance transatlantic trade is emerging. So now the negotiations for the Transatlantic Trade and Investment Partnership are underway. And it only took 20 years for this breakthrough! I am keenly aware of the fact that there will be difficult choices for both sides to make now that the talks are underway in earnest. Given the low average tariffs, the key to unlocking the potential of our trade relationship lies in the tackling of non-tariff barriers, as highlighted by the OECD. These consist mainly of customs procedures and of diverging regulatory systems, but also other non-tariff measures, such as those related to certain aspects of security or consumer protection.
There will be difficult bridges to cross in the area of health and safety standards, public procurement and agriculture but I am convinced that if both sides take an open and flexible approach, we will be able to agree on regulatory issues – effectively setting the standard for world trade. An ambitious, comprehensive and far-reaching agreement on trade and investment between the EU and the US will not only trigger economic growth in our respective economies. It will also send a strong signal of leadership to other economic powers.
This is the least of our responsibilities to our citizens on both sides of the Atlantic. The challenges we face, arising from recession, depression, and the sovereign debt crisis, requires us to be brave, and to go where we haven’t ventured before. We have the formula to a accelerate towards a transatlantic market, which will create jobs, stimulate recovery and contribute to global growth. This formula can ensure much needed benefits for our businesses and our citizens. We must pursue a common vision, with a mutual sense of purpose, for this vision to become reality.
As Reagan said in Pointe du Hoc in 1984 “We were with you then; we are with you now. Your hopes are our hopes, and your destiny is our destiny.” Let us never forget how much more we can achieve together.
[Keynote speech given during the 4th Transatlantic Think Tank Conference, Washington, July 2013]Lucinda Creighton Economy EU-US Trade Transatlantic
A Union of Values, Respect, Democracy and Common Economic Interest
23 Jul 2013
Karl Marx wasn’t wrong on everything. Take his famous dictum about history repeating itself: The first time as tragedy, the second time as farce. If 2003 was a transatlantic tragedy, with the open rift within the West about the Iraq War, then 2013, with its revelations of American data mining and spying on allies, and the ensuing European shock and anger, risks becoming the year of a transatlantic farce.
Again, European atlanticists look stupid – poodles to the US, so to speak. Again, and even more ominously, resentment against America has become a tool of European politics: witness the German Social Democrats’ blatant attempts (http://ces.tc/14XJ2mS) to paint Chancellor Merkel as too docile vis-à-vis American unilateralism. The pictures showing her smiling next to Barack Obama in Berlin, two weeks ago still an asset, suddenly have become a liability in her re-election bid.
Nevertheless, this is not 2003 – the main reason being that Europe’s relative weight in the transatlantic relationship has actually further declined over the last ten years: both militarily and economically. Militarily, the United States is – rightly or wrongly – withdrawing its last major combat units from Europe while Europeans compete in cutting their defence budgets to record lows. And they show very little willingness to shoulder any major new security burden. Economically, the US is now moving out of the crisis while Europe seems mired in stagnation, with dwindling exports, low competitiveness and a mountain of over-regulation. America is busily exploring shale gas, thereby creating windfall profits as well as reducing its energy dependence – while Europeans are dragging their feet over shale gas and thus risk missing out on cheap energy and less dependence on Russia.
Now we know that in 2003, the US also believed it could get on without the (West) Europeans. Or without anybody else, for that matter – after all, the term unilateralism was then born in reference to a White House allegedly in the grip of neocon ideology. But that mood changed very quickly in Washington, where the second George W. Bush administration became very cooperative with all Europeans – much more so than Obama’s America ‘pivoting’ towards Asia.
So where does this leave us atlanticists in the days of transatlantic spying and data mining? Three major truths come to mind:
First, most transatlantic spying is done jointly, not against each other. And it is important to keep the data mining apart from the eavesdropping. Data mining in private communication, according to all we know today, is also done by the French and British intelligence services, and the German authorities were at least informed about some of the NSA’s activities. After all, some spectacular successes of European services against would-be terrorists, such as Germany’s preventing the ‘Sauerland’ gang (http://ces.tc/12fEIkj) from killing hundreds in 2007, were already then explained by US services having used telephone and internet data.
Hence, there is no reason for Europeans to be particularly morally outraged about Snowden’s revelations. On the other hand, the scope of the snooping on the internet will be open for debate. Everyone in this debate subscribes to the need to find the right balance between privacy and security. No one can claim to have found the perfect solution. And as to the spying on allies: while we still have to learn about its actual scope – it is clear that diplomats always have to envisage that others will try to get hold of their secrets – even friends. In the EU institutions, with the lax attitude to secrecy and some Member States’ tendency to leak documents, it usually doesn’t take listening bugs or malware for others to find out what the European External Action Service or the Commission are up to.
Second, are trade talks such as TTIP the appropriate framework to hit back in anger? – No, because that would be self-defeating on a large scale. Due to the growing transatlantic asymmetry, and because of Europe’s dire need to increase its own potentials for growth, it has very little leverage through suspending or dragging out the negotiations. They will be hard enough from now on, in any case. To open up US public procurement, for example, or for Europeans to accept importing genetically manufactured organisms (GMOs), will require protracted domestic battles on either side. And, of course, discussing digital services in the TTIP framework will be a good opportunity to speak about privacy and security. But that would also presuppose having a digital single market in the EU – which is not in sight at the moment. All this means that the talks must go on now. Transatlantic differences in the digital field can be resolved in due time.
Third, it is time to develop a more realistic atlanticism (http://ces.tc/14XJhyc) : That includes being a bit more open about the dilemmas of freedom and security in the age of global terrorism. Some of the transatlantic rhetoric about the freedom of the individual as a core value of the West will sound hollow if we don’t more openly redefine it for the 21st century. There will have to be more exceptions to fundamental rights if we want to preserve them at all. If we pay attention to that, then 2013 does not have to become the year of the transatlantic farce.Roland Freudenstein Foreign Policy Internet Trade Transatlantic
Transatlantic relations need more realism – not more hysteria
08 Jul 2013
President Obama’s state of the union address contained a big success for transatlantic relations: “And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.”
A comprehensive Partnership agreement, covering investments, regulatory convergence and other non-tariff barriers would be a game changer in world trade relations. And this, for different reasons:
– It would enable the European Union and the United States to lead instead of follow when it comes to standard setting. This might seem as a technical argument but it is not. It would enable the EU and the US to set world standards for electrical cars, mobile devices, etc. giving our industries a competitive advantage.
– Indirectly, this Partnership agreement will increase the appetite for other economies to open up as well. When barriers to invest between the EU and the US are lowered, it will increase the interest of emerging economies to engage in similar negotiations. As they will want to avoid that EU or US investments are diverted from their economies to the transatlantic economic area. As such, a EU-US agreement will revive multilateral free trade negotiations.
Overall, a EU-US Partnership will make both economies more competitive and stronger. Such an agreement will not be a zero-sum game but a gain for both parties. However, some EU and US industries will face more competition and might lose or, to the contrary, become more globally competitive. Moreover, it might make the US a bit more European and the Europeans more American, an evolution that should benefit both societies.Stefaan De Corte Economy Growth Jobs Trade Transatlantic
Stefaan De Corte
Transatlantic Free Trade – An Agenda for Jobs, Growth & Global Trade Leadership
14 Feb 2013
The EU Carbon Border Adjustment Mechanism (CBAM) has to pass two major tests before it can come into effect. It has to withstand any challenges to its compatibility with the World Trade Organization rules. It also has to prove that it can effectively address carbon leakage and ensure a level playing field for European companies. It should not be allowed to be circumvented. This depends on the design of the CBAM and on how it is implemented.
If the CBAM is structured to be an effective tool to prevent carbon leakage, it will have to cover a wide scope of emissions, which may negatively affect many trading partners. The endeavour to prevent circumvention may turn the CBAM into an administrative nightmare for companies and for the public institutions involved. Many more trade-offs would have to be taken into account in the design and implementation of the mechanism and these will be discussed in this paper. All of them require thorough consideration and policy choices that have been carefully thought through. The paper includes a number of policy recommendations. The CBAM is unique in the world of trade—if it is to succeed, expectations must be tempered. If the CBAM is indeed able to help to achieve climate objectives, many countries may go on to develop similar instruments of their own. However, the failure of the CBAM could have serious implications for the global trading system and EU climate policy.Climate Change European Union Trade
Navigating the Carbon Border Adjustment Mechanism: The Dangers of Non-Compliance and Circumvention
15 Nov 2022
A Climate or Carbon Club has been proposed as a form of cooperation which could be established between like-minded countries sharing ambitious climate policies to encourage all others to follow suit and embark on equally grand climate measures. For the time being, this is a rather amorphous idea which needs to be converted into an effective instrument of the global climate transition. It remains unclear who could form a club, how its members could organise cooperation, what conditions would be expected from those willing to join, and what kind of instruments members could use to achieve their club’s aims. This In Brief seeks to shed some light on the concept.Climate Change Environment Trade
Climate Club: The Way Forward
25 Oct 2022
China is no longer only a partner, but increasingly also a systemic competitor, due to the continued enforcement of state capitalism under Xi Jinping. The hope for change through trade has not been fulfilled, as the growing influence of the Chinese Communist Party shows. Trust in the Chinese leadership has been eroded in recent years due to an aggressive global raw materials strategy, expansive moves in Southeast Asia, the Belt and Road Initiative, the 17+1 initiative, and the interference with Hong Kong most recently.China Economy Foreign Policy Trade
For a More Robust Approach Towards China in European Trade and Investment Policy
28 Sep 2020
Rules-based trade is under attack, and the World Trade Organisation (WTO) is at risk of marginalisation. The COVID-19 pandemic and its detrimental effects on public health, value chains, and industrial production have brought back national export restrictions and stopped the free flow of goods and people. Buzz words such as ‘decoupling’, ‘sovereignty’ and ‘autarky’ have quickly returned to the global stage. However, COVID-19 is not the first shock to global trade. The WTO is already facing an existential crisis due to a deadlock in negotiations, blockage of institutional reforms, and paralysis of the dispute settlement mechanism (DSM). Nevertheless, there is hope that countries experiencing the effects of disrupted trade means the EU can take the lead in global reform efforts.COVID-19 Crisis Economy Globalisation Trade
EU Trade Policy as an Economic Recovery Tool
27 May 2020
Non-governmental organisations (NGOs) are an indispensable part of civil society. However, NGO influence on policymaking is not always positive. A large number of well-connected NGOs explicitly aim to influence trade and investment policymaking. Some of the most influential NGOs that have campaigned against vital EU trade and investment policy objectives have received substantial funding from the European Commission and national governments.
This study calls on EU policymakers to ensure that NGOs financed by the EU do not fundamentally contradict the EU’s basic principles. Among other things, the study calls for a comprehensive reform of the EU’s Transparency Register and Financial Transparency System. This should include the introduction of a single, centralised system for recording and managing NGO grant funding.European People's Party European Union Society Trade Transatlantic
NGO Lobbying on Trade and Investment: Accountability and Transparency at the EU Level
08 Nov 2019
Since the end of the Second World War, every US administration has promoted European recovery, transatlantic cooperation and joint defence. Common interests, together with common principles and values, constituted the bedrock of the post-war partnership between Europe and the US. NATO became an alliance of both interests and values.
Today, however, the transatlantic partnership is facing a new series of challenges. Of these, two are of particular importance: one external, the other internal. The external challenge concerns the rise of two great revisionist powers, Russia and China, as well as Islamic terrorism. The internal challenge is the declining willingness of the US to defend the international order it created and the fracturing of the core of this system. These global shifts are forcing the Atlantic partnership to re-examine its common interests, its common values, its capabilities and its strategic objectives.
This paper argues that there is a need for a new grand bargain that would lead to a more equal transatlantic partnership. The goals are stronger trade relationships through revitalised negotiations for the Transatlantic Trade and Investment Partnership (TTIP) and a more even defence relationship that addresses both the question of burden sharing and the disparity in military capability between Europe and the US.EU-US Foreign Policy Trade Transatlantic
The Renewal of Vows: A New Transatlantic Chapter for Europe and America
08 Aug 2019
This paper briefly describes how international trade has been transformed in recent years and what has determined its increasing politicisation. It argues that the two main pillars of the global trading system—international trade regulation and the dispute settlement mechanism—are being put under strain due to various developments.
The whole system is being challenged by opposing tendencies: on the one hand, the multiplication of global risks and opportunities demands common action and multilateral rule-making; on the other, we are witnessing increasing fragmentation and regionalisation. The realistic objective that can now be set for the future development of world trade is the preservation of as much as possible of the present system and its improvement in specific areas.Trade
The Future of Global Trade: Between Multilateralism and Regionalism
27 Oct 2017
On the eve of the invocation of Article 50, this policy brief disentangles the main components of the Brexit imbroglio and lays out the legal framework and political constraints of the negotiations that are about to start. It assesses the reversibility of Brexit, the likely duration and possible outcomes of the negotiations, the legal options for the transition period, and the probable impact of Brexit on the EU27 in general and Central Europe in particular.
Because of the UK’s size, economic weight and political clout, as well as its peculiar historical background, it concludes that the new EU–UK relationship cannot be based on one of the existing ‘models’ of external arrangements. The new partnership between the UK and the EU27 will have to go beyond even the most comprehensive free-trade agreement and it should also include finance, energy and external economic policies, as well as covering foreign policy, security and defence.
The author emphasises that any weakening of the free movement of persons as a result of the negotiations would be a serious violation of the essential constitutional principles upon which the EU is built, and could damage the foundations of European integration. The brief considers managing internal differentiation without creating permanent divisions among groups of countries as the most important challenge ahead for the EU27.
It also argues that, with Brexit, Central Europeans will lose a powerful ally on many economic and constitutional issues, although their economic and geopolitical weight will be on the rise in the new EU27.Brexit Economy EU Member States European Union Trade
15 Mar 2017
The Transatlantic Trade and Investment Partnership (TTIP) aims to remove trade barriers between the world’s two largest economies – the EU and the US. The goal is to create growth and jobs on both sides of the Atlantic. There are three pillars upon which any future agreement will be based:
1. Market access for businesses
2. Enhancing regulatory cooperation; and
3. Setting international rules
However, the opposition to TTIP in Europe has increased significantly. This opposition reflects broader discontent at existing political structures, the continuing fall-out of the economic crises evident in Europe since 2008 and the concerns many Europeans feel about the revelations concerning the National Security Agency (NSA). Empirical data, however positive, will not be sufficient to successfully counter anti-TTIP arguments. For many, the benefits are intangible and too long-term.
As noted by the British Parliament, “the traditional political hurdle for trade agreements is that potential benefits are diffuse while potential costs are concentrated”. In this context it is important not to rely disproportionately on headline quantitative data, but rather develop real narratives to counter anti-TTIP arguments, which are often not based on the realities underpinning the TTIP process.
IN FOCUS is a new series of commentaries in which the Martens Centre looks closely at current policy topics, dissects the available evidence and challenges prevailing opinions.Economy EU-US Trade Transatlantic
TTIP: 11 Myths Exposed
02 Apr 2015
This paper presents the case for deepened trade and investment policy cooperation between the European Union and the United States. A trade deal between the two economic powers has become an increasingly popular notion, particularly given increased competition from China. Old arguments against a transatlantic deal have become weaker as the balance of the world’s economies has changed. Such an agreement would generate significant gains if designed properly and would encourage global trade liberalisation. It is time for the EU and US to press ahead with a free trade agreement. The EU and US also need to find a way outside of the WTO system to use their economic power as leverage in their dealings with emerging economies. An ambitious free trade agreement can, therefore, achieve more than the benefits of reducing barriers.Economy EU-US Trade
Transatlantic Free Trade: An Agenda for Jobs, Growth and Global Trade Leadership
01 May 2012
World trade is recovering from its sharpest decline since the Great Depression. Europe remains the world’s leading trading entity, despite the crisis. The authors of this paper assert that the EU should not retreat to protectionism, but should rise to the post-crisis challenge. The paper assesses how Europe can do this through strengthening the single market, proposes various objectives for external trade policy and examines the need for greater political advocacy regarding the benefits of open markets.Crisis Economy Trade
The Future of World Trade: EU Priorities for the Global Trading System after the Crisis
01 Mar 2011
The purpose of this research paper is to critically review the policies of the European Union towards Africa, to consider some important future challenges for the interregional relationship and to present some useful policy recommendationsForeign Policy Security Trade
EU-Africa Relations: Dealing With the Challenges of the Future
01 Jan 2010
Politicians and academics have warned against a surge of protectionist measures in light of the economic and financial crisis. Although the World Trade Organisation has extensive rules regarding tariffs, it offers few options for contesting protectionist subsidies and procurement conditions that favour domestic suppliers. This paper examines stimulus packages in both the US and EU, international rules governing protectionism and advocates a policy of greater market access.Economy EU-US European Union Trade
Good for the Economy – Bad for Trade: The Effects of EU and US Economic Stimulation International Trade and Competition
01 Jul 2009