The biggest news of the month does not come from Brussels but from the UK. The UK has voted to leave the EU. This process is going to take time and it is next to impossible to predict the consequences. But here it goes. For the transport sector it is likely to mean a quickening of the EU integration process particularly in the air sector, but also in relation to the harmonisation of standards right across the transport sector. There is likely to be a new push for a motorway toll system. It is not clear what the impact will be on the maritime sector other than the shifting of legal and insurance services sectors from London to the Continent over a period of years. Some see a slow down in UK trade hitting shipping in the short term but maybe increasing trade in the longer term as the UK builds new trading relations with third countries. In the short term the main problems will be administrative with the introduction of a new customs territory with its own rules and tariffs.
Barroso’s new job
Ex Commission President Jose Manuel Barroso has taken up a new job as Chairman of Goldman Sachs. Barroso was president of the Commission from 2004 to 2014 and was not considered to have been very effective. Or to put it more correctly. He did the job he was asked to do which was to do very little. Barroso waited the 18 months required under his own rules against conflicts of interest before taking up the new job. However when taking up the job Barroso told the Financial Times that his main job was to guide the bank through the whole Brexit process. As the Commission will negotiate Brexit on behalf of the EU it is hard to see how the taint of conflict can be avoided. The view among many in Brussels is that Goldman Sachs have done a bad deal as Barroso will not bring much to the table and in any event current Commission officials will be concerned for their own reputation if they were to meet or agree with him.
The maritime sector is already impacted by the slow down in world trade. Shipping suffers the consequences. This slow down is likely to be amplified by the increase in anti-dumping actions across the work but particularly in the steel sector. The EU is currently investigating dumping from China in relation to 11 different steel products all of which are likely to result in duties to counteract unfair trade. This will have the consequence of slowing shipments from China to the EU. An increase in steel anti-dumping cases can be seen not only in the EU but in the US and a number of South American countries as well as Japan and Korea.
Is China a Market Economy?
China claims that Article 15 of its Protocol of Accession to the WTO automatically entitles it to be considered a market economy as of 12 December 2016. Many in the EU consider that there is nothing in Article 15 with grants market economy status automatically to China. The only thing certain is that one small part of Article 15 expires on 11 December. The fight is over the consequence of that expiry. The European Parliament has voted that China should not be considered a market economy. Most neutral observers consider that China is not a normal OECD style market and that government management of the economy is extensive. The issue is important as change in China’s status would change the application of the rules addressing unfair trade and in particular dumping. The problem comes down to costs and prices. How can you rely on Chinese costs and prices if those costs and prices are determined by a market that does not determine the allocation of economic resources. The government determines how resources are to be allocated. The most important evidence of this is the build up of massive overcapacities in sectors like steel and glass
and paper and aluminium and ceramics. This build up could not happen if there was open competition in the sectors themselves and in the provision of capital to the whole economy. Easy money and the absence of effective bankruptcy law shield may state owned enterprises from the cold winds of the market evident in the EU and elsewhere.
Shipping accounts for about 3% of global greenhouse gas emissions. The IMO has agreed that new ships should be built to standards that would cut CO2 emissions by 30%. The new standard will apply equally to ships built in the developed and developing world. This new standard has been championed by the EU Commission in Brussels and adds to the cuts the EU has placed on aviation transport. The silver lining is that the new standards should also reduce fuel use saving the industry significant costs in fuel.
Global Warming II
The EU has agreed emission standards for non road engines including railcars, locomotives, inland waterway vessels, excavators and cranes. In addition there will be new EU approval procedures. The new rules will be published in September.
TTIP: the transatlantic trade and investment partnership
The 14th round of negotiations in Mid-July did not result in any breakthroughs. What seems to have happened is that there was a stocktaking of all the issues that have not been resolved. And is seems that there are many. In fact is seems that so far there is nothing agreed, not even the most simple of issues like the level of reduction in tariffs and the range of products in which tariffs must be reduced. This all comes at a time when scepticism about the deal is growing in France and in Germany. This is a big pity. TTIP should be more ambitious not less. The EU and the US need to create an area of common values and common ambitions with transnational institutions capable of defining and defending those values on a global level. We either abandon the global market or we create institutions capable of regulating it. TTIP was and remains an opportunity to start this regulation. The EU and the US share more than their differences over what is a clean chicken or GMOs. It is time to be positive and ambitious. This is what Brexit has taught us.
And to end on a serious note: the 18th EU/China summit
You might have missed it. But the EU and China met in Beijing in the second week of July to discuss relations between the two super trading blocks. Things did not go well. China and the EU are fighting over the status of China’s economy. In addition the EU wants greater access to China’s market and the dismantling of many of the key pillars of the China way. The best evidence of the level of disagreement is the fact that the two sides could not issue a joint statement or communique at the end of the two days of meetings. It gets worse. Donald Tusk, the President of the Council (representing the 28 EU member states) was reduced to talking in his concluding press statement that he had visited that morning the Chinese National Museum and had had a chance to appreciate Chinese culture. He said that these types of talks are not always easy especially when high and real differences persist. The EU and China agreed to disagree and Tusk took the opportunity to do some tourism.