Monthly update on the latest EU policy and regulatory developments - issue no 10/2018
Trade and EU external relations are high on the EU’s policy agenda these days. In this edition, we will - among other topics - address the latest developments in the somewhat strained EU-US trade relationship. The EU’s approach to US pressures – led by European Commission President Jean-Claude Juncker – is becoming more effective, step-by-step. The EU might not always flex its muscles proportionately to its economic power, but the response to the US has been firm and more confident than ever before. Trade of course is a European Commission prerogative, so less consultations with EU Member States are required compared to other policy areas. This results in a swift and coherent approach to those that challenge the EU on (free) trade issues.
Trade and investment with China is a slightly different ballgame. Over the last few years, concerns have arisen around foreign direct investment from third countries in Europe. Among other countries, Chinese investments are reviewed in this respect. The concerns are twofold. Firstly, they include concerns around foreign investments in so-called critical infrastructure (e.g. energy, transport, communications, data storage, space and financial infrastructure) as well as sensitive facilities and technologies (e.g. artificial intelligence, dual-use technology, cyber and nuclear security). Secondly, there are concerns that through extensive investments in particular EU Member States, the third-countries would de facto gain political influence in the European debate. The latter could compromise the sovereignty of the Member State to act independently and in its best interest in European policy and legislative discussions and decision-making. In this issue, we will review a related topic: that of the EU’s response to Chinese investments in strategic infrastructure. At a later stage we will devote significant attention to the Draft Regulation on Foreign Direct Investment Screening in the EU – a review system to allow Member States to check foreign direct investment against criteria based on national security or public order. In the US, a similar “check” exists through the Committee on Foreign Investments in the United States (CFIUS). In view of these developments, we will see a serious increase of regulatory, policy and legal challenges for clients globally. We are prepared, are you?
Finally, where would we be without Brexit? The clock is ticking and in the next weeks the UK and the EU should reach an agreement on the UK’s withdrawal from the EU. The timing becomes crucial now, since both in the UK as well as in Europe Parliamentary approval is required. And the European Parliament can only consider the matter after the UK Parliament has given its approval of any agreement that Prime Minister May might conclude with the EU’s negotiating team. Progress is made, but: there is no agreement until all is agreed – the Irish border and back-stop remains a serious sticking point. In case there is no agreement, a hard-Brexit is almost unavoidable, and the UK will leave the EU on 29 March 2019 at midnight in Brussels, 23.00 hours UK time. The clock is ticking…
This issue's topics at a glance:
- EU Reactions to Chinese Investments in Strategic Infrastructure
- 12th Asia-Europe Meeting (ASEM) Summit & EU-ASEAN Leaders' Meeting
- New Rules to Remove Obstacles to Free Movement of Non-Personal Data
- EU-US Trade Relations: New Tensions Amid Ongoing Talks
- EU Battery Alliance: One Year from the Launch
EU-US Trade: New Tensions Amid Ongoing Talks
US Commerce Secretary Wilbur Ross' recent visit to Brussels reflected renewed tensions in transatlantic trade relations, causing concern amongst the business communities in Europe and the US. After the deterioration of trade relations earlier this year, mounting in new US tariffs and EU countermeasures, US President Trump and European Commission President Juncker in July reached a handshake agreement, affirming to put any new tariffs on hold while launching talks on a new, limited trade agreement to eliminate trade barriers on (non-automotive) industrial goods.
However, following a meeting on 16 October between European Trade Commissioner Malmström and US Commerce Secretary Ross, both parties accused each other of impeding the ongoing exploratory talks, which aim to establish the scope of the agreement. As regards the status of preliminary talks, an EU delegation visited Washington this month, aiming to set out the agenda for subsequent gatherings of top-level ministers. Commissioner Malmström and US Trade Representative Lighthizer reportedly aim for a handshake agreement in late November with a view to reducing red tape.
Assuming that both parties will overcome the new tensions, they will seek to work towards zero tariffs and non-tariff barriers, harmonise standards, reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, soybeans, and liquefied natural gas (LNG).
Meanwhile, Trump reiterated the threat of car tariffs towards the EU, which he originally pledged to withhold during negotiations. The second big fear on the part of Europeans is the US' intention to cover the topic of agriculture, a sensitive matter to Europeans, which they insist to exclude.
European Parliament Adopted New Rules to Remove Obstacles to Free Movement of Non-Personal Data
On 4 October 2018, Members of the European Parliament (MEPs) in plenary session adopted new rules aiming to remove obstacles to the free movement of non-personal data, including machine-generated data and commercial data, within the EU. The establishment of this so-called 'fifth freedom' - the movement of data within the EU Single Market - is expected to significantly increase the efficiency in operations of companies as well as public authorities.
The draft Regulation on a framework for the free flow of non-personal data in the EU aims to prohibit national rules demanding data to be stored or processed in a specific Member State. The new law will solely allow restrictions on the location of data on the grounds of public security. In order to achieve greater transparency, competent authorities in the Member States will be required to inform the European Commission of any remaining localisation requirements.
From the perspective of European companies, the new rules will remove burdens and obstacles such as data localisation rules, which will create a level playing field in competition with international firms. The new Regulation on non-personal data will facilitate European companies' use of artificial intelligence, cloud computing and big data analysis, and will complement the General Data Protection Regulation (GDPR).
The text has been provisionally agreed with the Member States in the Council, and will be officially approved on 6 November. The Regulation will come into force six months after its publication in the Official Journal.
EU Battery Alliance: One Year from the Launch
On 15 October 2018, the European Commission reported that, one year after the launch of the EU Battery Alliance (EBA), major progress has been made towards the objective of establishing an independent capacity for the development and production of batteries in Europe.
The EU's effort to establish itself as a global leader in the strategic field of battery innovation and manufacturing is essential for the EU to deliver on its ambition to maintain its leadership in the automotive and clean mobility sectors, as well as in developing clean energy systems.
At this point, the EBA has achieved the following:
- The Commission has started to implement its Action Plan to assist Member States, regions and European industry in establishing competitive, innovative and sustainable battery manufacturing projects. The measures included relate to the regulatory framework, raw materials, an interregional partnership on batteries, research and skills.
- The first pilot production facilities are being built.
- Further projects have been announced by the industry, including a network of 260 stakeholders in industry and innovation, who committed to invest in projects relevant to the EU ecosystem, and a number of projects involving battery materials and battery cells.
The EU-based battery industry being a long-term strategic goal, the EU offers significant public investment. A high level of support is granted to collaborative projects in research and innovation, and so-called Important Projects of Common European Interest (IPCEI) benefit from up to 100 percent of EU funding. Moreover, investments in the production in disadvantaged regions of the EU can be eligible for regional aid.
12th Asia-Europe Meeting (ASEM) Summit & EU-ASEAN Leaders' Meeting
On 18-19 October 2018, the EU hosted the 12th biannual Asia-Europe Meeting (ASEM), bringing together the Heads of State and Governments of 51 European and Asian countries, the Secretary General of the Association of South East Asian Nations (ASEAN), and the heads of the EU institutions. Representing the most important Europe-Asia gathering in 2018, the summit focused on ASEM's support for the multilateral system, cooperation on global issues, and the promotion of inclusive growth and connectivity.
Among the key outcomes of the summit, the EU and Singapore signed
- a Free Trade Agreement (FTA)
- a Partnership and Cooperation Agreement (PCA)
- an Investment Protection Agreement (IPA)
These agreements represent the first building blocks towards a future region-to-region EU-ASEAN agreement. The EU-Singapore FTA, which will significantly facilitate trade, in particular in the fields of telecoms, environmental services and engineering, electronics, food products and pharmaceuticals, could enter into force before the end of the current Commission mandate in 2019.
ASEM leaders also discussed common challenges such as digitalisation and climate change, and ways to strengthen Asia-Europe sustainable connectivity in political, economic and financial, as well as social and cultural terms, and reviewed progress made in negotiations to conclude the EU-ASEAN Comprehensive Air Transport Agreement.
The ASEM summit was followed by the EU-ASEAN Leaders' meeting, which focused on discussing ways to strengthen EU-ASEAN relations.
EU Reactions to Chinese Investments in Strategic Infrastructure
In the context of the on-going European debate about how to address Chinese strategic investments in the EU, the European Parliament adopted a resolution on EU-China relations, calling upon the Member States to react in unity and take advantage of the EU's bargaining power to counteract Chinese influence in the EU.
The resolution - legally non-binding, but with significant political impact - stresses the strategic partnership with China and the significant potential for further cooperation. In parallel, it clearly acknowledges the challenges arising from the partnership. Members of the European Parliament (MEPs) demand that EU-China relations should be based on the respect for human rights, the rule of law and fair competition. MEPs warn about the lack of reciprocity providing a competitive edge for Chinese companies, and attempts to take control of the EU's banking and energy sectors and other supply chains, thus calling on China to increase transparency, environmental and social standards. Parliamentarians request Member States and accession countries to share with the EU institutions data on Chinese infrastructure investments.
Although the resolution as such will not trigger immediate legislative initiatives, it represent another example of the EU's growing concerns regarding foreign investment in Europe's strategic sectors.
As another expression of this concern, last year the European Commission presented a legislative proposal on screening of foreign direct investment, which, if adopted, will provide the European Commission with a mandate to review foreign investments in certain strategic sectors in Europe (including energy, transport, financial services, communications, data storage, space industry, and critical technologies), and issue an opinion that will have to be taken into account by the Member States concerned (see our previous report here).
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