Ferrobonus scheme approved by EU Commission

The Commission has approved the Italian Ferrobonus aid scheme aimed at shifting freight transport from road to rail. The Commission considers that it is in line with EU State Aid rules, and in particular the 2008 Commission Guidelines on State Aid for Railway Undertakings, and will not distort competition in the single market. One of the items to be evaluated by the Commission was the possible discrimination against inland and maritime transport.

China Market Economy Status

The Commission announced on 9 November that it would not recognise China as a market economy provoking a strong reaction from China in the WTO. China said that the EU was breaking a deal made in 2001 when China joined the WTO. Rather than recognising China as a market economy, the Commission proposes changes to the EU’s basic anti-dumping and anti-subsidy regulations. For anti-subsidy the change is to allow EU investigators to look into subsidies found during verification visits. The most controversial change is in relation to how to calculate the price of goods in China if it is agreed that the China is not a market economy and thus ‘market’ prices are not available. The Commission proposal will allow prices from outside China to be used but do it in a way different from the current analogue country approach. The Commission says the level of protection against unfair trade practices will remain the same.

Turkey in the European Parliament

The European Parliament has voted for a temporary freeze on negotiations allowing Turkey to join the European Union. This follows the crackdown in Turkey after the July attempted coup. The vote is not binding on the Commission, which is the EU’s negotiator, or the Council, which oversees the negotiations. Understandably Turkey reacted rather strongly against the vote claiming that the vote lacks vision. Across the EUniverse agrees. As does the ex prime minister of Sweden, Carl Bildt who said the vote showed a ‘populist short-term rather than strategic long-term approach to relations with Turkey. The EU blows hot and cold on Turkey and moves from intense negotiations (such as in relation to migration) to stand offs. This is no way to treat an important ally and can only result in alienating an important cultural and economic and strategic partner. 

CETA: the trade deal with Canada

The EU is slowly but surely dragging the Comprehensive Economic and Trade Agreement with Canada across the finishing line. But each step is hard fought over. First the EU Commission considered it necessary to change the rules on the adjudication of disputes between investor and states by the creation of, and insertion into the Agreement, of a new Investor Court System (which might well be found inconsistent with EU law by the European Court of Justice). Then at the last minute Wallonia refused to sign onto the deal. Wallonia was rounded on by all and sundry. But some sympathy must be given. Wallonia warned at early as April of this year (or six months before the veto) that it had reservations but the Belgian federal government did nothing. Canada was very gracious. The prime minister waited and waited till the EU got its act together and when Wallonia was placated (agreement to refer the deal to the European Court of Justice to see if it is legal) flew over to Brussels to sign the deal.

The whole affair shows the need to improve decision making in the EU. This is the time when you need to be Churchillian and use the crisis to get long term reform of governance of the EU.

TTIP: the transatlantic trade and investment partnership

Is the EU losing the capacity to conclude trade deals? CETA will probably survive but will TTIP even get to the finish line. Anti-trade forces ask a number of questions: i) is it really necessary to have a special arrangement to settle disputes between investors and states and ii) how to ensure that governments retain their sovereignty to regulate in a way and to a standard appropriate for a high standard area like the EU.

In relation to the second question the Commission assures the general public that regulatory competence and independence is ring-fenced. However, concerns continue to be raised particularly as part of the agreement foresees cooperation between the US and the EU on the setting of standards. On this issue the NGOs are mostly wrong. It is clear that if standards are the same across trading areas (like in the EU for example) then these standards cannot become barriers to trade as they are the same everywhere. It is also clear that if the EU and the US were to jointly lay down standards, these standards would become, de facto, world standards as all exporters to the EU and the US would need to meet them. Thus the EU and the US would be able to promote standards across the world including environmental and social standards. While it is true that there are still many differences between the EU and the US on social values and the protection of the environment a TTIP which opens up the possibility of developing standards without room for the lowering of standards is a good thing. If TTIP is not concluded it will be a major missed opportunity.

 Brexit

The difficulties caused by the UK vote to leave the EU become both clearer and bigger as each week passes. Theresa May has said that the UK wants sovereignty on the movement of people, no rule by the EU Court of Justice but access to the single market. The EU has said that the four freedoms, free movement of labour/people, services, capital and goods cannot be separated one from the other. Just like the Christian trinity the EU has the quaternity. Four in One. Each element is equal and the totality is indivisible. There is a conceptual stand-off.

This is the first and most fundamental of the problems. But there are many more. What will the cost be to the UK of having to regulate a complex modern economy for 60 million people equally to the way the EU regulates the economy for 500 million. There are hundered of examples. Consider food or pharmaceutical or agro chemical product authorisations or standards. Consider intellectual property. The UK will have to create new authorisation bodies equal in skill to those already existing in the EU. At what cost? Then there is the issue of trade negotiations and trade deals and the framework for those deals. The UK does not have the administrative capacity to negotiate and if the UK was to take the WTO route it would have to negotiate with the 160 different WTO members today.

The EU’s need to keep its own internal coherence will outweigh any desire to maintain strong relations with the UK. That reality is only slowly beginning to seep into the consciousness of all parties involved.