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News & Insights on Europe

News and Views on Europe – 21 Jul 2017

posted by eucentresg


Second round of Brexit talks get to “heart of the matter” amidst Tory infighting
The EU and the UK started their second round of Brexit negotiations this week. During the four-day talks, negotiators from both sides shared a common understanding on the political objectives to be reached with respect to the border in Northern Ireland and the rights of their citizens living in each other’s territories. But no progress was made on the most controversial issue: the financial settlement the British government must honour before leaving the EU in March 2019 – known as the Brexit bill – and the Court of Justice’s role in settling disputes after this date. Discussion on how to disentangle the UK from the EU membership of the World Trade Organisation (WTO) was also on the agenda.

The Brexit bill issue is particularly thorny. The EU became impatient over the London’s lack of preparedness for serious negotiations. Notably, the EU accused the UK for not having any detailed proposal to at least agree on a common methodology to calculate the final sum. Michel Barnier, chief negotiator for the EU, threatened to stall the talks if the UK says nothing more than “we will not pay a penny.” The UK, on the other hand, warned that stalling talks could be “very dangerous” for the EU. Although the British government on Monday (17 July) for the first time admitted its financial obligations to the EU budget, the negotiating team led by Brexit secretary David Davis rejected the EU’s demand to come up with a specific proposal on the bill. Instead, the UK is questioning its obligations in regards to every budget line of the 2014-2020 multiannual financial framework, the EU’s long-term budget. (London is particularly opposed to paying farm subsidies for 2019 and 2020 after it leaves the EU.)

The EU insisted that no discussion on future trade relationship between the UK and EU27 will be held until “sufficient progress” has been achieved on such issues as Brexit bill. The UK’s approach risks delaying the whole complex process which will end in 20 months’ time. A latest report published by a think tank known as The UK in a Changing Europe, laid out serious consequences from a breakdown in the negotiations. It found that a failure to reach a trade deal post-Brexit could result in “a further significant fall in the exchange rate, a consequent rise in inflation, a fall in wages and consumer demand and a fall in business confidence, leading to a slowdown in investment.” And according to a survey by the Institute of Directors (IoD) of nearly 1,000 leaders of professional organisations, 57 per cent of firms are already looking at scenarios and contingency planning related to Brexit. Financial firms are expected to make Brexit moves – relocating staff and business abroad –after year-end to pre-empt possible disruptions in their business ties with customers in continental Europe. For example, the US investment bank Morgan Stanley has reportedly picked Frankfurt as a new temporary hub to operate in the EU when Brexit takes effect. The move could cost some 200 jobs in the City of London.

While the consequence of Brexit negotiations not being handled properly could be extremely damaging for the UK, David Davis has his hands tied by Tory infighting. Some comments made by the soft-Brexiteer Chancellor Philip Hammond in a private, closed-door cabinet meeting were leaked to the press last week. Hammond was quoted as saying that public sector workers were “overpaid” and that “even” a woman could drive a train. Although these remarks – which Hammond denied – were not directly related to Brexit negotiations, the incident was seen as a sign that cabinet ministers with different views on Brexit (i.e. hard versus soft) have started to discredit each other and that Theresa May appears not be up to the task of maintaining discipline. Internal split within the May cabinet could seriously weaken the UK’s position in Brexit negotiations; May has declared that no minister is “unsackable” in an attempt to restore her authority. Still, New Statesman warns that if May cannot effectively referee the dispute, her colleagues may look for someone else who can.


EU close to triggering Article 7 over the erosion of rule of law in Poland
Since it came to power in 2015 in Poland, the right-wing Law and Justice party (PiS) has been pushing through legislations that dramatically impact the country’s legal order by curbing the powers of the judiciary. The EU has voiced concerns but has yet to take concrete actions.

However, on 19 July, European Commission Vice President Frans Timmermans said that the EU is “coming very close to triggering Article 7” in reaction to the laws recently adopted by the Polish parliament and the “proposed reform of the Supreme Court” which would “put the judiciary under political control”. Article 7 refers to a 2-phased procedure that would call for the EU to assess the risk of a systematic threat to the rule of law in any of its member states. Member states found “guilty” of undermining the rule of law would be sanctioned, which could include the suspension of a member state’s voting rights. However, this would need the approval of all member states. Hungary already indicated that it would veto such a move.

Thousands of Poles have also taken to the streets on the weekend to protest against planned laws which would undermine the rule of law. One of those proposed laws would dismiss the entire Supreme Court and give the justice minister the right to appoint judges. PiS argues that the court system is slow and corrupt and still under the control of communists and their heirs. The judiciary system is seen by many Poles as inefficient, 96% stated in a recent poll that they believe that the judges are subject to different interests and pressures. The opposition accuses PiS of subverting the constitution by eroding the independence of the judiciary. However, the opposition is fragmented and PiS enjoys support of about one third of the electorate.

Ultimately, it might depend on Poland’s President Andrzej Duda – a former Member of the European Parliament from PiS – who has to approve the legislation. Duda has strongly identified with PiS despite the Polish tradition of presidents being non-partisan. Until now he had signed all the laws reaching his office. However, perhaps because of the threats from the EU, Duda said that he “had submitted his own legislation” on the reforms of the Supreme Court. “Under his version, new judges would have to be chosen by a three-fifths majority in Parliament”. The ruling PiS falls short of controlling this majority in the parliament. Duda added that requiring a three-fifths majority would prevent the assertion that the Supreme Court is “controlled by only one grouping.”


“Tug of war” over issues around migration
Migration continues to be one of the pressing issues in the European Union (EU), and Italy has once again become the main gate of entry to the bloc. According to the Italian interior ministry, more than 93,000 migrants have arrived in Italy so far in 2017, a 17% increase compared to the same period last year. Italy complained that the other EU member states are not sharing the burden. The Dublin regulation, an EU law which keeps migrants in their first country of arrival, puts an unfair pressure on the country. Italy threatened that they might issue temporary visas for migrants – which would grant migrants stuck in Italy, the right to move to other EU member states. “This is a way of grabbing Europe’s attention and saying we must tackle this emergency together,” said Enzo Bianco, mayor of the Sicilian port town of Catania. However, since such a proposal can only be activated by a qualified majority decision in the Council of the EU, it is unlikely to materialise. Nevertheless, Austria was quick to react to Italy’s proposal, and said that it was ready to protect its borders.

The EU is desperate to get the situation in the Central Mediterranean under control. On Monday (17 July) the foreign ministers of the 28 EU member states met in Brussels and decided to limit the export of rubber dinghies and motors to Libya. EU foreign policy chief Federica Mogherini said at the press conference following the Foreign Affairs Council, that “These devices are used by traffickers for smuggling activities. This decision we have taken at the European Union level will help make their businesses and lives even more complicated.” In another bid to stop smuggling, the EU has also trained 113 Libyan coast guards in the last few months and plans to train another 75, Mogherini told reporters. The ministers also discussed the EU’s naval operation Sophia, which aims to crack down on people smugglers. However, some member states, including Belgium, want the operation to shift into Libyan territorial waters. An inquiry by the British Parliament was published last week (12 July) and found that the mission has failed and in fact encourages people to take the risky journey.

All those moves are part of a broader aim, which is to close down the migratory route in the Central Mediterranean, and to prevent NGOs from rescuing people inside Libya territorial waters.

Potential dispute between the EU and Malaysia and Indonesia over palm oil trade
Reuters (17 Jul) first reported that Malaysia and Indonesia were planning to raise the prospect of the European Union’s (EU) proposed curbs on the import of palm oil at the World Trade Organisation (WTO). These two countries together produce nearly 90% of the world’s palm oil.

A resolution by the European Parliament in April this year called on the EU to phase out the use of vegetable oil as biodiesel that are produced in an unsustainable way. This has irked Malaysia and Indonesia who perceived the move as discriminatory. France’s decision earlier this month to restrict the use of palm oil has struck fear that the resolution could become an EU directive binding to all its members.

A report in the Malaysia’s New Straits Times, quoting the Chairman of Malaysian Palm Oil Board, that French hostility to palm oil trade would hurt its ties with Malaysia. Reiterating the importance of palm oil trade to Malaysia, the Malaysian Minister for Plantation Industries and Commodities, Mah Siew Keong warned that if the EU discriminate against palm oil, “it would be very difficult to conclude the free trade agreement” between the EU and Malaysia. He also threw his support for Malaysia and Indonesia joining hands to file a complaint with WTO should the need arises.

In launching the 13th National Incorporated Society of Planters Seminar, Mr Mah remarked that Malaysia’s most prized commodity which has generated billions of ringgit for the nation, and contributed to the livelihood of some 5 million smallholders will no longer be called crude palm oil. It will be promoted as a Malaysian premier brand known simply as Malaysian Palm Oil.

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