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News & Insights on Europe

News and Views on Europe – 25 May 2018

posted by eucentresg


EU to begin free trade talks with Australia and New Zealand in July
After eight months of closed-door diplomacy, EU leaders formally approved on Tuesday (22 May) the directives proposed by the Commission to begin negotiations of the free trade agreement (FTA) with Australia and New Zealand. European Trade Commissioner Cecilia Malmström will travel to Australia and New Zealand to “politically launch” talks, and the “technical work” will kick off in July. While Malmström did not specify a possible date of conclusion, European Commission president Jean-Claude Juncker announced last September that the EU wanted to fast-track the FTAs with Australia and New Zealand so that deals could be secured before the next European elections in May 2019. To ensure the success of the negotiation, contentious provisions on investor protection will be dropped.

In the absence of a formal FTA, the EU and Australia have been conducting their trade and economic relations under the 2008 EU-Australian Partnership Framework. Currently Australia ranks as the 18th-largest trade partner in goods with the EU, while the EU represents Australia’s second-largest trading partner after China (2017 figures). With respect to New Zealand, the two sides entered into a partnership agreement which contains a number of economic and trade cooperation rules in 2017. New Zealand is now the EU’s 50th-largest trading partner for goods, while the EU is New Zealand’s third largest trading partner after China and Australia (2017 figures). It should be noted that all theses numbers include trade with the UK, which will no longer be an EU member by the time the trade deals come into effect.

The EU expects the agreement to increase EU exports to New Zealand and Australia by about a third in the long term, through removing customs duties and facilitating trade in goods and services and public procurement etc. At the symbolic level, Junker said the deal would “expand our alliance with partners committed to the same values such as human rights and similar standards on labour and environment, health and consumer protection”. What’s in it for Australia? Access to Europe’s 510 million consumers via an FTA could deliver a windfall of between $4.1 and 6.4 billion in GDP for Australia by 2030 according to EU estimates. Hailed as “one of the best deals that we could do” by New Zealand Trade Minister David Parker, an EU-New Zealand FTA is likely to boost exports by up to $NZ2 billion (approximately €1.2 billion) a year and save New Zealand hundreds of millions of dollars a year.

In fact, the EU had expected the European Council to greenlight talks before the end of last year, but concerns at the leaders’ level in France, Ireland and Belgium about “the reciprocity” of the potential agreements prolonged the approval process. (For instance, at that time France lobbied against the rush into negotiations with Australia and New Zealand, fearing a “free-trade stampede” would “wipe out” the country’s “struggling” agricultural sector.) Concerns were also raised because Juncker’s fast-tracked plan would mean any final deal would not need the final approval of the EU’s 38 separate national and regional parliaments.

The EU seems at a rush to conclude and ratify FTAs as it faces an increasingly challenging environment with unilateral protectionist measures taken by the US such as the threat to impose steel and aluminium tariffs, and now also on imported cars. The evolving Sino-US trade dynamics is also something that the EU is watching closely. The US said it would temporarily back off from threatening a trade war with China after Beijing agreed at the weekend to reduce the US trade deficit and to buy more American-made products. US Treasury Secretary Steven Mnuchin expects US agricultural exports to surge by 35-40%. Europe worried that the bilateral deal may come at the expense of Europe’s economy if European imports to China are to be substituted by cheaper US products. The EU is in need of markets and allies and likeminded countries like Australia and New Zealand are natural partners of choice.

Implications of the EU General Data Protection Regulation on Europe
The General Data Protection Regulation (GDPR) was passed by the EU in 2016 and would come into effect on 25 May 2018. The revised data protection act seeks to give citizens greater control over their personal data and strengthen individual privacy rights. Building on earlier EU privacy measures, the GDPR sets a higher bar on how companies obtain and manage personal data, requiring explicit consent from the citizen on how their data would be used. The GDPR also set severe penalties for companies violating the regulations with a maximum fine per violation of 4% of a company’s global turnover. Such reforms have been deemed to be the EU’s most comprehensive policy overhaul in a generation, and welcomed by some in view of recent high-profile breaches in data security by influential internet giants.

The updates to data protection laws have sparked a frenzy amongst tech companies, as they rush to meet GDPR requirements in order not to suffer a hefty fine. The GDPR compels businesses to be accountable to their consumers through increased online monitoring and the imposition of tougher penalties for non-compliance. There are concerns that the new data regulation rules would sink smaller companies that struggle to make the transition to operate in a tougher regulatory environment in Europe. Such companies may lack the resources and apparatus needed to sustain the compliance required by the revised legislation, making it challenging for them to maintain business operations in Europe. This gives bigger tech companies such as Google and Facebook an advantage over its smaller rivals, who may choose to shut down instead of persisting through the GDPR, given that they may not be able to incur long-term costs. Unsurprisingly, several SMEs have called for a period of grace during the first year of the GDPR so that there is sufficient time for such companies to transit and ensure that the requirements of the revised data laws are being met.

While the GDPR aims to protect internet consumers from “online hawkers”, it has ironically resulted in an online spam of late by companies seeking to gain individual users’ consent to personal data access and management. The new data laws are not projected to significantly affect an individual’s online experience, however they do provide important privacy rights that empower individuals in the Internet. EU citizens now have the power to take action against companies that may be in violation of their own personal data. In fact, several nonprofit organizations are already in the midst of lodging data protection complaints against some of the world’s largest tech companies. Individuals are also empowered to request for their personal information to be deleted, or fully disclosed to them. Arguably, this seems to mark a pivotal point in data control and the right to online privacy. As the execution of the GDPR is currently still in its infancy, only time will tell of its usefulness in strengthening data privacy, preventing online security breaches, and even potentially reshaping the web.

“Facebook out of control”: Heated outcomes from Zuckerberg-EU meeting over data scandal
The outcomes of the meeting held between Facebook founder Mark Zuckerberg and Members of the European Parliament (MEPs) on Tuesday (22 May) proved to be largely unproductive as questions remain unanswered and actions unaccounted for. The meeting in Brussels was held as part of the Facebook CEO’s ongoing apology tour due to the recent data scandal involving the social network’s mismanagement of customer information. The session commenced with Zuckerberg’s conciliatory script he had used in Washington, which included his acknowledgement of Facebook’s improper use of personal data and infringement of user privacy. The meeting was attended by leaders of the European Parliament and representatives of the different parties that make up the legislative body.

Notwithstanding Zuckerberg’s formal apology, European lawmakers in Brussels were clearly disappointed and unimpressed as they proceeded to grill Facebook for its breach in consumer trust and personal privacy. The authorities flamed the chief executive’s for his company’s abuse of power, its interference in foreign elections, as well as Facebook’s blatant disregard for proper data security measures. In particular, former Prime Minister of Belgium, Guy Verhofstadt, and now leader of the ALDE group in the European Parliament, appeared to be the most critical of Zuckerberg. He compared the Facebook CEO to the CEO in Dave Egger’s book The Circle, which depicts “a big data company that is out of control”. Others, on the other hand, seemed to take on a more diplomatic approach in questioning Facebook’s business ethics. Claude Moraes, chair of the EU Parliament’s Civil Liberties, Justice and Home Affairs Committee, expressed her concern for Facebook’s current measures in safeguarding customer privacy, claiming that they are insufficient and that Facebook “has to comply and demonstrate it[‘s commitment]”.

Several MEPs also accused Zuckerberg for cherry-picking the questions posed during the European Parliament session, claiming that he had purposely avoided sensitive questions. He observably dodged questions concerning Facebook’s plans on how it uses data from its Whatsapp division, as well the issue of targeted advertising. Furthermore, the responses that he did provide seemed to be insufficient and indirect, much to the chagrin of the MEPs. “Are you telling the truth?”, MEP Verhofstadt had reportedly questioned Zuckerberg, in relation to the latter’s reiterated stance in committing to the impending ratification of the revised GDPR. Notably, the Facebook CEO did not directly respond to any of Verhofstadt’s accusations in his short comments. With the GDPR coming into full force this Friday (25 May), it seems that all eyes will be on how Facebook will respond to the new data security measures and requirements.

Italy appoints political unknown as PM, uncertain times for the EU
Uncertain times lie ahead for the EU and Italy as the latter recently appointed a political unknown Giuseppe Conte to be the country’s next prime minister. The newly formed coalition government between The Five Star Movement and The League have been engaged in ongoing negotiations regarding key political issues, including the leader of the incoming administration. After some initial uncertainties over Mr Conte’s resume, he has since been officially approved by Italian President Sergio Mattarella. Preparations are currently underway for Mr. Conte to form his own cabinet of ministers before being officially inaugurated in parliament.

Critics are concerned over Conte’s observable lack of political experience and his credibility as a respectable public figure. A political novice, Conte has never held an elected office before, nor has he has any past public management experience. He is also not a known figure in Italian politics prior to his political appointment. Moreover, since his nomination as prime minister, Conte has been accused of inflating his own academic resume in order to boost his global profile. While his resume claims that he worked on his legal studies at the International Kultur Insitut in Vienna, the school is in fact a language school that does not seem to offer any legal courses. Moreover, newspapers also report that the New York University has no record of Conte ever attending the school. Such accusations, combined with Conte’s clear lack of political presence, have generated the widespread fear of Conte becoming a weak leader with little influence over his coalition partners.

Apart from the coalition’s unexpected nominee, the new government’s policy plans are likely to clash with some of the EU’s major economic and social policies. The joint government programme released last week was portrayed as Eurosceptic in nature. The two parties have made it clear that the EU budget will have to abide to the principles of Italy’s programme, and not the other way around. This has resulted in considerable tensions between the EU and Italy, as the Union continues to caution the latter against potential euro spillovers if it does not actively cut its public spending. However, the coalition government is pushing for the EU to alter its requirement for Italy to keep its public deficit under 3%, going against the European Commission’s desire for Italy to continue balancing its public accounts within the existing European framework.

Whether clashes between Italy and the EU would come to the forefront remains uncertain as the political drama in Italy continues to unfold.

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