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News & Insights on Europe

News and Views on Europe – 8 March 2019

posted by eucentresg

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EU insists Brexit delay on the horizon as Brexiteers scramble to approve May’s deal
With 22 days to the Brexit deadline, the UK government believes that Brexiteers’ attitude to the Withdrawal Agreement is softening. This is due to the possibility of Brexit being delayed via an Article 50 extension in a three-day marathon of votes starting March 12. However, Brexiteers want more legal guarantee that the backstop provision is only temporary. UK Attorney General Geoffrey Cox is crucial in the negotiations at this time as one Whitehall official said, “The AsG being able to say that the backstop is not indefinite is what gets it over the line.” Cox was in Brussels on Wednesday (5 March) to discuss the legality of the promise made by Jean-Claude Juncker and Donald Tusk that the backstop will not be utilised.

Former Brexit minister Dominic Raab and Nigel Dodds, deputy leader of the Northern Irish party, has spelled out specific tests by which to assess whether assurances to the Irish backstop will be legally binding at the treaty-level. They seek clear language on the changes and an exit route. Conservative Brexiteer Jacob Rees-Mogg also announced that he will accept May’s deal if she manages to acquire said changes to the Withdrawal Agreement. During the negotiations with Brussels, GA Cox has abandoned “blunt” demands for a hard time-limit or unilateral exit mechanism for the Irish backstop. Instead, he is working to secure an enhanced “arbitration mechanism” that would provide formal notice that the backstop should come to an end.

However, Brussels has shown less optimism about granting changes in the withdrawal agreement with the prevailing opinion that “not much is moving”, and is awaiting proposals from Theresa May in next week’s talks. As to what the specific changes in these proposals for changes to the backstop will entail, Brexit Secretary Stephen Barclay said “live discussions” are being conducted. Michel Barnier, EU Brexit negotiator, said the EU can give an “interpretative document” on the temporariness of the backstop that seeks the same commitment from the British side. The EU 27 remain open to a request for Article 50 extension but reiterated that the delay should be clear on its purpose.

Dominic Raab has criticised the EU for using “sensitivities” over Northern Ireland to force UK to concede to EU laws and undermine British competitiveness. In asking for the backstop guarantee, he believes Brexiteers are not being dogmatic but to “take back control of our laws”. After being heavily involved in the creation of the deal as former Brexit secretary, Raab quit when May was presenting it to the country.

George Eustice, U.K. Farming and Fisheries Minister, who quit last Thursday (28 Feb) over the Brexit delay announcement said that May’s negotiations would be weakened by the position some Cabinet ministers put her in by demanding an extension. He said he would support May’s deal but also urged his colleagues not be afraid of a no-deal. He believed that even in the no-deal scenario, EU governments would put temporary arrangements in place to avoid major disruptions, and this informal transition window would allow time for further negotiations.

In response to UK’s move to isolate citizens’ rights from the withdrawal agreement, the EU has declined to guarantee the rights of citizens living in each other’s territories. Commission spokesperson Mina Andreeva told reporters that agreeing to the deal is the best way to ensure the rights of the 4.5 million citizens concerned. However, the deal will not immediately impact 40 British teachers who are teaching 28000 students in 13 European schools as their exit secondments will be extended until August 2020. Education is a sector that could be adversely affected by Brexit. Article 125 in the Withdrawal text ensures their employment until the end of the 21 month transition period; without a deal, they could have lost their jobs on Brexit day itself. The deal struck between UK and the European schools also means that UK will continue to recognise the European Baccalaureate.

 

Macron laid out vision for a European Renaissance as EU gears up for Parliamentary Elections
French President Emmanuel Macron on Monday (4 March) laid out his vision for a “European Renaissance,” proposing multiple new institutions and a major conference to overhaul the Continent’s political structures.

“Never since the second world war has Europe been so essential. Yet never has Europe been in such danger. Brexit stands as the symbol of that,” Macron wrote impassionately in his op-ed to European citizens. He broadly structured his vision into 3 categories of Freedom: democratic freedom, freedom in security and territorial limits, and socio-economic and environmental freedom and progress.

In defending democratic freedom, Macron proposed a “European Agency for the Protection of Democracies” to safeguard each country’s electoral process against cyberattacks and manipulation. Claiming that “respect for the individual is the bedrock of our civilisation and our dignity,” Macron also proposed outlawing foreign financing of European political parties, as well as banishing online hate speech and violence.

With regards to security and territorial freedom, Macron called for a re-evaluation of the Schengen area, arguing that “all those who want to be part of it should comply with obligations of responsibility (stringent border controls) and solidarity (a single asylum policy with common acceptance and refusal rules).” He also proposed the establishment of a common border force and a European asylum office to tackle the issue of migration, believing in a Europe that “protects both its values and its borders.” In addition, he also called for the creation of a European Council for Internal Security.

On defence, Macron proposed for a treaty on defence and security that defines the EU’s “fundamental obligations in association with Nato and our European allies.” He calls for increased defence spending, a truly operational mutual defence clause, and a European Security Council, with the UK on board. Macron also championed for reforming European competition policy and trade policy by sanctioning or banning companies in Europe that harms Europe’s “strategic interests and essential values like environmental standards, data protection.”

Macron’s final theme on progress looked at the promotion of a European minimum wage that is “appropriate” for each country and collectively negotiated yearly. He also advocated zero carbon emissions by 2050 and cutting pesticide use in half by 2025, calling for all European institutions to “have the climate as their mandate.” He called for a European environmental bank to finance environmental transition and a European sanitary force to reinforce food safety. Additionally, Macron elucidated on the need to create jobs, arguing that it is necessary to regulate the digital giants through supervision, as well as financing innovation to spearhead new technological advancements. Macron also appears to be challenging China’s dominance and investments in Africa, positing that a “world-oriented Europe needs to look to Africa, with which we should enter into a covenant for the future, ambitiously and non-defensively supporting African development with investment, academic partnerships and education for girls.”

Macron’s manifesto is seemingly directed at the upcoming Parliamentary elections. Following this manifesto he now has to pick a lead candidate for his La République En Marche (LREM) party. According to senior party officials, Health Minister Agnès Buzyn and Europe Minister Nathalie Loiseau are the front-runners to top the candidate list.

In an emailed statement to the Reuters news agency, Hungarian Prime Minister Viktor Orban apparently welcomed Macron’s call for talks on reforming the EU. “This could mark the beginning of a serious European debate… In the details, of course, we have differences of views, but far more important than these differing opinions is that this initiative be a good start to a serious and constructive dialogue on the future of Europe,” said the Hungarian leader. However, in another statement, Orban’s office slammed Macron for being a “pro-immigration politician” attacking those who are opposed to immigration. He lashed out at European People’s Party (EPP) members who ask for expulsion of his party Fidesz from the centre-right family, describing them as “useful idiots” of leftist political forces. The Hungarian government also accused Macron of censorship, claiming that he called for the banning of “posters of the opponents of immigration.” Orban plans to target European Commission Vice President Frans Timmermans in the next phase of a controversial anti-immigration campaign currently featuring Commission President Jean-Claude Juncker and billionaire George Soros.

German conservative Manfred Weber, the centre-right European People’s Party (EPP) candidate for Commission President, said Wednesday (Mar 6) that signals from Hungarian Prime Minister Viktor Orban were not encouraging. This came after he said that Orban must apologise for his criticism of the EU or Fidesz risks being suspended from the group. EPP President Joseph Daul also denounced the Hungarian government’s anti-immigration campaign that besmirched Jean-Claude Junker, president of the European Commission. “The European People’s Party is a big family, which can have its differences. But there is a limit and Viktor Orbán overstepped the red line,” Dual said.

The EPP will discuss whether Fidesz party should remain a member— and whether to vote on the matter on March 20. Despite the contradicting sentiments, Fidesz maintains its wishes to stay in the EPP. “Fidesz is not in talks with any other group,” said Balázs Hidvéghi, the party’s communications director and an MEP candidate, in a statement to POLITICO on Tuesday. “We are in the EPP and wish to remain therein. We are ready to present our standpoint within the EPP family.”

In Poland, the newly established pro-EU coalition ‘European Coalition’ leads in pole position at the latest EU election polls with 37.5% of the vote. Poland’s centre-right Civic Platform (European People’s Party) recently formed an alliance in February with other opposition parties in a ‘European Coalition’ in order to challenge the ultra-conservative ruling party Law and Justice (PiS). PiS claimed 36.3% of the votes, according to the second seat projections released by the European Parliament. ALDE Group leader Guy Verhofstadt tweeted that “a coalition that can beat populists and make Poland influential inside the EU again – a role the Polish people deserve!”

Meantime, in general elections in Estonia, the opposition centre-right Reform party pulled off a surprise win over Prime Minister Juri Ratas’ governing centre-left Centre party. The results put Reform leader Kaja Kallas in pole position to become the country’s first female prime minister. Analysts predict that Kallas will likely face a difficult task in hammering out a coalition government in the parliament.

 

Europe’s continuing fight against fake news and cybersecurity threats: Huawei, Fake News, and GAFA Tax
Vice President for the Digital Single Market Andrus Ansip sat down with Huawei rotating chairman Ken Hu on Monday (4 March) in an encounter described as “conciliatory” by Huawei officials. The meeting came a day before the opening of a Huawei’s Cyber Security Transparency Centre in Brussels – in a move aimed at appeasing security concerns on the continent amid spying accusations by the U.S.

Justifying the opening of the Cyber Security Transparency Centre in Brussel, Hu said that “trust needs to be based on facts, facts must be verifiable, and verification must be based on common standards.” Hu also told representatives from the EU and World Economic Forum that Huawei believes that “this is an effective model to build trust for the digital era.”

“At Huawei, our promise is “Security or nothing,” he said. “We take this responsibility very seriously. Cybersecurity is our top priority across product design, development, and lifecycle management, and it is embedded in all business processes.” Hu added that “public and private sectors lack a basic common understanding” of cybersecurity and this could lead to difficulties in aligning expectations and responsibilities.

From cybersecurity to fake news, the EU Commission said in a statement on Tuesday (5 March) that Tech giants are not making enough progress in the fight against fake news,. “We need to see more progress on the commitments made by online platforms to fight disinformation,” the statement read. “Platforms have not provided enough details showing that new policies and tools are being deployed in a timely manner and with sufficient resources across all EU Member States,” the statement continues. This comes slightly over a month after the EU Commission published their first compliance reports in January under the voluntary code of practice against disinformation.

European Union finance ministers are also set to ditch a plan to introduce an EU-wide digital tax next week but agree to work on a global reform of the taxation of internet companies. Under the plan originally rolled out by the EU Commission last year, large companies would have been required to pay a levy on data sales, online marketplaces and targeted advertising. But several EU states blocked it, fearing a loss of revenues and retaliation from the United States and other countries affected. Tax reforms must attain the backing of all 28 EU member states. However, Ireland and Scandinavian countries are staunchly against the proposed tax. Several countries are also concerned over potentially provoking the US to impose a similar levy on European countries with bases across the Atlantic.

In light of the disagreement, France introduced on Wednesday (6 March) a bill to tax Internet and technology giants on their digital sales, curbing efforts to pay global levies in countries with lower tax rates. Dubbed the “tax of the 21st Century,” the bill is a proposal by Economy Minister Bruno Le Maire to have companies pay a tax of 3 per cent on much of their digital sales in France.

The so-called GAFA tax- named after tech giants Google, Apple, Facebook and Amazon- will target digital companies with global annual sales of more than €750 million, and sales in France of at least €25 million. The new tax will cover areas such as advertising, websites and the resale of private data. Approximately 30 companies originating from the US, China, Germany, Spain and Britain will be affected.

While it will only be applied in France, Le Maire said that he would continue to develop it internationally, as well as strengthen a common European position on the taxation of large digital companies. Paris says it is seeking “common ground” on the issue with fellow members of the Organisation for Economic Cooperation and Development (OECD) in a bid to for a worldwide agreement later this year.

 

EU tightens foreign investment screening while balancing trade tensions on automobile taxes with US; France motions to tax big tech
On Tuesday, 5 March, the European Council approved a set of new rules to scrutinise foreign direct investments on the grounds of security or public order, which will come into force in April. According to the OECD, the EU has one of the most open investment regimes. The comprehensive framework, something that EU rivals already have in place, was also welcomed by the European Commission as Trade Commissioner Cecilia Malmstroem said the EU will be “in a much better position to monitor foreign investments and safeguard our interests.” The new rules will be published on 21 March. The new framework will facilitate better information sharing between member states and the Commission, allow the Commission to issue opinions on investments that impact the EU’s strategic interests, as well as encourage international cooperation on investment screening.

This push back has had the intended effect of slowing down Chinese investments in the EU. According to researchers at Rhodium Group and the Mercator Institute for China Studies (Merics), there has been a 40 percent drop compared with 2017, and a 50 percent fall compared to the record €37 billion in 2016. This is due to both China pulling back on past investments as well as EU adopting stricter measures through new regulatory regimes. It was also found that Chinese investors have moved to new sectors like financial services, health and biotech, consumer products and services.

Just one day before the investment screening rules were approved, the Commission also signed an aviation agreement with the state of Qatar, the first of its kind with a Gulf state, meant to upgrade the rules and standards for flights between Qatar and the EU. The agreement goes beyond provisions covered by bilateral agreements through a single set of rules upholding high standards to promote fair competition, transparency, and social issues. It seeks to benefit all stakeholders and create a strong foundation for a long-term aviation relationship between Qatar and EU member states.

These agreements come at a time when trade relations between the EU and US worsen as Manfred Weber, the Spitzenkandidaten for center-right European People’s Party (EPP), urged Brussels to retaliate in kind if Donald Trump hikes tariffs on European cars. He was referring to US president Donald Trump’s threat to increase tariffs on European, especially German, automobiles claiming they constitute a national security threat. The Commission has also stated that they are planning for “counterbalancing measures” if Trump imposes levies and urged Europe to stay united.

Besides the car tariffs, transatlantic ties have been frayed over defense spending as Trump told Germany to increase its defense spending. Speaking at a gathering for supporters of his Christian Socialist Union (CSU) in near where BMW and Audi plants are located, Weber also emphasised that the EU and US are roughly the same size and hence the former “must be on an equal footing” with the latter.

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