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News & Insights on Europe

News and Views on Europe – 12 April 2019

posted by eucentresg

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Brexit extension granted until end of October; UK to participate in the European elections
On Wednesday (10 April), after an emergency European Council summit on Brexit, EU leaders agreed to a second Brexit extension until October 31. whereas Theresa May asked for a deadline of June 30th. Prior to the summit, British PM Theresa May wrote to President of the European Council to ask for a short extension till June 30th. She then met with Angela Merkel and Emmanuel Macron on Monday (9 April) to set out “the rationale” for a further short delay.

British MPs backed the June extension deadline, adding weight to her request. The vote in favor of extension was passed 420 to 110 with the support of Labour Party and much to the ire of hardline Brexiteers.

The conditions for the October deadline include a review at the end of June and requirement for UK to participate in the European Parliament elections. However, if Withdrawal Agreement is ratified before “the Halloween deadline”, the U.K. would be able to leave the EU earlier. EU sources stress that the June review is “not to revise the date but only to assess the situation”.

Tusk and May were in discussion for a longer,year-long deadline but the October deadline was decided amongst differing opinions and levels of willingness by EU leaders. France was “open to solutions” from Britain but thought a year-long extension is too long while Austrian Chancellor Sebastian Kurz wanted an extension “that is as short as possible”. Germany took a softer approach and prioritized “an orderly Brexit and the unity of the 27″.

French President Macron was the fiercest proponent for a short extension over a long one as it seems to him like an attempt to prevent the UK from leaving. However, other EU leaders believe that the long extension would grant UK the most autonomy in their actions.

Meanwhile, US President Donald Trump tweeted that EU’s approach to Brexit is “tough” and drew a parallel to their trade policy with the US, calling the EU “a brutal trading partner”.

Speaking in The House of Commons after the European Council Summit, May emphasized that the date of departure is in the hands of the Parliament as the UK can leave whenever they ratify the Withdrawal agreement. Facing down calls of resignation from Brexiteers, she stood by her words that she will do so once the Withdrawal agreement is ratified. After failing to pass the deal through Parliament three times, May has turned to cross party talks with Labour to find a way out of the Brexit Impasse. So far, no compromise has been reached as the two sides cannot agree on Labour’s demand to remain in the EU customs union. Although May has called the talks “uncomfortable for both sides” she hopes for a positive outcome.

The longer extension granted put the UK in a awkward position with regards to participation in the upcoming European Parliament elections. The European Parliament President Antonio Tajani warned Britain that the European elections are not to be “ridiculed”. He took issue with Theresa May’s approach to the European elections. In May’s letter to Donald Tusk asking for an extension, she had said that “while it is not in the interests of either the UK or the EU for her country to take part in the EU elections”, she would nevertheless prepare for the poll as a contingency. Tajani told May that the European election cannot be considered like a sort of game, adding that “if the UK decides to participate in the EU election, countries like France and Ireland – which were set to gain MEPs – would have to freese their additional seats”.

Meanwhile, a poll by Hanbury Strategy predicts that the Conservative Party would take only 23% of the vote compared to 38% for the Labour party if UK participates at the upcoming EU elections. The poll also predicts more Remainers would be likely to vote than Leavers at 47% compared to 38%. EURACTIV reports that while parties prepare their candidates, the election would have wider implications for Brexit and could launch a second referendum.

Conservative British MP and hardline Brexiteer Mark Francois warned that the October extension and elections are against the democratically expressed will of the British people to leave the European Union. This could result in UK being “a Trojan horse within the EU”. Francois comments are evident of the deep divisions that still exist within the House of Commons where consensus is still a way, way off.

 

Joint statement signed at EU-China Summit sets out “win-win” for China and EU
The EU-China Summit on 9 April was declared a win-win for EU-China trade relations. Donald Tusk declared the talks a “breakthrough” as Beijing made last minute concessions to EU demands.

A joint statement was signed on Tuesday after a weekend of tough negotiations. EU leaders were refusing to sign the statement even just a day before the summit over major disagreements such as forced transfer of technology and market access for European companies and investments to China.

The main sticking points in the negotiations also has to do with China’s industrial subsidies in the context of World Trade Organization (WTO) reform and upholding a rule based international order. On the subsidies, Chinese Premier Li said China supports “fair competition in competitive areas”. Beijing also acknowledged that there should not be forced transfer of technology and agreed to improving market access. The EU also pushed for stronger wording for human rights protection in the joint statement.

Relations with China has been a priority for EU and Brussels has become wary of Chinese investments in Europe as Chinese companies start getting ahead of their European counterparts. This culminated in a strategic document hailing a common approach to their “systemic rival”, China.

The success of the summit was due to a large effort by China to close the gaps in EU’s demands as Beijing was eager to have a joint statement. With the ongoing US-China trade war, Beijing wanted to move towards the EU but not at the expense of damaging negotiations with the US.

Both the EU and China agreed that the comprehensive investment agreement which they have been negotiating for a decade should be concluded by next year. Beijing also agreed to recognise 100 geographical indications from the EU. The China-EU trade relation relies heavily on manufactured goods, specifically of machines and vehicles, which made up 84% of the EU’s exports to China and 97% of imports from China in 2018. This includes telecommunications equipment and computers.

One issue that failed to materialise was the EU-China cooperation project on carbon capture and storage (CCS) which was agreed on at a previous summit in 2005 as part of EU-China’s Partnership on Climate Change. The aim of the CCS is to reduce carbon emissions to near-zero level by 2020; instead of releasing Carbon Dioxide (CO2) into the atmosphere, it would be liquefied and stored underground. However, due to issues in implementation, co-funding, and data-access, steps for the CCS remain in the early development stage and have been delayed.

Another issue that remained in the background was Huawei controversy surrounding its 5G networks, to which Premier Li said, “there must be presumption of innocence”. China’s response to EU’s demands is to open up its economy at a “reasonable pace”, according to Chinese representative Zhang Ming. He also urged the EU to maintain the openness in reciprocity, pushing back against the term “rival” and said, “China is a reliable, trustworthy and predictable partner of the EU — not something to be feared or guarded against.”

 

EU-US Tariff Dispute
The United States has threatened the European Union with billions of euros worth of trade sanctions in retaliation for EU subsidies to Airbus. This comes between a long running dispute between Washington and Brussels over mutual claims of illegal aid given to rival aviation giants Boeing and Airbus that began almost 15 years ago. The Boeing-Airbus spat is the longest and most complicated dispute dealt with by the World Trade Organisation (WTO), which aims to create a level playing field in global trade.

In a press release released on Monday (8 April), the Office of the United States Trade Representative (USTR) claims that it is acting in accordance to WTO rulings that “EU subsidies to Airbus have caused adverse effects” for the US. “This case has been in litigation for 14 years, and the time has come for action,” said US Trade Representative Robert Lighthizer. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional US duties imposed in response can be lifted,” he added. The USTR released a preliminary list of EU products that will be subjected to additional tariffs. These include jetliners, wine, cheese, seafood, and clothing, amongst others.

On Tuesday (9 April), the USTR released its own estimates that the harm from the EU subsidies amounted to $11.2 billion in trade each year. US President Donald Trump took to twitter threatening to impose tariffs on $11 billion of products on the EU. In his twitter post, he added that “The EU has taken advantage of the U.S. on trade for many years. It will soon stop!”

In response, the EU has slammed the USTR’s predictions, calling the sum cited by the USTR as “greatly exaggerated” and that preparations were underway to hit back. While the EU has yet to announce the amount of American goods it would target, Airbus said the bloc would proceed with “far larger countermeasures against the U.S.”

Although the proposed US tariffs account for only a small fraction of the overall US-Europe trade, they are probably a US negotiating tool to set the tone for wider, important negotiations to come, including in the auto sector.

The heightened strains come as EU works toward approving a mandate for the European Commission, the bloc’s executive arm, to negotiate cuts in industrial tariffs with the Trump administration. The new transatlantic tensions may confound those efforts as Europe labours to stave off American threats of separate duties on foreign autos and car parts.

“Whether the tariffs will enter into force will also depend on whether there will be an agreement between the EU and the U.S. about the treatment of subsidies for the aviation industry,” a German Economy Ministry spokeswoman said in an emailed statement to Bloomberg. “The EU is open to the U.S. offer for dialogue in order to reach a fair solution.”

According to EURACTIV, French Finance Minister Bruno Le Maire told a conference in Paris that the two sides needed to reach a friendly agreement. “When I see the situation global growth is in, I don’t think we can afford to have a trade conflict even if only on the specific issues of the aircraft industry in the United States and Europe,” he said.

German Finance Minister Olaf Scholz told Reuters in an interview on Wednesday (10 April) that further escalations between Europe and the US must be avoided. “All parties must do their part to avoid an escalation of trade disputes,” Scholz said when asked to comment on the U.S. threat to impose additional tariffs.

 

EU Elections Update
On Friday (5 April), EU institutions put their cyber systems to the test in a bid to assess the efficiency of responses to attacks against critical network infrastructure, ahead of the European elections in May. This was the first test of its kind, and was aimed at analysing methods to prevent, detect, and swiftly mitigate cybersecurity incidents. It also allowed member states to examine the ways they could increase cooperation between relevant authorities at a national level and cross-border in the event of a cyber-attack.

Over 80 representatives from EU governments, together with observers from the European Parliament, the European Commission and the EU Agency for cybersecurity (ENISA) participated in the exercise.

“A cyber-attack on elections could dramatically undermine the legitimacy of our institutions,” Rainer Wieland, vice-president of the European Parliament and German EPP MEP, said. “The legitimacy of elections is based on the understanding that we can trust in their results.”

While internet voting systems will only be used in Estonia for May’s ballots, electronic voting appliances could be put to use elsewhere across the bloc, despite previous concerns. Ireland had scrapped a 2002 plan to introduce electronic voting after a €54 million outlay, following public opposition and a lack of confidence in the systems. The Netherlands also abandoned electronic voting plans in 2007 after highly-publicised security issues, while Germany scrapped it in 2009, after the Federal Constitutional Court found that electronic voting was unconstitutional, citing high levels of public distrust.

Besides such “technical challenges” the upcoming election saw plenty of sounds and actions from the far right parties across Europe.

Matteo Salvini, the Italian deputy prime minister and leader of The League announced Monday (8 April) his ambition to form the largest group in the European Parliament by joining forces with Euroskeptics across the bloc following next month’s election. He said that the group would “change the rules of Europe,” as well as play a decisive role in choosing the members of the next European Commission later this year following May’s European election.

“Our goal is to finally be a governing force and a force of change,” Salvini said to MEPs from the Alternative for Germany (AfD), the Danish People’s Party and Finland’s True Finns. The event, held under the titled “Toward a Europe of Common Sense,” represented an intense ramping-up of populist ambitions for the next European Parliament. Salvini had proclaimed that the members present at the event would collaborate with the League’s longstanding allies such as Marine Le Pen’s National Rally, although the French party was notably absent from Monday’s event. The parties share common themes, he stated, including border control and “the fight against terrorism and against extremism.”

“The ambitious goal of all those around this table is to give birth to the first group in the next European Parliament,” Salvini told reporters at the event. The group would be “the largest, the most significant, most determined and future-oriented in the next European Parliament.”

The Austrian Freedom Party (FPÖ) confirmed on Tuesday (9 April) that it will join Italian far-right leader Matteo Salvini’s European election alliance. The prewritten statement signed by the FPÖ said that the alliance would “fight for a safer Europe with well protected external borders, less immigration and a stronger cooperation to tackle terrorism and Islamisation.”

Countering the “onslaught” from the far right, Frans Timmermans, the Social Democrats’ candidate to lead the next European Commission, will attempt a formation of a progressive majority after the EU elections. In an exclusive interview with EURACTIV, the first vice-president of the outgoing Commission was certain that “the era of two parties dominating the Parliament will come to an end.” His statement is a reference to the Party of Socialists & Democrats and the European People’s Party (EPP).

To achieve his vision, Timmermans contends that he will need some of the ‘progressive liberals’ from the ALDE group and will extend a hand to the party of French President Emmanuel Macron, the LREM party. However, the latter remains on the fence. Although it is seen as relatively close to ALDE, the French president himself has remained tight lipped as to which grouping his LREM party will ally with.

“I think he is just hedging his bets all over the place. All I can do is try and propose something that might be attractive to him as well, and then just wait for the choices he makes,” Timmermans said of the French head of state.

Timmermans draws the line at working with the extreme right in building political alliances “under any circumstances.” “Not wanting to cooperate with the extreme right is not because their ideas would not be social enough, it’s because they have a different vision of humanity, society.”

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