Last reviewed 18 December 2017
A regularly updated article featuring recent and forthcoming legislation affecting the EU, compiled by Paul Clarke.
Stage one completed
After a week in which it seemed that the Brexit negotiations might be derailed by the Government’s allies in Parliament, the Democratic Unionist Party (DUP), Prime Minister Theresa May seems to have achieved her aim of progressing to trade talks. An early morning visit to Brussels saw her standing next to European Commission President Jean-Claude Juncker as he confirmed that he would be recommending to the leaders of the 27 other Member States that negotiations should now progress to the second stage. The two sides had, he said, made “sufficient progress” on the three key “divorce issues” which the EU had said from the beginning would be required before the UK’s fervent wish to move on to detailed considerations of a future trading relationship would be granted. The full text of Mr Juncker’s report to the EU Council regarding progress on these issues can be found at ec.europa.eu.
Of the three — the money to be paid by the UK, the rights of EU citizens and the Irish border — it was the last that caused the DUP to threaten to deny its vital 10 votes to the Conservative Government. It is back on side after the negotiating text was changed to confirm that “no new regulatory barriers” will be allowed between Northern Ireland and the rest of the UK, and that its businesses will continue to have “unfettered access” to the UK market. Although still to be confirmed, it now seems probable that the UK will, in some form, stay in the EU’s customs union and single market for a two-year transition period after Brexit.
Now for the hard part
Most UK business groups were relieved that the first stage of the Brexit negotiations seemed to have come to a resolution acceptable to all sides. At the same time, they are keenly aware that there is much more to be done before the Government secures the new trading relationship it has been promising. The British Chambers of Commerce (BCC) seized on the mention of a transition period but warned that, welcome as this was, business will want the details confirmed swiftly in the new year. Companies want answers on what leaving the EU will mean for regulation, customs, hiring, standards, tariffs and taxes, it said.
EEF, the manufacturers’ organisation, agreed that the latest decisions mark just one stage in a long and complex process and stressed the need to pin down the transition arrangements, which will be in place after March 2019, to ensure it is as usual for companies for as long as it takes until a final deal is reached. For the Institute of Directors (IoD), Director General Stephen Martin repeated a point made by both the BCC and the EEF: the EU staff of UK companies must be reassured as to their future status.
MPs cast doubt on Government’s Brexit position
A Parliamentary Committee has said that it cannot see how it will be possible to reconcile there being no border between Northern Ireland and the Irish Republic with the Government’s policy of leaving the Single Market and the Customs Union. The Exiting the European Union Committee has published, at publications.parliament.uk, its report on the Brexit negotiations. It calls on the Government to set out in detail how it plans to meet its objective of avoiding the imposition of a border between Northern Ireland and the Republic, including if no withdrawal agreement is reached by 29 March 2019. The Committee is also calling on the Government to publish a White Paper on the proposed implementation period as soon as possible after the European Council in December.
It said that it had heard evidence that an implementation period “is only valuable if it is agreed sooner rather than later”. The Committee wants the White Paper to provide detail on the UK’s participation in the single market, the customs union, how free movement will operate, the jurisdiction of the EU’s Court of Justice (CJEU), UK membership of EU agencies and security, defence and foreign policy co-operation. It has also called on the Government to ring-fence a deal on citizens’ rights so that it is preserved even if no overall agreement is reached.
EU businesses already saying their Brexit farewells
Nearly two-thirds of EU businesses who work with UK suppliers expect to move some of their supply chain out of this country as a result of Brexit, according to a survey from the Chartered Institute of Procurement and Supply (CIPS). The increase since May 2017, when just 44% of EU firms were expecting to move out of the UK, is probably caused by problems with the Brexit negotiations. The pessimistic view is shared in the UK where 50% of businesses told CIPS that they are becoming less confident that the two sides will secure a deal which continues to offer “free and frictionless trade”.
The survey of more than 1100 supply chain managers in the UK and Europe also revealed that 40% of UK businesses with EU suppliers have begun the search for domestic suppliers to replace their EU partners, up from 31% in May. On a more positive note, a quarter (26%) are taking the opposite approach and investing more time to strengthen their relationship with valuable suppliers on the continent. A similar percentage (25%) of UK businesses with more than 250 employees have already spent at least £100,000 preparing their supply chain for the split.
Brexit shaping UK labour market
Businesses should start adjusting to a new era of lower migration, a leading think tank has advised, with a drop of over 100,000 in net migration over the last year showing that the labour market is being reshaped before the UK actually leaves the EU. The Resolution Foundation highlighted that net migration fell by a third to 230,000 in the 12 months to June with EU migration accounting for over three-quarters of this fall, driven by fewer job seekers from the other Member States coming to the UK to find work. Its analysis suggests that the recent fall in migrant workers has been especially pronounced in London and among EU-born graduates, while the number of low and mid-skilled EU migrant workers continues to rise.
New Bill allows for different Brexit scenarios
Draft legislation intended to prepare the UK customs regime for life outside the EU has started its progress through Parliament. Although the Taxation (Cross-border Trade) Bill lays the foundations for the UK’s standalone customs regime, it has been drafted, the Government explains, to allow sufficient flexibility for a range of potential outcomes from the Brexit negotiations. Previously known as the Customs Bill, the proposals include provisions introduced following representations from the business community. Specifically, Parts 1 and 2 of the Bill, which provide for a new standalone customs regime, are largely based on EU law — with the intention that the new regime will continue to operate in much the same way as it does today.
The Bill makes clear that, depending on the outcome of the negotiations, companies currently trading only with the EU may be subject to customs declarations and customs checks for the first time. Provisions to enable the creation of a standalone customs regime include allowing the UK to charge customs duty on goods (including on goods imported from the EU) and to establish its own nomenclature to define how goods will be classified in order to determine the amount of duty due. The Bill will also ensure that VAT and excise legislation function effectively once the UK leaves the EU. Commenting for the British Chambers of Commerce (BCC), Anastassia Beliakova said that businesses will expect the legislation to provide continuity and alignment with the existing Union Customs Code, and help establish future customs co-operation with the EU.
UK’s reputation on the line over customs system
A new report warns that failure to ensure the UK has a viable customs system up and running in time for Brexit could have a huge impact on the country’s reputation. To avoid that possibility, MPs on the Public Accounts Committee have made a number of recommendations, mostly aimed at HM Revenue & Customs (HMRC). In Brexit and the Future of Customs (available at publications.parliament.uk), they recommend that HMRC should ensure that traders are informed of the Customs Declaration Service (CDS) timeline and progress by January 2018. HMRC should also promote the benefits of obtaining trusted trader status and aim to increase the number of registered traders.
Brexit could see the number of customs declarations which HMRC must process each year hit 255 million and a failed customs system could therefore lead to huge disruption for businesses, the report notes. MPs cite the possibility of long queues at Dover and food being left to rot in trucks at the border as two examples of the impact. It is therefore critical, they say, that HMRC should ensure that both the CDS system and the Customs Handling of Import and Export Freight (CHIEF) system contingency option are capable of managing 255 million declarations. The system must also be flexible enough to meet the wider challenges of an integrated customs and trade system for the UK, including managing changes to tariffs and international trade quotas. The Committee accepts that lack of funding is impeding HMRC from upgrading CHIEF and recommends that the Treasury provides the £7.3 million required.
Plans to create a European Social Security Number
The European Commission has announced proposals to create a European Social Security Number (ESSN) that should see this initiative brought to fruition before the UK leaves the EU. In his recent State of the Union Address 2017, Commission President Jean-Claude Juncker announced plans for a European Labour Authority (ELA) that would, he argued, ensure that EU rules on labour mobility are enforced in a fair, simple and effective way. “It is absurd to have a Banking Authority to police banking standards,” he said, “but no common Labour Authority for ensuring fairness in our single market. We will create such an Authority.”
Part of that plan involves creating an ESSN in order to simplify and modernise citizens’ interaction with administrations in a wide range of policy areas. Legislative proposals for both initiatives were set out in the Commission’s Work Programme for 2018 and are planned for adoption by the second quarter (Q2) of 2018. The Commission has now launched a consultation into how it intends to implement both the plans for the ELA and for the ESSN. This involves a questionnaire which can be found at ec.europa.eu and for which the deadline for comments is 7 January 2018.
Call to end Swedish Derogation
The Work and Pensions and Business, Energy and Industrial Strategy (BEIS) Committees have called on the Government to close the loopholes that allow companies to use bogus self-employment status as a way of recruiting cheap labour and avoiding tax. Their report, which is available together with a draft Bill at publications.parliament.uk, argues that the provision in law which enables agency workers to be paid less than permanent employees doing the same job must be removed. They are referring to the so-called Swedish Derogation which is an opt-out contained in the EU’s Agency Work Directive (2008/104/EC) with regard to equal treatment in relation to pay. This covered workers permanently contracted as an employee of an agency and in receipt of pay from that agency between assignments.
Referring to the recent Taylor Review into working practice, the new report states: “Many reputable agencies do not abuse this opt out. Others, Matthew Taylor told us, are reluctantly ‘complicit due to pressure from companies they supply’ and had urged him to recommend its abolition.” The TUC has backed both Mr Taylor’s comments and the recommendations from the Parliamentary Committees with General Secretary Frances O’Grady arguing that the Swedish Derogation creates an unequal workforce, denying agency workers the going rate for the job. She also welcomed the Committees’ call for a clearer definition of employment status.
EU proposes new tools to combat VAT fraud
At least €50 billion is lost to the Member States every year in VAT fraud. With this in mind, the European Commission has unveiled new tools to make the VAT collection system more effective and to close loopholes which can lead to large-scale fraud. It has highlighted revelations in the “Paradise Papers” which show how tax avoidance schemes can be used to help wealthy individuals and companies to circumvent the EU’s VAT rules. Recent reports also suggest that VAT fraud schemes can be used to finance criminal organisations, including terrorists.
The new proposals should enable Member States to exchange more relevant information and to co-operate more closely in the fight against these activities. One aim is to improve information sharing between tax and customs authorities for certain customs procedures which are currently open to VAT fraud. Under a special procedure, goods that arrive from outside the EU with a final destination of one Member State can arrive into the EU via another Member State and transit onwards VAT free. VAT is then only charged when the goods reach their final destination. This feature of the EU’s VAT system aims to facilitate trade for honest companies, but can be abused to divert goods to the black market and circumvent the payment of VAT altogether. Under the new rules, information on incoming goods would be shared and co-operation strengthened between tax and customs authorities in all Member States. See ec.europa.eu for more details.
Tax havens named
The first-ever EU list of “non-cooperative tax jurisdictions” (essentially tax havens) has been agreed by the Finance Ministers of EU Member States. The list includes 17 countries that have failed to meet agreed tax good governance standards. In addition, 47 countries have committed to addressing deficiencies in their tax systems and to meet the required criteria, following contacts with the EU. The full list can be found at www.consilium.europa.eu and includes Bahrain, Barbados, Macao, Trinidad and Tobago, Tunisia, Mongolia, Panama and the United Arab Emirates (UAE).
Expressing its sympathy and support to the jurisdictions in the Caribbean region that were severely struck by devastating storms in September 2017, the EU said that the screening process should be put on hold for a number of jurisdictions: Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos Islands and the US Virgin Islands. As a first step, a letter will be sent to all jurisdictions on the EU list, explaining the decision and what they can do to be de-listed. A first interim progress report should be published by mid-2018 and the list will be updated at least once a year.
EU tightens controls on dual-use products
Controls on exports of sensitive dual-use products — those with a potential military as well as a civilian use — are getting tighter according to a new report. Published by the European Commission, this shows that efforts to control nuclear technology, chemical equipment, high-tech electronics and other products that can be used for both civilian and military purposes have been increasing at EU level. The Commission is candid about the difficulties in obtaining reliable information on dual-use exports, as there is no defined economic sector for such goods. It is possible, however, to estimate the trade using data collected both by the Commission and by national authorities. Based on those figures, the Commission has calculated that in 2015 the total value of applications to export dual-use goods reached €44 billion — equivalent to 2.5% of the EU’s total exports.
Authorised dual-use trade amounted to €33.7 billion, representing 1.9% of total extra-EU exports, with a majority of transactions authorised under individual licenses (some 25,000 single licenses were issued in 2015) and global licenses (by their value). In 2015, 640 export applications for such products were refused — a number that represents about 0.1% of total extra-EU exports and 4.5% of the value of controlled dual-use exports for that year. The full text of the report on the implementation of EC Regulation 428/2009 setting up a regime for the control of exports, transfer, brokering and transit of dual-use items can be found at eur-lex.europa.eu.
EU revises its trade defence measures
Following a recent decision by the European Parliament to support measures aimed at strengthening EU anti-dumping and anti-subsidy legislation, the agreement has now also been approved by the Member States. Described by the Commission as a “landmark deal”, the measures are intended to make the EU’s trade defence instruments (TDIs) better suited to the challenges of the global economy. Noting that “we are not naïve free traders”, Commission President Jean-Claude Juncker said that Europe will continue to stand for open markets and rules-based trade, but will not hesitate to resort to trade defence options in order to ensure a level playing field for EU companies and workers.
Changes introduced by the new rules include cutting the current nine-month investigation period for the imposition of provisional measures and providing companies with an early warning system to help them adapt to a new situation in case duties are imposed. Smaller companies will receive assistance from a dedicated help desk, to make it easier for them to trigger — and participate in — trade defence proceedings. In cases targeting imports of unfairly subsidised or dumped products from countries where raw materials and energy prices are distorted, the EU will have the option of adapting its “lesser duty rule” and imposing higher duties. The legislation now only requires the formal approval of the EU bodies before it can be published.
EU and Japan finalise Economic Partnership Agreement
The conclusion of these negotiations is an important milestone on the way to the biggest bilateral trade agreement ever negotiated by the EU. The Economic Partnership Agreement (EPA) will open huge market opportunities for both sides, strengthen co-operation between Europe and Japan in a range of areas, reaffirm their shared commitment to sustainable development, and include for the first time a specific commitment to the Paris climate agreement. The agreement will remove the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan, as well as a number of long-standing regulatory barriers. It will also open up the Japanese market of 127 million consumers to key EU agricultural exports and will increase EU export opportunities in a range of other sectors. The agreement will, in particular, scrap duties on many cheeses such as Gouda and Cheddar (which currently are at 29.8%) as well as on wine exports (currently at 15% on average) and will ensure the protection in Japan of more than 200 high-quality European agricultural products, so-called Geographical Indications (GIs). The Commission will submit the agreement for the approval of the European Parliament and EU Member States, aiming for its entry into force before the end of its current mandate in 2019.
Chancellor alerted to poor trade figures
There may be fine times ahead once the UK leaves the EU, as those backing Brexit are keen to argue, but business groups are pointing out that the country’s current trade position is weak, and shows no signs of improving. The latest figures, covering September 2017, show a widening trade gap that was primarily caused by a sharp rise in imports, particularly in machinery and fuels. While the expected boost from the fall in the value of the pound has indeed helped some exporters, this has been more than offset by the increased cost of imported raw materials and capital equipment.
The rise in exports has mainly been to EU countries which tends to reinforce the need for politicians to agree a deal with the Union that safeguards favourable terms of trade for UK businesses with their largest overseas market. Both the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB) have used the figures to remind Chancellor Philip Hammond that his Budget on 22 November is an ideal moment to offer more support to UK companies wanting to export. FSB Chairman Mike Cherry pointed out that one in five small businesses currently exports and, with the right support, that figure could be doubled.
UK, Brexit and citizens’ rights
The European Parliament’s Brexit Steering Group, chaired by Guy Verhofstadt, has poured cold water on Brexit Secretary David Davis’ assertion that a deal on citizens’ rights is almost finalised. The Group said that it did not agree with this optimistic view as there are still major issues that have to be resolved. Its most important concern is the UK proposals for settled status for EU citizens in the UK, including the administrative procedures as set out in a technical note recently published by the UK Government.
Mr Verhofstadt said that acquiring settled status must be an automatic process in the form of a simple declaration, not an application which introduces any kind of conditionality (for example a proactive “criminality check”). Furthermore, it must enable families to make one joint declaration, not separate declarations for each individual family member. As well as being cost-free, he continued, the procedure must see the burden of proof resting on the UK authorities to challenge the declaration, and this only on a case-by-case basis and in line with EU law. The Group also stressed that any withdrawal agreement at the end of the UK-EU negotiations will need to win the approval of the European Parliament before it can be implemented.
EU view of Article 50 negotiations
The EU’s Chief Brexit Negotiator, Michel Barnier, spoke at the end of the sixth round of Article 50 negotiations and stressed that he was determined to reach a deal on the orderly withdrawal of the UK from the Union. However, he reiterated that there must be “sincere and real progress” on the three key areas of the negotiation before the other Member States would give him a mandate to open the second phase of the negotiations (talks on a possible trade deal). These three key areas remain: the monetary settlement; the rights of EU citizens; and the question of the border arrangements between Northern Ireland and the Irish Republic. Mr Barnier reminded the UK that it only had a short time before the rest of the EU would meet (in December) to decide if that progress had been achieved — and there was much still to do.
Court annuls fines in cartel case
In 2013, the European Commission imposed fines on Citigroup, Deutsche Bank, JPMorgan, RBS, RP Martin and UBS after they admitted their involvement in a series of cartels relating to Yen interest rate derivatives. Fines totalling €1.4 billion were levied by the Commission. However, an allegation that the ICAP Group had facilitated six of the seven cartels was refuted and ICAP chose not to settle the case. When, in 2015, the Commission imposed a fine of €14.9 million on the company, it brought an action before the EU’s lower court to have that decision annulled.
The General Court has now found that the Commission’s case against ICAP was flawed on a number of points. It took the view that the Commission had not proved that ICAP participated in one of the cartels, that the duration found by the Commission of the company’s participation in three cartels was excessive, and that it failed to provide sufficient reasons as regards the way it calculated the fine. Although the Court concluded that the Commission did not commit an error of law or assessment in finding that the infringements alleged against ICAP were restrictive of competition by their object, it decided to annul the part of the decision setting the fines because it was insufficiently reasoned. The judgment (which is summarised at curia.europa.eu) can be appealed to the Court of Justice of the European Union (CJEU) within two months.
EU wants better online protection against fraudsters
EU-wide rules to better protect consumers against scams and to detect and stop rogue online traders more swiftly have been approved by the European Parliament. The new rules aim to close legal loopholes, which are exacerbated because consumer protection systems differ from one EU country to the next. National enforcement authorities will have more powers to detect and halt online breaches of consumer protection laws and be able to co-ordinate their actions better across the EU, under the revised Consumer Protection Cooperation (CPC) Regulation once it is formally adopted.
Once the improved CPC Regulation is in force, investigation and enforcement powers will have to include the ability to:
request information from domain registrars and banks to identify rogue traders
purchase goods or services as test purchases, including under a cover identity (mystery shopping)
order the explicit display of a warning to consumers, or order a hosting service provider to remove, disable or restrict access to an online interface (a website or app) if there are no other effective means to stop an illegal practice.
The European Parliament has insisted that consumer organisations should be more widely involved in flagging suspected infringements, since they are likely to hear about them earlier than the authorities.
Government publishes post-Brexit Customs Bill
A new Customs Bill to be put before the UK Parliament contains provisions aimed at allowing the Government to create a standalone customs regime and to amend the current VAT and excise regimes once the UK leaves the EU. If approved, the proposals will enable the customs duty on goods to be varied and will specify which duties are payable on which goods. It will also provide for preferential or additional duties to be set in certain circumstances (to support developing countries, for example). Overall, the Customs Bill is intended, the Department for International Trade (DIT) explained, “to maintain a functioning movement of goods from the day we leave the EU by continuing the VAT and excise regimes in line with the final deal reached in negotiations”.
Customs transit procedure goes digital
The International Road Transport Union (IRU) and the United Nations Economic Commission for Europe (UNECE) have signed two agreements on the digitalisation of the customs transit procedure under the Transports Internationaux Routiers (TIR) Convention. Full digitalisation of the TIR customs transit procedure will be supported by the first agreement — a Memorandum of Understanding (MoU) to further strengthen co-operation between the two bodies. The IRU believes that this will harness the advantages already offered by its digital transit tools and digital customs procedures to benefit all TIR contracting parties.
The agreements are, the IRU argues, an acknowledgment of the success of the first trials of a fully digital TIR process (eTIR), which saw two shipments between Iran and Turkey pass all border and customs formalities using digital data exchange between transport operators, customs authorities, the TIR system guaranteeing organisations and the UN. Further eTIR pilot projects and regular co-ordination on the use of digital transport, customs and transit tools will now follow.
Rest on the seventh day?
The Court of Justice of the European Union (CJEU) has given its judgment in a case concerning the interpretation of rest day provisions set out in the Working Time Directive (2003/88/EC). In its ruling in Case C-306/16 (which is summarised at curia.europa.eu), the CJEU confirmed that each worker must enjoy adequate rest periods, but that individual Member States have discretion as to when these must be granted.
Under the Working Time Directive, every worker is entitled, during each seven-day period, to a minimum uninterrupted rest period of 24 hours plus 11 hours’ daily rest. However, the Court has ruled that EU law does not require the minimum uninterrupted weekly rest period to be provided no later than the day following a period of six consecutive working days, but does require it to be provided within each seven-day period. It would therefore be permissible to work on 12 consecutive days.
Deal reached on Emissions Trading System
The European Parliament and the EU Council of Ministers have reached a provisional deal to revise the EU Emissions Trading System (EU ETS) for the period after 2020. The EU ETS puts a cap on the carbon dioxide (CO2) emitted by more than 11,000 installations in the power sector and energy intensive industry through a market-based cap and trade system. Described as a landmark agreement, the latest deal aims to deliver on the EU’s commitment to turn the Paris Agreement on climate change into reality and reduce greenhouse gas (GHG) emissions by at least 40% by 2030.
Building on a proposal from the European Commission, the draft deal includes changes to the existing ETS intended to speed up both emissions reductions and action to reduce the current oversupply of allowances on the carbon market (which could be worsened when the UK leaves the EU). It also offers additional safeguards to provide European industry with extra protection, if needed, against the risk of carbon leakage (the process of losing business to non-EU countries which do not apply such strict environmental standards). Before becoming law, the agreed text must be formally approved by both the Parliament and the Council.
EU pushes for global leadership in clean vehicles
The European Commission has proposed new targets for the EU fleet-wide average carbon dioxide (CO2) emissions of new passenger cars and vans to help accelerate the transition to low- and zero-emission vehicles. To reach the targets for new cars and vans, the average CO2 emissions will have to be 30% lower in 2030, compared to 2021. The Commission hopes that new CO2 standards will help manufacturers to embrace innovation and supply low-emission vehicles to the market. A Clean Vehicles Directive, if adopted, will promote clean mobility solutions in public procurement tenders and thereby provide a solid boost to the demand and to the further deployment of clean mobility solutions, the Commission explained. More details of the proposals can be found at europa.eu.
Views sought on pesticide risks
The European Food Safety Authority (EFSA) has launched a public consultation on its guidance for assessing risks to birds and mammals from pesticides. The feedback received will help to identify areas in the guidance document which need revision and/or correction. Full details are available at www.efsa.europa.eu and the deadline for submitting comments is 18 December 2017. In the UK, the Health and Safety Executive (HSE) recommends that bird and mammal risk assessments should be conducted according to the EFSA Guidance Document.
European Medicines Agency to leave London
One of the unpublicised results of Brexit is that the London-based European Medicines Agency (EMA) is looking for a new home. As with other EU agencies, it must be sited in an EU country and the other 27 Member States will shortly decide where that new home will be. A decision is expected on 20 November, with the Agency poised to start working with the new host country immediately. Described as a challenging undertaking under any circumstances, the move is made even more difficult by the need to complete the transition by the end of March 2019 (Brexit Day). The Agency’s new host city will need to provide good quality housing for some 900 new households as well as schooling for around 600 children.
EU wants tougher border controls
An improved Schengen Information System (SIS) should help to step up the EU fight against terrorism, cross-border crime and illegal immigration. The SIS is used to share information among the institutions of countries participating in the Schengen Agreement which underpins freedom of movement in much of the EU (and beyond into countries such as Norway and Switzerland). The European Parliament has recently given its support to three new EU regulations which aim to improve the SIS by introducing:
an obligation for a Member State to swiftly share details of a terrorist act with all other Member States
a preventive alert signalling children who are at high risk, for instance, from parental abduction
an automatic alert to all national authorities when an entry ban is issued by one Member State
a new alert system for so-called “unknown wanted persons”, to help enforcement bodies to access SIS information on individuals whose fingerprints are found on a crime scene
compulsory sharing of data on fingerprints, palm prints, facial images and DNA with all national law enforcement authorities.
Trade Bill paves the way to Brexit
Publishing its Trade Bill, the Government said that it is intended to establish the powers required to ensure that the UK can implement more than 40 existing EU trade agreements once it leaves the Union. The aim is also to enable the UK to become an independent member of the Agreement on Government Procurement (GPA) and thereby to make sure that UK companies have continued access to £1.3 trillion worth of government contracts and procurement opportunities in 47 countries. As EU anti-dumping protection will no longer be available to UK companies, the Bill will establish a Trade Remedies Authority charged with defending British businesses against unfair trade practices.
EU guidelines for trade with Australia and New Zealand
The EU is set to launch negotiations for new free trade agreements (FTAs) with the Australia and New Zealand, and Members of the European Parliament (MEPs) have taken the opportunity to give their input to the Council of Ministers and the European Commission ahead of the talks. The Council is expected to approve its negotiating mandates in November, which would enable the Commission to start talks with the two countries before the end of 2017. MEPs have suggested that some agricultural products may need special treatment, such as quotas or transition periods and safeguard clauses, while the most sensitive ones might have to be excluded.
MEPs also want EU businesses to be offered new opportunities to win contracts with public authorities in Australia and New Zealand and have called for a specific chapter in the negotiations to be devoted to creating business opportunities for small firms. They have insisted that no provision should prevent EU governments from legislating to protect health, safety or the environment, or require them to privatise public services. Finally, Parliament has said that EU consumer protection standards must be maintained.
How EU trade agreements work in practice
Anyone wondering how EU trade agreements actually work on the ground will find the answers in a new report from the European Commission. It examines 25 trade agreements currently in force, together with the measures put in place to maximise their benefits and to ensure that the rules agreed are actually respected. As well as confirming that trade agreements have led to significant increases in exports, and have boosted the EU economy, the report also considers what lessons can be learned and what can be improved when new agreements are being negotiated.
Arguing that trade agreements have particularly benefitted EU exports, the Commission cites four countries to which the EU has increased sales: Mexico (+416% since 2000); Chile (+170% since 2003); South Korea (+59% since 2011) and Serbia (+62% since 2013). There is, however, scope for further improvement and, with a lack of awareness having been identified as one of the main reasons why smaller companies do not use FTAs, the Commission is promising a digital campaign targeting SMEs. Report on Implementation of Free Trade Agreements can be found here.
Of trade and technology
Trade and technology are two of the most powerful drivers of economic progress, according to the Director-General of the World Trade Organization (WTO). Launching the latest edition of the WTO’s World Trade Report, Roberto Azevedo also noted that, while most people benefit considerably from trade and technology, others can lose out. The report states that the rise of a more integrated global economy has accelerated the spread of innovation, information and know-how — and has spurred cross-border collaboration and competition. It explains that this has helped to fuel technological advances such as containerisation and improvements in air travel, which in turn have helped bring about an increasingly integrated global economy. The World Trade Report 2017: Trade, Technology and Jobs is available here.
EU to strengthen its trade defence instruments
To help it deal more effectively with unfair competition from dumped and subsidised imports from outside the Union, the EU has decided to tighten its trade defence instruments (TDIs). Following an agreement between the European Parliament and the Council of Ministers (representing the Member States), a European Commission proposal to change the Union’s anti-dumping and anti-subsidy legislation is set to enter into force by the end of the year. The legislation will introduce a new methodology for calculating dumping margins for imports from third (non-EU) countries in case of significant market distortions, or a State’s obvious influence on the economy. The rules are, the Commission argues, formulated in a country-neutral way and fully comply with the EU’s obligations under WTO rules. A number of criteria will be used to assess potential market distortions, including state policies and influence, the widespread presence of state-owned enterprises, and discrimination in favour of domestic companies.
Eurozone has a good trading month
In September 2017, compared with the previous month, the seasonally adjusted volume of retail trade rose by 0.7% in the 19 Members of the Eurozone but only by 0.3% in the wider EU of 28 Member States. Among those States, the highest increases in the total retail trade volume were registered in Ireland (+1.4%), Denmark and Luxembourg (both +1.3%) as well as France (+1.2%), while the largest decreases were observed in the UK (–2.2%), Croatia (–1.9%) and Lithuania (–1.0%).
Cautious welcome for Florence speech
The fact that the Government has finally admitted to needing a transitional period before leaving the EU was enough for Britain’s main business groups to get behind Prime Minister Theresa May’s position on Brexit set out in her recent Florence speech. Firms will welcome the proposal for a transition period for business that averts a cliff-edge exit, the CBI said, and the Institute of Directors (IoD) expressed relief that a transition or implementation period had been firmly established as government policy. A word of warning came from the British Chambers of Commerce (BCC) with Director General Dr Adam Marshall pointing out that, given the complexity of the changes ahead, most businesses would prefer a transition that lasts at least three years (not two as suggested by Mrs May).
Given that the transition period is at the moment only a suggestion from one side of the table, the reaction of the EU negotiating team will be crucial and the initial comments from Michel Barnier were guarded. He said that the speech showed “a willingness to move forward” but that he was expecting much more detail from David Davis and his team when the two sides had their October meeting. At the closing press conference after that session, a downbeat Mr Barnier welcomed the impetus provided by Mrs May’s speech but warned that the two sides were still deadlocked on the question of the UK’s financial commitment post-Brexit. And until that issue is resolved, he repeated, the EU will not move on to discuss trade arrangements.
Deal or no deal?
In two White Papers (details below), the Government has set out the legislation that it plans to introduce to ensure that the UK is ready for the first day after EU exit, whether that is with an agreement in place or not. Addressing Parliament, Prime Minister Theresa May said that the papers “pave the way for legislation to allow the UK to operate as a trading nation as we leave the EU and prevent disruption to trading arrangements”. They enable the UK to prepare for a range of negotiated outcomes including an implementation period, the Government has stressed.
Science and innovation after Brexit
The Government has issued another in the series of future partnership papers, setting out its thoughts on continued co-operation with the EU after Brexit, with the latest report covering collaboration in science and innovation. Setting out examples of where the UK sees potential mutual benefit in a close working relationship, the paper (which can be found at www.gov.uk) outlines objectives for an ambitious science and innovation agreement. It also considers areas where there are precedents for countries outside the EU to participate in pan-European space programmes such as Galileo (satellite navigation) and Copernicus (earth observation).
The paper also looks at projects on nuclear research including: the Oxfordshire-based Joint European Torus (JET) which is funded by the EU’s Euratom Research and Training Programme and supports 1300 jobs in the UK, 600 of which are highly skilled scientists and engineers; and the International Thermonuclear Experimental Reactor (ITER). Secretary of State David Davis said: “This paper sends a clear message to the research and innovation community that we value their work and we feel it is crucial that we maintain collaboration with our European partners after we exit.”
Dawn raids by EU competition inspectors
The European Commission has confirmed that its officials carried out unannounced inspections in several Member States concerning online access to bank account information by competing service providers. It has concerns that the companies involved and/or the associations representing them may have engaged in anti-competitive practices in breach of EU antitrust rules that prohibit cartels and restrictive business practices. These alleged anti-competitive practices are aimed at excluding non-bank owned providers of financial services from the market by preventing them from gaining access to bank customer’s account data, despite the fact that the respective customers have given their consent to such access. The Commission stresses that carrying out such inspections does not mean that the companies or their associations are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation.
MEPs call for action after Ryanair debacle
Members of the European Parliament (MEPs) have expressed dismay about the difficulties faced by passengers following the cancellation of thousands of flights by low-cost airline Ryanair. Pointing out that passengers were not given sufficient information on compensation and re-routing options, MEPs called for more effective sanctions for companies that fail to comply with EU law. Arguing that competitiveness should not be gained at the cost of workers’ rights, some called on the European Commission to investigate working conditions at low-cost air carriers. In response, the Commission said it will launch a study of social conditions and mobile workers’ rights in the aviation sector next year.
Proposed changes to existing legislation on passenger rights have been deadlocked for a number of years, with the Council — which represents the interests of Member States — so far failing to negotiate with the European Parliament. The actions of Ryanair could see renewed pressure to open negotiations.
Customs after Brexit
Introduced by the Prime Minister as described above, the Treasury’s Customs Bill White Paper, which can be found at www.gov.uk, sets out plans to legislate for the standalone customs, VAT and excise regimes the UK will need once it leaves the EU, particularly if it proves impossible to reach a deal before the Article 50 deadline. The Government will bring the Bill before Parliament later this year. The White Paper explains its approach to the Bill, setting out how the current customs, VAT and excise regimes operate for cross-border transactions, why the Bill is necessary, and what it will contain. Anyone wishing to comment ahead of the debate in Parliament is invited to email their views to CustomsStakeholders@hmtreasury.gsi.gov.uk, before 3 November 2017.
Real news about fake goods
More than 41 million fake and counterfeit products were stopped at EU borders last year. According to the European Commission, potentially dangerous products such as medicines, toys and household electrical goods accounted for over a third of all goods intercepted. There was a 2% increase in the number of articles intercepted compared with the previous year, with the goods seized having a total value of some €670 million. The Report on EU Customs Enforcement of Intellectual Property Rights: Results at the EU Border 2016 can be found here.
Cigarettes accounted for almost a quarter (24%) of the articles detained by customs authorities. Toys were the second largest group (17%), followed by foodstuffs (13%) and packaging material (12%). The main source of fake goods was China, which accounted for 80% of those seized. Vietnam and Pakistan were cited by the Commission as the originating countries for large amounts of cigarettes, with Singapore the main source of counterfeit alcoholic beverages. Fake clothing accessories tended to originate in Iran, while Hong Kong topped the table for counterfeit mobile phones and most counterfeit medicines came from India.
Dual-Use items list updated
The European Commission has adopted its annual update of EC Regulation 428/2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items. This lists those items which potentially have both a military and a civilian use and must therefore be subject to effective control when they are exported from or transit through the EU. The text of the amending legislation can be accessed via trade.ec.europa.eu as can the Comprehensive Change Note Summary 2017 which summarises the proposed changes. They are mainly the result of a review of the Wassenaar Arrangement Dual-Use Lists, Missile Technology Control Regime Technical Annexes, Nuclear Suppliers Group and Australia Group Common Control Lists during the course of 2016.
EU Prosecutor to fight fraud against EU funds
The European Parliament has given its consent to the establishment of a European Public Prosecutor’s Office (EPPO) which will be in charge of investigating and prosecuting perpetrators of offences against the EU budget. Currently, only national authorities can investigate and prosecute EU budget-related fraud, such as the intentional misuse of EU structural funds or cross-border VAT fraud, but their jurisdiction ends at their national borders. The EPPO will allow for swift information exchange, co-ordinated police investigations, fast freezing and seizure of assets, as well as arrests of suspects across borders.
The EPPO will be set up, probably in 2020, by way of enhanced co-operation among 20 Member States. The eight that currently do not participate — Sweden, the Netherlands, Malta, Hungary, Poland, the UK, Ireland and Denmark — will be able to join at any time, should they choose to do so. Parliament has approved the common definitions of the fraud-related crimes that will fall under the jurisdiction of the EPPO and agreed that this list could in future be extended to include, for example, terrorism.
All parts of the Banking Union to be complete by 2018?
The European Commission has announced plans to accelerate the completion of the missing parts of the Banking Union. It is suggesting new measures to reduce non-performing loans and to help banks diversify their investments in sovereign bonds. On the risk-sharing side, the Commission is setting out some suggestions to facilitate progress in the European Parliament and the Council on steps towards a European Deposit Insurance Scheme (EDIS), guaranteeing citizens’ deposits in the Banking Union at a central level, a vital missing element of the Banking Union.
In 2012, the Commission proposed a Banking Union that would place the banking sector on a sounder footing and restore confidence in the euro. The Banking Union is based on stronger prudential requirements for banks. It consists of bank supervision, rules for managing failing banks as well as improved protection for depositors. The first two pillars were achieved with the establishment of the Single Supervisory Mechanism (SSM) and of the Single Resolution Mechanism (SRM). However, a common system for deposit protection has not yet been established. The Commission put forward a proposal for a European Deposit Insurance Scheme (EDIS) in November 2015. See ec.europa.eu for full details.
EU proposes far-reaching reform of VAT
The European Commission has published proposals for reforming legislation on VAT which it has described as the biggest reform of EU VAT rules in a quarter of a century. The move is intended to improve and modernise the existing system which was introduced as a transitional regime in 1993. At the moment, businesses trading cross-border currently suffer from 11% higher compliance costs compared to those trading only domestically, the Commission has highlighted. By simplifying and modernising VAT, those costs could be reduced by an estimated €1 billion.
From the Member States’ perspective, over €150 billion of VAT is lost every year, with about a third of that amount thought to be due to cross-border VAT fraud. The proposed regime should, the Commission claims, reduce that fraud by about 80%. Under the present VAT rules, domestic and cross-border transactions are treated differently and goods or services can be bought free of VAT within the Single Market. That system is widely acknowledged to be fragmented, overly complex and open to fraud. If adopted, the Commission’s proposals would fundamentally change the regime by taxing sales of goods from one EU country to another in the same way as goods are sold within individual Member States. They would also introduce the concept of a Certified Taxable Person — a category of trusted business that will benefit from much simpler and time-saving rules. Towards a Single EU VAT Area — Time to Act can be found here.
Taxing the Digital Single Market
The European Commission has set out a number of options for taxing the digital economy. In A Fair and Efficient Tax System in the European Union for the Digital Single Market (available at eur-lex.europa.eu), the Commission argues that international tax rules, which were designed for “bricks and mortar” businesses, are now outdated. The current tax rules no longer fit the modern context where businesses rely heavily on hard-to-value intangible assets, data and automation, which facilitate online trading across borders with no physical presence, it suggests.
In the absence of a fundamental reform of international tax rules, the Commission wants to ensure a coherent EU approach to taxing the digital economy and to ensure the fair and effective taxation of all companies. Three possible options are set out, including an equalisation tax on the turnover of digitalised companies, which would take the form of taxing all untaxed or insufficiently taxed income generated from their internet-based business activities, including business-to-business and business-to-consumer.
The other options are a withholding tax on digital transactions (a standalone, gross-basis, final withholding tax on certain payments made to non-resident providers of goods and services ordered online) and a levy on revenues generated from the provision of digital services or advertising activity (a separate levy could be applied to all transactions concluded remotely with in-country customers where a non-resident entity has a significant economic presence). Depending on the outcome of discussions between Member States, it is possible that legislation will be proposed in the first part of 2018.
New rules to resolve tax disputes
The EU Member States have given the formal green light for new rules to better resolve tax disputes. The decision taken by EU Finance Ministers will ensure that businesses and citizens can resolve disputes related to the interpretation of tax treaties more swiftly and effectively, the European Commission said. It will also cover issues related to double taxation — a major obstacle for businesses, creating uncertainty, unnecessary costs and cash-flow problems. Double taxation refers to cases where two or more countries claim the right to tax the same income or profits of a company or person. It can occur, for example, due to a mismatch in national rules or different interpretations of a bilateral tax treaty with regard to transfer pricing arrangements.
The future of UK trade policy
The Trade White Paper, published by the Department for International Trade (DIT) and available at www.gov.uk, is intended to establish the principles that will guide future UK trade policy as well as laying out the practical steps that will support those aims. Introducing it to Parliament as part of her review of the Brexit talks, Prime Minister Theresa May said that the policy will ensure that the UK can support developing economies by continuing to give them preferential access to UK markets and will prepare to bring across into UK law existing trade agreements between EU and non-EU countries. It will also create a new, UK, trade remedies investigating authority and includes provisions to enable the UK to maintain the benefits of the World Trade Organization’s (WTO) Government Procurement Agreement (GPA).
Trade outlook improves, but not for everyone
The USA and the UK are being held back by the lack of visibility around Donald Trump’s policies and the outcome of Brexit negotiations, respectively, while Europe is seen as the big winner in the current world economic upturn. “World economic growth might not yet be at its highest (2.9% in 2017 and 2018),” leading credit insurer, Coface, said, “but there can be no denying that there are healthy signs.” This last quarter (Q3), nearly all of the revised country and sector risk assessments from Coface show marked improvements.
Among EU countries, Hungary (raised to A3) is, Coface said, demonstrating lively economic activity while Finland (up to A2) has encouraging prospects. The Coface risk scale runs from A1 (very low risk) to E (extreme risk). Overall, the credit insurer has found the global economy to be continuing its recovery, with the growth in world trade stronger than anticipated at the start of the year. Europe’s performance is buoyant and political risks, although not disappearing altogether, are fading. There are increasingly positive signs in Brazil and Russia, while capital is once again flowing in some emerging countries.
EU casts a wider trade net
The European Commission has launched a package of proposals on trade and investment. In its Communication A Balanced and Progressive Trade Policy to Harness Globalisation, available at trade.ec.europa.eu, the Commission focuses on four key issues: new trade deals, foreign direct investment (FDI), resolving investment disputes and the transparency of trade policy. The EU does not currently have a bilateral free trade agreement (FTA) with either Australia or New Zealand and that, the Commission argues, leaves EU businesses with comparably less favourable conditions to access those two markets.
It therefore recommends that the EU Council should formally authorise the opening of negotiations aimed at securing trade deals with both antipodean countries. The FTAs should, it says, be modelled on recent agreements negotiated with Canada, Vietnam and Singapore. A multilateral court for the settlement of investment disputes should also be created, the Commission advises, in order to ensure a more transparent, coherent and fair approach to deal with company complaints under investment protection agreements. In a spirit of openness and transparency, the Commission has said that it will, with immediate effect, publish all its recommendations on negotiating mandates for trade agreements. Documents will be sent to all national Parliaments as well as being made available to the general public.
EU-Canada trade agreement goes live
The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada has entered into force provisionally and is expected to save EU businesses €590 million a year. It removes duties on 98% of products (tariff lines) that the EU trades with Canada and also gives EU companies the best access ever offered to companies from outside Canada to bid on the country’s public procurement contracts — not just at the federal level but also at provincial and municipal levels.
According to the European Commission, CETA will especially benefit smaller companies who can least afford the cost of the red tape involved in exporting to Canada. They will save time and money, the Commission has suggested, by avoiding duplicative product testing requirements, lengthy customs procedures and costly legal fees. It has published a Guide to the Comprehensive Economic and Trade Agreement (CETA) for businesses which can be found at trade.ec.europa.eu.
UK and EU set out WTO plan
The UK and EU have set out how they intend to address the implications of Brexit for future global trading arrangements. In a letter (www.gov.uk) to members of the World Trade Organization (WTO), they confirm that they will seek to maintain existing levels of market access for those other countries in a number of ways. The proposals include meeting the quantitative commitments of the post-Brexit UK and remaining 27 EU Member States in the form of tariff-rate quotas by apportioning the existing commitments of the 28-member EU.
In a press release accompanying the letter, the Department for International Trade (DIT) said: “To ensure a smooth transition which minimises disruption to our trading relationships with other WTO members the UK intends to replicate as far as possible its obligations under the current commitments of the EU.” The proposals have, however, been criticised by seven countries — including Canada, New Zealand and the USA — which fear that the plan to divide existing quotas would disadvantage them.
The Northern Ireland-Irish Republic border after Brexit
Everyone from the UK Government to the European Commission, including businesses, the local people and the security forces, agrees that returning to a hard border between Ireland and Northern Ireland would be a disaster. The problem is, finding a way to keep something as close as possible to the present open system that will recognise, post-Brexit, that the 300-mile border (about 200 crossing points) will separate the EU from part of a non-EU country. According to a position paper prepared by the Northern Ireland Office and the Department for Exiting the European Union, the answer lies in an “unprecedented solution” which would see no customs posts and increased use of technology. The paper, available at www.gov.uk, advances some of the same arguments used in the Government’s proposals for a new Customs arrangement with the EU (see UK makes its bid for a new Customs Union below).
Secretary of State for Northern Ireland James Brokenshire said: “The paper provides flexible and imaginative ideas and demonstrates our desire to find a practical solution that recognises the unique economic, social and cultural context of the land border with Ireland, without creating any new obstacles to trade within the UK.” The Government promises no passport controls for UK and Irish citizens travelling within the Common Travel Area (CTA) and no question of new immigration checks operating between Northern Ireland and Ireland. It also suggests that small and medium-sized businesses should not have to comply with any new customs tariffs, arguing that they are engaged in local business rather than international trade. Larger firms might be required to declare their import and export businesses online and the paper suggests mutual recognition of Authorised Economic Operators (AEOs), enabling faster clearance of AEO goods at the border.
Unique solution needed for Ireland border
As mentioned above, there is general agreement on all sides that what is needed to maintain a frictionless border between the Republic of Ireland and Northern Ireland after Brexit is a unique solution: the problem is no-one can agree on what that solution would look like. Possibly an even greater problem is that both the UK and the EU think that it is the other’s responsibility to come up with that solution. In its two recent future partnership papers on the Ireland/Northern Ireland problem and on Customs arrangements with the EU, the UK Government sought to show that the two solutions were intertwined. This is because it believes that the “Irish problem” cannot be solved other than in the context of a wider trade deal while the EU has insisted that “sufficient progress” must be made on three key provisions — the financial settlement, the Irish border and the rights of EU citizens — before it will move on to trade talks.
Issuing the EU’s paper on the Irish border question (which has been drafted in close co-operation with the Irish Government and which can be found at ec.europa.eu), the European Commission has made it clear that it is sticking firmly to that position and been equally forthright on where the responsibility lies. “The onus to propose solutions which overcome the challenges created on the island of Ireland by the UK’s withdrawal from the European Union, and its decision to leave the customs union and the internal market, remains on the United Kingdom,” the paper states. Reacting to its publication, the CBI welcomed its recognition of the unique social and economic characteristics of the island of Ireland. But the much wished for unique solution will, the employers’ body said, take time to agree and implement, and a transitional trading period will therefore be essential.
Let’s talk money
Chief EU Negotiator Michel Barnier has expressed impatience over the UK’s refusal to come forward with a clear proposal to settle the financial contributions which the EU believes it will owe to the Union’s budget after Brexit. While Secretary of State for Exiting the European Union, David Davis, described the latest four days of talks in Brussels as a “long and detailed discussion”, his opposite number was clearly irritated that progress was not being made over the UK’s financial settlement, citizens’ rights and the Northern Irish border. In his negotiating mandate, the other Member States told Mr Barnier that these issues had to be addressed in some detail before the talks could turn to a possible trade deal. He is due to report back to them in October and, at the moment, seems unlikely to be giving a favourable recommendation.
“We are quite far to say that sufficient progress has been made,” Mr Barnier said at the conclusion of the latest round of talks. He has criticised the UK negotiators for examining the EU approach to the final settlement on a line-by-line basis while refusing to give any indications of what the UK thinks the figure should be. A growing animosity between the two sides over the question of the UK’s financial contribution was heightened when International Trade Secretary Liam Fox described the EU approach as blackmail. Arguing that businesses have become impatient with the slow progress of the Brexit negotiations, he said everyone would benefit if the outcome was free trade with no tariff barriers.
Court rules on flight compensation
The compensation payable to passengers in the event of cancellation or long delay of a connecting flight must be calculated according to the radial distance between the departure and arrival airports. Giving its Judgment in Case C-559/16, the Court of Justice of the European Union (CJEU) ruled that the fact that the actual distance travelled might be greater than that between the two airports because of a connecting flight has no impact on the calculation of compensation. The case was referred to the CJEU by the Hamburg Local Court, Germany, which asked for clarification on how compensation should be calculated under EC Regulation 261/2004. Under that regulation, passengers delayed by three hours or more are entitled to compensation of €250 for flights up to 1500km and to €400 for flights of more than 1500km between two Member States.
The German court wanted to know whether the amount of compensation payable to the passengers concerned should be based on the distance between the departure airport (Rome) and the arrival airport (Hamburg) which is 1326km, or whether it should be calculated on the distance actually covered by the journey, which was routed via Brussels and therefore totalled 1656km. In determining the amount of compensation in the case of a connecting flight, the CJEU found that only the radial distance that a direct flight would cover between the departure and arrival airports should be considered.
VW urged to act on “dieselgate” cars
With some eight million consumers across the EU Member States hit by the Volkswagen (VW) “dieselgate” emissions scandal, the company had committed itself to repairing all affected cars by this autumn. However, with consumer authorities across the EU continuing to receive indications that many cars have not yet been repaired, the European Commission has urged VW to complete its repair programme as soon as possible. It has given VW a month to confirm that it will fully implement its commitment and ensure that all affected cars are brought into full conformity with type approval rules. Among other things, VW has been told that it should inform consumers individually about the work required as soon as possible, with details of why the car has to be repaired, what the repair entails, what action they must take to get their car repaired, and the implications of not having the vehicle fixed.
UK makes its bid for a new Customs Union
Having faced criticism for failing to spell out the details of its approach to the Brexit negotiations, the UK Government decided to publish a set of Future Partnership Paper, beginning with one on future customs arrangements. Available at www.gov.uk, this 16-page document sets out the Government’s ambition for a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and the EU. Essentially, David Davis, Secretary of State for Exiting the EU, explained, an interim customs system would be put in place after Brexit that would be “as close as we can get to the current arrangements” to allow time for a long-lasting trade agreement to be put in place. However, he went on, during this interim period, the UK should be allowed to negotiate its own international trade deals.
Three immediate problems present themselves when this is looked at from the EU side of the argument: none of the other Member States is allowed to negotiate such deals; the EU has already made it clear that it will not discuss trade matters until progress is made on three other key issues and it does not see frictionless trade as possible outside the present Customs Union. The three issues on which the EU expects real progress within the next few weeks are: the rights of citizens after Brexit; agreement on the so-called Divorce Bill and realistic proposals for managing a post-Brexit border between Northern Ireland and the Republic. The UK paper suggests two possibilities to the EU: a highly streamlined customs arrangement between the two sides, leaving as few additional requirements on EU trade as possible or a completely new customs partnership with the EU, “aligning our approach to the customs border” in a way that removes the need for such a border.
EU has its say on post-Brexit Customs
The European Commission has published its position paper on Customs Related Matters Needed for an Orderly Withdrawal of the UK from the Union. This can be found at ec.europa.eu and particularly concerns the customs status of goods that enter, leave or transit the customs and tax territory of the EU or the UK, where the movement starts before and ends on or after the withdrawal date. The Commission argues that the basic approach to be followed should be that the rules applicable in respect of an operation when it is commenced should continue to apply to that operation until its completion. “It is for the declarant to demonstrate the status of the goods (Union or non-Union) before the date of withdrawal and the fact that the relevant movement or entry into a customs regime was initiated before the date of withdrawal,” the paper states.
The Commission also calls for the eventual Withdrawal Agreement to set out the appropriate treatment in relation to VAT and excise duties and licensing requirements in those circumstances. Responding to the paper, the British Retail Consortium (BRC) said: “On VAT specifically, we note that the Commission has recognised the need for a supplementary agreement, which is essential given that any new demand for upfront payments of import VAT could cause major cash flow headaches and additional red tape for firms.”
Brexit, customs and consumers
Consumers should not notice any difference in terms of the availability of affordable, quality products when they make purchases or visit stores post-Brexit a new report from the BRC argues. The Consortium fears, however, that without additional agreements and investment to supplement a customs deal, such choice and availability will be at risk. In its report A Fair Brexit for Consumers: The Customs Roadmap, the BRC sets out a series of recommendations which it claims will help achieve a smooth transition for consumers. Available at brc.org.uk, the roadmap identifies not only a number of practical challenges and considerations that the Government faces in delivering a frictionless trade deal for consumers, but also the essential steps that must be taken to achieve that objective.
European supply chains are a key part of delivering the goods that UK consumers buy every day, the BRC notes. The majority of those goods — particularly food — need to be transported quickly, so the UK will need a system of post-Brexit controls which ensures that products can continue to be imported without delays, disruption or additional costs. With annual customs declarations in the UK estimated to rise from 55 million to 255 million after the UK leaves the EU in March 2019, it is feared that failure to reach a deal could see delays of up to two to three days at ports. A strong deal on customs is therefore essential to deliver a fair Brexit for consumers, BRC Chief Executive Helen Dickinson has argued. Although the Government has acknowledged the need to avoid a cliff-edge, a customs union will not in itself solve the problem of delays at ports, she went on. Agreements on security, transit, haulage, drivers, VAT and other checks will be required to get systems ready for March 2019, Ms Dickinson pointed out.
The future of cross-border trade in goods
No-one knows what the next few years hold for trade between the UK and its largest trading partner because its future relationship with the EU (both trading and political) is still unclear. However, it is becoming apparent that simply addressing customs issues will not be enough to ensure frictionless trade post-Brexit, an influential think tank has argued. The Institute for Government (IfG) acknowledges that the Government’s position on Future Customs Arrangements: A Future Partnership Paper shows that it realises the potential for disruption to trade when the UK leaves the EU. The problem is, according to the IfG’s Jill Rutter: “Until we see plans for the future relationship with the Single Market, particularly for agriculture and fisheries, we will not know the scale of likely border checks and additional compliance costs.”
The Government needs to show that it has a clear understanding of the implications for business of its negotiating strategy, she explains, and the IfG is, therefore, calling on ministers to publish proper assessments of the impacts of the options so as to enable informed public debate. In its own assessment of the impact of Brexit for cross-border trade in goods, the IfG highlights that leaving the EU will disrupt the UK’s integrated supply chains in areas such as automobile manufacturing and will actually create friction. Its assessment is based on five potential options for future trade, including staying in the Single Market, and the UK leaving the EU with no deal and then trading with the bloc on World Trade Organization (WTO) terms. The authors find that while “off-the-shelf” options such as staying in the Single Market (the Norway model) or a new customs union (the EU-Turkey model) could remove some disruption, none would eliminate friction entirely. Frictionless Trade? What Brexit Means for Cross-border Trade in Goods set out the options at www.instituteforgovernment.org.uk.
The state of the Union
European Commission President Jean-Claude Juncker has delivered his State of the Union Address 2017, presenting his priorities for the year ahead and outlining his vision for how the EU could evolve by 2025. Available at europa.eu, his speech argues that Europe now has “the wind in its sails” with partners across the globe starting to line up to conclude trade agreements with the EU. Only late in his speech did he mention Brexit and then only to say: “On 29 March 2019, the United Kingdom will leave the European Union. This will be a very sad and tragic moment. We will always regret it. But we have to respect the will of the British people. On 30 March 2019, we will be a Union of 27. I suggest that we prepare for this moment well, among the 27 and within the EU institutions.” A series of factsheets expand on some of the key elements touched upon in the President’s speech. This can be found at ec.europa.eu and the subjects covered include: Posting of Workers in the EU; Better Regulation; The EU’s Key Partnership with Africa; A European Minister of Economy and Finance; and A European Labour Authority.
Health and safety
Huge cost of work-related accidents and injuries
New estimates of the cost of poor occupational safety and health (OSH) suggest it is costing the EU 3.3% of its gross domestic product (GDP) each year — equivalent to €476 billion. Globally, the figures are 3.9% of GDP and €2680 billion. Published by the European Agency for Safety and Health at Work (EU-OSHA), the findings also show that work-related illnesses account for 98% of all deaths related to work in the EU and 86% worldwide. In most European countries, work-related cancer accounts for the majority of costs (€119.5 billion or 0.81% of the EU’s GDP) with musculoskeletal disorders being the second largest contributor. A new data visualisation tool developed by EU-OSHA (and available at visualisation.osha.europa.eu) shows the global costs of work-related illnesses and accidents in a series of infographics.
Cybercrime and other security issues
The European Commission’s latest monthly progress report on security issues in the EU considers, among other things, the fight against cybercrime. In its Tenth Progress Report Towards an Effective and Genuine Security Union (which can be found at eur-lex.europa.eu), the Commission highlights the No More Ransom initiative. Established in 2016 and supported by Europol, No More Ransom is a public-private initiative to combat ransomware. Victims of ransomware can access more than 50 different decryption tools on the initiative’s website which have been successfully used to enable 28,000 successful decryptions since the scheme was launched.
The report also considers developments in external border security, including systematic checks against security databases of all travellers, including EU citizens, crossing the external borders, and an EU Entry/Exit System which will register entry and exit data of non-EU nationals crossing the EU’s external borders. In addition, it touches on transport security, including the security of civil aviation flying over conflict zones, and the threat to rail transport.
How to settle investment disputes
Multilateral reform of investment dispute settlement could be a step closer following an announcement by the United Nations Commission on International Trade Law (UNCITRAL). In response to a formal request from a number of countries, including the EU and its Member States, UNCITRAL has agreed that further work should be carried out on the issue. Welcoming the announcement, the European Commission noted that the continuing significance of investment rules and efficient investment dispute settlement is confirmed by a steady increase in the number of international investment treaties (more than 3200) and investment chapters included in bilateral and regional trade agreements. However, in contrast to other areas of international economic relations, where multilateral rules have gradually evolved, international investment law has mostly developed through bilateral negotiations.
Following a number of high-profile cases (including disputes over the Transatlantic Trade and Investment Partnership (TTIP)) with regard to investor-state dispute settlement (ISDS), there have been calls for an international regime to be established. Ideally, the Commission suggests, that would provide investors and governments with a single set of rules — including an effective dispute settlement and enforcement mechanism, which is accepted by citizens, businesses and policymakers. As that objective seems unachievable in the short term, focus has shifted to an easier target — multilateral reform of the ISDS. Meeting that target now seems a little more likely, following the decision that UNCITRAL will initiate work on possible multilateral reform, including — potentially — the creation of a multilateral investment court. This could be important for the UK if it continues to insist that it will not accept the European Court of Justice (ECJ) as an arbiter in any post-Brexit trade disputes with the EU.
UK seeks to cut export tariffs on food and drink
The Department for International Trade (DIT) has confirmed that it is examining options for reducing tariffs on UK exports. With concerns having been aired recently over the impact of a trade deal with the USA on the Scotch Whisky industry, the DIT has moved to reassure businesses that it is seeking to make it easier for UK companies to benefit from post-Brexit trading opportunities. Figures from the Food and Drink Federation (FDF) show that whisky, salmon and chocolate remain the UK’s top three export products. DIT staff are now said to be looking at how future trade agreements, and stronger trade ties with key trading partners around the world, could reduce export tariffs for Scotch Whisky, smoked salmon and other iconic Scottish produce.
Tariffs can, of course, be a significant barrier to trade. While the DIT says that those on smoked salmon average 13%, in the case of Scotch Whisky, tariffs can be over 150% of the value of the product with similar levels applied to gin. Currently, any changes to export tariffs require negotiations at EU level. With the UK scheduled to leave the Union in March 2019, the DIT stresses that it is working now to assess which markets offer the most potential for UK export growth post-Brexit. “Reducing the costs for companies to sell overseas will become one way of further opening up free trade routes and boosting sales,” International Trade Secretary Dr Liam Fox agreed. The DIT also revealed that it has established 11 working groups to strengthen trade and commercial ties with key trading partners around the world, including: Australia, China, India and the USA.
New customs system may not be ready for Brexit
The body which oversees public spending has warned that the new computerised system for handling customs checks set to be introduced by the UK may be delayed beyond the Brexit deadline. And that, the National Audit Office (NAO) has warned, could mean a temporary return to a paper-based system and long delays for traders. Its report on the progress of the Customs Declaration Service (CDS) programme highlights the risks and issues that HM Revenue & Customs (HMRC) is having to manage ahead of implementation of the new service by January 2019.
Being so close to the March 2019 deadline for completion of Brexit negotiations, little contingency time is available should the programme overrun or unexpected problems occur, the NAO points out. Available at www.nao.org.uk, The Customs Declaration Service highlights that 8700 users and intermediaries, including freight suppliers, customs agents and software providers, are directly affected by the new system. HMRC’s current estimate of the maximum number of customs declarations per year after March 2019 based on current levels of UK/EU trade is 255 million. According to the report, the decision to leave the EU could increase the number of transactions by around 200 million and more than double the number of traders having to go through customs processes. In response to the NAO report, HMRC said: “The Customs Declaration Service is on track for delivery by January 2019 and will support international trade once the UK leaves the European Union.”
Worrying warning for UK ports
A leading economic consultancy has produced a report predicting possible border chaos after Brexit with new customs checks and ensuing delays costing the UK economy more than £1 billion a year. Oxera has looked at the likely options and scenarios as a result of the current Brexit negotiations and suggests that the most likely outcome would be something it describes as “slow trade: low regulation, high enforcement”.
“This isn’t just about the UK and nearby countries such as France and Belgium, either,” Oxera Partner Andrew Meaney said. “It has been estimated that around two-thirds of Irish exports to the continent move via the UK.” What will happen, he questions, if, post-Brexit, all those goods are subject to four new checks (at an Irish port, at two English ports and then a French one)? As an example of the complications caused by modern supply chains, Mr Meaney cites the fact that a fuel injector for a diesel lorry sold in the UK will have crossed the Channel five times before the truck is ever driven by the customer.
With the possibility of thousands of lorries trying to clear a more complicated Customs process at Dover, the Oxera report also points out that the lorry park designed to deal only with current congestion (caused by Operation Stack) will not be ready until 2018. It is not perhaps surprising that the Port of Dover has called the worst-case scenario “Armageddon” in its own assessment of the possible consequences of the Brexit negotiations. See www.oxera.com for full details of the report.
Businesses need details of Brexit transition
Chancellor Philip Hammond has been prominent among those in Parliament calling for a transition period at the end of the formal Brexit negotiations to ensure that there is no sudden “cliff edge” departure from the EU. However, it is clear that not all his Cabinet colleagues agree with him and the Institute of Directors (IoD) has now made it clear that there needs to be a collective decision on how to approach a transitional agreement as soon as possible. In Bridging the Brexit Gap: Options for Transition (available at www.iod.com), the business group puts forward a range of options for a business-friendly transition between March 2019 and the point at which a new trading arrangement with the EU is completely finalised.
These include: prioritising an agreement to extend the Article 50 deadline; taking up membership of the European Economic Area (EEA) to have a similar status to that enjoyed by Norway and entering into an agreement to prolong the application of EU law in the UK. To accompany the above options, and replicate the benefits of being in the EU Customs Union, the IoD also suggests a transitional customs agreement which would include maintaining Common External Tariff alignment and continuing to transpose EU customs and VAT legislation. Head of EU and Trade Policy, Allie Renison, said: “The IoD has put forward this range of options for transition in the hopes that it sparks a proper debate on the practicalities of how best to Brexit.”
Input wanted into MAC immigration investigation
Having been asked by the Government to advise on the economic and social impacts of the UK’s exit from the EU, the Migration Advisory Committee (MAC) has issued a call for evidence, seeking wider involvement in its deliberations. Details can be found at www.gov.uk together with a briefing note, “EEA-workers in the UK labour market” which provides some preliminary analysis of the UK labour market and other countries’ migration systems. It makes the point that, because the MAC approach is based on maximising the “total welfare of the resident population”, this is likely to lead to a policy that seeks to select migrants. The briefing paper outlines some of the criteria that might be used to make that selection and provides a brief overview of the current employment of the European Economic Area (EEA) migrants (considering occupation, industry, region, age and self-employment). “The note does not make any policy recommendations or provide any conclusions,” the Committee emphasises. “It asks questions rather than answers them.” The deadline for submitting responses is 27 October 2017.
Right to preserve products’ luxury image
The Court of Justice of the European Union (CJEU) has been asked by a German court to consider whether, under EU competition law, a supplier of luxury goods (in this case, Coty Germany) may prohibit its authorised retailers from selling its products on third-party platforms such as Amazon or eBay. Case C-230/16 will come before the CJEU later this year but has first been considered by one of its leading lawyers, Advocate General Wahl. He has been asked to consider the legal implications of the case and to provide the Court with an opinion which will guide, but not necessarily decide, its final ruling.
The Advocate General has argued that such a prohibition, which seeks to preserve the luxury image of the products concerned, is not, under certain conditions, caught by the prohibition of agreements, as it is likely to improve competition based on qualitative criteria. The conditions include that the prestige image of the products concerned requires selective distribution in order to preserve the quality.
Confidence boosts online shopping
The percentage of people in the EU choosing to buy online has almost doubled in 10 years. The European Commission’s latest Consumer Conditions Scoreboard shows that barely a third (29.7%) of consumers shopped online in 2007, while more than half (55%) do so now. Confidence in online shopping has increased 12% among those buying from retailers located in the same country and by 21% for people purchasing from other EU Member States. Consumers are, however, still facing obstacles when trying to buy from online retailers based in another EU country, including having payments declined and delivery refused.
Despite the rise in consumer interest, many retailers report that they are still reluctant to expand their online activities — particularly when it comes to selling online to consumers in other EU countries. Their concerns are mainly linked to a higher risk of fraud and non-payment in cross-border sales, different tax regulations, and differences in national contract law and in consumer protection rules. Overall, just 40% of retailers currently selling online said that they are considering selling cross border as well in the coming year.
EU looks at Customs-related information exchange
The European Commission has launched a public consultation on the steps that it might take to enhance the exchange of Customs-related information with countries outside the customs territory of the Union. Details can be found at ec.europa.eu and the deadline for submitting comments is 16 October 2017. “Globalisation combined with the increased cross-border flow of small low-value consignments challenges customs resources not only when ensuring the collection of customs duties,” the Commission points out, “but also as regards their role in ensuring security and safety of the single market and its inhabitants and guaranteeing the protection of intellectual property rights.”
The challenge, as it sees it, is to facilitate legitimate trade while ensuring the collection of customs duties and minimising the security and safety risks through international co-operation and bilateral agreements with non-EU countries. Customs-related information refers to all information acquired by the customs authorities in the course of performing their duty. This includes, for example, data provided to customs authorities through declarations or applications, information gathered by customs in the course of verifications and controls as well as information on persons with a certain status (Authorised Economic Operators (AEO), for example), and persons involved in a given transaction/movement and data on means of transport. Although the EU has several procedures in place to facilitate the exchange of information, these tend to be ad hoc solutions which require lengthy and complex negotiation processes and create administrative burden. The Commission is, therefore, looking at the possibility of introducing a single legal base and infrastructure for systematic exchanges of Customs-related information.
The GDPR after Brexit
It was widely anticipated that the Government would continue to observe the requirements of the EU’s General Data Protection Regulation (GDPR) after the UK leaves the Union and that has now been confirmed. Earlier this year, the Department for Digital, Culture, Media & Sport (DCMS) ran a short, one month, consultation on the GDPR, focusing on the exemptions available to Member States within the terms of the regulation. This made sense as the main provisions of the GDPR will apply directly in all Member States with effect from 25 May 2018 (at which time the UK will still be a member) and no national implementing legislation is required. As each Member State needed to decide how and if it would apply the exemptions, however, some action would be required.
Responding to the results of the consultation, the DCMS has explained that a new Data Protection Bill is to be introduced which will not only carry out that task, but also would effectively copy the whole of the GDPR into UK legislation. This will ensure that it remains part of domestic law, whatever happens during the Brexit negotiations, and that, in turn, will ensure that UK companies will comply with EU data protection law even after Brexit — seen as vital given the likely data flows between the UK and other Member States. Matt Hancock, Minister of State for Digital, said: “Bringing EU law into our domestic law will ensure that we help to prepare the UK for the future after we have left the EU… The Data Protection Bill will allow the UK to continue to set the gold standard on data protection.” See www.gov.uk for full details of the Bill which also covers the Data Protection Law Enforcement Directive (DPLED). As the title suggests, this is of concern to the police, prosecutors and other criminal justice agencies.
Airline’s Passenger Name Record data
The Court of Justice of the European Union (CJEU) is occasionally asked to give a formal opinion on the legality of certain aspects of major international agreements into which the Union is planning to enter. This should not be confused with the opinions delivered by the CJEU’s Advocates General as part of the Court’s normal handling of cases. In this context, the Court has declared that the agreement envisaged between the EU and Canada on the transfer of Passenger Name Record (PNR) data may not be concluded in its current form. The full text of the Opinion can be found here. It argues that several provisions of the draft agreement do not meet requirements stemming from the fundamental rights recognised by the EU including respect for private life and the protection of personal data.
One in five business leaders ignorant of EU law
A new survey by the Institute of Directors (IoD) has found that just a quarter of nearly one thousand business leaders understand how their businesses are affected by EU legislation. Responding to the question “How well do you feel you understand whether and how EU law impacts your business or sector?” only 27% of 991 IoD members responded “very well”. More than half (53%) opted for “somewhat well”, while 14% confessed to understanding it “not very well” and 4% “not well at all” (2% said the question was not applicable to them). That means that 18% of those questioned still lack an understanding of how EU law affects their sector.
Even greater ignorance was found in relation to the impact of World Trade Organization (WTO) rules on UK-EU trade. Asked how much they thought they and/or their organisations understand what moving to WTO rules would mean for their business, only 19% were confident that they “fully understand” the implications. Although 40% claimed to “somewhat understand” the likely impact, 23% chose “don’t understand very well” and 9% selected the response “don’t understand at all” (8% thought the question did not apply to them). The survey also found that 33% of respondents are not likely to undertake any scenario or contingency planning related to Brexit.
UK to set up Trade Remedies Organisation
Few details have been made available of the UK’s plans for trading after it leaves the EU, but it now appears that they will feature the setting up of a new department to be called the Trade Remedies Organisation (TRO). This information has not exactly been released by the Government: details appeared in an online civil service advertisement (no longer available). This explained that the Department for International Trade (DIT) wants to set up a new arm’s length body, the TRO, whose 130 staff will fulfil some of the new powers it expects to have when it becomes an independent member of the World Trade Organization (WTO).
These will include the ability to investigate and tackle incidents of unfair trade, such as dumped or subsidised imports which threaten domestic industries and undermine the case for free and open trade. The job specification goes on to say: “The Trade Remedies Organisation will be underpinned by detailed legislation which is being delivered as part of the Trade Bill due to be introduced in Parliament in September 2017.” The plan is to have it operational by October 2018 (having studied the way other countries design and operate their systems) in order to take on new complaints from UK producers in a similar way to how the European Commission presently conducts anti-dumping investigations.
Farm subsidies and food security
A new proposal aims to limit farm subsidies based on the size of a country’s agricultural sector. Presented to the World Trade Organization (WTO) by the EU and Brazil, the idea is to reduce the trade-distorting impact of subsidies. In recognition of the specific needs of poorer countries, it would see the least developed countries exempted from any subsidy limits, with other developing countries allowed to give their farmers more generous support and more time to adapt to the new system.
The initiative — which has already been supported by Colombia, Peru and Uruguay — also seeks to address the issue of food security in a way that does not distort the market. Domestic support for agriculture will be on the agenda of the WTO Ministerial Conference to be held in Buenos Aires this December. EU Commissioner for Trade Cecilia Malmström said: “Together with Brazil and other countries we are demonstrating our staunch support for a global trading system based on rules […] Our proposal is at once ambitious and realistic. It will ensure that we can have forward-looking and hopefully successful negotiations on this important issue in Buenos Aires.” The text of the proposal is available here.
Brexit means uncertainty
In a debate with the European Economic and Social Committee (EESC), the EU’s chief Brexit negotiator has made it clear that the UK leaving the EU means uncertainty for citizens, businesses and jobs. Michel Barnier stressed that his task is to negotiate on the basis of the proposals that the UK puts on the table, which amount essentially to: no free movement for EU citizens; full autonomy of law-making; no role for the Court of Justice of the European Union (CJEU) and the ability to sign free trade agreements (FTAs) outside the Customs Union and the Single Market.
Mr Barnier also highlighted three main issues concerning the UK’s withdrawal: the basic freedoms of free movement of people, goods and capital are indivisible; there is no option for sector-by-sector participation in the Single Market; and the EU will continue to set its own economic and social rules and standards — which all third parties must respect.
Members of the EESC agreed that, although a good deal is in the interests of both the 27 Member States and the UK, the most important thing is the future of the EU. “We have to make people aware about the countless advantages of EU membership. Brexit has shown very clearly that many people are not aware of the fact that these advantages come from being a member of the European Union,” EESC President Georges Dassis said.
Google searches for reasons for fine
Search giant Google has been fined €2.42 billion for contravening EU antitrust rules by illegally giving its own comparison shopping service an advantage over its competitors. Announcing the fine, the European Commission said that Google has abused its market dominance as a search engine and must end the illegal practice within 90 days — or face penalty payments of up to 5% of the average daily worldwide turnover of its parent company, Alphabet. Previously known as Froogle, then Google Product Search, the current Google Shopping service enables consumers to compare products and prices online from a range of sellers. However, by giving prominence to its own shopping service and by demoting competitors, Google has, the Commission claims, given itself a significant advantage over its rivals.
While traffic to Google’s comparison shopping service has increased significantly, visits to rival sites have declined, as consumers choose to follow links shown higher up in Google’s search results. Google could also face civil actions for damages from people or businesses affected by its anti-competitive behaviour. A Commission Fact Sheet on the case is available at europa.eu. Google has “respectfully” rejected the Commission’s findings and said it is looking into the possibility of appealing against the record fine.
Court upholds fine on Toshiba
The Court of Justice of the European Union (CJEU) has upheld a €61.44 million fine imposed on Toshiba for its role in a gas insulated switchgear (GIS) cartel. The decision ends a dispute that started in 2007, when the European Commission imposed fines totalling €750.71 million on 20 European and Japanese companies for their participation in a cartel on the market for GIS between 1988 and 2004. Toshiba and Mitsubishi Electric were fined €86.25 million and €113.92 million respectively, and were also ordered to pay a further amount of €4.65 million jointly and severally. In 2011, the EU’s General Court annulled those fines, arguing that the Commission had infringed the principle of equal treatment in calculating them. New fines imposed by the Commission were upheld in January 2016.
That decision was appealed by Toshiba, which asked the CJEU to set aside the judgment of the lower court. The appeal has now been dismissed by the CJEU and the fine imposed by the Commission on Toshiba (€61.44 million, of which €4.65 million is to be paid jointly and severally with Mitsubishi) becomes final. A summary of the judgment is available at curia.europa.eu.
Court rules on unfair terms in consumer contracts
General rules protecting consumers against unfair terms also apply to contracts of carriage by air. In a case concerning Air Berlin, the Court of Justice of the European Union (CJEU) found that cancellation fees charged by airline companies may be assessed for unfairness and that, in addition, the various items which make up the final price to be paid to the airline must be indicated separately. Air Berlin included a term in its general terms and conditions stating that, when a passenger cancels a flight booking at an economy rate or does not take the flight, a sum of €25 is to be charged as a handling fee on the amount due to be reimbursed. Germany’s Federal Union of Consumer Organisations not only considered that term invalid under German law, but also argued that, as it is the performance of a legal obligation, Air Berlin cannot charge separate fees.
The CJEU was asked to interpret EC Regulation 1008/2008 on common rules for the operation of air services in the EU. In its judgment, the Court found that the pricing freedom recognised for air carriers by the regulation does not preclude the application of a national law transposing Directive 93/13/EEC on unfair terms in consumer contracts from leading to a declaration of invalidity of a term such as that imposed by Air Berlin. The national court will now decide the case in accordance with the CJEU’s decision — which is equally binding on other national courts before which a similar issue is raised.
Changes to Union Customs Code welcomed by IRU
New legislation adopted by the European Commission has increased the guarantee limit under Transports Internationaux Routiers (TIR). With over 50 countries using the procedure, the TIR system is the international customs transit system with the widest geographical coverage. It enables goods to move under customs control across international borders without the payment of the duties and taxes that would normally be due at importation or exportation. The new rules — which entered into force on 14 June — raise the guarantee limit in the EU from €60,000 to €100,000 per TIR Carnet.
Welcoming the move, the International Road Transport Union (IRU) said that the change to the TIR guarantee limits will ensure a better value customs transit system, with extra financial security and a more comprehensive guarantee framework for transport, trade and customs. Overall, it will result in a more effective and robust system for customs authorities and the road transport industry, the IRU claims. Countries outside the EU which will also benefit from the increased limit include: Armenia, Azerbaijan, Bosnia and Herzegovina, Iran, Kyrgyzstan, Serbia and Ukraine. Any new countries acceding to the TIR Convention will also be able to benefit from higher limits. The full text of the new rules — in the form of EU Regulation 2017/989 which amends the Union Customs Code (UCC) EU Regulation 2015/2447 — can be found at eur-lex.europa.eu.
EU moves on endocrine disruptors
A proposal aimed at identifying endocrine disrupting properties of active substance used in pesticides has been approved by representatives of the EU Member States. Presented by the European Commission, the proposal will amend the regulation concerning the placing of plant protection products on the market. Once implemented, the new regulation will ensure that any active substance used in pesticides which is identified as an endocrine disruptor for people or animals can be assessed and withdrawn from the market. It is seen as a step towards a new strategy which will aim to minimise exposure of EU citizens to endocrine disruptors beyond pesticides and biocides, including, for example, toys, cosmetics and food packaging. See the European Commission website for more details.
How well are Member States implementing EU legislation?
The European Commission has published two reports on the implementation of EU law by Member States. The Annual Report on Monitoring the Application of EU Law reveals a 21% increase of open infringement cases compared to the previous year. The policy areas which saw the most infringement cases opened in 2016 were internal market, industry, entrepreneurship and SMEs, and environment. In terms of late transposition, Cyprus and Belgium had the highest number of open cases, while Italy, Slovakia and Denmark had the fewest. For incorrect transposition and/or erroneous application of EU law, Germany and Spain had the highest number of cases pending, while Estonia had the lowest total number of open cases last year.
The Single Market Scoreboard evaluates how the 31 members of the European Economic Area (the EEA includes the EU Member States plus Iceland, Liechtenstein and Norway) apply the relevant rules and identifies where greater effort is needed. Based on their performance in a series of governance tools and policy areas in 2016, the best-performing countries were Austria, Denmark, Estonia, Lithuania, Malta and Slovakia. The scoreboard also monitors Member States’ openness to trade and investment, and their wider efforts in opening up sectors such as public procurement, professional qualifications or postal services. For the 2017 Scoreboard, Member States had to transpose 66 new directives compared to 47 for 2016. The increased workload caused problems in most Member States, the Commission acknowledges. In the UK, environment and transport proved particularly difficult areas, with eight infringements for the former and seven for the latter.
EU and Japan reach agreement in principle
After some years spent in discussions, the EU and Japan have moved quickly to agree the final stages of their proposed Economic Partnership Agreement/Free Trade Agreement (EPA/FTA). The two sides have reached an “agreement in principle” on the main elements of an EPA, described by the European Commission as the most important bilateral trade agreement ever concluded by the EU. As such, for the first time, a specific commitment to the Paris climate agreement has been included.
For the EU Member States, the new agreement will remove the vast majority of duties paid by their companies, which add up to €1 billion annually, open the Japanese market to key EU agricultural exports and increase opportunities in a range of sectors. The EPA sets the highest standards of labour, safety, environmental and consumer protection, fully safeguards public services and has a dedicated chapter on sustainable development, the Commission has pointed out. EU Trade Commissioner Cecilia Malmström said that it demonstrated that the EU and Japan, democratic and open global partners, believe in free trade. Among other provisions, the agreement scraps duties on many cheeses such as Gouda and Cheddar (which currently stand at 29.8%) as well as on wine exports (currently at 15% on average). Negotiators from both sides will continue to work to resolve all the remaining technical issues and expect to conclude a final text of the agreement by the end of 2017. See europa.eu for full details of the agreement.
EU exporters face rising barriers
European exporters reported a 10% increase in the number of trade barriers they encountered last year. A new report from the European Commission reveals that 372 such barriers were in place at the end of 2016 in more than 50 global trade destinations. Of those, 36 obstacles were created during the year. According to the Report on Trade and Investment Barriers (available at trade.ec.europa.eu), those newly created barriers could affect EU exports currently worth some €27 billion. The latest annual report highlights barriers to trade spanning a wide range of products, from agri-food to shipbuilding.
It shows that Russia, Brazil, China and India top the list of G20 members that have created the most obstacles to imports. The majority of protectionist measures reported in 2016 were introduced by Russia, India, Switzerland, China, Algeria and Egypt. On a more positive note, using its Market Access Strategy, the Commission succeeded in removing 20 different obstacles identified as hindering European exports. South Korea, China, Israel and Ukraine were the countries with which the EU was most successful in negotiations to restore normal trading conditions. The food and drink, automotive and cosmetics sectors benefited the most from the Commission’s actions. Examples cited include China suspending labelling requirements that would otherwise affect the €680 million of EU cosmetics exports and South Korea agreeing to bring its rules for the size of car seats into line with international standards. Warning that the scourge of protectionism is on the rise, EU Trade Commissioner Cecilia Malmström described as worrying the fact that G20 countries are maintaining the highest number of trade barriers. Of more concern is the fact that the recent summit meeting of G20 leaders failed to resolve this problem.
Could Brexit help poorest countries?
Bangladesh, Ethiopia, Haiti and Sierra Leone are among 48 countries that will continue to benefit from duty-free exports into the UK after Brexit. The Government has confirmed its intention to maintain the EU’s “Everything But Arms” initiative, which helps selected countries trade all goods other than arms and ammunition. Not only will the countries currently benefiting from duty-free exports into the UK continue to do so, but a post-Brexit Government will also explore options for expanding relationships with additional developing countries, such as Ghana, Jamaica and Pakistan. In a joint announcement, International Trade Secretary Dr Liam Fox and International Development Secretary Priti Patel highlighted the role that trade can play in combating poverty. Free and fair trade has been the greatest liberator of the world’s poor, Dr Fox suggested, adding that the Government’s announcement shows its commitment to helping developing countries expand their economies and reduce poverty through trade. By helping these countries to harness the formidable power of trade, not only is the UK creating trading partners of the future for its businesses, but it is supporting jobs at home, Ms Patel argued.
The UK currently imports some £20 billion of goods per year from the developing countries concerned. That equates to about half of clothing and a quarter of coffee and other everyday goods such as cocoa, bananas and roses. In the Government’s view, without sustained economic growth and the jobs associated with it, a whole generation in the poorest countries of the world could be consigned to a future where opportunities are out of reach. That could, it argues, potentially fuel instability and mass migration — which could have consequences for the UK.
How sound is global trade?
Protectionism, lack of trade finance, and efforts by national governments to support their own businesses are all to blame for the poor growth of export markets according to a new report from the UK manufacturers’ organisation EEF. Since the financial crisis, exports have grown at an annual average rate of just 1.3% per year, compared to 5.1% in the decade before the crash. Globally, trade volumes are running at more than 20% below their pre-crisis trend. That poor growth can only partly be attributed to sluggish demand, the EEF notes in its report Global Trade — Run Aground or Structurally Sound? (available at www.eef.org.uk). The introduction of post-crisis protectionist policies means that many export destinations are not as open to trade as they used to be. Such policies may have been justified in the wake of the financial crisis, the EEF concedes, but their ongoing impact — and the potential for them to be further ramped up — raises questions about trade growth potential in the UK.
EU backs open and connected aviation markets
The UK general election may have left continued uncertainty in its wake with regard, not least, to the Brexit negotiations, but this is not perhaps the overwhelming concern elsewhere in Europe that it is here and the EU continues to push ahead with its own priorities. One of these is the need to deliver on the Aviation Strategy for Europe that was published in December 2015 and which will have considerable implications for trade, given the importance of air transport to both imports and exports. The latest moves by the European Commission in this sector feature a set of initiatives which aim to safeguard competition and connectivity in aviation, facilitate investments in European airlines and enhance the efficiency and connectivity of Europe’s skies. The main challenge for the growth of European aviation is seen as the need to address the capacity, efficiency and connectivity constraints. The proposals put forward by the Commission include: a regulation on safeguarding competition in air transport; guidelines on ownership and control of EU airlines; guidelines on public services obligations and practices facilitating continuity of air traffic management. These are all described in more detail in a report entitled Aviation: Open and Connected Europe which can be found at ec.europa.eu.
Concerns over Whitehall’s ability to cut trade deals
A report by the Institute for Government (IfG) claims that, despite the creation of the Department for International Trade, the UK’s Ministers and civil service are not even close to being ready to negotiate — let alone implement — new global trading relationships. Not only does it lack the necessary expertise, but its standard ways of working will make it more difficult to establish an effective trade policy, the IfG has suggested. By nature generalist, secretive and unwilling to make difficult trade-offs, Whitehall will present Government Ministers with some very difficult political choices and the UK will only reap the benefits of taking back control of trade policy if the Government radically changes the way it operates. According to the report Taking Back Control of Trade Policy, Ministers will have to make difficult choices about the UK’s priorities — and must recognise there is much more to trade policy than making deals. Rather than prioritising negotiations with Brazil, Russia, India and China (the BRIC countries) or the USA, the focus should be on replicating existing EU deals with Canada, South Korea, Switzerland, Turkey and Singapore, it says. The UK should avoid launching trade negotiations with large numbers of countries and either doing bad deals quickly or getting bogged down in protracted talks going nowhere.
Brexit study stresses need for good trade deal
Harvard University’s Kennedy School has interviewed over 50 mid-sized British businesses and trade associations, aiming to identify the main priorities for Brexit from their perspective. Former Labour Shadow Chancellor Ed Balls is one of the authors of the resulting paper, Making Brexit Work for British Business: Key Execution Priorities which is available via www.hks.harvard.edu. The study highlights the overwhelming importance of securing a good trade deal with the EU, given that 61% of UK exports go to the Single Market or to countries with which the UK already has free trade agreements (FTAs) through the EU. “Given that trade with the EU is far greater than with any other part of the world for many major sectors of the economy, it should be no surprise that all the companies we interviewed regarded the EU as their most important international market,” the paper states. It notes that all the companies spoken to by the researchers expressed a preference for remaining in the Single Market and Customs Union. Most also expressed concerns about the potential impact of tariffs and customs controls on their costs and competitiveness should the UK leave the Single Market. Several trade associations were particularly worried at the prospect of the UK leaving without securing an FTA and thus defaulting to the World Trade Organization (WTO) most-favoured-nation status, since this would lead to a sharp increase in tariffs and non-tariff barriers for companies in some sectors exporting to their largest markets. While some companies were attracted by the prospect of new markets, once the UK leaves the EU, all were “highly sceptical” about the potential to replace unfettered access to the EU with growth elsewhere.
Protected food names
During the latest round of trade talks with the EU, China has agreed to protect 100 European geographical indications “against imitations and usurpations”. The names of the food products concerned cannot, therefore, be copied or misused by other manufacturers and the European Commission expects increased consumer awareness and demand for these high-quality products. They include Feta, Champagne, Gorgonzola and, from the UK, Scotch Whisky, West Country Farmhouse Cheddar, Scottish farmed salmon, and White and Blue Stilton cheese. In return, the EU will protect a similar range of products including Yantai Ping Guo (Yantai apple), Hengxian Mo Li Hua Cha (Hengxian jasmine tea), Panjin Da Mi (Panjin rice) and Baise Mang Guo (Baise Mango). “The Chinese market for agri-food products is one of the world’s largest, and is getting larger every year, fuelled by a growing middle class population that has a taste for European food and drink products, often as a result of their international travels,” the Commission said. The country also has a rich tradition of geographical indications of its own, many of which are still largely unknown to European consumers but which should in future become more widely available, thanks to the agreement. Over 3300 names are now registered for protection in the EU with the latest from the UK being Traditional Welsh Perry, Traditional Welsh Cider and Cornish Sardines. For a full list of protected products, see the European Commission website.
Energy drains from health claims case
The Court of Justice of the European Union (CJEU) has confirmed that a number of health claims relating to glucose cannot be authorised. In its Judgment in Case C-296/16 P, the Court found that claims made by Dextro Energy had been rightly rejected by the European Commission on health grounds. In 2011, Dextro Energy requested authorisation to use a number of health claims relating to glucose. Despite a positive opinion by the European Food Safety Authority (EFSA), the Commission refused to authorise the claims on the grounds that they encouraged the consumption of sugar — something that is incompatible with generally accepted nutrition and health principles. When the General Court upheld the Commission’s decision, Dextro Energy appealed to the CJEU. Dismissing the appeal, the CJEU argued that the Commission did not err in finding that the health claims in question, which highlight only the beneficial effects of glucose for energy metabolism without mentioning the dangers inherent in increased sugar consumption, were ambiguous and misleading, and could not therefore be authorised.
Election confusion should cause customs rethink
The new Government should review its decision to leave the EU Customs Union, given the confusion caused by the inconclusive results of the general election and lack of a clear mandate from British voters. That is the argument put forward by the Freight Transport Association (FTA), the body representing the UK’s freight and logistics industry. Its Deputy CEO, James Hookham, described the four weeks of campaigning for the election as vital time lost to preparations for the crucial Brexit negotiations. “It is now imperative that that the new Government focuses its efforts on supporting the logistics sector to ensure that business can continue to trade efficiently with our EU customers and suppliers,” he argued. Highlighting that leaving the Customs Union threatens the imposition of tariffs, border checks, Customs declarations and huge amounts of bureaucracy for the significant number of UK businesses that trade in the EU, Mr Hookham pointed out that 44% of the UK’s exports in goods and services were transported to the EU in 2016. They totalled £240 billion out of the £550 billion earned by the country’s total exports. In order to “Keep Britain Trading”, Mr Hookham continued, exporters and importers and the international logistics sector need trading conditions which are as seamless and easy to navigate as possible. The Conservative Party will attempt to remain in power by forming an alliance with Democratic Unionist Party MPs. The Northern Ireland party, formed by Dr Ian Paisley, is strongly pro-Brexit but does not want a “hard border” with Ireland.
Quicker bans on legal highs
Under new rules on which the European Parliament and the EU Council are nearing agreement, the deadlines for determining the risks posed by new legal substances suspected to be harmful will be substantially reduced, shortening the whole procedure almost by half. This will mean that new psychoactive substances (NPS), or legal highs as they are more popularly known, will be declared illegal and removed from the market more quickly. Following an initial report by the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), the European Commission will have two weeks to request an assessment of the potential risks posed by the new substance. Member States will have to apply any ban no later than six months after the Commission’s decision. However, legislators expect that most countries will be able to apply bans much more quickly.
Just don’t do it
Nike is one of three major companies subject to EU antitrust investigations which have been launched into whether certain licensing and distribution practices illegally restrict traders from selling licensed merchandise cross-border and online within the EU Single Market. Nike, Sanrio and Universal Studios license the rights for some of the world’s most well-known brands. Among other brands, sports apparel manufacturer Nike is the licensor of rights for Fútbol Club Barcelona’s merchandise, Sanrio is the licensor of rights for Hello Kitty and Universal Studios is the licensor of rights for the “Minions” and “Despicable Me”. The Commission will investigate whether the three companies, in their role as licensors of rights for merchandising products, may have breached EU competition rules by restricting their licensees’ ability to sell licensed merchandise cross-border and online. These practices may ultimately harm consumers by preventing them from benefiting from greater choice and lower prices, both online and offline, the Commission warned. There is no legal deadline for bringing an antitrust investigation to an end and the Commission has stressed that the opening of a formal investigation does not prejudge its outcome. There must be some concern on the part of the companies involved, however, as previous, such cases have tended to result in fines totally hundreds of millions of euro.
Is worker entitled to paid leave?
Asked to consider whether treatment of a UK worker with regard to holiday pay was compatible with EU legislation, Advocate General Tanchev has advised the Court of Justice of the European Union (CJEU) that the case should go in favour of the worker when it is heard in full later this year. He had been asked to provide a legal opinion in Case C-214/16 (King v The Sash Window Workshop Ltd) which had reached the European Court after the UK Court of Appeal asked for a ruling on the application of the Working Time Directive (2003/88/EC). The Advocate General (AG) argues, in an Opinion available at curia.europa.eu, that the CJEU’s case law states that the existence of the right to paid annual leave is not to be subject to any preconditions whatsoever. Furthermore, upon termination of the employment relationship, a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave. Finally, the AG considers that it is incompatible with EU law to require a worker to take annual leave before being able to ascertain whether he will be paid for it. This long-running case still has some way to go as the CJEU will not give its ruling until later in the year (and while it usually follows an AG Opinion, it is not bound to do so) and the final decision will then lie with the Court of Appeal. It will have to use the EU Court’s interpretation of the directive in finally deciding what happen to Mr King’s claim.
Reducing VAT on e-books
EU citizens could pay less for e-books now that the European Parliament has agreed to allow Member States to reduce VAT on them to match printed book rates. Currently, e-books have to be taxed at an EU minimum standard rate of 15%, whereas Member States are free to charge the reduced rate of at least 5% — and in some cases, even 0% — on printed publications.
EFTA and India still pursuing deal
A warning for the UK: nearly nine years have passed since the European Free Trade Association (EFTA) opened negotiations with India on a comprehensive free trade agreement (FTA). Sixteen rounds of talks have now taken place, the most recent being held from 29 May to 2 June this year. That meeting discussed outstanding issues regarding trade in services, rules of origin, intellectual property rights and trade in goods. The two sides agreed to continue negotiations with a view to moving “swiftly” towards concluding the process and scheduled a further round of negotiations for this autumn.
EU aims to help Ukraine
Proposals are being discussed in the EU which, if adopted, will improve access for Ukrainian exporters to the EU market. EU ambassadors have reached agreement on the Council’s position on temporary autonomous trade measures in favour of Ukraine and have asked that they be adopted swiftly. The new measures, which would apply for three years, comprise additional import quotas at zero tariff for certain agricultural products (tariff rate quotas at 0%), plus the partial or full removal of import duties on several industrial products. The EU is Ukraine’s largest trading partner, with Ukrainian exports to the EU totalling €12.7 billion in 2015. EU exports to Ukraine that year were valued at €13.9 billion.
Sri Lanka import duties removed
From 19 May 2017, duties on a wide range of products imported into the EU from Sri Lanka have been removed. The initiative lifts duties on 66% of tariff lines, including textiles and fisheries products. The move was agreed as part of the EU’s Generalised Scheme of Preferences (GSP+), which supports developing countries by fostering their economic development through increased trade with Europe. An application for GSP+ was made by the Sri Lankan Government in July 2016. The country had previously benefitted from the scheme, but preferential treatment to Sri Lankan imports was stopped by the EU in 2010 over concerns about human rights violations. In lifting the duties, the EU is responding to reforms made by the Sri Lankan administration, which has committed itself to effectively implementing 27 international conventions on issues including labour conditions and environmental protection. The EU is Sri Lanka’s biggest export market. In 2016, total bilateral trade amounted to almost €4 billion, with EU imports from Sri Lanka totalling €2.6 billion (primarily textiles, rubber products and machinery).
Certifying organic imports
A new system of electronic certification (e-certification) is being used to monitor organic products imported into the EU. Described by the European Commission as pioneering, the e-certification system is intended not only to improve food safety and reduce fraud, but also to cut the administrative burden for operators and authorities. The electronic system will run in parallel with the existing paper-based system for six months but, from 19 October 2017, organic imports will be covered only by e-certification. The new system will be integrated into the existing electronic Trade Control and Expert System (TRACES) which is used to track movements of food products across the EU. The legal basis of the new system is EU Regulation 2016/1842 (available at eur-lex.europa.eu), which amends EC Regulation 1235/2008 as regards the electronic certificate of inspection for imported organic products and EC Regulation 889/2008 as regards the requirements for preserved or processed organic products and the transmission of information.
Deal reached with Norway
The EU and Norway have agreed a deal to facilitate bilateral trade in agricultural products. After two years of negotiations, the deal will grant mutual duty-free access for 36 tariff lines, including live plants, corn for feed, berries and fermented beverages such as perry and cider. Norway will grant the EU tariff quotas for products such as meat, dairy, grains, vegetables and ornamental plants. An additional 1600t quota will be available for bovine meat, plus smaller quotas for EU chicken and duck meat, pork, hams and sausages. There will also be an additional 1200t quota for cheese. In return, Norway will receive a 700t quota for various types of chicken meat, plus a quota for preserved meat and offal. Quotas for dried milk albumin and whey products will also be available, as well as quotas for freshly cut flowers and for potato chips. The EU will also offer Norway duty-free market access for a type of animal feed and bran, sharps and other residues.
Dumping threat to UK jobs
One of the many aspects of Brexit which the Government needs to consider is how to tackle unfair competition from abroad. Responsibility for anti-dumping measures, anti-subsidy measures and safeguarding measures (so-called trade remedies) currently resides with the European Commission. Fears have been raised that a post-Brexit UK could be left defenceless against dumped products flooding into the country and destroying thousands of British jobs. To highlight the issue and urge action on it, a group of 10 organisations aims to persuade the political parties to address the issue in their election manifestos. Published by the seven manufacturing trade associations and three trade unions, The Future of UK Trade Remedies sets out the actions needed to establish a trade defence mechanism for the UK. The new Government should, it says, ensure that new UK trade remedies are adequate to fully alleviate market injury to UK manufacturing and that they are available immediately after Brexit. The paper sets out a number of steps that the organisations believe would help ensure the effectiveness of a new trade remedies system, including having a well-resourced single unit within the Department for International Trade (DIT) to investigate trade complaints.
New weapon in battle against cartels
Individuals can now help in the fight against cartels and other anti-competitive practices by using a new tool to alert the European Commission to illegal practices while preserving their anonymity. These practices include agreeing on prices or procurement bids, keeping products off the market or unfairly excluding rivals and can cause immense damage to Europe’s economy. They can deny customers access to a wider choice of goods and services at reasonable prices, stifle innovation and put companies out of business. Commissioner Margrethe Vestager, in charge of competition policy, explained: “Inside knowledge can be a powerful tool to help the Commission uncover cartels and other anti-competitive practices. With our new tool it is possible to provide information, while maintaining anonymity. Information can contribute to the success of our investigations quickly and more efficiently to the benefit of consumers and the EU’s economy as a whole.”
As well as allowing individuals to provide information, the new tool gives them the option of asking for the Commission to reply to their messages, allows the Commission to seek clarifications and details, and preserves the individual’s anonymity through encrypted communications and the use of an external service provider. Full details can be found at the European Commission website.
E-commerce sector given a warning
The European Commission’s final report on its e-commerce sector inquiry identifies a number of problems. According to Competition Commissioner Margrethe Vestager, certain practices by companies in e-commerce markets may restrict competition by unduly limiting how products are distributed throughout the EU. One of the main goals of the Commission’s Digital Single Market strategy, she explained, is to ensure better access for consumers and businesses to goods and services. The e-commerce sector inquiry complements the Commission’s legislative proposals in this regard. Its main aim was to allow the Commission to identify possible competition concerns in European e-commerce markets. The Commissioner said that she was pleased to note that some companies had already taken action on their own initiative. Citing Dorothy Perkins and Topman, among others, she said: “This can help consumers to purchase products more easily cross-border and benefit from lower prices and a wider choice of retailers.” See the European Commission website for more details.
Lords bite back on chocolate
While Brexit may have divided the country, and the question of how to proceed with a future EU-UK trade relationship may still be unresolved, there can be few people prepared to argue against a call for post-Brexit chocolate guarantees. The GMB (which is the union for chocolate bar producers) has backed a House of Lords report calling for guarantees on confectionery tariffs post-Brexit, pointing out that sugar and confectionery are already subject to the highest EU tariffs. Available at www.publications.parliament.uk, the report suggests that up to 97% of the UK’s food and drink exports could be at risk after Britain leaves the EU. Eamon O’Hearn, GMB National Officer, said: “We share Peers’ concern regarding the impact of Brexit on the food and drink industry. We’ve already seen the effect in Scotland with Diageo cutting jobs — and now fears are growing in England following job losses at PepsiCo and Nestlé.”
Guarantees must be given, he argued, that the already high tariffs will not be increased during the Brexit negotiations. Mr O’Hearn also called for consumer standards to be maintained to ensure that the UK market is not flooded with substandard, artificially cheap products. “Whoever wins the General Election needs to ensure our food and drink jobs — the UK’s largest manufacturing industry — are protected and that consumers are not subjected to sky-rocketing prices,” he concluded.
First AEO status for multipurpose port
London’s major port has recently been awarded an internationally recognised quality mark and been accepted as an Authorised Economic Operator (AEO) by HM Revenue & Customs (HMRC). Tilbury is the first multipurpose port in the UK to receive full AEO status for security and customs simplification processes. This recognises that the customs controls and procedures at the port are efficient and compliant and most importantly, secure. The accreditation follows a full site audit at the port by HMRC which thoroughly reviewed the port’s operational processes, IT, security, storage, procurement and HR procedures. The AEO regime operates under the EU’s Union Customs Code and is administered in the UK by HMRC. AEO status gives quicker access to certain simplified customs procedures and in some cases, the right to fast-track shipments through some customs procedures.
Rules of Origin used to mitigate refugee crisis
A meeting between the EU and Jordan aimed at promoting enhanced trade has examined ways that the “EU Rules of Origin Initiative” can be used to mitigate the effects of the Syrian refugee crisis on the Jordanian economy. Rules of origin are the technical criteria which determine whether a specific product qualifies for duty-free or other preferential treatment under a given trade agreement. As a result of the war in neighbouring Syria, Jordan is currently hosting over 1.3 million Syrians, including over 658,000 refugees. This has disrupted Jordan’s traditional trade patterns and affected inward investment. Helping Jordan to deal with this crisis, the EU provides financial help but also wants to look at other ways that the country’s economy can be revived.
The agreed simplification under the EU-Jordan Rules of Origin Agreement covers a wide range of manufactured products and includes items that Jordan currently exports in small volumes to the EU and others where there is currently no trade. The alternative rules of origin now available for Jordanian exports to the EU are similar to those applied by the EU to imports from Least Developed Countries (LDCs) under the EU’s “Everything But Arms” initiative. There is, however, an additional condition that Jordanian producers must have a workforce comprising of 15% Syrian refugees, rising to 25% after three years, and that production must take place in one of the 18 specific zones identified in the agreement.
Commission wrong to oppose “Stop TTIP” initiative
If at least one million citizens, who are nationals of at least one quarter of the EU’s Member States, invite the European Commission to submit an appropriate proposal on matters where they consider that EU legislation is required for the purpose of implementing the Treaties, the Commission is bound to comply. However, before being able to begin collecting the requisite number of signatures, the organisers of what are known as European Citizens’ Initiatives must register with the Commission, allowing it the chance to examine the subject matter and objectives. Registration may be refused where the subject matter of the initiative clearly falls outside the framework of the Commission’s powers to propose legislation.
In July 2014, a citizens’ committee asked the Commission to register an initiative entitled “Stop TTIP”. In essence, that proposal requests the Commission to recommend that the Council cancel the mandate which the latter granted it to negotiate the “Transatlantic Trade and Investment Partnership” (TTIP) and, ultimately, to refrain from concluding the “Comprehensive Economic and Trade Agreement” (CETA) with Canada. The Commission refused to register that proposal and has now been told by the EU’s General Court that it was wrong to do so. Upholding the action in Case T-754/14, the Court rejected the Commission’s arguments and annulled its decision to reject registration. The Commission may appeal this ruling to the EU’s Court of Justice (CJEU).
Read all about it
Clearly not a believer in the “keep your cards close to your chest” school of negotiating, the European Commission has published all 16 of its proposals for the ongoing trade negotiations with Mexico. As well as matters such as rules of origin and trade remedies (such as anti-dumping and countervailing duties), these cover areas including dispute settlement, competition policy, public procurement, intellectual property rights and good regulatory practices. The documents were made available at trade.ec.europa.eu, as EU Trade Commissioner Cecilia Malmström travelled to Mexico to assess the state of play and discuss the way forward for the proposed trade deal. The latest negotiating round took place in April, with the next one planned for the end of June. The negotiations on a modern trade agreement to replace the current arrangements, which were laid down 20 years ago, started in the spring of 2016. EU Trade Commissioner Cecilia Malmström, who believes that the negotiations could be concluded before the end of the year, said that the new agreement will cut unnecessary red tape, bringing the relationship up to modern standards, adapted to new global economic realities.
Investing in Myanmar
Negotiations are continuing on the EU-Myanmar Investment Protection Agreement (IPA). A meeting between the two sides at the end of April included discussions on the EU’s reformed approach to investment protection and investment dispute resolution, including a code of conduct for the judges of the Investment Court System. The proposed IPA aims to offer investors from both sides a predictable and secure investment environment, protect them against discrimination, and ensure they are treated in a fair and equitable way. It also seeks to ensure that investments will not be unfairly taken away without fair compensation. Negotiations started in 2013 and reflect the Union’s improving relationship with Myanmar, which has also seen the lifting of sanctions (other than an arms embargo) and the granting of preferential access to the EU market. In 2015, EU-Myanmar trade was worth €1.2 billion, with the EU importing goods worth €675 million from Myanmar (notably garments and agricultural products). In terms of exports, the EU shipped goods worth almost €549 million to Myanmar (mostly machinery and transport equipment).
A “Reflection Paper” entitled Harnessing Globalisation has been published by the European Commission aiming to launch a debate on how the EU and its Member States can shape globalisation in a way that anticipates the future and improves the lives of European citizens. “The fact is that, even if the EU has greatly benefitted from globalisation, it has also brought many challenges,” the Paper states. Available at ec.europa.eu, it notes that, for the EU, global trade has boosted economic growth, with every €1 billion of additional exports supporting 14,000 jobs. Cheaper imports benefit poorer households in particular, the Commission highlights, but it accepts that these benefits are not automatic nor are they evenly distributed. “Europe is also impacted by the fact that other countries do not all share the same standards in areas such as employment, environmental or safety standards,” the Paper argues, “meaning that European companies are less able to compete on price alone with their foreign counterparts; this can lead to factory closures, job losses or downward pressure on workers’ pay and conditions.”
However, the Commission argues that the solution lies neither in protectionism nor in laissez-faire politics. The evidence presented in the Reflection Paper shows clearly, it suggests, that globalisation can be beneficial where it is properly harnessed. The EU must ensure a better distribution of the benefits of globalisation by working together with Member States and regions, as well as with international partners and other interested parties. The EU could push for new rules to create a level-playing field by addressing harmful and unfair behaviour such as tax evasion, government subsidies or social dumping. Effective trade defence instruments and a multilateral investment court could also help the EU act decisively against countries or companies that engage in unfair trade practices.
EU still working on Japan deal
The EU-Japan Free Trade Agreement (FTA) negotiations were officially launched on 25 March 2013 and the European Commission has recently published a report summarising progress made during the 18th round of the trade talks. Held during the first week of April, the latest negotiations covered the following areas: trade in goods (including market access); non-tariff measures; rules of origin; trade in services; procurement; intellectual property (including geographical indications) and other issues (institutions and regulatory co-operation). Work progressed in what the Commission described as a constructive atmosphere, with both sides said to be working with a renewed sense of urgency in order to conclude the talks as soon as possible. The report is available at trade.ec.europa.eu. Japan is the EU’s second biggest trading partner in Asia after China.
What do UK firms want?
Almost two-thirds of small firms say their top priority for the UK’s Brexit negotiations is to secure access to the EU single market. A survey conducted among some 1750 people by the Federation of Small Businesses (FSB) shows that 63% of them put accessing the single market top of their Brexit wish list. The FSB report Keep Trade Easy: What Small Firms Want from Brexit also shows that over half (58%) of smaller firms find the EU single market easier to trade with than non-EU markets. Responding to the survey, 45% of current exporters and 53% of importers said that they find trading with the single market cheaper than trading with non-EU markets. (For those who find it more expensive, the figures were 9% and 8% respectively.)
The introduction of tariffs on UK-EU trade would have a significant impact, with a quarter (27%) of small exporters saying they would be deterred from trading with the EU should they face any tariffs at all. A third (34%) said they would be put off if a tariff rate of 2–4% was introduced. Concerns were also raised over non-tariff barriers, with the biggest concern being additional administrative burdens, such as those associated with complying with rules of origin.
Call to join cartel case action
The European Commission has released details of the settlement reached in the EU case involving a truck manufacturers’ cartel which existed for 14 years: from 1997 to 2011. Five companies were found to have broken EU antitrust rules by colluding on truck prices: MAN, Volvo/Renault, Daimler, Iveco and DAF. The Commission found that they colluded on gross (and sometimes net) price increases for medium and heavy trucks throughout the European Economic Area (EEA), including by exchanging detailed spreadsheets showing intended future prices split by truck standard model for each manufacturer. The manufacturers agreed on the timing of the introduction of new vehicle emission technologies, as well as how much to charge for them, and also discussed reducing rebates when the Euro was introduced.
The cartel was revealed to the Commission by MAN, which consequently escaped being fined under the EU’s Leniency Clause which encourages cartel members to break ranks. All five companies acknowledged their involvement and agreed to settle the case. According to the UK’s Road Haulage Association (RHA), the non-confidential version of the settlement (published by the Commission at www.rha.uk.net) provides further evidence of the need for legal action against the manufacturers concerned. The Association is in the process of applying to represent the haulage industry in seeking to reclaim the overpayment made by transport firms for vehicles during the period the cartel operated (and potentially beyond that point). Transport firms seeking compensation are urged to contact the RHA even if they are not among its members. There will be no cost for joining the legal action.
Merger of container liner shipping companies approved
The Commission has cleared under the EU Merger Regulation the proposed acquisition of Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (HSDG) of Germany by Maersk Line A/S of Denmark, subject to conditions. Both Maersk Line and HSDG are active worldwide in container liner shipping. The clearance is conditional upon the withdrawal of HSDG from five consortia on trade routes connecting:
northern Europe and Central America/Caribbean
northern Europe and west coast of South America
northern Europe and Middle East
the Mediterranean and west coast of South America
the Mediterranean and east coast of South America.
On these routes, the merged entity would have faced insufficient competition after the transaction.
EU sees no problem with proposed acquisition of Sky
The Commission has approved unconditionally the proposed acquisition of Sky by 21st Century Fox, a US-based global media company. The Commission concluded the transaction would raise no competition concerns in Europe. The proposed transaction would combine Sky plc, the leading pay-television operator in Austria, Germany, Ireland, Italy and the UK, and 21st Century Fox, Inc, one of the six major Hollywood film studios, as well as a television channel operator (Fox, National Geographic).
New EU rules to ensure safety of medical devices
The EU has introduced updated rules to ensure the safety of medical devices ranging from simple contact lenses and sticking plasters to sophisticated pacemakers and hip replacements. The current rules on the safety and performance of medical devices in the EU were harmonised in the 1990s. To reflect the substantial technological and scientific progress in this sector over the last 20 years, the Commission proposed to update the rules. However, it will be some time before the new rules come into force. They will start to apply three years after publication of a new regulation on medical devices and a further two years later for in vitro diagnostic medical devices. See the European Commission website for further details.
Setting the standard in customs competency
The official publication by the European standardisation body CEN Standard of Customs Competency for Customs Representatives (EN 16992:2017) has been welcomed by leading trade bodies. CONFIAD, the Pan European Network of Customs Brokers and Customs Representatives, and CLECAT, the European association of freight forwarders, transport and customs-related services, said that it would promote professionalism, skills and knowledge in the customs representation within the EU. Both bodies have promoted and financed the development of the CEN Standard.
Under the management of AFNOR (the French National Standardisation Body), it was developed by CEN, taking the Customs competency framework for private sector published by the European Commission into consideration. In line with the criteria of customs competency required by the Authorised Economic Operator — Customs (AEO(C)) status in the Union Customs Code, the new Standard will support customs representation services offered by any customs representative in an EU Member State where the customs representative is not established. At national level, each National Standardisation Body will now need to prepare and finalise the national publication of the Standard.
Half of the EU’s problem goods originate in China
Despite several years’ progress in tackling dangerous imports from China, the country still accounted for 53% of notifications made under the EU’s Rapid Alert System in 2016, although that represented a fall from 62% in 2015. The figures are presented in the European Commission’s latest report on imports of dangerous non-food products (which can be found here). This confirms that the majority of dangerous products notified in the Member States last year came from outside the EU.
In 2016, there were 2044 alerts on dangerous products circulated among national authorities through the Rapid Alert System. Of those, 468 notifications (23%) were of European origin; China was the country of origin for 1069 (53%); 102 notifications concerned products from the USA (5%) and 53 indicated Turkey as country of origin (2.6%). Last year, the most notified product categories were: toys (26%); motor vehicles (18%); and clothing, textiles and fashion items (13%). Risk of injury (25%) and from chemicals (23%) were the most notified dangers. A growing problem is that dangerous products notified in the Rapid Alert System are increasingly sold online. In response, the Commission has stepped up its co-operation with Amazon, eBay and Alibaba, all of which have agreed to increase their efforts to remove notified products from their websites.
Misleading travel booking websites told to smarten up
Consumers are encountering a growing number of problems with online travel services, with these services now among the most frequent consumer complaints made to European Consumer Centres. The European Commission and EU consumer protection authorities launched a co-ordinated screening of 352 price comparison and travel booking websites across the EU in October 2016. They found that prices were not reliable on 235 of the sites. For example, additional price elements were added at a late stage of the booking process without clearly informing the consumer or promotional prices did not correspond to any available service. The offending websites must now correct the irregularities with authorities in the Member States activating national enforcement procedures to ensure they comply.
First loan agreement backed by Natural Capital Financing Facility
The Natural Capital Financing Facility (NCFF) is a financial instrument that combines financing from the European Investment Bank (EIB) and European Commission funding under the LIFE Programme, the EU’s funding instrument for the environment and climate action. It will contribute to meeting the objectives set out by LIFE, in particular “nature and biodiversity” and “climate change adaptation” by providing financial solutions to bankable projects that promote the conservation, restoration, management and enhancement of natural capital for biodiversity and climate adaptation benefits.
This includes ecosystem-based solutions to challenges related to land, soil, forestry, agriculture, water and waste. Eligible projects under the NCFF include payments for ecosystem services, green infrastructure, biodiversity offsetting, and investments for innovative pro-biodiversity and climate adaptation businesses. A budget of €100–€125 million is available for the period up to 2019. The Bank on Nature Initiative will build on NCFF support to promote nature and climate adaptation projects through tailored loans and investments, backed by an EU guarantee. It recognises and fosters the business case for investing in natural capital for biodiversity and climate change adaptation purposes.
Court rules on visas
The Court of Justice of the European Union (CJEU) has ruled (in Case C-544/15) that national authorities may refuse, for reasons of public security, to grant to an Iranian national with a degree from a university subject to restrictive measures a visa for study in a sensitive field such as information technology security. The university in question is the subject of restrictive measures from the EU because of its support of the Iranian Government, in particular in the military field. The Court confirmed that national authorities in the EU enjoy a wide discretion in assessing the facts in order to ascertain whether, in the light of all the relevant elements of the situation of a national from a non-EU country who is applying for a visa for study purposes, that person represents a threat, even if potential, to public security.
Feel free to go roaming
The European Parliament has removed the last hurdle on the way to full abolition of retail “roaming” surcharges for people using mobile phones in EU countries other than the one where their provider is based. The abolition of retail roaming surcharges, now scheduled for 15 June 2017, will enable consumers to call text and use mobile data for the same cost at home and while travelling in another EU country. They will also be able to transfer data across borders from another EU Member State for the same cost as at home.
EU still accounts for half of UK trade
The EU still accounts for about half of the goods imported into the UK and exported from it. Data issued by the EU’s statistical office, Eurostat, for 2016 show that, based on trade value, 47% of goods exported from the UK went to EU countries, while 51% of goods imported into the UK were from the EU. The statistics also show that the USA and China accounted for 32% of EU trade last year: 18% (€610 billion) of total EU trade in goods was with the USA and 15% (€515 billion) was with China.
Machinery and transport equipment, other manufactured goods, and chemicals were the main categories of product traded by the EU. Last year, the UK was one of just four EU Member States (along with Germany, Ireland and Malta) whose main partner for exports of goods was a country outside the EU. In the UK’s case, the USA was the main export destination, with 15% of goods sent there. Germany (11%) and France (6%) were the UK’s other main destinations for goods exports. In terms of imports, the UK’s top three partners in 2016 (based on trade value) were Germany (14%), the USA (9%), and China (9%).
Mercosur deal still pending
The long-awaited trade agreement between the EU and the South American Mercosur countries still has no conclusion in sight. The European Commission has published a report summarising progress made during the latest round of negotiations for an agreement with Argentina, Brazil, Paraguay and Uruguay. However, this is the 27th round of negotiations on an EU-Mercosur Association Agreement and, while it saw progress in all three main parts of the proposed text — trade, political dialogue, and bi-regional co-operation — there remains much to discuss.
Better news on EU-Japan FTA
The 18th round of negotiations on a Free Trade Agreement (FTA) between the EU and Japan took place in Tokyo in early April, and the two sides are now aiming to reach a deal by the end of 2017. The European Commission confirmed that the latest negotiating round discussed all issues to be covered by the FTA, including market access for goods and services. From an EU perspective, the deal is intended both to strengthen its partnership with Japan and to make it easier for European exporters to sell their products and services to Japan’s 130 million people. Japan is the EU’s second biggest trading partner in Asia after China. Between them, the EU and Japan account for more than a third of the world’s GDP. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.
Positive trade talks with Mexico
A new trade deal between the EU and Mexico is scheduled for conclusion at political level by the end of this year. Following a third round of talks in Brussels in 10 April, the Commission said that good progress was being made towards agreeing a modernised trade deal between the two sides. EU proposals presented so far have concerned rules of origin, public procurement, sanitary and phytosanitary measures, energy and raw materials, intellectual property rights and trade by SMEs. The trade relation between the EU and Mexico is currently based on an Economic Partnership, Political Co-ordination and Co-operation Agreement (the Global Agreement), which entered into force in 1997.
EU-Australia FTA edges closer
In a busy month for EU trade negotiators, Trade Commissioner Cecilia Malmström and Australia’s Minister for Trade, Investment and Tourism, Steven Ciobo have reached an agreement on the scope of a potential trade deal. The Commission will now ask Member States to authorise the launch of formal negotiations on a Free Trade Agreement (FTA). The EU is Australia’s third largest trading partner. Annual bilateral trade amounts to more than €45.5 billion, with EU exports to Australia mostly comprising vehicles and machinery.
Sanctions on Iran extended
The EU Council of Ministers has decided to extend until 13 April 2018 the restrictive measures previously imposed in response to serious human rights violations in Iran. These measures, which were first introduced in 2011, include a ban on exports to Iran of equipment which might be used for internal repression and of equipment for monitoring telecommunications.
Blocking trade in conflict minerals
New EU legislation aims to ensure that minerals used by industries in the Member States are sourced responsibly. A draft regulation approved by the European Parliament will impose due diligence requirements on all but the smallest EU importers of tin, tungsten, tantalum and gold. Importers will be legally bound to check their supply chain and big manufacturers will have to set out their plans for monitoring their sources. It is estimated that the new rules will cover up to 95% of imports with effect from January 2021. Small importers, such as dentists and jewellers, will be exempt from the rules, as will those using recycled materials.
Tin, tantalum, tungsten and gold are used not only in the manufacture of jewellery, but also in the production of many high-tech devices in the automotive, electronics, aerospace, packaging, construction, lighting, industrial machinery and tooling industries. The aim of the regulation is to make sure that such metals and minerals are sourced responsibly, and that the proceeds of their sales do not help fund rebel groups, conflict and terror. It will apply to all conflict-affected and high-risk areas in the world, including the Democratic Republic of the Congo (DRC) and the Great Lakes region of Africa. While a non-exhaustive list of areas concerned will be drawn up, the European Parliament warns that country of origin is not the only indicator, and that information on transit routes and suspect suppliers should also prompt background checks. The draft regulation must be formally adopted by the EU Council of Ministers before it becomes law. The period before it comes into force (in 2021) will, the Parliament argues, give Member States time to appoint competent authorities and allow importers to become familiar with their obligations.
Revolutionising transport operations in Europe
The advent of national digital consignment notes in France and Spain has been described as a revolution in transport operations with these notes already used for 65% of the nearly two billion tonne-kilometres performed by European hauliers each year. The launch of the national electronic notes was co-ordinated by the Asociación de Transporte Internacional por Carretera (ASTIC) in Spain and the Fédération Nationale des Transports Routiers (FNTR) in France. It follows the successful deployment of the cross-border electronic consignment note (e-CMR) in January this year, when a test delivery of oranges was transported from Huelva to Perpignan.
The national digital note enables transport operators to input information electronically, store logistics reports and exchange data in real time through a mobile phone or tablet device. Doing so allows agencies to instantly receive information on the goods being transported. Greater use of digital technologies in road transport documentation reduces the environmental impact of global trade, the IRU points out, by streamlining processes, using less paper and minimising archival requirements.
Should UK rejoin EFTA?
A report from the House of Commons International Trade Committee has recommended that the Government should look at the possibility of the UK rejoining the European Free Trade Association (EFTA). Doing so would, the MPs argue, offer an opportunity for a smoother transition as the UK leaves the EU. The prospect of membership of EFTA from 2019 onwards could be to Britain’s advantage, the report argues as it calls on the Secretary of State to publish a White Paper on EFTA membership before summer 2017, so that negotiations can commence before the end of the year.
In UK Trade Options Beyond 2019 (available here), the Committee considers four different scenarios for the UK’s post-Brexit international trade relationships. For each one, it addresses not only the implications for UK trade, but also the issues that the Government will need to resolve. The scenarios considered are: the UK’s relationship with the World Trade Organization (WTO); the Free Trade Agreement (FTA) that the Government intends to strike with the EU; the implications of the UK falling back on trading with the EU under WTO rules alone and the UK’s future trading relationship with non-EU countries.
UPS-TNT merger decision annulled
In 2013, the European Commission refused to authorise a merger between United Parcel Service (UPS) and TNT in the express small package delivery services sector. That decision has now been annulled by the EU’s General Court because of a procedural irregularity. Giving its Judgment in Case T-194/13, the Court found that the Commission had infringed UPS’ rights of defence by relying on an econometric analysis which had not been discussed in its final form during the administrative procedure. An appeal, limited to points of law only, may be brought before the EU’s Court of Justice (CJEU) but action must be taken within two months.
Massive fines for cartel members
The European Commission has again proved that the company which is the first to break ranks and expose an illegal price-fixing cartel can save itself millions of euro. It has recently fined Behr (Germany), Calsonic, Denso, Panasonic, Sanden (all Japan) and Valeo (France) a total of €155 million for taking part in one or more of four cartels concerning supplies of air conditioning and engine cooling components to car manufacturers in the European Economic Area (EEA). All six suppliers acknowledged their involvement in the cartels and agreed to settle the cases against them. Denso was not fined for three of the cartels as it revealed their existence to the Commission and thus saved itself €287 million.
Court defines concept of basic rate phone calls
The cost of a call to an after-sales telephone number must not exceed the cost of a standard call. That is the decision reached by the EU’s Court of Justice (CJEU) in a case concerning the interpretation of Directive 2011/83/EU on consumer rights. The issue was referred to the CJEU by a German regional court which was hearing a case concerning a German company that sells electrical and electronic equipment. The company, comtech GmbH, provided a telephone number for after-sales service but the cost of a call to the advertised non-geographic number exceeded the cost for a standard call to a geographic landline or mobile number. A German association claimed the practice was unfair and sought an injunction ordering comtech to discontinue it.
Although Directive 2011/83/EU provides that consumers must not pay more than the basic rate for calls to such lines, it does not define what constitutes a basic rate. The referring court, therefore, sought clarification of the concept of “basic rate” call charges when a telephone line is used by a company for the purpose of enabling customers to contact it in relation to after-sales services or similar contractual issues. In its judgment, the CJEU ruled that basic rate must be interpreted as meaning that call charges to such lines may not exceed the cost of a call to a standard geographic landline or mobile phone line. The Court also noted that, provided the limit of the cost of a standard call charge is respected, the fact that a trader makes or does not make a profit through a telephone helpline is irrelevant.
Breast implant case finally makes it to judgment
It is nearly seven years since reports began appearing that a French manufacturer had produced breast implants using industrial silicone which did not comply with quality standards. Case C-219/15, which has just been the subject of a ruling by the EU’s Court of Justice (CJEU), was brought by a German woman who tried to claim compensation from TÜV Rheinland, the body appointed by the implant manufacturer to audit its quality system for the purposes of EU certification. In her view, an inspection of the delivery notes and invoices would have enabled TÜV to ascertain that the manufacturer had not used an approved form of silicone.
The CJEU ruled that a conformity assessment body such as TÜV is not under a general obligation to carry out unannounced inspections, to examine devices and/or to examine the manufacturer’s business records. However, in the face of evidence indicating that a medical device may not comply with the requirements laid down in Directive 93/42/EEC concerning medical devices, the notified body must take all the steps necessary to ensure that it fulfils its obligations under that Directive. The Court emphasised that the conditions under which culpable failure by a conformity assessment body to fulfil its obligations under the Directive may give rise to liability on its part vis-à-vis end users are governed by national and not EU law.
Labelling rules also apply to alcohol
The alcoholic beverages industry has been given a year to develop a self-regulatory proposal aiming to provide information on ingredients and nutritional value of all alcoholic drinks. This follows the adoption by the European Commission of a report on the mandatory labelling of the list of ingredients and the nutrition declaration for such drinks. Commissioner for Health and Food Safety, Vytenis Andriukaitis said: “This report supports the right of people in the European Union to be fully informed about what they drink. Moreover, it does not identify any objective grounds justifying the absence of the list of ingredients and nutrition information on alcoholic beverages.” The EU regulation on the provision of food information to consumers (1169/2011) which became applicable in December 2014 includes rules on listing ingredients and providing a nutrition declaration. These rules are mandatory for all foods although there is an exemption for beverages containing more than 1.2% alcohol per volume. Such information is nevertheless provided by some producers on a voluntary basis. Furthermore, a number of Member States have maintained, adopted or proposed national measures imposing additional labelling requirements on ingredients for all or certain alcoholic beverages.
Right to be forgotten does not apply to a company register
Salvatore Manni, a director of a company awarded a contract for the construction of a tourist complex in Italy, was concerned that properties in the complex were not selling. That was, he argued, because the companies register showed that he had been the administrator of another company that went bankrupt. Mr Manni brought an action against the Lecce Chamber of Commerce, which was ordered by the local court to anonymise the data linking Mr Manni to the liquidation of the first company.
The Chamber of Commerce appealed that decision to the Court of Cassation, which asked the EU’s Court of Justice (CJEU) for a ruling on whether EU legislation precludes any person from accessing, without any time limit, data relating to natural persons set out in the companies register. In its ruling (which can be found at curia.europa.eu), the CJEU finds that there is no right to be forgotten in respect of personal data in the companies register. However, when a sufficiently long period after dissolution of a company has passed, Member States may in exceptional cases restrict access to such data by third parties. In the Manni case, the Court considers that the fact that properties on the complex do not sell because potential purchasers can access data about him in the companies register cannot justify limiting access by third parties to that data.
Where next for Europe?
As preparations go ahead to mark the 60th anniversary of the EU on 25 March 2017, the European Commission has produced a White Paper on the Future of Europe: Reflections and Scenarios for the EU27 by 2025. This looks at how Europe will change in the next decade, from the impact of new technologies on society and jobs to doubts about globalisation, security concerns and the rise of populism. It spells out the choices the EU faces: “being swept along by those trends, or embracing them and seizing the new opportunities they bring”.
Preventing tax avoidance through non-EU countries
The latest addition to the EU’s anti-tax avoidance toolbox will prohibit multinational companies from escaping corporate tax by exploiting differences between the tax systems of Member States and those of non-EU countries (so-called “hybrid mismatches”). These occur when countries have different rules for the tax treatment of certain income or entities, which multinational companies can abuse to avoid being taxed in either country. The new legislation (which has been adopted but not yet published) will ensure that hybrid mismatches of all types cannot be used to avoid tax in the EU, even where the arrangements involve non-EU countries. The new rules will come into force on 1 January 2020.
EU and Chile reach deal on beef
An agreement on how to describe cuts of meat seems set to allow EU beef exports into Chile. The South American country’s legislation on meat requires that cuts are identified in accordance with a specific nomenclature and classification of bovine carcases. However, the terminology and criteria differ to those applied in the EU. The new agreement on a correlation between Chilean and EU names for the cuts and classification of the carcases means that existing requirements of meat marketing standards will no longer be a barrier to EU exports of beef to Chile. Although not traditionally a major export market for EU beef, the European Commission says that firms could find Chile a potential new outlet for their veal exports.
EU-Singapore FTA awaits legal opinion
The EU-Singapore Free Trade Agreement (FTA) was concluded in October 2014, but has not yet entered into force. Before it can do so, the EU’s Court of Justice (CJEU) must rule on the areas of competence which apply to the European Commission and the EU Member States. The Court’s opinion is expected in the first half of this year. In advance of the decision, both the EU and Singapore have reaffirmed their commitment to the deal. On a recent visit to Singapore, EU Trade Commissioner Cecilia Malmström said that the FTA “will open doors and create opportunities for companies big and small, help to boost economic growth and investment, and create jobs”.
Described as a landmark agreement, the FTA is the first deal between the EU and a country in South East Asia. Once it enters into force, it will provide greater market access and will remove customs duties and other barriers to trade. Sectors anticipated to benefit particularly include pharmaceuticals, electronics, chemicals and food products. In 2016, the EU was Singapore’s second largest trading partner, accounting for 11% of its global trade. Singapore is the EU’s largest trading partner in the Association of Southeast Asian Nations (ASEAN) region.
New Zealand trade deal moves closer
Formal negotiations on an EU-New Zealand trade agreement have moved a step closer following the end of exploratory talks. Those talks — which started in October 2015 — have involved representatives from both sides in discussions about the areas to be covered in formal negotiations and what sort of trade deal they should be aiming to agree. With annual bilateral trade amounting to more than €8 billion, the EU is New Zealand’s second largest trading partner after Australia. For the EU, trade with New Zealand results in a positive trade balance of €1.3 billion, the European Commission has pointed out, and EU companies hold nearly €10 billion in foreign direct investment in New Zealand. The Commission will now ask Member States for a mandate to negotiate on behalf of the EU. At the same time, it is assessing the potential impact of a trade deal with New Zealand taking into account the new opportunities that such as agreement could create for EU businesses, as well as agricultural sensitivities in the Member States that need to be considered.
EU agrees medicine inspections with the USA
The European Commission and the US Food & Drug Administration (USFDA) have reached agreement on the mutual recognition of inspections of premises where medicines are produced. An update to the 1998 Agreement on good manufacturing practices (GMP) provides for EU and US regulatory authorities to rely on information provided by their counterparts with regard to facilities that manufacture medicines and active pharmaceutical ingredients. According to the Commission, the move will improve the EU’s ability to identify and address problems at factories before they become a public health risk. It will also reduce the administrative burdens and costs facing pharmaceutical manufacturers, including smaller producers. The recognition of inspections is expected to apply from November this year. The full text of the agreement can be found at trade.ec.europa.eu.
Japan next stop in EU trade journey?
EU and Japan have promised to redouble their efforts in order to complete their proposed Free Trade Agreement (FTA) in the next few months. Together they account for more than a third of the world’s GDP and Japan is the EU’s second biggest trading partner in Asia after China. Imports from Japan to the EU are dominated by machinery, electrical machinery, motor vehicles, optical and medical instruments and chemicals. In the main, EU exports to Japan include motor vehicles, machinery, optical and medical instruments, pharmaceuticals and electrical machinery. An Assessment of Barriers to Trade and Investment Between the EU and Japan, which includes details of trade between the two, can be found at trade.ec.europa.eu.
Changes to the Torture Regulation
Coming into force on 17 March 2017 and available at www.legislation.gov.uk, the Export Control (Amendment) (No. 2) Order 2017 (SI 2017/193) amends the Export Control Order 2008 (SI 2008/3231) (known as the ECO) to make provision for the enforcement of trade restrictions in relation to certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment. This brings into UK law the provisions of EU Regulation 2016/2134 which amends earlier European legislation, specifically EC Regulation 1236/2005 (known as the Torture Regulation).
The new Order amends the ECO to allow for the issuance of Union General Export Authorisations under the Torture Regulation. It also inserts into the ECO a number of offences in relation to the prohibitions and authorisation requirements introduced by the amending EU regulation. The Department for International Trade (DIT) has also published a consolidated list of strategic military and dual-use items that require export authorisation. This can be found at www.gov.uk. This brings together the UK Military List, the UK Dual-Use List, the EU Human Rights List, the UK Security and Human Rights List, the UK Radioactive Source List and the EU Dual-Use List. Dual-use items are those which fall under export control procedures because they have both a civilian and a military use.
Legal challenge to EU restrictions on China imports fails
The EU’s General Court has confirmed the validity of anti-dumping and anti-subsidy measures introduced by the European Commission against imports of solar panels from China. The Court joined together Cases T-157/14, T-158/14, T-160/14, T-161/14, T-162/14 and T-163/14 which had all been brought by companies affected by anti-dumping duties imposed by the EU on imports of solar panels and key components originating in and consigned from China. EU Regulations 2013/1238 and 2013/1239 set the duties after an investigation carried out by the Commission in 2012 and 2013 had revealed that Chinese solar panels were being sold in Europe at well below their normal market value.
“Duties were imposed in order to mitigate the injury caused to the European industry by the unfair commercial practice known as dumping,” the General Court noted. It was also told that Chinese undertakings exporting to Europe were receiving illegal subsidies, which caused significant injury to EU solar panel producers. The 26 companies affected by those duties (with an average rate of 47.7%) applied to the EU Court for annulment of the anti-dumping and anti-subsidy measures imposed by the Commission. In a ruling set out in full at curia.europa.eu, the Court rejects all the applications and confirms the definitive duties. An appeal, limited to points of law only, may be brought before the EU’s highest court, the Court of Justice, against this decision of the General Court, within two months (that is, by 28 May 2017).
EU welcomes entry into force of WTO Trade Facilitation Agreement
The most significant multilateral trade deal concluded since the establishment of the World Trade Organization (WTO) in 1995 has entered into force. Ratifications by Chad, Jordan, Oman and Rwanda meant that the Trade Facilitation Agreement (TFA) had reached the pre-determined threshold of 110 WTO members required for its immediate entry into force. The agreement aims to simplify and clarify international import and export procedures, customs formalities and transit requirements. It will make trade-related administration easier and less costly, thus helping to provide an important and much-needed boost to global economic growth. EU customs authorities will play a leading role in the implementation of the agreement, the European Commission has said, acting both as an example to follow and as an engine for further progress in trade facilitation within the EU and at international level.
The EU has been one of the promoters of the TFA and led the efforts towards its conclusion. Following the ratification of the deal by the EU Council and the European Parliament in 2015, the Union actively encouraged other WTO members to approve the deal without delay. While the critical mass has now been reached, allowing the agreement to become effective, the Commission said that it hopes the remaining WTO members will ratify the agreement in the near future.
Comparative advertising may be unlawful
ITM, a company responsible for the strategy and commercial policy of the outlets belonging to the Intermarché retail chain, sought an injunction in the French Courts to stop a television advertising campaign by the multinational retailer Carrefour. The campaign compared the prices of 500 leading brand products charged in Carrefour shops and in those of competitors, including Intermarché shops. The Intermarché shops selected for comparison were supermarkets complained ITM, whereas those of Carrefour were hypermarkets. That information was shown on the screen, but not prominently. The French Court of Appeal asked the EU’s Court of Justice (CJEU) whether such advertising is lawful under Directive 2006/114/EC on misleading and comparative advertising and under Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market.
Ruling in Case C-562/15, the CJEU found that comparative advertising based on prices in shops of different formats and sizes can be unlawful in certain circumstances. Such advertising is also liable to be misleading, the Court argued, if consumers are not informed clearly in the advertising itself of the difference in format and size of the shops being compared. It is now for the national court (the Court of Appeal of Paris) to decide the case taking account of the ruling of the CJEU.
EFTA States want to be kept in the loop
Three members of the European Free Trade Association (EFTA) are also signatories to the European Economic Area (EEA) Agreement. Their EEA membership allows Iceland, Liechtenstein and Norway to participate in the EU’s Single Market. Following the UK’s Brexit vote, the three EFTA States have stressed the importance of close dialogue with the EU during the forthcoming EU-UK negotiations. Norwegian Ambassador Oda Helen Sletnes has reportedly received assurances from the European Commission’s Chief Brexit negotiator, Michel Barnier, that the EU will remain in close contact with the EFTA States during the negotiation process. Mr Barnier also said that it was a priority for the EU to safeguard the EEA Agreement.
During its current six-month stint as chair of the EFTA Council, Norway has stressed that it will be placing particular emphasis on developments in the Brexit negotiations, with a view to maintaining close economic and trade relations with the UK. The fourth EFTA member, Switzerland, is not part of the EEA. However, EFTA’s Secretary-General, Kristinn Árnason, recently stated that, although there is inevitable uncertainty about the negotiations between the UK and the EU, it is clear that both the process and the outcome of the discussions would affect all the EFTA States — including Switzerland.
UK firm caught in EU cartel clampdown
Three companies involved in a car battery recycling cartel — including UK company Eco-Bat Technologies — have been fined a total of €68 million by the European Commission. Campine (Belgium) and Recylex (France) were the other two companies to be fined for breaching EU antitrust rules. A fourth participant, Johnson Controls (USA), avoided a fine under what is known as the Leniency Clause by being the first participant in the cartel to break ranks and offer the Commission details of the illegal behaviour. Batteries from cars, vans and trucks are the most recycled consumer product in the world. Some 58 million of them are recycled every year in the EU alone, including nearly 99% of car batteries. The recycling companies buy used batteries from scrap dealers or scrap collectors and then sell the recycled lead — mostly to battery manufacturers, who use it to make new car batteries.
The Commission started its investigation in response to an immunity application by Johnson Controls in June 2012. It found that the four companies had colluded to reduce the purchase price paid to scrap dealers and collectors for used batteries. This disrupted the normal functioning of the market and prevented price-based competition with the impact felt mainly, the Commission found, by smaller battery collectors and scrap dealers. The Commissioner responsible for competition policy, Margrethe Vestager, said that behaviour that undermined competition would not be tolerated. “The four companies fined today have colluded to maximise their profits made from recycling scrap batteries, reducing competition in this essential link of the recycling chain,” she added. Eco-Bat was fined nearly €33 million; the fine for Recylex was just under €26 million and Campine was fined a little over €8 million.
Going electronic at the border
A delivery of oranges from Huelva to Perpignan marked the world’s first border crossing to use electronic consignment notes (e-CMR). The 1300km journey from Spain to France was part of a wider strategy to digitise trade facilitation systems, offer increased efficiency and reduce operational costs. The test shipment was jointly organised by the International Road Transport Union (IRU), the Asociación de Transporte Internacional por Carretera (ASTIC) in Spain and the Fédération Nationale des Transports Routiers (FNTR) in France. The consignment crossed the Spain-France border at Le Perthus. France acceded to the e-CMR protocol only last October, joining Bulgaria, the Czech Republic, Denmark, Estonia, Latvia, Lithuania, the Netherlands, Slovakia, Spain and Switzerland in adopting it.
According to the IRU, the key benefits of e-CMR include: lower costs, faster administration, faster invoicing, and reduction of delivery and reception discrepancies. It also offers greater transparency, improved data accuracy and real-time access to shipment information, and proof of pick-up and delivery. Speaking for Spain’s Ministry of Transport and Infrastructure, Joaquín del Moral said that, as one of the first countries to ratify the e-CMR protocol, Spain supports both the e-CMR and this latest initiative to test and analyse the benefits. Information about e-CMR is available at the IRU website.
EU-wide protection for whistleblowers?
Members of the European Parliament (MEPs) have urged the European Commission to propose “immediately” an effective and comprehensive European whistleblower protection programme. In a recent debate, they deplored the Commission’s failure, to date, to deliver any legislative proposals to establish a minimum level of protection for whistleblowers who help protect the EU budget against fraud. Any programme should include protection mechanisms for companies, public bodies and non-profit organisations, MEPs agreed by a huge majority. They also advocated setting up an independent EU body, with offices in all Member States, to help whistleblowers to use the right channels to disclose their information on possible irregularities affecting the EU’s financial interests. Prior to the establishment of such a body, MEPs would like to see a special unit set up within the Parliament, with facilities including hotlines, websites and contact points.
UK and Gibraltar are indivisible
For the purposes of the freedom to provide services, the UK and Gibraltar are a single Member State. That is the legal advice given to the EU’s Court of Justice (CJEU) by Advocate General Szpunar in Case C-591/15 (The Gibraltar Betting and Gaming Association Limited (GBGA) v HMRC). The case — which has implications for online gaming providers — was originally brought before the High Court in the UK by the GBGA on the grounds that the UK’s New Tax Regime adopted in 2014 is contrary to the freedom to provide services enshrined in EU law. HM Revenue & Customs (HMRC) argued that the GBGA has no enforceable EU rights because the provision of services between Gibraltar and the UK is not caught by EU law. The High Court asked the CJEU to rule on the issue.
In his opinion, Advocate General Szpunar argues that, although it is clear from the Treaties that EU law applies to Gibraltar, the relationship between the UK and Gibraltar when it comes to the application of fundamental freedoms is not clear. (It is the role of the Advocates General to propose to the CJEU a legal solution to the cases for which they are responsible. The Court will give its judgment at a later date and, while it is not bound to follow the Advocate General’s advice, it tends to do so in the majority of cases).
Germany green-lighted to go electric
The European Commission has decided that Germany’s scheme to roll out a network of user-friendly infrastructure for charging electric vehicles across the country is in line with EU state aid rules. It addresses a real gap in the market without unduly affecting competition in the Single Market, Competition Commissioner Margrethe Vestager said. At a cost of in total €300 million over four years, this measure promotes the installation of new standard and high-speed charging stations for electric vehicles, as well as the extension of the existing infrastructure. The scheme is open to all, including companies, individuals and local authorities, and support will be awarded progressively through an open and transparent tender procedure. It requires that the electricity for the charging infrastructure comes from renewable energy sources.
EU sets its sights on Indonesia trade deal…
The European Commission has published details of its current trade negotiations with Indonesia. Bilateral trade talks between the EU and the South East Asian country were launched in July 2016, with the aim of concluding a Comprehensive Economic Partnership Agreement (CEPA) between the two. Issues covered include: customs duties and other barriers to trade; services and investment; access to public procurement markets; competition rules and the protection of intellectual property rights. With a population of over 250 million people, Indonesia is the largest market in South East Asia. Figures for 2015 show that bilateral trade in goods between the prospective partners had already reached more than €25 billion that year. The EU is Indonesia’s fourth largest trading partner, while Indonesia is the Union’s fifth largest partner in the Association of Southeast Asian Nations (ASEAN).
Details of the negotiations just released by the Commission show that the talks have addressed the opening of public procurement markets, the need to reduce unnecessary overlapping regulatory barriers to trade and how to increase trade benefits for small businesses. In addition to trade issues, the CEPA is also intended to uphold current levels of protection for consumers, workers and the environment, and to promote sustainable development. Further information about trade between the EU and Indonesia can be found at the European Commission website.
… and turns its attention to Mexico
With the US President, Donald Trump, making very clear that trade with Mexico means an unacceptable loss of jobs in the USA, he has left his southern neighbour in little doubt that the North American Free Trade Agreement (NAFTA) will soon be a thing of the past. Stepping into the breach, the European Commission has suggested that negotiations on a new trade deal between the EU and Mexico should be speeded up. The move will see an additional two rounds of talks take place in April and June this year. There will also be a meeting in Mexico City between the EU’s Trade Commissioner, Cecilia Malmström, and Mexico’s Minister of Economy, Ildefonso Guajardo, to take stock of the negotiations. The aim is not only to modernise the existing deal between the two, but also to broaden its scope. In a joint statement, Mrs Malmström and Mr Guajardo said: “Together, we are witnessing the worrying rise of protectionism around the world. Side by side, as like-minded partners, we must now stand up for the idea of global, open co-operation.”
Exports from the EU to Mexico include machinery and electric equipment, transport equipment, chemical products and mineral products; services exported to Mexico are mainly in the travel, sea transport, air transport and computer and information services sectors. The EU is Mexico’s third largest source of imports (8% of foreign trade) after the USA (67%) and China (9%). It is anticipated that a new deal will further reduce customs tariffs and provide EU businesses with more opportunities to provide services, participate in public procurement and invest in Mexico. For more information, see the European Commission website.
EU trade with the rest of the world stays in the black
The latest figures from the EU’s statistical office, Eurostat, show that the Union exported more goods to the rest of the world in November 2016 and recorded a €25.9 billion trade surplus, compared with €22.9 billion in November 2015. For the year to November, Eurozone exports of goods to the rest of the world stood at €1869 billion (nearly stable compared with January to November 2015) with imports at €1620.8 billion (a decrease of 2% compared with that same period). As a result the 19-member Eurozone recorded a surplus of €248.2 billion, compared with +€214.3 billion in the January to November 2015 period. For the full 28-member EU, however, the trade surplus in November 2016 was just €6.9 billion, compared with +€5.7 billion in November 2015.
As has been the case for many months, the country pulling the surplus down, for the full EU, has been the UK which, in the period January to November 2016 recorded a trade deficit of €195.4 billion (compared with €144.1 billion in the same period in 2015). France was the closest to the UK with a €61.8 billion deficit; Greece and Spain followed, both recording –€16.8 billion. Once again the largest trade surplus was recorded by Germany, although its figure of €238.3 billion was only slightly up on its January to November 2015 surplus of €229.5 billion. The next two — Italy, with €45.8 billion, and Ireland (€44.9 billion) — followed some considerable way behind.
Environment MEPs chided for agreeing Canada trade deal
Members of the European Parliament’s (MEPs) Environment Committee have gone against the advice of the MEP charged with producing an assessment of the EU-Canada trade agreement and voted to accept it. The Committee’s Rapporteur had produced a highly critical report on the Comprehensive Economic and Trade Agreement (CETA) which continued its ratification process in the European Parliament after narrowly escaping being derailed last year by opposition from the Belgian region of Wallonia. Green group Transport & Environment (T&E) said that the Committee “had missed a vital opportunity to redflag” the agreement, arguing that it should have been rejected because of its flawed investment tribunal system and “toothless” environmental provisions.
CETA, suggested by some as a model for the UK’s trading arrangements with the EU post-Brexit, would set up special investment tribunals to only hear cases brought by corporations, not by citizens or their governments. This would, T&E argues, allow companies to bypass national courts to pursue financial payouts from states and thereby threaten measures taken in the public interest, such as policies favouring renewable energy. “CETA also does nothing to encourage climate mitigation measures, as called for in the Paris climate agreement which was signed by both Canada and the EU,” the environmental group went on. It has called on the full European Parliament to reject the trade agreement when it comes before a plenary session on 15 February 2017. However, MEPs voted to accept the deal which could start to come into effect as early as April 2017.
Trade Facilitation Agreement nears ratification
Nigeria has ratified the Trade Facilitation Agreement (TFA), making it the 107th member of the World Trade Organization (WTO) to do so and meaning that only three more ratifications are needed to bring the TFA into force. The Agreement, which will apply to all 164 WTO members, is expected to change customs procedures in a way that will help small businesses access new export opportunities. It has two significant sections, with section I containing provisions for expediting the movement, release and clearance of goods, including goods in transit. It clarifies and improves the relevant articles (V, VIII and X) of the 1994 General Agreement on Tariffs and Trade (GATT) and sets out provisions for customs co-operation. Section II concerns special and differential treatment (SDT) provisions allowing developing and least developed countries (LDCs) to determine when they will implement individual provisions of the Agreement.
WTO Director-General Roberto Azevêdo welcomed Nigeria’s initiative but used the occasion of a speech to the World Economic Forum in Davos to warn of a potential rise in protectionism around the globe. His speech came on the same day as Donald Trump was sworn in as President of the USA with an address in which he made plain his trade policy for the next four years. Mr Trump said: “Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”
A joint assessment setting out progress on the negotiations for a Transatlantic Trade and Investment Partnership (TTIP) has been issued by Trade Commissioner Cecilia Malmström and US Trade Representative Michael Froman. The joint report outlines progress made in all areas of the talks, including: access to markets for both EU and US firms, technical regulations and standards, and global rules on trade. This last point includes sustainable development, labour, the environment and SMEs. Among a number of issues where differences remain to be resolved are access to public procurement markets, investment protection and intellectual property. Commenting on the report, Commissioner Malmström said that the EU “has left no stone unturned in trying to achieve a balanced, ambitious and high-standard TTIP agreement with clear benefits for citizens, local communities and companies”. Given President Trump’s critical comments about TTIP, however, considerable doubts remain about its future.
Modernising the Customs Union with Turkey
Together with Norway and Switzerland, the country probably mentioned most by those discussing the possible models for the UK’s future trading relationship with the EU is Turkey, which is presently in a 20-year-old Customs Union with the EU. The European Commission (EC) has decided that it is time for change, however, and it has put forward what it describes as an upgrade of the EU-Turkey agreement. Modernising the Customs Union to reflect current EU-Turkey trade relations would, the Commission argues, bring substantial economic benefits for both partners. Arguing that the evolution of the economic environment, and the significant growth of EU-Turkey trade, means that the Customs Union that entered into force in 1996 is becoming less and less equipped to deal with the modern-day challenges of trade integration, the Commission has asked the Member States for a mandate to launch fresh talks with Turkey. Assuming that the Member States, through the EU’s Council of Ministers, give the Commission the go-ahead, it seems that it will be dealing with at least two major negotiations this year.
Commission sets out long-term plan for Customs Union
National customs administrations in the EU Member States should work towards acting as a single entity, the EC has argued. Setting out its vision for the future of the Customs Union, the Commission says that greater co-operation among national authorities is needed if the challenges of the 21st century are to be met. The Customs Union operates under a legal framework known as the Union Customs Code (UCC) which has been in force since 1 May 2016. The system helps, according to the Commission, to protect the public against terrorist, health and environmental threats, while at the same time fostering and developing competitive businesses. Among the Commission’s main priorities for further developing the system are: encouraging common agreement among Member States on the application of EU customs rules, helping customs administrations to make the work of 120,000 customs staff more effective, and upgrading and aligning new EU-wide IT systems dedicated to customs procedures. The Communication, Developing the EU Customs Union and Its Governance, is available at the EUR-Lex website.
Still no deal on Environmental Goods Agreement
EU Trade Commissioner Cecilia Malmström and US Trade Representative Michael Froman have jointly chaired a meeting hoping to reach a deal on an Environmental Goods Agreement (EGA). Since July 2014, the EU and 16 other members of the World Trade Organization (WTO) have been negotiating on an agreement to remove barriers to trade in green goods that are crucial for environmental protection and climate change mitigation. These would include products such as carbon dioxide scrubbers, recycling machinery, heat pumps, thermostats and wind turbines. The negotiators are building on a list of 54 products on which the member countries of Asia-Pacific Economic Co-operation (APEC) have agreed to reduce their tariffs to 5% or less. Speaking ahead of the meeting, the Commissioner said: “Making trade in environmentally-friendly technologies cheaper is a key step on the way towards reaching the targets set in the Paris agreement on climate.” However, a joint statement with the US Trade Representative, released after the Geneva meeting indicated that agreement has still not been reached. While recognising that many participants engaged constructively, and brought new contributions to the table, the statement concludes that “participants will now return to capitals to consider next steps”.
Commission confirms counterparties
The EC has adopted equivalence decisions for central counterparties (CCPs) and trading venues in 10 non-EU jurisdictions. India, Brazil, New Zealand, Japan Commodities, the United Arab Emirates (UAE) and the Dubai International Financial Centre (DIFC) are all deemed by the Commission to have equivalent regulatory regimes for CCPs to the EU. Confirmation that they meet the EU’s regulatory standards will, the Commission explains, “contribute to market certainty and cross-border activity, avoiding the fragmentation of markets”.
The Commission has also determined that the rules governing certain financial markets in Australia, Canada, Japan and Singapore can be deemed equivalent to those in the EU. The decision will allow EU corporates active in financial markets to apply the same treatment for their transactions on these exchanges as for European ones for the purpose of calculating whether they cross thresholds triggering mandatory clearing under EU Regulation 648/2012 (known as “EMIR” — the European Market Infrastructure Regulation). Commenting on the announcement, Commissioner Valdis Dombrovskis said: “The EU co-operates closely with third countries to protect financial stability while supporting firms to operate across borders in global markets.” Details of the Commission’s decisions can be found at ec.europa.eu.
Freedom of movement
London prepared to go it alone on visas
Mayor of London Sadiq Khan has warned the Government that he will have no choice but to look at a London-specific solution if ministers refuse to act over employers’ fears that business will lose access to skilled EU workers after Brexit negotiations. He is to arrange a meeting with business leaders and other experts to push ahead with plans to put pressure on the Government to develop a new system to ensure that businesses can retain access to the skills they need. “The City of London Corporation and London Chambers of Commerce have already done some crucial early thinking about options,” the Mayor went on, “but we need to go further and faster to make the case to the Government and develop a new system.”
In a speech to the Institute of Directors (IoD), Mr Khan claimed that ministers appear not to be listening to business concerns. He highlighted that London has one of the most international workforces in the world, with 616,000 people born elsewhere in Europe working in the capital, representing 12.5% of the entire workforce. The Mayor noted that 88,000 are employed in the construction industry, 49,000 in financial and insurance activities and 58,000 in professional, scientific and technical activities. He believes that a London work permit could help to keep many of these people in London as such a scheme would allow employers to be able to sponsor skilled foreign workers after Britain leaves the EU.
Mondelez puts four fingers up to Nestlé
The European Union Intellectual Property Office (EUIPO) has been told to reconsider whether the three-dimensional shape corresponding to the product “Kit Kat 4 fingers” can be maintained as an EU trademark. The mark was registered by the EUIPO in 2006, following an application by Nestlé four years earlier. In 2007, Cadbury Schweppes (now Mondelez UK Holdings & Services) applied for a declaration of invalidity, but the EUIPO dismissed the application in 2012. Now, the EU’s General Court has annulled that decision and ruled that the EUIPO must re-examine whether the shape of the well-known chocolate bar had acquired distinctive character in the 15 Member States concerned when Nestlé made the original application. A summary of the Judgment in Case T-112/13 can be found here.
Commission complains after firearms law shut down
After a year of discussions, the European Parliament and the Council have reached a provisional agreement on a new Firearms Directive. The agreement includes a ban on automatic firearms transformed into semi-automatic ones, the regulation of alarm and acoustic weapons, restrictions of online sales and provisions on greater exchange of information between EU Member States. Once formally adopted, the new legislation will amend Directive 91/477/EEC on control of the acquisition and possession of weapons. Although Commission President Jean-Claude Juncker described the deal as “a milestone in gun control in the EU”, the Commission has complained that elements of its original proposal were not supported by the Parliament and the Council. Commissioners had called for the most dangerous semi-automatic firearms to be completely banned and for magazine size to be limited to 10 rounds for all semi-automatic firearms.
EU set to modernise its trade defences
If the world really is heading for a new era of protectionism and trade barriers, the EC seems determined that the EU should at least have its defences in good order. It has finally reached agreement with the Council of Ministers, representing the EU’s Member States, on a proposal which it first put forward in 2013. At the time, it said that the aim was to provide Europe’s trade defence instruments (TDIs) with more transparency, faster procedures and more effective enforcement. In exceptional cases, such as in the presence of distortions in the cost of raw materials, the agreed proposal will enable the EU to impose higher duties through the limited suspension of the so-called lesser duty rule. This currently lays down that a duty may be imposed to remove the effects of dumping on imports of a particular product. An assessment is also made of the level of duty needed to remove the injurious effects of dumping with measures being imposed at the level of dumping or injury, whichever is the lower.
The TDIs employed by the EU have remained largely the same for over 15 years but the Commission has argued that the situation on world markets has changed dramatically. The proposed regulation amending current anti-dumping and anti-subsidies regulations to better respond to unfair trade practices now has to be agreed with the European Parliament, with the Commission hoping to have it in place as soon as possible in 2017.
China goes into battle over Market Economy Status
Whether or not a country is granted Market Economy Status (MES) by the EU sounds like a rather arcane economic argument, but it can, in fact, have a huge impact on that country’s exports. This is because MES is used to calculate anti-dumping measures when the EU decides to take action against a country, which it believes is helping exporters to sell into the EU market at unrealistically low prices. If an exporting country is not accepted as having MES, in other words if its costs and prices are not market based, then it will face much higher anti-dumping duties as the EC seeks to protect European industries from unfair competition. China has been pushing for MES from the EU for some time, but its patience seems to have run out as it has now turned to the WTO for redress.
It has opened a dispute process at the WTO with regard to both the EU and the USA, claiming that both use unfair “calculation methodologies” in anti-dumping proceedings. When China joined the WTO, existing members were given a 15-year period during which they could treat it as a non-market economy if dumping duties had to be calculated. However, that period ran out on 11 December 2016 and China has wasted no time in demanding that it be granted MES. It was reportedly angry that the EU had imposed anti-dumping duties on its steel products, still treating it as a non-market economy just a few weeks before the WTO’s deadline. China described this decision as protectionist. Under WTO rules, the parties to a dispute must discuss the matter and try to find a satisfactory solution without proceeding further with litigation. Only if consultations have failed after 60 days can the complainant request adjudication by a WTO panel.
New edition of global trade classification
A revised version of the Harmonized System (HS) Nomenclature entered into force on 1 January. The new edition introduces 233 sets of amendments, with most of the changes prompted by the Food and Agriculture Organization of the United Nations (FAO), including amendments for fish and fishery products. It is therefore not surprising that it is the agricultural sector that has seen the most changes (85), with the chemical (45) and machinery (25) sectors also among those most heavily revised. Developed by the WCO, the HS Nomenclature was first adopted in 1983 and is now used by over 200 countries and Economic or Customs Unions for classifying goods in international trade. It is also used by the WTO and individual countries as a common language of trade for the purposes of trade negotiations, and as a basis for determination of the origin of goods. Further information about the HS is available at www.wcoomd.org.
EU tackles non-tariff barriers
The EC has announced measures to help exporters get the most from EU trade deals. It is joining forces with the 28 Member States in efforts to tackle the non-tariff measures and red tape that hamper EU exports. Despite action to remove trade barriers in non-EU countries, a joint report from the Commission and the International Trade Centre (ITC) reveals that problems still exist. Based on interviews with 8100 export-oriented businesses, the report provides new evidence of the impact that non-tariff barriers imposed by the EU’s major trading partners have on exporters. Although the great majority (80%) of barriers are in non-EU countries, a significant proportion (20%) of complaints by EU businesses concern procedures in their own countries.
Tackling those issues requires the involvement of the Member States, the Commission points out, urging greater co-operation in implementing existing regulations and agreements and in streamlining procedures. By co-ordinating trade diplomacy, eliminating obstacles at home and supporting business wishing to take up the opportunities offered by EU trade agreements, it highlights, national governments can save exporters time and money — and thereby help their competitiveness in world markets. According to the report, the majority of non-tariff measures encountered by EU exporters are burdensome entirely or partially because of the procedural obstacles encountered when trying to demonstrate compliance with a given regulation — rather than the regulation itself being too strict. Navigating Non-tariff Measures: Insights from a Business Survey in the European Union can be found here.
Updated trade agreement with Mexico
As part of its commitment to a more transparent trade policy, the EC has published six initial proposals for modernising various elements of the EU-Mexico trade agreement. It has also made available a report on the recent round of talks that took place in Mexico. All these documents can be found at the European Commission website. EU Trade Commissioner Cecilia Malmström explained: “Sixteen years have passed since the current EU-Mexico became effective. Today we need to adapt it to a new trade reality. We’ve had some good initial talks with our Mexican counterparts but to reach a good agreement we also need constructive engagement from interested parties.” Since the existing EU-Mexico agreement entered into force in 2000, EU-Mexico trade in goods has increased by 180% and amounted to €53 billion in 2015.
The texts presented by the EU in the latest negotiations aim to increase participation of European companies in Mexican public tenders, and vice versa, and to increase co-operation on import requirements related to food safety, plant and animal health. The Commission is also keen to facilitate trade in energy products and raw materials, and to define more flexible rules of origin (establishing what products can benefit from lower customs tariffs). More generally, the proposals seek to reduce unnecessary regulatory barriers to trade and to increase the part of trade benefits that go to small companies.
EU Court set to rule on how trade agreements are concluded
When the UK’s ambassador to the EU said that a trade deal after Brexit could take 10 years to complete, one MP said that trade talks could be completed “in an afternoon”. If this seemed unlikely when he said it, it seems even less so after one of the leading lawyers at the Court of Justice of the European Union (CJEU) recently produced an opinion on how Free Trade Agreements (FTAs) are to be concluded by the EU. Advocate General Eleanor Sharpston had been asked by the Court to look into the relevant law after the EC asked whether it (representing the EU as a whole) could conclude the FTA with Singapore without involving the Member States. The Court will give its response to the Commission’s request in 2017 and may go against Ms Sharpston’s advice, but it is more likely that it will agree, particularly given the fact that she is among the most senior of the CJEU’s Advocates General.
The Court’s decision will be final and there will be no right of appeal, so the likelihood is that the Member States will be given a more powerful voice in the conclusion of EU trade deals. Recognising the possibility of further delay, the Advocate General notes that difficulties may arise from a ratification process involving all of the Member States alongside the EU. However, she considers that that cannot affect the question of who has competence to conclude the agreement. Ms Sharpston’s arguments can be found at curia.europa.eu.
Brexit for business
British businesses of all sizes and from all sectors want to know how easy it will be for them to trade with the EU after the UK leaves the Union. They need to know what rules they will be working to and how they can secure access to skilled workers and labour, CBI Director-General Carolyn Fairbairn said as she announced the publication of a new report on Brexit. Based on the largest consultation of its members since before the EU referendum, “Making a success of Brexit” sets out six common principles that respondents from a wide range of companies identified as business priorities. Top of the list is the need for a barrier-free relationship with the EU (described by the CBI as the UK’s largest, closest and most important trading partner). That is followed by the need for a clear plan for regulation, to provide companies with certainty in the short term and which will balance influence, access and opportunity in the long term.
A migration system which allows businesses to access the skills and labour needed to deliver growth is third on the list, followed by a renewed focus on global economic relationships (with the business community at their heart) and an approach that will protect the social and economic benefits of EU funding. The list of priorities ends with the call for a smooth exit from the Union. The report points out that there are serious concerns in the business community about disruption if a final deal is not finished by the time the Article 50 negotiations are complete. It can be found at www.cbi.org.uk.