How the new European Commission will affect business
What the ECCT delegation learnt from the recently-completed Open Door Mission
By Duncan Levine
Nothing is certain in politics or business, of course. And, depending on who the ECCT delegation spoke to during its annual Open Door Mission trip to Brussels in late December 2019, the answer on any number of subjects varied widely. (Read the Event Report here to see who the delegation met with and some of the highlights of the trip). However, there are several insights gleaned during the trip on current trends and anticipated policy direction under the new European Commission and the impact this may have on business.
Still in a transition phase
The new European Commission under President Ursula von der Leyen took office in December 2019. While the day to day business of the commission continues as usual, it usually takes several months before all posts are filled and for comprehensive policies to have been drafted and implementation to begin. Therefore, don't expect too much to happen in the first few months of 2020.
Climate on their minds
Addressing climate change is at the top of the agenda of the new commission as outlined in the guiding principles for the new commission, which are: a European Green Deal, an economy that works for people, and a Europe fit for the digital age.
The Green Deal is being driven by popular support within EU member states, backed by the recent large increase in the number of green or leaning-towards-green party representatives both in the European parliament and at the national and local level in European member states (although member states are not completely aligned on green issues). This popular support gives the commission a political mandate take action on a number of fronts. For example, the new commission is talking about things like a carbon border tax and duties on high carbon products, such as steel from China. However this idea is fraught with difficulties, given the interconnectedness of global supply chains and related complexities. It is very difficult to calculate, for example, the carbon content on steel beam from China. If there is no agreement on the calculation, those on the receiving end of higher duties may take their cases to the WTO.
European business and industry associations are generally supportive of the green deal, as long as polices are feasible, expectations are realistic and affordable for companies given that the private sector will be asked to foot much of the investment bill that will be required. For example, if the EU raises carbon reduction targets, this will have a major impact on a number of industries. While companies engaged in low carbon and renewable energy activities will benefit, the automotive industry, for example, will find it difficult to meet ever-tougher fuel emission requirements. There is also somewhat of a disconnect between public demands and consumer behaviour. A case in point is that while there is strong public pressure on authorities to improve air quality, 2019 vehicle sales data in Europe reveal that there is much stronger demand preference in the EU for gas-guzzling SUVs than for electric vehicles or other fuel-efficient new energy vehicles. This is creating a real headache for automakers.
US-China trade war
While President Trump is touting the first phase of his trade deal with China as a great success and there is some concern within EU member states about the implications, the general consensus in Brussels is that phase 1 will not have much of an impact. However, there is more concern in Brussels about the prospect of a phase 2 deal if that would allow the US access to important industry sectors in China that would exclude EU players. In the meantime, the EU's trading relations with the US remain tense over issues such as the US’s punitive measures imposed on Airbus, existing tariffs and the threat of tariff increases by the US on certain products (Trump has threatened raising tariffs on European cars and food, for example), and opposition to the imposition by EU member states of a digital tax, which would disproportionately affect US tech giants.
The UK is leaving the EU. While the overwhelming sentiment in Brussels is regret over the UK’s pending exit, there is also relief that the decision is now final and things can move on to discussing future EU-UK relations. On this score, don’t expect things to be wrapped up so quickly as the two sides are not aligned on a number of issues.
Judging by conversations with EU officials in Brussels, the EETO Head in Taiwan (based on his interview with Euroview), and Taiwanese officials in Brussels, EU-Taiwan relations are excellent. While there are some tensions on certain trade issues, the current comprehensive bilateral platforms and frequent exchanges remain effective in addressing trade issues. Moreover, in recently years, bilateral exchanges have been extended to include discussions on human rights, the digital economy, tackling misinformation and cyber security, among other issues. On the subject of an EU-Taiwan Bilateral Investment Agreement (BIA), it is too soon to say what the position on the matter will be for the new Trade Commissioner, Phil Hogan. Regardless, the new trade commissioner will have a lot on his plate initially dealing with the EU's biggest trading partners, China and the US, and finalising a number of other trade deals already in the pipeline.