Archive for the ‘Trade’ Category

Leadership needed for Europe’s foreign policy

Monday, October 19th, 2009

A fundamental purpose of the Treaty of Lisbon is to make the European Union an effective force in the modern world, a global player with a power and influence far greater than the sum of its parts. The appointment of a High Representative bestriding Commission and Council, served by the European External Action Service (EEAS), is designed to provide the institutional framework to achieve this aim, in conjunction with the new Council President.

But will the member states appoint people capable of fulfilling such high ambitions? and how much power will governments be willing to concede in making the new system work? In particular how will, say, France and the United Kingdom approach the challenge, given their highly active foreign service and foreign policy traditions? Remember President Sarkozy and Georgia? Who will speak for Europe in the future?

The rumour mill is working overtime as we await the Klaus signature on the Treaty. The Council President could be an effective bureaucrat or a political driver, male or female, from big country or small. Ireland’s Mary Robinson is one possibility for the presidential job. Tony Blair? I don’t think so, given the UK’s absence from the euro, Schengen etc and Blair’s record with Bush. The Netherlands’ Balkenende could run strongly for the High Representative job. It’s fun to speculate, but no one seems to have any real idea.

It does matter who gets the job of High Representative for Foreign Affairs and Security Policy. The external relations aspects of the Treaty imply far-reaching change within the EU institutions. Over the next two or three years thousands of officials will be brought together from the Council Secretariat, from the external services of the Commission and from the member states to form the EEAS,  a separate entity to handle the EU’s relations with the outside world. Great leadership qualities will be essential to build an effective service.

There will be some fierce institutional battles before there are any diplomatic ones. On Thursday October 22 MEPs will vote on the Elmar Brok report which outlines the parliamentary view of the EEAS and insists that the service should be clearly affiliated to the Commission and funded from its budget. This would give Parliament a direct say which it would be denied if EEAS and its funding were to be hived off to the Council. ALDE member Andrew Duff warns of a block on the new Commission appointments if the EP does not get its way. So it’s clear that the institutional wrangling is by no means over.

The scale of the changes ahead is considerable. It seems that more than 5,000 people could be transferred from the Commission alone – a fifth of its total complement. They may continue to work in the building where they are now, probably the Charlemagne, but they will no longer be Commission officials (although remaining EU officials). Trade, development and enlargement will remain the Commission’s direct responsibility, but even these departments will be expected to work closely with EEAS.

The European Commission’s 125 or so delegations across the world, plus the Council’s liaison offices, will become European Union embassies, with responsibility for co-ordinating and implementing European policies in their territory. Up to now it has been the embassy of the member state holding the Council Presidency which had this role (or a caretaker embassy in the absence of a national representation). Many officials of the EEAS will be recruited as “temporary agents” from national governments, to serve in the representations and in Brussels.

I gather that the Swedish presidency, COREPER ambassadors in Brussels and the Commission are working intensively to work out the appropriate structure for EEAS. It will then be up to the High Representative, once appointed, to make a formal proposal to the Council in consultation with MEPs and with the “consent” of the Commission as to how the new organisation will function. It looks as if the HR/VP will be appointed before the new Commission has taken over, in which case the current commissioner from that country would stand down. Whoever takes the post will have a formidable task ahead.

Posted in Defence, European politics, Integration, International, Trade, Treaty of Lisbon | No Comments »

Europe can be pleased with G-20 outcome

Friday, April 3rd, 2009

Let’s accentuate the positive! The G-20 meeting in London did achieve a much wider consensus and more far-reaching decisions than most people thought possible.  Merkel, Sarkozy, Barroso and Obama all said so. The summit was also remarkable for its recognition of the realities of a changing world economy and the ability of its disparate players to make common cause.

The G-8 is dead: long live the G-20. It would be good to think that this bodes well for an effective global response to climate change in the run-up to Copenhagen.

The Europeans could feel quite pleased with themselves. The conclusions of the London meeting delivered many of the aims which had been set by the EU spring summit and the EU finance ministers in preparation for the London meeting.

But beware of the fudge. As is usually the case on these occasions, the billions and trillions which appeared in the communiqué were not all they seemed, as the FT nicely demonstrated in its graphic. For instance, the $250bn figure to support trade finance apparently relates to the amount of trade supported rather than the cost of underwriting it, which is put at $25bn; and the much hyped extra funding for the IMF comprises some money already committed from Japan and the EU and greater borrowing in the future. The IMF will be selling some of its gold bars as well.

Will this be enough to support the economies of central and eastern Europe?

On the other hand the programme to increase the role of the new global economies in the IMF and World Bank is a recognition of the need for change, while a commitment to avoid trade restrictions provides a valuable sheet anchor to restrain protectionist pressures in difficult times.

The Merkel-Sarkozy positioning in advance of the summit and President Sarkozy’s threat to walk out were intriguing. Their pre-summit initiatives were no doubt an assertion of their independence and a way of distancing themselves from the US, particularly important for both leaders given the public resentment against an American banking system which had precipitated the crisis in the first place.

German opposition to pumping more cash into the economy along the lines advocated by Gordon Brown reflected long-standing German fears of inflation, while President Sarkozy’s threat to quit made great news coverage for him at a time when he is battling deep unpopularity at home – and just as France becomes a full member of NATO. He was able to show himself as the scourge of Anglo-Saxon capitalism.

In fact the London conclusions on financial regulation appear to fit neatly with the EU agenda agreed last month.  President  Barroso has already outlined the timetable for action.  A beefed up global Financial  Stability Board will be a valuable counterpart to the proposed EU risk assessment bodies. The European Commission will be pleased to become a member of the FSB.

Tax havens were President Sarkozy’s final battleground, aimed particularly at the 60 per cent of hedge funds which he claimed were registered in these territories. He wanted instant publication of the OECD name-and-shame list, but ran up against Chinese opposition related to the position of Hong Kong and Macao. It was President Obama who brokered a deal in the margins of the meeting, as Sarkozy himself acknowledged.

“The era of banking secrecy is over” said the final text. Let’s now see how quickly those EU countries which have still to implement the tax standard (Austria, Belgium and Luxembourg) can be persuaded to agree.

Posted in European politics, Finance, International, Trade | No Comments »

Europe prepares for G20 crisis meeting

Monday, March 9th, 2009

The European Competitiveness summit should look very different this year. The March 19-20 meeting will be struggling to finalise an EU position for the April 2 crisis meeting of the G20 in London on the basis of the Commission’s Communication.

Negotiations will take place against a profoundly uncertain economic backdrop where there are major potential risks to national economies across Europe and beyond. I have talked with old friends in Brussels who believe that the credit crisis still has a long way to run. They even talk of the need for a new Marshall Plan to rescue stricken economies. (A view which, I should say, some leaders rejected at the March 1 European Council).

“A global crisis needs a global solution. Today we have put our proposal on the table for a European response for the G20 meeting in London. Europe will speak with one voice”. So promised President Barroso when launching the Communication Driving European Recovery.

The Commission’s document plays down any sense of impending doom. Its main focus is on improved financial regulation along the lines of the February 25 report by the Jacques de Larosière taskforce.

As anticipated, this report was just what the client (ie the Commission) ordered: a European Systemic Risk Council (ESRC) based on the ECB which would provide early warning of supervisory risk, a European System of Financial Supervision (ESFS) to beef up supervision at the level of firms, extended regulation in areas of financial services which are currently unregulated and action to control the bonus culture of banks.

The main difference from the Larosière proposals is an increased urgency: the measures should be up and running in 2010, rather than over a three-year run-in period.

It’s my impression that the member states will broadly approve the proposals on financial supervision, although the Brits and other non-eurozone countries can be expected to oppose such a significant role for the European Central Bank. In any event, the EU will be determined to retain European control over prudential issues, albeit in the context of global co-ordination, and not cede power to others.

Dealing with these supervisory issues is all well and good, but essentially deals with past failures and the need to avoid them in future. Is that a sufficiently ambitious position for Europe at the G20?  The challenge now is to get the world economy going again. The Communication sees the €400bn European Economic Recovery Plan providing co-ordinated stimulus to Europe’s economy, but much of that is a repackaging of existing funds and most of the funding comes from the member states themselves.

The Commission “remains committed” to working with European and international financial institutions to support the economic stability and development of potential EU candidates and neighbouring countries.

In outlining an EU position for the G20 the Commission defends free trade and global development. I just wonder whether enough attention is devoted to the concerns of the G12 – those like Argentina, Brazil, China and India which have joined the G8.  At least there are calls for reform in the governance of the IMF and the World Bank, a temporary doubling of IMF resources and strengthening of its surveillance role. That does seem to recognise a global dimension.

Posted in Finance, Trade, Treaty of Lisbon | No Comments »

Economic crisis exacerbates tensions

Tuesday, February 17th, 2009

The economic crisis is exacerbating tensions across the EU. President Sarkozy has done his bit, stating on television that while French manufacturers can make cars in India which are for sale to Indians, they should not make cars in the Czech Republic which would then be sold in France.  He apparently called for the repatriation of car manufacture to French soil.

Sarkozy’s remarks could not have come at a worse time for the Czechs. The last thing you want when unemployment is rising and your currency is under pressure is any threat to the new investments which are so vital for your economy. Nor is it helpful when your country still has to ratify the Lisbon Treaty and you depend on a sceptical parliament to vote it through.

An angry Czech prime minister Mirek Topolanek warned of the spectre of protectionism, which could prolong and intensify the downturn. On February 9 he announced plans for a European Council to discuss protectionism, while on the very same day Sarkozy and Chancellor Merkel issued a joint (rival) statement calling for an informal European Council “to prepare the spring summit”.

It has now been agreed that everyone will lunch together in Brussels on March 1. Will protectionism be mentioned at all, I wonder.

Protectionism can take many forms. Who can resist a headline?  “British jobs for British workers” said Gordon Brown at the 2007 Labour Party conference, only to see his rallying call spelled out on strikers’ placards earlier this month as British workers complained that Italians and Portuguese were carrying out a contract at a British oil refinery (owned by Total). Right-wing parties made hay of it and we will no doubt see the slogan again during the European election campaign although not, I imagine, in the hands of Labour candidates.

The president of Italy’s Cofindustria expressed her dismay at the phrase, complaining of “protectionist tendencies and raw nationalistic instincts” in an article in the Financial Times.

The French bail-out plans for the car industry have put the European Commission on the spot. Competition Commissioner Neelie Kroes was quick to condemn Sarkozy’s original remarks. When the plan itself was unveiled, the Commission asked for further details to ascertain whether state aid conditions were being met. Commission president Barroso was rather defensive of the French, saying that if regional aid was proposed it would clearly relate to investment within France.

There is another interested party to this debate on protectionism: the United States. The €800bn emergency bill which was passing through Congress contained some significant “Buy American” clauses for public contracts, with particular relation to steel. It seems that President Obama was quick to amend this to say that any such moves must be compatible with international trade obligations, but you can be sure that the small print of the 1,000 page document will be rigorously scrutinised by trade officials across the globe.

As the April G20 meeting comes closer, where the role of international institutions such as WTO, IMF and World Bank will be discussed, everyone will be scrutinising everyone else’s actions for any moves towards the erection of trade barriers in the face of the worldwide recession.  European solidarity has rarely been more essential.

Posted in Elections, European politics, Eurozone, Trade, Treaty of Lisbon, UK politics | No Comments »

Europe prepares for Obama presidency

Monday, November 10th, 2008

After all the excitement of an amazing US presidential election, here we stand in the cold light of dawn, wondering what happens next. What can we Europeans expect of President Barack Obama? As others have pointed out, his first duty will be to serve the interests of those who elected him and not the political priorities of friends and neighbours, so we should not raise our hopes too high.

Yet things do seem very different this time. All the evidence suggests that Senator Obama will be a president who is deeply committed to a multilateral approach and who perceives international co-operation as fundamental to meeting the challenges which the US faces. His July trip around Europe gave a strong indication of his global perspective. The deeply unpopular image of America across the world causes him real distress.

Obama was careful during his campaign to avoid giving too many hostages to fortune, but trade was one exception, as the candidate argued that free trade agreements such as NAFTA were responsible for job losses and that outsourcing of production benefited businesses while damaging the interests of their workers.

A strengthened Democrat majority in Congress will not make it any easier to resist protectionist sentiment and no doubt we can expect some early measures such as support for the US auto industry – a distant echo of President Bush’s support to steel and farming in the early days of his first term. There may well be tax changes as well, which make outward investment less attractive to US firms.

There is a small window of opportunity. Over the coming weeks people will seek to breathe new life into global trade negotiations. The new trade commissioner Baroness Ashton has raised the hope of progress for the Doha Round in what I thought a rather convincing BBC interview and Pascal Lamy has offered to stay on at the WTO in pursuit of an agreement.

So will the November 15 summit in Washington open the way for trade talks as the Brazilians hope, I wonder? And will President Sarkozy speak for free trade during the meeting? Maybe it will be easier in the absence of ex-Commissioner Mandelson!

Climate change is an issue where we can confidently assume that the new president will chart a new course. Take a look at his manifesto on energy and climate change. He espouses emissions trading, wants renewables to provide 25 per cent of energy needs by 2025 and sees further investment in biofuels and new technologies. Nuclear power and energy saving also feature on his wishlist.

Europe should feel comfortable with this agenda, but faces some fundamental challenges of its own, in particular whether it can deliver on the commitments already made, without which its current position of leadership will melt away. The broader challenge is to bring China, India and similar economies more directly into global decisions. Real progress by Europe and the US will be an essential precursor of movement here.

The evolution of US policy towards Russia will be of special interest to Europe, intertwined as it is with the issue of Star Wars missile defence.

Medvedev’s clumsy reference to Russia’s anti-missile missiles in Kaliningrad (or are they anti-anti-missile-missiles?) is hardly likely to change US policy, but I suppose was intended to put pressure on the EU and to drive in deeper any wedge between the US and Europe. After all, Russia already has such armaments in situ. For Polish prime minister Donald Tusk Medvedev’s statement was political and not military.

Obama is a man who will take his time. Once in office he will no doubt weigh up the efficacy of the anti-ballistic missile system, its budgetary cost and its political implications. The Pentagon is asking for $65.5 billion for development at a time of severe budgetary pressures. Any improvements in US-Iran relations would also come into the picture. If there is a change in US policy it will be rationally thought through and set in a wider context than just providing comfort for Russia.

The Europeans are keen to seize the initiative on a reform of global economic management at the November 15 Washington summit and produced a detailed set of proposals when they met in Brussels on November 7.  The current mood in the US will certainly be responsive to tougher regulation, maybe going further than the European Commission, for instance, would want. How far a new president will respond to giving more power to international organisations such as the IMF remains to be seen. Once again the Democratic dominance in Congress will be an important factor.

Finally there are those issues such as the Middle East conflict and the war in Afghanistan. While Europeans hope for a more proactive US role in the peace process they can also expect the new president to demand greater support against Al-Qaeda. This may be the most challenging element in transatlantic relations over what promises to be a period of far-reaching change.

Posted in Climate change, Defence, Energy, Finance, International, Russia, Trade | 1 Comment »

Doha collapse: bitter disappointment for the Commission

Thursday, July 31st, 2008

Collapse of the Doha Round after seven years of negotiation must have been a major disappointment for the European Commission. As the Barroso team moves towards the twilight year of its five year term a positive result in Geneva would have somewhat alleviated the gloom following the Irish referendum, the suspension of the Lisbon Treaty process and the stormy economic environment facing Europe.

For Commissioner Peter Mandelson it was a bitter personal blow, since negotiation of a new global trade agreement was almost the raison d’être of his five years in Brussels.

Doha was named the WTO’s Development Round. It was intended to reflect the change in priorities which gave more recognition to the needs of developing countries and acknowledged the emergence of new economic powers. Unlike previous rounds, this was not a private party between the European Union and the United States. The powerhouse economies such as Brazil, India and China were major players and the poorer developing countries were expected to be major beneficiaries.

The talks apparently foundered on Indian and Chinese demands for a high level of protection against surges in food imports. The United States was fiercely opposed to these safeguard arrangements. So was Brazil and other agricultural exporters among the developing countries.

Impending elections played their part, certainly as far as the US was concerned, but also in India – see Carl Mortishead’s analysis in the London Times of the Indian political situation.

Failure in Geneva marks the end of an era when policy-makers across the globe pushed to open up trade and when vast numbers of people across the world benefited from rising living standards as a result.

There will be attempts to rescue something from the wreckage, but there are big dangers ahead. Protectionism is a real risk in a time of economic downturn. A new US president could be tempted down the same path as was taken by Bush in his early years, when he rushed to protect US steel and agriculture. Bilateral deals are likely to increase.

Europe has a crucial role to play in this uncertain environment. At least the EU maintains its commitment to an open world trading system and it must play to its considerable strengths to defend it. The fact that European trade policy is set at one remove from the pressures of national politics is a great advantage: even an irritable Sarkozy can be resisted. The Barroso Commission must keep up the good fight through the rest of its term of office.

As Brussels goes on holiday, so does this blogger. Back in September!

Posted in Agriculture, Trade | No Comments »