In the last few days, the Commission controversially rejected the proposed merger of Siemens and Alstom—and Paris and Berlin have already vowed to try and change Europe’s competition rules to encourage European champions in the future.
The Commission released a status report on the U.S.-EU trade talks, noting that while some progress has been made—the shadow of possible 232 tariffs on autos looms large. Services have been notably left out of the discussions to date. The Council is due to consider the EU’s draft negotiating mandates for the first time on February 22. For its part, the European Parliament is considering a motion that would call on the Council to reject even starting negotiations while the steel and aluminum tariffs remain.
EUROPEAN COMMISSION CONSULTATIONS AND REQUESTS FOR COMMENT
A full list of all open Commission consultations is available here.
DG CLIMA – Revising the Rules for Free Allocation in the EU Emissions Trading System – Deadline for comments: February 22, 2019
DG ENERGY – Consultation on the list of Candidate Projects of Common Interest in Electricity Infrastructure – Deadline for comments: February 28, 2019
DG TAXUD – Evaluation of Administrative Cooperation in Direct Taxation – Deadline for comments: March 4, 2019
DG JUST – Evaluation of the Consumer Credit Directive – Deadline for comments: April 8, 2019
U.S.-EU Trade & Cooperation on China
European Commission releases Transatlantic Trade Progress Report
The European Commission published a report on the progress of the trade talks with the U.S. initiated after last July’s meeting between presidents Juncker and Trump. Europe is focused on removing tariffs on industrial goods, and on delivering results from regulatory cooperation and conformity assessments. The EU is also seeking to facilitate increased imports of soybeans and LNG from the U.S.
The report identifies pathways to progress on regulation of pharmaceuticals and medical devices, and prioritizes cybersecurity cooperation. Finally, it notes existing Section 232 tariffs on aluminum and steel, and reiterates that imposition of similar tariffs on autos would halt the talks immediately. The full report is here.
European Parliament Considers Motion to Disapprove U.S. Trade Talks
The Parliament’s International Trade Committee is considering a motion to request the Council of the EU to reject the recently-issued negotiating mandates that would give the Commission the green light to formally commence trade negotiations with the U.S. Some MEPs reject the premise of negotiating while the Section 232 tariffs on steel and aluminum products are in place. Commission officials, however, insist that a better approach is refusing to conclude a new trade agreement until those tariffs are removed. The Council is due to consider the mandates at a meeting on February 22.
U.S. Ambassador urges EU to Join Forces against China
U.S. Ambassador to the EU Gordon Sondland called on the U.S. and EU to overcome their current trade tensions and join forces to push back on shared challenges vis-à-vis China’s trade practices and industrial policies.
State Department Urges European Allies to block Chinese Companies
Washington is calling on its European allies to block Chinese companies Huawei and ZTE when building their next-generation telecommunications networks, citing Beijing’s unchecked ability to access sensitive data from these companies and the attendant threats to national security. Some German officials doubt the credibility of the U.S.’s pleas, citing past U.S. intelligence hacking of German officials.
Environmentalists, allies urge Trump against Uranium tariffs
After two American mining companies requested tariffs on the import of uranium, environmentalists and U.S. allies have expressed formal opposition to the duties. If implemented, these tariffs would raise fuel prices and could force several of the U.S.’s 98 nuclear power plants to cease operations. The EU has spoken out against these potential tariffs, objecting to the potential use yet again of Section 232 authority. The U.S. Chamber opposes such measures, since they would present unnecessary challenges to the nuclear power sector, and undermine U.S. energy security.
Commission Approves U.S. Soybeans as Biofuels
The European Commission recently approved U.S. soybeans as a source of biofuel. The decision means American soy crops comply with the sustainability criteria under the EU's Renewable Energy Directive and can therefore be used for producing subsidized biofuels in the EU. "The United States is Europe's main soya beans supplier and today's decision will further expand its market opportunities in Europe," the Commission said in a statement. The recognition is valid until July 2021, when new—and yet to be defined—EU rules for renewable energies start to apply.
Siemens-Alstom Merger Fallout & EU Competition Policy
Commission Vetoes Siemens-Alstom tie-up
European Competition Commissioner Margrethe Vestager announced the Commission’s veto of the proposed merger between Europe’s two leading train manufacturers. Paris and Berlin were strongly pushing for an “Airbus for the railways” in the face of growing competition from China’s state-owned CRRC, which is approximately 3x the size of Siemens and Alstom combined. Commission President Jean-Claude Juncker defended Vestager’s decision, citing the importance of ensuring a level-playing field in Europe over playing politics. The EU determined that Europe’s rail users have more to fear from a dominant Siemens-Alstom than a “big bad Chinese wolf.”
European Digital Tax Efforts
France’s Digital Services Tax
The French government is working to implement a domestic tax on two types of digital services. The draft legislation covers tech companies that connect users with each other to offer a service, such as booking a room on Airbnb, and platforms that sell space online for targeted ads such as Facebook and Google. Economy minister Bruno LeMaire had previously indicated that companies that report over 25 million Euro in revenues in France and 750 million Euros worldwide would be subject to the new tax, whose final rate and implementation date remain unclear.
OECD eyes long-term solutions to digital tax questions
Countries and jurisdictions participating in the OECD/G20 Inclusive Framework for Base Erosion and Profit Shifting (BEPS) have ramped up efforts towards reaching a solution over the question of how to most effectively tax multinational corporations as the economy rapidly digitalizes. The group released a position paper addressing key areas where consideration or reforms are necessary.
U.S. Senate Finance Committee opposes unilateral tax decisions
Leaders from the Finance Committee wrote to Secretary Mnuchin last week, condemning unilateral European digital tax measures, not least given their unfair focus on American companies. Senators Grassley and Wyden urged Treasury to play a more active role in ongoing OECD talks. Senator Grassley also spoke forcefully against these unilateral actions during a floor speech last week.
Germany’s competition authority has ordered Facebook to change its data collection procedures. The regulator said Thursday that Facebook’s data practices across its suite of apps constitute an “abuse” of its market power. The company must first obtain consent from users before combining their data. Facebook plans to appeal the decision.
25 years after Norway entered the Single Market by joining the European Economic Area, EU skepticism is on the rise. Opponents are beginning to question the impact the deal has had on wages, labor laws, and national sovereignty and self-determination. The deal largely makes Norway a “rule-taker” at the hands of the EU. While Norway has full access to the inner market, it also must accept the free movement of workers and adopt new EU laws, without having a full say in the debate.
NATO members signed an agreement with the Republic of North Macedonia on Wednesday that will make it the alliance’s 30th member. NATO Secretary-General Jens Stoltenberg underlined that North Macedonia’s involvement will bring increased stability to the Western Balkans. Each of the 29 NATO members must now vote to ratify North Macedonia’s ascension to the alliance.