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26th Nov 2022

EU commission changes gear on trade

  • Katainen (l) and Malmstroem (r) introduced proposals that seek to reinforce EU trade powers (Photo: European Commission)

The European Commission rolled out a proposal Thursday (14 September) to start free trade talks with Australia and New Zealand, and to install an EU investment screening framework.

The EU executive's push to start negotiations with Austria and New Zealand is part of an effort by the bloc to strengthen its position as a leading global trading power, as the US is turning inwards and pursuing an "America first" policy.

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"In the current international climate, the world needs leaders in trade. The EU continues to champion free and fair trade. […] Today's proposals show this leadership in a action," trade commissioner Cecilia Malmstroem told reporters.

In an effort to calm increasing criticism over the opaque nature of trade talks, the commission published its proposed negotiating mandate , and at the same time sent them to national parliaments.

Malmstroem called it "unprecedented and unrivalled transparency" in EU trade.

The trade commissioner added that, in being more transparent, they hope to avoid situations like last year with the Canada free trade agreement (Ceta), when Belgium's Wallonia region objected to the deal in the last minute, claiming they were not informed.

Malmstroem emphasised that it is the member states' responsibility to keep their regional parliaments up to date.

The trade commissioner said agreements with Australia and New Zealand could increase exports to the two countries by around a third in the long-term.

The EU's ambitious trade agenda comes as the US is following a more protectionist policy, and the UK is aiming to start its own trade policy as soon as it leaves the EU in 2019.

The commission hopes to close the deals with Australia and New Zealand before the end of the Juncker commissions mandate, and before the UK can close its own deals with the two countries.

The trade deal with Canada will enter into force next week, and talks with Singapore and Vietnam have finished.

In July, the EU also struck a political agreement with Japan and is aiming to conclude talks with Mexico and the Mercosur countries - Argentina, Brazil, Paraguay and Uruguay - before the end of the year.

The commission is also hoping to be able to start talks with Chile "very soon".

Investment courts

The EU executive, however, is not going to pursue an agreement on investment protection with Australia and New Zealand for now, as the commission is in talks with other countries to set up a permanent multilateral investment court system.

"There is an increasing debate that the old ISDS [investor-state dispute settlement] system is flawed," Malmstroem noted, saying there are over 3,000 bilateral ISDS agreements worldwide.

ISDS systems have increasingly been criticised for their bias toward businesses, and for being ad hoc, inefficient, and not transparent.

The multilateral investment court system proposed by the commission would be permanent, more independent - as not only disputing parties but states could appoint permanent judges - and would be more transparent.

The EU executive also published its recommendation for negotiations on the court system.

"We reach out to as many countries as possible to have a multilateral court system that would take over this ISDS," Malmstroem said.

Screening

The commission also announced plans to put in place a framework, which would screen foreign investments in Europe.

But the EU will not be able to block investments.

Decisions on foreign investments would stay with the member states, but there would be an information sharing mechanism to let other EU states and the commission know if there are sensitive investments, or acquisitions that could have an impact on other states.

The EU executive will be able to screen foreign investments likely to affect projects that have received EU money from funds designed for research, space or transportation, energy and telecommunications networks.

Commissioner for jobs and growth Jyrki Katainen, who was speaking at the same press conference as Malmstroem, gave the example of a foreign company buying a short section in a cross-border energy network.

He said the framework will provide a chance to check if that company has bought any more sections in the network, and if it would put the EU into an "unfavourable situation" as it seeks to ensure uninterrupted energy flows.

"We don't want to restrict investments, but we want to be aware, much better than today, what investments are coming in, who invests, and if something raises concerns, it [the framework] allows member states to take the right decision," he told reporters.

Britain is priority

The commissioner said trade talks with Britain are a priority once the first phase of Brexit negotiations are finished.

"As soon as we know when we can start negotiating about the future arrangement, [trade] negotiations will start then. There's no political priority that we want to keep the UK as the last in the queue," Katainen said.

"Keep calm, don't panic," Malmstroem added, saying the commission is able to simultaneously negotiate trade deals.

EU preparing to screen Chinese investments

The EU is to screen foreign investments to avoid takeovers in sensitive sectors. But the plan, mainly aimed at China, will raise political and technical difficulties.

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