On Friday 23 June, the heads of state or government of the EU countries made progress towards a better balance between market openness and a level playing field for international trade (see EUROPE 11813).
The European Council, which is understandably divided over the degree of openness and/or protection of trade, was measured in its statements. “Europe is and will remain open for business. But we agreed that Europe needs to better protect people from unfair trade practices, for example by introducing more reciprocity. We agreed that the Commission will analyse investments from third countries in strategic sectors”, the President of the European Council, Donald Tusk, told the final press conference.
“Trade must be free, but fair”, added the President of the Commission, Jean-Claude Juncker.
Controls on foreign acquisitions. The French President, Emmanuel Macron, failed to convince his European partners of the need to give the Commission more powers to check foreign acquisitions, particularly Chinese ones, in the EU in order to protect strategic sectors. The final text of the conclusions of the European Council replaces the term ‘screening’ with ‘analysing’ investments in strategic sectors.
Spain, Portugal and Greece, amongst others, are reported not to have supported the French proposal, due to concerns that such measures would hinder foreign investments in their countries. Other member states, such as the Nordic countries, which are committed to the concept of market openness, expressed misgivings over controls on foreign acquisitions.
When asked about this watering-down of terms, Juncker said that he shared the French President’s views. “I want Europe to be open, but not given away. The Commission has been asked to look at this matter in greater detail, which we already have done to some extent in the reflection document on globalisation. There are no differences of opinion worthy of the name between the French President and the Commission”, he said (our translation).
Next stage, State of the Union? The Commission thus has its mandate to carry out this analysis of controls on strategic investments. In the State of the Union speech in September, President Juncker may provide clarifications as to what strategic investments will cover and how the powers to control them will be divided between the national and the European level.
Macron stressed that “we are in favour of an open economy, free trade that respects the rules of multilateral trade, but not in the naïveté that is Europe’s own”. “We have talked a lot of trade at a time when protectionism comes up a lot in debates. We are in favour of free and regulated trade”, said the German Chancellor, Angela Merkel.
The Spanish Prime Minister, Mariano Rajoy, stressed that trade helps to create wealth and jobs and that it is important that all countries play by the same rules.
The new Irish Prime Minister, Leo Varadkar, whose country is pro-free trade, said that the proposal on the Commission’s examination of foreign investments should not be used as a “protectionist Trojan horse”. He went on to say that he understood the position of member states that want to see certain investment practices monitored, and that his country did not want permanent strategic infrastructure under the control of non-European governments, states or companies. Listing strategic sectors, the Italian Prime Minister, Paolo Gentiloni, referred to the military field, security and sectors using sensitive banking data.
The European Council has pledged to ensure that the markets will remain open and to fight protectionism. The EU will take steps to promote genuinely fair competition conditions, whilst remaining vigilant to ensure the respect and promotion of vital standards, including social, environmental, health and consumer protection standards, which are central to the European way of life, the conclusions read. The EU leaders call upon the Commission and the Council to intensify and move forward the debate on how to improve reciprocity in public procurement and investments.
The co-legislators are called upon to reach a swift agreement on modern trade defence instruments that are compatible with the WTO and will bolster the EU’s capacity effectively to fight unfair and discriminatory trade practices and market distortions.
Free-trade agreements. The European Council wishes progress to be made in all the negotiations currently underway, for instance with Mexico, Mercosur and the Asia-Pacific region, in order to conclude ambitious and balanced pre-trade agreements, in which reciprocity and mutual benefits are guiding principles. The European Council welcomes progress recently made in negotiations with Japan, which could pave the way for the conclusion of a political agreement. (Original version in French by Lionel Changeur with editorial team)