BusinessEurope Headlines No. 2019-08
"The Circular Economy Action Plan has given more long-term investment certainty to businesses, but more can be done to create a real market for secondary raw materials", said BusinessEurope's Industrial Affairs Director Alexandre Affre at the annual Circular Economy Stakeholder Conference in Brussels on 6 March. The Conference brought together hundreds of policymakers, businesses and other stakeholders to discuss the opportunities and challenges in the circular economy. Affre added that "we need to boost consumer demand and boost finance for innovation and waste management infrastructure. Furthermore, we support value chain communication to improve circular practices. In particular, it is easier for SMEs to offer circular services and products if there is a real demand for this from the larger companies".
Contact: Leon de Graaf
Photo copyright: European Commission, DG GROW
By Maurice Fermont, Adviser for International Relations
Brexit’s negative economic consequences have been highlighted by the European business community for a long time. No arrangement other than continued EU membership will provide the same economic benefits that the UK and the rest of the EU have enjoyed until now. The business community therefore advocates for the closest possible relationship between the UK and EU while safeguarding the integrity of the European Single Market. This approach should mitigate the negative economic consequences of Brexit and preserve pan-European supply chains to the greatest extent possible.
Brexit also means that the UK must renegotiate its relationship with the rest of the world. The type of future relationship third countries will enjoy with the UK will, however, depend on the degree to which the UK wishes to remain integrated with the EU. A very close level of integration (such as remaining inside the EU’s customs union), would mean the UK could continue trading products seamlessly with the EU – with whom it trades around 50% of its trade in goods. The UK would then remain part of the EU’s common commercial policy and be bound by its external tariffs. This would by and large preserve pan-European supply chains.
If the UK adopts an independent trade policy and negotiates a free trade agreement with the EU, the UK will be able to negotiate free trade agreements (FTAs) with other countries, including those with which the EU has no trade agreements. The downside, however, is that existing EU FTAs will then cease to apply to the UK. Around 15-17% of all UK trade is covered by these FTAs. At present, the UK is set to negotiate its future relationship with the EU based on the closest possible integration through a free trade agreement and is pursuing the objective of “rolling over” its existing FTAs with third countries.
Rolling over existing FTAs is far from simple, however. First, the EU has negotiated around 40 agreements with over 70 countries across the world. Rolling them over will be a time-consuming exercise. Second, due to the fact the UK is a smaller market than the EU, third countries will likely want to offer the UK different terms, either by increasing their access to the UK market, or lowering the UK’s access to their market. Third, the withdrawal agreement provides for a 21-month transition period, within which these agreements would have to be rolled over or renegotiated to avoid an interruption in the terms of trade with the UK.
Even if the UK manages to roll over or renegotiate most or all its existing FTAs, the terms of trade for businesses from the EU, UK and around the world would still be impacted negatively as compared to the status quo. Currently, all goods entering or leaving the UK under EU free trade agreements may contain any degree of components or content value from elsewhere in the EU – and still benefit from preferential tariffs. This means that even goods not wholly or even largely manufactured in the UK benefit from reduced or zero tariffs. If the UK negotiates an FTAs with the EU and rolls over existing FTAs, then goods exported from the UK will require a much larger degree of UK content in order to benefit from preferential tariffs. The way pan-European supply chains have evolved over decades, however, means that much of the UK’s exports would struggle to obtain this status.
Lastly, much of the negative consequences for business have less to do with tariffs or rules of origin, and more with rules for services trade and the UK’s regulatory proximity to its major trading partners (of which the EU covers around half). An FTA only offers limited access for services trade and is no guarantee for regulatory equivalence between two trading partners. With tariffs gradually reducing over decades of free trade negotiations, any divergence in regulations that affect products or services make up a much larger chunk of the existing trade costs for companies.
Brexit presents a significant challenge for businesses operating across the EU and the UK. Any future relationship that is less than a customs union would throw up further barriers for business who must rely on an FTA between the EU and the UK. But an additional and significant cost that should not be overlooked is that the UK’s departure from the EU coupled with a low degree of economic integration will have significant ripple effects on all companies trading between the EU, UK and third countries.
Contact: Maurice Fermont
On 28 February, the 3rd Turkey-EU High-Level Economic Dialogue took place in Istanbul, hosted by Berat Albayrak, Minister of Treasury and Finance of Turkey and Jyrki Katainen, Vice-President of the European Commission. Luisa Santos, International Relations Director of BusinessEurope was present during the dedicated business pillar of the event and had the opportunity to communicate key messages to the Turkish and European political leadership. Turkey is a neighbour and close partner of the EU, it is therefore important for the integration and alignment process to continue. This will allow the two partners to overcome current challenges and benefit from significant opportunities, especially in the field of economy, trade and investments. For instance, the Customs Union, which binds the two partners since 1996, has delivered results but it has become obsolete, as it does not capture important elements of today’s economic reality, such as services or digitalisation. This needs to be changed. At the same time, BusinessEurope emphasises the role of stability and predictability in Turkey as key factors to attract investments, as well as the participation of the private sector in the development of rules and regulations. This is important as it will help legislators in Turkey understand the reality of business and better match their needs with the broader public interest.
Contact: Sofia Bournou
Photo copyright: EU Delegation Turkey
Following the Achmea case ruling of the Court of Justice of the EU, which found the investor-to-state dispute settlement (ISDS) system included in intra-EU Bilateral Investment Treaties (BITs) incompatible with EU law, all intra-EU BITs will be terminated. In a letter sent on 5 March and addressed to European Commission President Jean-Claude Juncker, BusinessEurope argues that the termination of these agreements, without being accompanied by the establishment of an alternative dispute settlement mechanism, will result in a lower level of protection for EU investors within the Single Market. In this regard, BusinessEurope would like to support the creation of new dispute settlement system, that will be impartial, effective in terms of process and costs, enforceable and transparent. Such a mechanism will give assurances to investors and help boost the business and investment in the EU. BusinessEurope believes that it is possible to develop such a system that is compatible with EU law and calls on the European Commission to launch, as soon as possible, an impact assessment process on this subject.
Contact: Sofia Bournou
Following the release of the Public Consultation of the Organisation for Economic Co-operation and Development (OECD) on “Addressing the Tax Challenges of the Digitalisation of the Economy”, BusinessEurope presented its newly adopted response on 6 March. In our response, we welcome the OECD’s recent work and progress in the area of digital taxation as we stress that only through a global consensus at the OECD can we hope to reform the global tax system in a coherent and lasting way. In addition, our response argues that any upcoming international agreement must not ring-fence the digital economy, must be in line with international taxation principles and should provide tax certainty for companies.
Contact: Pieter Baert
- 12 March: Economic and Financial Affairs Council
- 13 March: European Commission reflection paper on EU – China relations
- 14 March: B20 in Tokyo
- 20 March: Launch of BusinessEurope Reform Barometer