A week in Brussels, Anti-coercion instrument, GSP, GSP Plus, EBA, India, Latest news, Supply chain due diligence & forced labour

Week in Brussels: anti-coercion, GSP wrangles, forced labour, India

A few notable developments in EU trade policy this week. By Rob Francis an Iana Dreyer.

Czech Republic senate opposes anti-coercion instrument institutional setup

Prague is not the only capital sceptical of the decision-making process foreseen in the EU’s coming anti-coercion legislation. But this matter is now public – and it matters as the Czech Republic is due to take over the rotating presidency of the Council this coming July.

The ACI is intended as a deterrent tool against would-be economic coercers from outside the EU. It could lead to swift and sweeping trade restrictions across of economic areas. These would be adopted via a ‘delegated act’, i.e. a procedure that gives de facto the European Commission almost full discretion in deciding what to do how and when.

The moment the ACI proposal was released last December, it was clear that the matter would raise significant questions as to its effect on the EU’s overall institutional balance – and hence rile some capitals.

It is rare to see member state objections to a regulation published and openly accessible in the document register of the Council. But that is exactly what happened this week.

Czech lawmakers are “of the opinion” that the procedure “does not allow sufficient involvement of the member states in the decision-making process”.

They call for “the introduction of a procedure that will allow broader involvement in the whole decision making process so that they can thoroughly control the Commission when adopting response measures”.

This month a draft report by the European Parliament goes in the opposite direction to member states and calls for even more centralised economic gun-powers as part of the ACI.

GSP – delays amidst member state pushback against restrictive trade approach

The week started with a surprise postponement of the vote in the European Parliament’s international trade committee on the European Commission’s proposal to revise the EU’s Generalised Scheme Preferences.

This was put down to there being a need for “further considerations”, as explained by the committee chair Bernd Lange. This could of course also be code for the fact that discussions between political groups on this issue are proving difficult, notably around safeguards and thresholds.

The anti-migration provision in the proposal stipulating that GSP countries should lose their benefits if they fail to readmit their own nationals could also be a contentious point in the discussions.

Parliamentarians have only been given one week more to come to an agreement. The two-step vote, the first on amendments, the second on the report as a whole, will take place on the 2nd and 3rd May respectively in Strasbourg in an extraordinary committee meeting.

In a related development, a group of EU countries on Tuesday published a non-paper which criticised elements of the commission’s proposal, saying it reflected a “more restrictive and EU-focused approach to the GSP”.

The signatories – Austria, Denmark, Estonia, Finland, Germany, Ireland, Latvia, Luxembourg, the Netherlands, Malta, Slovenia, and Sweden – note the proposed 10% reduction in the product graduation threshold “which we consider to run counter to the general goal of the GSP”.

“While we understand the argument for promoting diversification, we are not convinced that a full 10% reduction is warranted,” they say.

They do however back the commission’s decision not to expand the automatic safeguard mechanism or the product graduation mechanism to GSP+ and EBA countries, and therefore say they are opposed to the presidency’s proposal to expand the automatic safeguards to cover rice, sugar, and shoe products.

“Subjecting the Least Developed Countries  to these mechanisms would not aid their development or reduce poverty,” the countries argue., adding it would send a “drastic signal causing reputational damage to the EU”.

The signatories also note the “far-reaching social and economic impact of Covid-19” as well as the “practical limitations to the use of GSP preferences that lie outside of the scope of this revision, e.g. the rules of origin for the products covered. These have not been changed or liberalized since 2011 and no changes are foreseen in the near future”.

They continue: “It is our understanding that this hindrance, in combination with the Commission proposal that further limits GSP, would make it difficult for beneficiaries to make full use of the trade preferences.”

The 12 countries are also calling for a “new division of the sensitive and non-sensitive goods” which could “benefit the beneficiary countries and promote export diversification”.

They request the commission to report on which sensitive products could be “re-listed” as non-sensitive.

Discussions on the GSP review in the council and the parliament will continue in the coming months.

Forced labour product ban – further details emerge

Borderlex readers will already be aware that the commission is planning to put forward its marketing ban on products made with forced labour in September.

During this week’s meeting of the European Parliament’s international trade committee, this timing was narrowed down further to “mid-September” to coincide with the state of the union speech to be given by commission president Ursula von der Leyen.

“This doesn’t leave us with much time, but we aren’t starting from scratch,” Madelaine Tuininga of DG Trade told the committee.

The official signalled that there would be a “call for evidence” in May and that the EU executive would be happy to “engage in discussions with those interested”.

Tuininga also confirmed that the proposed ban would cover both domestic and imported goods in order to be in line with WTO rules and would be combined with a “robust risk-based enforcement framework, built on international standards”.

It will also complement existing horizontal and sectoral initiatives – such as the recent proposal on corporate suitability due diligence.

Earlier, the committee had heard from Bob Mitchell, vice-president of the Responsible Business Alliance, who emphasised the importance of policy alignment with international frameworks, risk assessments, and groundwork.

In his presentation to MEPs Mitchell said that the use of “leverage” and the threat of disengagement on the part of a company can be effective in influencing supply chains and that there is a need to go beyond voluntary guidelines.

He cautioned that the commission needs to give companies clear guidance on what is required well ahead of time.

James Cockayne, professor of global politics and anti-slavery from the University of Nottingham, emphasised how forced labour creates a drag on sustainable development more generally, harming workers, market competition, innovation, and the environment.

He mentioned that forced labour product exclusions can “change incentives to businesses but their effects vary depending on factors”.  Such factors include the percentage of countries that participate in the boycott and how the host government responds to pressure.

MEPs, spearheaded by committee chair Bernd Lange, are in the process of drafting an oral question and a resolution on the issue of forced labour which will be adopted in advance of the commission’s proposal.

Indian FTA vibes – and a TTC out of the blue

This week the parliament’s international trade committee also heard a report from its delegation which had travelled to India on 11-13 April.

Committee chair Bernd Lange, who led the delegation, noted the good timing of the visit since it took place one week before India’s trade negotiation team were due in Brussels to discuss the relaunch of FTA discussions.

The German lawmaker explained that new negotiations could be announced in June and that the parties had agreed to work on the basis of three agreements covering trade, geography indications, and investment.

Brussels and New Delhi had agreed to launch these negotiations at a bilateral summit in May 2021, but both sides have found it difficult to get these negotiations off the ground.

Lange suggested that the delegation had not been briefed on the embryonic EU-India Trade and Technology Council which was announced on Monday (25 April).

Recapping the visit during which participants had met with ministers, the negotiating team, trade unions, and business from both sides, he said there is a desire in New Delhi for a “comprehensive trade agreement” and that India understands that the scope would go beyond tariffs and services.

My feeling is that there was an openness and clear commitment that there are no hidden redlines,” he told the committee.

It will not be plain sailing, however. The chair of the committee referenced some problems ahead, notably around agriculture and dairy products, the movement of workers, services in general, public procurement, geographical indicators, and investment.

On the latter for example, Lange recalled that India has developed a new chapter on investment with new remedies.

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