Life in Brussels is slowly resuming after the summer holidays. But trade events certainly did not take a break. In the past weeks, a WTO agreement on e-commerce rules was announced, while the EU is intensifying digital trade partnerships.
Next to the digital space, disputes on green industries are dominating trade news. Particularly the wind power sector, with EU industries preoccupied by Chinese wind turbines in Germany and “buy local” requirements in Taiwan.
This and more in this “back to school” TradeViews.
One Big Thing.
Shopping around for support for WTO e-commerce rules
Online shopping has been around for decades, with digital trade accounting for approximately 25% of all international trade. In July, the World Trade Organization published its first global rules on digital trade, which the members had spent five years negotiating. The plurilateral E-Commerce Agreement is set to benefit both businesses and consumers once it hits the WTO rulebook, with key goals such as facilitating cross-border electronic transactions, reducing barriers to digital trade, and promoting innovation.
While it covers anything from electronic signatures and consumer protection, one of the sticking points was data privacy provisions pushed by the EU, also known as Article 25. In fact, the EU has been including similar privacy caveats in all its recent digital trade deals. As reported by Politico, US business is very critical of these provisions, saying they will leave room for governments to take protectionist measures.
For the E-Commerce Agreement to be fully integrated into the WTO rulebook, consensus of all the organisation’s members is required – although it might take until after the November elections for the US to get back to the negotiating table, which the Biden administration left last year. Judging from the e-commerce moratorium drama we covered in March, this may take some time.
Second in line.
DATA summer: Japan, US, Singapore, China
The summer was certainly not for EU data agreements. With the beginning of July, EU-Japan deal on data flows entered into force. The negotiations, launched in 2022, will now start bearing fruit for sectors such as financial services, transport, machinery, and e-commerce.
On 19 July, Brussels and Washington celebrated the first anniversary of the EU-US Data Privacy Framework (DPF) with a launch of its periodic review. More than 2,800 enterprises have joined the framework since its implementation. Positive outcome of the review would be good news for businesses that have suffered from uncertainty caused by the previous Privacy Shield, invalidated by the Schrems II ruling.
The end of July brought the conclusion of EU-Singapore digital trade negotiations. The fast-tracked agreement took just one year to complete, and will accompany the broader 2019 EU-Singapore trade deal and last year’s Digital Partnership. The text awaits ratification, and the EU is on the lookout for next digital trade targets – most likely South Korea and key FTA partners without a digital provisions chapter.
Even Beijing stayed in the loop, as we saw with the launch of the Cross-Border Data Flow Communication Mechanism on 28 August. Its main goal is facilitating flows of non-personal data between EU and China, something that European companies have struggled with due to vaguely defined concept of “important data”, which go under higher security scrutiny in Chinese law.
Gone with the North Sea wind
A new project in northern Germany is animating a big dispute in the European renewables sector. In July, the asset manager Luxcara signed the purchase of 16 wind turbines from Chinese manufacturer Ming Yang Smart Energy for a project in the North Sea. This is the first European order of Chinese wind turbines – aside from a minor project in Italy.
The reaction of the EU sector was vehement. WindEurope argued that Chinese wind turbines companies can sell at cheaper prices than Europeans because of public subsidies. They also pose security risks in light of the amount of data they handle. In asking for state support, the EU wind power industry has always stressed the story of their solar counterparts – which were undercut by Chinese companies for lack of EU trade defence.
The European Commission was already active in the field. In April, Competition Commissioner Margrethe Vestager announced a probe into Chinese wind turbine manufactures in 5 EU countries, under the new Foreign Subsidies Regulation. When it comes to security concerns, the Net-Zero Industry Act will push Member States to diversify their suppliers of clean technologies, and, in its 2023 Wind Power Plan, the Commission promised to identify cybersecurity risks in the sector. The same Vestager had proposed G7-level discussions to come up with a list of “trustworthiness criteria” for clean technologies, like sustainability, cybersecurity and data security. In Euractiv’s words, Chinese wind turbines might face a Huawei-treatment when operating in the EU.
The dilemma between efficiency and security in pursuing the green transition will certainly keep the next Commission occupied.
Buy Taiwanese, irritate Europeans
In a rare example of bad timing, the EU is now in a dispute with a usually close partner, again on the wind sector: Taiwan. A new Taiwanese law states at least 60% of the components used in offshore wind farm projects must be procured locally. On 26 July , the Commission requested WTO consultations, saying the policy is discriminatory and breaches WTO rules. The law is also problematic for certain Taiwanese companies, as sourcing nationally certain inputs is proving difficult and expensive.
Positively, EU and Taiwanese officials will meet in September to discuss the contentious policy. Economic Affairs Minister Kuo Jyh-huei added that Taipei will “gradually work towards an open market”. If the talks do not deliver a compromise, the EU could ask the WTO to set up a panel to rule on the issue.
Countries are increasingly moving towards domestic-focused green policies, as shown by the Inflation Reduction Act, using subsidies or local-content requirements in green projects. To what degree these policies are admissible for the pursuit of sustainability goals is a million dollar question for the WTO framework.
As the EU-China EVs dispute continues, is a trade war “unavoidable”?
As part of its ongoing anti-subsidy investigation, the European Commission has disclosed to interested parties the draft decision to impose definitive countervailing duties of up to 36.3% on imports of electric vehicles from China. The Commission reaffirmed its previous findings that Chinese EV production had benefited from extensive subsidies. A final decision is expected to be published by 30 October at the latest, when EU Member States will vote on the Commission’s proposal.
Beijing heavily criticized the draft decision, defining it as an unjustified protectionist. In a clear tit-for-tat China is launching an anti-subsidy investigation into European dairy exports. Beijing apparently wants to increase the pressure to force the EU to make concessions.
The move comes after Josep Borrell, the EU’s outgoing high representative for foreign and security policy, said that a trade war between Europe and China may be “unavoidable”. Negotiations with Beijing are still possible to avert the tariffs and further escalation, but no result has been achieved yet. Instead, China has filed a complaint with the WTO at the beginning of August to “safeguard the development rights and interests of the electric vehicle industry and cooperation on the global green transformation”.
Over on X: Trade expert Robert Francis’ take on the nomination of Christophe Hanser as Commissioner for Luxembourg. As a former MEP, Hansen was in charge of important trade and sustainability files like the Deforestation Regulation.
On our radar.
6 Sept | Deadline for providing feedback to the Commission’s evaluation of the EU-US Data Privacy Framework.
9 Sept | INTA is back to school, with its ever-green Chair Bernd Lange and new Vice-Chairs. MEPs will discuss the aforementioned WTO agreement on e-commerce, followed by an exchange with DG TRADE top official Sabine Weyand.
1-3 Oct | POLITICO is hosting the Competitive Europe Week. You can find our team in pretty much all sessions.
17 Oct I Euractiv conference on the future of transatlantic relations, notably after the presidential elections.
What we’re reading.
Time to look into the crystal ball for the next EU Trade Commissioner. Financial Times’ Andy Bound tends towards the Dutch Wopke Hoekstra. He comes from a trade-committed country, and has been both finance a foreign minister. What’s certain is that many countries would rather have a budget or single market portfolio. Euronews breaks down each country’s nominees and potential role.
Albeit not enough to undermine the centrist coalition, right-wing parties made gains after the elections. The trade-focused Heinrich Foundation reflects on the implications of the growth of right on EU’s trade and business policies.
The EU and Australia recently signed a critical mineral partnership. But what are we missing in the absence of an FTA? The Italian Institute for Internal Political Studies reflects on the issue.
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