Vulcan Insight | Analysis of the latest EU Developments 30 Sep – 4 Oct 2019

Key Events This Week

Brexit: UK’s new proposals greeted with dismay by EU leaders
On Wednesday UK Prime Minister Boris Johnson set out in a letter to European Commission President Jean-Claude Juncker his plans to resolve the issue of the Irish backstop.

While Juncker stated that there were some ‘positive advances’ in the UK’s new plan, the proposal, presented by UK Chief Brexit negotiator David Frost, would mean physical infrastructure close to the border. However, Michel Barnier later stated that it would be difficult to see a deal emerging unless the British fundamentally amend their position.

The proposal is to have Northern Ireland leave the EU but still retain regulatory alignment on sectors such as agriculture and industrial goods until at least 2025, meaning the north-south border would be largely about maintaining customs checks. Regulatory checks would take place in the Irish Sea between the U.K. mainland and Northern Ireland.

The proposal scraps previous ideas such as keeping Northern Ireland within an all-Ireland economic zone (rejected by DUP) or keeping all of the U.K. within the EU customs union (rejected by Tories).

The Taoiseach Leo Varadkar said, after his own call with Johnson on Wednesday evening, that “the proposals do not fully meet the agreed objectives of the backstop.” But he also said he would “study them in further detail, and would consult with the EU institutions,” as well as other EU27 leaders. The UK went on to set the EU a deadline of just two days to begin intensive talks on the proposals. Both Irish and EU officials are slow to dismiss the proposal out of hand, with Tánaiste Simon Coveney welcoming the progression on some elements of the proposal, such as a written commitment and legal text on an all-island approach to agri-foods and SPS.

The issue of democracy and consent was raised by parties in both Northern Ireland and Ireland as the proposals lays out a framework in which the Northern Ireland executive and assembly would be given the choice by 2021 on whether to remain in the single market and all-island regulatory zone, or move to UK rules for goods. Under Johnson’s proposal political parties in Northern Ireland would be asked for their consent every four years. Taoiseach Leo Varadkar reiterated that any consent mechanism must reflect the views of all sides, and no one political party should be able to veto the will of the majority of people in Northern Ireland.

No 10 has already hinted that the Prime Minister may boycott the Brussels summit on 17 October unless intensive talks begin straight away – which would bring any hope of a deal crashing down. The general consensus in Brussels appears to be that Johnson does not want a deal – he simply wants to blame the ‘inflexibility’ of the EU for a hard-Brexit.

However, the EU could grant another delay to Brexit until the new year even if a letter requesting it is not signed by Prime Minister Johnson himself. The Benn Act – approved by parliament last month ahead of Mr Johnson’s unlawful prorogue – dictates that he must ask for an Article 50 extension if his new Brexit plan is not approved by 19 October.

 

Commissioner hearings high on drama
The 27 Members of Ursula von der Leyen’s European Commission have been undergoing a series of hearings in the European Parliament this week aimed at evaluating whether they are fit for their jobs. The hearings started on Monday 30 September with Irish Commissioner-designate Phil Hogan one of the first up.

Hogan, who currently holds the Agriculture portfolio, was questioned by members of the International Trade (INTA) committee as he endeavors to take over the high-profile Trade portfolio. Hogan impressed the members and, despite some questions relating to the now controversial Mercosur agreement, managed to sail through the hearing and receive the backing of the Committee.

Others did not fare as well. In an unprecedented move, the Legal Affairs (JURI) in the European Parliament rejected the Commissioners-designate from Romania and Hungary last week before the hearings has even started, citing conflicts of interest. Socialist Rovana Plumb, and Centre-right Hungarian László Trócsányi were the only Commissioners designate asked by EU lawmakers to face a grilling over potential conflicts of interest and discrepancies in property statements.

Many members of the European Parliament criticised the move by the JURI committee saying that it had denied them an opportunity to question the nominees themselves in their committees (TRAN for Plumb and AFET for Trócsányi). But Romania and Hungary swiftly replaced them and have now put forward Dan Nica, a sitting MEP and Olivér Várhelyi, Ambassador to the EU, respectively.

But the drama and power plays did not stop there. On Wednesday, Commissioner-designate Sylvie Goulard, the French nominee who will hold the weighty Internal Market portfolio received a grilling from members of the IMCO committee over allegations that her parliamentary assistants were used for domestic political work during her time as an MEP.

As Macron’s choice for the role, Ms Goulard was always going to face a rough ride from MEPs who supported the Spitzenkandidat system, which Macron famously rejected after the European elections and left the EPP’s Manfred Weber at a proverbial loose end and out of a job he felt he was guaranteed. The hearing served to prove that at the end of the day the EPP remains the largest party in the European Parliament, so keeping them on side would be wise.

Ms Goulard has been asked by IMCO to submit more written answers before they will make a decision about her suitability for the role. Despite this political grand-standing, she is expected to be approved.

The new Commissioners will be officially approved at the European Parliament plenary session in Strasbourg on Tuesday 23 October.

 

World Trade Organisation rules on EU-US trade dispute
Following the largest ever ruling by the WTO, the US is set to impose 25% tariffs on Scotch whisky, Irish products including Kerrygold and Baileys, and French wine in a move which many fear could trigger a trade war. The case dates back to 2004 and a WTO dispute between the US and EU. The long-running arbitration found that the EU has given aerospace company Airbus illegal subsidies, causing an unfair competition environment for America’s Boeing. The US is thus permitted to impose tariffs on €6.84 billion worth of imports from the EU.

The WTO is also set to rule on a parallel case brought by the EU against the US for its support for Boeing, following which the EU would be able to impose its own tariffs on US imports. While Donald Trump’s rhetoric on unfair trade practices against the US has often come across as brash and unsubstantiated, this dispute has gone through an internationally agreed arbitration process and comes with considerable clout. US Trade Representative Robert Lighthizer said, “We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

EU Commissioner for Trade Cecilia Malmström said it would be short-sighted and counterproductive for the US to adopt countermeasures, noting both the US and EU have been found to be at fault. She stated that mutual countermeasures would only inflict damage on businesses and citizens. Malmström emphasised that the EU is ready to find a fair settlement but will have no option but to impose countermeasures if the US does the same. Incoming EU Trade Commissioner Phil Hogan said that the EU “has to stand up for itself” and should identify products for potential retaliatory action.

Given the stance of the current White House on such trade disputes, the chances of a settlement deal seem slim. On Twitter, Trump called the WTO decision “a nice victory” and said the EU has “treated the USA very badly” on trade. EU-US tensions are expected to continue, and the latest developments raise the possibility of another trade war between the US and a key trade partner.

Key Dates: 
  • 7-8 October: Justice and Home Affairs Council
  • 8 October: Hearing for the Executive Vice President of the Commission for an Economy that Works for People, Valdis Dombrovskis
  • 9 October: Eurogroup
  • 10 October: Economic and Financial Affairs 

Compliments of Vulcan Consulting, a member of the EACCNY