Finally some relief on the never-ending Brexit saga, as Sunak and Von der Leyen announce the deal on Northern Ireland. On other fronts, the EU considers prolonging trade preferences to Ukraine and continues FTA talks with India. And check out the rest of the newsletter to see what Sabine Weyand, Cecilia Malmström and other key women in trade are up to – happy International Womens’ Day!
One Big Thing.
Tying the knot: the Windsor Framework
After years of negotiations, the EU and the UK found a deal on the most contentious post-Brexit issue: Northern Ireland. Finally, European and British businesses can enjoy some predictability on EU-UK economic relations, as flagged by leading MEPs. In the past two years, London and Brussels have been negotiating to minimise technical barriers to trade left by the 2019 agreement (a recap below). The solution is the establishment of two lanes for goods coming from Great Britain: a “green lane” for those meant to stay in Northern Ireland, which will face minimal paperwork, and a “red lane” for those meant to enter Ireland (therefore the EU single market) to go through full custom checks. Moreover, London’s rules on VAT and state aid will return to Northern Ireland, and the Ulster parliament will have an “emergency brake” against new EU legislation with “significant impact on everyday life.”
Facilitation of EU-UK trade (and the UK’s internal trade) will be the main immediate consequence, starting with agri-food, which was met with relief by Irish farmers. Also, Horizon Europe, the EU R&D programme, should be opened again to British companies. Clouds remain: possible discontent from Ulster Unionists, potential EU-UK divergences on state aid or role of the EU Court of Justice, or the remaining red tape on the Irish Sea. More deals will be needed to fully stabilise EU-UK economic relations. But the Windsor Framework is the first significant pro-trade signal in a while. With more to follow, as London seems close to relaunching trade talks with Pacific countries and the US.
Zoom In: The Windsor Framework reduces the risk of unilateral measures, coming just as London was preparing a law to potentially overrule the former Northern Ireland Protocol, and Brussels was pondering a tool to sanction the UK in case of breaches to post-Brexit commitments.
Zoom Out: Need a step back? In 2019, then UK prime minister Boris Johnson and the EU struck an initial agreement to avoid a “hard border” between the two Irelands. To do so, Northern Ireland had to accept EU regulations on goods, while products coming from the UK had to be checked. Northern Ireland Unionists feared that this regulatory divergence would have separated them from London, with big red tape for companies trading across the Irish Sea.
The Next: Now, the deal has to be approved by the British Parliament. Although it will have broad support in London, Ulster’s Unionists promise close scrutiny.
Second in line.
Zero-sum grain game
It’s been more than one year since Russia has invaded Ukraine, followed by its numerous negative trade consequences and attempts to mitigate them. On the EU side, autonomous trade measures, or ATMs (pause of import duties, tariffs, quotas and defence measures), complete with “solidarity lanes” have been introduced – and they are here to stay, the Commission has announced. Renewing ATMs for another year means that the EU will continue walking a tightrope. On one side, standing with Ukraine and enabling supply chains to run obstacle-free; on the other, keeping domestic farmers happy – not an easy task even in peaceful times. EU countries bordering Ukraine have been hit with Ukrainian grain flooding their markets, causing upset amongst domestic producers. But despite some rumbles of re-introducing tariffs by Polish deputy minister of agriculture earlier this year and a joint statement from a group of EU agriculture ministers, on member state level the topic is very much a political “hot potato”. Now it’s up to the European Parliament and the Council to have their say on renewed ATM regime – stay tuned!
EU-India: a yes (in theory)
The next round of the EU-India free trade negotiations is due soon, on 13-17 March. While the first two rounds saw the two sides discuss their convergent and divergent positions, the third set of negotiations saw discussions on the text. The real stuff. Progress has been steady so far. However, the two sides continue to hold significant divergences on the trade and sustainable development chapters, among other areas. And at a time when the EU and India agree on the importance of “sustainability and inclusive growth”. In theory. The EU business community has also signalled that it wants the agreement. In theory. Yet, it has cautioned that perhaps the level of ambition should be scaled back to accommodate the deadline the two sides have given each other: 2024. Clearly, the two sides see each other as potential partners. They hold similar values and have a common understanding of the current political zeitgeist (as shown by the recent visits of German Chancellor Olaf Scholz and Italian Prime Minister Roberta Meloni). But will this be enough? A space to watch as 2024 creeps closer.
The Critical Raw Materials Club: A Game-Changer in the Global Supply Chain?
The EU is more and more considering the idea of a Critical Raw Materials Club (CRMC): a structural cooperation with like-minded partners to secure the inputs necessary for the EU’s climate and tech plans. The CRMC could diversify the EU’s sources of critical raw materials, invest in research and development, promote recycling, and develop domestic production capacity. But what would the CRMC mean for the current power dynamics dominated by the US’s Inflation Reduction Act (IRA) and China’s monopoly over critical raw materials? The IRA emphasizes domestic production, whereas the CRMC focuses on diversifying sources and connecting consumers and resource-rich countries. But the Commission also hopes that the creation of this club could convince the US to soften the “Buy American” provisions of its green subsidies. China’s monopoly over critical raw materials, however, remains a significant challenge. The EU’s Critical Raw Materials Act could also play a role in this power struggle. The legislation, expected on March 14, aims to secure access to critical raw materials, promote sustainable sourcing practices, and reduce dependence on imports. If it works, it might give the EU more bargaining power in negotiating trade deals and strengthen its position in the global supply chain, and allow it to claim its seat at the table.
On our radar.
6 March I Competition chief Vestager delivered a speech on the Foreign subsidies regulation. Only “big fish” and distortive subsidies will be caught, she assured.
9 March I Women in Trade is hosting a film screening in support of Ukraine
9 March I Michelle Donelan, recently appointed UK Secretary of State for Science, Innovation and Technology, is set to deliver a keynote on the UK data regime at IAPP’s DPI UK. All eyes on the UK data protection moves?
10 March I Watch out for possible announcements on the IRA. Von der Leyen is in Washington negotiating to include EU companies in the US tax credits.
14 March I Long-awaited presentation of the Critical Raw Materials Act, the Commission’s plan to reduce dependencies on inputs for the twin transitions
16 March I Cecilia Malmström, former Trade Commissioner, will speak at Friends of Europe on trade trends
20 March I Bruegel hosts an event discussing how should be the EU’s response to the IRA
28 March I Turning tables on top EU correspondents, the upcoming #BrusselsCalling will be moderated (in-person!) by reporter-turned-Commissioner Mairead McGuinness. Join us!
What we’re reading.
Trade with friends? Not enough. Trade boss Sabine Weyand calls for a less picky trade policy. Reliability, more than like-mindedness, is the key word.
On the other hand, an Euractiv argues that geostrategic considerations might give a push to trade (for example “friend shoring” for energy and critical inputs)
WTO Deputy Director-General Angela Ellard discusses how to make trade more inclusive for women. Key takeaways: recognising that international trade is not gender-neutral, and the efforts to make trade more beneficial for women must take it into account.
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