The EU tackles the “weaponization of trade” with three new instruments. Affected are the rules for public tendering, foreign subsidies and safeguard measures, or other constraints against EU exports that are not in line with WTO rules. Falk Steiner describes three EU tools in more detail in his analysis.
The pandemic has shone a bright light on industrial weak points in the European health sector. 16 EU member states have signed a manifesto “Towards an independent, competitive and innovative European healthcare sector” to strengthen Europe’s sovereignty in this area. Germany, however, is hesitant about the IPCEI (Important Project of Common European Interest) – at the risk of being left behind in this area, as Eugenie Ankowitsch analyzes.
Federal Minister for Economic Affairs and Climate Action Robert Habeck (Greens) wants to move fast with the planned law on the introduction of minimum storage level requirements for gas storage facilities, set to come into force on May 1. Europe.Table has received the parliamentary group’s submission, which outlines basic gas price developments over the coming months and their impact on the storage levy and thus the costs for gas consumers. Read more on this in the News.
The amendment of regulations for crypto services (MiCA) is off the table. Changing the directive would have meant a de facto ban on the digital currency Bitcoin. More on this in the News.
Bernd Lange (SPD/S&D), Chairman of the Trade Committee in the European Parliament, sees a “weaponization of trade”. And Lange is not only referring to the currently so important issues of dealing with the Russian Federation but also to the behavior of China and the USA under Trump. Arbitrary punitive tariffs, subsidies, targeted mistreatment of European companies abroad – all this is part of the arsenal of the world’s powerful states.
Trade policy is not the responsibility of the member states, but exclusively of the EU – and the EU is now in the process of significantly sharpening its trade war instruments once again, fueled by the impact of the Ukraine crisis. The first step was taken in 2020 with the FDI direct investment screening, and it was not until mid-February that a tightening of the rules in the event of trade disputes came into force. A few days later, the Commission broke new ground with a case against structural discrimination by European players in the People’s Republic of China before the World Trade Organization (WTO).
But now, three more relevant legal acts are to follow. And they have their work cut out for them. The most advanced is the International Procurement Instrument (IPI), the rules for procurement. Parliamentary rapporteurs, the Council Presidency, and the Commission reached agreement on this in the trilogue late yesterday afternoon. Companies from outside the EU often participate in public tenders. These include companies suspected of receiving preferential treatment from their home countries and thus indirectly gaining advantages in EU markets.
“In public procurement procedures in the EU, suppliers from third countries, for example, China, regularly get their turn, winning prestigious contracts in the EU with artificially cheap offers,” said rapporteur Daniel Caspary (CDU/EPP). “At the same time, European suppliers were denied access to public procurement procedures in third countries. The IPI, as a new trade instrument, puts a stop to this competition-distorting practice.” The basic principle of the IPI is reciprocity: Companies whose home markets are not at least equally open as those of the EU can be affected by price premiums or exclusion from contracts.
The second piece of legislation is aimed at foreign subsidies that impact the EU market. The Foreign Subsidies Instrument (FSI) is intended to combat distortions of competition caused by illegal subsidies from third countries. The European Parliament is nearing the end of its deliberations on this issue, with 478 amendments and 27 compromise amendments currently on the table. However, some issues have not yet been conclusively clarified for the Parliament’s position, such as the important question of what exactly should be considered state aid and at what limits the EU Commission must intervene.
Reinhard Bütikofer (Greens/EFA), for example, criticizes the fact that the Commission proposal is limited to financial aid: “This approach falls short, as other types of preferential treatment are not covered by it.” CSU/EPP MEP Christian Doleschal stresses that the effectiveness of the FSI must be evaluated in any case – the selected thresholds, for example, would have to be reviewed after five years at the latest. The vote for the parliamentary position on the FSI is scheduled for April 5.
The third piece of legislation is the Anti-Coercion Instrument (ACI). Proposed by the Commission in December, the instrument is intended to be used when a country applies, for example, safeguard measures or other constraints against EU exports that are not in line with WTO rules. Currently, experts say, there is a lack of a way to respond to such measures in the relatively short term.
At an INTA trade committee hearing on the ACI yesterday, for example, Elvire Fabry of the Jacques Delors Institute stressed that the instrument’s strength lies in its deterrent effect. “For credible deterrence, all 27 must commit – regardless of the cost. Consistency is key,” Fabry said. Costs of such countermeasures should therefore also be borne jointly. Moreover, the signal effect of a rapid adoption of the ACI should not be underestimated.
For Claire Reade of the Center for Strategic and International Studies, the ACI is somewhat weaker than US powers in direct comparison. The International Emergency Economic Powers Act (IEEPA), combined with Section 301 of the US Trade Act of 1975 concede broad rights to the presidential administration. “The US government has greater latitude under US law,” Reade said in comparison to the proposed ACI. It is also not necessarily bound by international law such as WTO rulings from the US perspective, unlike the ACI for the EU. However, there is also an opportunity for transatlantic cooperation in the ACI: “Perhaps we can achieve joint benefits in this context,” Reade said.
Why is the anti-coercion instrument so relevant? Individually, each EU member state is quite small, but collectively, the “divide and rule” tactics of the People’s Republic of China do not work, said Henry Gao, a professor at Singapore Management University. “Linked as an inseparable bundle,” the ACI could become an EU asset. However, he also warns against overestimating the tool. Countermeasures should be expected. Sanctions, in particular, Gao says, would play into the hands of the government in the People’s Republic and could rally the population behind the Communist Party. The ACI alone is not enough; effective sanctions would look like the current alliance against Russia, which consists of many more participants – including countries such as Singapore in addition to the EU and the United States, Japan, and the United Kingdom. This is the answer to the question: How do you play four-dimensional chess with China?
At present, a consultation on the ACI is still ongoing – its deadline was extended by two weeks by the EU Commission yesterday, as DG Trade Director General Sabine Weyand announced in the EP Trade Committee. The ACI is “not a blank check for countermeasures” and should not replace dialogue, Weyand said. Countermeasures within the framework of the ACI would have the goal of persuading the other side to give in. The ACI is explicitly part of the framework of international law, particularly under the WTO’s self-defense rights. But there are also measures that are not currently covered by the WTO framework, such as China’s measures against EU member state Lithuania.
EU trade policy is thus getting a host of new instruments. But whether the IPI, FSI, and ACI will actually have the desired effect is currently completely open. Given the current global political framework, all three projects will likely be adopted more quickly than feared just a few months ago. Europe is gearing up for trade wars – at least with extensive new regulations.
France had already announced in the program for its EU Council presidency that it would launch an IPCEI (Important Project of Common European Interest) for the health sector. The presidency will work hard to strengthen Europe’s sovereignty in health technology by promoting an industrial strategy in the health sector, it says. By driving innovative developments in the various areas of healthcare, Paris aims to strengthen healthcare industrial policy and the EU’s strategic positioning in the sector.
Now, 16 member states, including France, Austria, Spain, Belgium, and Denmark, have signed a manifesto to this effect as part of the ministerial conference “Towards an independent, competitive and innovative European healthcare sector”. Groundbreaking developments in areas such as genomics and personalized medicine, artificial intelligence, and even biotechnology will fundamentally change tomorrow’s medicine and the organization of healthcare systems, the statement said. Therefore, it is crucial that Europe, which already has a strong and export-oriented industry, prepares for these changes and supports the development of its companies in these new areas.
“The healthcare crisis has been a powerful reminder of the need for the European Union to defend its sovereignty in the healthcare industry,” said French Health Minister Olivier Véran. “This unprecedented crisis we have lived through has highlighted our industrial vulnerabilities, particularly in this critical sector,” added Agnès Pannier-Runacher, French Secretary of State for Industry.
With the manifesto, signatories formally agreed on the scope of projects they plan to support during 2022. Projects must be in one of three strategic themes:
Participating member states also want to consider other areas to be included in the second wave of IPCEI Health. Digital health, medical technology, and medical devices are currently considered favorites.
The timetable for the introduction of the IPCEI envisages two phases to ensure extensive involvement of the member states. The first phase will be dedicated to the three sets of issues mentioned above. Projects can be pre-notified to the European Commission in two waves: first from June 2022 and then in October 2022. The second phase of pre-notification of projects should then also be completed by the end of 2022.
Germany, and thus German companies, are not part of the IPCEI Health. As recently as May 2021, the then German Chancellor Angela Merkel, the then German Ministers Peter Altmaier (Economics) and Jens Spahn (Health), and EU Commission President Ursula von der Leyen had held talks with French President Emmanuel Macron on closer cooperation in the health sector. The former German government wanted to provide massive funding for gene and cell therapies in particular.
While France is now getting serious, Germany is holding back after the change of government, even at the risk of being left behind in this important area. In principle, it is still possible to join an IPCEI at a later date. However, it is uncertain at present whether Germany will take up this option. The health ministry, which is responsible for the subject, has not commented on the issue at all, and the Federal Ministry of Economics, which is responsible for all IPCEIs, has been vague for the time being.
Germany has been part of the multilateral working group preparing IPCEI Health since it was established last summer and has contributed very actively to the design of an IPCEI Health in recent months, a ministry spokeswoman said in response to a question. It will continue to work with France and the other interested member states in the multilateral working group on IPCEI Health.
According to the Federal Ministry of Economics and Technology, the German government can only sign a political declaration if the budgetary funds for its implementation are available or in sight. Anything else would not be reliable, neither with regard to interested companies nor to the other participating member states. This does not sound like a high priority or an unconditional will to act.
The situation is different in France. In mid-2021, President Emmanuel Macron presented the Health Innovation Strategy 2021-2030. The strategy aims to put France at the forefront of European research and achieve sovereignty in the health sector. The budget: €7 billion, borne by the state and the private sector.
In the fall of 2021, the French government launched the“Digital Health” initiative. With this, France aims to become the global market leader in digital health by 2025. The package is to be endowed with a total of €650 million. Opened in December 2021, the PariSanté campus, a digital health cluster, covers around 20,000 square meters and brings together startups, research institutes specializing in eHealth, SMEs, and major corporations.
With a budget of €45 million, four strategic areas are initially being promoted there: artificial intelligence in healthcare, imaging, numerical modeling, and the socio-economic challenges of health data. Most recently, France took the lead in an illustrious consortium to prepare the European Health Data Space (Europe.Table reported).
France plans to make €1.5 billion available for the planned IPCEI Health. The first French projects are to be pre-notified to the European Commission from June 2022, another indication of the great pace being set by the neighboring country. If Germany wants to participate in IPCEI Health, the German government will have to get a move on.
“The mentality of our society has to change,” says Roberto García Martínez. When he talks about the future of resource extraction in Europe, his voice resonates with meaningful seriousness and unmistakable confidence. He is CEO of Eurobattery Minerals, a company engaged in resource mining in Europe to extract ethically sourced and fully traceable battery minerals. The focus is on nickel, cobalt, copper, and rare earth exploration. Current projects are underway in Finland, Spain, and Sweden.
Roberto García Martínez is actually a lawyer, but his career began in a mining company in Spain. In the 2000s, he went with a client to West Africa, where he worked in the sustainable diamond industry. He wanted to stay for two years – it turned out to be 15. Two and a half years ago, Eurobattery Minerals called, and he moved back north.
He sounds euphoric when he talks about the future of the European mining industry. There is currently a growing awareness of how much potential there really is in the mining of raw materials in Europe and what opportunities there are for independence from the world market.
At the end of 2020, the European Union founded the European Raw Materials Alliance. Developments like these are long overdue because energy storage technologies, which are essential for the energy transition, rely on raw materials. In Europe, there are currently 26 projects working on batteries, all of which are still being established. For a long time, the mining industry in Europe had a mixed reputation and was outsourced to other countries. But those days are over now.
An increased focus on European raw material production also brings other advantages. For example, manufacturing processes could be simplified immensely. The supply chains of EVs, for example, would be shortened if the raw materials essential for production could be mined in Europe. These developments would be particularly effective given the Supply Chain Act coming into force in 2023.
Future ambitions and ideas abound for Roberto García Martínez. “I am Chief Executive Officer, but my people call me Chief Vision Officer because I am a visionary,” he says with a smile. His goal is completely CO2-neutral production, more cooperation with clean energy producers: For example, wind energy, which is already being used in the projects in Spain, or water energy in Finland.
For future projects, he would like to see the approval processes speed up and become less costly. Because action is urgent. Fair raw materials for the transportation revolution are more important now than ever. Anouk Schlung
The EU tackles the “weaponization of trade” with three new instruments. Affected are the rules for public tendering, foreign subsidies and safeguard measures, or other constraints against EU exports that are not in line with WTO rules. Falk Steiner describes three EU tools in more detail in his analysis.
The pandemic has shone a bright light on industrial weak points in the European health sector. 16 EU member states have signed a manifesto “Towards an independent, competitive and innovative European healthcare sector” to strengthen Europe’s sovereignty in this area. Germany, however, is hesitant about the IPCEI (Important Project of Common European Interest) – at the risk of being left behind in this area, as Eugenie Ankowitsch analyzes.
Federal Minister for Economic Affairs and Climate Action Robert Habeck (Greens) wants to move fast with the planned law on the introduction of minimum storage level requirements for gas storage facilities, set to come into force on May 1. Europe.Table has received the parliamentary group’s submission, which outlines basic gas price developments over the coming months and their impact on the storage levy and thus the costs for gas consumers. Read more on this in the News.
The amendment of regulations for crypto services (MiCA) is off the table. Changing the directive would have meant a de facto ban on the digital currency Bitcoin. More on this in the News.
Bernd Lange (SPD/S&D), Chairman of the Trade Committee in the European Parliament, sees a “weaponization of trade”. And Lange is not only referring to the currently so important issues of dealing with the Russian Federation but also to the behavior of China and the USA under Trump. Arbitrary punitive tariffs, subsidies, targeted mistreatment of European companies abroad – all this is part of the arsenal of the world’s powerful states.
Trade policy is not the responsibility of the member states, but exclusively of the EU – and the EU is now in the process of significantly sharpening its trade war instruments once again, fueled by the impact of the Ukraine crisis. The first step was taken in 2020 with the FDI direct investment screening, and it was not until mid-February that a tightening of the rules in the event of trade disputes came into force. A few days later, the Commission broke new ground with a case against structural discrimination by European players in the People’s Republic of China before the World Trade Organization (WTO).
But now, three more relevant legal acts are to follow. And they have their work cut out for them. The most advanced is the International Procurement Instrument (IPI), the rules for procurement. Parliamentary rapporteurs, the Council Presidency, and the Commission reached agreement on this in the trilogue late yesterday afternoon. Companies from outside the EU often participate in public tenders. These include companies suspected of receiving preferential treatment from their home countries and thus indirectly gaining advantages in EU markets.
“In public procurement procedures in the EU, suppliers from third countries, for example, China, regularly get their turn, winning prestigious contracts in the EU with artificially cheap offers,” said rapporteur Daniel Caspary (CDU/EPP). “At the same time, European suppliers were denied access to public procurement procedures in third countries. The IPI, as a new trade instrument, puts a stop to this competition-distorting practice.” The basic principle of the IPI is reciprocity: Companies whose home markets are not at least equally open as those of the EU can be affected by price premiums or exclusion from contracts.
The second piece of legislation is aimed at foreign subsidies that impact the EU market. The Foreign Subsidies Instrument (FSI) is intended to combat distortions of competition caused by illegal subsidies from third countries. The European Parliament is nearing the end of its deliberations on this issue, with 478 amendments and 27 compromise amendments currently on the table. However, some issues have not yet been conclusively clarified for the Parliament’s position, such as the important question of what exactly should be considered state aid and at what limits the EU Commission must intervene.
Reinhard Bütikofer (Greens/EFA), for example, criticizes the fact that the Commission proposal is limited to financial aid: “This approach falls short, as other types of preferential treatment are not covered by it.” CSU/EPP MEP Christian Doleschal stresses that the effectiveness of the FSI must be evaluated in any case – the selected thresholds, for example, would have to be reviewed after five years at the latest. The vote for the parliamentary position on the FSI is scheduled for April 5.
The third piece of legislation is the Anti-Coercion Instrument (ACI). Proposed by the Commission in December, the instrument is intended to be used when a country applies, for example, safeguard measures or other constraints against EU exports that are not in line with WTO rules. Currently, experts say, there is a lack of a way to respond to such measures in the relatively short term.
At an INTA trade committee hearing on the ACI yesterday, for example, Elvire Fabry of the Jacques Delors Institute stressed that the instrument’s strength lies in its deterrent effect. “For credible deterrence, all 27 must commit – regardless of the cost. Consistency is key,” Fabry said. Costs of such countermeasures should therefore also be borne jointly. Moreover, the signal effect of a rapid adoption of the ACI should not be underestimated.
For Claire Reade of the Center for Strategic and International Studies, the ACI is somewhat weaker than US powers in direct comparison. The International Emergency Economic Powers Act (IEEPA), combined with Section 301 of the US Trade Act of 1975 concede broad rights to the presidential administration. “The US government has greater latitude under US law,” Reade said in comparison to the proposed ACI. It is also not necessarily bound by international law such as WTO rulings from the US perspective, unlike the ACI for the EU. However, there is also an opportunity for transatlantic cooperation in the ACI: “Perhaps we can achieve joint benefits in this context,” Reade said.
Why is the anti-coercion instrument so relevant? Individually, each EU member state is quite small, but collectively, the “divide and rule” tactics of the People’s Republic of China do not work, said Henry Gao, a professor at Singapore Management University. “Linked as an inseparable bundle,” the ACI could become an EU asset. However, he also warns against overestimating the tool. Countermeasures should be expected. Sanctions, in particular, Gao says, would play into the hands of the government in the People’s Republic and could rally the population behind the Communist Party. The ACI alone is not enough; effective sanctions would look like the current alliance against Russia, which consists of many more participants – including countries such as Singapore in addition to the EU and the United States, Japan, and the United Kingdom. This is the answer to the question: How do you play four-dimensional chess with China?
At present, a consultation on the ACI is still ongoing – its deadline was extended by two weeks by the EU Commission yesterday, as DG Trade Director General Sabine Weyand announced in the EP Trade Committee. The ACI is “not a blank check for countermeasures” and should not replace dialogue, Weyand said. Countermeasures within the framework of the ACI would have the goal of persuading the other side to give in. The ACI is explicitly part of the framework of international law, particularly under the WTO’s self-defense rights. But there are also measures that are not currently covered by the WTO framework, such as China’s measures against EU member state Lithuania.
EU trade policy is thus getting a host of new instruments. But whether the IPI, FSI, and ACI will actually have the desired effect is currently completely open. Given the current global political framework, all three projects will likely be adopted more quickly than feared just a few months ago. Europe is gearing up for trade wars – at least with extensive new regulations.
France had already announced in the program for its EU Council presidency that it would launch an IPCEI (Important Project of Common European Interest) for the health sector. The presidency will work hard to strengthen Europe’s sovereignty in health technology by promoting an industrial strategy in the health sector, it says. By driving innovative developments in the various areas of healthcare, Paris aims to strengthen healthcare industrial policy and the EU’s strategic positioning in the sector.
Now, 16 member states, including France, Austria, Spain, Belgium, and Denmark, have signed a manifesto to this effect as part of the ministerial conference “Towards an independent, competitive and innovative European healthcare sector”. Groundbreaking developments in areas such as genomics and personalized medicine, artificial intelligence, and even biotechnology will fundamentally change tomorrow’s medicine and the organization of healthcare systems, the statement said. Therefore, it is crucial that Europe, which already has a strong and export-oriented industry, prepares for these changes and supports the development of its companies in these new areas.
“The healthcare crisis has been a powerful reminder of the need for the European Union to defend its sovereignty in the healthcare industry,” said French Health Minister Olivier Véran. “This unprecedented crisis we have lived through has highlighted our industrial vulnerabilities, particularly in this critical sector,” added Agnès Pannier-Runacher, French Secretary of State for Industry.
With the manifesto, signatories formally agreed on the scope of projects they plan to support during 2022. Projects must be in one of three strategic themes:
Participating member states also want to consider other areas to be included in the second wave of IPCEI Health. Digital health, medical technology, and medical devices are currently considered favorites.
The timetable for the introduction of the IPCEI envisages two phases to ensure extensive involvement of the member states. The first phase will be dedicated to the three sets of issues mentioned above. Projects can be pre-notified to the European Commission in two waves: first from June 2022 and then in October 2022. The second phase of pre-notification of projects should then also be completed by the end of 2022.
Germany, and thus German companies, are not part of the IPCEI Health. As recently as May 2021, the then German Chancellor Angela Merkel, the then German Ministers Peter Altmaier (Economics) and Jens Spahn (Health), and EU Commission President Ursula von der Leyen had held talks with French President Emmanuel Macron on closer cooperation in the health sector. The former German government wanted to provide massive funding for gene and cell therapies in particular.
While France is now getting serious, Germany is holding back after the change of government, even at the risk of being left behind in this important area. In principle, it is still possible to join an IPCEI at a later date. However, it is uncertain at present whether Germany will take up this option. The health ministry, which is responsible for the subject, has not commented on the issue at all, and the Federal Ministry of Economics, which is responsible for all IPCEIs, has been vague for the time being.
Germany has been part of the multilateral working group preparing IPCEI Health since it was established last summer and has contributed very actively to the design of an IPCEI Health in recent months, a ministry spokeswoman said in response to a question. It will continue to work with France and the other interested member states in the multilateral working group on IPCEI Health.
According to the Federal Ministry of Economics and Technology, the German government can only sign a political declaration if the budgetary funds for its implementation are available or in sight. Anything else would not be reliable, neither with regard to interested companies nor to the other participating member states. This does not sound like a high priority or an unconditional will to act.
The situation is different in France. In mid-2021, President Emmanuel Macron presented the Health Innovation Strategy 2021-2030. The strategy aims to put France at the forefront of European research and achieve sovereignty in the health sector. The budget: €7 billion, borne by the state and the private sector.
In the fall of 2021, the French government launched the“Digital Health” initiative. With this, France aims to become the global market leader in digital health by 2025. The package is to be endowed with a total of €650 million. Opened in December 2021, the PariSanté campus, a digital health cluster, covers around 20,000 square meters and brings together startups, research institutes specializing in eHealth, SMEs, and major corporations.
With a budget of €45 million, four strategic areas are initially being promoted there: artificial intelligence in healthcare, imaging, numerical modeling, and the socio-economic challenges of health data. Most recently, France took the lead in an illustrious consortium to prepare the European Health Data Space (Europe.Table reported).
France plans to make €1.5 billion available for the planned IPCEI Health. The first French projects are to be pre-notified to the European Commission from June 2022, another indication of the great pace being set by the neighboring country. If Germany wants to participate in IPCEI Health, the German government will have to get a move on.
“The mentality of our society has to change,” says Roberto García Martínez. When he talks about the future of resource extraction in Europe, his voice resonates with meaningful seriousness and unmistakable confidence. He is CEO of Eurobattery Minerals, a company engaged in resource mining in Europe to extract ethically sourced and fully traceable battery minerals. The focus is on nickel, cobalt, copper, and rare earth exploration. Current projects are underway in Finland, Spain, and Sweden.
Roberto García Martínez is actually a lawyer, but his career began in a mining company in Spain. In the 2000s, he went with a client to West Africa, where he worked in the sustainable diamond industry. He wanted to stay for two years – it turned out to be 15. Two and a half years ago, Eurobattery Minerals called, and he moved back north.
He sounds euphoric when he talks about the future of the European mining industry. There is currently a growing awareness of how much potential there really is in the mining of raw materials in Europe and what opportunities there are for independence from the world market.
At the end of 2020, the European Union founded the European Raw Materials Alliance. Developments like these are long overdue because energy storage technologies, which are essential for the energy transition, rely on raw materials. In Europe, there are currently 26 projects working on batteries, all of which are still being established. For a long time, the mining industry in Europe had a mixed reputation and was outsourced to other countries. But those days are over now.
An increased focus on European raw material production also brings other advantages. For example, manufacturing processes could be simplified immensely. The supply chains of EVs, for example, would be shortened if the raw materials essential for production could be mined in Europe. These developments would be particularly effective given the Supply Chain Act coming into force in 2023.
Future ambitions and ideas abound for Roberto García Martínez. “I am Chief Executive Officer, but my people call me Chief Vision Officer because I am a visionary,” he says with a smile. His goal is completely CO2-neutral production, more cooperation with clean energy producers: For example, wind energy, which is already being used in the projects in Spain, or water energy in Finland.
For future projects, he would like to see the approval processes speed up and become less costly. Because action is urgent. Fair raw materials for the transportation revolution are more important now than ever. Anouk Schlung
