The key priority of trade ministers gathering at Bratislava on Friday (23 September) will be to garner sufficient support from member states to authorise the signature of CETA next month at a bilateral EU-Canada summit.
Other major items on the agenda are what to do about TTIP as the end of the Obama administration approaches and what to do about the China antidumping file ahead of a decision in December on granting the country market economy treatment in trade defence cases.
Focus on CETA
Two contradictory but ominous opening salvos were fired ahead of the meeting that opens on Friday. The first salvo came from Dutch Prime Minister Mark Rutte, who has declared that his country would not ratify the EU Ukraine Association Agreement following its rejection in a consultative referendum in April 2016. The agreement was ratified by all other member states and the European Parliament. Most of its provisions are already applied ‘provisionally’. Now the EU Ukraine deal is facing major uncertainty over its future validity.
The move highlights the dangers that CETA is facing as it will be ratified as a ‘mixed’ agreement, involving the signature of the Council, the European Parliament and the 28 member states: years of uncertainty and the risk that it is ultimately vetoed by one single member state.
But CETA received a boost from Germany. The country’s parliament – the Bundestag – accepted that the deal be applied provisionally at a vote on CETA on Thursday (22 September). Should CETA fail, it will not be due to Berlin.
TTIP will also be on the plate. The question will be how to tackle the negotiations in the remaining months of 2016 before the Obama administration closes down. A complete halt to talks is not expected, nor a formal call to do so by member states, though one can expect strong language from member states criticising the state of the talks. French state secretary of state Mathias Fekl today reiterated his assessment that TTIP negotiations “are a failure” in the newspapers Les Echos in France and Handelsblatt in Germany.
The Commission itself is sending signals to proponents of an early conclusion of TTIP that this is not very likely to happen. Expectations in business circles Brussels are that, if at all, a deal will only be possible in or after 2018.
China decision likely avoided
Persons expecting that a decision on the testy file of treating China like any other WTO economy in trade defence by 11 December 2016 could be tentatively sketched will most likely be disappointed. To do so is an obligation the EU has under the terms of the country’s WTO accession protocol – at least this this the opinion of the Commission’s legal service.
The Commission has embarked on a complicated political and legal game to try to overcome opposition to granting China market economy status: reviving an old reform of trade defence instruments that includes doing away with a so-called ‘lesser duty’ rule, so as to be able to charge higher antidumping duties, and introduce changes to EU antidumping law to make it more “American style” as various Commission officials have stated, including Commission president Jean-Claude Juncker.
Antidumping experts believe the EU is seeking to proceed like it did when Russia was granted market economy status in 2004: to introduce new methods of calculations that allow it to charge higher than normal antidumping duties originating from the country. In the Russia case this meant calculations on raw material input prices resulting from allegedly distortive domestic policies such as export taxes or subsidies.
But the EU methodology has come under fire in the Court of Justice and the WTO. It was condemned by the WTO’s dispute settlement body over antidumping duties on Argentinean biofuels, and an appellate report on this case is expected early October. The method is also contested by the Russian government in a case brought to the WTO in 2015.
Devising new methodologies won’t be simple. Trade lawyer Erwin Vermulst, an eminent antidumping specialist believes adopting an “American style” method could entail adopting a ‘factors of production’ methodology used by Washington. Though the method is economically more coherent as it focuses on comparing prices with similar economies (developing countries in a developing country case), “it is not less WTO illegal”, Vermulst said.
The EU is also seeking to find ways to take antidumping decisions more swiftly than hitherto.
A decision on removing China from the EU’s list of non market economies will only likely be taken at the very minute in December, or even past the deadline, many believe.
In the corridors in Brussels it is being said that the cabinet of President Juncker, who has decided to become the ultimate arbiter of the China file, is waiting for the outcome of a constitutional referendum in Italy. The referendum was expected to be held in October, but was postponed. Italy is the main opponent to treating China as a market economy. Should MES status for China be announced before the referendum, this could contribute to a potential failure for prime minister Matteo Renzi in his referendum. This in turn could scupper his reformist administration. Yet the Renzi government is an active proponent of CETA and TTIP and ally of the Commission in these files.
Key member states such as France and Germany have been very prudent in making any statement on China’s status. Paris is however actively advocating for changes in antidumping rules along the lines proposed by the Commission. These moves meet with scepticism in Nordic member states in particular.
The steel industry, leader in a coalition of industries on the ‘China MES’ issue, has expressed renewed opposition to the move ahead of the Bratislava meeting. “The country does not have an economy in which the market determines prices – one of the most basic elements in determining eligibility for [market economy] status, Axel Eggert, Director General of EUROFER said in a statement today