As 2017 Approaches, EU Prepares for Busy Year on Trade and Investment Agenda

15 December 2016

The coming year is expected to be a pivotal one for the 28-nation EU bloc, as it embarks on the next chapter of the “Brexit” process and sees elections in various large member states, while also working to advance its foreign trade and investment agenda on multiple fronts.

Meanwhile, the bloc is also expected to face continued populist pressures, while grappling with the growing strength of some “Eurosceptic” political parties and major leadership transitions taking place in other parts of the globe throughout 2017.

One of the key priorities in the coming months will be the preparations for the next stage in the EU-UK relationship, in light of the June 2016 referendum result in the United Kingdom which was in favour of a so-called “Brexit.” (See Bridges Weekly, 30 June 2016)

Leaders from all EU member states – minus the UK – are due to meet in Brussels, Belgium, on Thursday 15 December with the expectation that they will release a statement outlining their approach to the UK exit negotiations when these kick off in early 2017.

“The objective is to set out how the Brexit process will be handled by the EU 27 once the UK has notified,” says the European Council’s website in describing the meeting.

UK Prime Minister Theresa May announced in early October that she intends to trigger Article 50 of the Lisbon Treaty to begin exit talks with the European Council by the end of March, a pledge she has since reaffirmed despite ongoing legal challenges within Britain on the subject. (See Bridges Weekly, 6 October 2016)

Under Article 50, any member state wishing to leave the EU has two years from when that article is triggered to negotiate their withdrawal, though that timeframe can be extended if all parties agree.

Michel Barnier, who has been appointed the Chief Negotiator on the EU side for the exit talks, told reporters this month that the upcoming talks would be “legally complex [and] politically sensitive,” while suggesting that the actual negotiating time period will be a mere 18 months in light of the initial preparatory steps as well as the need for ratification.

The UK’s Supreme Court heard the government’s appeals last week on whether parliamentary approval would be needed prior to launching “Brexit” talks with the other EU member states. A lower court ruling had deemed that the government did need lawmakers’ sign-off to do so.

The discussions going forward will have to face a host of difficult topics, such as the level of access that the UK would have to the single market, which EU officials say is contingent on accepting all “four freedoms” involving the movement of goods, services, people, and capital. Among other issues, the UK will also need to sort out with fellow WTO members what “Brexit” will mean for its current membership terms, specifically its “schedules,” with International Trade Secretary Liam Fox reportedly beginning informal preparatory discussions on the subject.

France, Germany gear up for elections

Meanwhile, preparations are underway in France and Germany for presidential elections whose outcomes could be game-changers for the bloc.

German Chancellor Angela Merkel is running for a fourth term in her role. Announcing her plans in late November, she predicted a tough-fought campaign against opponents whose policies could have implications for “our values and way of life in Germany.”

The French election process is also well underway, with some primary runoffs already being held earlier this autumn and more slated for early next year. Among the candidates expected to face off against one another in the general election are centre-right François Fillon of the Republicans, far-right Marine Le Pen of the National Front, and Manuel Valls of the centre-left Socialist Party.

Elections could also be called in Italy, after Prime Minister Matteo Renzi stepped down following a constitutional referendum held earlier this month. His successor is Paolo Gentiloni, of Renzi’s same party, and while parliamentary elections are due in 2018 speculation is rife that these could be brought forward to 2017. General elections are also set for the Netherlands in March.

As the various campaigns get underway, candidates are expected to address deep-seated national tensions over migration, trade, and the overall merits, pitfalls, and future of the EU integration project.

Indeed, the “EU 27 leaders” who are meeting this week in Brussels are currently involved in a process of “reflection” for the bloc’s future that began in the wake of the UK referendum result. This process is due to end in time for the March celebration of the 60th anniversary of the Rome Treaties. Those were the accords that effectively launched the European Economic Community, the EU’s predecessor. (See Bridges Weekly, 15 September 2016)

Trade, investment negotiations

The shifts in Europe’s political landscape come as the bloc navigates the next steps for its foreign trade and investment agenda, which has multiple initiatives underway and several more on the horizon.

The European Parliament is expected to vote on whether to ratify the EU-Canada Comprehensive Economic and Trade Agreement (CETA) in early 2017, which has already seen heated debate within the bloc during the signing process that was completed this autumn. (See Bridges Weekly, 3 November 2016)

Another EU accord is also facing difficulties moving forward, as Dutch Prime Minister Mark Rutte has indicated that he will not sign the political and economic EU-Ukraine Association Agreement unless certain conditions are met, such as ensuring that the accord does not pave the way for Kiev to eventually join the European Union. Dutch voters rejected the Ukraine association deal in a non-binding referendum that was held earlier this year. (See Bridges Weekly, 14 April 2016)

EU leaders are expected to discuss the next steps for the situation on Thursday, according to a draft annotated agenda for this week’s European Council meeting.

Meanwhile, EU negotiators are working with Japan in an effort to clinch a political accord by year’s end, though these talks could go into the new year. Japan is the world’s third largest economy, with talks between the two sides having already undergone 17 rounds in a bid to address topics ranging from agricultural trade to automobile regulations. (See Bridges Weekly, 8 December 2016)

On the investment front, another process that is gearing up involves exploratory discussions for a multilateral investment court. The European Commission announced its interest in developing such a system last year. (See Bridges Weekly, 7 May 2015)

Just this week, the European Commission and the Canadian government held a first set of talks with other government officials on the subject in Geneva, sources confirmed. The topic of investment protections in trade and investment accords has drawn significant public scrutiny in Europe, both in the case of CETA and others.

Also on the docket include the expected launch of negotiations with Australia, along with efforts to upgrade an existing trade deal with Mexico, among others.

Going into the new year, an overarching challenge for the bloc will be in making sure that it continues to show a united front on the international stage in global trade and investment rulemaking, particularly in light of political developments being seen elsewhere.

EU Trade Commissioner Cecilia Malmström said earlier this month that the European Union could potentially fill the “void” should US policy take a more inward focus, given the impending change in leadership in the North American economy. (See Bridges Weekly, 8 December 2016)

ICTSD reporting; “EU Calls for Brexit Talks ‘Swiftly’ After Article 50, Draft Says,” BLOOMBERG, 12 December 2016; “House of Lords: EU-UK trade deal will take more than 2 years,” POLITICO, 13 December 2016; “Brexit: ‘Clear plan’ for interim deal needed, say peers,” BBC, 13 December 2016; “Exclusive: Dutch to demand limits on Ukraine deal at EU summit,” REUTERS, 12 December 2016; “Data fight emerges as last big hurdle to EU-Japan trade deal,” POLITICO, 9 December 2016; “Liam Fox opens talks with WTO over terms of membership,” FINANCIAL TIMES, 5 December 2016; “Angela Merkel to Stand for Re-Election as German Chancellor,” WALL STREET JOURNAL, 20 November 2016.

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