Germany's EU Council Presidency. Leading Europe out of the crisis

POSITION | EUROPE | GERMAN EU COUNCIL PRESIDENCY

Leading Europe out of the crisis Industry’s Expectations of the German EU Council Presidency

26 June 2020

Introduction 23 October On 1 July Germany took over the Presidency of the Council of the European Union2017 for the first time since 2007 and for the thirteenth time in total. In view of the unprecedented challenges posed by the effects of the COVID-19 pandemic, the circumstances for this Presidency are clear: the aim is to lead Europe out of the worst economic crisis since the Second World War. Already in the first quarter of 2020, EU Gross Domestic Product (GDP) fell by 3.3 per cent compared to the previous quarter. This slump will intensify in the second quarter. The guiding principles of the German Presidency must therefore be to overcome the COVID-19 crisis and advance economic recovery. To this end, all measures must be directed towards strengthening Europe both internally and externally. Core elements of this consolidation are the restoration and deepening of the Single Market, the implementation of the industrial and digital strategy, a growth-promoting implementation of the Green Deal and a determined foreign and trade policy.

There will be no “business-as-usual” under the German Presidency. This applies not only to the substantive priorities, but also to the way the Council and the other institutions work. Problems include restrictions on travel, social distancing rules and the limited possibilities for making decisions in video or telephone conferences. This will considerably impact the negotiation capacity in the Council and will complicate the EU's legislative process.

In the first weeks and months, the German Presidency will be dominated by the discussion on the Multiannual Financial Framework (MFF) - including the EU reconstruction instrument "Next Generation EU" - and by the negotiations on the future relationship with the United Kingdom. This makes it even more important in the time remaining to consistently focus the various sectoral policies on a comprehensive and sustainable recovery. Only with a strong economy there will be a strong Europe. And a

Dr Heiko Willems | BDI/BDA - The German Business Representation | T: +32 2 292 1002 | h.willems@bdi.eu | www.bdi.eu

Leading Europe out of the crisis

strong and innovative industry is a prerequisite for Europe to be able to shape the future regarding issues like climate change or digitisation with its own technologies and concepts on an equal footing with global competitors such as the USA and China.

Economic policy - in its various forms - must therefore be the focus of the German Presidency. The BDI will use its expertise to constructively contribute to the discussions on the measures to be taken in Brussels and Berlin. In addition to our priorities in the various policy areas, in this paper we lay out what industry expects from politicians regarding the concrete initiatives to be taken during the German Presidency so that Europe emerges stronger from the crisis.

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Table of Contents Investing in the recovery of Europe .................................................................................................. 3 Making the deepening of the Single Market the European growth programme ........................... 4 Implementing and further developing the EU industrial strategy .................................................. 5 Emerging stronger from the crisis with digitisation and innovation ............................................. 6 Making the Green Deal growth-friendly ............................................................................................ 7 Strengthening the competitive order ................................................................................................ 9 Making healthcare management and systems fit for the future ................................................... 10 Strengthening Europe's role in the world ....................................................................................... 11 Negotiating future relations with the United Kingdom .................................................................. 13 Imprint ................................................................................................................................................ 15

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Investing in the recovery of Europe Where do we stand?

The European economy faces the consequences of the COVID-19 pandemic. The proposals of the German and French governments and the EU Commission for recovery represent a necessary and appropriate response to the worst economic crisis since World War II. The central banks in the EU, above all the European Central Bank, are also taking strong monetary policy measures to counteract the economic slowdown and the weak development of the inflation rate.

The European Commission's package of measures was presented on 27 May and includes a recovery plan of 750 billion euros for the regions and sectors most affected by the COVID-19 pandemic. Of this amount, 500 billion euros are to be made available as non-repayable grants until 2024. A further 250 billion euros are envisaged in the form of loans. The package is to be financed mainly through bonds that the European Commission intends to place on the capital market. Repayment will be made via the EU budget starting in 2028 and stretching over a 30-year time horizon.

The European Commission has also presented a new proposal on the Multiannual Financial Framework (MFF) for the next seven years. It provides for a volume of 1.1 trillion euros. An additional 13.5 billion euros will be allocated to the EU research programme Horizon Europe (a total of 94.4 billion euros). The European Fund for Strategic Investments (EFSI) and the InvestEU programme are to be increased by 30 billion euros. The European Commission also wants to make more money available for cohesion and agriculture.

What does the BDI want?

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No departure from either the structure (ratio of grants to loans) or the level of financial detail of the Commission proposal.

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Align reform and recovery measures with the European Semester.

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Focus on stability in monetary union when designing solvency measures since insolvencies, loan defaults and non-performing loans affect the financial stability of the banking industry.

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Equip Horizon Europe with at least 120 billion euros to achieve political goals of the EU construction plan, the Green Deal and digitisation.

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Ensure calculable and timely use of infrastructure funds (energy, transport, digital) in order to develop the greatest possible potential through EFSI and within the framework of InvestEU; accelerate planning and approval procedures and reduce bureaucracy.

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Provide further urgently needed funds to strengthen and modernise the European economy in addition to the proposed 150 billion euros in loans for strategic industries.

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Abstain from new taxes and levies at EU level, such as digital and plastic taxes or new unilateral carbon levies.

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Accelerate the dismantling of tax barriers in the Internal Market through a swift introduction of a Common Consolidated Corporate Tax Base (CCCTB) including both stages (i.e. harmonisation of the tax base and consolidation of profits and losses).

What do we expect from the German Presidency?

Work towards concluding the negotiations on the MFF and the package of measures for economic recovery; make the European Commission's targeted proposal the basis for negotiations.

Making the deepening of the Single Market the European growth programme Where do we stand?

The European Council and European Commission have rightly made the Single Market a central component of their recovery plan. The COVID-19-related disruptions in cross-border production and supply chains have clearly demonstrated the existential importance of a well-functioning Single Market for the European economy.

However, even before the crisis, companies - especially small and medium-sized enterprises - were not able to fully exploit the potential of the Single Market due to overly complex regulations, divergent national legal frameworks and bureaucracy as well as protectionism by the Member States. As a result, the EU is missing out on an economic potential of up to 1.1 trillion euros or up to 8.6 percent of EU GDP. Restoring the Single Market alone is not enough. Its deepening and continuous removal of regulatory, administrative and tax barriers must become a central growth project for the future of the EU.

What does the BDI want?

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Launch a comprehensive re-start of the Single Market and make its completion in all areas a central part of the post-COVID-19 recovery and growth programme.

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Increase EU-level and national capacities, resources and know-how for proper implementation and enforcement of Single Market rules and develop European guidelines to avoid national gold-plating.

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Strengthen transparency and avoid the creation of new barriers in the Single Market through systematic notification of new measures and application of the proportionality test.

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Implement rapidly and fully the Commission's Single Market Barriers Report and Action Plan on implementation and enforcement of Single Market rules.

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Ensure effective coordination and cooperation between the Single Market Enforcement Task Force and the Competitiveness Council and the European Parliament's Internal Market Committee.

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Further develop and deepen the EU Better Regulation Agenda, in particular the assessment of impacts on SMEs, and fully implement the Interinstitutional Agreement on Better Law-Making.

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Reduce bureaucracy systematically with the help of REFIT and the One-In-One-Out principle, capturing both administrative and substantive compliance costs.

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Create a European Public Procurement Portal to ensure easy access to relevant information on national public procurement markets, complaint systems and tendering procedures.

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Create a European legal form for SMEs.

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Reduce bureaucracy in the legal framework for European standardisation (New Legislative Framework) to support innovation, rapid market access and international competitiveness.

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Further deepen economic relations with Eastern Partnership countries.

What do we expect from the German Presidency?

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Make the deepening of the EU Single Market in all areas (goods, services, workers mobility, capital, digital, energy) the central cornerstone of the European post-COVID-19 recovery and growth programme.

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Initiate Council Conclusions on reducing bureaucracy in the New Legislative Framework; revive the Council Working Party on Standardisation and ensure independent interpretation of the Standardisation Regulation by the Council Legal Service.

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Hold an economic summit with the six countries of the Eastern Partnership in autumn and focus on the integration of these countries into European value chains.

Implementing and further developing the EU industrial strategy Where do we stand?

The future of Europe is closely linked to the future of European industry. A strong and innovative industry is a prerequisite for Europe to respond to global future issues such as climate change or digitisation with its own technologies and concepts on an equal footing with global competitors such as the USA and China.

The severe economic crisis caused by the COVID-19 pandemic requires a strategic rethink of EU industrial policy. Protective measures to contain the virus' have massively disrupted European and international value chains. The Single Market and globalisation have failed the COVID-19 stress test.

A massive decline in industrial production in Europe is looming, with consequences for jobs and investment in the future.

In March 2020, the European Commission presented an industrial strategy which contains numerous announcements but leaves important questions regarding their implementation and practical design unanswered. The strategy aims to drive forward ecological and digital change and strengthen Europe's global competitiveness.

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What does the BDI want?

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Rapidly restore European and international value chains interrupted by the COVID-19 crisis.

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Include the perspective of industrial competitiveness in environmental, climate and consumer policy discussions at an early stage.

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Reconcile the European Commission's climate protection ambitions with the objective of greater competitiveness, growth and the creation of new jobs.

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Create tax incentives and a state aid framework that encourages private investment in climateprotecting technologies.

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Develop a strategy for the import of renewable energy sources and a hydrogen roadmap.

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Present an action plan for increased carbon leakage protection before the end of this year.

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Free "Important Projects of Common European Interest" (IPCEI) from their current ad hoc approach and place them on a modified European legal and financial basis.

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Ensure effective protection against unfair competition from state-subsidised companies from third countries.

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Promote business cooperation, accelerate and improve merger control procedures.

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Accelerate investment in research and technology deployment in areas such as artificial intelligence, 5G and data and metadata analytics; present a 6G Action Plan in a timely manner.

What do we expect from the German Presidency?

Develop, together with the European Commission, a concrete action plan for a strong post-COVID-19 EU industrial policy.

Emerging stronger from the crisis with digitisation and innovation Where do we stand?

The COVID-19 pandemic has highlighted the importance of digital solutions and secure, high-performance digital networks: from home schooling to maintaining work processes via digital media. Without digital technologies, our social and economic life would probably have come to a standstill during the crisis, and the socio-economic damage would have been much greater. This experience has noticeably increased the willingness of companies, politics and society to take the leap into the digital age.

With its digital strategy, the European Commission had already set itself ambitious goals before the COVID-19 crisis. Artificial intelligence (AI), the data and industry strategy as well as research and innovation are rightly important pillars of this strategy. It is to be welcomed that the expansion of the European digital ecosystem is a central leitmotif of the European Commission. The aim of European data policy must be to further support the use and exchange of data by companies.

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What does the BDI want?

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Strengthen Europe's digital sovereignty and resilience: promote technologies in a targeted manner and build up and expand competencies - starting with digital infrastructure, hardware, software and electronics.

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Ensure the viability of e-government: promote ICT equipment and digitisation of processes and bring them up to European standards.

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Establish a European data ecosystem: strengthen digital sovereignty in the field of cloud computing; open the "GAIA-X" project to all interested EU member states.

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Accelerate the roll-out of digital infrastructure to meet the needs of society and industry across the board: radically reduce the duration and simplify the authorisation procedures for the roll-out of fibre networks.

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Promote European high-performance computing capacities; provide European scientific institutions and enterprises with high-performance infrastructure; ensure connectivity to future technologies such as quantum computing.

What do we expect from the German Presidency?

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Lift the Franco-German cloud project GAIA-X to the European level.

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Strengthen investment in future technologies and innovation: finalise the EU research programme Horizon Europe and conclude the negotiations.

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Use key technologies such as AI across sectors as drivers of Europe's economic reconstruction and promote the development of an AI ecosystem in Europe; in particular, strengthen networking initiatives of industry and rely on innovation-friendly regulatory frameworks.

Making the Green Deal growth-friendly Where do we stand?

In order to achieve the transformation to a climate-neutral and sustainable economy, enormous investments are necessary: according to the European Commission approx. 300 billion euros annually - by both private and public actors. Due to the COVID-19-related deepest economic crisis since World War II, however, private investment activity throughout Europe is declining significantly. It will not be possible to fully compensate for this fallout, even with government support programmes, as funds become scarcer due to rising government debt.

It is also unlikely that CO2-free industrial technologies, a sustainable hydrogen economy, climate-neutral electromobility, a renewable electricity supply, as well as modern environmental technologies and more sustainable products will be available to the necessary extent (and at competitive prices) within a very short time. Transformation processes and technical ramp-ups take time.

Also, when pursuing the ambitious goal of climate-neutral mobility, the economic and technical feasibility of measures ought to be considered. Solutions must be found that will help the heavily burdened

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mobility sector out of the crisis without creating additional burdens. Only economic efficiency and technically feasible ramp-up curves can enable climate protection without loss of prosperity.

Europe must earn and maintain the trust of its citizens that the transformation of society as a whole, as set out in the Green Deal, can succeed and lead to new growth.

What does the BDI want?

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Rapidly create the conditions for investment - especially in infrastructures for hydrogen and charging stations; avoid or postpone burdens.

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Combine available resources for economic recovery and climate or environmental protection efficiently and intelligently; make investment decisions now in new processes and procedures that support climate neutrality in 2050.

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Design the framework for ambitious EU targets for 2030 and 2050 in a technically reliable and economically predictable way.

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Do not further increase costs through the Eurovignette Directive in view of the very few technical alternatives in road freight transport; moderate CO2 pricing, replace current pollutant components and use funds earmarked for investment in climate-friendly trucks and as well as charging and H2refuelling tank infrastructures for trucks.

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Avoid double burdens from the EU Emissions Trading Scheme and the international compensation mechanism CORSIA in aviation, invest in the revitalisation of air transport and achieve sustainable increases in efficiency by implementing the "Single European Sky".

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Strengthen intermodal transport and interconnect all modes of transport; support European digital rail to create more capacity.

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Create a supportive policy framework to manage the transition to a circular economy with substantial investments, realignment of product portfolios and development of new markets.

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Implement existing comprehensive EU framework conditions for the protection of biodiversity throughout Europe - with equal consideration of economic, social and ecological aspects.

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Conduct dialogue and coordination on EU climate policy with EU candidate countries and Eastern Partnership partners as well as with Russia.

What do we expect from the German Presidency?

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Clarify whether and how enormously tightening of the already ambitious EU 2030 target to 50, possibly up to 55 percent, should be achieved in such a short time.

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Design future state aid rules, in particular the General Block Exemption Regulation and the Energy and Environmental Aid Guidelines, in such a way that EU Member States can implement ambitious energy, environment and climate policy more effectively than in the past.

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Promote the European hydrogen strategy - including an import strategy for hydrogen and its derivatives.

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Create a reliable European regulatory framework for joint offshore wind projects to fully develop existing European sites.

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Provide investment incentives for energy-efficient building refurbishment to ensure that the EU renovation wave delivers both the required CO2 savings and employment effects; ensure that additional financing instruments made available at EU level build on existing incentive instruments in EU Member States so that financial resources can be used effectively and efficiently.

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Find a balanced approach in the strategy for intelligent and sustainable mobility: use all technological levers for carbon-neutral mobility and, in addition to electromobility, promote hydrogen mobility and market penetration of CO2-neutral fuels on an equal footing while removing existing burdens.

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Use the opportunities of a circular economy while mastering the associated challenges for companies.

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Fill knowledge and data gaps before existing EU environmental policy instruments are further developed; above all, work to improve the database for Natura 2000 sites and create standards so that German companies can use their innovative potential to benefit the environment.

Strengthening the competitive order Where do we stand?

Digitisation and globalisation are significantly altering the conditions on EU markets. Market structures are constantly changing due to new technologies and increased competition from non-EU players.

EU competition law, based on the principle of free competition and ex-post control, is a cornerstone of the Single Market and its success. Overall, it must not lose its impact or mutate into an ex-ante regulatory instrument.

However, today’s EU competition law has in part been interpreted in an unchanged manner for many years and is therefore unable to take challenges and opportunities of digitisation and globalisation sufficiently into account; there is an urgent need for revision, particularly with regard to framework conditions for business cooperation which hinder innovation. At the same time, competition is at risk from state-owned or state-subsidised companies from third countries, which Europe has so far been unable to adequately deal with. The European Commission has therefore recently proposed measures for dealing with such actors.

Finally, in the context of the green and digital transformation, the right course of action in terms of state aid rules will be decisive for maintaining industrial competitiveness - in particular the practice-oriented amendment of the framework conditions and promotion of IPCEIs. What does the BDI want?

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Modernise the interpretation and application of EU competition law.

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Pursue further harmonisation of competition policy and competition law at European and international level.

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Leading Europe out of the crisis

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Ensure a global level playing field: avert distortions of competition in the Single Market caused by companies subsidised by third countries and remedy shortcomings in competition with non-European companies - also with regard to public procurement.

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Do not create new regulation that is not based on proven market failures.

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Promote legal certainty for business cooperation - reduce antitrust barriers to innovation.

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Merger control: streamline procedures and take greater account of global competitive influences as well as efficiency considerations.

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Promote IPCEI more strongly and make its framework conditions more practice-oriented.

What do we expect from the German Presidency?

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Evaluate and improve merger control and the design of the "Instrument on Foreign Subsidies" under intensive involvement of industry.

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Prevent regulation contrary to the principle of free competition.

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Promote further harmonisation of competition policy and competition law in the EU and internationally, in particular in the context of a WTO reform.

Making healthcare management and systems fit for the future Where do we stand?

The German Presidency has the historic task of becoming not only a presidency of the crisis, but also a presidency of the future. This applies in particular to health care in Europe and also globally. Europe is already one of the world's most important exporters of innovative drugs and medical products. A future-oriented strengthening of the innovative power of the industrial health care industry in Europe is the most sustainable way to expand Europe's sovereignty in medical care. It is therefore important to protect and promote European innovative strength and existing value chains within the framework of the German Presidency.

Another key is the digital transformation of the healthcare system. This offers opportunities and possibilities to make research and care more targeted, effective and crisis-proof in the future. The vision of networked communication between all players in the system and new partnerships is already a reality in many EU Member States. In order to make the digital transformation a success, the German Presidency must provide impetus for a coordinated European approach.

What does the BDI want?

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Create incentives for targeted promotion of production sites in Europe in order to strengthening sovereignty in medical care.

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Preserve the achievements of the Single Market to strengthen the industrial healthcare sector in Europe; make a clear commitment to industrial and regulatory property rights (in particular intellectual property).

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Enable EU-wide exchange of health data in accordance with the provisions of the EU General Data Protection Regulation (GDPR) in order to effectively realise the opportunities offered by digitisation; involve industry at an early stage in a dialogue to establish a "European Health Data Space".

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Create new added value in the development of innovative solutions and their translation through the EU research programme Horizon Europe in the field of health, also with the support of targeted public-private partnerships (PPP).

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Strengthen global health through bilateral and multilateral formats and give political support to the World Health Organization (WHO) as the key to promoting all health-related global goals.

What do we expect from the German Presidency?

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Recognise the value of industrial healthcare in Europe and its performance in the COVID-19 crisis; further strengthen the innovative power of the healthcare industry in Europe with the "EU Pharmaceutical Strategy" and protect existing value chains by maintaining and expanding IP incentives.

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Consistently promote the establishment of a "European Health Data Space" and make it accessible for industrial health care management.

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Formulate guidelines for the medical devices sector for a Europe-wide uniform interpretation of the regulatory framework following the moratorium on "Medical Device Regulation" (MDR); initiate a moratorium on "In Vitro Diagnostic Medical Device Regulation" (IVDR).

Strengthening Europe's role in the world Where do we stand?

The international consensus on a liberal, multilateral world order with open markets and enforceable rules for trade and investment has broken down. Systemic competition with capitalist China, nationalist tendencies in the USA and a weakened World Trade Organization (WTO) are creating considerable uncertainty for our companies. The COVID-19 pandemic is acting as a catalyst for protectionism, demands for the re-localisation of production, state intervention in private investment decisions and criticism of globalisation. Against this backdrop, the European Commission is working on a new trade strategy to contribute to fair competition internationally and in the European Single Market.

Given that a large part of global economic growth will in future take place outside Europe and that the European economy thrives on international integration, the EU must continue to play an active role in shaping globalisation. In order to be able to effectively assert values, standards and interests internationally and to remain as an independent power factor in the world, the EU must present a unified, consistent and convincing image to the outside world.

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What does the BDI want?

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Strengthen and reform the WTO, promote plurilateral agreements; support consensus-building in institutions of global governance (G7, G20); closely involve business.

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Conclude and implement bilateral trade and investment agreements (especially with Mercosur and China, but also Mexico); implement Economic Partnership Agreements (EPAs) with African states.

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Contribute to competition on an equal footing, e.g. through a revised "International Procurement Instrument" (IPI) and adaptation of European and international framework conditions in dealing with transparency, dumping, subsidies and state-owned enterprises.

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Avoid new burdens on free trade through unilateral measures and protectionism; use an active, liberal EU trade policy, which clearly aligns safeguard measures with the Union interest and does not define trade policy primarily as a lever for other policy objectives.

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Avoid disproportionate human rights monitoring and reporting obligations in corporate supply chains.

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Strengthen technological sovereignty without encouraging autarky and protectionism.

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Develop a successful strategy to counter extraterritorial sanctions against European companies.

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Develop an EU-Africa Strategy in which the private sector plays an important role and is supported by easily accessible funding instruments.

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Ensure secure raw material supplies through fair competition in open global markets and nondiscriminatory access to raw materials from abroad.

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Strengthen European security and defence capabilities and cooperation programmes; allocate 13 billion euros to the European Defence Fund (EDF); promote key strategic technologies and reduce technological dependencies; seek synergies with civil research.

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Strengthen the European space industry as a strategic sector of the future through increased investment, awarding contracts to companies and a budget in the MFF of at least 17 billion euros over the next seven years.

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Continue to push ahead with the reform of the OECD Consensus on Export Credit Financing.

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Continue integration of the Western Balkans into European structures; start accession negotiations with Albania and Northern Macedonia.

What do we expect from the German Presidency?

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At multilateral level, support the Commission's line on reforming and strengthening the WTO; promote a constructive EU position in the replacement process of the WTO Director General.

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Aim for plurilateral agreements under the umbrella of the WTO, especially on electronic commerce.

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Strengthen the EU agenda for cooperation with Latin America and bring EU-Mercosur free trade agreements to the signature, as well as support EU EPAs with African countries and support Cotonou follow-up agreement, strengthening economic growth and investment in ACP countries; support implementation of the African Free Trade Area.

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Pursue conflict resolution with the US on the Boeing-Airbus cases; pursue industrial goods agreements and mutual recognition of conformity assessments with the US.

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Seek a united stance on all issues concerning China and on issues of unfair competition with China's state-owned economy; in negotiations for the EU-China investment agreement, seek accommodation and concessions from China.

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Adopt Council position on the IPI, which takes into account the position of business.

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Contribute to a constructive conclusion of the trilogue negotiations on EU dual-use reform, rejecting the latest proposal of the European Commission and striving for legally secure and practicable export controls.

Negotiating future relations with the United Kingdom Where do we stand?

The German Presidency falls in the second half of the one-year Brexit transition phase. Despite the slowdown in economic exchange over the past years, the United Kingdom (UK) remains an important partner for Germany and Europe. Interdependence exists in almost all industrial and service sectors.

They also include the free movement of workers and capital. Brexit means that many legal frameworks are no longer applicable. During the German Presidency, it will be important to adopt a legally valid partnership agreement and thus create reliable foundations for companies. It is clear, though, that even a deep and comprehensive partnership cannot replace the advantages of full membership in the Single Market.

What does the BDI want?

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Conclude a comprehensive agreement with UK allowing zero duties and avoiding quotas.

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Ensure fair competition conditions to a sufficient extent.

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Comply with WTO rules.

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Preserve European regulatory autonomy.

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Pursue EU partnerships with other trading partners taking into account the rights and obligations of both partners through an appropriate balance of rights and obligations.

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Avoid discrimination of the EEA states, Switzerland or Turkey.

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Facilitate future agreements on product, labour rights and environmental standards to prevent regulatory competition.

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Adopt unilateral instruments for simplification in bilateral trade (e.g. data traffic) in time before the end of the current Brexit transition period.

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Exclude sectoral market access for individual industries only.

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Implement civil and labour rights from the withdrawal agreement throughout the EU.

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Implement provisions of the exit agreement on the new EU external border on the island of Ireland to protect the Single Market.

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What do we expect from the German Presidency? â–Ş

Conclude a balanced partnership agreement with the UK.

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Implement emergency measures for possible failure of the negotiations at an early stage.

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Imprint Federation of German Industries (BDI) Breite StraĂ&#x;e 29, 10178 Berlin www.bdi.eu T: +49 30 2028-0 Editorial office Dr Heiko Willems Director BDI/BDA - The German Business Representation T: +32 2792 1002 h.willems@bdi.eu

Document number: D 1211

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