shippinglogistics The Malta Independent on Sunday 14 APRIL 2019
2
APRIL 2019
|
shippinglogistics
How China’s first ‘SILK ROAD’ slowly came to life – on the water
F
ew images are more enduring in the historical imagination than the train of two-humped Bactrian camels plodding across desert sands from west to east, or vice-versa, across the vast open spaces of Eurasia. Now that China is edging towards a modern incarnation of the “silk road” it is worth remembering how this emblem of the ancient world actually came into being. There is no doubt that these overland trading routes existed in the early and late Middle Ages. There is also no doubt that these treks across deserts brought massively important cultural influences from the west to the east while carrying goods in the other direction. But there is another side to this tale, and it is one which the Chinese government acknowledges with its huge One Belt One Road (OBOR) transcontinental infrastructure project to link East Asia to the Middle East and Europe. Simply put, the story of the silk road, ancient or modern, is as much the story of the sea as the dunes.
Trade in ideas The overland routes carried spices and gems and other non-bulky items as well as bolts of silk and packages of unwoven silk thread. They also helped to bring the ideas and art of both Islam and Buddhism to East Asia. That is why Indian art, already impregnated by Greek influences since Alexander the Great, had so great an impact on the art of China and even Japan. It is curious indeed to see motifs in medieval sculptures of the Buddha that survive in Japan that can, ultimately, be traced back to the ancient Mediterranean. In the eighth century there were merchants – many of whom were Jewish
and known by the still unexplained title “Radhanites” – who set out from France and in some cases managed to reach China overland. But they were not the true pioneers, as they attached themselves to existing camel caravans. At this point, the route cannot seriously be seen as an example of proto-globalisation. The effects on the economy of Western Europe from very small amounts of high-cost luxury goods were minimal. Routes right across Asia could only flourish when political conditions were right, and the 11th and 12th centuries were a relatively quiet period. However, with the rise of the Mongols, a new political order imposed peace from Russia to China and made long-distance travel easier. This was particularly the case when the Genoese and Venetians installed themselves in trading centres along the Black Sea, notably at Caffa (modern Feodosiya) in the Crimea, and Tana on the Sea of Azov. The most famous European visitor to medieval China – Marco Polo – was not, if his account is to be believed, typical: he spent many years in the Mongol administration during the 13th century before returning to Venice by sea. But there were Genoese and Venetians who travelled out to Quanzhou on the coast of China and lived and died there. And there were certainly bolts of Chinese silk that found their way to Western Europe; at least one item in the ceremonial regalia of the Holy Roman Emperor was made from Chinese silk.
in fact it had continued without a break for many centuries. Indeed, there were already elements in place in the days of the Roman Empire, when Greek merchants from Egypt reached the Bay of Bengal and massive quantities of pepper reached the port of Rome at Ostia. But in the days of the Roman Empire, maritime links to China were tenuous in the extreme, and Roman embassies to the rival great empire tended to be dismissed without much interest. Moreover, Chinese governments tended to look away from the sea, concentrating on the exploitation (and taxation) of the rich resources of their own country. The great transformation occurred from the seventh century as the area now known as Malaysia and Indonesia was opened up to maritime trade. Under the Song dynasty, based in southern China around 1100, Chinese merchants were encouraged to head across the water. Trade in camphor out of the East Indies pointed in two directions: upwards to the coast of China, but also westwards into the Indian Ocean. A trading network developed in the East Indies, under the auspices of the rulers of Sri Vijaya in Sumatra, which linked the world of the Chinese traders to that of the Malay and Indian traders. A trade route was emerging that was worthy of the name. This was a “silk route of the sea”.
Primacy of the sea routes
Along the sea routes, increasing quantities of spices filtered westwards, passing India and flowing up the Red Sea, where they were moved on to Alexandria in Egypt, and collected by merchants from Genoa, Venice, Barcelona
As the Mongol Empire broke up in the 14th century, the primacy of the maritime route linking China to lands further west became more obvious, though
Gingerbread
and other western ports. Sometimes they made their way across Europe by land, or eventually around Iberia by sea, and ended up in the gingerbread of Hanseatic burghers in Lübeck, Riga or Tallinn. Ships also carried enormous amounts of Chinese porcelain, much in demand in the Islamic world, which keeps turning up in shipwrecks in and around the South China Sea. The Cirebon shipwreck found off Java carried half a million pieces of porcelain, part of a cargo weighing 300 tons. Eventually, with the foundation of Melaka at the start of the 15th century the Chinese established a base on the edges of the Indian Ocean. This was the result of the short-lived period of vigorous maritime activity around 1420, when the Ming emperors sent large fleets out into the Indian Ocean under the command of Admiral Zheng He to show the Chinese flag and to collect information about the world beyond the Middle Kingdom. These routes linking east and west long preceded the coming of the Portuguese, Spaniards and Dutch, who transformed the trade of the world after 1500. And it was the maritime (rather than the overland) silk route that can be seen as a very early case of what might be called proto-globalisation. It is interesting to note that much the same applies today: the quantities of goods carried by train across Asia under the OBOR project cannot hope to match the enormous amount of containerised goods a revived Chinese merchant marine will be able to carry by sea. This article has been published as part of the World Economic Forum series, The State of Trade.
shippinglogistics
|
3
APRIL 2019
Trade wars are growing over the digital economy
and developing countries are shaping the agenda At the heart of the current US trade war with China is tariffs on imports like steel, sorghum and silicon chips. But, with the growing role of data and digital technology in the world economy, a new arena of digital trade conflict is on the cards.
Christopher Foster and Shamel Azmeh reports
This article was first published in theconversation.com Christopher Foster is a Presidential Fellow at the Global Development Institute, University of Manchester Shamel Azmeh is a lecturer in International Development, Global Development Institute, University of Manchester
R
apid growth in e-commerce, cloud computing, and other parts of the digital economy are driving important shifts in the global economy. Digital firms are today among the leading global companies. Meanwhile, firms in all sectors are incorporating digital tools into their business models. But the growth and globalisation of the digital economy is still not underpinned by clear global regulatory frameworks. While there are clear rules governing trade in goods such as books and DVDs, it is still not clear what happens when these goods become digital and are transmitted across borders through platforms such as Netflix. Similarly, while we have clear rules on goods like cars, TVs and industrial machinery, we lack clear regulations on the data that these goods increasingly collect and transmit. The desire to put rules in place on digital trade is gaining momentum. This has grown as a number of countries, such as China, Indonesia and Nigeria, which have introduced policies that legislate against foreign data flows and e-commerce, affecting the business models of leading global digital corporations. A new push came during the World Economic Forum in Davos earlier this year when 76 countries announced plans to begin negotiations on digital trade.
Digital divide Behind the agenda to introduce global rules on digital trade, there are significant tensions that could spill over into conflict. On one side is the US and a number of leading digital nations, backed by the vast lobbying power of Silicon Valley and big business. On the other side, a number of emerging and developing countries are looking to resist new rules that they see as adding extra burden on them, with vague benefits. Leading digital firms, and other big companies using digital tools, have mobilised. They are pushing for international rules on issues such as data flows, custom duties on e-commerce and requirements that foreign firms reveal their computer (source) code. This campaign is most visible in the US where digital firms like Google, Facebook, and Amazon have grown in political power. They have pushed for trade rules
that enable them to expand globally without facing complex rules in different countries, which limit their ability to operate from a distance. This is the core of their business models. During the Obama administration in the US these activities contributed to the emergence of the “digital trade agenda”. Digital trade rules were seen as crucial for giving rapidly growing US firms a predictable global landscape, as they expanded. This agenda was pursued through a number of channels, notably the Trans-Pacific Partnership (TPP), which was described by the US trade representative at the time as the “most ambitious and visionary internet trade agreement ever attempted”. The Trump administration, with a focus on supporting traditional industries, has shown less interest in digital trade. This has led to a stronger roles for other leading digital economies such as Australia, Japan, and some European countries, with support from global digital firms. But there has been strong opposition from a number of less developed countries. Many of them believe these rules will widen the digital divide that already exists between the developed and the developing world, by exposing local digital firms to fierce competition. As the history of trade rules has shown, rapidly opening developing economies up to foreign competition can potentially hollow them out. Plus, some countries argue that they might need to adopt more active policy to develop their own digital economies, which they fear global rules could limit. Their resistance came to the fore during discussions on new digital trade rules in the World Trade Organisation (WTO) in 2017. The fight was led by India and the WTO’s Africa Group, which highlighted
the risks of imposing WTO rules on future economic development. Through coalition building, they were able to resist the push for new rules leading to an impasse in the WTO.
A global realignment? The success of developing and emerging countries in resisting the push for digital trade rules at the WTO was also down to the lack of strong consensus in leading economies. The EU, in particular, was hesitant. Key voices expressed concerns about the impact of new rules on the European digital economy, limiting the ability to establish strong online data protections in the continent. Recent indications, however, highlight growing alignment between these leading economies. A recent draft of the digital trade chapter in the “deep and comprehensive trade agreement” between the EU and Tunisia shows a European shift towards a stronger position on digital trade. Nonetheless, emboldened by their previous successes, some developing country alliances are now looking to roll back other digital trade commitments in the WTO which they see as damaging. Notably, the “moratorium on e-commerce” – adopted in 1998 at the WTO in which countries agreed to (temporarily) refrain from imposing custom duties on electronic transmissions – is being challenged by India and South Africa. They see these rules as problematic, limiting their ability to collect tariffs as more goods are sold digitally. These diverging positions are likely to increasingly cause conflict in the coming years. The stakes are high and outcomes are likely to shape the direction of the global economy in the future.
4
APRIL 2019
|
shippinglogistics
EXPRESS TRAIL an enabler to any business’ logisti EXPRESS TRAILERS is currently undergoing challenging but very exciting times. The Malta Independent on Sunday spoke to FRANCO AZZOPARDI, Chairman and CEO about this interesting time for the company and the way the company is offering logistics solutions that are proving instrumental for so many businesses to operate more efficiently. Can you give us a few company statistics and figures? Our company sees its earliest origins in the 1930’s but it was in the years after World War II that Emmanuel Vella started build the founding blocks of who Express Trailers is today. He started buying his first truck, then he started fostering his eight sons in the business until eventually, everyone found his specific role within the company. The more the country advanced, the bigger the need for a company like ours who could enable more economic growth. Today, Trailers Express is among the leading company for transport and logistics with around 300 people and a domestic fleet of over 3 kms if it lines up bumper to bumper. Needless to say we also have an equally significant and impressive line-up on the continent.
What are the company’s more recent investments and developments? Express Trailers is currently undergoing many internal changes in terms of operation and its technology systems not only throughout its different business activities but also a change in our thinking process to continue strengthening the way people look at our company. In short, we are doing what we are doing so that our customers and all those who somehow come
in touch with the world of transport and logistics, realise what a sophisticated and specialized industry this has become. The three principal business drivers in our industry are people, equipment and space and investments have to be incessant in all three areas of resourcing. Among the many internal changes being affected, we are the final stages of a long process of implementing a new Core Transport Management System, a platform which we consider to be the heart of our system and that enables us to be at par with the highest international standards. This is major surgery in our Operations and Methods and it will change the way we take bookings, to the way we plan to the delivery and invoicing cycle. This in itself, is a strong enabling tool for our logisticians. Then we are also optimising on the space where we work towards more efficiencies. One area of focus is our former VRT garage which is now being relocated to larger premises outside our operations yard which is currently used by our trucks and trailers. The main gain apart from space is also people related. Our workers and customers can enjoy a safer environment too. Related to space optimisation, we are also in the final stages of a state-of-the-art ambience for training of both our people and also clients and other parties interested in logistics both to do business and also from a career perspective. The learning centre will be managed by our Academy. We are also seeing business growth in our ShipLowCost service where now, we are
offering this service also to businesses especially retailers who want to start selling internally online through e-commerce solutions. We have also invested in a new cloud-based Warehouse Management System together with Databyte, a leading developer assisted by the standard setters Gartner research company. We are also looking at an expansion project at an international level. As you see, we’re far from quiet!
How has your central warehousing project helped you deliver a more efficient service? Yes, this was a project that we completed only last year. It consists of a new warehouse, centralizing our ‘managed warehousing’ activities in one place so that Express Trailers can now deliver a more efficient and flexible service. We have always worked closely with businesses so we understand that today, to operate and remain competitive, business must be supported by a strong logistics and a robust information platform. Businesses are able to be more efficient only if they focus on the main operation of their business without the need of having to be distracted by managing inventories, storage and distribution routines - something that today, is ideally taken care of by experts like ourselves, having the Total Logistic Solution with the economies of scale
that can benefit traders. We have been offering an innovative system of “pay-as-you-use” where today, Express Trailers provides companies with a conveniently located central warehouse and distribution operation, supported by robust IT ecosystem to help them handle the import, export and distribution. Through this service, customers have the opportunity to store all their goods with us and then, through our specially developed IT system, we manage the location, stock levels, orders and shipments in time real, on a pay-as-you-use pricing model. Basically, whatever the business of the customer, our Warehouse Management System enables us to order, collect, pack and re-distribute the work on behalf of the client.
How do you ensure the safety of goods of your customers as well as employees at work? Safety at work is of prime importance to us. A defining trait of this company is that first and foremost, the corporate culture and tone at the top starting from Board level and cascaded with amplified importance down through the Risk Committee and the executive. That tone is a resonance of the respect we have always shown towards our people and its clients. We respect our people whom we consider our family, flag-bearers and ambassadors of everything that represents Express Trail-
shippinglogistics
|
5
APRIL 2019
ERS ics needs
Franco Azzopard
more elaborate and time-sensitive. The other major challenge we face, which challenge is mostly overlooked by policy makers, is the lack of trailer parking space available on the island. With the current market prices of real estate, we cannot expect our shareholders to finance the acquisition of property simply for parking equipment at night because understandably, the price of real estate reflects the potential of property being built up not left barren. This is a serious and growing problem which will eventually limit expansion, which in turn is not congruent to where the country seems to be pointing at in terms of demand for goods by an increasing population.
ers. We ensure constant safety by giving continuous training to our employees. Last year we launched the Express Trailers Training Academy to offer all employees continued training for them to become professionals in their respective fields and for them to remain abreast with the latest developments in this dynamic market. Our employees are not just employees, but when they start working with us, they become experts and professionals in their work. That together with a persuasive attitude towards working safely is part of our #WeAreOrange culture and love mark.
To which countries do you operate? We operate to every country in Europe, and beyond, including the North Africa, Asia and the Far East. But really and truly, we can carry and deliver to anywhere. We are able to do so because we invested in our fleet, our equipment and in our people. We have acquired the experience that allows us to operate from anywhere to anywhere.
Since your operations are so widespread, how do you coordinate operations effectively? The more the population grows, the further the increase in consumption and imports. Demand from consumers and increased demand for import and transport of machinery and heavy equipment always led Express Trailers to keep investing in more vehicles for its fleet. Since its early years, Express Trailers’ strength has always been its propensity to invest more in its operations, in the competences of staff, IT-enabling tools and space where to work. Our operations people have acquired both academic and practical knowledge and developed a strong sense of foresight and an arsenal of solutions that can be applied to
challenges and problems with speed and rigour. Yes, our fleet has always been part of a long-term investment for the company and every time we looked at growth, this growth also meant more vehicles for our fleet. This fleet is then managed through a computerized system able to know where each trailer is, how far it is from destination and that is capable of monitoring and controlling the trailers’ temperature. But the essence of coordination is an intersection of tacit and explicit knowledge of the science and art of logistics. That is the hallmark of Express Trailers.
Do you offer advantageous rates to be more competitive? Today, Express Trailers has grown to the extent that the service we offer, goes beyond the simple delivery of goods from one place to another. Our expertise is distinguished and differentiated through the management of the logistic risks involved so that ultimately belong to the owner of the cargo, that is our client. Few realize the extent of risks involved in transportation and logistics. We operate under the inter-
national CMR convention which regulates the risk ownership between the logistic company and the customer. Thanks to our experienced and professional people who operate our services, today we can ensure the best service. This is not a matter of price – because every customer is unique, and our price reflects the service and risk mitigation we deliver to every customer.
What kind of challenges are involved in your line of operations? Probably, one of the biggest challenges we face daily is that we operate a large fleet of trucks and trailers on the road and therefore, we are constantly striving to find a balance between our operations while ensuring that our presence on the road causes the least danger or inconvenience possible. Obviously, to manage all the risks involved in the handling and delivery of any goods, whatever the circumstances, is another challenge that we face daily. And like any other business, the key challenge remains that of ensuring that our operations remain relevant and competitive in a dynamic sector that is becoming
Can you list some of the largest jobs undertaken by Express Trailers? As a company, we are capable of carrying practically anything, including what is also considered as hazardous cargo. Therefore, rather than look at the larger work we’ve delivered, we prefer to look at some of the most prestigious projects which over the years have enhanced the confidence in our company and its capabilities. Amongst the most prestigious projects worth mentioning, there was the handling of logistics for athe American TV crews for the famous Summit held in Malta between Bush and Gorbachev in the late eighties, more recently, in 2008, we carried the new currency when Malta introduced the Euro and today, anyone who drives on the new flyover Tal-Qroqq, will do well to remember that all the structure on which the flyover is built, was carried by us. But on a regular basis, we carry prestigious cars, medical equipment, industrial equipment and machines and we also help our cultural heritage when we support Fondazzjoni Wirt Artna by carrying historic cannons and other artefacts for its growing collection.
6
|
shippinglogistics
Photo: AP/Martin Meissner
APRIL 2019
In this file photo, a container ship is loaded at the harbor in Hamburg, Germany. The United States is considering putting tariffs on $11 billion in EU goods per year to offset what it says are unfair European subsidies for planemaker Airbus. While the size of the potential tariffs is relatively small compared with the hundreds of billions of goods the U.S. and China are taxing in their trade war, it suggests a breakdown in talks with the EU over trade.
FROM JETS TO CHEESE Trump wants to impose new tariffs on EU
The United States wants to tax $11.2 billion worth of EU goods — from airplanes to Gouda cheese — in what some experts say marks another attempt by the Trump administration to use tariffs to reshape global trade in its favor. CARLO PIOVANO and PAUL WISEMAN of Associated Press reports.
T
he World Trade Organization ruled last year that the European Union provided illegal subsidies to plane maker Airbus. The U.S. tariff wish-list, released late Monday, reflects the Trump administration’s calculation of the harm the EU subsidies have inflicted on the United States — and specifically to Boeing. A WTO arbitrator is expected to rule this summer on how much relief the U.S. is actually entitled to. Trade analysts say it isn’t unusual for countries to present a tariff target list before the WTO arbitrator sets actual parameters. In the U.S. case, it allows the Office of the U.S. Trade Representative to collect public comments on the potential tariffs. And it lets the EU know which European industries might be hit and perhaps encourage a settlement. Jennifer Hillman, a former U.S. trade official who also served on the WTO’s appellate body, said the U.S. government typically would announce the target list quietly, perhaps through a notice in the Federal Register. Instead, she noted, the Trump administration declared
its intentions “with fanfare and hoo-ha” in a press release designed to attract public attention. “You’re scaring a lot of importers” who see the products they bring into the United States on the target list, said Hillman, who now teaches law at Georgetown University. “You’re creating chaos in the market.” Economists say the Trump team appears to want to use the ruling not merely to help Boeing but to heighten pressure on trading partners like Germany with which the U.S. has a trade deficit. In the end, more tariffs could further raise consumer prices in the United States and weigh on the global economy at a time when it’s showing alarming signs of stress as the U.S. wages a broader trade war with China. After the U.S. Trade Representative’s office issued a list of EU products it wants to tax, President Donald Trump took to Twitter to make the case. “The EU has taken advantage of the U.S. on trade for many years. It will soon stop!” Trump tweeted Tuesday. The Trump administration’s list of European products to tax
includes the types of helicopters and aircraft Airbus makes but also a wide range of European exports: famous cheeses like Stilton, Roquefort and Gouda, wines and oysters but also more obscure exports like ceramics, knives and pajamas. Chad Bown, a senior fellow at the Peterson Institute for International Economics, said it would be “a game changer” if the United States actually imposed tariffs on Airbus planes. “We’ve never done tariffs on airplanes before,” he noted. Normally, countries use favorable WTO rulings to compel trading partners “to give up the bad stuff they were doing” and don’t actually end up imposing tariffs. The Trump administration could be different. “They just like to impose tariffs,” Bown said. While the size of the tariffs is small compared with the hundreds of billions the U.S. and China are taxing in their trade war, it suggests a breakdown in talks with the European Union over trade. The U.S. and EU have been negotiating since last year about how to avoid tariffs that Trump has wanted to impose, with little result. Trump in June last year im-
posed tariffs of 25% on steel imports and 10% on imported aluminum from the EU in a move that seems aimed at helping the U.S. industry but has also raised costs for many businesses that import these products. The EU responded with tariffs on about 2.8 billion euros’ worth ($3.4 billion) of U.S. steel, agricultural and other products, from Harley Davidson bikes to orange juice. The U.S. and EU have since July been negotiating how to scale back the tariffs, with Trump holding out the bigger threat of slapping tariffs on European cars — a huge industry in the region — should the negotiations not yield a result. The EU responded Tuesday to the U.S.’s latest call for new tariffs by noting that it was based on America’s own estimate, not anything it had been awarded by the WTO. Eric Schweitzer, the head of the Association of German Chambers of Commerce and Industry, lamented the trade tensions. “There are already more than enough tariffs,” he said. “Instead of the U.S. making fur-
ther threats, both sides should now keep a cool head and aim for de-escalation.” Whether the U.S. gets the legal right to implement the new tariffs will depend on a ruling by the WTO, an organization based in Geneva that sets the rules for global commerce and settles disputes. After 14 years of legal wrangling between the U.S. and EU, the WTO ruled in May last year that the EU had provided some illegal subsidies to Airbus, hurting Boeing. The WTO also ruled last month that Boeing received illegal tax breaks from Washington state and that the EU could seek damages. But the ruling was limited: The state tax subsidies came to only about $100 million. The U.S. attempt to tax Airbus jets comes just as Boeing is facing broad challenges over the global grounding of its 737 Max airliners amid concerns that technical problems could have contributed to two crashes in five months. Tariffs on European airplanes could in theory help Boeing and hurt Airbus, whose shares were down almost 2% on Tuesday.
shippinglogistics
|
7
APRIL 2019
Brexit with brie? Common Market 2.0 proposal explained – through the import and export of cheese Amid the ongoing Brexit standoff, one proposal that has been gaining traction and which MPs will now vote on in a series of indicative votes in parliament, has been the crossparty plan for a “Common Market 2.0”. STUART MACLENNAN reports
S
uperficially, the plan resolves a number of the challenges posed by Brexit, including the thorny issue of the Irish border and the UK’s future trading relationship with the EU. But the plan – also known as Norway+ because it has similarities with the EU’s relationship with Norway – involves the UK compromising on a number of its current red lines, while at the same time requiring a fundamental revision of one of the EU’s existing free trade agreements. One way to understand how a Common Market 2.0 might work – and how it would differ to other options on the table – is to look at one type of good that might move between countries. Say, cheese. First, it’s important to establish the difference between a free trade agreement and a customs union. As a rule, tariffs are applied on the basis of where goods originate from. The EU’s free trade agreement with Canada, for example, means that you can import Canadian Avonlea cheese into the EU free from tariffs. However, the EU’s lack of an free trade agreement with the US means that American Monterey Jack cheese
Under Common Market 2.0, the UK would be the only state outside of the EU to participate in both the EU customs union and the single market. The lack of a red line bisecting Ireland is the reason why a customs union is so attractive.
is charged at €221.20/100kg. If you first export Monterey Jack to Canada, and then from Canada to the EU it will still be chargeable, as the goods originated in the US. Under a free trade agreement, checks on where good originated – known as “rules of origin” checks – are still required. A customs union is a more advanced form of trading relationship, where you agree not only to remove any tariffs on each other’s goods, but also to apply the same tariffs on goods originating from third countries. This means, for the purposes of the EU customs union, that Monterey Jack will be treated the same whether it is imported to Belgium or Bulgaria. Within a customs union it’s unnecessary to check from where goods originate when they cross a border as they will already have received the appropriate customs treatment.
Back to the 1990s
The Common Market 2.0 idea is an attempt to reverse engineer the previous 25 years of EU integration, reverting the UK’s participation in the EU to the position before the Maastricht Treaty was agreed in 1992. Under the plan, the UK would rejoin the European Free Trade Association (EFTA) of which it was a founding member prior to joining the European Economic Community. The UK would also accede to the European Economic Area (EEA) agreement with the EU. This is a two-pillared agreement between the EU, as well as three of the four EFTA members: Iceland, Liechtenstein and Norway, but not Switzerland. This is often known as the “Norway model”. Under Common Market 2.0, the UK would be the only state outside of the EU to participate in both the EU customs union and the single market. The lack of a red line bisecting Ireland is the reason why a customs union is so attractive. Dr Stuart MacLennan Such an approach would result in the UK adopting EU-EEA measures relating to the internal market, including the free movement of goods and services, and competition law. But the UK would no longer be subject to the direct jurisdiction of the Court of Justice of the EU, which would be replaced by the jurisdiction of the EFTA Court. Under this approach, regulatory alignment is all but guaranteed, as standards would ultimately be agreed by the EU and EEA (of which the UK would be a member) – meaning that all cheese capable of being sold in the EU, be that French
brie or Dutch edam, ought to be capable of being sold in the UK and vice versa. What moves the Common Market 2.0 proposal beyond simply replicating the Norway model, however, is that it also involves the UK entering a customs union directly with the EU, thereby removing the need for rules of origin checks on the Irish border between Northern Ireland and the Republic of Ireland. Checks on cheese moving between Norway and Sweden are rare – but they do happen. By entering into a customs union with the EU such checks along the Northern Irish border would never be necessary. The major stumbling block with Common Market 2.0, however, is that under the EFTA agreement it’s not currently possible for member states to enter into a customs union with other states – whether the EU or otherwise. So Norway cannot enter into a customs union directly with the EU, or the US, for example. If the UK were to seek this, it would require special treatment not only by the EU, but by EFTA as well – the political difficulties of which have been largely overlooked.
Free movement question
The Common Market 2.0 arrangement would also, controversially for many, involve the UK continuing with the free movement of persons. The key piece of legislation providing free movement rights for EU and EEA citizens – directive 2004/38 – was incorporated into EEA law in 2007. One saving grace for the UK might be the joint declaration attached to that 2007 EEA decision that it cannot be the basis for the creation of political rights, and that the directive does not impinge upon immigration policy. This reflects the fact that the primary focus of EEA law is on economically active migrants, rather than EU citizens. The Common Market 2.0 approach is therefore unlikely to be viable. Not only would it enrage the right wing of the Conservative Party, it would require agreement from the EU, the EEA and Switzerland. Given the difficulties the UK has had agreeing a deal with one trading bloc, trying to win over three – the EU, the EEA, and EFTA, as well a domestic audience – looks near-impossible. This article was first published in theconversation.com Stuart MacLennan is a senior lecturer in Law at Coventry University
8
APRIL 2019
CHINA, EU agree to strengthen TRADE relationship C
hina and the European Union agreed Tuesday to strengthen their trade relationship, pledging to work toward making it easier for foreign investors to get access to China, the world’s second biggest economy. In a joint statement, the two sides said they committed to widening market access and eliminating discriminatory requirements for foreign companies and agreed that businesses should not be forced to transfer their technology — issues that foreign investors in China have long complained about. EU leaders Donald Tusk and JeanClaude Juncker and Chinese Prime Minister Li Keqiang discussed the issues at their summit before claiming a breakthrough in their trade relationship. “Negotiations have been difficult but ultimately fruitful,” Tusk said.” We managed to agree a joint statement which sets the direction for our partnership based on reciprocity.” The stakes at the annual summit were high, with two-way trade between the EU and China worth around €575 billion annually. The EU is China’s biggest trading partner, while for the EU, only the United States is bigger. The EU and China also said they reaffirmed the “rules based multilateral trading system” with the World Trade Organization at its core and plan to intensify discussions aimed at beefing up international rules on industrial subsidies. China wants a bigger role in the WTO and other international organizations like the United Nations and the International Monetary Fund. But China’s ample financial support for state-owned companies has been the target of Western trade officials. EU Trade Commissioner Cecilia
Malmstrom has in the past called out China for “unfair trade practices” including government subsidies intended to give its companies a competitive advantage. The summit statement shows “China is willing to make some concessions and that’s important,” said Mikko Huotari, deputy director of the Mercator Institute for China Studies, a Berlin-based think tank. The promises don’t mean China will quickly transform from a state-led economy into a market driven one, but “it’s about getting back on track with regard to reform promises and ambitions that the Chinese themselves have expressed,” he said. The leaders discussed China’s policy of forcing foreign companies to turn over intellectual property as a condition for access to its big and growing market — an issue that Washington has also made a centerpiece of its trade dispute with Beijing. In their closing statement, they said: “Both sides agree that there should not be forced transfer of technology.” The EU in December stepped up a WTO legal challenge filed in 2018 against China’s forced tech transfers, calling it a major issue affecting European companies. Li strongly denied that Beijing is behind industrial espionage, saying the government has never called on Chinese companies to infringe intellectual property rights or steal trade secrets. The EU’s executive Commission said last month in a strategy report that China was a “systemic rival” which preserves its domestic markets for national champions while placing “onerous requirements” on EU companies doing business there.
|
shippinglogistics
Chinese Premier Li Keqiang, centre, is welcomed by European Council President Donald Tusk, left, and European Commission President Jean-Claude Juncker ahead of an EU China Summit at the European Council building in Brussels, this week
Chinese Foreign Minister Wang Yi, left, is welcomed by European Union foreign policy chief Federica Mogherini
Li said after the summit that will change. “We will not treat EU companies, especially those registered in China, with discriminatory policy, including solely foreign-owned companies in China,” he said. “And likewise Chinese compa-
nies should not be discriminated against in their operation in the European Union.” The summit comes two weeks after Chinese President Xi Jinping agreed during a visit to Paris to work with European leaders to seek fairer trade rules.
People demonstrate for the rights of the Tibetan and Uyghur people in front of EU headquarters in Brussels ahead of an EU-China summit, this week. China’s prime minister is meeting top European Union officials Tuesday to discuss thorny issues including better access for European companies to Chinese markets and security concerns over high-speed 5G network technology.