10 Oct 2019
Phil Hogan Obtains Parliamentary Committee Approval as EU Trade Commissioner After Presenting Robust Views
On 30 September 2019, following a parliamentary vetting process held in the Trade Committee of the European Parliament, Phil Hogan obtained preliminary approval to become the EU’s new Trade Commissioner. During his speech, Hogan manifested his intent to advance a proposed international procurement agreement to gain leverage vis-à-vis Beijing. Moreover, he announced the levying of a carbon border tax to protect EU companies forced to comply with tough greenhouse gas rules. Hong Kong and mainland Chinese traders can expect a tougher stance on international trade matters during Hogan’s term in office as EU Trade Commissioner.
While delivering his speech in the hearing held before the Trade Committee of the European Parliament, Phil Hogan stated that the trade relationship with mainland China will be a major challenge during his mandate as EU Trade Commissioner.
Hogan announced his plans to make progress on the procurement agreement, which Brussels intends to conclude with Beijing. The objective with the proposed agreement is to promote reciprocity and open up procurement opportunities for EU companies in mainland China. Hong Kong traders might recall that this proposal had been previously blocked in the European Council due to EU Member States’ diverging interests. However, Hogan noted that there is a “growing awareness in the Council” with respect to the conclusion of this agreement, and noted, for example, “a little bit of softening” on the side of the German Economy Minister.
Hogan expressed that a carbon border tax will be in his trade agenda as one of his priorities. Currently, European industries pay a carbon price established by the EU’s Emissions Trading System - set at about €25 per tonne. Companies operating outside the EU are not obliged to pay such a charge, which could mean that their production costs are lower. A carbon border tax would impose a “carbon price” on imports, levelling the playing field with domestic products. It should also act as an incentive for other economies wanting to sell to the EU to decarbonize their production processes.
The carbon border tax will be enforced as a measure to prevent companies that seek to establish themselves outside the EU in order to circumvent the EU’s strict environmental rules, commonly referred to as “carbon leakage”. Consequently, imports originating in countries with a less stringent emissions regime would be taxed upon entering the EU.
The WTO obligations prohibit discrimination between imports and domestic products. Nevertheless, the general exceptions to the rules of the WTO Agreements allow WTO Members to impose measures necessary to protect the environment. However, these cannot be applied in a manner that constitutes a means of arbitrary or unjustified discrimination nor a disguised restriction on international trade.
Referring to the trade relationship with mainland China, Hogan announced that he would discuss WTO reforms with the leadership in Beijing during a WTO Ministerial Conference, scheduled to take place in Shanghai in November this year.
Members of the European Parliament (MEPs) also tabled questions on the EU-US trade relationship and possible ways ahead, given the reluctance of the EU’s largest transatlantic partner to engage and its willingness to impose tariffs. Hogan spoke in favour of a stable, predictable and rules-based multilateral trading system, and expressed that he will engage with the United States to restore a level playing field in the WTO in addition to seeking the renovation and unblocking of the WTO’s Appellate Body. In the event of a failure to cooperate with the US Administration, Hogan suggested that the EU is working on a “plan B” for the reform of the WTO.
MEPs emphasised the European Parliament’s demand to see EU trade deals enforced and trading partners held accountable in case of a breach of their obligations. Hogan announced that he is aiming to “vigorously stand-up” for EU trading rights. For this purpose, he announced his support for the creation of the office of a Chief Trade Enforcement Officer which was previously proposed by the new President-elect of the EU Commission, Ursula von der Leyen. Hogan explained that the Chief Trade Enforcement Officer would work under his guidance in order to ensure a more coherent and coordinated approach, as well as new streamlined procedures to resolve issues linked to the implementation of agreements to which the EU is a party.
The chair of the European Parliament’s Committee on International Trade, German Socialist MEP Bernd Lange, expressed the view that Hogan had made “no mistakes” but was sometimes “a bit vague”, and that some of his commitments were “not very clear”.
Ultimately, however, Hogan proved to be well-prepared for the parliamentary scrutiny and encountered no serious difficulty in obtaining approval from MEPs. He is expected to start his new term in office on 1 November 2019, after the Parliament’s plenary confirms his election in a vote scheduled for 23 October 2019. Under Hogan’s term in office, Hong Kong traders can expect to see a tough approach with regard to the EU’s trade relationship with third countries, including mainland China.