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White Paper Issued Presenting Five Possible Scenarios over Future of the EU

On 1 March 2017, the European Commission presented a White Paper outlining five potential paths the EU might take to re-imagine its future following the departure of the UK. The White Paper was prepared as part of the Commission’s contribution to the Rome Summit on 25 March 2017, marking the EU’s 60th anniversary. The five possible versions of how the EU might look by 2025 are outlined as follows:

1) “Carrying on” 

Under this scenario the EU would continue along the path of incremental progress and reform that it has already set itself through President Juncker’s New Start for Europe guidelines of 2014 and the Bratislava Declaration of 2016. The EU Member States would continue to refine the single market, and would provide a unified front on foreign affairs issues while merging certain military assets. Nevertheless, certain areas – most notably border control – would remain subject to national control. 

Notably for those trading into the EU, under this model Member States would continue to pursue trade-progressive agreements with “like-minded” partners with a single voice.

2) “Nothing but the single market”

This vision for the EU’s future imagines an arrangement that pares Member State cooperation back to its original core – the liberalisation of the internal market. As the functioning of the single market would become the EU’s main focal point, certain regulatory processes could become more streamlined and simplified. For example, further progress could be made in coordinating standards related to the free movement of goods and capital. Under this model, Member States would no longer cooperate in areas such as migration, defence or security.

Hong Kong traders should note that a push to reduce EU-level regulation could result in increasingly disparate regulations in areas of lower consensus such as consumer, social and environmental standards. While such differences could foster a race between Member States to deregulate – which might benefit importers – increasingly divergent standards might pose compliance challenges. Such changes, combined with a lower ethos of cooperation generally, could also fuel internal disagreements regarding trade policy, which the White Paper cautions could create difficulties in concluding new trade agreements. 

3) “Those who want more do more”

According to this model, those Member States that would wish to deepen their cooperation at a faster pace than others in certain areas such as defence, internal security, taxation or social issues, would be able to do so in coalition with each other. This type of arrangement already exists with respect to the Euro and Schengen, and could allow for greater technological cooperation, and improved products, services and working conditions.

With respect to trade, Member States would continue to pursue progressive trade agreements, as under the first model.

4) “Doing less more efficiently”

Under this scenario, the Commission envisages the EU focusing its cooperation on fewer areas, but pursuing those targeted issues more aggressively to deliver stronger results. Specifically, the EU might develop better tools and capacities to deal with topics in which added oversight or coordination would be helpful, such as technology investments or energy policy, while scaling back on issues where EU involvement brings less added value.

Traders operating out of Hong Kong might be interested to learn that the Commission anticipates that this model would allow for the quick conclusion of international trade agreements at EU level. Enforcement of EU-regulated areas would likely be high while common standards might be set to a minimum.

5) “Doing much more together”

This model envisions a much more thorough and deep EU integration across all domains. The decision-making process would be stronger and faster, while the EU would speak with a unified voice across most international areas.

Such an approach would result in an even stronger single market, and the much deeper harmonisation of product and environmental regulations. The EU’s enforcement capabilities would also widen. While import standards would likely increase with rigour, the greater standardisation of the EU’s approach to trade might simplify relationships with traders that are seeking to import products from outside of Europe.

Hong Kong traders should bear in mind that the Commission does not offer these five scenarios as a choice of mutually exclusive proposals for immediate implementation, but as guiding points for common reflection going forward. As a consequence, the direction of the EU post-Brexit and the resulting implications for trade with Europe will only emerge slowly over the course of the years to come.

Please click on the following to examine the White Paper.

Content provided by Picture: HKTDC Research
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