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Tuesday, August 26, 2008

Economics in EU, july, 2008

In today's edition:
  • EU offer to slash farm duties dismissed as 'propaganda'
  • EU Court says Spanish blockage of energy merger illegal
  • EU fuelling illegal logging trade, says report
  • Commission delays water saving obligations for farmers
  • SMEs hail new EU strategy on industrial property rights

EU offer to slash farm duties dismissed as 'propaganda'

22 July 2008

An attempt by the EU's trade chief to impress his counterparts at global trade negotiations in Geneva with a pledge to cut the bloc's agricultural tariffs by as much as 60% fell flat as both France and Brazil denied the proposals were anything new.

The Doha Development Round, which aims to liberalise global trade and extend the benefits of globalisation to developing countries, was launched by ministers of WTO member countries in November 2001 in the Qatari capital, Doha.

World Trade Organisation Director General Pascal Lamy had convened trade ministers from 35 key negotiating countries on 21 July in a bid to finally achieve a breakthrough in seven year talks on liberalising international trade.

At the meeting, EU Trade Commissioner Peter Mandelson sought to kickstart proceedings with the announcement that the EU was ready to raise its offer on cutting farm tariffs to 60% - rather than the 54% the bloc had previously committed to.

But he stressed that the new offer was conditional on rapidly emerging economies such as Brazil, India and China coming forward with improved offers on lowering industrial tariffs. Indeed, better access to these markets, which are still highliy protected, is a key demand of European manufacturers and is seen as a necessary trade-off for the sacrifices European farmers will be asked to make.

Brazil denounced the proposal as a pure artifice, while EU Agriculture Commissioner Mariann Fischer-Boel said the offer was "nothing new" and French State Secretary for Trade Anne-Marie Idrac denied that the EU was ready to raise its offer in any way.

According to Idrac, the difference between the two figures is simply due to a recalculation of the Commission's earlier offer, with the higher figure reflecting the inclusion of tropical products, such as bananas – on which a deal is yet to be achieved – in the tariff cut calculations. source

My comment: Lol, that's rather funny. I mean, the guy happily announces the increase and then everyone say "oh, no, that was a mistake". Anyway, I don't care so much about liberalisation of the international trade. I just found it funny how they make an offer, that in the end isn't exactly the same offer.

EU Court says Spanish blockage of energy merger illegal

18 July 2008

The EU's highest court ruled on 17 July that Spain broke EU internal market rules when it insisted last year that all mergers in the energy sector must be pre-approved by its national energy regulator, effectively thwarting a takeover attempt on the national energy company Endesa by Germany's E.ON.

Commenting on the case, the European Court of Justice (ECJ) rejected Spanish justifications that its actions were based on safeguarding public interest and safety as the aim had been to preserve security of energy supply. "The Court considers that the Spanish system of prior authorisation is not proportionate to the objective of ensuring security of energy supply," it said in a press release.

The ECJ also found that Spain had failed to fulfil its obligations under the "principles of free movement of capital and freedom of establishment".

The ruling was welcomed by Internal Market Commissioner Charlie McCreevy's spokesman because it confirmed the "consistent line that special rights have no place in the internal market".

The ruling relates to a February 2006 takeover bid of Endesa by German power company E.ON.

While the bid was approved by the Commission, it was blocked by Spain's National Energy Commission (NEC), which imposed a number of conditions on E.ON's bid.

The Commission began infringement proceedings against the NEC in April 2007 on the basis that it was infringing on the free movement of capital and freedom of establishment (EurActiv 29/03/07). But E.ON withdrew its bid shortly thereafter.

In a separate move, Spanish construction group Acciona SA and Italian utility Enel SpA launched a joint bid for Endesa in 2007, which the NEC also said it had to pre-approve. Both of these actions were widely regarded as protectionist measures by Spain to prevent foreign companies from taking stakes in the domestic energy sector.

In March of this year, the ECJ ruled that the NEC's provisions on prior authorisation of acquisitions in the energy sector was contrary to EU rules (EurActiv 07/03/08). Despite the expiry of the E.ON bid at the time, the court ruled this did not relieve the NEC of the responsibility to remove regulatory obstacles to merger and acquisition bids from other non-Spanish firms.

In a separate case, the EU's Competition Commissioner Neelie Kroes has also sent Spain a final warning on restrictions placed on a bid for Spanish utility Iberdrola by Acciona SA and Enel SpA. source

My comment:Hehe, too bad for Spanish nationalists. Well, I completely understand them, of course, but that's how it should be, they should find another way to protect national interests, a way that isn't protectionist that is. And probably decrease somewhat the level of paranoia. Those energy giants are annoying and suspiciously powerful, but I doubt they'd compromise their business in screwing the energy market in Spain. Though, just imagine how any bill on energy unbundling will pass if EON controls Spain too. I think the EU or at least the Parliament should consider this little problem. Those companies are getting really powerful and if we want to keep them under control, that should happen quicly.

EU fuelling illegal logging trade, says report

22 July 2008

Almost a fifth of the wood imported into the EU stems from illegal logging, compounding deforestation and climate change, according to a report published on 22 July by environmental group WWF.

The reportPdf external , based on 2006 imports, suggests that between 16% and 19% of the wood imported into the EU comes from illegal logging or suspicious sources.

This means that about 30 million cubic metres of wood was imported into the EU illegally in 2006, it estimates. While Russia, China and Indonesia are the bloc's main suppliers, the report highlights imports from Eastern Europe as particularly troublesome, with some 28% of wood imports suspected of stemming from illegal sources. Russia is also said to have exported some 10 million cubic metres of illegal wood to the EU in 2006.

Among the major EU importers, which include Finland, the UK, Germany and Italy, WWF points the finger at Finland in particular as the country of destination for nearly half of all (legal and illegal) timber imports from Russia into the EU. There, they are processed into pulp or paper and exported to other EU countries.

Deforestation is widely recognised as having a detrimental effect on climate change, and the WWF report criticises EU member states for being "guilty" of adding to the problem. According to UN figures, deforestation accounted for 20% of global CO2 emissions in the 1990s, and efforts to stem it featured highly in global climate talks in Bali last December (EurActiv 14/12/07).

Illegal timber imports are also hitting local economies by pushing timber prices down, says the report.

WWF urges the EU to improve its current voluntary licensing mechanism – the so-called Forest Law Enforcement, Governance and Trade (FLEGT) system – which it believes is not tough enough. "Even if all agreements currently being negotiated by the EU with partner countries were concluded, about 90% of the illegal wood would still enter the EU," it notes.

Moreover, with the recent enlargement of the EU, illegal logging has now become more of an internal problem, challenging the new entrants.

What's more, it highlights the fact that there is currently no voluntary partnership agreement in the pipeline with China, which is becoming a major global exporter of timber.

The report thus calls on the EU to set up a system whereby operators must prove the legality and origin of imported wood and whereby inspections take place at the point of sale within the EU. It also recommends that companies take on more responsibility for ensuring that they are complying with existing legislation and "provide for an efficient regime of penalties to deter serious infringements".

Other major exporters of illegal wood include South East Asia (40%), Latin America (30%) and Africa (35-55%). source

My comment:I completely agree on this one. It's a tragedy to see a naked mountain that once was all covered with magnificent trees. And that's what happens in Bulgaria. The wood goes in unknown direction and the illegal loggers are free to do whatever they like. And that's waste for everyone!

Commission delays water saving obligations for farmers

15 July 2008

The Commission has rejected the notion that farmers should implement river basin management schemes in exchange for agricultural subsidies, despite increasing fears over water shortages and droughts.

As part of the so-called "health check" of the EU's Common Agricultural Policy (CAP), the Commission proposed a number of amendments to the rules governing how farmers can receive subsidies. Among these are a number of cross-compliance measures whereby in order to receive direct payments, farmers have to meet certain environmental, food safety, animal health and welfare standards.

One proposal made by the Commission concerns the extension of existing cross-compliance measures to include an obligation on farmers to leave "buffer strips" between agricultural land and watercourses and to require authorisation for using irrigation channels.

The idea is to save water as global warming threatens to provoke increasing droughts in the future. The agriculture sector is currently the highest consumer of water in the EU at 69% of the total.

There have been fears by member states that the EU's water framework directive (WFD), which includes obligations to improve the management of Europe's freshwater rivers, lakes and wetlands, as well as water pricing measures, would be included as a new requirement in the cross-compliance scheme.

But the commissioner allayed these fears, saying: "I firmly believe that now is not the right moment to bring the Water Framework Directive within the scope of cross-compliance" because these schemes have not yet been implemented in member states.

But Organisation for Economic Cooperation and Development (OECD) official Tom Jones said something has to be done to put an end to the current situation under which heavy subsidies encourage farmers to waste water. "Agricultural water use – primarily for irrigation – remains heavily subsidised, which encourages inefficient use of often scarce resources."

However, this position is contesded by EU agricultural association Copa-Cogeca, which stresses that "food, much like drinking water, is a basic human need and as such agricultural production must be given priority".

The Commission has proposed using 'modulation' as a means of reducing direct payments to farmers and increasing the amounts received for rural development, which would essentially 'green' the CAP. source

My comment: Hm, food is a basic human need, but water is with priority. I think some people really can't believe that there is scarcity of water, not somewhere in the world, but here, in Europe. Like in Spain this summer. That's very sad and irresponsible.

SMEs hail new EU strategy on industrial property rights

18 July 2008

Despite the absence of concrete legislative initiatives on issues such as the Community patent, businesses have praised the Commission's new strategy to better protect patents and trademarks – an area particularly crucial for smaller companies.

The draft communication, presented by the Commission on 16 July, proposes two main courses of action: firstly, helping SMEs to better exploit their property rights, and secondly, better protecting rights by stepping up the fight against counterfeiting and piracy.

The protection of intellectual property is seen as key to stimulating innovation and R&D investment and facilitating the transfer of knowledge "from the laboratory to the market place".

According to a 2006 study of European company executives, 35% considered the use of property rights as very important or even critical to their business model, while 53% said it would become an important issue within two years.

Improvements to the current IPR system are among SMEs' key demands as in most cases, they do not have sufficient resources or their own legal departments to deal with these issues.

A key element in the Commission's new strategy, according to the President of the Association for Competitive Technology Jonathan Zuck, is the suggestion that small businesses would be able to avoid costly legal proceedings in court to resolve patent disputes. Instead, the Commission says it will look into the establishment of "alternative dispute resolution (ADR) mechanisms," which it acknowledges could "substantially improve" the settlement of disputes.

Such a mechanism would be "key for smaller players", allowing all parties to settle disputes more efficiently, said Zuck.

The Commission's draft also stresses the need to set up an EU-wide jurisdiction system for patents. But up till now this has been a major stumbling block in the negotiations on a Community patent, and the strategy offers no new solutions as to how to move forward on the issue.

However, the paper suggests new paths to help SMEs exploit their property rights, such as reducing patent fees or providing tax incentives to promote licensing activities. This is also a key objective of the Small Business Act proposed by the Commission in June (EurActiv 26/06/08).

The new strategy also stresses the need to address the rising number of counterfeit products flooding the European market, as these are causing an increasing threat to the health and safety of European citizens (EurActiv 20/05/08).

The lion's share of these fake products (60%) stems from China, where the Commission recently set up an IPR helpdesk to provide advice to businesses. source

My comment: As you know, I'm very strongly for a Community patent system, so every step in that direction is welcomed by me. Let's see where this one will take us.

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