Category Archives: Enterprise

Two Important Strategies for the Sustainable Development of the European Union

The European Commission has published in the recent days two communications that touch on important aspects of the sustainable economic development of the EU.

The first is a communication on renewable energy and the progress towards the 2020 targets. The communication presents an overview of the renewable energy industry in Europe, its prospects to 2020 and addresses the outstanding challenges for the development of the sector. The Commission points out that renewable energy constituting 62% of 2009 energy generation investments in the EU. Member States projections show that renewable energy will grow at a faster pace in the years up to 2020 than in the past. Combined Member States expect to more than double their total renewable energy consumption from 103 Mtoe in 2005 to 217 Mtoe in 2020. If all the production forecasts are fulfilled, the overall share of renewable energy in the EU will exceed the 20% target in 2020. The Commission suggests that whilst annual capital investment in renewable energy today averages €35bn, this would need to rapidly double to €70bn to ensure the EU achieves its goals.

The second is a communication on the commodity markets and raw materials. This communication was delayed due to the French request to include measures to improve the transparency of financial and commodity markets. The document makes an overview of developments on physical markets of oil, gas, electricity, agricultural commodities and raw materials. The Commission outlines the growing interdependency of financial and commodity markets and then outlines policy measures for the separate physical markets. The communication then outlines the Raw Materials Initiative and describes the 14 critical raw materials – those who have a particularly high risk of supply shortage and are particularly important for the value chain.

 

 

EU Flagship Initiative on Resource Efficiency Launched

The European Commission has launched a very important flagship initiative on resource efficiency under the Europe 2020 Strategy. The Commission believes that increasing resource efficiency will be key to securing growth and jobs for Europe. It will bring major economic opportunities, improve productivity, drive down costs and boost competitiveness.

The most important medium-term policy measures are:

• An energy efficiency plan with a time horizon of 2020 which will identify measures to achieve energy savings of 20% across all sectors, and which will be followed by legislation to ensure energy efficiency and savings;

• Proposals to reform the Common Agricultural Policy, the Common Fisheries Policy, Cohesion Policy, energy infrastructure and trans-European networks for transport in the context of the next EU budget to align these areas with the requirements of a resource-efficient, low-carbon economy;

• A new EU biodiversity strategy for 2020 to halt further loss to and restore biodiversity and ecosystem services in the light of pressures on ecosystems;

• Measures to tackle the challenges in commodity markets and on raw materials which will, amongst others, periodically assess critical raw materials and define a trade policy to ensure sustainable supplies of raw materials from global markets. These measures will promote extraction, recycling, research, innovation and substitution inside the EU;

• A strategy to make the EU a ‘circular economy’, based on a recycling society with the aim of reducing waste generation and using waste as a resource;

• Early action on adaptation to climate change to minimise threats to ecosystems and human health, support economic development and help adjust our infrastructures to cope with unavoidable climate change;

• A water policy that makes water saving measures and increasing water efficiency a priority, in order to ensure that water is available in sufficient quantities, is of appropriate quality, is used sustainably and with minimum resource input, and is ultimately returned to the environment with acceptable quality.

Customs: New Security Data Electronic Declaration from 2011

From 1 January 2011, traders are obliged to make an electronic declaration to Customs with security data on goods before they leave or enter the European Union. The type of security data requested from the traders varies according to the means of transport and the reliability of traders involved in the operation (see Annex 30a of Regulation (EEC) No 2454/93). It can include, for example, a description of the goods, information on the consignor or exporter, the route of the goods, and any potential hazards. The time limits for submitting advance security data also vary according to the means of transport: from 24 hours in advance of loading for maritime cargo to 1 hour before arrival for road traffic or even less for certain air transport.

Commission Initiatives on VAT and E-Invoicing

The European Commission has launched two important initiatives respectively on VAT and E-Invoicing.

On VAT the Commission has published a green paper aiming at a public consultation with stakeholders. The main questions:

  • What would be the most suitable VAT arrangements for intra-EU supplies? Is taxation in the Member State of origin still a relevant and achievable objective?
  • Which of the current VAT exemptions should no longer be kept? Should VAT be applied to passenger transport irrespective of the means of transport used?
  • Should the current exemption scheme for small businesses be reviewed and what should be the main elements of that reassessment?
  • What changes should be introduced to improve the neutrality and fairness of the rules on deduction of input VAT?
  • What are the main problems with the current VAT rules for international services, in terms of competition and tax neutrality or other factors?
  • Which, if any, provisions of EU VAT law should be laid down in a Council regulation instead of a directive? Might guidance on new EU VAT legislation be useful even if it is not legally binding on the Member States?
  • Do the current rates structure creates major obstacles for the smooth functioning of the single market (distortion of competition), unequal treatment of comparable products, or leads to major compliance costs for businesses?

The Commission communication “Reaping the benefits of electronic invoicing for Europe” notes that the existing rules that govern e-invoicing in Europe are still fragmented along national lines and most of the potential of e-invoicing is still untapped. The Commission wants to see e-invoicing become the predominant method of invoicing by 2020 in Europe and sets the following priorities:

  • to ensure legal certainty and a clear technical environment for e-invoices to facilitate mass adoption;
  • to encourage and promote the development of open and interoperable e-invoicing solutions based on a common standard, paying particular attention to the needs of SMEs;
  • to support the uptake of e-invoicing by setting up organisational structures, such as national e-Invoicing fora and a European Multi-Stakeholder Forum.

 

 

The Technicalities of Eurozone Breakup

The concept of eurozone breakup is not new, and I have mentioned it before. But now more and more voices warn of this threat. One important observer of European affairs, Gideon Rachman, says that the single currency will indeed eventually break up – and that the euro’s executioner will be Germany. On the other hand a prominent US economist, Barry Eichengreen, says that the euro is an example of a path-dependent historical process that is unlikely to be reversed. None other than Angela Merkel said that “if the euro fails, then Europe fails”. But is this really true?

The markets signal mistrust. Even Mrs. Merkel admits that the eurozone is facing “an exceptionally serious situation”. In any case the possible breakup of the eurozone is a matter of speculation.

That being said, there’s not much discussion on the technicalities of the eurozone breakup, and that is a hugely important aspect. It is very important mainly because of the legal basis of the eurozone and its structural place in the legal framework of the European Union.

Barry Eichengreen again is probably the only person who wrote a whole scientific paper on the subject, claiming that the technical difficulties would be quite formidable. He notes that redenomination in national currencies may pose some real difficulties, especially in determining the scope of redenomination. But his analysis focuses mainly on the exit of a single country or a group of countries from the eurozone, and not on the breakup of the eurozone as a whole.

More recently Wolfgang Münchau and Susanne Mundschenk have written an analysis for Eurointelligence that considers the legal implications of both the exit of a single country from the eurozone, and the breakup of the eurozone altogether. The authors note that the European Treaties have no provision for an exit clause from the euro area, just as there is no provision for an exit from the CAP. They claim that it is virtually impossible for a member state to leave the euro area, devalue, and remain in the EU. They also dismiss the argument that Germany’s persistent trade surplus will eventually cause the collapse of the euro area. But in their paper they do not consider the technicalities of a possible breakup if it occurs.

The truth is that the breakup of the eurozone goes through a Treaty amendment. This may be a simplified procedure (art. 48, para. 6 TEU) since the provisions on economic and monetary policy are in part III of TFEU, and the breakup of the eurozone does not increase the competences conferred on the EU. Such a breakup is only possible through a unanimous decision of the European Council, though. That means that all member States must agree on the dissolution of the Economic and Monetary Union in its present form. The real challenge will be to agree on initial redenomination rates.

However unlikely that is, I would like to point out that there is, indeed, a legal mechanism for the breakup of the eurozone. This breakup will only happen if all Member States agree that the euro is not a sustainable currency. To me it sounds much easier to prevent this breakup from happening in the first place. But should Member States fail to act on the euro crisis, a breakup of the eurozone remains legally and technically possible.

As for the claims that if the euro fails, then Europe fails, I disagree. It is better to have limited, but consensual integration process, than to have secession or atrophy.

 

 

New Directive on Combating Late Payment in Commercial Transactions

The European Parliament has approved the final text of a new directive on combating late payment in commercial transactions. As a general rule, the deadline for both public and private sectors to pay a bill for goods or services will now be 30 days. For business-to-business payments the general deadline is 30 days unless otherwise stated in the contract. If both parties agree, it is possible to go up to 60 days. The payment period may be extended beyond 60 days only if “expressly agreed” by the creditor and the debtor in the contract and provided that it is not “grossly unfair” to the creditor.

For public-to-business payments the general deadline is 30 days. If the two parties wish to extend the payment period, this has to be “expressly agreed” and “objectively justified in the light of the particular nature or features of the contract”. Member states may choose a payment deadline of up to 60 days for public entities providing healthcare.

Security of Supply of Rare Earths: a Wake-Up Call

The Chinese government has blocked exports to Japan of rare earth minerals used in products like hybrid cars, wind turbines and guided missiles. The ban was introduced following a dispute on the detention of a Chinese fishing trawler captain by Japan. Japan has been the main buyer of Chinese rare earths for many years, using them for a wide range of industrial purposes.

This is the first time that China is ultimately using the dependency of a trade partner on rare earths to wield political pressure in an international dispute. It’s unprecedented and probably illegal under WTO rules.

However, there are no guarantees that such measures will not be imposed in the future on the European Union, too. In fact a report of a special ad-hoc working group has listed rare earths as some of the truly critical raw materials for the EU.

The recent imposition of the ban by China raises important questions about the future supply of rare earths and other rare raw materials to the EU. The EU should continue its engagement with the WTO on this issue. China should be decisively discouraged from using such policy measures in the future.

UPDATE: China has denied reports it banned the export of rare earths to Japan. More information on this will probably follow in the next few days.