Where is the EU is heading to – on 10th May the Commission presented a reflection paper on that topic, which was discussed by the European Parliament this week in Strasbourg. It discusses how the EU can harness globalisation. For the first time, the Commission openly acknowledges growing inequality and social polarization being the negative consequences of globalisation.
The reflection paper is the second of five papers that the Commission publishes in the context of the White Paper on the Future of Europe presented in March this year and should stimulate discussions on the future design of the EU up until Juncker's State of the Union Address in September.
After two decades of denial, not only the supposed gains of globalisation, but also its downsides are mentioned: The gains in prosperity are far from being equally distributed – neither within the EU nor within the Member States. The Commission also refers to the danger of social polarization and the fear of loss of national identity, tradition and ways of living, which is expressed by parts of the EU population, as a result of free trade and deregulated globalisation. Unfair trading practices and the tax evasion of large corporations also had negative effects on certain European industries and public budgets.
While the reflection paper initially presents a balanced view of the opportunities and risks of globalisation, the subsequent proposals for solutions are primarily aimed at international cooperation and the economy rather than placing people in the centre of attention. Nevertheless, the wide-ranging considerations also show how extensive globalisation and the associated challenges are.
According to the reflection paper, the negative effects of globalisation are to be addressed at a global as well as an EU level. It comprises a more or less well-known catalogue of proposals ranging between international agreements to combat climate change, a new EU development policy, international coordination and cooperation – for example to combat tax havens – and further free trade agreements. Within the EU, public and private investment, active labour market policies and lifelong learning should shape globalization, distribute profits more equally, while promoting an innovation friendly environment and economic growth.
The Commission also raises the question of whether the current structure of the EU provides “transparent and inclusive decision-making procedures” for international agreements referring to the opinion of the European Court of Justice (ECJ), published this week, that clarifies the competencies of the EU in free trade agreements. It specifies that non-direct foreign investment as well as investment courts are mixed competence and thus require, in addition to the approval of the Council and European Parliament, those of national and regional parliaments in the Member States.[i]
The European Parliament welcomed the reflection paper as an important impulse. The Vice-Chair of the S&D group, Jeppe Kofod, stressed the importance of showing EU citizens what the EU is doing to promote globalisation. As an example, he proposed a “Scoreboard of Harnessing Globalization”, which should include, among other things, the initiatives on tax avoidance of corporations currently discussed in the Parliament. The AK also supports country-specific reporting on profits of multinational corporations and calls for binding and enforceable labour and environmental standards in free trade agreements. This is the only way to counteract a trade that is increasingly taking place along global value chains and enables multinational corporations to avoid taxes, labour and environmental standards through offshoring, outsourcing and complex corporate structures.
[i] Although the decision specifically relates to the currently negotiated free trade agreement between Singapore and the EU, it is thought to impact on other “new generation” free trade agreements, including possible agreements with Japan, Mexico and Australia as well as the United Kingdom. According the ECJ, the Commission has no exclusive competence with regard to investment protection and the settlement of disputes between investors and states. This also includes the investment court systems, which have already been criticized during the CETA negotiations, as they grant privileged rights to investors. Still, the ECJ confirms that the Commission has exclusive competence with respect to transport services and the content of trade and sustainability chapters, thus, goes beyond the opinion of the advocate-general.