Committee on International Trade Ordinary meeting
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This was also an opportunity.
Speaker 5
For us not only to renew the 12 existing domestic advisory groups, also last year, we welcomed two new DAGs to our scope and quite interestingly because, of course, we welcomed the first African DAG, I'm very pleased that Alain Lacreste is the new chair of EU Kenya DAG can give you a report on how the work so far extended. And, of course, also had the new DAG on New Zealand. And if you can imagine, if you do join online meetings, I think this is possibly the furthest way that you could ever get. For us, this also means that we now start to have more mix of DAGs because we used to have only traditional, classical DAGs covering the implementation of the TSD chapters. But now, for a long time, the UK was the only one that had also covered the entire scope.
But now Kenya and New Zealand and new DAGs arriving beyond that might also be a challenging exercise for us to see how we are going to manage our advisory respect. It also means that we have to start also thinking a bit creatively. How do we manage our daily workload with the increasing number of very unique systems of civil society participation in the DAGs? Last year, we also tried not only with the Commission to think together how we can maybe have now a new DAG following Ukraine, Moldova, and Georgia together in one DAG, it was also in close collaboration with the commission to see what would be the best model. And then, of course, we also tried if we don't put the DAGs together, which I was always very cautious to advise because we're still independently liaising with our counterparts. But maybe there is an opportunity that at least the EU DAG meetings on our side, we could do together.
So in December, we had a joint meeting of the DAGs of Singapore, Korea, and Japan, where we took a broader geographical view and also for us to learn from each other's experiences. So that is a good opportunity. Just briefly to mention also the DAGs have continued funding provided by the Commission whenever we're engaging and traveling also for the meetings in Brussels, but also when we are going abroad. And please also let me mention the great support that we have from the ESC secretariat. This is a wonderful extension, and we always said we are together in that exercise.
And maybe let me just mention and elaborate, because you apparently have emphasized in particular the uniqueness of that body. So I would just like to mention two points of caution. We fully understand that in times now, economic security is the prevailing narrative that everything is focused on. And TSD is a bit lower on the agenda, but still it is the core beating heart of our trade engagement because, like, we very much also engage in a value-based trade policy. And then you look at new agreements, and I just want to mention also India.
We had a brief look also at what it means not only for the TSD chapter, the provisions in there. There is a lack of dispute settlement, but also the different composition of the DAGs and their engagement with the government. So I think we really should be cautious not to lose a model that we really, over the years together, with all our experience, have developed. The second point of caution, there seems to be a new appetite to have quicker, smaller agreements, not fully-fledged FTAs. Like, for instance, we have the critical raw materials agreements.
We do have the clean trade and investment partnerships, the CTIPS. Now we're in South Africa. But none of these have a TSD chapter, nor do they have civil society monitoring. And I think this is a huge gap in our allies because if we're not there, when we're talking about critical raw materials, about mining, about clean trade, the knowledge of civil society and the implementation of those goals are very much needed. So I just wanted to also throw that into your consideration when you're dealing with those matters.
I think this is something that absolutely needs to be closed as a gap, because we are there in our advisory role. We're not just like a nice to have, neither TSD chapter is a nice to have, but also we are an asset. Not just like, okay, we're a burden, you have to engage with civil society. And final word on that, because we must never forget that the text in a trade agreement matters. The way that it is drafted, the way that is agreed, the way that you agree on it and finally approve it, the text is the one that we have to deal with as domestic advisory groups.
And if we don't get the tax right and precise that for the meetings of the DAGs and for the civil society forum, whatever engagement, but also on the binding and forcibility of those provisions, the DAG will suffer for the years to come, because we are there to implement what is in the tax agreement. So thank you for the introduction. Thanks.
Bernd Lange
A lot, Tamir, for giving his perspective and also some advice to make it even better. And now I will invite the chair of the DAC for the Andean countries. No. Wong, the DAC for Japan. Japan is the first.
Stuart Newman, please.
Speaker 7
Yeah. Thank you, Bernd. Also, Tanya, welcome to the opportunity to speak. I think I can be fairly brief because Japan is not one of the first countries you would think of when you have TSD concerns with the EPA. But we did meet just two weeks ago in Tokyo, the seventh joint dialogue meeting.
It was at the Ministry of Foreign Affairs, but also represented was the Ministry of Economy, Trade and Industry, of Health, Labor and Welfare, Agriculture, and also the environment. So, there's a good representation from the Japanese government side. We also had members from civil society from Japan. There is no fixed Japanese DAG as such. There are which makes it a little bit difficult when you want to have one to one meetings with them because you have different representatives each time.
But I think in particular of importance was that the trade union confederation, Rengo, was present because we were able to have side meetings with them on some of the issues that were raised. Of course, from the EU side, they were members of the delegation and DG Trade and certain representatives from the EU DAG. Couple of the issues that we raised, concerns the ratification of ILO convention 111, which is on discrimination in employment because there are still some problems with discrimination for women and on civil servants given their political views. Japan has ratified ILO 87 on the right to organize and collective bargaining. But there are issues of the correct implementation there because there are restrictions for public servants such as prison officers, the police, and firefighters with the ability to strike and demand extra pay and better working conditions.
So that is something that we had a very good presentation from on the other side, especially from Rengo, but that is something that needs to be improved. We also raised the EU Japan Green Alliance. We would like decarbonization in the maritime industry to be included there. And we also focused on the new national action plan on business and human rights, which came into play in December just of last year. We had a good presentation there from Professor Sugawara, and we'd already examined this ahead of schedule, of course.
That is a voluntary action plan, but it does at least include human rights in supply chains and capacity building for businesses to a job, the UN GPs. So that's a welcome improvement. But of course, it would be much better if it were mandatory. Now, one of the problems that Japan is facing is a population crash. People tend to have children only when they are married.
And people are getting married either much later or in much fewer numbers. So at the moment, the working population is 74,000,000, but it's predicted to be less than 60,000,000 by 2040. So Japan actually desperately needs migrant workers, but there is an anti-migrant worker sentiment in Japan. That's part of its culture. It was quite close for many hundreds of years, of course.
There is a new law coming in next year, mid of next year, which will provide better conditions for migrant workers, but Japan needs them. There is a reluctance to use them. We also presented the foreign, the forced labor regulation. I gave some details on that. We're not, of course, concerned that there is forced labour in Japanese factories.
The chances of that are very low. But the forced labor regulation does apply throughout the supply chain. So I emphasize to Japanese manufacturers and Japanese business that they should look through their own supply chain, which is very much focused in Asia, and work with EU companies to make sure that there is no forced labor further down the chain. I also presented, for the third time, the CS triple d. Two years ago, I was able to present what it would be because it was about to come into force.
And then a year ago, when we met with our counterparts here in Brussels, I had to unfortunately give some of the proposals for the change. And then this year, I was able to say how much the omnibus had decimated the due diligence directive. So there are three different times and three different presentations there. Finally, we also agreed to continue our work on the death study on human rights and the environment and the impact on the businesses with respect to due diligence legislation. And I suppose in conclusion, I can say that we had a good discussion with our counterparts.
As ever, they tend to be a little deferential to the ministry that is present, and the interaction is a little bit closed. Again, that's more or less a cultural thing, I think. But once you meet them one on one, which was very useful, they were quite open, and we had some good meetings in this upper side. Thanks.
Bernd Lange
Thanks a lot. Even Japan seems not to be a really complicated partner, but, of course, the details are still there. So it's important to have the DAC there. So, Ben, you are responsible, the chair of the DAC for Kenya, please.
Speaker 8
Thank you very much. An onion. My god. With all respect, I'll limit myself to the Andean countries because there's already a lot happening there to fill five minutes. So indeed, the deck to the Andean countries, otherwise also known as Colombia, Peru, and Ecuador.
So maybe some observations. As you noticed, it's one of the few free trade agreements that has several trading partners on the other side, which is maybe an advantage and as well also delivers significant challenges to deliver. So, for example, from an EUDAG perspective, it means that we are not only building relationships with one counterpart, but we're trying to build relationships with three counterparts. And I think in these three countries, we are talking about countries who don't necessarily have strong cultures of building bridges between different sections. So of civil, there's not a culture of employers and trade unions coming together and bargaining collectively or presenting a common way forward on whatever is happening in that specific country. As we'll see later, actually, this is one of the challenges to start with.
So it means that we not only have three counterparts, but we do have three counterparts where each, in their own respects, has significant challenges, even sometimes with their own recognition. I think the most visible example is Peru, where the government has not yet recognized what we consider the official counterpart. So there are sort of two parallel structures in coexistence, and that also even makes it for us sometimes challenging to know who we should talk to and how to organize that. Nevertheless, in its first or after its first decade of provisional application, because we went from provisional application to full application with the full ratification of all EU member states of the agreement, we also managed now for the first time in history to have a joint consensual agreement between all those DAGs on how the implementation of the TSD chapters should look like. So that happened last December in Lima, Peru, where all the DAGs present could find itself for the first time in the history of that agreement behind a joint text, which is historic because, as I mentioned, the labor relations in those countries are not necessarily in best shapes.
And I think that also reflects, of course, on the substance. So if we look specifically at TSD concern, we do have a few countries that are, let's say, repeated customers at the ILO supervisory mechanism. I think especially Colombia is a serious and persistent case of anti-union violence and where the ILO has, I think, systematically called for more protection measures against interference with trade union work. We see similar patterns in Ecuador and Peru, where there's deep frustration on union work and collective bargaining, and where there are judicial barriers. And similarly, in Peru, the ILO has identified repeatedly deficits with the labor inspection to actually guarantee freedom of association rights.
So that's what the ILO has said, that to a certain extent, also persists in or is reflected in the joint declaration, although that joint declaration is a joint declaration by employers, unions and the Group three, which is the rest of the civil society. Nevertheless, what I think also adds maybe to the flavor of this agreement is that although there are three trading partners, all three trading partners are currently also covered by a complaint at the single entry point. And I think that's maybe one of the most visible ways why TSD in this agreement is so difficult. So for your memory, the first complaint was lodged by CNV International a few years ago. It has led to consultations with Peru, which then eventually led to the adoption of a list of activities, which then took a year to be republished exactly the same as a joint list of activities, which is now, I think, over a year ago.
And I think up to date, there is no report of any implementation of those activities, at least to the DAC. Maybe things have moved, but as such, they have not been reported as progressing. The case of Colombia. Colombia initially responded to the CNV complaint, saying we have our own legislative process, which will tackle some of these issues raised. But that process has failed.
So there, the commission, to the best of our knowledge, is now engaging with Colombia to seek also a road map moving forward. But so first step complaint with, as to date, no reported progress. And then there's also the case of Colombia. Colombia recently saw a case filed against itself by a French NGO, ActionAid, which also worked with its local partner, Astec, in the banana sector. And that complaint, although circling around freedom of association rights, actually also covers literally the whole TSD chapter.
So it's a case where there's lots of deficits, where there are lots of challenges in implementation, and where there's very little movement. And then if we look forward, I think that also gives a sentiment on the next problem ahead, because one of the conditions for the full ratification of this agreement was also to modernize it and to bring it up to date with what the TSD then thinking is of the latest communication. So a broad approach and enforceability. And that's a discussion that if you see a bit of progress already on the single entry point cases, that seems to be very difficult, and where we think that the commission will need to take a more assertive stance. I'll take it as this.
Thank you very much. Thanks.
Bernd Lange
A lot. And specific to manage these challenges with these three countries, it's not an easy task. I remember quite well the development of that. So now, finally on Kenya. So I was so keen on Kenya because it's so new, and Elena will give us a hint on that.
Speaker 9
So new that I hope I won't disappoint. So we the DAG was established recently, and we met for the first time in October. So we're still in the phase of focusing on securing its internal functioning and defining our priorities for the work. Obviously, it's not just the TSD chapter, although that remains a key focus, but it's also the rest of the agreements and the challenges therein. This agreement is also important because it sets a precedent for perhaps a future agreement with the region.
Speaker 10
And so we're very glad that the standard set in the TSD chapter is quite high. And if other countries in the region are interested in joining an agreement with the EU, this will be the bar. So it is, you know, it's important we also get it right in the practice. We have discussed the challenges of the implementation of the agreement. We have noted in particular the aspects of sanitary and phytosanitary compliance, transport and logistic constraints, and the need to ensure that the trade facilitation measures translate into tangible benefits for all actors concerned.
Speaker 9
We've also placed an emphasis on establishing a balanced and representative Kenyan domestic advisory group. As previous speakers have said, it's very important that we have a counterpart to deal with, and this remains a priority on the Kenya DAG as well, because effective DAG to DAG cooperation is essential for the credibility of the monitoring mechanism and the impact the monitoring mechanism can have. We have already highlighted to the commission gaps in representation on the Kenyan side, in particular, absence of key stakeholders such as trade unions and employer organizations, which will need to be addressed before we can even proceed into any meaningful discussion. Looking ahead, we are defining the priorities for the work program. Given the discussions we've already had, these priorities are likely to include the implementation of core labour standards across key export services.
We will do an analysis on working conditions and wage levels, and then assess the broader social impact of the agreement and its contribution to decent work. We will also focus on value chain analysis in sectors such as flowers, horticulture, coffee, and tea, again, with particular attention to living wages, occupational safety and health, and gender equality. We are also looking at the emerging EU sustainability legislation, and we understand that this will have an impact on Kenyan producers. And we're open to cooperate to ensure that the new due diligence requirements, however narrowed down and deforestation related rules, do not represent an obstacle to trade, but actually that the trade represents an opportunity to ensure compliance also with these new measures. We will be meeting next in mid-April.
We will have an exchange with the institutional representatives. Again, much in the same way as many other DAGs, the dialogue with the commission is key. It's key for us to do our job, to receive updates on the state of implementation, on the state of the discussions in the trade specialized committees. And so we will also have presentations from the EU delegation in Kenya, because their perspective on the ground is also very important. And with our Kenyan institutional counterpart.
So we have invited the deputy ambassador. And we have invited a representative from the European Parliament because we also believe we need to strengthen the dialogue between the monitoring that is carried out in this house and the monitoring on the domestic advisory group. There's a lot of synergies there, and the more we can be complementary to each other, the better. Two points of discussions in particular, as I mentioned, sanitary and phytosanitary compliance, which are critical to exports, better understanding the challenges faced by exporters, and identifying ways to support and cooperate. And secondly, the link between trade and decent work with an exchange with the ILO, because they have an ongoing project on how social dialogue and labor standards can effectively promote the contribution of this EPA to decent work.
And then we will adopt our priorities and rules of procedure. So we remain open to continue this cooperation and report back to the monitoring group on the East African community in the future. Thanks.
Bernd Lange
Perfect. Thanks a lot. I give now the floor to my colleagues, and then to the commissioner, and then, of course, you have the possibility to answer. And Lydia is the first.
Speaker 12
Thank you very much, Chair. And, I have a few questions, from the EPP side. And the first is on the DAGs, if they really reflect all the key stakeholders affected by the trade agreements? For example, do SMEs, industry, and workers feel properly represented, or are still some voices missing? A second question is if there are recommendations taken seriously by the European Commission and by partner governments in relation to the work of these domestic advisory groups.
And if there have been any cases where their input clearly influenced the implementation of an agreement, or does the follow-up remain quite limited? And finally, what are the main weaknesses holding these groups back? Is it mostly a question of resources, lack of access to information, weak political follow-up, or limited contact with decision makers? Thank you.
Udo Bullmann
Thanks, Chair. One or two general remarks and one very important question, to me important question. First of all, thanks to Tanya, coordinating role, as well as to all the three reports. Very interesting, listening to you. Very important.
Thanks also to Miss Krasda for the invitation to the European Parliament. As far as I know, the European Parliament will follow this invitation and is very grateful for that. What I think about your reports is the following. If trade is not anymore only about taking economic advantages by whomever, enterprises in the North, governing classes, whoever takes whole societies. If trade is not automatic, how lucky can you get the mechanism to make everybody rich and better off?
Nobody believes that anymore because that was the neoliberal ideology that failed long ago. If trade is a contested policy area in an international battleground, for Europe, it's the only way to survive because we are absolutely dependent on international exchange, not only economically, but also we urgently need regulatory dialogue. We need to survive with our standards, with the idea of our norm sets. And if we do not find partners who echo that and who integrate labor law, social standards, economic security, etc., etc., we are not able to survive. So you are part of an extremely important policy area of the European Union.
And if you report to us about struggle, about conflict, about insufficiencies, then we should welcome that, because they are absolutely necessary steps to be taken. This is not really awkward. This is good news for us because somebody is struggling for the right cause. So we should welcome not only the good news, but also the problems because you are really on the avenue and give us an idea of how to proceed. And now the very question is, and the most important question for me is, how can we support you?
And especially, how can we support the idea to strengthen your counterparts, because this is of the essence. We need to have partners in our partner countries that echo your enthusiasm, that echo your activity and your energy. What can the commission do? What can the European Parliament do to make you even more effective and your work even more impactful on the joint standards that we would like to achieve? This is my very question.
Speaker 15
And, yeah, I'm keen to hearing about your views on that. Thanks a lot. Saskia?
Speaker 16
Good morning, everyone. I'm really happy that we keep this annual rendezvous from the European Parliament Inter Committee and the DAGs, and also to hear from you. Thank you for your updates on this important agreement. I fully agree with you, Tanya. It's unfortunate that the TSD is not anymore considered from the political side as a core in the different trade agreements, and this is also what you are in the first line supposed to look at, implementation of the TSD chapters.
And so I think from the European Parliament side, we also have to be attentive to that and make sure that we also facilitate the work of civil society and all the stakeholders in the follow-up and implementation of the trade agreements. You mentioned India, but there are certainly others that are concerned. Also happy to hear from madam Crasta that you invite us to further synergies between DAGs and the European Parliament, and thank you for inviting us. I wanted to know from all of you, actually, if you consider that you are sufficiently involved in the European Parliament's work in the monitoring groups. I think it would be interesting that every time a monitoring group comes together, you are automatically, as a chair of the related DAG, invited also in our institution.
Tanya, you mentioned the quicker and smaller agreements, the so-called mini deals. Seems hearing from you that you're not particularly involved in this. Can you confirm that? Do you have had any exchanges with the commission on them, and how can we further contribute to improve this? I think it's also a call from the European Parliament's side, but we can work together on this, I guess.
The DAGs produced a non-paper back in '21. Things have changed since then, the geopolitical context. Also, do you have any views on what you would update? Yeah. It's a broad question, if you had to.
To madam Crasta for Kenya, I was wondering if you've had any exchanges with your counterparts on the European East African Court of Justice that issued interim injunction suspending the economic partnership agreements with the EU. And what would be your expectations regarding the next steps? On the Andean community, I was wondering, listening to you, if you think that the EU should trigger the human rights clause of the agreement, considering the backlash that we've seen all over the years in terms of human rights. And you also mentioned in one of your reports the infringement of the nonregression clause of the trade agreement. So if you have anything to share with us on this, it would be interesting.
And recently, there's also a sustainable investment facilitation agreement that has been concluded with Ecuador. Have you ever been consulted on this at all? Thank you, Stuart, for the update on Japan. It's interesting to see, and you mentioned forced labor, for example, and maybe to have further feedback on how we can work together on this with other countries as well, including Japan, to implement and maybe come to closer common rules on the matter? And finally, I was also wondering from all of you if you have any exchanges on the omnibus legislation with your counterparts, the effects of the recent revision of the legislation, and the extraterritorial impacts of our legislation because it's often seen as a challenge from our partners.
And do they request something from our side to help them actually to implement the rules and standards? Thank you.
Thank you. Lucas.
Lukas Sieper
Thank you very much, chair. I also want to express my thanks for the invitation that was given to the members of parliament, and I found this point particularly interesting because now I've done my fair share of delegation trips. And, I know that it's always great fun for us MEPs, maybe sometimes too much fun. I know that one, of our honored colleague from the SND streams the goal to visit every country of the world through a delegation. So, what I want to say is I think we should work when we are there and not only enjoy the good weather or the trip.
So in your opinion, because it sounded a little bit like this was the first invitation of this kind. If I'm wrong, I'm sorry for that. But what do you need from us, the MEPs, the most, when we really take up this invitation? How can we be of use in these talks? Thank you very much.
Bernd Lange
Thanks a lot. And, Lucas, I can assure you that, in my delegations, it's work and not leisure. And I guess all my colleagues have some experience with that. It's a secretariat as well. Now I will give the floor to the commission, and I'm really happy that here, Rojan is with us, well known.
Perhaps one question also to the commission from my side. So we have different countries where different EU delegations are present. Is there some guidelines also for the delegation how to deal with the ducks, how to support their work, how to promote their work, perhaps also an exchange of best practice so that everybody, head of delegation, can learn a little bit from experience from others. So, but now you have the floor.
Speaker 19
Yes. Thank you very much, Chair Helane. And indeed, I can already confirm we involve the EU delegations very closely in meetings and in the preparations of meetings, especially, of course, when they take place on the ground. And this is anyways our spirit with the DAGs, as the DARC chairs here can hopefully confirm, we are in close dialogue, not only in the formal settings, which is, of course, foreseen in the FDAs and civil society dialogues, and as invitees to their DARC meetings or in the format when we invite DARC chairs together with our partner countries into the trade and sustainable development committees where we have this dialogue also directly. But we have it all over the year, informally, over coffee.
Whenever DAC chairs or members reach out to us, we are available. And this is absolutely necessary because we consider the cooperation also as one of advice. We need and want the advice of the DARGs because they represent different perspectives of civil society, something which, coming back to the delegations, maybe not always able to provide. So we think this is a very useful exchange, even beyond the formal rendezvous, which we have as they are foreseen in the FTAs. Also, on this occasion, thanks to the Secretariat of the EESC, of course, who really support all this work very professionally and enthusiastically.
We also can confirm that financing, as this is indeed always an important issue, especially in such a setting where we have many countries around the world and many participants, financing is secured and remains secured. Also with the outlook, and I'll get back to this at the end, of an increasing number of DAGs, which is natural with the increasing number of free trade agreements which we are concluding. Then taking the examples of the DARKs represented here through their chairs of also three very, I think, interesting, it's a good choice of countries. Japan, a highly developed country where we have a long-standing relationship, but which has not always been easy on this side of civil society because the Japanese side was a bit reluctant to engage. And you heard this from the debriefing here this year.
We managed to improve it a bit, and not least also by inverting the order of the civil society dialogue and the official government-to-government meeting. So now we finally got the Japanese to have this civil society meet before the government-to-government, so we can really have reasonable input into the government-to-government meeting. And also the time distance has increased from many months down to much less. Today, the committee is meeting, so the government meeting is taking place. The Andeans, countries, let's say, in the middle of economic development where we have a lot of issues on the labor side and where we are engaging, and where Dag members can also confirm maybe from the meetings we had on the public ones, where we really try to hold up the voice of civil society when the other side is trying to quell it a little bit.
And I can assure you we're doing this also behind the scenes. And there was a reference already to the work plans we have, in particular, regarding the workers' rights. And then Kenya, as something very new and developing country, where we are setting up a new dock and where we indeed are facing this issue of representativeness. And we have, we are making efforts as the commission. We have made efforts to indeed mobilize the civil society, and with pressure and insistence from our side, on the Kenyan side.
Only last week, my director was there to make sure that the DACs were representative. We have this representativeness issue actually also here in the EU, but not because we, as the Commission, would suppress anybody, but it's just the lack of interest in some sectors of civil society in participating in the DAGs. This also refers to one question of a member from the EPP. So not so much a problem of business, participating also their associations representing small and medium sized companies, sometimes even a bit too much interest of sectors which have very particular economic interest in the relationship, and maybe not so representational. Then secondly, also no problem, thank goodness, on the labour side here.
We are benefiting from the very strong European labour movement. They are, on the European side, always well and professionally represented. But in so-called group three, on the environment and climate side, we are really suffering from a lack of interest of the groups. One will have to analyze this. We, as a commission, are trying to make an effort to reach out to them, but this is also a call to anyone here with those more links into that sector of civil society.
Please motivate them to participate. And now to finalize with a quick look into the future, this will be a very imminent question. May, we'll make a call for membership of the new DAC for the Mercosur agreement. So we will then, as it is the normal procedure for the DACs, make a public call and ask for membership. And this will be the moment, I think, especially for this one, it's very obvious why environment and climate NGOs could be interested to get members for this new DARZ, and then to finalize maybe, as I said, we will have many more FTAs in the future, thankfully, and hopefully also with the blessing of the European Parliament.
And this will also mean many more ducks, of course, which will make it more complex for us, obviously, and also for civil society to find the time and the resources to participate. Thank you.
Bernd Lange
Thanks a lot. And now I give back the floor to the representative of the DAGs for three minutes each, and Stuart is first.
Speaker 7
Yeah. Thank you, Bernd. I'll take three or four points, maybe, one of which was just touched on. Representatives from our counterparts on the DAGs, it depends on the country with whom we're dealing. As was just mentioned with Japan, there's been some problems getting proper representation.
With my other hat on, so to speak, in Vietnam. Well, originally, did not want any civil society involved in the DAG. It's been a struggle to get proper representation, and it continues to do so. On the other hand, civil society has been oppressed quite strongly in Vietnam by the government, with people being arrested for tax evasion, would you believe? And so the powers of civil society there are somewhat limited in any case.
What can the European Parliament do to help us? Well, we would like better notification of when delegations are visiting countries with whom there are trade agreements so that we can feed into you to raise issues other than just enhanced trade, but also on TSD requirements. So better coordination there. The same would go for monitoring groups if we were made aware of when monitoring groups were being held, and perhaps an invitation to the DAG members or at least the chairs so that we can feed in. There also would be very useful.
The, of course, the TST chapters differ from agreement to agreement. Some of them are quite good with legal enforcement. Some of them have quite specific requirements to accede to or ratify various ILO conventions, whereas others contain wording such as we recognize the importance of doing blah blah blah. Of course, that is reluctance on the side of the country to improve working conditions and human rights. I'll touch on an anecdote actually.
A couple of years ago, I was speaking at the IOM on the forced labor regulation in front of well over 100 representatives from various ministries and governments. And, the Kenyan representative held his hand up and said, oh, we've just signed an agreement with the EU, but you are forcing TSD requirements on us. So which I said, this is not an EU requirement. These are international requirements, some of which you should already be complying with. So you should take the opportunity to actually put processes in place that improve the human rights of your citizens.
He didn't respond to that. So I think that speaks volumes. But I'll stop there. Thanks.
Thanks, Ben.
Speaker 8
Thank you very much. I'll also concentrate on a few questions. I think similarly on the composition issue, we don't see much of a problem at the EU side because the DAC is already relatively comprehensive, but also non DAC members have seen the way to the single entry point to file additional views on the TSD chapter of the agreement. So I think in that sense, this side is covered, but the other side remains deeply problematic. The composition is equally contested, etc.
My understanding is that there is going to be financial support for the DAGs on that side. So that is one element of the puzzle. But I think, in essence, a large part of the problems that we're facing or the challenges that we're facing are also to be found in the political nature, political in terms of what is the political space that civil society enjoys in these three countries. And again, if you look at the TSC challenges, they also reflect on the political space. And I think it really comes to that question, as should the EU trigger the human rights clause.
I think that's a political question. I think the commission has indicated that they're indeed making a lot of efforts to build a bit of that space in relation to the trading partners. In this trading agreement, the chairs, for example, do not exchange directly with the TSD committee other than in the civil society forum, whereas in other agreements, that space is already there. So there's certainly space for improvement. But specifically in this agreement, given that we are looking at the modernization, the whole TSD chapter was written in a different epoch and needs to be updated with the thinking of today and with the latest communication.
So that requires a lot of political capital, and that certainly requires, in our opinion, a sort of stance of the European Union and the Commission. And so, in that sense, what can the parliament do? The parliament, of course, can deliver part of that political capital. It will empower the commission to take a more assertive stand if it knows it has the support of this house to go for an ambitious modernization.
Speaker 8
That TSD agreement, because I think the TSD chapter is important to us, but it's equally important for the broader context in those countries. We see that. We were, for example, in Peru, in Lima. There is.
Speaker 8
Problem with the representation of the DAC, but civil society organized a whole week of events surrounding all kinds of elements related to the agreement. So we do see that the enthusiasm is there, and it needs to be properly captured. And so civil society there repeatedly refers to the human rights clause of the agreement. So it's really an anchor point of domestic legitimacy in the trading countries in the Andean countries. So that's a basis I think we definitely need to build on and strengthen towards the future, and a more dynamic and assertive approach can take place.
And then I think, finally, I support indeed everything that my colleague, Stuart, was saying, so better information exchange would work. We, as the Endure deck, to the best of my knowledge, have never been invited into the monitoring group. There is certainly, I think, their inspiration to build upon that and improve that. So that's certainly something that we're willing to do. Same thing, looking at better notifications and of when missions take place, etc.
That's certainly something that we could build and work on. Thank you very much.
Thanks a lot. Elena?
Speaker 9
Agreeing with everything that has been said, I want to bring my experience of the interplay with the monitoring group. So I was invited to the monitoring group on the East African countries partnerships, and there was a very good engagement with colleagues from the commission. I cannot say the same about yesterday's meeting, the monitoring group on negotiations with the UAE. I was invited to give evidence, but the negotiator left the room, and the colleagues who stayed in the room did not engage in discussion with us. So, to answer the question, are our recommendations listened to?
Well, it's difficult to say if colleagues other than the TSD unit in DG trade do engage in the conversation with us, the stakeholders. So I would invite a more organic conversation there. On the court case, to be honest, we haven't discussed it in the Kenya DAG, but I think we will be asking questions to the Kenyan deputy ambassador at the meeting in mid April. We understand that Kenya is appealing the regional court decision, but we don't know yet where it's gonna go. But we also know that the impact on neighboring countries of the EU agreement is being looked at.
The concerns have been raised already, but I think attention is being paid to that particular aspect. We on the visits and the parliament delegations to various countries, my recommendation would be that the delegations meet much in the same way as we do things in Europe. Three stakeholders, trade unions, businesses, civil society organizations, that as part of the course, parliament delegations meet with all three actors in the countries they are visiting. I get requests from some people in this house asking for contacts to meet the trade unions, but it's not a reflex that goes across the piece every time a delegation is organized. And I am not saying that the delegation only needs to meet with trade unions.
I am saying they need to meet with the three stakeholders in the same way as we do things on this side, of the part of the trade agreements. And I very much agree and salute the capacity building financial support. I think that is critical. It's critical also to come out of a punishment logic. You know, there is willingness in our trading partners to do things better, but they need help.
And I understand that the EU delegation in Kenya, for instance, will be relying on the EU DAG to explain how we do things to our Kenyan counterparts, because it is their first experience. They've never been involved in a DAG. So this exchange, at a very practical level, can be a useful experience. Thank you.
Thanks a lot. Tanya.
Speaker 5
Thank you very much. I would try to wrap up some of the questions, but let me start with very concrete questions like, what would you like to see from you? So very concretely, before you go on mission, contact the DAC because we can provide you with information on the ground, the challenges that we are facing. When you come back from the mission, we would very much appreciate also getting a briefing from your side on your engagements, and in particular, you will also meet with your political parliamentary partners. Engage in our joint statements or on the EU statements for the matter, for instance, for Japan where we don't have a joint statement.
When you are invited, do come. And when you develop your own positions related to that country, also get in touch with us, because maybe we could provide you some input on the relevant elements. And finally, take our positions also into consideration when you start with your resolutions, with your work here, because we are the ones having hands and boots on the ground and to know precisely we are in the engine room of an FTA after it has been concluded. So take that advice. Very briefly to the question on the mini deals.
The quick answer is no. Neither, of course, are we involved because there is no domestic advisory group. There is no structured civil society monitoring in those deals. And, also, I have to say, as much as we do appreciate the engagement with the civil society dialogue meetings on the various matters, they will never replace the structured engagement that we do have in the domestic advisory groups. On the non paper of the DAGs, yeah, maybe it is about time that we also collect a lot of the best practices because by now we have really tried also to disseminate the best practices over the number of DAGs.
But maybe also to collect a bit more of the recent challenges that we have. So it's on the to-do list. I would just briefly touch on the question of the weaknesses and the recommendations being taken seriously. On the weaknesses, maybe it's like on two points. I see a challenge that, of course, our key interlocutor and I really would like to commend the entire TSD team because we are on the personal level and also professional level, we very closely work together.
But also this involves our advice involves other DGs, CLEMA, DG MOVE, environment, and employment. But of course, then you have a like struggling as soon as you say, okay, this is about trade, the responses, then you go to DG Trade. But actually, we should bring everyone together. And the second point, and this touches also what Elena had said, with the fact that we are now getting more and more agreements that are covering the entire scope. Of course, we also have different interlocutors in DG Trade.
They are not as experienced in their engagement with the DAGs and with civil society as our TSD unit is. And I think this might become a problem. This is a bit like those warning words, and, let's say, the request also to the Commission to work together with us, how we can sort of circumvent that this will not become a problem. And on the final point, because Bernd, you mentioned in particular that the details do matter. I cannot fully agree to that one.
I'd just like to give one example of where the recommendations are followed up. We've just come back from the meeting in Tokyo. And we had a very serious discussion also about the ILO matters. Stuart had mentioned also the Japanese Trade Union Confederation, Rengo, was there. And there was a clear recommendation also to maybe advance and accelerate the conversation, not only for Japan to still ratify convention one eleven on the discretion at the workplace, but also to finally come in compliance with convention eighty seven on the right to organize because public servants, they're still lacking that right.
So maybe it's about time to have government-to-government consultations about that, and that was raised in joint meetings. So let's see whether that recommendation is going to be followed up. Thank you.
Bernd Lange
Yeah. Thanks a lot. And once again, don't hesitate to contact us. We are open-minded, and we want to learn from your experience. And, Elena, I can guarantee you that the last 12 years on each mission of the intercommittee, we had contact to business, to civil society, and, of course, to trade unions as well.
And I will guarantee this for the next 3 years as well. So that's for sure. And I will remind my chairs of the monitoring groups, of course, that it's really an advantage to invite you. We'll send a letter again. And we should really promote the DAX.
I remember in the last legislative term, we had a mission from Inter, and a colleague from us talked about DAX, and then a member of parliament from this partner country asked why he's talking about this animal anymore. And so we have to really advise give you some input to everybody that this is a key element of involvement of civil society in partnership, and this is also one unique element of EU trade policy. Thanks a lot.
Thank you. And.
Bernd Lange
Now we switch to point seven. It's the termination of a flat agreement, and Carrie Carlsbro is the rapporteur, and I give her the floor for 3 and a half minutes.
Speaker 20
Thank you, chair. Thank you, Bernd. Dear colleagues, it is once again time to discuss the termination of one of our Flex VPA agreements, this time the agreement with Liberia. And let me begin by being very clear. I deeply regret the developments we have seen in recent years that where the EU has chosen to end several agreements due to a lack of progress.
During the discussion on determination on the agreement with Cameroon, parliament was very clear that we wanted to preserve the parts of the FLECT VPA framework that we have been particularly successful. Now we do regret the need to terminate the VPA with Liberia and stress the importance of the commission continuing its engagement with the government of Liberia on forestry issues at the
Speaker 20
time. This should not mean turning our back on Liberia. On the contrary, we must continue constructive engagement to combat illegal logging. Dialogue with stakeholders, including civil society, indigenous communities, and local authorities, must continue even without a formal VPA in place. I also want to reaffirm the value of the VPA model as such, despite challenges in some cases.
VPA remains an important legal and policy framework. They have delivered results in countries where there has been a genuine political commitment and also meaningful bilateral cooperation. We should therefore not abandon the VPA concept. Instead, we should continue promoting new agreements with committed partners and support implementation where VPA remains viable tools for reform and sustainability. But we must also learn from mistakes and use the experience we have.
It is also essential to preserve parliamentary oversight. European Parliament must remain closely involved in assessing the progress, impact, and future direction of all VPAs. We must learn from past experience and use our experience, as I said. But finally, in the end, we must continue the work for sustainable trade. And this is the key message I want to send to you.
This discussion to terminate this VPA must also lead to a greater effort when it comes to sustainable trade in forestry at the same time. Finally, I would like to thank the rapporteur for the early opinion, Monsieur Charles Gorens. And I agree that solutions must be in place before terminating the VPA. It's problematic that there's still no timeline on when the new Forest Partnership will be in place. And I look forward to continuing the dialogue with the commission on how this can be addressed.
And I would welcome hearing directly from the commission on how you intend to proceed to upholding the important dialogue with the stakeholders, especially the civil society. And I'm looking forward to the exchange on this topic with you. Thank you.
Bernd Lange
Thanks a lot, Karin. And I'll give for two minutes the shadow of aperture floor. Lydia is the first.
Speaker 12
Thank you very much. Good morning. First of all, I would like to thank our colleague for her work on this draft report. We share a number of important elements in this, in the approach proposed. We agree that the progress made in Liberia should be recognized, even if it has been uneven.
And we also agree on the importance of maintaining close cooperation between the European Union and Liberia, and on the need for parliament to play a stronger role in overseeing both existing VPAs and future forest partnerships. However, I would like to raise an important concern. If the VPA is terminated, we should move rapidly in a structured way towards a forest partnership. So there should be no vacuum in EU-Liberia cooperation. On the other hand, it is true that the flag licensing scheme was never implemented, but it is also true that the relevant progress was made in a country facing major structural challenges and fragile institutions.
And so in such a context, a formal framework in the European Union matters, and it can contribute to the consolidation of democracy, support the functioning of institutions, and encourage reforms and dialogue. So I would also like to raise a broader question about the effectiveness of the VPA methodology itself. VPAs remain a relevant instrument, and in my view, they provide stronger practical incentives than a simple forest partnership. But we also have to be honest. And since 2009, only Indonesia has reached the licensing stage, while many other VPAs have remained at an impasse or are now being terminated.
I'm really concluding. And for that reason, at a time when some VPAs are still under discussion, it is fair to ask whether this methodology is fully delivering on its objectives. And coming back to Liberia, our message is very simple: to support the transition, avoid vacuum, preserve the progress made, and as I was saying, use these moments to reflect seriously on the future and effectiveness of VPAs. Thank you.
Speaker 21
Thanks a lot. Jean Marc. Thank you, chair.
And thank you, colleagues. I think on the content, we do agree on the analysis here. Firstly, that VPAs are a key tool to combat illegal logging. At least that's the case in theory. Second point on Indonesia and Ghana.
There was success given that flight licenses came to the fore. We were able to speak with our counterparts in Ghana, and that showed that this tool does allow for the implementation of the EU deforestation legislation. Coming to Liberia now, there are some specific deliverables that have been achieved. For example, training the forest development agents, improving traceability systems, or the mechanisms to share profits with local communities, and so on. But it is true to say that Liberia has not achieved the status of flagged licenses even though in 2013, we were hoping to see this in 2014.
We do understand too there is some impatience and hopelessness, given how much effort has been put into achieving these goals that haven't come to the form. 46 licensees were operational in 2022, 2024. That almost doubled. Then there was a change of government in 2024. The new government has set itself the goal of achieving the license this year, in 2026, the flight license.
So with that backdrop in mind, the decision to terminate the VPA does seem somewhat difficult to understand, maybe slightly premature because the reasons that have been given against the termination of the VPA are so that we don't unwind all of the progress that has been made. And we hope that the different aspects that have been laid out under the VPA could be taken up under the Forest Partnership, i.e., continuity with the joint implementing committee or Liberia implementation committee and other bodies of that nature. So in favor of applying pressure here, but we should do our utmost to conserve and retain what has been achieved thus far under the VP in Liberia.
Speaker 23
Thank you, sir. The Patriots Group welcomes the termination of this voluntary partnered partnership agreement with Liberia. This agreement has been dead for over a decade. Since 2013, Liberia has failed to implement the required timber licensing scheme, yet the European Union has kept this bureaucratic ghost alive. Furthermore, this failure proves a much broader point.
We cannot simply export our complex environmental regulation and expect the rest of the world to respect it. Lecturing third countries while ignoring the reality on the ground simply does not work. We must prioritize the protection of our own European market and industries. If a third country cannot guarantee that its temper comes from legal and verified sources, there is absolutely no room for preferential treatment or empty partnership. We must stop funding illusions, and it is time to end this facade today.
Thank you.
Speaker 16
Thank you very much. Thank you also, Karin, to the reporter for the very good work. I'm speaking on behalf of Anna Cavazini, who is our shadow on the file but couldn't join us this morning. We deeply regret the commission's decision to terminate the VPA, which had created a functionally traceability system ensuring timber compliance with national laws while also enabling multistakeholder participation among government, lodging companies, CSOs, and forest dependent communities. And this inclusive approach has really strengthened sectoral accountability, even as Liberia continues working toward flex license issuance.
Despite the slow progress in some areas, the current government in Liberia does have the political will to address the challenges faced in the area of deforestation and forest governance. So a termination of the VPA in this context could really send a wrong political signal. Also, similar to the rapporteur, we do not want the progress that was made during the VPA to be lost, but profit from the existing structures and know-how also during the forest partnership. Thus, it is essential that the VPA will turn uninterrupted to the forest partnership and that CSOs are involved in the creation of the new forest partnerships. That it also continues to be inclusive and accountable, with enough resources and capacity building for the CSOs.
We also take notes of the issues that have been raised in the debate opinion, and we'll, of course, take the final opinion into account. And we will table some amendments, and our shadow report looks forward to working with the report and the other groups on this important matter. Thank you very much.
Lynn Boylan
Thanks, Chair. I think to echo what others have said, we do have a real issue with the direction of travel on the voluntary partnership agreements on forest law enforcement, governance, between the EU and third countries. Excuse me. We saw last year the unilateral termination of the Cameroon VPA, where the commission did not consult with civil society organizations or communities who had benefited from that VPA. And indeed, the commission did not even properly consult with the government of Cameroon, who reacted with strong surprise when the decision was announced.
So we all know that the VPA model isn't perfect, but it does create the space for community engagement, for civil society input, and the scrutiny of this house on how the agreement is functioning. So I think like others have said, I'm concerned that the trend we see is a move towards new forms of bilateral cooperation, such as raw material partnerships or nonbinding memoranda of understanding. These new frameworks are not subject to the formal EU legislative procedures and do not require the Parliament's consent. And, of course, this means that we don't have the oversight that we should have, unlike what applies with the VPAs. So this institutional bypass, I think, is particularly worrying given the EU's stated ambition to combat imported deforestation and promote sustainability.
I also believe that abandoning the VPA model as we are doing with Liberia will send a signal that the EU is not committed to the fight to end deforestation, but it seems instead only interested in a raw materials race. It sends out the message that we're not concerned with the social and environmental impact of deforestation and illegal logging on communities impacted, but instead place a corporate profit instead of community well-being. We are also saying to the civil society groups that their input isn't valued anymore, and that the work that they do to protect their environment and communities will not be supported. So I think what we're seeing here is an abandoning of a system that, yes, is flawed, but that could be improved in favor of a narrow, untransparent, and extractivist model, which is not sufficient to tackle deforestation and illegal logging.
Lukas Sieper
Thank you, chair. I would like to take this opportunity to remind some of our colleagues that when we conclude an agreement that is not merely exporting our values or legislation, it is a deal with a sovereign nation and proud independent people. And you should never underestimate another people just as a pawn in the policies of this union, which is built on respect for diversity. If we talk about funding nonsense with union money, in my personal opinion, we should maybe stop funding certain European political parties or governments that actively work to combat the values and goals laid down in the treaties. On the matter at hand, I want to give my full support to the report.
Thank you very much.
Bernd Lange
Thanks a lot, Lucas. By the way, is this your last visit of the intercommittee so far?
Bernd Lange
So we will miss you. Thank you. So then I give the floor to the commission, Mr. Patrice Moussie.
Speaker 27
Yes. Thank you very much, and good morning, everyone. I would like to first convey Missus Marinesen's apologies for not being here today due to a prior commitment she could not avoid. The commission has proposed to terminate the VPA with Liberia. This decision was not taken lightly, but the reality is as follows.
After more than 12 years, progress has been very limited. Implementation has been inconsistent. The licensing system is far from being operational, and illegal logging and weak governance remain widespread. So as a reporter, Missus Carlsbro, rightly notes, Liberia failed in meeting its obligation. And, unfortunately, there is no credible prospect that the VPA will progress and achieve its core objective, despite repeated political assurances by the government of Liberia.
In front of this situation, the EU must remain credible and consistent. Credible, maintaining a VPA that does not deliver will weaken the EU position as a real reliable partner in promoting legality, good governance, and sustainable trade in wood product. It's also sent a signal that commitments can remain unfulfilled without any consequences. And second, consistency. The VPA with Cameroon, as it was said, has already been terminated.
Maintaining a similarly underperforming VPA with Liberia could be perceived as unequal treatment and discrimination. So it's important to remind this. This being said, the commission remains committed to forest governance, legality, and the fight against deforestation, and is also committed to continuing cooperation with Liberia on forest. But it's clear that we need a different type of partnership. The partnership is that alternative, and we welcome the reports that support this direction.
And we appreciate also the European Parliament's willingness to be closely associated with the development of the Forest Partnership. It's important to remind that the Forest Partnership will build on what has worked on the VPA and not forget what has failed, okay? So what has worked, it's notably the multi-stakeholder participation and the legal reform. But what the Forest Partnership will bring and focus on is value chain, traceability, fight against deforestation, investment, all what the VPA didn't do. Okay?
And it's important also to have a stronger link between forest, trade, and economic development. Okay? However, it's important that this new partnership, for this partnership to succeed, it must be credible and inspire confidence. It must be established on a clean and healthy foundation. So maintaining a stalled VPA alongside a forest partnership will create confusion and weaken both instruments.
So it will also send mixed signals to the economic operators and partners. So we keep a stalled instrument. We forget the commitments that Liberia should have taken, but we propose another framework. So I would like to conclude on this. The commission is informed or would like to inform the parliament that Liberia has turned its back on the VPA.
And at the last EU-Liberia political dialogue, Liberia agreed to move from a VPA to a forest partnership. It's commission opinion that the EU should make the same choice. Thank you.
England. Carrie?
Speaker 20
Thank you. Thank you, colleagues, for this exchange. And I think it's important to stress and highlight that we share the commitment for cooperation with Liberia. We raise our concern when it comes to the consequences if we drop out. This is not only about sustainable trade, which is, of course, the core issue we are discussing, but it's also the relations we have with the country, the platform which can be used as a dialogue between us, between civil societies, as many of my call I think all colleagues, almost all colleagues, raised here.
So in also, in the geopolitical situation we are, I think, it's very important to underline that this decision, it's not the same as moving out or a change direction because our presence, our commitment in countries like Liberia is, of course, in mutual interest, but it is also very important for the European Union. So let's be active. Let's work together, but let's also share and improve our ambitions on this. And, to just finish this, terminate this agreement, it would be a wee easy way out, but I think we should be more ambitious than that. Thank you very much.
Bernd Lange
Indeed. Thanks a lot. And to find a new way in is also a much complicated number. Thanks a lot. The deadline for amendments on the consent and on the motion for the nonlegislative resolution is on March 25 at 12:00 high noon.
Thanks. Next item is the amendment to article 36 of the international agreement on olive oil and table olives. And it's a quite technical issue, but nevertheless, we have to do it because of an international agreement. And I give Mister Kern Dillon, from the commission, the floor to explain what's behind this article 36.
Speaker 28
Dear honorable members, indeed, this morning, I will not take a lot of your time on this technical matter, but let's have a closer look. So the 2015 international agreement on olive oil and table olives, which provides the legal basis for the International Olive Council, is set to expire in December 2026. The EU is a longstanding member of the International Olive Council, which is the only intergovernmental organization in the field of olive oil and table olives. As a first producer, consumer, and exporter of olive oil in the world, the EU plays an important role in this organization, which is particularly relevant for setting trade standards for olive oil. So to ensure continuity and in order to avoid lengthy negotiations around the possible new agreement upon expiring, it was decided by the members of the International Olive Council to amend its article 36 to enable the extension of the agreement for a period of five years if the members do agree.
So this is the text that is presented to you, is this a possibility of extension. The text was adopted by the European Council in July 2023, and it is now presented to this committee for consent. Once we receive your consent, the EU plans to present its acceptance of this amendment to the depository in the United Nations before the summer break. Thank you very much.
Bernd Lange
Thanks a lot. And this committee gave me the honor to be the rapporteur on this file. And, I guess, regarding the situation, of course, we had some conflicts regarding olive oil also at WTO and some others. It's important to have an international organization for setting standards. And, of course, it's not totally perfect, but to guarantee the existence of the organization for another five years, I fully support the proposal to go ahead for another five years.
Now I give the floor to the shareholder, and Borja is first.
Borja Giménez Larraz
Thank you, chair. I'm gonna talk on behalf of mister Soidom, and this proposal concerns the amendment of article 36 agreement on olive oil and table olives. As outlined in the commission's proposal, the amendment is essentially procedural as it enables the agreement to be extended for successive periods of up to five years beyond its current expiry date of 31 December 2026. It does not modify the substantive provision of the agreement, nor its policy objectives. Rather, it ensures the continuity of the existing institutional framework.
However, while procedural in nature, the decision remains strategically important. First, the agreement provides the legal and institutional foundation for the work of the International Olive Council, which is the central forum for international cooperation in the olive oil and table olive sector. Second, it helps maintain internationally recognized standards for quality classification and analysis of olive oil. These standards are essential to ensure transparency in the market, prevent fraud, and protect both producers and consumers. And third, the European Union is the world's largest leading producer, consumer, and exporter of olive oil, ensuring the continuity of this agreement, therefore, contributes directly to safeguarding the stability and competitiveness of a sector that is economically and socially vital for many rural areas across the union.
Thank you very much.
Perfect. And Lynn?
Lynn Boylan
That was quick, chair. Thank you. We have, I think, we have got a real opportunity now to set the agenda for the next five years of this agreement. And I think we should be focusing on binding environmental standards, because the agreement currently contains no provisions on agricultural sustainability. And the IOC's environment subcommittee still remains advisory, so the next round of negotiations would provide an opportunity to incorporate binding criteria on water, soil, and pesticides.
I think we also need transparency on water management because intensive irrigated olive cultivation is a major consumer of water in areas experiencing water stress, and the agreement should include monitoring indicators. I think we need to see protection of small producers, because, again, the market is becoming increasingly concentrated. Mechanisms to ensure producer prices and distribution margins could also be introduced. Europe represents 70% of global oil production, and this involves hundreds of thousands of small producers across the Mediterranean. It includes landscapes, soils, and biodiversity that the market alone will not protect.
And I also just want to recall that the olive harvest in Palestine should be a time of joy and celebration, and that olive farmers there instead face escalating violence from illegal Israeli settlers on the Israeli state, and those Palestinian olive farmers must be protected.
Speaker 28
No. Many thanks for the round and for the comments. As I said, we plan to present our acceptance of this amendment to the United Nations hopefully before summer break, so that we can continue the operations of the organization and indeed potentially also look at further changes in the scope in line with the comments. Thank you.
Bernd Lange
Thanks a lot. Of course, at one time, we have to discuss modernization of the whole issues and take on board the sustainability issues, and so on. Thanks a lot. So the deadline for amendments, if there would be something, that amendment, is March 24 at 12:00 high noon. So next point is point nine, Switzerland.
As you know, luckily, after a long term of negotiations, we had really the possibility now to have, yeah, let's say, a framework which is bringing a lot of agreements together. And it's also a little bit a dynamic basis for further relation. And I hope that this can be stabilized, the relation between Switzerland and the European Union, and also lift a little bit the jungle of up to 100 different agreements we have so far between Switzerland and the European Union. And now we have in this package a lot of elements on food safety, on health, on electricity, on financial contribution on economic and social cohesion in the union, the participation of several programs of Switzerland in the EU programs, the integration of the European Space Agency, and so on. We received a referral from the council on March 10.
And besides the discussion we have now, we will go to Switzerland, to Bern, in the week before Easter. And this is exactly the right timing to discuss it with our Swiss counterparts. And, of course, they also have a big duty to bring this package through their democratic structure. I guess they had also to organize a public vote on that. So having said that, I give, of course, now with pleasure, the floor to our standing rapporteur, Seljana.
Željana Zovko
I thank you very much, chairman, and thank you for organizing as well this very timely visit to the secretariat. Switzerland is a like-minded, close, and strategic partner of the European Union. The comprehensive package of agreements represents an important step forward in modernizing our bilateral relationship and assuring that our cooperation reflects today's economic realities. The package will reduce technical barriers to trade, strengthen conformity assessments, modernize agricultural trade, and support the mobility of persons. Most importantly, it will increase legal certainty for economic operators and deepen economic integration to the benefit of both sides.
Although this is not a purely trade agreement, its implications are horizontally important for our economic relationship. Switzerland is the EU's fourth largest trading partner, and more than 50% of Swiss exports go to the European Union. In 2024, total trade in goods reached Europe, €328,300,000,000, with EU exports amounting to €193,400,000,000 and imports of €134,900,000,000, generating the trade surplus of €58,600,000,000 for the EU. This demonstrates the depth and mutual importance of our economic ties. The agreement pursues several key objectives, modernizing the existing bilateral framework, assuring a level playing field including state aid provisions, improving citizens' rights, and preventing discrimination between workers from different member states, which is particularly important for cross-border services, creating new opportunities for businesses, and ensuring a balanced framework consistent with our agreements with other partners.
Switzerland, as a close neighbor and reliable partner, also contributes significantly to the Union's economic security and strategic resilience. At the time of global trade disruptions, closer and more structured cooperation can strengthen our network resilience against supply chain disruption and economic coercion. The European Union and Switzerland also share a strong commitment to a rules-based multilateral trading system. As highly open and globally integrated economic economies, we have a common interest in advancing WTO reform and restoring a fully functioning dispute settlement system. Cooperation in the agri-food sector is another important pillar.
Switzerland is the EU's fourth largest agri-food partner, and the establishment of a common food safety area will introduce a single rule book and an integrated control system covering the entire food chain. This represents a significant step to our deeper regulatory cooperation and stronger market integration. At the same time, I have previously expressed regret that Switzerland was not exempted from the EU steel tariff rate quotas, unlike other EFTA partners. Given the high level of market integration and the current geopolitical context, this decision risks complicating the ratification debate that you just mentioned in Switzerland and may provide arguments to those seeking to block the agreement. Ratification will soon enter a sensitive political phase in Switzerland, including a referendum.
For this reason, it is essential that this parliament sends a clear sign of openness, stability, and partnership. Last month, the council gave its green light to the signature of a broad package agreement. And on March 2, president von der Leyen and president Guy Parmelin signed the package of agreements. Additionally, the request for consent was referred to the parliament on March 10, and we will have an opinion on the AFET recommendation. I'm looking forward to our constructive work.
Thank you.
Bernd Lange
Very much. Thanks a lot, I'll now give the floor for two minutes each, and Javier is first. Thank.
Speaker 39
Thank you very much, chairman. First of all, I'd like to thank Zeliana for all of the work on this file. I think 99% or even 100% of this opinion really is something that we can agree on. Switzerland is a very important partner, especially in the current world and in the geopolitical context that we find ourselves in. There's been very complex, intense, but important negotiations on this agreement.
Speaker 37
In 1992, Switzerland declined to join the European Economic the European Union. So there's been a lot of hesitance hesitancy. And I think that this package of agreements now is extremely important, because it provides a modern, stable framework that we need with Switzerland. Along with all of the benefits that will come with the agreement, implementing standards in pharmaceutical and health technology, that's very important, food safety as well, the European electricity market as well. It's also crucial.
Speaker 36
We need to work together with the Swiss because, as you said very rightly, we need to ratify it here, in the EU. But in Switzerland, they will have a referendum. And it will be a good opportunity when we have our mission to speak to our Swiss friends, to show that we are very happy with this agreement. It will benefit both sides. And I think that we need to then move forward.
There is also a Libbey opinion on this, which talks about free movement of workers. They are part of the trade. There are hundreds of thousands of workers that cross the border to Switzerland to work, and not recognizing qualifications is extremely important. That's all part of the trade. So I think that both opinions that will feed into this file are important.
Speaker 40
I think that this is a crucial moment for Switzerland. So you have my support, and we'll be able to move this opinion forward. Thank you.
Speaker 23
Thank you, sir. Switzerland is a highly successful sovereign nation and one of our most important economic partners. Our group strongly supports a robust, mutually beneficial trade relationship with our Swiss partners. Pragmatic free trade is exactly what Europe needs to build prosperity. However, looking at this report, it is clear that Brussels cannot simply trade.
It must dominate by using market access to four so called dynamic element on a third country. You are demanding that Switzerland blindly copies EU regulations and accept the European Court of Justice as the supreme judge. This is not a trade partnership. EU instead on tying economic cooperation to the free movement of persons. Switzerland has a fundamental right to control its own borders and protect its labor market, a right its citizens have repeatedly defended in democratic referendums.
Let us focus on what truly benefits both sides, removing trade barriers, and fostering economic growth. We need free trade based on mutual respect between sovereign nations. Thank you so much.
Thank you.
Speaker 41
You, chair. I'll be speaking Dutch. See, people are putting their headphones on. Okay. Chair, my group welcomes this long-awaited signing of the broad-ranging agreements between the EU and Switzerland, where we're making a clear step towards a modernized, streamlined, and more efficient cooperation with one of our most important strategic partners and neighbors in Europe.
These agreements don't just strengthen our economic ties, but they also make sure that we have predictable rules when it comes to origin, technical standards, and mutual market access. The agreement shows once again when the EU can be pragmatic and look to the future, then it can move away from high standards being decoupled. So we can get those high standards, and we can get mutual respect. We welcome this draft opinion from our EPP rapporteur, Miss Zwovko. I think she's underscoring the right focus on trade, and we can encourage that with Switzerland.
Speaker 42
Just one thing that may be missing in this opinion, ladies and gentlemen, is respect for the SMEs. They're the backbone of both economies. They're the catalyst for prosperity and progress. This agreement could be a very important springboard for the internationalization of our SMEs. And, also, we should have more attention to implementation and governance.
Speaker 41
So I'm looking forward to good cooperation with the other shadow rapporteurs and with the rapporteur herself, Miss Swabko. Thank you.
Speaker 20
Thank you, chair. Every day, we can add a new trade agreement with a new country to our trading family is a very good day. The EU is Switzerland's most important trading partner, but I'm sure that this agreement will be mutually beneficial. And it's not only about trade. This is something which I think can be very important for citizens, for people, because this is about it's a it's a framework for deeper cooperation.
It expresses our willingness to solve problems together and create better opportunities for our common future. So congratulations to us and to Switzerland. Thank you.
Bernd Lange
Thanks a lot. Lin, you want to come in on that? Oh. Yeah. So, because it was not really mentioned.
Speaker 45
Well, looking at the draft opinion, a few reflections I'd like to share with you, calling for caution given the complexity of the nature of this package of agreements and the balance. Maybe it's not the appropriate time to conclude a trade agreement that's broader reaching, coming services and protection mechanisms for investments. Maybe at this juncture, it'd be better for us to consolidate the progress that's already been made rather than adding additional aspects to this. Look at the 2021 agreement, and protection of workers and freedom of movement is something we should focus on as well. On February 11, we had a meeting with the Swiss.
Speaker 46
I think that shows progress. We certainly don't want any undermining of worker protection. I think we should have a further reaching study in that before we move forward. And looking at Swiss liberalization in the energy sector, we need to be cautious looking at public services being undermined at the local level and cantonal level. So this is a political aspect that we need to take into consideration when working with the Swiss authorities.
Speaker 48
I think that we should have more guarantees in place before moving forward, and safeguards need to be in place as well for the labor market. Thank you.
Bernd Lange
Thanks a lot. Of course, we can't change the government in Switzerland.
Lukas Sieper
Thank you, chair. I'm so terribly and honestly impressed by the mental flexibility of some of our colleagues when in one order of point of business, they lamented the European Union is not putting too much of their own interest into our trading agreements. And then, in the next order of business, doing exactly this is lamented as the subjugation of a sovereign partner. In another nation, I think, you should decide what you want. Do you want the European Union that is strong in negotiating its trading agreements, or do you want the European Union that also takes the interest of the other sides, but you cannot lament both at least?
I want to point out one very good thing about this trading agreement, and that is that it's secured funding and access of the Swiss people, Swiss young people to the Erasmus plus program. We are a European continent that is bigger than the European Union, and we are seeing a young generation that is coming together. And I think especially, the Erasmus Plus program can be an important tool to strengthen the relationships with our partners in Europe that are still outside of this union. Thank you very much.
Bernd Lange
Thanks a lot. And now I give the floor to the commission, Mr. Nicholas von Lingen.
Speaker 47
Thank you very much, Mr. Chair. Maybe two points from our side at this stage. Just to recall how our relationship with Switzerland is so much more than an FTA. We do have an FTA. It's from 1972.
It was updated in 2006. But the big thing that happened was in 1999 when, after the Swiss decided not to join the European Economic Area, we concluded a series of bilateral agreements which go much further than any FTA does because it actually extends the internal market, provides Switzerland access to our internal market. So that explains why these agreements are very special. This explains why we needed to modernize them, because we're talking about our internal market, our rules, and those who are in the internal market should play by the same rules. I think that's a discussion we have in trade discussions also, but it's particularly true when it comes to our internal market because what we want is our internal market to work properly and for there to be a legal certainty and a level playing field.
So what are the elements which show that it's so much more than a trade agreement? You can see the agreements on land and air transport, which actually give access to the inter market in these modes of transport. The free movement of person agreement, of course, it's about the rights of citizens, but it's also about provision of services called border by individuals. It's also posting of workers. And we have also some elements about professional qualifications, which are mutual recognition, which actually goes much further than what we do in even the most modern FTAs.
The electricity agreement, another example, a good service here, they will be in the European electricity market. Food safety also exchanges will happen without controls because we will have alignment with the rules of the European Union. And, of course, even the MRA, the mutual recognition agreement on conformity assessment, is much different than the ones we have. It's essentially one as if they were in the European Union. And this explains why we need rules, which are the same in the same way.
The 27 member states have the same rules. But as I said, this also goes much further than an FTA or a trade relationship. There's a lot for the citizens. I mentioned the free moon of persons, the rights for students. There's also union programs.
There's a health agreement. This leads me actually to my second point. As you can see, this is a very wide package. We could have done more, and I think there was a prospect at some point that they would join the European Economic Area. That is not the perspective.
We devised a very balanced package which is wide, and we think that it's balanced enough for the interest and the sensitivities on both sides. If we look at the exceptions, the way we've devised the role for the court of justice, the protection of public services, and also sensitivities when it comes to the area of electricity. So I think what we would like to stress is the importance to focus on the package as it is. That's what is being transferred by the council to the parliament, but also what the federal council last Friday transmitted to the Swiss parliament, a very wide package, but one which they think should go through as a package. Thank you very much.
Bernd Lange
Thanks a lot. And we are crossing fingers that Switzerland is also going ahead with this proposal. Celia?
Željana Zovko
I thank you very much. And, I would like to thank you for the constructive, very positive approach from all, the shadow reporters. And I think that this will be very good cooperation. And above all, we have to work on behalf of European citizens because this is, as I mentioned already, the fourth we are trading. It's the fourth our export country that our partner.
And this is, above all, in you know, we are here to work on behalf of European citizens, and I think it's very positive that we all have this very positive approach and also to help Swiss public to understand that this is for the mutual benefits. Thank you.
Bernd Lange
Indeed. So we will work on that. And, of course, one instrument is the, yeah, the content to this agreement. And the deadline for amendment is March 23 at 12:00. So I guess that we will work quite quickly in finalizing our approach.
Perfect. Thanks a lot. Next point, 10, is the presentation of a study which was requested by the intercoordinators on industrial overcapacities, with a focus on China. And I'm happy that we have now Mr. Bernard Troester here with us. Hello.
And Stefan Meyer is online. They did the research and present now the study, and I'm really keen to hear this study. First of all, I've always had my question mark in my head when it comes to overcapacity. What is overcapacity? So inside the European Union, we are producing a lot of cars, and one third of them we are exporting outside the European Union.
Is this over capacity? Of course, we would not say. But if another country is producing more than the domestic demand, then we mentioned it as overcapacity. And secondly, regarding China, of course, the specific situation that the domestic demand in China compared to the GDP is much lower than in other industrial countries. It is, of course, a specific, let's say, train for export, which is based also on this economic situation in the country.
So, but I'm not the author of the study. That is Mr. Triste and Mr. Meyer, and I give them now the floor to present it around ten, twelve minutes. Yes.
Speaker 49
Thank you very much. Yeah. My name is Bena Troesta. I'm a senior researcher at the Austrian Foundation for Development Research. And together with my colleague, Stefan Meyer, who is joining online, we represent our research team who are also participating online, I think, and would be able to ask additional questions on the specific topics.
The study itself contains very different issues around the overcapacity topic. So we developed a definition of industrial overcapacity. We applied this actually empirically to the industrial sectors in China. We conducted four case studies on specific, interesting sectors. We also include a section on China's internal perspective on overcapacities and the recent policy adjustments, and we have an in-depth analysis of the unilateral trade measures that have been taken or could be taken by the European Union.
Now let's go into the question: what is industrial capacity? As we've heard, there's no widely accepted definition of this term. And so we aim to develop a definition that actually looks at the persistent structural imbalances, rather than the temporary cyclical fluctuations. So, according to our definition, overcapacity exists when capacity expands faster than demand over several years. And this imbalance that actually leads to kind of overprotection is absorbed through different channels.
For instance, inventory accumulation, exports, spillovers, or price or margin compression. What is important here is the duration of these conditions. So the longer these conditions actually exist, the more likely they are policy-driven. Out of the definition, we get different variables, which we applied actually to 14 industrial sectors in China. And when you switch the slide, you can see that actually, we discovered that in at least 10 sectors, we see clear evidence on overcapacity, meaning that in these sectors, capacity growth is higher than demand growth, and you see the absorption channels active.
What we see is also that currently, the inventory channel is the main way where overproduction is actually going internally in China. And out of the 14 sectors, we see six, only six sectors where there's a rising export share. But actually, these are the sectors that have driven the export surge to the EU. And these include the electric machinery, for instance, with lithium batteries, but also automobiles with electric vehicles. The role of the government policies and support measures is obviously widely discussed in this topic.
However, we cannot really empirically link it to the overcapacity signals due to the available data, but at least we show some indicators through the behavior of state-owned enterprises that actually increase over capacities. Then, on the next slide, we see the sectors for which we conducted case studies. This is semiconductors, electric vehicles, hydrogen, robotics, all are very interesting. I can't, unfortunately, go into the details. Bottom line of this is that European companies that participate in these sectors are actually in the high-tech segments there, which somewhat shields them from the effects of our capacity so far.
The main exception here is the electric vehicle and battery sectors. And here, we see that the trend towards regional production for regional sales actually reduces this pressure on the EU that comes from exports from China to the EU. However, having said that it's about the technical capabilities of the European companies, this also leads to the internal discussions in China, which actually see overcapacities as a problem, but they are framed differently. And they are seen as a problem because they appear in the lower middle range of the technological scale in the sectors, which is then for the Chinese government actually a barrier to the upgrading of the technology. So basically, the idea that there are policies that should reduce overcapacities in China should be seen also with the central aim of the government in China to make an upgrading of technology, which then actually intensifies competition with European companies on a different level.
And with this, I hand over to Stefan on the legal issues.
Speaker 51
Associate Professor for EU and International Law here at VEU, Vienna University of Economics and Business. And then I want to turn to the question, which measures the EU has at its disposal to react to overcapacity issues? The most obvious answer is that the EU may impose trade defense measures to counter unfair competition. These include anti-subsidy, anti-dumping, and safeguard measures. While such measures must be compatible with WTO law, their efficacy is increasingly subject to criticism also at the WTO level, for example, because of the cumbersome procedures and high evidentiary thresholds, which pose particular problems when dealing with non-transparent economies.
Speaker 50
Moreover, traditional trade defense instruments have simply not been designed to target the structural root causes of overcapacities. In this regard, I want to highlight two limitations. First, TDIs can only be imposed at a rather late stage. An injury to the EU industry must already have occurred or at least be imminent. By contrast, the systemic subsidization and other market-distorting state practices, which often play a major role in the buildup of overcapacity, occur long before this overcapacity becomes a trade issue.
Thus, remedies can address the symptoms, but not the structural causes of overcapacity. The second limitation concerns the defensive nature of the TDIs. They offer a short-term band aid rather than a long-term solution when it comes to issues such as competitiveness or technological leadership. Therefore, we find that traditional TDIs alone are unlikely to create the structural conditions for effectively tackling overcapacity issues. Please move to the next slide.
And I want to briefly address the proposed steel measure, which aims to replace the steel safeguard, which will expire in June later this year. In our study, we find that the proposed measure is a creative way to address overcapacity issues in the steel sector in a WTO-compliant manner, at least in principle. However, we have serious doubts that the proposed measure can serve as a model for a broader cross-sectoral instrument dealing with overcapacities. For one, overcapacity is not a well-defined legal concept, as Bernard mentioned, which means that trading partners may perceive and challenge any definition as arbitrary or discriminatory. For another, such a horizontal measure would require far-reaching modifications of EU gut commitments, and such modifications would not only drastically raise prices of EU imports, but likely also lead to large-scale retaliatory actions by trading partners and thus affect EU exports in an unpredictable manner.
Thus, in our view, a more strategic sector specific approach that combines defensive measures with proactive industrial and r and d policies appears better suited to protect and further EU competitiveness. With this, I wanna come to the next slide and to some of the policy recommendations we formulated in the study. On the cooperative side, we suggest that the EU may explore common ground, for example, when it comes to the reform of the WTO rules on subsidies. While some members will obviously be unwilling to change rules which benefit them, other changes may be perceived more as win-win. One example could be the inclusion of a carve-out or security exception in the WTO subsidies agreement.
Another option could be reviving the category of non-actionable subsidies. Another recommendation that we make in the study is that the EU fully uses the policy space available under existing WTO law. A prime example is the lesser duty rule and the basic anti-dumping regulation. In our view, this lesser duty rule should not be abandoned completely, but it should only be applied when imposing a higher duty is clearly not in the EU's interest. On a more confrontational side, we think that the EU could take a more assertive stance on overcapacity issues.
This could entail challenging the practices of state-owned enterprises under the underutilized Chinese accession protocol to the WTO, as well as imposing more measures providing strategic protection in specific sectors similar to the proposed steel measure, ideally together with proactive industrial and R and D policies. And with this, I want to hand back to Bernhard. Thank you.
Speaker 49
Then we go to the last slide. Also on the policy recommendations, so, basically, beyond the legal measures, we also captured the idea how overcapacities are debated in China. And what you see is, again, that in this internal debate capacities are part of this debate about involutions, so the fierce competition of many companies within China. And so this and the outcome is basically the bottom line is that it's seen as a barrier to technology upgrading, and the Chinese are aware that they should do something about overcapacities. However, it might intensify competition in high-tech sectors or in the segments of specific sector with a high technological capability.
So this actually leads us to a further recommendation. Firstly, we need to understand, which is also an outcome from our case studies, the global production networks and the dynamics there. We can't just simply look at trade data to identify the risks that are there for the EU. We further need to link trade defense instruments better with industrial upgrading in the EU industry. It shouldn't be a predictive measure to do the business as usual, but rather go further into this competition in the high technological sectors.
And the other issue that we also raise is that in trade, exchange rates matter. So it might be an idea to address exchange rate distortions that might amplify trade imbalances. And for this, we're happy to discuss.
Bernd Lange
Yeah. Thanks a lot. Our speaker, Patoppas Carfan, can't be here, but perhaps allow me some questions. You mentioned in your first slide the definition of overcapacity. Of course, I'm not able in this short time to check if also the European Union has some kind of overcapacity.
So in some areas, we have also an increase in volume, and also our domestic demand is not going in the same direction. So if we are arguing towards a country, we should be sure that we have not similar problems on our desk, because this is always a discussion when we are looking for trade agreements that we have a fair balance. And second point, the question of unfair competition that, of course, is a crucial one. You mentioned some elements in your proposals. Do we have one element which might be the most effective?
We have this whole deal of antidumping, anti-subsidies, foreign subsidies regulation and so on to tackle these unfair practices. And, certainly, I'm a little bit worried about the effect how we can really establish our measures in an environment of gut and WTO, which is not harming from us, the system. So you mentioned a little bit some elements, but perhaps a little bit more concrete how we can secure our agency, but not really harming the situation because as everybody is knowing that the WTO got this under pressure from other sources as well. And yeah. But I stop here.
So I guess my colleagues will also have a lot of questions. And Mr. Sveida Alvar is the first for two minutes, please.
Speaker 52
Thank you very much, Chairman. I'd like to thank you very much for your presentations. Now on this topic, the problem of low capacity in China is nothing new. It's something that industry here in Europe has been complaining about for a long time. Now it's important to talk about a reality that exists.
And this is a phenomenon that is changing at speed. The sectors that are being affected, the number will increase in the future. And so it's important now to act. We need to focus on how we can respond to the problem as well. I think it's right that the reform suggests better use of our trade defense instruments, together with an industrial policy and a multilateral framework.
This is something that the parliament has defended as part of the economic security strategy, but we need to be realistic. To think that the WTO can provide an effective response to these challenges is perhaps not right. We need to react quickly, and the WTO may not be able to respond quickly enough. So I'd like to ask three questions to our experts. Now, in addition to electric cars and steel, in what new sectors should we be identifying risks of overcapacity, taking into consideration the speed at which this phenomenon is developing?
For example, in the pharmaceutical sector? Secondly, overcapacity affects China negatively as well. How is this being discussed in the new five-year plan? Is there a will to tackle it? And thirdly, how should the EU respond when, in addition to suffering the consequences of overcapacity, there are also American investigations under Section 301, which is causing this very phenomenon.
Thank you.
Daniel.
Speaker 53
Thank you very much. Thank you, chair. And thank you for this study as well. It's very important and shows us something that is very clear to SMEs and has been for a long time, and that's that some are playing according to the rules and others are not. And this is a reality that we know that some people come out with fine words about free trade, but then distort and use unfair practices, dumping, subsidies, social, environmental, trade union rights often nonexistent.
Speaker 55
And for years, even though we've been aware of these practices, the European Union has closed its eyes to this and thought that the free market would overcome and would allow the market to go from protectionism to genuine openness. But this bet was lost, and we can see very clearly the results of this. This persistent overcapacity, or widespread capacity as it says in the study, is a huge problem for our economy. It's clear that China and other countries are not gonna change their attitudes, not in the short term at least. We heard the line from both commissioners Sergeyne and Sevechevich a few months ago, that we need to act.
Speaker 53
We need to act fast. We need to protect these sectors. Steel is a major problem, not only because it's been the target of Chinese practices for many years, but also because it's something we're looking at in a trilog on overcapacity. We're facing a fork in the road. We're gonna continue as normal.
We're gonna change the path. And we think, as the ECR, we should change paths, as we heard from the commissioners. And this means we should listen to companies and entrepreneurs, not on ideology. We need to understand where we want to go as Europe. We, as the parliament, are ready.
We want to expect openness and confrontation pragmatism from the council and the commission colleagues. Let's be honest and ask ourselves, how can it be that over all these years, nobody thought of using anti Kershon instruments against China, which would have been justified. Well, suddenly, in a very short period, the US could be the target of the same instrument. So we're seeing this approach. But until Europe abandons ideology and approaches changes in trade in a consistent fashion, we will never be forceful around the negotiating table.
Thank you.
Speaker 56
Thank you so much for this study. And, also, I think it's extremely timely that we're discussing it here in Inter because, as we all know, we have the economic security on initiative report, but also, of course, several committees are going now to China. And I think it's extremely important that everyone in the parliament who will visit China in the next months addresses the question of overcapacities because, of course, yeah, even if the Chinese will not do anything or will not immediately take action, I think just that we, as European Union, have a very unified approach and criticizes and talk about it is very important. I think our analysis is also even supported by the highest level by the IMF, the latest IMF recommendations on China. You probably all know them.
Also recommending increasing internal demand, recommending to the Chinese government to also cut some of the overcapacities and industrial subsidies. So I think it's very important that we all go with the same message to China. I wonder to the authors of the study. I mean, I read the summary. I haven't had time yet to read the full study, but probably you can go a little bit more in detail what you mean with speeding up and enhancing our trade defense instruments.
Because in theory, I could not agree with you more. I think we are a little bit too cumbersome and a little bit slow with all the investigations and the system how it works, because the times have just been changing since we also put these instruments in place, and China has even gotten more export oriented, more aggressive in their industrial policy. So in which way should we exactly amend or update our trade defense instrument? And I also, this is my second point, fully agree with you that we need a more proactive industrial policy. That's what you're also recommending.
And, of course, we have the proposal on the IAA on the table. There are other instruments that the commission had already proposed, but do you see more additional need, when you also talk in your study about a more proactive industrial policy in strategic areas? Thank you.
Bernd Lange
Thanks a lot, and I give support to the vice chair of the delegation to the National Congress of China, Marqueta Kavanaugh.
Speaker 57
Yes. Different chair today. Thank you. I would like to urge this committee to completely discard the lens of classical economics today. What the data shows us for decades already is not a market failure, an accident of rapid development, or a temporary misallocation of capital.
I wanna set a clear baseline for this point on behalf of the China delegation today. Chinese overcapacity in EVs, lithium-ion batteries, and legacy semiconductors is a highly calculated state-directed geopolitical strategy. It's designed to flood our single market, artificially suppress global prices, and bankrupt European producers before they have the chance to scale. We have already lived through the consequences of inaction. We watched heavily subsidized dumping completely hollow out the once thriving solar industry in Saxony and across Europe.
We traded short-term cheap green tech for long-term strategic dependency. We absolutely cannot allow the European automotive and critical hardware sectors to suffer the exact same fate. When we discuss our response today, we must acknowledge that our traditional trade defense instruments are too slow. Antidumping investigation takes 14 months. By the time a tariff lands, the European competitor is already insolvent.
We must federalize and accelerate our economic statecraft. First, we need to preemptively apply the foreign subsidies regulation, launching ex officio investigations the moment data indicates dumping. Second, we must pull the revenue from punitive tariffs to directly fund our own domestic manufacturing under the Industrial Accelerator Act. Thirdly, we must stop pretending these subsidized experts are just cheap metal and glass. This is where we must aggressively leverage the new cybersecurity act.
By implementing its trusted ICT supply chain framework, the commission will gain executive power to classify state-subsidized authoritarian vendors as high risk. And this will allow us to instantly lock them out of our energy grid and public procurement entirely. Colleagues, we cannot regulate a command economy using the polite tools of open-market fundamentalism. We must aggressively defend our reindustrialization. Thank you.
Bernd Lange
Thanks a lot. But, of course, Mercator, then it's always a question of what consequences it will have for other trade partners. So once again, for me, it can't be that overcapacity from China is bad, but overcapacity from Europe is good, because we are earning money off that. So once again, we are producing in Europe per year round about 12,000,000 cars, and we are exporting 5,000,000 of them. So is this overcapacity, is this good, elicited, or not?
So we have to really also question ourselves before attacking or being aggressive against others. So this has to be a balance. And perhaps one question from my side, a little bit. Also taking on board the question of Mr. Soldo Alvarez regarding the 15th year's plan of China and also the National Congress recently, where they, of course, stick to this involution policies.
So they want to accelerate industrial pool production. But at the same time, they also recognize that the domestic demand is too low, and they want to stimulate that. And this is, of course, for this pressure for export, also important. Have you any indication how this might be working and how perhaps the European Union can also, let's say, stimulate or support such a stronger demand inside China. I give now the floor to the commissioner, I guess.
Yeah. Please.
Speaker 58
Thank you, Mr. Chair, and good morning, everyone. And thanks for the extremely interesting and timely study, which we have looked at with attention and listened carefully to the presentation. I think there's a clear case here that is identified by the study. And there's, I would say, a general recognition by most analysts of what is happening, and also of the fact that possibly the worst is to come in terms of a wave of overcapacity. Mr.
Chair, you referred to different cases of overcapacity. Of course, it's true that there's not a clear definition of overcapacity, but we have to distinguish between cyclical and more structural overcapacity and scale. In the case of China, it makes 50% of world steel, 40% of global chemical, 57% of commercial vessels. That I don't know the definition precisely, but it's overcapacity in a way that has the potential of altering the dynamics of the global market. And indeed, it identifies a massive challenge.
We're talking about 60% of EVs these days produced in China, who was a net importer of cars until very recently, five years ago, and now, of course. So this is just to say that there's a structural dimension there that allows us to distinguish between different cases of exporting production from a structural overcapacity. And of course, that comes with a number of dimensions. For example, the level of subsidization that has been growing over the last few years between four and five times more quickly than any type of subsidies being provided by similar companies in other countries. So, these are data that are available on how subsidization is actually driving excess capacity.
In a situation, as it was mentioned, of sluggish domestic consumption, no real estate sector in China can absorb production and de facto a global manufacturing, which is for above 30% coming from China, while the consumption in China is 13%. And all the rest goes into the global markets, knowing that certain markets have been increasingly restricting access, and the European market is certainly a premium market that can pay well and, therefore, is a natural target. So this is a situation that the report captures clearly. I think we could even go further when it comes to distinguishing between values and volumes. Trade deficit has been growing over recent years, has been doubling in the last 9 years, but it has multiplied by five in volumes.
And that tells you that there's an issue of price gap, and the price gap is a competitiveness gap, so lower prices of what China sells. And of course, fourteen consecutive months of manufacturing deflation in China and the devaluation of the currency play a role, and some estimate the 20% price competitive gap, an additional one that has emerged over the last two, three years. So we do have challenges that need to be addressed. And some of the, we have been listening carefully to some of the recommendations, and we agree with many of those recommendations. Just some specific comments.
Of course, the WTO is a forum that we value and could potentially be a forum to discuss, in particular, subsidization, which is not captured by subsidies and not captured by the WTO rule book the way it should these days. It's not easy for the way the WTO works, but we are looking at it actively. And of course, MC14 will provide an opportunity to further get into the need to reform the WTO and make it more adherent to the challenges of today. We had also the WTO. We have had in the past a WTO working group with China itself to try to discuss some of these issues, and it has not been easy.
We haven't had easy discussions, and we'll be looking at how to discuss that bilaterally with China as well as multilaterally in the WTO. TDI, we have something like 143 measures targeting Chinese products directly, indirectly. It is true. TDI is not a systemic tool. It goes product by product.
So it does the trick for what it is designed to do, but we cannot solve a systemic issue through a nonsystemic tool. So what we have been putting in place recently over the last year, it's an import surveillance task force that tells us precisely about import surges. We have been upgrading the industrial policy, or at least with a number of proposals, so that is also what the report says. And we'll continue getting into that and see whether the toolkit as it is is sufficient or not. I mean, it's also a part of our general reflection on economic security, if you look at the communication published in December.
Of course, it's definitely not China-specific, but it looks at economic security, and some of the issues we're discussing are economic security related, of course. Last point is addressing exchange rate effects. It's very challenging and that's something that we currently read about and we also reflect. But it is difficult because even international organizations have problems defining it or even recognizing devaluation. The IMF only recently has opened to us as a knowledge that there is a devaluation issue.
And I would say institutionally, tools are not there to address it properly. Even if you wanted to address it to TDI, it's very difficult because of the volatility, by definition, of exchange rates. But that's something we are aware, and we are also engaging on those issues with China when we engage bilaterally because it's an issue that requires action. Otherwise, pressure will continue to mount to ensure that our economic, our single market and industrial basis is not fundamentally structurally affected. I'll stop there.
Speaker 49
Yeah. Thank you very much for the comments and questions. I quickly want to go for the economics issues and maybe the Chinese internal debates. I'm not sure if my colleagues can actually join online to have a comment there, because we have a scholar on Chinese studies who might say something on the five-year plan. But I start off with the definition of the overcapacities.
I would not stick to the level of exports that you're doing. It's overcapacities more to it. It is, on the one hand, you have more projection than you would have without such a level of capacity. So the high level of capacity is somewhat forcing you to produce more than you usually do. And this overproduction has to go somewhere.
And that's why overproduction, our definition, also takes up these channels that absorb overproduction. And that's basically then the inventories currently. And to some degree, it's already exports. And I would also agree to the point that has been raised by the representative of the commission, that there might be more to come because if inventory is currently the main channel of absorption, it's not clear if that can be continued for a longer time. If not, then export would be the other option.
So it's risky, and that's why it's important for the EU to be prepared. So we don't really figure out or pick out specific sectors that you should look at because across all the industrial sectors, you pretty much see the overcapacity risks. So I would actually point to much more monitoring and also understanding of the dynamics that are going on in China. And one issue that then leads me to the internal position in China and the question that the Americans also want to investigate now, The Chinese actors are very sensitive about who defines overcapacities. Basically, this has been in the news lately, as the US administration wants to do this.
And so we have to look at the internal debate in China more closely. And it's all reframed about this involution topic and the fierce competition. One thing that I want to mention here is the agreement between the EU and China on the EVs, so that there should be something like a minimum price of Chinese cars to come to Europe. And that's somewhat in the spirit of the Chinese administration as well because they want to get rid of the low quality, only cost-based competition. So a minimum price for electric vehicles also means that these companies that actually only produce on the cost element are actually driven out of the market, which is actually in the desire of the Chinese administration.
But it's complicated and they also, that's why engage in the five years plan and the discussion around it with several instruments that they want to take internally actually to take up this. This is basically the main idea, to steer investment activities more from the top. And the other one is actually to enable the exit of companies either through mergers and acquisitions or other policies. And with this, I want to hand over to Stefan to address the trade measure issues and the WTO measures issues.
Speaker 51
Yeah. Thank you. So, to the question, what's the most effective means? I'm afraid there is no silver bullet that we can offer that we have identified in the study. We share the concerns about further eroding and undermining the WTO.
So for example, we have not even discussed an issue that has come up in the literature time and again, which is to introduce local content requirements, because those are so blatantly in violation of WTO law that we thought this is not really, there is no place for this in the study. It's also why we're very skeptical and cautious against this idea of a broader overcapacity instrument modeled on the steel measure. We think that the steel measure is a very good approach to target concrete overcapacity issues in a specific sector, and we think this model could be applied to other sectors. But, of course, it's not only the question of whether there's an overcapacity, but also whether the EU can meet demand if such a measure is being imposed. So I think it's not one measure that can be seen as solving all the issues, but rather the application of the various measures that are in place.
We have only touched upon a few of them. You also mentioned in your statements and questions, for example, the foreign subsidies regulation, but there's also investment screening. There is the international procurement instrument, which can be used to indirectly address overcapacity issues. And, the question how to improve the TDIS, this is, of course, very complicated because, there is so much determined at the WTO level that without the WTO or changes in WTO rules, it's very difficult to further improve EU trade defense instruments. I think one aspect that could be done, and this is not a change in the legal setup, but we've seen a stark increase in TDI cases in recent years.
Speaker 50
So we suggest that perhaps more staff for the commission for the competent authority that deals with these cases could help speed up the process, at least to some extent. And I think I would leave it here. Thank you.
Speaker 49
Yeah. If yeah. Leah is joining as she's a Chinese, China expert in our team.
Speaker 59
Yes. Hello. To join. Thank you for your interesting question. Of course, one very important question is if this talk about involution is also translated into measures.
As far as I checked, there are really a lot of measures going on to actually kind of put their idea that competition and actually price below cost is the main problem to tackle this problem. I cannot say right now because it's just going on in the last year if this will succeed, but we do see reduced support for exports in actually sectors like photovoltaics, for example, but also batteries. We see increased, like, legal measures against actually prices with low cost, though this is not quite, I cannot really say what kind of measures or there's no cases where I can see what they really want to do. But I can, what I can prove is that since 2018, at least the state administration for market regulation was put actually, or established to actually tackle antitrust problems. And these seem to be actually pretty effective, so the measures they have done here.
So it depends on how serious or how much political priority the government is putting in different sectors or in different issues, how they're going to play out legally. When I look now to really what was published in the fifteen five year plan, interestingly, there is not much mentioning of the word evolution, but we see it in different aspects, actually. That is kind of the background idea also for the new 15 five year plan, who is not actually a very new model of this. It's mainly, I would say, a consolidation plan. What's interesting is, though, that the government in several instances is likely to reduce investments because there are a lot of problems with government debt and that they want to make investments more efficient and want to increase, actually, private sector investments and reduce public investments.
So with this, I would say there is some moving space to discuss with China how to tackle actually this global issue that China owes it to themselves. I just want to, like, when reading as a Chinese tax in a robotic sector, there are industries saying, for us, it is a problem. We cannot even move to international markets because we have so much Chinese competition that if we sell below price or below cost, then actually we cannot feel even if we export. So I think that makes me kind of believe that China is wanting to tackle it and give you some space to kind of discuss it or, yeah, take the floor more on these issues.
Bernd Lange
Yeah. Thanks a lot. And I can really underline just some discussion with the Chinese authorities. And now it's possible to discuss overcapacity and improvement for the domestic demand, which was totally forbidden and impossible some years ago. Thanks a lot to all of you.
It was really fruitful, and good luck for your further research. Thanks.
Bernd Lange
June is cutting now the web stream because we are starting the coordinators meeting.
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