Committee on International Trade Ordinary meeting
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INTA European Parliament
Follow its sittingsChristoph Kiena
So that gives you a sense. Maybe Australia may be geographically far away, but they're actually a very important trading partner of the European Union. Our bilateral trade, when you count goods and services, amounts to €90,000,000,000 almost. Now our expectation is that exports of goods are expected to increase by up to 33%. EU investment into Australia has the potential to grow very significantly.
Tariffs are going to be eliminated in Australia on over 99% of the EU goods. Just for 1%, there will be a seven-year transition, most of it at entry into force, 98% at entry into force. And the one exception that we have came from our side, I have to admit, where we're both going to exclude steel products from the coverage of trade liberalization, but that came further to the EU's proposed introduction of permanent measures on steel that were just agreed in a trialogue a couple of days ago, or one could almost say a few hours ago. Now key sectors with very strong potential for export growth include dairy, motor vehicles, and chemical products, to mention just a few examples. But what I would want from the outset to emphasize is that myself and my colleague Raimundo, who is here with me from DG Agriculture and who was leading the negotiations on agriculture, we kept in mind the EU agricultural sensitivities throughout the process.
And I'm happy to report that this agreement will provide EU farmers with better export opportunities, better possibilities to sell their goods in Australia. Again, here, to name a few examples where the agreement will eliminate tariffs on major EU sectors of exports such as wines, cheese, pasta, but it will also protect the EU's finest food and drink products. So Ambassador Campbell will be very happy whenever he goes back to Australia. He will be able to enjoy as good delicacies as we have here. Indeed, Australia will protect geographical indications for 165 food products and for 231 spirit drinks.
And in addition, we concluded in parallel, we modernized the bilateral wine agreement with Australia. So over 1,600 wine geographical indications will also be protected. Now the agreement will ensure, as I already hinted, the EU's most sensitive agricultural sectors. And for the most sensitive products, the agreement will only allow for limited access to the European market by means of very carefully calibrated tariff rate quotas that will be gradually implemented and subject for certain products to significant sustainability conditions. These products that will be subject to carefully calibrated tariff rate quotas are beef, sheep and goat meat, sugar, rice, dairy, and other products like wheat gluten, sweet corn, bulk rum, derivative of starches, and ethanol.
The agreement will also provide for a bilateral safeguard mechanism so that the EU will be able to impose safeguard measures in case of a surge of agri-food imports from Australia if this import surge causes or threatens to cause a serious injury to EU industry. The safeguard provisions in the agreement, I'm happy to report, are largely consistent with the most recent provisions that were agreed on in the context of the EU Mercosur agreement. Moving to the industrial sector, I'd like to mention another important development to the benefit of our car industry, in addition to the elimination of import duties. You know that Australia currently applies a system of a luxury car tax by which vehicles above a certain price need to pay a 33% tax when they are imported and sold in Australia. As part of the negotiations, in parallel, Australia has agreed to increase the threshold for electric vehicles to 120000.
And below that threshold for electric vehicles, that tax will not be applied. And we estimate that about three-quarters of our exports of electric cars would be, therefore, exempted from the luxury car tax, and that will be quite significant. But let me move briefly to critical raw materials. We all know that critical minerals are indispensable for a wide set of strategic sectors, and that their demand is expected to increase exponentially. While we rely heavily on imports, of course, in the European Union, Australia is a major supplier of critical minerals, including aluminum, lithium, manganese, but also rare earths, etcetera.
So the agreement is going to be important as it will facilitate access to one of the world's largest sources of critical materials. Furthermore, it will also guarantee that the critical minerals sourced in Australia will be produced in a sustainable, socially responsible, and safe manner, thanks to the agreement's sustainability provisions in the chapter on energy and resources. Now, sustainability, obviously, is relevant not just for Critical Minerals but across the board. And that's why the agreement fully integrates our high standards on trade and sustainable development. It contains binding commitments to implement the Paris Climate Agreement and ILO core labor standards. It contains dedicated gender equality provisions.
It contains provisions on trade and fossil fuel subsidies and their reform. Obviously, the trade and sustainable development chapter will be subject to the dispute settlement provisions of the agreement, with the possibility as a measure of last resort, which we obviously don't imagine would ever be needed in the case of our bilateral relations with Australia, but the possibility is there to suspend trade concessions in case of breach. Turning to trading services. The agreement will make it easier for EU professionals to work in Australia. And service providers in key areas such as financial, telecommunication, or international maritime transport services will have better access to the Australian market.
We will also benefit from entry quotas for engineers and researchers that will boost European and Australian innovation. The agreement will enhance the access of EU companies into Australian government procurement markets and vice versa, obviously. It contains an ambitious chapter on digital trade that will notably prohibit unjustified data localization requirements, but that will ensure the full protection of personal data and privacy. It contains a strong chapter on intellectual property that will encourage innovation and creativity. And we will have a chapter to the benefit of small and medium sized enterprises to ensure that small businesses can fully benefit from all the opportunities that the agreement will offer to them.
Finally, the agreement gives civil society a very prominent role in the monitoring and implementation of the agreement. We will have domestic advisory groups and the usual civil society forum to help us in this process. All in all, and I'm sorry, I'm just a little bit long, I'm convinced that this deal is going to be extremely valuable. In terms of transparency step, we, together with Australia, have published the text of our agreement on March 31. And in terms of next steps, you already alluded to that.
But it's not just that we're waiting for ratification, we're actively working on making it as fast and as swift as possible. And I look forward to cooperating with the European Parliament, the Inter Committee and the Monitoring Group and its new chair to make that process as quick as possible. Thank you.
Bernd Lange
Christophe, thanks a lot for this comprehensive overview, and I guess it's really demonstrating what a wonderful agreement we were able to conclude in the negotiations. The new standing rapporteur is Jürgen Warman. I give him the floor for 3 minutes, please.
Jörgen Warborn
Thank you, chair, and thanks to Christophe for his presentation. And as the chair said, this is a wonderful agreement. It's fantastic to see the list of free trade agreements that the commission has concluded recently, almost one FTA a month. And I would hope that we can keep up that pace for the rest of this mandate. So a strong signal to the commission to continue to work hard to facilitate trade for businesses.
Thank you very much for this presentation. We all know, and it was discussed as well, it was a bumpy road. It was put in the freezer for some time, but now it's definitely put in the microwave. And we will hopefully serve this dish pretty soon to businesses and people working in the export industry in Europe. This is not only beneficial for us from an economic point of view, but also a very important signal that Australia and EU remain committed to a rules-based international trading order with open and free trade.
And here, Australia is a key strategic partner in the Indo Pacific, which, of course, in this current geopolitical context is very important to have like-minded partners, is more important than ever. This agreement is expected to significantly expand opportunities for EU exports in both goods and services, with projections suggesting a substantial increase. Already today, EU exports to Australia support around 460000 jobs. And that number is very likely to further grow in a time where trade uncertainty is still there. The provisions on critical raw materials are particularly important.
Australia is a major producer of resources that are essential for the EU's green and digital transition. So securing a stable and predictable supply chain is a key objective here. And I'm really happy that we seem to have a very strong chapter on this. I look very much forward to working as the standing repertoire on this file, together with all the shadows. We have already had one monitoring group since this was concluded.
And of course, now we will set up a number of meetings where we will scrutinize the chapters more thoroughly. And that's why I have a few questions for the commission, because we would like to put this over the finishing line as soon as possible. But there is, of course, translation and legal scrubbing, and so on. And we would like to have it as soon as possible. So when can it be referred to, so we can really start working on it, would be my first question.
Then on the SME chapters that was mentioned, very important because small and medium-sized enterprises, there is a huge potential for them to export more. Are we is this the same SME chapters as we have had? Or have we pushed it even further to improve the possibilities for SMEs to do business? And finally, on geographical indications, it seems to be a strong outcome here, and we like that. But how will these protections be effectively implemented and enforced in Australia?
Thank you, chair.
Thanks a lot, Richard.
Richard Szostak
Great. Thank you. Thank you, chair. Obviously, three weeks ago, we concluded eight years of negotiations, and the timing could not be more fitting, especially knowing that since 2018, it's not only what we see right now currently with the US tariff disruption, reshaping the supply chain, so Chinese economic version that is getting more and more severe or Russia's war of aggression. And beyond that, also, the period of the COVID.
Speaker 10
And, obviously, in this environment, diversification and reliable partners are not just useful, they are necessary. Australia is that partner, a reliable, like-minded democracy in the Indo-Pacific, and this agreement brings real benefits for European companies in machinery, chemicals, automotive services, and public procurement, but the strategic value goes even further. Even beyond the cooperation that we have on Eurovision, Australia is one of the few trusted democracies with serious reserves and production capacity in raw materials Europe needs. As was mentioned by the commission, lithium, manganese, box seats, cobalt, titanium, and rare earths. These are the materials behind the battery, semiconductors, aerospace, defense production, and grid infrastructure.
Speaker 13
And it's very evident that Europe cannot talk about rearmament and technological sovereignty while remaining dependent on vulnerable or hostile supply chains, and Australia can help close that gap. Alongside this, the FDA, the EU and Australia have signed a security and defense partnership covering cyber resilience, counterterrorism, countering hybrid threats, and space security. The authoritarian powers threatening stability in Europe, and those challenging the rules-based order in the Pacific operate from the same playbook. Diversifying our trade is also diversifying the coalition defending international law. But support for this agreement cannot mean ignoring agricultural sensitivities.
Speaker 12
Increased access for beef, sheep, meat, sugar, and dairy must not undercut European farmers who already operate under the world's strictest environmental, food safety, and animal welfare standards. Safeguards must be workable in practice, not just reassuring language on paper, and this is important for the ECR group. But nevertheless, yes, the stronger partnership with Australia. Yes. It's the strategic trade with trusted partners.
Thank you.
Thanks a lot. Pinot.
Benoit Cassart
Yes. Yes. Good morning, everybody. I speak in the name of Karen Kelsbo, our president. Thank you to the commission for the excellent briefing, and congratulations on finally reaching this finish line with this negotiation.
From RENEU Europe, we, of course, welcome the fact that we appear to be able to conclude yet another free trade agreement during this term, and I don't think I need to convince anyone when it comes to how significant this is economically, geopolitically, and for relations between the EU and Australia. I'm also very pleased that we have an agreement in place with a proper sustainability chapter included. I think it is important that we do not lose sight of that aspect when we conclude new agreements. Thank you.
Bernd Lange
Thanks a lot. And now it's a pleasure for me to invite the first chair, our first vice chair of the agriculture committee, our colleague, mister Buddha, for two minutes, please.
Daniel Buda
Thank you very much, chairman. Certainly, I am here as a representative of the AGRI Committee. And as you well know, we, the members of the AGRI Committee, always appreciate concluding commercial agreements, but we also have certain reserves from the point of view of what this trade may mean for agricultural products. So there are a few things that I would like to highlight as regards these tariff quotas for beef, for sheep meat, and for other products. I'm very interested in things that relate to the quality of these products.
As we well know, in Europe, we have very high standards for our agricultural production as regards the usage of growth hormones, pesticides, etcetera. I don't wanna list them all. I'm very interested in how we can guarantee that the products that will come to Europe from Australia will respect the same high-quality standards that we have in the EU. Moreover, I'm also worried about the fact that we've been talking here about the presence of civil society in the monitoring of these imports. I do not doubt the need to have a strong and active civil society in this field.
However, I hope we also have the institutional capacity for the member states in the EU, which should have the capacity to control all of these imports. I remember from our discussions on Mercosur that it is important to send a strong message in the public space that all these goods that we will import from Australia will respect the same quality standards. So I would like to mention this, dear chairman here in the INTA committee. Well, I will surely be coming before in the future as well. We need to not lose sight of the cumulative effect of these tariff quotas. For example, we have the 30,000 tons of beef for this agreement and another several thousands from Mercosur, and these all add up. And we must not forget that it adds up.
It's cumulative, and the agricultural sector might feel certain pressures because of this. It already feels very pressured, and we might risk making it even more fragile. So we salute this agreement, but we need very firm agreements as regards quality and monitoring of imports. Thank you.
Bernd Lange
Thanks a lot. And now I invite the chair of the delegation to Australia, John Kelly, for two minutes.
Seán Kelly
Zealand, we held interparliamentary meetings with our colleagues from Australia in December 2024 and October 2024. Moreover, we've had a number of preparatory and follow-up meetings, hosted high-level visitors from Australia, some more here today. We welcome them, and have engaged with the European Australia Business Council, both here in Brussels and in Canberra. Although the agenda with such an important partner as Australia is always broad and includes issues like connectivity, relations with China, security, Russian aggression to Ukraine, the situation in the Middle East, scientific and education cooperation, and much more. A positive outcome of the free trade agreement has always been the main topic and the cornerstone of our relations.
The agreement was supported by both sides, meticulously negotiated, and finally concluded, and congrats to all involved. Previous speakers have touched upon a number of the achievements of the deal: protection of geographical indications, rules of origin, market access, and sustainable development and climate provisions, among others. From the perspective of our delegation, the key issue is that Australia is as much a pillar of international trade as the EU is, with transparent and stable rules, and emphasis on sustainability and innovation deeply beneficial for our societies. As parliamentarians, we played a crucial role by advocating the benefits of a fair agreement for our societies and being a bridge to connect our businesses, universities, trade unions, and think tanks to the dynamics of negotiations. Now it is our role to do what we can to make the ratification and implementation process a success.
And I agree with my colleague, Joergen Warburden, the sooner we can do that, the better. A free trade agreement is not a goal per se, but an instrument to create prosperity and trust. With the current disruption of world order and multilateralism, our duty is now to bring about a deeper political cooperation and people-to-people contact with like-minded partners. This free trade agreement can be a key element in shaping an alliance of democracies that respect international rule of law, that consider allies before acting purely for their own benefit, and that restore faith in the world order. So thanks to everybody, the president of the commission, prime minister of Australia, especially commissioner Sefkovich, and also minister Don Farrell from Australia, whom we met on a number of occasions.
And I'm pleased to say he's very proud of his Irish ancestry. So, good news all around. Thank you very much.
Bernd Lange
Thanks a lot, Jean. Now we have one shadow left, Brando, and then we have six requests for the floor, and then we will give Christoph the chance to answer.
Thank.
Speaker 25
You, chairman. I'd like to thank you for the work you've carried out on this dossier. Of course, I'd like to welcome and thank him for his work, ambassador Campbell. It wasn't a simple negotiation. We followed it step by step.
Brando Benifei
Towards the end, obstacles that seemed impossible to overcome were successfully solved. So this really deserves to be explicitly mentioned. And timing is important too. The global trade system is fragmented. It's under pressure.
Speaker 20
It's chaotic. And this is on a day-to-day basis. So we need a partner like Australia. It's not just useful, it is essential. There's also a clear strategic dimension.
Speaker 23
Access to critical raw materials is essential. A stable relationship with Australia is the right step in this direction. Now let's look at some points of merit. Trade, sustainable development, the solid commitments in terms of the fundamental conventions of the ILO and of the Paris Agreement, and enforcement are exactly what parliament requested. As to mobility, details for engineers and experts, about 3,000 per year, which goes towards innovation and improvements for the next generations, an agreement aimed at the future, thought out thinking of the economy and the people of the future.
Speaker 20
From this point of view, I'd like to ask a clarification on the label market text requested by Australia. There should be a list of exempt sectors. Where have we got to now? An agreement on such an important point has to be balanced, and must not cause any obstacles to the arrival of European workers. And this is something that's important for European youth.
If I look at Italy, for instance, over 10,000 Italian young people go per year to Australia with a working holiday visa, and the residents are over 163,000. So this agreement would open more opportunities for a mobile generation that is willing to face the world. Another point on geographic indication. We've discussed at length. There's a grace period of ten years without a block of exporting Australian prosecco to third countries.
Brando Benifei
But on the whole, even though there has been criticism that does not see the value of it, we will find though that Italy will receive 57 protected ITs and important points for Piccolino Romano and Parmigiano Romano, offering our Australian friends the possibility of appreciating at more accessible prices these wonderful grappa. So in conclusion, this is a significant agreement with a partner who is close to us in mind, in a region where we have to show our presence. And European generations would look towards more new businesses, new opportunities, and new careers. As a group, we're willing to look at the text and work constructively in the committee to go ahead with this dossier in good time. Thank you.
Barry Cowen
Thank you, chair. As I said yesterday, at this committee, a first-time member of the International Trade and Aggregates, one of my key priorities has been to contribute more to timely and efficient trade agreements. So it's welcome that after years of negotiation, we've concluded this trade deal with Australia. It's a strong agreement. It eliminates tariffs on the vast majority of goods and builds on existing EU agri-food surplus of over 2,000,000,000, and is expected to increase all EU exports by 33% over the next decade.
And crucially, does so while protecting sensitive sectors through quotas and safeguards. And for Ireland, for example, and for Europe, trade has always been transformative. Since we joined the European Economic Community in 1973, our growth has been built on access to markets beyond our own. And today, as in a far more uncertain global environment, that logic is even stronger again. So we must continue to look outward beyond our own 450,000,000 consumers to partners like Australia, India, and Mexico, amongst others.
And as someone who truly understands the value of trade, I don't believe in hedging our position on agreements like this. You cannot be an exporting nation like ours and Ireland, and expect to oppose every trade deal. Where a deal is fair, where our standards are aligned, and where our key sectors are protected, then we should say so, and support it accordingly. This agreement meets that test. It's balanced, it's pragmatic, and it strengthens Europe's position in a changing global economy.
Thank you.
Cristina Maestre
Thank you, chair. And thank you, Mr. Keane, again, for this detailed explanation. I join the words said by recognizing the strategic connection with Australia and the ties we have now, given the global tension. But I would like to focus on what the vice president of the cultural committee said on our concerns. We've listed our concerns.
Possible cumulative effect that could be in the agricultural and livestock sector, an agreement that coincides with the moment in time when our farmers are well, prices are increasing, this touches the competitiveness of our agricultural products and our livestock and meat products. So I'd like to stress the importance that this has and to pass it on to negotiators to be very careful with the numbers and the quotas, because we want to, some might think it's a small figure, but if you multiply it by nine, the existing production, when we look at sugar, rice, sheep, goats, these are all very sensitive points for European farmers. And for this reason, I think it all has to be very well balanced. But the budgets and the quotas which will be established, we're still in time to make a perfect agreement where it's great that you can put the IGPs on, but it would also be good to strengthen them further. So I'd also like to ask Mr.
Keane, if you can clarify better the mechanisms for protecting the agricultural sector and some doubts I have on the final calendar, on the scheduling. Thank you.
Speaker 27
Julio. Thank you very much, chairman, dear colleagues. I, like yourself, said at the beginning of the meeting, I am also prepared with a very long speech of support for this agreement, but I won't have the chance to deliver it since I only have fifty seconds left of my intervention. But, in any case, I would like to first express gratitude and congratulations to chief negotiator Kiner, here with us, and to DG Trade for this long and winding road of our EU Australia negotiations. I think that many important aspects have also been said by the previous speakers.
Iuliu Winkler
First of all, regarding industry critical raw materials, I would like to emphasize the other agreement which came together with the FDA, which is the security and defense partnership, and this is very important in enforcing not only the geopolitical importance of the FDA, but the geopolitical importance of our overall relations with Australia in the Indo Pacific context. I think that it's clear from the interventions that there is a political majority in support of the EU Australia agreement. And I think in the following, I don't know how many months, Mister Keenan probably will tell us, we will have to enforce this political majority so we have a decisive and clear support for the ratification. And as questions, maybe just, I joined the vice chair of the agri committee, and I joined also previous speakers in asking mister Kiner to give us more details on the safeguard mechanism for the sensitive agricultural products because this will be something that we will be asking our constituencies, and it is important for our constituents, for our producers so that this agreement really will be a win win story for all parties involved.
Thank you very much.
Thanks a lot. Nico.
Enikő Győri
Thank you, chair. I think, Jorgen is right in saying that this year progress concerning FTAs is impressive. Finally. Thank you. So this year progress in FTAs is impressive, but let's add that after five years of very low activity by the commission and putting a lot on FTAs which have nothing to do with free trade. I would join all the colleagues who raised concerns concerning the agricultural part like sheep, honey, mice, must, and ethylacore.
And here, the cumulative effect is extremely important. So my chair, my humble request to you is to dedicate an entire session of our inter-committee to this issue because we really need to have a clear picture in a transparent way. We have to know that having together the FDA with Ukraine, now with Australia, Mexico is coming in, honey. Mexico is the greatest producer on Earth. Mercosur, India.
Let's have a clear picture of the cumulative effect. Second on the GIs. We don't have a clear picture yet. We have two GIs which are very special because Hungarians who left Hungary, let's say, 100 years ago, started to produce saggadi salami and czaba salami over there, which have nothing to do with our own protected trademarks. So here, we would like to know what is the final idea, whether there will be at least a differentiation between the two types of trademarks.
And finally, the legal nature. So what will it be? Will it be a Mercosur type issue, and what's the timing by the commission? Thank you so much.
Thank you, Jessica.
Jessika van Leeuwen
Thank you very much, chair, and I'd like to congratulate the commission on this free trade deal with Australia. At first hand, it looks quite interesting. As a farmer citizens' movement, we welcome free trade. But as many of my colleagues also have mentioned, the cumulative effect of all these trade deals starts to really add up for our agricultural sector. So we need to get a clear picture of this.
I have to say also that the commission managed to resist the pressure from Australia in the farming sector because the Australian farming sector definitely is not happy. They wanted to do more. And so I'm happy that they were able to resist, because we cannot rely on other continents for our food production. I have a concern, though, when it comes to equal standards because even though in a lot of things we're similar, Australia allows the usage of estradiol beta seventeen both for growth hormone purposes and for ester synchronization. Of course, on paper, treated animals cannot be slaughtered in the EU, but the same is true for Brazil.
And we see the controlling mechanism failing on both sides. So we have estradiol-containing meat reaching the EU market, exposing our citizens to compounds that endanger their health, not to mention the unequal playing field for our farmers. So my question, how does the commission plan on ensuring that this Australia deal will not result in a Brazil 2.0 and we do not consume what we cannot produce ourselves. Thank you very much.
Benoit Cassart
Thank you, chair. I wanted to speak on behalf of the Renew Group after my previous statement. I want, or rather now I wanna be speaking as a European farmer. Glad to see the advantages of this agreement. There are numerous advantages economically, strategically, etc.
However, as a farmer, I wanted to draw your attention to two things. The first is the cumulative effect, as my colleagues already said. But I wanted to talk about the sheep sector and the drive for Europe to become more independent. This is important for our farmers. This was a strong signal.
And in our agreement with New Zealand already, we damaged our own sheep and lamb production, and we've added a layer to that with this agreement. And then I've got another question. On the chapter on sustainability, we've included a lot of our European values, you said, and that's good. But is this actually binding? And can we consider this chapter as a mirror measure when it comes to our own standards in sanitary matters and animal welfare?
Bernd Lange
Thanks a lot. And from my side, perhaps, two questions, Christophe. One is on the agriculture side. So European farmer and processed agriculture goods achieved last year a surplus in trade of €64,000,000,000 mainly with countries where we have trade agreements, so wine, cheese and milk powder and so on. Can you give me a hint how this will be developed in the context of the Australia agreement?
Will you be there? An additional surplus, which sectors will be profit or have the most benefit in the agriculture field. Secondly, in my career here, I fought for a lot of issues in trade elements, so more transparency so that the tax should be published, the European position should be published, all members should have access to the documents, and so on. And now looking to this Australia agreement, a lot of elements are in. So most of all the elements we fought for, also sustainability, fair relation on raw materials, the GIs by the way, on the GIs, regarding Australia, it was mainly on wine.
I remember quite well when we were in Australia to discuss the wine. And, of course, we had to also taste the wine. So it was a really challenging delegation. But one thing is missing, which I fought, I guess, now for 12 years as a chair, the time between finishing the negotiation and the ratification. And it takes sometimes one year, sometimes two years, and it's totally not understandable for normal citizens and for me neither.
And now we are on a path to use the English version as a text for the procedure, and also Mariusz Sefkovich took this idea on board and presented it to the trade minister, Nicosia recently. So how can we really improve the time scale, and what is your expectation? Could we go for ratification in 2026? Chris Hertten.
Christoph Kiena
Thank you very much, Mr. Chair. And perhaps I'll start with your last question because it links with mister Warburn's first question. In formal terms, the formal answer to this question is that before we can submit the text to the council officially, we need to agree with our Australian colleagues and, nevertheless, friends, still friends, on the legal scrubbing of the text. So we are working very intensively on this, but obviously, I cannot give you any guarantee as to when that will be completed. What I can commit to, however, is that I can commit the European Commission's full and pragmatic participation in any kind of process you want or Mr.
Warburn will want to take forward in the monitoring group on the FDA with Australia to accelerate the process towards ratification. And I remember that the agreement with New Zealand was the subject of such informal meetings that actually started before the text had been formally referred to the European Parliament. So on my side and on the side of my colleagues, there is full availability to participate in a series of dedicated meetings on the different pillars of this agreement. And we've heard you, of course, and it's not surprising. Agriculture will be center stage to any such effort.
And I'm very happy to be here with my colleague Raimondo Serra, who I am just warming the floor up for. He will respond to the agricultural questions afterwards. But we will certainly look forward to cooperating with the European Parliament to ensure a swift process of ratification. Now for the other non-agricultural questions, yes, the SME chapter was already concluded quite a while ago. You know that these negotiations were interrupted for some time, and then again in the last couple of years.
So it is fundamentally the same chapter on small and medium-sized enterprise as you have seen in other recent agreements. I should, I'm not going to speak about agriculture, but I should have said in my introduction that, of course, this agreement will ensure that all EU norms of quality and standards, sanitary issues, will be fully respected for Australian exports into the EU. But I'll let my colleague explain more about this. Regarding the labor market test that Australia applies to European citizens, there is indeed a list of sectors of specific EU interests that has been negotiated, and that will be subject to some kind of exception for that. It hasn't yet been published.
We're still working on that in terms of legal formatting with our Australian colleagues. But I can tell you that it covers sectors like engineering, management consulting, architectural services, financial services, computer-related, environmental services, telecommunication, construction services, etcetera. So it's going to be quite significant and very useful from our perspective. Finally, I think there was a question on the legal nature of the agreement. This is going to be a free trade agreement, so it falls under the exclusive competence of the European Union, which means that the European Parliament will, of course, need to ratify this agreement together with the Council.
But we will not need to go to all the member states' national parliaments. I missed one. There was a question in the end about whether the chapter on trade and sustainable development would be constraining. And yes, it is legally binding, and it will be enforceable by means of the dispute settlement system, including the possibility of last resort to suspend trade concessions. Raimundo on agriculture?
Raimundo Serra
Thank you, mister chair, and thank you to all the members that have put agriculture into the center stage of this FTA. There's been indeed a center stage throughout the negotiations, and without any surprise, it's also center stage when it comes to the outcome. Very telegraphically, the rapporteur has inquired on the actual implementation of GI protection as a consequence of the agreement. There are very strong provisions on enforcement. Australia will be obliged by the commitment taken in this FDA to create a new system of protection of geographic indications in Australia as well for Australian producers.
Speaker 38
And they will put in place a new born system of control that will act both administratively and judicially. Administratively, what we call exofficial and also on demand. So right holders will have the possibility to ask the competent authorities in Australia to enforce the rights that will be given through the FTA. Now moving to one of the horizontal questions being put forward with many of you. The respect of European standards, there is no novelty in that.
Raimundo Serra
The US very stringent standards to protect human, animal, and plant earth. This will apply before and after the FDA to all imported goods from Australia. This brings me also to a question from the chair on possible predictions on the, plus that will be given by the FDA. The EU enjoys already a very substantial trade surplus in agri food with Australia. Today, we have more than 2 billion of surplus, given the fact that Australia has liberalized fully 100% of its trade with EU on agricultural products, including on dairy products where there were tariffs that were significant, not beyond cheeses.
We can predict without any number in our pocket that this will create a further boost to EU exports of wine, cheese, and processed agricultural products. Going through the questions, the cumulative effect, this indeed deserves not just seconds or minutes of my reply, but a dedicated session. Just keep in mind that the cumulative effect of FTA has been very present in our mind when designing the quotas that are today the outcome of this, of this, FTA, and all the numbers have been calibrated to the coma. Let me go through the questions to see if I'm missing any fundamental ones. There has been a very specific question on geographical indications from Hungary.
Once again, probably the GI section would deserve a dedicated session in itself. But, indeed, the effort of us negotiators has been to, first and foremost, fully protect those GIs. And when those GIs were subject to a very significant use in Australia, given the immigrant dimension that was very present in Australia. We have designed some very carefully designed rules. Those rules allow certainly for differentiations between products that have been used by Australian competitors to the true EUGIs.
In the case of Shigeru Sarami, there is no specific rule, so you can count on the fact that that product would be fully protected, and the only shiggy salami that will be present in the Australian territory will be the right one from Hungary. On another GI that you have mentioned, which is Chobay. That term will be for free use in Australia as this has been found very widespread in the Australian market. Still going through the questions on the ship sector. The ship sector has been quite a headache for us negotiators and also for the Australian negotiators.
You have read the headlines, so you know the of Australia were very different from the outcome that has been finally inked in the agreement. Let's keep in mind one very true reality, which is a fact. Australia is the largest producer and exporter of sheep meat in the world. They export more than 1,000,000 tons of sheep meat to the world, and the 25,000 tons that is the result of the FDA pays in contrast to that reality. At the same time, a point that has been made is that the EU market has already given quite a substantial access to other competitors, notably New Zealand.
And that reality has been taken into consideration when designing the quarter that has been given to Australia. And probably to conclude this, that journey toward the agricultural outcome, the safeguards. The safeguards have been a very important element to close up the tariff negotiation. And it's a very Mercosur-like type of language that you will find in the agreement that is publicly available. For the most sensitive agricultural products, the bilateral safety mechanism will extend beyond the normal duration of the safeguard, which is 7 years.
So that mechanism, that allows the EU to take temporary safeguards if need be. So in case of injury or threat of an injury in our market, will last for 15 years for beef, 12 years for sheep and goat meat, 10 years for rice, 8 years for sugar, and 7 years for the other products. But this is a guarantee for our farmers that if there is a clear connection between any market disturbances in the EU market and the imports from Australia, the EU has the tools to address that injury and to take remedies. I would stop at that, because I'm aware of the time. Thank you.
Bernd Lange
Yeah. Perfect. Thanks a lot. And Nico, checkered salami is protected, and that's really good. And it's because it tastes quite good.
So I like it. Thanks a lot to everybody. I was first discussing about this conclusion of the negotiations. The text is on the website, so everybody can look at it. And I hope, Christophe, that we see each other quite soon for the start of the ratification.
Thanks a lot. So the next point is the vote. The vote on point 16, the AI report. And we start before starting with the AI report, I will make a test mode. And the question is, do you have a good Easter time?
The vote at Easter time. Easter time. Good Easter time. The vote is open.
Members are reflecting about Easter.
Still too short.
Bernd Lange
Then I will close the vote. And, yeah, mainly good Easter time. Unfortunately, two of my members have not so good an Easter time. So now we have the report by Brando Binnifei on AI. We had 104 amendments, and we had some compromise amendments.
And the compromise one is now the first. We vote on who is in favor of compromise one, against, abstention adopted. Amendment 32 in favor. Against abstention, rejected. 33 in favor. Against abstention, rejected.
Compromise two. Favor. Against, abstention, adopted. Compromise three in favor. Against, abstention, adopted.
Compromise four in favor, against abstention, adopted. 42 in favor, against abstention rejected. Compromise five in favor against. Abstention. Adopted.
Compromise six in favor. Against. Abstention. Adopted. 49 in favor.
Against abstention, rejected. Compromise seven in favor, against abstention, adopted. Compromise eight in favor, against abstention, adopted. Compromise nine in favor, against, abstention adopted. Compromise 10 in favor, against abstention, adopted.
Compromise 11 in favor, against abstention, adopted. Compromise 12 in favor against abstention, adopted. Compromise 13 in favor, against abstention. Adopted. Compromise 14 in favor, against abstention.
Adopted. Compromise 15 in favor, against abstention, adopted. Compromise 16 in favor, against abstention, adopted. 84 in favor, against. Abstention rejected.
85 in favor. Against. Abstention rejected. 86 in favor. Against.
Abstention. The check 886. Vote is open, and the vote is closed, and it is rejected. And, compromise 17 in favor, against abstention, adopted. Compromise 18 in favor, against abstention, adopted.
94 in favor, against, abstention, rejected. 95 in favor, against, abstention, rejected. 96 in favor, against, abstention rejected. Compromise 19 in favor, against. Abstention rejected.
Compromise 20 in favor. Against. Abstention adopted. 101 in favor. Against.
Abstention rejected. 102 in favor. Against. Abstention rejected. 103 in favor.
Against. Abstention adopted. One in favor. Against. Abstention adopted.
Two in favor. Against. Abstention adopted. Three in favor. Against.
Abstention adopted. Four in favor. Against. Abstention adopted. Five in favor.
Against. Abstention adopted. Six in favor. Against. Abstention adopted.
Compromise 21 in favor. Against. Abstention. Compromise 22 in favor. Against abstention, adopted.
Compromis 23 en faveur. Against abstention, adopted. 19 in favor. Against abstention, adopted. 20 in favor.
Against. Abstention, check. 20. Vote is open. And the vote is closed.
And this is adopted. 24, minus 24 in favor against abstention adopted. And then we have 26 in favor, against, abstention adopted. 27 in favor. Against.
Abstention adopted. And check. Check. 27. Check.
And the vote is closed and is adopted clearly. And 28 in favor, against please. Yeah. Let's check. Not everybody shows their hand.
So the vote is open on 28. And the vote is closed, and it is adopted. The report as a whole electronically, the vote is open. Yep. And the vote is closed, and it's clearly adopted.
Congratulations, Brando. So I guess it's also an important part regarding the discussion in the global sphere about digital trade. Point 17, a really important amendment on the international agreement on olive oil. Only one amendment, and the vote is open; for the one, the vote is closed. And it is by unanimity.
Wow. That's quite unique here. Loves boil. Thanks. Thanks a lot.
This was our voting session. And if anybody would leave the room now, please do it quietly. Quiet. Quiet. So now we come to the monitoring groups.
And the first monitoring group is in Indonesia. You remember in September, we concluded the negotiation with Indonesia on the trade agreement. And I hope that Julio is ready now. Yulio,
Indonesia. Chairman,
I'm sorry. I was.
Ah. I tried to.
Make a long introduction.
Establishing the.
Iuliu Winkler
Thank you. Thank you, chairman. And we had in March, one of the meetings of our monitoring group on Indonesia. As colleagues know very well, we have the agreement which has been concluded. And now we are scrutinizing the contents of the agreement and, of course, eagerly waiting for the famous legal scrubbing and translation process that was referred to also in our previous discussion.
Mister Fabien Gel is the chief negotiator for this agreement, and he was present in the monitoring group, touching on three aspects of this quite complex agreement. First of all, access provisions and trading goods. On second point, he touched on, and we found out about, government procurement, SOEs, competition policy, subsidies, and IPR. And at the third point of our discussions, the investment protection agreement, which is a separate agreement in this case. And I can, of course, give you details.
GIs, for example, are very well protected for 200 EU GIs. We have an agricultural list of products which are protected. We have a situation of complementarity regarding the industrial cooperation and exchanges. And, also, we have found commission has found solutions to the critical raw materials ban or export restrictions story, which is not a 100% solution, but, anyway, it's a good compromise between the parties. The second point on government procurement, this is, as you know, in Asia, always a sensitive topic, and we have the negotiators have reached the conclusions and solutions for provisions for public procurement and also for state owned enterprise, which come with a gradual approach in the agreement.
And competition policy, of course, knowing the Indonesian bureaucracy and the very complicated system, that will be an independent authority for competition policy, a watchdog to enforce the competition rules. And finally, very briefly, the investment protection agreement, that is a separate, self-standing agreement. There was no other way to find compromise because our counterparts did not accept the permanent multilateral mechanism as it is proposed by the European Union, but we cannot agree anymore to the ISDS, which is a long standing discussion. Speaking of our legacy, also here in the International Trade Committee. So the solution is a state-to-state system.
We have set up a timetable. So next week, we have the following meeting of all, and we are, of course, in close contact with the commission to have a consistent timetable. We try to push them, but that is not really successful about the speed of this whole process. But what we could squeeze out of mister Fabien Gel was that this year, the agreement will be on our table for ratification. Of course, this year means the second half of the year, so we will see.
But, anyway, dear chair, if you have ways to push, then please push the commission so that we can keep up this very nice pace of discussing new free trade agreements. Indonesia, I have to tell this, and with this, will finish, is a crucial partner in ASEAN. Maybe it is, I think it's valid for all ASEAN countries. They are not so very well known and very well understood here in this European Parliament, but I feel, and I'm not alone with this. We have discussed with several colleagues.
I feel that there is a positive political goodwill to these agreements, and I think that Indonesia will be benefiting of a positive approach. But, of course, we have to work on this. Thank you very much.
Bernd Lange
Thanks a lot, Julio. Any questions on that? Yes, quite a comprehensive report. And I guess, also give pressure so that we can have it in the second half year on our table. Jurgen, anything additional to Australia now?
Jörgen Warborn
No. Since we just had the discussion with the Keener, I don't think I need to go into any details. We all have it, and I think it was a good discussion. And even though there are both possibilities on the agricultural side, you pointed out, Cher, I think that it is important to say. But also some sensitivities, of course.
We will scrutinize it very carefully. And I think it was a good discussion in the sense that we pushed the commission on the timetable. And that might be, that is very important now. Rickard Cols, he mentioned the fact that Australia is part of Eurovision. And since Chair often use song titles, I thought that maybe I should do something about it.
ABBA won the Eurovision Song Contest back in 1974. And they have a song title that I think is applicable when we communicate with the commission, because we need it fast. Right? So we could say, give gimme. Yeah.
Richard Szostak
Yes. Thank you, chair. On Chile, the monitoring group met, this, and it was after a pause of nearly a year. Since our last meeting, we have seen a number of important developments in EU-Chile trade relations, which we discussed with Ambassador Navarreta and also the DG Trade, Mister Garzotti. And, in November, the trade committee and the trade council established under the new interim trade agreement held their first meeting following the agreement's entry into force on 01/02/2025.
Implementation seems to, therefore, be off the promising start. We are still not reaching to be the second largest trading partner. We're still third, but we're getting there. On the political front, of course, there is a political landscape change in Chile. Chile held presidential congressional elections in November and December 2021, and president Jose Antonio Caste of the Republican Party took office on 03/11/2022.
So we have a very fresh government in Chile, only a month in their workings. So it was pretty hard to get concrete answers from madam ambassador since they are still adjusting where to be and so on. What remains regrettable, although, is the slow progress in reviewing the trade and sustainable development provisions and the interim agreements. Both sides had committed to launching this review within twelve months of agreements entering into force. We all know we see it's already over the deadline, but the commission has already proposed several modifications shared with inter committee member states and our Chilean counterparts, but so far, no decisive progress has been achieved.
But I also think it's also in the light of the political change in landscape in Chile. We also have some work to do on our side. The EU member states still need to complete ratification of the EU Chile advanced framework agreement if we are to strengthen our position and come close to being Chile's second largest trading partner. Later this spring, the next EU-Chile joint parliamentary committee will take place, and we will use this opportunity to give the political push to advance the review of the TSD provisions. And more on the positive notes, and which was instrumental for the monitoring group, I would like to highlight that concerns raised last year about the proposed industrial complex near the Paranal Observatory in the Atacama Desert.
As you know, we have a huge EU investment, EU project, the Paranal Observatory. Aside from immense scientific and symbolic value for our partnership have been resolved, the investor decided not to proceed with the project, ensuring that there will be no risk in light pollution to this world class observatory. So that is also a positive note that I can deliver to Inter from the monitoring group, but we will keep you updated on any future developments.
Bernd Lange
Thanks a lot. Any questions? Not the case. Then Jung again on the Philippines.
Jörgen Warborn
Yes. In the Philippines, we had a monitoring group yesterday after the fifth round of negotiations. It's been very constructive. I can also add that when we were in Launde, we had the opportunity to meet the chief negotiators from The Philippines as well. And the sense is that they are working very constructively, very seriously.
There is not a lot of, my feeling, theater in the negotiations. It's rather problem-solving and trying to find solutions. And that, of course, is very positive. If I recall it correctly, I think we have now provisionally closed 14 chapters. Last round was 5 additional chapters.
And the next round will be in May. And for that, of course, the main issue will be the market access issues. There are, of course, some complicated issues, not least in public procurement. And they are working very hard to solve this. We are pushing the timeline here as well.
I think both sides would like to see it as fast as possible. But of course, we would like to have a good agreement as well. So, but I'm very positive that this will be closed, the negotiations this year at least.
Bernd Lange
Great perspective. Thanks a lot. Any remarks? Not the case. So this was a report of the monitoring group, so quite promising on all three of them.
Thanks a lot. Next point is the negotiation on a further possible trade agreement with Malaysia. And it's, of course, also an important partner for us, and the EU, also an important partner for Malaysia, I guess, the fourth largest trading partner. The negotiations had so starting in 2010, remember, we had, firstly, the try to have a region-to-region trade agreement from the European Union to the ASEAN community. This didn't work, and therefore, we started negotiations with the ASEAN country individually.
And one of the last in this line of countries of the ASEAN community is Malaysia. And now we want to know what the state of play is. The last round was held on February 26. And mister Eitra Montesa, deputy head of Unit South and Southeast Asia from DD Trade, is here with us and gives us a state of play on the negotiation. Please.
Eitra Montesa
Thank you very much, chair and honorable members. Thanks a lot for this invitation. And I believe this is the first time that we are coming here to Inta in this setting, even if we spoke before in the context of a monitoring group. So I will explain a bit what the Malaysian negotiations mean in the context of the general strategy that the commission is following in the region. This comes from the 2021 Indo-Pacific strategy, where we identified a number of issues that require expanding our network of agreements.
Speaker 40
I think we were speaking about the race of China, the U. S. As a less reliable partner, and the need to diversify sources of supply and export destinations. And I think what was needed or what was considered to be important in 2021 is truly amassed today. And Malaysia plays an important role in this context, and I will try to explain why.
The Malaysian economy creates important market and investment opportunities for European companies, including in the green and digital transitions. Malaysia is our third largest destination in ASEAN, after Singapore and Vietnam. And Malaysia is quite a special country in that region because it's the most developed country after Singapore. And they have both the middle class or the growing middle class that is more likely to buy the products that European companies are selling, the kind of industrial processes that also buy the machinery that European companies are selling. And this is something quite peculiar in the region.
It is a country that has both energy materials. So they have gas. They are a strong supplier of gas and also of oil. And also other raw materials, including rare earths. And Malaysia is a very complementary economy to that of the European Union in the sense that we do not identify the sensitivities that we have with other trading partners sometimes.
Malaysia is a net importer of agricultural products. They require the need to increase their investment, therefore, direct investment. And they need technology often from European companies. And they have quite a close market for companies that are not coming from countries with which they have a free trade agreement. Our companies are at a disadvantage in Malaysia in comparison with many other trading partners because Malaysia is a member of the CPTPP, so they have trade preferences there, and is a member of other regional agreements, including ASEM.
That's what we are trying to address with this FTA negotiation. So a country that is growing very strongly, a country with a middle class that is also growing very strongly, a country in which our companies have today a disadvantage, an important disadvantage, and a country in which we see that there are complementarities, that we have opportunities, and where sensitivities are relatively low. Because of this compelling economic case, the negotiations were relaunched in January 2024. And we did it on the basis of a long stock-taking exercise that was very comprehensive. We are not negotiating in a vacuum.
And what we are looking for is meaningful market access for goods, services, investment, as well as government procurement. And we also want to cover the various non-tariff barriers at the Malaysian side and regulatory cooperation issues that the Malaysian economy has put in place. We also have an ambitious chapter on trade and sustainable development, and we have shared with you and also with the council all the texts, so they should not be a surprise to you. Progress on the negotiations is satisfactory, but we have identified some areas where we think there will be more difficulties. I mean, we are at this stage, we are making a lot of progress, but of course, we are not entering the most difficult part of the negotiations.
I'm going to speak about those difficult areas later. If negotiations progress well and if we find a solution for two areas where we have identified a little bit more of difficulties on the Malaysian side, which are geographical indications and SPS, and this is something that I'm going to develop a little bit later, we, in a best case scenario, would be thinking about sharing market access offers for services, for goods and for government procurement by the summer or right after the summer. But it requires, and I come back again to that, that we find a solution for geographical indications and for SPS. And the next round will take place from June to August, and it will be a full round the same way that it was the third round that I will explain later. We are aiming for a conclusion as soon as possible.
It would be great to have the agreement concluded by the 50th anniversary of EU ASEAN relations. That's October, September 2027. But this is a very ambitious target because we have started, after all, their negotiations like The Philippines and Thailand. So we are trying to catch up. We don't know whether this is going to be possible.
We are building on the momentum that we have, the political momentum that we have in Europe, but also in Malaysia. But it will be very challenging, so we will be reporting regularly to see whether this is within reach or not. What we have seen so far in the three rounds that we have is that Malaysia is engaging. This is also a political priority for them. They also see the geopolitical context the same way.
They are reading the room the same way we are reading. This is also important for them. They are also missing out with competitors because they see that we have concluded an agreement with India. We have concluded with Indonesia. We are advancing very fast with the Philippines.
And we are advancing quite fast also in Thailand. So Malaysia does not want to miss out. But as always, substance is going to trump speed, and we want to have a comprehensive agreement. We don't want to miss opportunities here. It's also important to stress that all discussions are taking place on the basis of the EU tax proposals.
So the Malaysian side is focusing on the areas where they cannot agree. And that helps a lot because we can go faster, but also because we can identify the issues where the real problems are. The outcome of the third round of the three rounds that we have is that we are very close to conclusion on four chapters: on SMEs, good regulatory practices, on digital trade, and on trade defense. Then there are some areas where progress has been very good, and we have significant agreement on text, particularly on services and investment, on which capital movement is concluded. On trading goods, 90% of the text has been agreed on rules of origin, customs, and trade facilitation.
And we have very constructive exchanges, but we still need further discussions on energy and raw materials, on TBT, including the Carr Annex and other annexes that are sectorial, on SOEs, on government procurement, TSD, and some other issues that are also important, but I will not develop because of the dangers of time. And we have identified some important challenges also going forward. The most important one or one of the most important ones will be motor vehicles, where the Malaysian economy is very protected. They have local brands, and they are protecting them very strongly. In our view, with measures that are not WTO compatible, but they have been in place for many years.
We are in contact with the European industry that has a local presence in Malaysia. We are trying to fight those measures. There are some areas that are more important. They have import licenses, discriminatory excise duties that are very strongly discriminating against imported cars and European cars. And they also have tariff and non-tariff barriers that are quite important.
This is going to be very difficult because the Malaysian incumbents are very much protected and well-connected politically. Also on raw materials and energy, where, as I said before, Malaysia is a net exporter and is an important source of supply for the European Union and diversification. On geographical indications, where the Malaysian system is very different from the system that we are trying to achieve because they have a system that requires registration in Malaysia, and where direct protection of geographical indications in international agreements is not possible. So we are asking them to change this the way we did it with Australia, for instance. And of course, this creates resistance within their system that we are trying to overcome.
They know that this is an important request of the European Union. So they are engaging. They are engaging very actively, but this will also be difficult. On meat, in general, pork, poultry and beef, where we have several SPS problems. And on top of that, we have halal concerns because the way they are incorporating their halal requirements actually makes it very difficult for some of our companies to sell beef and poultry in Malaysia.
So we are trying to address this through specific rules on Halal conformity assessment. And also, normal SPS asks that the European Union does in general in this kind of agreements: system recognition, pre-listing, and regionalization. And we have something very specific for Malaysia, which is palm oil, where Malaysia has a very offensive interest, where we have a 12% tariff. But also, where Malaysia wants to reserve part of their production for their domestic industry, so we are discussing at the same time access to the European market and to be able to have the palm oil that we need, if that is the case. I think I will end up here, and I will be very happy to take your questions.
Bernd Lange
Thanks a lot for giving us a hint about the state of play. And now our vapouriteur is not here, but the shadow vapouriteur is there. And Joram is the first for the PP.
Jörgen Warborn
Yes. Thank you very much to the commission. Very interesting and very good to have this discussion here now. I have a few direct questions. First of all, could you elaborate a bit more on the export potential?
Have we quantified it in any way? You mentioned, of course, the importance of a growing middle class and how they could be very strong consumers. But maybe if you can expand a bit more, so we understand the opportunities here. And then you said that the SME chapter is provisionally closed already. This is one very important chapter, I would say.
But I've for some quite some time, I've been questioning if the chapters we are using, if they are good enough. Because there are a lot of SMEs that do not export outside the European Union. So the potential is there, but there is something holding them back. And, of course, they could be political insecurities. They can be culture issues and language issues and whatever, and we cannot sort everything out in free trade agreements.
But I'm wondering if there are ways to improve our SME chapters. And if you, if this one, my first question, is this one a copy-paste of the other ones? Or have we improved it? Or are the commission thinking of improving the SME chapters? And then maybe I lost attention for a short period of time, but the GIs had an agreement with the US recently.
And I guess the GI issue with the US, this might clash with our perspective. So if you could share some insights on that one. Thank you.
Thanks, Latium. Christina.
Thank.
Cristina Maestre
You, chair. And many thanks for the details on the negotiations with Malaysia. We defend the free trade agreement as a geopolitical tool for a shared responsibility. It'll strengthen our strategic independence and our economy, which is what we defend in the EU. But Malaysia should not just be a supplier of raw materials.
We were talking about gas as well. And the raw materials coming from rare earths is something that makes Malaysia a very interesting trade partner, will strengthen us and will have added value, cleaner energy, digital, and so forth. And this will strengthen our production chain. So I think that in any case, the reality is that the EU must accompany our partner, Malaysia, in cooperation and technical assistance. I think it's very important for the EU as the fourth trade partner of Malaysia, and they reach a maximum in 2023 of 25,000,000,000 euros.
So I think we can be a very interesting partner for the EU. I'd also, though, like to mention palm oil, which is a very sensitive topic. The discussion or the dialogue on standards, the climate standards, biodiversity that the EU defends, for instance. And this is a question really on our positioning when we look at our regulations for deforestation. This is really under discussion, and also the question of sustainable development and trade, what the position is.
Because for us, this is an important when we look at life, emergency, labor, and rights. Now, as to the technical duties for trade, amongst the ones that weren't mentioned, I would like you to discuss something about public trade and investments, which is something that's important. And what type of disadvantages that these companies have? Because we would like to build something with guarantees for them. So I think that we need to pay attention to everything that has to do with obstacles, trade obstacles, especially those mentions for automotive, the automotive sector, and see how we would improve this.
Thank you.
Thanks. Katharina.
Katharina Vieira
Thank you very much, chair. So as you mentioned in the beginning of your intervention, with this relaunching of negotiations, we're coming to having negotiations or existing trade agreements with all major economies in Southeast Asia, which is quite remarkable. And we welcome the cooperation with Malaysia, and we hope that we can get the best out of these negotiations. And, of course, coming from the Greens, you can expect what I consider to be the best, and that is to remember that with increased trade volumes and with an FDA, we must also ensure that this comes with a responsibility to not drive adverse impacts on the environment, on labor rights, or leads to more land grabbing by local or international companies that has a huge consequence on indigenous peoples. And this is particularly the case with the expansion of new mines or industrial projects.
So, obviously, the way to address and try to prevent these negative impacts is to have as strong as possible, TSD chapter. And then I urge both the EU and Malaysia to commit to ambition when it comes to trade and sustainability, so that there can be remedies to address these adverse impacts on local communities and on workers. As the colleagues mentioned, palm oil is, of course, standing out as a highly at risk for deforestation commodity, and, therefore, it should really be taken into account, not just the things that the commission mentioned about access to the local market versus to the EU, but also implementation of the EU deforestation regulation at its highest level of ambition, and other measures or investments that can prevent deforestation in Malaysia. And finally, but not least importantly, also as a member of the human rights committee, I do see some concerns with the human rights situation in Malaysia as a trade partner, is also often someone that geopolitically we want to align with and get closer with, then I must mention that our concerning reports that Malaysia continues to yield repressive laws to criminalize the sense, censor critical speech, and harass human rights and environmental defenders.
And therefore, for functional FDA, this cannot be the case anymore. And I hope that the European authorities are raising this with the Malaysian government and that there's cooperation not just with the government but also with the companies. On a positive and final note, I'd like to congratulate Malaysia for having launched its first national action plan on business and human rights, and I hope that level of commitments can be transposed into the TST measures of the agreements. Thank you.
Bernd Lange
Thanks a lot. And from my side, four points. First, I would really underline the first question of Jurgen. So the influence of the agreement with the United States on our negotiations. So there were some elements regarding GIs.
There was also some elements regarding digital tax and some other elements where I think this would limit the possibility of Malaysia to have a deal, no, not a deal, an agreement with us. So perhaps you can give me a hint about that. And secondly, the other big animal in the room is, of course, China. And how, of course, also this big volume of Chinese products coming to Malaysia is playing a role? And do you also look quite carefully regarding the circumvention situation regarding Chinese products coming via Malaysia to the European Union?
Thirdly, you mentioned Halal. And here, I guess, it's really a big market chance for European producers if we can find a proper way for this recognition or certification. We had the same discussion with Indonesia, where I'm not satisfied with the outcome. So, what is your perspective on that? And fourthly, of course, they are also in the CPTPP and how you feel the relation between our negotiation and the membership of this organization.
Speaker 45
You, chairman. Oh, we said at the beginning, in order to diversify everything in an unstable situation. The EU is ratifying free trade agreements, and here with Malaysia, it's part of this. Now having to deal with a major contradiction here, the urgent need to strengthen our own industrial independence and the reality of this agreement that tends to make us dependent rather than developing our own production capacities. What is even more of concern is the shade of an agreement to the detriment of climate change and labor rights.
Colleagues have mentioned Malaysia, and the others are two of the greatest palm oil production. And there's even more, deforestation and damage to the environment. So here, there are some realities here, are brutal. Deforestation is increasing and local communities are having to leave and also local workers too have to leave. So in this agreement with Malaysia must not become a new source of injustice, especially when we look at the legislation on fundamental rights.
And deforestation has to be at the heart of the negotiation of this agreement if there will be one. Because even though the right look puts our own standards in interiorly, we do want to have a certain consistency on the international level in terms of social rules and regulations. So we look at our policy. We have to serve the protection of the environment and social justice. It must also allow us to guarantee our strategic position, which is not only obtained through this formal agreement.
Speaker 40
Thank you very much, sir. And I will try to I will answer one by one. First, to the questions from Mister Warborn. The export potentials. We have very substantive bilateral trade already, now in the absence of any agreement.
We have roughly €46,000,000,000 of trading goods, around €10,600,000,000 in trading services. We have a deficit on goods and a surplus of services. The deficit in goods is larger than the surplus of services. And we have quite a complementary basket of products that we sell and buy from Malaysia. It is difficult to anticipate how the agreement is going to, it will very much depend on the final outcome.
What we see is that we are at a disadvantage with our competitors in Malaysia. All CPPP partners, they have tariff preferences, but they also have preferences on government procurement, for instance. And this is something that all our companies, when we have contacts with them, tell us that that's something that we should try to solve as soon as possible, because this prevents them from competing on a level playing field in Malaysia. We consider that there will be a considerable expansion of bilateral trade. It is difficult to anticipate, I cannot give you a price tag on how much this is going to be.
And I mean, of course, we have the figures of the impact assessment. But I think at the time where we are negotiating now, I mean, we will see depending on the final outcome. But what our companies say is that this agreement would be a game-changer in Malaysia for them. For those who are established in Malaysia, but also for those who are not established in Malaysia, and I come to your question on SMEs. SMEs, they benefit from trade agreements in two different ways.
The one that is maybe more visible is that they can more easily trade in those countries. And I think the chapter that we have, which is the regular chapter that we have tabled in previous negotiations, facilitates a little bit this. I will pass the information of your request to my colleagues dealing with this, particularly, that could be or should be improved. And I guess they will be very happy to receive input and good ideas. But there are some real improvements in this chapter.
For instance, one of the things that Malaysia has already agreed to do is to do a searchable database of economic opportunities. But there is a second way in which SMEs benefit from trade agreements. SMEs, they are major contributors to the global value chains that actually end up in, in this case, Malaysia, so that they contribute to the products that are sold maybe by bigger companies in Malaysia. And so they increase their economic activity in this indirect way. And I think both ways are very important.
I don't know which one is more important. On geographical indications, there is indeed a clash with the agreement with the U. S. The agreement with the U. S.
Includes a list of cheeses and meat names that should be open for use by everyone. I'm not really sure how we should read the agreement with the U. S. It's a very controversial agreement in Malaysia, extremely controversial at the political level. And we have seen recent, and I don't think we need to enter very, very strongly in what the reaction of the different political stakeholders in Malaysia has been about the Supreme Court's announcement of the executive order imposing tariffs.
To put it mildly, I am not sure it's a very stable agreement. I am not sure it's an agreement that will be easy to implement or monitor. I'm not completely sure what's going to be the life of the agreement in Malaysia and across the ASEAN countries. What I can see is that Malaysia does not see this agreement as a complete impediment to having the normal negotiation that we want to have with them on GIs. So they are engaging.
And they understand that this is an important request of the European Union, and one on which they need to deliver to make progress across the board. So that message has been passed very clearly, and we see that there is good reception from the Malaysian side. They need to work internally. And the U. S.
Deal, I don't think it's the only problem that they have on GIs. It's maybe not even our most important problem. But we see that there is a real engagement, and there is a will to try to find solutions. And they know that this is important for us. I will go now to Ms.
Maestre. We fully agree Malaysia is not only about gas or raw materials. This is an economy that is growing very importantly and where we have already a lot of bilateral trade without this agreement that we are, as I said before, trying to improve. But this is also an area in which we need to have access to that market because it's a market in which we are way below our potential, everything on machinery, on cars, on government procurement, where we have world leaders across the world. And we should not be at the level of trade that we are with Malaysia.
So we are well below. This is something that we can improve. But this is also a country where we have inputs that we need. And it's industrial input, but also non-industrial input. And those inputs are extremely important for our green and digital transition.
It's one of the few countries where we have an alternative source of chips. And we know how we can be dependent on bottlenecks, for instance. And we need to diversify our sources of supply. But also, it's one of the few alternatives to China on raw material, on rare earth, and processed rare earth. And this is something that can be weaponized in the future.
And we will need to have diversified sources of supply. So Malaysia also plays an important role in that regard. Of course, we will apply our internal legislation on deforestation. Deforestation. TSD has been tabled the same way we have done it with other trading partners.
It's an important request from us, also on labor rights. On government procurement, you were asking what is an example of an area where we are losing out in relation to our CPPP partners. Well, they have a system of points or price score. And CPPP partners, they have a better price score than non CPPP partners. So our companies, actually, they are at a disadvantage in relation to other trading partners, not only in relation to Malaysian companies, but also in relation to, for instance, Japanese companies, Canadian companies, or Australian companies, which are more present in the country.
And on cars, this is very important for us. I mean, we have a lot of information. We are making very strong requests in Malaysia. Also on conformity assessment procedures, we are coming there with a request to have a car annex that would facilitate, for instance, the certification or the approval of parts and cars, of wholly wheeled cars in Malaysia. Today, this is very difficult, and it creates additional costs that for cars where you don't still have the volumes, that huge volumes per car, the over cost can be quite important.
We don't have an investment protection agreement negotiation with Malaysia, and we will not have one, at least in the near future. So investment protection is outside the scope of these negotiations. Ms. Vieira, well, I said again that our ambition on TSC is as strong as we have with any other trading partner. And on green legislation in the European Union, we are not compromising.
We are not doing what we are doing is, we are speaking quite a lot on trade facilitation, how we can help them to be more equipped to comply with our legislation. This being said, Malaysia is not a developing country. Malaysia is a country that has a significant level of development, industrial development, where they have significant capacity also internally in terms of regulatory capacity and government capacity. And it's a country that is growing very strongly. So this is not a country that we have to assist in the same way we would with a much poorer country.
And for the wind transition, as I said before, this is a very important partner. This is a partner where we can get information, input that is needed for us to succeed in the green transition that we are intending to have. And they are also doing this internally. They are investing a lot in renewable energy. And I think we also have a role to play in that regard through government procurement, but not only through networks, through investment in energy production and energy conduction, etc.
And this is something that our companies on the ground tell us. We want to be part of this revolution also in Malaysia, and we want to be better placed to do it. And then the questions from the Chair. We already spoke about GIs in the context of the U. S.
Deal. Other problems, we don't know yet. I mean, as I said before, this is a very unstable agreement. But it could also help us because it helps us know what are the real red lines of Malaysia in a number of areas where they have at least said publicly that they are ready to do something with The U. S.
So it will be more difficult for them to say, not publicly, but in private, that they are not able to do this for us. So this is something that is a source of concern, but also could help us, could be used as leverage. China, on circumvention. We have very strong rules of origin in the agreement, and we will have discussions on the specific rules of origin. So this would address the anti-circumvention problem.
What we see is that Malaysia is not happy to be overdependent on China on a number of issues. And they know that the U. S. Is not a very reliable and stable partner these days. So the European Union stands out as something that creates a middle way in which you can have, I mean, have discussions because you still have to make sure that this is a mutually beneficial agreement.
But that we both agree that it has to be mutually beneficial. We are not trying to impose our will. We want to make sure that our requests are well protected and that they will be stable, that there will be rules that will be respected. So Malaysia is eager to have this agreement with us. On Halal, take your point that Indonesia is not a good example.
We are trying to solve that. We are doing a lot of work on implementation with Indonesia. I mean they were here a couple of months ago in a study visit. They are trying to find out solutions outside the trade agreement to deal with the halal problem. In the case of Malaysia, we are still in the negotiation phase.
Malaysia is a very difficult partner on Halal. They have the highest standards in the Muslim world. But it's a partner that is reasonable. We are trying to find solutions. We don't know whether we will succeed.
One of the things that we are trying to find is that at least with a single Halal certificate, you could certify the whole value chain in Europe. At this stage, you have to have one Halal certificate per country, which makes things very complicated. And we also want to make some commitments on the timing for inspections and the fact that once you have asked for it, you will have a certificate in the long, I mean, in short term, and that our conformity assessment bodies will be recognized. If this is done, our chances are much better, because we have a lot of room to improve. We are selling quite a lot of pork because they have 24% of the Chinese population, Chinese origin population, but we are selling very little beef, very little poultry compared to our potential.
And this is something we need and want to improve. And on CPTPP, well, as I said before, a very good example of where they have this advantage is government procurement, but they have it across the board. So this if was the only reason why we had to have an agreement, this is something that we need to solve because our companies are not playing on a level playing field. And finally, in reply to Messier, as I said before, we are not compromising on any of our internal legislation. This is something that we are protecting.
We are protecting the policy space that we need in order to implement our legislation. And we are not being required, we are not being asked by Malaysia not to do it on any of the issues that you have raised. I honestly believe that this agreement will make the European industry more able to compete in the international, in the global sphere. And I think this would actually help our economic sovereignty. This will make us stronger.
This will make our GDP stronger. This will create more taxes in Europe so that we can sustain our citizens, but also our industry if there is a need to do it. We will have companies that will be more secure against international disruptions and the weaponization of trade. I think for our green transition, this will make it easier, and this will make it cheaper for our consumers not to pay a higher price because of the decisions that we are taking in order to improve our industrial and energy sovereignty. I think this agreement is indeed a win-win.
I think it will make trade easier, but it will make trade more stable. And it will make our people benefit from economic opportunities abroad, but also benefit from a more stable environment. And just as a final point on the information that we have from our Malaysian companies, there is that companies in Malaysia are open to international trade. They actually offer much better opportunities than companies that are not open to international trade. So the fact of having a more internationalized economy for Malaysia is a source of labor improvement and is a source of income improvement for workers, that from that perspective also, think, make this agreement a win-win situation.
Thank you very much for your questions.
Bernd Lange
Thanks a lot for this comprehensive overview and the answers. And I hope good luck for the negotiations. Of course, Malaysia is an important partner and also an important actor in the ASEAN community. And if this would fit together with the Philippines, with Thailand, and the existence of Singapore and Vietnam, it would be a really big success. So, thanks a lot.
And this concludes the exchange of views. And last point on our agenda of today is the state of play with relation to The United States. And I'm happy that Matthias Jorgensen is here with us, the expert on the commission on this item. And I guess it's quite timely because we have now round about 1 year after the 04/02/2025, the so called Liberation Day, I call it always inflation day, where we have a lot of different tariffs to the whole world, by the way, also to Malaysia. And then second remarkable date is the June 4 year, where The United States doubled the tariffs on steel, aluminum, and copper from 25% to 50%.
And then we have the July 27, the Scotland deal. And now we have April 6, where The United States published, on the one hand, some modification regarding the so-called derivatives, and on the other hand, tariffs on pharmaceuticals. So, long story. And specifically regarding the exercise from April 6, we are keen to hear the assessment of the commission. Matthias?
Matthias Jorgensen
Thank you very much, Chairman. And indeed, as you say, there's a broad picture, but then there are also specific issues. And I'd like to thank you for the opportunity to exchange views on the recent steps taken by the U. S. Administration to adjust the tariffs on steel, aluminium, copper, and their derivatives, as well as the newly announced tariffs on patented pharmaceuticals.
So let me walk you through the announcements, and how the commission sees the implications for the EU. I would start with the $2.32 tariffs on metals related to U. S. Measure, which was announced on April 2. So on April 2, the U.
S. Issued a presidential proclamation that adjusts the US tariffs on metals, steel, and aluminium, as well as copper. The US thereby reinstated the steel and aluminium tariffs last spring, and since then increased the tariff levels to 50%, as well as significantly expanded scope, as you said. That was a problem for last year. It's quite clear that these measures, which were very broad, set up quite a bit of problems for exporters and importers.
There was some disruption. And this was not only in terms of costs, but also in terms of administrative requirements. So we have been pushing the US administration to find a solution on this. We've been pushing at technical and political level. And there have also clearly been pressures from the domestic U.
S. Industry and importers that have underlined the damaging effects of these measures. Now we have a new decision. And this announced decision, this revision on the Section 232 tariffs on steel of aluminium derivatives, recognize, I think, the fact that there were shortcomings. It recognizes it reflects the pressure that The U.
S. Has come, notably from importers in the U. S. And the fact that the administrative burden of the previous regime was really very complicated. So that is a step forward, and we should welcome that.
But I think more than just broadly welcoming and say, okay, well, is good. I think it's important that we look at what the changes are, in detail. And if we look at it, we can see that the U. S. Has now made several adjustments.
And they have, first of all, introduced a tiered tariff level system for applying tariffs to the products covered. And that means that the core steel and aluminium products and certain derivatives remain subject to the 50%. Most other derivatives are now subject to 25% or 15% inclusive tariffs. And a number of products have been delisted altogether. And these are mainly products where the content of metal is low or limited to packaging, or due to other considerations.
And there are important exemptions there for EU exporters because that covers, for example, beer, cosmetics or motorcycles. There is also an important change in how the tariffs are applied. So instead of applying the tariff to the value of metal content, which was how it was done before, now the tariff will apply to the whole value of the product. So the key question here is, of course, what does it mean for our exporters and the goods we're exporting? It's not an easy issue.
It's technically complicated, and we need feedback. So we are still in the process of assessing the implications for EU exports. And the two regimes are not easily comparable because of the way the tariffs are applied. But what we do know is, for a fact, that it is possible, we think, to estimate what the amount of products excluded from the new tariffs are. As I said, it includes beers or beer, cosmetics, or other low metal contracts.
And we, looking at 2024 figures, we believe that this will exclude tariffs on EU exports of around €17,600,000,000 worth of exports. That is taking the figures of 2024. And that is, of course, again, welcome. Moreover, we can see the temporary relief has been provided for products such as industrial machinery or grid equipment. And that, again, would cover 10 700 000 000.
So, where? Charges have gone down. And this is also positive. Yet for other products, the picture is not so clear. I mean the fact that U.
S. Tariffs now apply to the whole value of the product, brings a certain amount of simplification. And it eliminates the uncertainty of how the metal content was supposed to be evaluated previously, and which we understand from traders caused different tariff rulings in various instances. But on the other hand, this change means that the average tariff costs will slightly increase, most likely. We're in touch with the EU industry to understand the effects and practices.
Info is coming in on this. And you have, for example, seen that the machinery sector has expressed some concerns, and that's been in the press. And we are very closely working with them to understand the implications and see what the points are that we can take up. And of course, the commission is continuing to raise this issue with the US side, both seeking clarifications on how these tariffs will be working in practice, to be sure that it is actually simplification and to avoid unintended negative consequences on EU exports. Because I think that's a point.
I think for us, the EU-US deal of last summer remains the basis of our relationship. The 15 percent tariff ceiling is what we are working for. This is a step, I think, in this direction, but the work is not finished, and we will continue to work towards this goal and defend EU export interests. Now let me turn to the question of the 2 32 pharma tariffs, which were announced also on April 2. And in this announcement, the U.
S. Has announced new tariffs on imports of patented pharmaceutical products and ingredients. And they come as a result of the Section 232 investigation, which was launched in April by The U. S. The consequences are that as soon as July or indeed late September for smaller producers, The U.
S. Will apply a 100% tariff on imports of patented pharmaceuticals. Generic medicines for now remain subject to MFN tariffs, which is mostly zero. But this is going to be reviewed in one year's time. And it's important to note that for those countries that the US considers they have a trade deal or trade arrangement and that includes the EU, well, these countries would benefit from a more favorable treatment. For those, and that is an important point, this means for the EU that no, not for those, but for the EU, this means that a maximum 15% tariffs will apply for patented medicines and no tariffs will apply for generics.
That's the way we understand it. This is positive because this treatment is in line with what we agreed last year in the joint statement of August 21. And we again, we think this is a positive and welcome signal that The U. S. Is going to stick to what they agreed to in the EU.
S. Deal. So aside from these headline elements, the newly announced tariff regime includes, and I think this is again an unfortunate feature, but includes a complex set of product and company-specific exemptions. But that is a bit of the reality of trade relations with The U. S.
Today that we and exporters have to navigate. Tariff will vary between 0-100%. And again, as I said, 15% for the EU. But it will depend on whether or not a producer has made a deal with the U. S.
Administration, whether the products are considered as generic, and whether exports come from a trade partner country. There's a complex structure of exemptions and carve-outs that makes it difficult to fully understand the scope and the impacts on trading partners of The U. S. And again, here, we are engaging with industry and relevant associations. They're quite well organized inside the EU to better assess the scope and the impact of these tariffs and how this will play out in what is, as you know, a highly complex and sophisticated supply chain across the Atlantic.
And we will also, in this area, seek further clarifications from the U. S. On how the tariff and the company-level derogations will be implemented in practice. So again, a U. S.
Measure, which is not simple. It has brought some improvements, but there's clearly still work to do. So we will continue monitoring this, and we're happy to continue exchange reviews with you on this. And thank you for this opportunity to provide you with a first overview.
Bernd Lange
Thanks a lot, Matthias. And now I take the floor as Robert Matur on the U. S. Files. And I have a lot of questions, Matthias.
First of all, on this new regulation from April. So some products are released, like, for example, motorbikes. I like it very much. So this was quite simple in our discussion. So I hope this discussion led to this effect.
But this is only a small product drop in the whole volume of more than 400 products. And a lot of them are now based on 15%, but the big volume is now on 25%. And 25% is not 15%, if I'm right. So therefore, I would really like to see the concrete figures. And, but yes, of course, we should look to the figures starting with February and not using the figures from 2024, because there, the situation was totally different.
And perhaps you can provide me also with the figure of what the situation after February went on, because I had some figures from some industries that the export really went down. Even in total, the European Union has more share to export because on the other side, China is going down as well. So the export share to the United States is bigger. But these products are on the specific focus. And indeed, we have some industries.
We made an assessment. Yeah. It is an advantage not to make a clear declaration how many or how much percentage steel and aluminum is in a product. So it's better to have one tariff, but 25 is more than perhaps before. The German Association for Machinery analyzed that before the April regulation, they had to pay an average 21% tariff.
And with this new regulation, they have to pay 26%. So an increase of tariffs with this new regulation. And therefore, I guess we should really look to the concrete figures so that we have a proper assessment. That's also relevant, of course, for our negotiation regarding the two fires. If this is really the assessment that, at the end of the day, this new regulation brings more tariffs than before, this is not a positive element.
Even the motorcycles are accepted. And secondly, on the steel and aluminum and copper, we had, of course, in the deal from Scotland also the question regarding the proof for TOQ solution on that. Are there any negotiations going on? So is this still untouched since one year here? And the, yeah, overall assessment is the development regarding the bureaucratic burden, the different tariffs.
Is this still a development which goes in the right direction, or you think that the movement we see so far is still stabilizing or even making the situation worse. And, but yes, in this whole exercise about the assessment of these derivatives, and, of course, for me, these are the main issues regarding also the negotiation on the tariffs on our side beside some other elements. The question, what is your assessment about this new booklet, which was published quite recently about the new trade barriers from The United States, the national trade estimate, where, I guess, in this 500 pages, we have 45 pages on potential trade barriers coming from the European Union, quite good description of the EU legislation. But there are also some elements in which might lead also to additional pressure, additional tariffs. So, what is your assessment of this new publication?
Will this have an effect? And lastly, this is on the pharmaceuticals. So the whole result is a bit not in line, I would say, with rationality, but they accepted the 15% for us. And they didn't touch, so far, some products which have zero tariffs at the moment. Is this the example for all 2 3 2 investigation?
What is your assessment on that? There are a lot of other two three two investigation on the table. Yes. That's from my side. I guess, Jung, you speak for the EPP.
Jörgen Warborn
Yes. Thank you very much. I have some similar questions, but I'd like to put it like this. So on steel, it's pretty clear that it's not aligned with our agreement, the Turnberry agreement. It's over 15%.
And we are, of course, now in trial of negotiations, but it's clear that the parliament has expressed clearly that if it is not in line with the Turnberry Agreement, then it cannot the tariffs reductions that the EU is doing cannot happen before it is in line with the Turnberry deal, meaning it has to be capped at 15%. And it's not capped at 50% here. So it's, of course, good that the administrative burden for calculating the value is taken down. But at the same time, before, it was calculated on part of it, and now it's calculated on the entire value, which means that the actual tariff is, of course, going up. So this signals very clearly that it's not in line with the Turnberry deal.
So my question, of course, will be to I understand that the commission now is analyzing this, but I mean, what is there to analyze? For me, it's totally clear. And now the discussion has to be with the US administration to sort that out, so we have it capped at 15%. Over to pharma because then, of course, I think it's here, it's capped. We are within the deal.
No problem. We can go ahead and we can, if it was only up to pharma, we're not totally happy about it. But it's still within the deal, and we have to respect that. But what happens if we cannot sort out the steel issue? Then I guess the US will say, then we don't have a deal with the EU.
And then I guess that will mean that we will have a percent on the tariffs on pharma. So my question to the commission, how are these interplayed, and how do you negotiate both these issues? Thanks.
Thanks a lot. Richards?
Richard Szostak
Yes. Thank you. Well, thank you all the two previous speakers who raised very legitimate questions, and I absolutely agree that discussion should not become an abstract debate about the transatlantic relations, but really focusing on what remains on the trade issue and particularly in a more practical aspect. So, of course, the question is how do we protect the industrial European industrial capacity when the new trade measures affect the sectors that are strategically important for Europe, and the new US tariffs measures on, as was mentioned by the commission, the pharmaceuticals, but not only steel, aluminum, and derivative products are a problem for European industry. And I think they're not gonna ease it.
They're just gonna ramp up more. They are framed as national security measures under section 232. We do understand the logic of reducing dangerous dependencies, and Europe has learned that lesson itself, be it on energy, critical raw materials, defense, and medicines. But the way we responded, it really matters. On pharmaceuticals, the headline measure is a 100% tariff on patented medicines and related ingredients.
EU origin products are reportedly treated more favorably around 15%, but that is still a tariff on one of Europe's strong high value export sectors. The incentive structure is also clear: lower prices, move production to the United States, or face higher barriers. For Europe, pharmaceuticals are not just another export category. This is a research patent, high-skilled jobs, advanced manufacturing, and health security. If tariffs pressure makes relocation more attractive than producing in Europe, then we risk weakening one of our few sectors where Europe still has a real global strength.
The same issue arises with the steel aluminum derivatives. Primarily, metals remain heavily protected, but the most significant concern is the treatment of downstream products. Tariffs now apply to the full customs value of many covered metal articles and derivatives, not only to the metal content. That means a European machine component or piece of industrial equipment can be taxed on the value of its engineering design and technology, simply because it contains steel or aluminum. This is not a small technical adjustment.
It changes the effective burden on European exporters. And there's also a broader European point here. We cannot ask companies to invest and comply, decarbonize, and keep production in Europe while treating these pressures as if they are merely external shocks. At some points, industrial policy has to mean defending their industries we still have. So the point is not to escalate.
The point is to be serious. The commission should come back with a precise assessment of which exporters are hit, which member states, which SMEs, which pharmaceuticals, machinery, and equipment supply chains. It should pursue exemptions and carve-outs where EU, US supply chains are mutually beneficial, especially in health, defense-related industry machinery, and critical manufacturing. And it should keep credible options on the table because negotiations work best when Europe knows its own interests and is prepared to defend them. So to conclude, of course, transatlantic relationships do matter, but, of course, we should protect our interests and particularly industry interests in particular.
Thank you.
Thanks a lot. Karen?
Speaker 48
Thank you, and thanks to the commission for the very timely presentation. Well, The US is constantly testing the limits of what is actually permitted within the framework of the joint statement, and many very good questions have already been raised. So I don't need to repeat them. But it's, of course, very challenging for us. My question concerns the link to the EU's new instrument dealing with the overcapacity in steel.
Could you please explain in the simplest way possible terms how the two pieces of legislation will interact, that would be very interesting to hear from you. Thank you.
Bernd Lange
Thanks a lot. I have no further requests so far. Then I give Brando. Brando. Oh.
Chair of the US.
Bernd Lange
Oh, Brando, of course, not as a member of this committee, but as chair of the US delegation.
Brando Benifei
Please. Thank you, chair. Thank you for inviting me to take the floor in my capacity as chair of the delegation for relations with The United States. I would also like to thank Matthias Jorgensen for his presentation. It is essential to continue engaging constructively in our transatlantic discussions.
In fact, on pharma, the joint statement proved its value in shielding us from yet another extreme potential tariff escalation of up to 100% in a sector that is not only strategic for its industrial importance, but also vital for public health covering pharmaceuticals and medical devices. But when it comes to steel and aluminum derivatives, significant question marks remain. There is still a lack of clarity regarding the applicable tariff regime. What is presented as a simplification risks in practice becoming more burdensome and potentially disadvantageous for our operators. In particular, the revised approach under section 2.32, which now applies tariffs to the full customs value of imported products, as other colleagues underlined already, including derivatives, could substantially increase the burden on EU exporters and create further uncertainty. And in fact, I heard just now from the commission that they also don't have clear data on this, and they need to better assess.
So we cannot say it's a better step. It's a good step forward, because we still don't have enough data. So more precisely, what challenges does the commission foresee in the implementation of this new way of dealing with this. Well, I can also add that the European Parliament has taken a firm position on steel in the Turnberry regulation, highlighting unacceptable asymmetry between lowering tariffs to zero on US steel entering the EU, while the issue of derivatives remains largely unresolved on the US side. We have introduced clear conditionalities including a suspension clause, a Sunrise clause, six months time frame to ensure that satisfactory solution is reached.
At this stage, however, we still appear far from meeting these conditions. And finally, let me say one final thing as in my capacity as shadow rapporteur on the new instrument addressing steel overcapacity for which a trial agreement was reached last Monday. Here, again, uncertainty persists. It remains unclear how the US tariff regime will interact with the EU steel safeguard framework, particularly in light of the need to assign quotas to the US following article 28 GATT negotiations. I would therefore ask the commission what approach it envisages to ensure coherence between these frameworks and how this interplay will function in practice.
Thank you.
Bernd Lange
Thanks a lot. And a small additional question, but perhaps not so relevant for Europe. But in this new regulation, is a part saying if a product is produced with aluminum, copper or steel from the United States, this tariff will be reduced. Has the commission any knowledge about products produced in Europe using steel, aluminum, copper from Europe as relevant for us? So Matthias, a lot of questions.
Matthias Jorgensen
Thank you very much, Chairman, and thank you for these very relevant questions. Chairman, you're saying 25% is not 15%, and that is correct, which is I'm a lawyer, but even I can make that kind of math. It is a mixed bag. But it is also clear that the U. S.
Considers that they have not committed to a 50% cap on steel in the joint statement. That's what they argue. They argue that they are willing to look at the question of TOQs and solutions. But the signals we are getting from the US is that on this and other areas where the EU is asking for further tariff reductions. I think a key point for the US is that there is a decisive process by the EU for moving forward and lower tariffs in accordance with the joint statement as we have committed to before we go to this next step and start trying to lower further tariffs, be that on steel and aluminium or other.
We can like that or not. We can find that it's fair or not. We think that 15% is a good figure. That should also apply to steel. We also feel that there should be tariff-free TRQs with the U.
S. We will continue to make that point towards the U. S. But it remains a complicated discussion at a moment in which you have seen that the US, by the way, not alone in the world, is intent on protecting very strongly its steel and metals sector generally. So no, there is not forward movement yet on these Tier Q discussions.
But I think that if we pass this legislation, we will have a better tariff legislation, we will have a better and stronger basis upon which to engage with The U. S. Also on this issue. The bureaucratic burden has stabilized. Is it worse?
This is not a theoretical question. This is a practical question. We saw that there were some very heavy, and I think the US recognized it, some unmanageable bureaucratic burdens. Now I don't think that they willfully put into effect a system which proved pretty difficult to navigate. I think they had the estimates that they estimated when they put it into practice that it would work.
So I think, again, this is something where we will have to see on the basis of the practical experiences of EU exporters. What is the bureaucratic burden for EU exports? And then if it shows again that they are difficult and complicated, we need to tick them up, but on the basis of concrete examples. I'm taking questions in order. What's the commission's assessment of The U. S.
National trade estimate? Well, it's not a surprise. I mean, is a yearly publication by the US. We also, by the way, put forward trade barrier reports on a yearly basis, and third countries are not particularly surprised either. It is not a measure.
So I think we should just take it for what it is. It's a catalog of what they see as barriers around the world, and we can see that we are prominently featured, maybe because we have some rules that they don't agree with, but also because we are very important trading partners. So they hear a lot, of course. But this instrument, this document as such has no impact on EU US trade. It gives us a good view of what the US would maybe like to discuss or what they are unhappy about, but that's it.
And we will see it. We will look at it this year, and we will see it come back next year. So we should take note, but that's it. Now that was a good question, the next one. Is the pharma outcome of 15%?
I mean, what is going to happen with these Section 2 32 outcomes? Will it be tariffs, or will it be something different? We have seen that the US, in the past, as a consequence of section 232 investigations, did come with tariff measures. But we have recently seen that it's not necessarily a tariff measure. It can be, for example, a decision by the US to engage in international negotiations when it comes to critical minerals, for example.
That's the outcome of the section 232 investigation on critical minerals. So it is possible that for future investigations, are tariff consequences, but it is also possible that there is not. I think for us, it's important that the US respects the 15% ceiling there. And I think, mister Warmbone, I think you asked a good question. I mean, what if there is no deal?
What if there is no EU, US statement and deal that both sides are implementing? What are the consequences? Will we go to 100%? I think that is a possibility. What is clear is that if we do not move forward on this and we don't respect the deal on both sides, there will be more uncertainty.
There will be a risk of escalation. There'll be the scenario that we have all worked very hard to avoid, and that I think there was a clear political decision within the body politic of the EU as such last year to try to avoid. So I think it's a very pertinent question, and that we should try to avoid it. And as it comes to the ECR, absolutely, we need to pursue further exemptions and defend the EU interests. And again, when we have showed that we are and we have implemented what we have committed to do, we will be able to have a better platform for constructive engagement to that effect.
Now then, comes this very useful question. Oh, no, sorry. Before I come to that with the steel measure, you asked a very specific question, Chairman, on what to compare, I mean, '24, '25 figures. I mean, the problem is here that, as explained, the charge and the calculation methodology from metal content now to flat rate makes it very challenging to exactly compare what the situation will be as regards last year's tariffs and our and this year's tariffs because the metal content of the product varies by product to product and by producer to producer. So that's why it is, that's something where we can use 24 figures.
But this specific material metal content by producer and by product is not publicly declared. So that's why we are trying to work with industry, BDMA, you cited them yourself, to understand and see on the basis of what we get from them and available data. But what is clear is that it is complex and not uniform. So if we want to have a meaningful comparison, I think we have to stick to this issue of 2024 figures, which is the last year in which trade was normal. Now steel measure, EU steel measure, and this regulation.
We think the situation is clear. The EU steel measure prevails. There's a specific provision in the measure, which has now been agreed or gone through trialogues, which clarifies that autonomous preferences, like the one that we would implement via the measure, related just to the US, do not prevail over the steel measure. And that means that imports from the US will be treated like any other steel imports from third countries. In that respect, we believe there's clarity.
Thanks a lot. Jurgen?
Jörgen Warborn
Yes. One follow-up after your answer on Langhe's statement that 25% is more than 50%. And I understood that you, as a lawyer, could agree to that. And then you said that the US doesn't view that they are committed to the 15% cap on steel and aluminum. So as a lawyer, do you think that the US is committed to the 15%?
Bernd Lange
Thanks a lot. And, Matt, here's once again to the figures. So you are advertising this exercise from the U. S. As a success because you have calculated a relief from €17,000,000,000. But on the other side, you can't give me the figure of which products will increase.
And as I mentioned, there is a lot of calculation going around that in total, there will be an increase of tariffs because the products are now tariffed because of the value of the product. And 25% is much more than 15%. So I guess it's not quite balanced if you are really advertising 17,000,000,000 release. But on the other side, you can't give me the figure of how much more tariff industry has to pay. Therefore, I guess we should really look to a balance sheet, where we can see the real figure.
And then, of course, it's also relevant for our future strategy. Yeah, please. Yeah.
Speaker 49
Greg, thanks a lot. I would like just to clarify one of your statement. Well, responding to mister Warborn's note that 50% tariffs on aluminum and steel are higher than agreed in Scotland. And therefore, still we are taking this fact into consideration regarding the validity of or to the closure of Trilog and validity of lowering of taxes for U. S.
Speaker 50
You responded that, yes, it's true. If the agreement will not be formally concluded, we will pay 100% tariffs on the pharmaceutics. And therefore, we need to avoid this situation. So I would like to, well, by expectation of agreements. So I would like to clarify what we as lawmakers, as part of the lawmaker process in the parliament should do in order to avoid application of 100 percent taxes for pharmaceutics.
Speaker 49
So, what does it mean? Should we accept or yeah? Should we close the trialogue, and should we apply zero tariffs for US imports to Europe even if we will still pay 50% tariffs for our export of aluminum and thus will be the agreement closed and thus we will avoid 100% tariffs on pharmaceutics, or will it still stay in our current position? So the deal is not done because we still have to pay 50% tariffs on aluminum and steel. So is this a risk?
Does it mean that, I don't know, after two, three months, The US will close the issue of negotiations with the Europe, and they will conclude that the agreement is not closed, and therefore, they should apply 100% tariffs. Do I understand correctly? Yes.
Matthias Jorgensen
Yes. Thank you. So when it comes to steel, the language of the joint statement, which is, I mean, we're making the legal question, but this is not a legally binding instrument. I think that's quite important to say. But it says in paragraph three that with respect to steel, aluminium, and their derivative products, the European Union and the United States intend to consider the possibility to cooperate on ring-fencing their respective domestic markets from overcapacity while ensuring secure supply chains between each other, including through tariff rate quota solutions.
So nice and general, and we need to put the meat on the bones there. That's something that we will try to do. But it links into what you said, chairman, which I'm not sure I used the word success. I think I used the words mixed bag, and I used a step forward. But it does by no means mean that we are in a situation when it comes to steel and aluminium where we are happy with the situation.
And we will continue to address this issue and take it up. But it is a step forward on a number of our products, motorcycles indeed also included. But on others, it is not. And we will continue to fight for this issue. And I believe that there's still very significant scope for progress on this.
Bernd Lange
Yes. Thanks a lot. Not totally satisfying. But, nevertheless, it's not the last time we ever exchanged a few, I guess, on that. On this pharmaceutical question, you want to come back?
Speaker 49
Okay. So I understand that once we will start to apply zero tariffs on U. S. Import, the US will not recognize the agreement, let's say, conclude it, and there is a risk that they will put us to the list of those without trade agreement and they will start to apply 100 tariffs on pharmaceuticals. But, yes.
Matthias Jorgensen
I think it's not really a question to me. I don't know what the US does intend to do. What I do know is that I think we're working under the assumption that we are both sides doing what we are committed to. And in case the US decides that they are not bound by the deal anymore, well, we will have to see what we do. And if we would signal by not passing legislation that we are not intending to proceed in accordance with what we have agreed to, then it's up to the US to decide what it would do.
And that's we will have to see what they would do.
Bernd Lange
Yeah. Thanks a lot, Matthias. And we are not recognizing you as a representative of the US Embassy. Thanks. Thanks a lot.
This concludes our inter meeting of this week. And thanks a lot to the interpretation. And, we have our next meeting in May. And I guess we have on May 6 also another trial log on this issue. Thanks a lot.
Have a good time.
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