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INTA European Parliament
Follow its sittingsYes.
Tony Sharma
Chair, honorable members, thank you for the opportunity to present this briefing, EU trade in textiles, import and export flows, prepared at the request of the Committee on International Trade. I am Dr. Tony Sharma, associate professor at the National Institute of Fashion Technology, India. Can we go to the second slide, please? The purpose and the scope, the briefing examines EU trade in textile and clothing between 2014 to 2023, covering both imports of new textiles and exports of used textiles. New textiles and clothing are classified under HS chapters 50 to 63, excluding HS 6309 and 6310.
6309 covers used textiles and worn clothing, and 6310 covers rags and scraps, which cannot be used.
Asia is the principal source of new textile imports while Africa and Asia are the main destinations for used textile exports. Now the analysis draws on databases from UN Comtrade, Eurostat Comext, Euratex and other peer-reviewed literature. Now there are two questions which run through the analysis. How EU sustainability compliance is reshaping new textile imports is the first question. Second is whether used textile exports declared as reusable are transparently and credibly managed after they leave the European Union.
Next slide please. As a matter of fact, the EU happens to be a major import-dependent trader. EU remains one of the world's largest textile trader, roughly one-fifth of global exports and one-quarter of global imports by value. The figure shows EU imports of textile and clothing falling from 132.7 billion euro in 2014 to 124.1 billion euro in 2023 after having peaked at 145.9 billion euro in 2022 before the 2023 correction. Now exports rose steadily over the same period from 57.1 billion euro to 69.7 billion euro, a 22% increase.
The European Union has been a net importer throughout, though the deficit narrowed as exports has been outpacing the more volatile import trend. Now intra-EU trade also remained substantial at approximately 107 billion euro in 2022, reflecting an integrated single market production and distribution network. Next slide please, slide four. New textile imports composition and concentration, if we see that, the figure shows the breakdown of 2023 trade by product category. Finished garments dominate imports at 72.5% of value compared with 57.8% on the export side, evidence that EU exports lean more heavily on fabrics, raw materials and technical textiles than imports.
On the supply side, five countries, China, Bangladesh, Türkiye, Vietnam, India, together account for about 63-65% of EU clothing import value. China occupies about 29%, Bangladesh 18%, Türkiye 12%, Vietnam 9 and India 7. Next slide please, slide five. Now there's a structural shift reshaping import competition. The figure shows that supplier mix is shifting.
China's share of EU clothing imports has been falling. It has fallen from 38.7% in 2014 to 27.3% and Bangladesh's share has increased from 15.1 to 20.9%. But that does not mean to say that China's competitiveness has reduced in any way. It has been shifting its focus into higher value capital-intensive manufacturing. Other than this, there are two other pressures which are being faced by the European market.
An estimated 4.6 billion low-value e-commerce parcels, as just mentioned earlier, these many parcels enter the European Union in 2024, around 90% from China, prompting a new small parcel customs regime from 1st July 2026. And then of course the second pressure, a flat 15% EU-US tariff on EU textile exports as applied since the July 2025 joint statement. Next slide please. Then we come to the pain point which is the used textile exports, volumes and destination.
Now, turning to used textiles, export volumes rose from 400,000 tons in 2003 to approximately 1.7 million tons in 2019, easing to 1.37 million tons in 2023. Now in value terms, this is small, just 1% of the total exports from European Union. But then in terms of material, it's very high, and the pain is that how will it be disposed after it has been used by the people in the third countries. The figure shows the leading destination by volume in 2023, where Pakistan and United Arab Emirates happen to be the largest recipient, followed by India, Tunisia, and other countries of Africa. Next slide please.
That's slide number seven. When we say used textiles, all used textiles are not the same. There are three major segments, so to say. Post-consumer household textiles, the textile which people use and then they discard, that's the largest volume and most variable. And then we have pre-consumer manufacturing waste coming from the industry, more consistent and readily recycled.
And then we have industrial rags under HS 6310 with limited reuse potential. Policy measures suited to one of these streams cannot be applied to all the other streams. Now geographically, this trade is highly concentrated. Germany, Italy, France, Netherlands, Belgium together account for approximately 74% of extra-EU used textile exports, with Netherlands and Belgium functioning partly as sorting and re-exporting hubs. Next slide please.
That's slide number eight. The coherence challenge. Now this brings me to what the briefing identifies as the central coherence challenge. On the import side, scrutiny is high through CS triple D, ESPR, digital product passports, and forced labor regulation. But on the export side, when we are talking about exports of used textiles, these are classified as reusable, face comparatively limited scrutiny at the point of departure.
So when these are being exported, the scrutiny is not as high. Now evidence from Accra's Kantamanto market illustrates why this matters. Roughly 40% of items in an imported bale cannot be resold, generating an estimated 70 tons of textile waste daily at that market alone. Now the question is one of quality assurance, transparency, and accountability after export. We'll go to the next slide please, which is slide number nine.
Compliance pressures are rising unevenly, so to say. What we are saying here is that on compliance more broadly, the amended corporate sustainable due diligence directive, thankfully it has been amended and it has been in force since March 2026. It now applies direct obligation only to firms exceeding 5,000 employees and with a turnover more than 1.5 billion euro, so virtually sparing the small and medium enterprises from the direct impact of the corporate sustainability due diligence directive. The eco-design regulation, digital product passport requirement, and the forced labor regulation are all expected to phase in between 2027 to 2027 to 2028. I would also flag the gender dimension over here.
Women make up 60 to 65% of the garment workforce in major supplier countries, concentrated in the lowest paid, least protected roles. Next slide please. And then I have also included a comparative perspective between Bangladesh, Vietnam, and India. Briefly on three comparator countries, Bangladesh graduates from LDC, least developed country, to a developing nation, and so therefore everything but arms preference is going to convert to GSP plus eligibility, wherein which is going to be tougher because it's going to require double transformation rules of origin that its fabric import dependent industry will find demanding. Now Vietnam illustrates predictable investment-linked adaptation under the EU-Vietnam free trade agreement in force since 2020.
It has been doing pretty good. India presents scale and diversity, EU textile and apparel exports valued at approximately 7.2 billion USD spanning 342 exporting districts, with the concluded but not yet ratified EU-India FTA adding a significant new dimension.
Now all three countries here adaptation succeeds where regulatory ambition is paired along with the predictable transition periods and institutional support. Otherwise, it would not be able to, these transitions would not be able to come to fruition. Next slide please. Now we come to the conclusion. The three conclusions that I have come to is first, the EU remains structurally dependent on imports in labor-intensive clothing segments while retaining comparative strength in higher value and technical textile products.
Second is EU's textile exports are policy relevant chiefly through their volume and downstream fate, not their value. The issue is credible reuse and transparency, not the trade itself. And third and most importantly, coherence is overarching challenge. Now across both flows, the central task is aligning, tightening import-side sustainability expectation with the oversight of the EU applies to its own export flows. Simply said, the amount of diligence which is being applied to the imports into the European Union, the same amount of diligence need to be exercised on the exports of used textiles from European Union.
Next slide please. Now I come to the six recommendations to the committee. I'll wrap it up in a jiffy. First, protect the EU clothing producer from unfair competition. Like sir said, the committee should confirm a small parcel customs rule in force from 1st July 2026 are applied consistently and are narrowing the price edge of platforms like Shein and Temu.
It should also check whether Asian exports redirected to the EU after the 2025 US tariffs are disrupting sensitive categories and whether safeguard tools are still adequate. That's the first recommendation. Second recommendation, make the digital product passport a real customs tool. Now interoperable passport data on fiber, origin and compliance would let border checks work directly off it ahead of the 2027-28 rollout. Now the committee should ask now whether smaller exporters have enough support so the system doesn't become a barrier.
Throughout the analysis, what I have tried to elucidate is that the regulations and the compliances, they can be handled much better by the larger companies. So when European Union is looking at any of the regulations, it also has to see, should see that it does not become a barrier for the smaller, small and the medium enterprises. The third recommendation is manage Bangladesh's LDC transition carefully. Bangladesh graduates on 24th November 2026 with everything but arms preference and then it has to graduate into GSP plus, but GSP plus is going to come with a lot of compliances. So which means the committee should request early monitoring of the likely trade and employment effects and ensure any safeguards are proportionate.
This is important because 80% of the GDP of Bangladesh is dependent on garment exports. In case they are not able to handle the compliances related to GSP plus, it would lead to a large scale unemployment and a disruption in the Bangladesh economy. Sorry. The fourth recommendation, bring buyer purchasing practices into the picture.
Simply said, pricing, payment terms and lead times set by large brands can undermine supplier compliance even where standards exist on paper. Now what what what what I'm saying over here is that when the buyer pays less and and provides lesser amount of time to produce a shipment, the vendor is perforce will have to do things in such a way that it would violate what EU is actually prescribing. So so in a way, the big buyers, their pricing and the payment terms and the lead times, that also needs to be kept in check if we want that the the the objectives of laid down by European Union, they are fulfilled. The fifth recommendation, create clearer customs categories for used textiles. We talked about 6309 and 6310.
Simply said, what is what what seems to be happening is that 6309 is used textile, 6310 is scrap and rags. Now what has been happening is that rags and scraps have have been, let's say, included in in used textile and and then it has been exported to the third countries. What I'm proposing over here is to create clearer customs categories for used textiles. This is best done through the combined nomenclature's annual update, separating reusable clothing from material meant for processing or disposal. It should be phased in with clear guidance for smaller operators, so it improves transparency without disruption.
And the last recommendation, the sixth one, is explore a voluntary trusted operator scheme modeled on the authorized economic operator framework. It would reward good sorting, record keeping and destination tracking while letting the charities and small collectors join through group arrangements. Parliament should also request periodic review of how sustainability, waste and trade rules interact in this sector, the sector which is related to collection and recycling. Together these six steps form a coherent, proportionate agenda, protecting competitiveness, supporting smaller firms and improving transparency on the export side. Next slide please, the last slide.
So I I come back to the two questions: how EU sustainability compliance is reshaping new textile imports and whether used textile exports declared as reusable are transparently and credibly managed after they leave the European Union. So to to to conclude, EU textile trade policy is strongest when sustainability ambition is matched with transparency, proportionality and practical support. I thank the committee for its attention and and I welcome your questions.
Bernd Lange
Thanks a lot, Professor, and now I give the floor to my members. Any remarks, questions? Jürgen, please.
Jörgen Warborn
Yes, thank you, Chair, and thank you for a interesting presentation. A few questions. First of all, one of your recommendations is for the Commission to assess whether Asian clothing exports to the EU is creating market disruptions and whether our trade defense or safeguard instruments remain adequate. But what evidence is there that lower-priced imports in themselves constitute a market disruption rather than just reflecting legitimate comparative advantage and delivering lower prices for European consumers? Second of all, you rightly acknowledge that indirect compliance cost can hit smaller suppliers the hardest and risk concentrating supply chains.
Yet your recommendations rely on additional monitoring, reporting and oversight by the Commission. How can we ensure that this does not ultimately translate into new information requests and compliance expectations for businesses further down the supply chain?
And finally, your fourth recommendation suggests that the Commission should monitor the purchasing practices of large brands and retailers, including pricing, payment terms, and lead times. Why do you believe this should be the role for the European Commission rather than a matter for the market and contractual relationship between private businesses? Thank you.
Thanks a lot, Lina.
Lina Gálvez
Thank you, Chair, and thank you, Dr. Sharma, for your presentation. So for us, it is clear that for us, competitiveness and trade policy cannot be separated from sustainability, labor rights, and corporate accountability. I think your study points that the European Union remains heavily dependent on imports of labor-saved clothing, but from countries really facing unsafe conditions, low wages, and weak labor protection. Also that our environmental responsibility does not stop at our borders, and if we truly believe in circular economy, we cannot export our waste management problems to developing countries. And also that our legislation matters, and that's why we need instruments like forced labor regulation, ecodesign framework, or the digital product passport.
However, the study also highlights the consequences of recent narrowing of the Corporate Sustainability Due Diligence Directive, and you mentioned how important it is this directive. And at the same time, we are witnessing what seems to be a contradiction. On the one hand, we have the United States launching investigations arguing that the European Union is not doing enough to prevent products linked to forced labor from entering the market. But on the other hand, we have also the European Union facing strong pressure, including from parts of the US business community and reflected in the recent EU-US joint statement, to simplify or weaken due diligence requirements such as the Corporate Sustainability Due Diligence Directive. So from your perspective, how should the European Union navigate this apparent contradiction?
Can we credibly strengthen the fight against forced labor while at the same time reducing corporate due diligence obligation? And if I may, I will change language now and make a very specific question in Spanish, if you allow me, because it is... En mi propia tierra, en Sevilla, en Andalucía, tenemos un sector artesanal y tradicional importante, que es el del arte sacro textil, el textil religioso y litúrgico, que están denunciando una creciente competencia de piezas bordadas a bajo coste desde Pakistán. Se comercializan directamente a los consumidores a través de redes sociales y en algunos casos reproduciendo diseños copiados de estos talleres, que son talleres completamente artesanales, y que se envían mediante tránsito por otros Estados miembros que no son España y con formas que parecen diseñadas para eludir los controles aduaneros al entrar en España.
Usted en su estudio recomienda un nuevo tratamiento aduanero para los paquetes pequeños y bueno, pues que parece que no se está aplicando de manera coherente en todos los Estados miembros. ¿Existe a su juicio, y con esto termino, un riesgo de que los envíos pequeños utilicen el tránsito intra Unión Europea para evitar los controles aduaneros específicamente para envíos pequeños a granel? ¿Y qué tipo de coordinación entre autoridades cree que hace falta para resolver este problema? Y si más allá del fast fashion, saber si el pasaporte digital de productos y las herramientas de supervisión podrían adaptarse para proteger a los pequeños productores artesanales altamente especializados. Y por último, quisiera plantear una cuestión sobre competencia desleal.
Muchas veces diseños copiados se comercializan como artesanía original. ¿Consideraría oportuno que esta Comisión integre la dimensión de la propiedad intelectual en su enfoque? Creo que sería un paso realmente fundamental para proteger realmente a los pequeños productores de la Unión Europea. And thank you, Chair, if I took a bit longer with this. Thank you.
Bernd Lange
Muchas gracias. Anybody else? Ah, so Chris and then Saskia and then Udo. Okay. Chris.
Geert Bourgeois
Thank you, Chair. Thank you very much for this very interesting study. I have two questions. First of all, the study identifies low-value imports from online platforms as a growing challenge. Does the author, does you, believe that the current customs reform is sufficient or are additional trade defense measures needed?
And secondly, the study highlights the EU dependence on a small number of supplier countries. Does you believe that the EU should prioritize diversifying supply chains or should it encourage more textile production within Europe? Two concrete questions. Thank you, Chair.
Saskia Bricmont
Merci beaucoup, je vais m'exprimer en français. Tout d'abord, un grand merci à l'auteur de l'étude pour cette étude qui est sans doute de loin la plus intéressante que j'ai lue sur le sujet jusqu'à présent, très concrète et aussi avec des recommandations basées sur des faits. Le premier point important pour nous, c'est l'asymétrie que vous pointez entre les importations de textiles d'une part qui sont soumis à des législations fortes avec des risques que les obligations qui en découlent pour les PME soient extrêmement contraignantes et que donc leur viabilité économique soit menacée. Et l'autre, c'est les exportations de textiles usagés qui, elles, échappent finalement à ce suivi méthodique et ce qui peut aussi occasionner des difficultés importantes dans les pays tiers parce que la qualité de ces textiles usagés n'est pas correctement renseignée, voire frauduleusement renseignée. C'est aussi une étude importante parce que vous faites le lien entre commerce et plusieurs législations.
J'ai envie de pointer trois aspects importants. D'abord, les chapitres de développement durable de nos accords commerciaux et le mécanisme de préférences généralisées, GSP, qui mettent un cadre à la production de textile. Mais il y a quand même encore un loophole, un gap, un écart dans le sens où les grands donneurs d'ordre européens peuvent se soustraire à l'obligation d'avoir une politique d'achat responsable. Et donc ça pointe, sans le dire, l'opportunité manquée du dernier omnibus sur le devoir de vigilance. Le deuxième point intéressant pour nous et pour moi en tant que rapporteure de la réforme sur le code des douanes, c'est le fait que vous proposiez la création d'un statut d'opérateur économique agréé pour les opérateurs qui collectent, trient et exportent des textiles usagés conformément à des normes vérifiables en matière de qualité et de transparence avec des avantages qui en découleraient aussi en termes de simplification administrative pour eux et de traçabilité de ces flux.
Là, je me tourne vers la Commission européenne pour savoir ce qu'elle pense de cet aspect. Et vous pointez dans vos recommandations la demande que le Parlement fasse un examen périodique de la manière dont les règles de l'Union européenne en matière de développement durable, de déchets et de commerce interagissent. Et là, Président Lange, je me dis que ça pourrait être intéressant que les standing rapporteurs des monitoring groups des pays concernés, surtout les principaux pays producteurs comme le Pakistan, le Bangladesh, que je préside, mais aussi les pays destination de nos textiles usagés, envisagent une initiative commune pour faire ce suivi parce que je pense que ce serait extrêmement intéressant à notre niveau de le faire. Je vous remercie.
Rudi Kennes
Yes, thank you chair, I will speak in Dutch. Ja, allereerst meneer Sharma, bedankt voor uw studie en de presentatie. U erkent terecht dat slechte werkomstandigheden niet alleen de schuld zijn van slechte regelgeving in de productielanden, maar dat de macht van de markt en de inkooppraktijken van de grote merken hier ook een grote rol in spelen. Ook de effectiviteit van de hoofdstukken over handel en duurzame ontwikkeling hangt af van de inkooppraktijken van de grote merken. Maar uw aanbevelingen gaan helaas niet veel verder dan verbeterde transparantie en technische bijstand.
En daarom wil ik u het volgende vragen. Eén: als de macht van de grote merken een belangrijk probleem is, waarom beveelt u dan geen bindende verplichtingen voor die bedrijven aan? En kan een vrijwillige transparantie dit machtsonevenwicht ooit doorbreken? Ik denk dat de ervaringen uit het verleden duidelijk aantonen dat dit niet het geval is. En twee: veel van de problemen in de sector, lage prijzen, slecht werk en klimaatschade, worden veroorzaakt door het verdienmodel dat gebaseerd is op wegwerpkleding en overproductie.
Hoe effectief kunnen maatregelen zijn als ze dit model niet aanpakken? En voorzitter, ik weet niet of dat er iemand van de Commissie aanwezig is. Ja. Mijn excuses. Tot slot wil ik dan aan de vertegenwoordiger van de Commissie vragen: al meer dan tien jaar wordt er in Genève onderhandeld over een bindend verdrag van de VN voor multinationals en mensenrechten.
De onderhandelingen naderen een beslissende fase, maar de EU blijft cruciale provisies tegenwerken. Mijn vraag is dus: gaat de Commissie de Raad om een volwaardig onderhandelingsmandaat vragen voor de sessie van oktober eerstkomende? Dank u wel.
Udo Bullmann
Thanks a lot, Udo.
Thank you very much, chair, and thank you very much, professor, for this interesting material that you have presented. Let me a bit dialogue with the first question that was presented by our colleague Jörgen Warborn. Me, I'm an individual consumer and I would like to buy a T-shirt. And this T-shirt has to be nice, I have to like the style, it should be good quality and of course, like Jörgen, I wouldn't like to pay too much, of course. But on the other hand, I would like to be totally safe that there is no forced labor, there is no forced children labor and that those who have produced the T-shirt have decent salaries and they can have a decent living.
But how can I know? I mean, I get lost in this variety of self-made labels which tell me everything and nothing. I do not know. So is this labeling policy that we are realizing at the very moment, is that sufficient? If it's not sufficient, what do we have to do?
Do we need additional due diligence instruments? Normally we think yes, otherwise we cannot be safe. And I'm pretty sure that Jörgen is similarly doing his choices, so it's not only me who would like to get to know, he wants to know it as well. So we could join each other being curious enough to be safe. How can we manage that as European consumers?
What does it need in technical terms, in legal terms, to put us, the two consumers, on the safe side? That was my number one question. And number two question, our experts. I listen to people, sometimes people tell me from the trade and development point of view, don't export anymore anything. And then I'm going to meet, for instance, entrepreneurs from Ghana, from Africa or from other countries that tell me, oh, don't listen to them because this is our business.
And it's wonderful to have the material, but the material needs to be useful. And do not send us your crap, please send us the things that we can afterwards remake into ordinary use. It's a big part of our consumption, it's a big part of our business reality. Don't stop exporting, but safeguard the quality of your exports. This is what you argued yourself, very concrete steps, one, two, three, what do you recommend?
Thank you.
Bernd Lange
And from my side, really in addition to the second question of Udo. So at the moment, Udo and Jörgen are buying new clothes and even more than in 2019. So in average, 2019 it was roundabout 17 kilo and now it's 20 kilo. And 12 kilo per year you have waste, waste of clothes. And how to deal with this?
We have, we changed the Waste Framework Directive last year, end of last year, so that clothes are now obliged to be collected separately. Is this sufficient or is there another measure necessary to guarantee that quality for the export, for the reuse is guaranteed? And now I give the floor to Michal Galenik, senior expert for textile from DG GROW.
Michal Galenik
Thank you. Let me start by giving some data for the EU textile sector. In fact, the sector is still much bigger than most people think. So in the EU we have 194,000 textile companies that employ 1.2 million workers with a turnover of 166 billion euros. Now 36% of EU turnover originates in Italy, which is the biggest manufacturer of textiles and clothing in the EU.
And then looking at trade data, as was mentioned with the presentation of the report, the EU is a very big importer of textiles and clothing.
In fact, the biggest importer in the world. So last year, the EU imported 122 billion euros of textiles and clothing. What's interesting with this data is that close to 80% of EU textiles imports originate in seven countries, mainly in Southeast Asia. And all of these countries, except for China, have preferential access to the EU market. But what's also interesting to know is that the EU is a major exporter of textiles and clothing.
So last year, the EU exported 61 billion euros of textiles and clothing, which is close to 40% of EU turnover. Now, looking a few comments about the report, it provides a useful overview of EU trade in textiles and highlighting both the sector's economic importance, but also the many challenges it faces. So the study is right to underline, as as you also mentioned in your presentation, the EU's structural position in textiles. So the EU remains heavily reliant on imports in labor-intensive clothing, but the EU retains a much stronger position in higher value in technical textiles and a specific specialized textiles segments. And this is an important distinction because it suggests that the competitiveness challenges differ significantly across the different product groups.
The study, as already mentioned, usefully highlights supplier concentration. The prominence of China, Bangladesh, Türkiye, India, and Vietnam in EU sourcing raises legitimate questions about supply chain resilience. And the section on textile exports is also very interesting, and used textile export is also very relevant. And the study is right not to treat all used textiles trade as problematic. So the key policy question is credibility and whether exports declared as reusable are in fact reusable.
Now, new EU legislation is in place that restricts the exports of textile waste. So it bans the exports of textile waste to non-OECD countries, and it requires that secondhand clothing exports are only intended for reuse. Also, the analysis in in the study I found very interesting about recent EU legislation. In fact, textiles used to be a sector which was very little regulated. And now, following the publication of the textile strategy in March 2022, a number of instruments have been adopted or are under preparation that will significantly change the legislative landscape for textiles.
A few comments about your recommendations. The customs reform, especially in relation to small parcels, is highly relevant given the growth of e-commerce and the enforcement challenges associated with low-value consignments. And now, with the customs reform as of the 1st of July this year, there is a 3 euro flat duty applicable to to these small consignments with a low value below 150 euros.
Also the digital product passport that you mentioned could help to improve traceability and consumer information. And finally, indeed, you mentioned Bangladesh in the report and it will leave the least developed and EBA scheme to a GSP, most likely a GSP plus scheme. And this could create, because of the rules of origin of the double transformation, disruptions in a strategically important country. So overall, to conclude, the study offers a balanced and policy-relevant assessment, but the challenge is simply not only to make textiles trade more sustainable, but to ensure coherence while remaining mindful of competitiveness. Thank you.
Tony Sharma
Thank you for the questions. I am at a, there are some questions which are very fundamental and they don't really have very simple answers to it. So I would like to focus on a few of them to which I have a clear understanding since I have worked in exports for a decade. The first one being that how do we solve this problem where let's say European Union has certain objectives and based on those objectives there are regulations in place. And those regulations have to be respected by the customs, has to be taken cognizance of by all the brands, big or small, while they are importing from other countries.
So while they are importing from other countries, let's say any of the brands, when they are importing, the prices that they, because it's a buyer's market, the competition is very high. Textile and clothing is not a highly technical product so to say, the basic products being manufactured in Southeast Asia. The competition is very high and for a couple of cents the business moves from India to Bangladesh, Bangladesh to China. So the prices are rock bottom, the lead times are very low. So when the lead times are very low, the vendor has very less money to work with and very less time to work with.
And because of that, the vendor will cut corners and somehow give you the price as well as the shipment on time. Now as per Adam Smith, it's a free market and anyone can buy from anyone and if a brand wants something at three dollars or three euros and if somebody is ready to sell at three euros, then what is the problem? So by the same virtue, if I am able to sell something in another country at very low prices, even lesser than the prices at which I am selling in my own country, then you have a law, you have a mechanism where you say no, this is dumping and we would not allow this to happen and therefore we are going to levy anti-dumping duties and then of course countervailing duties.
So there is a mechanism for that. So when we say that if I'm getting, if a European consumer is getting a product at low prices, then what is the problem? And yes, everyone, it's a personal product and everyone wants to look good and they get bored if somebody's getting bored of a garment very fast, how do you control that? I mean, it's a personal choice. So a consumer says, it is my money and I'm going to buy as many that I want to and if I wear it just for half a dozen times and if I want to discard it, who's anyone to stop me?
So these are some very fundamental, very difficult questions. Now to those questions, like the question about the small artisan, small communities in Spain manufacturing religious products. They have a complaint that Pakistan is making those products and they are selling it to, they're routing it through other countries and eventually those products through other countries are reaching the Spanish markets. And they are counterfeits, Pakistan is not supposed to make those religious garments, but it still is reaching those Spanish markets and the small community over there is facing problem. A similar thing happens in India also.
Now in this case, I have a very simplified answer to it, but it's not very easy to implement. So the answer is that if we are able, like we have this digital product passport. So if we have the technology, we have the artificial intelligence and if we have a mechanism by way of which we are able to track the products from one point to another to another to the final point and then see the trend and detect whether something is going wrong or not. Of course, I have another, it's just a small idea that we've been working on. That idea is that if a consumer could just scan a product and check whether that product is legitimate or not.
Some mechanism where the product has a QR code or some number by way of which a consumer can find out whether this is legitimate or not or whether it should be there in that particular market or not. It's a small idea and can be worked on. There are a lot of such ideas that can be worked on. Now the recommendation that I have given in that very brief space, the recommendations are at a very aggregate level, not very specific. For each of the questions posed by the respectable members, the answers are not easy and we will have to take a very deep dive into each of those questions.
Only then we will be able to have a very specific answer and those answers are going to be very detailed, so to say. So I have a request here is that if I can have all the questions mailed to me, I could actually work on those and then actually reply at a very specific level.
Otherwise, giving an answer to a question which the world has not been able to crack, I cannot claim that. But yes, of course, I can give solutions, probable solutions, which can be worked upon.
Bernd Lange
Yeah, so we will proceed in this way. Thanks a lot for the offer and we will send you the questions. Thanks a lot, Professor. All the best for you. And this ends the item, I guess five was it, and now we switch to item six, which is the outbound investment.
And outbound investment, dear colleagues, was part of the European Economic Security Strategy. And in this strategy adopted in 2025, the so-called Šefčovič doctrine, there was a recommendation to the Member States that they should review the outbound investments made since the 1st of January 2021 in three critical technology areas: semiconductor, AI, and quantum technology. And the deadline for this comprehensive overview is set for the 30th of June 2026. And of course, this date is gone and now we are here in a good moment to take stock about the preliminary results of this exercise. And without further introduction remark, I will give the floor to Alexandra Koutoglidou, the Head of Unit F4, Economic Security Instruments, from DG TRADE.
Please, for about 10 minutes.
Alexandra Koutoglidou
Hello, thank you. Thank you, Mr. Chair, honorable members, thank you for inviting us and for your interest to this matter that indeed occupies a lot of our time these days. Let me also start by making a little bit of an introduction and sharing the context under which we are working in this area of outbound investment as part of investment security, our investment security work in the unit. As you are aware, the EU is amongst the biggest sources of outbound investment and we are all aware that outbound investment comes with a lot of benefits. It brings innovation, it drives economic growth, and it can lead to partnerships with third country entities that can make our own companies, the EU-based companies, more competitive and hence drive also the competitiveness of the EU market to a better point.
That said, already in 2023, in the Economic Security Strategy communication, the Commission identified certain risks for the EU economies: risks to resilience of supply chains, physical security or cybersecurity of critical infrastructure, risks to technological security or technological leakage, and the possible weaponization of economic dependencies or risks of economic coercion.
In that same communication, it was acknowledged that some of those risks may also be posed by outbound investments. And it was therefore considered warranted to look closely into such transactions with a focus on with a focus on a specific risk that concerned technology leakage in a narrow set of technologies: artificial intelligence, quantum, semiconductors, where that technology leakage could lead to the enhancement of military or intelligence capabilities of third country actors. Already in 2023, the communication announced the establishment of an expert group on outbound investment that has been since a viable platform for the Commission and for member states to exchange on the matter and to share good practices. Then on 15 January 2025, the Commission adopted a recommendation on reviewing outbound investment in technology areas that are critical for economic security. These are the three technology areas that I mentioned before, so AI, semiconductors and quantum technologies.
And the Commission essentially recommended to member states to undertake an exercise of monitoring and of reviewing transactions in those sectors in a country-neutral way, so without pointing to a specific destination as riskier than other, but also acknowledging that different member states may make an own risk assessment in that regard or prioritize looking into specific countries for resources reasons also. And the recommendation took a broad take as to the type of transactions that could be linked to. Because as you know, investment is a broad concept, it can come with movement of capital, financing of transactions, but also simply technological transfer, transfer of assets, know-how and so on. The recommendation outlined the type of information to be gathered by the member states and during the entire monitoring period, there were different meetings organized in the context of the outbound expert group in order for member states to share from their experiences, to exchange on good practices and how they could ensure that the outcome of their reports would be would be useful and would lead to the evidence that is required for all of us to make an informed decision on the way forward. And in that context also, the Commission did we did the best that we could in order to support member states in identifying transactions and assessing the relevant risks.
The deadline for the member states' reports, as you mentioned, is indeed the 30 of June to be delivered. And at this stage, we are still analyzing.
I'm sorry, probably you expected something more interesting than an analysis, but as a matter of fact, we are still reviewing the reports that we have received from Member States. What we can say is that all Member States have taken the exercise quite seriously and they have devoted resources to this exercise, trying to gather evidence, to look closely into specific transactions and to appreciate risks that may relate to them. We will spend the summer period making this assessment and we expect that we will be able to provide a more comprehensive overview of findings, reflections and possibly suggestions for the way forward to be put forward for discussion, to put on the table for discussion in early autumn. So I will close here and happy to reply to any questions you may have.
Jörgen Warborn
I think Mr. Scholz will come back on behalf of EPP. I have a question, though, if I may. So, a couple of weeks back, we had this interesting discussion about the kill switch when it comes to the US and Anthropic. And that was, of course, national security. That was a reason why some of the products couldn't be sold to other countries, including the European Union.
And now we are discussing the same issue, but rather from a European perspective. So I would like to know how the Commission is thinking about this in the other way around, because I think it's ultimately a very hard discussion because, of course, national security exists. We have to make sure that military innovation and competence does not come in the hands of our adversaries. And we also have to make sure that we have the efficiency in the economy that makes sure that European businesses can thrive, if it is in AI, if it is in quantum, if it is in semiconductors. And if we close that market for European businesses, well, then growth in Europe will not take off.
So how do you see this kill switch argument and how do you see the economic efficiency together with and paired with the economic security?
Bernd Lange
Thanks a lot. And for the S&D, the shadow is Brando Benifei. He is not here and I will ask on his behalf two major questions. So, a little bit also going in the direction of Jörgen. So we have a lot of elements where we are trying to promote the industry.
So we have now the Chips Act and the AI Development Act and the Industrial Acceleration Act. How fits this together with the outbound investment proposals? And what does it mean for the economic development?
So for me, it seems to be at the moment not really coherent, to be honest. And secondly, so of course we expected that you would present us a little bit more from the review from the member states, what is completed now. And you mentioned this will be done now during the summer break, so no summer break for you. And of course my question is then, what is the consequence of that? Will be there some benchmarks on that?
And is this the ground for deciding then if further legislative action are needed? And the possible question is of course then, if there is some legal action, will this also give a targeted, proportionate and legal certainty to the European business? So this was Bernd. And then we have Jessica.
Jessika van Leeuwen
Thank you very much, Chair. To be honest, I'm a bit surprised, and this my surprise goes to the secretariat, because we have a topic on the agenda that clearly was not ready to be on the agenda yet. So I think this is a shame because there's not a lot of MEPs today to address this topic, and actually we have learned nothing from this session. Luckily we still can give some guidance now on what kind of information we would like to get out of the analysis from the Commission. I have two questions that I would like to ask, and I will ask them in Dutch.
Kan de Commissie toelichten hoe de outbound aanbeveling complementair is aan inbound FDI screening, zoals in het Next-periodedossier, en zou een geïntegreerde aanpak van in- en outbound investeringen in de semiconductorsector niet effectiever zijn voor de economische veiligheid van de Unie? En mijn tweede vraag is: welke concrete maatregelen neemt de Commissie om te voorkomen dat outbound investment controls disproportioneel schadelijk zijn voor Europese en Nederlandse venture capital, startups en scale-ups in semiconductors, AI en quantum? Wordt er gewerkt met drempels of uitzonderingen voor kleinere transacties? Dank u.
Anna Cavazzini
Yeah, thank you. You have probably seen that our own-initiative report on trade and economic security called on the Commission to propose a regulation on outbound investment screening. Just one example: BASF has an eight billion investment in Zhanjiang in China, the largest single investment in the company in 160 years, where the Commission calls China a systemic rival. We are getting more entangled and entangled with their supply chains and their goal of getting all supply chains back to China. So there is clearly a political dimension to individual private investment decisions.
So I wonder if the Commission basically has drawn from the member states' monitoring. I mean, you said you are still in analysis, but I wonder if you have seen some patterns or if you see basically some need for action, for example, what the Parliament has asked for, a legislative proposal to also screen outbound investment a little bit more closely than just you're doing right now. Thank you.
Rudi Kennes
Dank u. Dank u, voorzitter. Ja, decennialang was het vrije verkeer van kapitaal eigenlijk heilig in deze Unie. Maar toen Europese bedrijven hun fabrieken, hun technologie en hun banen naar het buitenland verplaatsten, op zoek naar de laagste loon en de zwakste rechten, dan was er geen enkele screening. Geen review, geen expertgroepen, geen risicoanalyses.
En wie heeft die prijs betaald? De werknemers hier met sluitingen, herstructureringen en reorganisaties. En toen de kapitaalvlucht hele industriële regio's leegtrok, noemde men dat de markt. Niemand in de Commissie sprak toen over economische veiligheid. Maar nu er geopolitieke rivaliteit is met China, verandert de toon compleet.
Nu moeten uitgaande investeringen worden gescreend, gereviewd en beoordeeld. Want blijkbaar is de veiligheid van kapitaal en van geopolitieke belangen veel belangrijker dan een publieke zaak. Veiligheid van de werknemers is dat nooit geweest. Maar goed, de Commissie, ben ik heel blij om, heeft wel iets belangrijks toegegeven nu. Namelijk dat private investeringsbeslissingen wel publieke gevolgen hebben en dat we ze dus mogen beoordelen en sturen.
Het dogma van het vrije verkeer van het kapitaal is doorbroken en wel door de Commissie zelf. En dan is mijn vraag: waarom stopt die logica bij geopolitiek? Als we investeringen kunnen screenen op technologische risico's, dan kunnen we ze ook screenen op banenvernietiging, op belastingontduiking, op delokalisatie en op mensenrechten. Want kijk naar wat we nu niet screenen. We beoordelen elke chip die richting China gaat.
Maar Europese investeringen die de genocide in Palestina financieren, in de Israëlische defensie-industrie, in bedrijven die actief zijn in illegale nederzettingen, die mogen gewoon doorgaan. Geen review, geen risicoanalyse, geen probleem dus. En daarom twee vragen aan de Commissie. Eén, wat betreft de lidstaten, we hebben dat gehoord dat hier rapporten binnen zijn en mijn vraag is daarin heel simpel: krijgt dit Parlement volledige toegang tot die resultaten? Twee, is de Commissie bereid om in een toekomstig kader voor uitgaande investeringen niet alleen geopolitieke risico's op te nemen, maar ook bindende criteria voor mensenrechten, internationaal humanitair recht en de gevolgen voor de werkgelegenheid?
En zo niet, waarom is de vrijheid van kapitaal dan wel onderhandelbaar voor geopolitieke belangen, maar niet voor mensenlevens en jobs? Dank u wel.
Alexandra Koutoglidou
Yes, sorry, I'm noting down the questions, I don't want to forget anything. And and thank you, thanks to to everyone for all the questions. I mean, I'm sorry it has been disappointing that we haven't come back with more information, but for what it's worth, until at least to us, your questions are viable and we are going to take everything that you said into consideration while we are reviewing the Member States' reports and we are assessing the results. In in that respect, we have also seen, of course, the the EP resolution and we very much welcome how balanced the the proposal was in that regard. We note that there is a an explicit call for the Commission to propose legislative action in terms of outbound investment.
We also note that any such proposal the Parliament would want to see it being targeted, risk and evidence-based and proportionate to any specific risks to be to be addressed.
And at this stage, all that I can say in that respect is that we're considering all that, but there is no decision having been taken in terms of tabling a legislative proposal. It is it is a little bit premature and in a sense we are aware that many people are also concerned that we may come with a legislative proposal. Therefore, we really want to make an objective assessment of the risks that are out there to see whether existing tools already address those risks and then engage in a conversation both with the member states and of course with the European Parliament. The the first question was about anthropic where indeed there was a measure of export controls that that we have noted and of course the European Union also has a regime on on export controls that concern dual-use products. That is a different regime and to a certain extent it it may address some of the risks that tech leakage may be presenting.
So it's something that we are looking in parallel to to our assessment with regards to the risks on outbound investment to see if there are any gaps there. Definitely anything that may come as a reflection or as a proposal by the Commission, be it legally binding or non-legally binding, would never have as an objective to close down business in the European Union or to close down the market. That's really not the objective here. The objective is to continue having an open market for foreign investment while we are finding a way to balance this against monitoring and addressing the risks that may come with certain of those of those investments. But certainly the general principles on which the European Union itself has been founded about the freedom of capital, the freedom to do business, these are non-negotiable here and if if there were any measures or any recommendations, any discussion to be to be had around that matter, it would be more about acknowledging potentially that the world has changed and then discuss jointly how we can address the risks and and that changed world, of course without closing down our market because that that's definitely not what we want.
Is industrial policy coherent with any outbound regime? I think that an extreme view would be to say yes, in the sense that if we want to continue producing in the European Union, then we can also prevent technological leakage and protect the technology that is being produced within the European Union from from leaving the European Union. We're not there yet in in taking such a position. And in any event, the risk that member states have been monitoring is really a very narrowly defined risk that concerns technical technological leakage for military applications. This is this is really quite narrow, the technologies that are being looked into are also strictly defined.
Therefore I would think that for the time being we are indeed trying to maintain the balance that all economic security instruments of the Union are trying to maintain. On the one hand the openness of the European economy that has brought prosperity to the European Union and on the other hand protection of our security and well-being. What would be the consequence of the review? There is no there is really no decision at this stage but whether it will be something targeted this I think is something the Commission has already announced both in the communication and the economic security strategy that indeed any reflection any action to be taken would be targeted and strictly defined. Is outbound investment linked to FDI screening?
There may be there is there are views and there is a school of thought that considers that a lot of the risks that we are addressing through FDI screening are also risks that may be posed through outbound investment. And that concerns for instance unwarranted transfer of know-how viable technologies unique technologies intellectual property rights or know-how technological processes in the sense that this IP or technology can we can lose it if the company is bought out and then transferred to foreign operators. It can also be lost if the company relocates or if EU investors finance competitors of those unique technologies in a third country. For the time being there is no direct link made between the two but what we are trying to see is whether the risks of outbound investment can also be covered through FDI screening or whether there is something that is maybe not covered through FDI screening and would require being mindful also when looking into outbound investment. Then whether we will foresee an exception for small businesses.
For the time being we're not considering any rules so also no exceptions because we're not we're not considering legislating. If we come out with anything of course we are mindful of the fact that it shouldn't impose burden neither on the businesses but nor on the Member States' administrative authorities also. Will the Parliament be given a possibility to see the results of the report? We need to see how we handle the results. We cannot share full access to the reports because they contain sensitive company data and to a certain extent some of those data are not transferred also by the Member States to the Commission for reasons of confidentiality.
What we what we will probably do is that we will draw the patterns as you said and the conclusions and we will come back to present those so that you get a picture of the result of the monitoring even if you don't get the specific details with company names and so on. And I think that this was all I believe.
Bernd Lange
Thanks a lot. So Mr. Saido, the shadow rapporteur, excuse me, standing rapporteur on economic security and author of our report, arrived a little bit late, but I give him the floor now.
Juan Ignacio Zoido Álvarez
Estamos hablando de problemas de comercio internacional y no tenemos resuelto el transporte todavía interno. He salido de Sevilla a las seis de la mañana y acabo de llegar ahora mismo a Bruselas. He acumulado retraso en dos vuelos distintos y eso es lo que me ha impedido. Ruego que me disculpe no solo el presidente, sino el resto de colegas y sobre todo la Comisión. El pasado mes de junio este Parlamento aprobó el pleno el informe sobre el papel del comercio en la seguridad económica de la Unión Europea.
En él pedimos a la Comisión que proponga la revisión del marco legal de las inversiones salientes para atajar las fugas de tecnologías críticas, una de las piezas del puzle que nos faltan. Llevamos mucho tiempo mirando la seguridad económica solo hacia dentro, pero no hemos abordado los riesgos de que terceros países puedan apropiarse de las tecnologías y el conocimiento que estamos exportando. Y cada vez es más evidente que la seguridad económica es un reto en un doble sentido. Así lo han comprendido otras potencias que ya han reaccionado. En el pasado año Estados Unidos puso en marcha un mecanismo vinculante que controla inversiones salientes en semiconductores, tecnología cuántica e inteligencia artificial.
Y desde hace dos semanas China también aplica su propio reglamento de inversiones salientes. Por eso me gustaría hacerle algunas preguntas a la Comisión. Los informes que los Estados miembros deben emitir vencen este mes y el diagnóstico que probablemente vaya a ser es el que ya intuimos, que los controles son insuficientes. Siguiendo la experiencia de Estados Unidos, ¿qué elementos de ese modelo cree la Comisión que se podrían trasladar al mercado europeo, al marco europeo, perdón? Y finalmente sobre China, ¿tiene la Comisión constancia de inversiones chinas hacia Europa que ya se hayan bloqueado al amparo de este reglamento o datos sobre el impacto potencial que prevé que tendrá para nosotros?
Muchas gracias.
Alexandra Koutoglidou
Yes, thank you very much for those questions. Indeed there are several foreign countries that do maintain outbound investment regimes. You mentioned the US and China. It's also Korea and Japan and Taiwan, if I'm not mistaken, that they have own regimes of monitoring outbound investments. And we are of course studying those systems in order to see what is the experience also from the implementation of those regimes.
And it is something that we will take into account as we are also analyzing the reports of Member States because also the mechanisms of those foreign countries, they are taking into account risks that are posed by international investments. So we are interested to see the different risks that different countries may take, may focus on, may be focusing on.
And precisely because different partners may be focusing on different types of risks, not all of those regimes are different. There is a different approach that is being followed. The US is focusing mostly on monitoring the financing of outbound investment, for example, while Japan is focusing more on technological controls when it comes to outbound investment. And China's approach is the one that we have all recently seen in the legal act that was recently adopted, which essentially formalizes a little bit the regime that existed before between prohibited and encouraged investments. If I'm not mistaken, that regime entered into force on the 1st of July, so it is a little bit early to have information about the impact of its implementation.
As far as we are aware, we have not heard of any investment having been blocked on that basis. And we understand that a main objective of China's act is to ensure a closer monitoring of the investments that are taking place in third countries, including after their establishment. So it's something that we will continue monitoring to see how it evolves, but we don't have yet concrete experience from implementation.
Bernd Lange
Thanks a lot. So this concludes point six and we switch immediately to point seven. This is the implementation of the macro-financial assistance to third countries last year. And the presentation by the Commission will be given by Ms. Stéphanie Pamies, the head of unit for neighborhood countries and macro-financial assistance. Remember, dear colleagues, we have MFA to Ukraine, Egypt, Jordan, North Macedonia.
So there are a lot of elements which could and should be interested for us. And I give now the floor to Ms. Pamies.
Stéphanie Pamies
So good afternoon. I hope you hear me well. I'll speak closer to the microphone. So thank you very much for this invitation. So indeed, I will present today the main findings of the MFA annual report that was published by the Commission on the 23rd of June.
So this is a regular report that we publish every year on macro-financial assistance, so which is a type of financial assistance to third countries. And so today I will give you an insight about the main findings of this report. To note also is that it is available on our website together with a staff working document that provides more details into the different operations that took place last year. So just as a reminder, as in past editions, the annual report covers operations that took place in last year, so this time in 2025. It also provided a description of ex-post evaluations that were carried out because this is something that we systematically perform on each operation.
It also contains information on general developments related to the MFA instrument, if relevant, and a short overview of potential future developments.
So last year, we had a very important MFA operation to Ukraine. So as you know, despite the remarkable resilience of the economy of Ukraine and the substantial support that is being provided by the EU through the Ukraine facility, Russia's continuing aggression kept creating additional financing needs in 2025 and beyond. So in this context, the EU provided additional support through the so-called ERA MFA, standing for Extraordinary Revenue Acceleration MFA. This operation was worth 18.1 billion euro, provided under very concessional terms. To recall, it was part of the global, the more global G7 ERA initiative in 2024 to provide 45 billion euro to Ukraine, in particular by leveraging extraordinary revenue generated from the Russian immobilized sovereign assets.
So this operation, so the regulation that provided the legal foundation for this operation entered into force in October 2024, and the MFA was released through a single, or what we call a sole installment, conditional on the fulfillment of a number of policy conditions. Later on, the disbursement took place throughout 2025, and it took place in several what we call tranches. There were actually 10 tranches, each time subject to the fulfillment of the political precondition, and the report contains, and in particular the staff working document contains more details on these elements. Now turning to the South neighborhood, there were two MFA operations, one to Egypt and one to Jordan. So in the case of Egypt, to recall the context, it's a country that's been affected by both the Russian war against Ukraine, but also and more directly about the escalating conflicts in the Middle East, with a number of tension and conflicts still ongoing.
That has affected the country via multiple channels, and that has had for consequence to widen the external financing needs of Egypt. So in this context, to recall again, the Commission proposed in March 24 an MFA package of up to 5 billion euros in concessional loans, divided into two operations: a short-term MFA operation of 1 billion euro that was put into place to address urgent financing needs of the country, and a second operation worth 4 billion euros, what we call a regular MFA operation, which was adopted by the European Parliament and the Council in June 2025. So the first installment of this second operation was done in January 2026, following a positive assessment of the implementation of a number of policy measures, 13 in total, that were linked to this particular installment in different areas. Also progress on the implementation by Egypt of the concrete and credible steps required under the political precondition, and the IMF program remained on track. So now if I turn to Jordan, for which we also have ongoing MFA operations.
So again, difficult context of the region, of the Middle East region, that has increased pressure on the country's security and has tested its economic resilience.
So in this context in April 2025 the European Parliament and the Council approved a first MFA operation to the country worth 500 million euro. So the first disbursement of 250 million euro took place in September 2025 after the relevant requirements were assessed as positively fulfilled. So this concerned notably the political precondition and a satisfactory track record of implementation of the IMF program. Additionally in October 20 in August sorry 2025 the Commission proposed an additional MFA operation worth also 500 million euros in concessional loans which was approved by the European Parliament and the Council in January 2026 again to address the increasing financing needs of the country. The MOU and the loan facility agreements are currently being prepared and the disbursements are expected to take place this year and next year in parallel with with the operation that was already fully signed and has started to disperse.
Last point about other ongoing operations or our 2025 elements is that we have an MFA operation to North Macedonia that was agreed approved by the co-legislators already in 2023. So it's worth 100 million euro. So that was also there to address the increasingly fragile situation of the country. A first disbursement to recall took place in April 2024 for half of of the total level of the operation so 50 million euro. But to date the authorities have not made a request to the Commission for the provision of the second tranche of the second installment.
The availability period of this MFA runs until August of this year meaning next month and we assess that it is not very likely that these funds will be requested at this stage. Also to note that the country has currently no active program with the IMF. Now if I move more briefly to an overview of the ex-post evaluation so there were a number of them that were either completed in or initiated last year. So first of all in January 25 the Commission published the joint ex-post evaluation of the operations to the Eastern Neighborhood countries of Moldova Georgia and Ukraine. We also had the post-eval the ex-post evaluation of the COVID-19 MFA operations to 10 partner countries which was published in December of last year.
Then in 2025 the Commission launched an ex-post evaluation of four MFA operations provided to Ukraine from 2022 to 2023 including the emergency MFA the exceptional MFA 1 and 2 and the MFA plus where the publication is expected by the end of this year. Two new evaluations will be launched this year one covering Moldova and North Macedonia operations from 22 to 26 and one covering the Ukraine era MFA operation. Last point to conclude my presentation just to to stress that the current MFA period has been exceptional in terms of multiplication of of shocks that have hit our partner countries meaning increasing financing pressures and increasing difficulties on the for their economy.
That includes of course the COVID-19 pandemic but also the different geopolitical shocks that took place combined with a number of structural vulnerabilities. We have of course, as you know because we had earlier discussions on this, an ongoing new MFA operation that started this year, so in the month of June with Ukraine. This is as part of the Ukraine support loan following an agreement by the EU leaders in December 2025 to provide a new limited recourse support loan to the country. So this is an operation worth 8.35 billion euro for which we have started with a first disbursement already by the 25th of June. And last sentence, I would say that the need for MFA is expected to remain high given of course the challenging global outlook that we are currently facing.
Thank you very much and I'll stop here.
Bernd Lange
Thanks a lot and this will be the case and on the other side the MFR will be not increase drastically, I fear. Jörgen.
Jörgen Warborn
Yes, thank you very much, thank you for your presentation. I'd like to start with asking you a question of when it comes to Ukraine and I totally support the MFA for Ukraine, I think it is very important for the people of Ukraine, it's very important for us in Europe as well. At the same time we have worked, the Commission has worked in the other direction when it comes to the steel instrument where we cut down on their quotas. And I think we in the Parliament during the negotiations were clear what kind of expectations we had when it came to the quotas. But here I think the European, the Commission is working in two different directions.
So do you see the contradictory here or and how do you analyze this situation? And then my second question is on the MFA and how we see it when our, the countries that we are supporting, when they have close ties to our adversaries. For example if you're part of the BRICS and we still give micro-financial assistance, how do you see that potential conflict here and how do you make the right choices when it comes to that? Thank you.
Kathleen Van Brempt
Thank you very much. Of course a lot of support for this instrument but we also need to remain well attentive to certain issues and one of them is of course human rights, rule of law, democracy and that's what I want to ask my questions about, mainly on Egypt. The MFA on Egypt requires concrete incredible progress on democracy and rule of law and human rights. And in your own report you acknowledge and I quote that Egypt continued to face challenges in the area of democracy, rule of law and respect for human rights with persisting restrictions on civic space, freedom of expression, peaceful assembly and association as well as media freedom. Leading organizations, human rights organizations and NGOs tell us that there has been no tangible progress in that area and some even argue that the situation has deteriorated since the working of the MFA.
For example, thousands of political prisoners are still in detention, restriction on independent media, civil society organizations, they are ongoing and anti-terrorism laws that continue to be used to silence journalists, activists, sorry, and political opponents. So that, then I have some questions. Can you be more explicit, which measurable improvements on human rights and democratic freedom justify the positive assessment and the disbursement of the first billion? How does the Commission respond to the serious concerns raised by several NGOs? And last question, before the next installments are released, what specific benchmarks on political prisoners, media freedom, civil society and democratic participation will Egypt have to meet?
Thank you.
Christophe Bay
Merci, merci Monsieur le Président. Comme vous le savez, notre groupe n'est pas hostile par principe à cette utilisation de cet instrument puisque nous avons voté pour l'accord de prêt à l'Égypte et à la Jordanie. Pour autant, je souhaiterais quand même un peu mettre en garde la Commission sur le risque d'engrenage, l'engrenage de l'endettement, c'est-à-dire maintenir des États dans une course perpétuelle à l'endettement et là c'est un Français qui vous le dit. Nonobstant cette première observation, j'avais une question très précise à poser à la représentante de la Commission, à savoir sur la période 2027-2029. Et vous avez indiqué, Madame, que la nécessité d'avoir recours à cet instrument allait s'accroître.
Donc sur la période 2027-2029, quelles sont les perspectives et quels sont les États sur lesquels cet instrument pourrait s'appliquer ?
Markéta Gregorová
So low, it's okay. Thank you very much, thank you for the presentation. I focus in MFAs on Ukraine and Moldova, so also my questions will go in that direction. The Ukraine facility has been added into the financing architecture. How do you see the long-term financing architecture for the Ukraine facility and the MFA?
How tightly they have been synchronized? And do you envisage for the Ukraine facility to become the single implementation framework for the future EU financial support to Ukraine, or will the multiple instruments continue in parallel? And second, to the Moldova growth plan, that is a fraction of what is mobilized for Ukraine, which of course needs more, but still it's one of the most exposed countries to war spillover. How will the Commission ensure that the exceptional financing needs of Ukraine does not reduce the capacity to provide adequate support to other Eastern Partnership countries, especially since the MFA is being integrated into the Global Europe instrument? Thank you.
Thanks, Lynn.
Lynn Boylan
Thanks, Chair, and thanks to the colleagues from the Commission. I also first want to raise the issue of Egypt and the Commission's own conclusion in its report that both the economic conditions and the political precondition set out in the 2025 MFA have been fulfilled. As my colleague from the S&D has said, we know that there's a coalition of international NGOs who've written to us to challenge this assessment and what they're saying is that the procedural developments such as dialogue with the EU and the US, administrative reports and participation in the UN Universal Periodic Review as if they were real progress on democracy and human rights.
And what we actually need to see is really concrete and credible steps towards democracy, the rule of law and respect for human rights. And that in fact the Commission is weakening this political condition by accepting symbolic rather than tangible progress. I'd also like to ask if the Commission has looked at the situation of the Palestinian refugees in Egypt and how they're being treated as part of their assessment because most of the Palestinian refugees have been left undocumented and not recognized as refugees and therefore have no legal protections whatsoever. And that includes families, you know, who have worked for EU institutions who are now refugees in Egypt. And then finally I wanted to ask about the Ukraine MFA and the wider economic picture.
I think we're all in agreement that we hope that this war will end and that a just and lasting peace can be put in place. But in terms of what happens next, I'm concerned that Ukraine will be expected to immediately transition to a free market economy. We know that here in Europe post-war economy was led by the public sector. And I don't think we should be expecting a vast privatization in Ukraine. So I'd ask the Commission whether they recognize the essential role of the state and public services in building a genuinely just and inclusive post-war recovery.
Bernd Lange
Thanks a lot and from my side also regarding Egypt and Jordan. So we are giving a lot of money to them. And if I'm talking to a normal citizen outside the Brussels bubble, what could give me an argument, what is the main achievement of the MFA in Jordan and Egypt and where are the main risks for the implementation? Specifically of course in Egypt where we discussed so intensive here in the Parliament. And regarding the geopolitical situation there in the Middle East, of course do you expect that there is some additional MFA coming to our table quite soon?
And this of course leads to the final question regarding the future MFR and the question how we have a perspective to guarantee MFA situation at least on a similar level. Is the Commission working on some strategies on that? So, the Commission.
Stéphanie Pamies
Okay, so first of all thank you very much for all these questions. So I think I will try to group them. There were questions on Ukraine and Moldova, also Egypt and Jordan and also on the future of MFA as an instrument. So when it comes to Ukraine, I mean we have to remember what is the objective of macro-financial assistance. It's a crisis instrument that is there really to support a country addressing its financing needs, so country having difficulties to finance itself and to strengthen the macro stability of the country.
So this is the essential objective of MFA as a crisis instrument by difference to longer-term support that is achieved via other type of instruments.
And this is what is key, obviously a key instrument to support, to encourage a number of structural reforms with a medium-term perspective to accompany and to support the accession path of the country to the EU. So we see these instruments as, you know, MFA, Ukraine facility or MFA and facilities in general also in in other countries such as Moldova as really complementary tools. So pursuing, you know, complementary objectives. So so I think we, you know, we don't see contradictions. I mean, they are different different policies that are ongoing with Ukraine obviously, but this is a country at war who for which it is very important that we give the ability to fight the war but also the ability for the state to continue to function.
And I think this is very much in the interest of Ukraine obviously, but also in the interest of of the EU. So in terms of of MFA also with respect to to different countries. So just to recall that there are two important requisites for a country to to benefit from MFA. One is a very important one is the political precondition and I will come back to this also in the context of Egypt in a minute. And another one which is more in terms of financial condition in terms of having an IMF program that is on track, very important in terms of having reassurances on the debt sustainability of the country and also have a strong fiscal framework anchor for for the MFA.
But to go even further back, I mean, we have to remember what is the primary objective of MFA. So since the introduction of this instrument, it has been about supporting countries, mainly in the neighborhood of the EU. And why do we we do that? Because we believe that we have a strategic interest in having macro stability in these countries. Because if we consider either candidate countries or countries part of the neighborhood policy, we have as the EU a key interest that these country remain macroeconomically stable, not least to avoid, you know, a number of negative spillover effects on our own on our own countries.
So I think this is how we see this as as very important. And for other objectives, let's say, they are other tools. So but the MFA has has this specific focus. So to to carry on maybe on on Ukraine. So we see of course you you know very much very you know very well as part of the Global Europe regulation that there is a specific dedicated budget that is foreseen for for Ukraine.
And this is very much to ensure precisely and to answer to the question also with potential crowding out on other countries such as Moldova precisely the fact that there is a kind of a dedicated envelope allows that other countries can still benefit from our assistance. So I mean MFA is will remain part of the toolkit. As I said, it's a crisis instrument, so it fulfills other objective that this longer-term instrument. It will very much remains, you know, as part of the of the global toolkit that we can offer and whether it's Ukraine or other countries. I think we have it is clear that this this will remain.
So maybe now to go back on on Egypt and Jordan.
So first, what concrete elements to justify? Well, I mean, concrete elements is again, thanks to this key MFA operation that are indeed substantial, we allow these countries to really weather the current shocks. I mean, the intensity and the turbulence of the global economy and the particular situation of the Middle East has not got any calmer since these MFA operations were offered. So I think this is what we can report on, that really it's a key element to foster macro stability in these countries, but also and very importantly to foster reforms, because we believe strongly that there are a number of structural reforms that these countries would not have so swiftly carried out if it wasn't for the support of MFA. Because also to recall, MFA is a performance-based indicator, so we provide budget support to countries to address their financing needs, but against the fulfillment of a number of policy conditions.
So this is what we offer with MFA, or what we want to achieve with MFA. And I think it's very important again to recall that Egypt and Jordan are two countries with which the EU has signed strategic and comprehensive partnerships. So it was truly recognized that they are very important countries for the EU as anchor of stability in the region. And I think again, the recent development has really supported this approach that we need elements of stability in the region. So in terms of political preconditions, to recall the legal basis indeed of the Egypt MFA is a bit different from other countries because it's more in terms of progress trends, concrete and credible steps.
So I mean, as you said in the report, in the annual report, we didn't shy away from, you know, a number of difficulties. We don't pretend, you know, the situation is perfect. But just to reassure you that, I mean, the EU really closely monitor human rights developments in Egypt, also in terms of progress towards democratic standards. And we do this at all possible levels, of course with the government and national authorities, but also with CSO interlocutors. And this is elements that are, you know, discussed and reminded in different fora.
We were able also to conduct wide consultations during the negotiation of the MFA to recall and for the assessment of the MFA package. We also have regular institutional consultations under the association agreements and international fora including the UN's Human Rights Council. I think this is something you reminded. So the MFA is precisely another platform, another instrument to foster progress in these different areas, because we look broadly at democratic standards, rule of law, human rights situation. We take into account obviously the, you know, the Universal Periodic Review that are carried out.
And so the report highlights a number of elements on which we found a basis to find progress overall. And to recall that we reassess the situation for each and single disbursement. So it's not just at the inception of the operation, but also ahead of each disbursement. Currently we are preparing for the second disbursement and as customary we are preparing an in-depth assessment of the political precondition and obviously also of the policy conditions together with our colleagues from the External Action Service.
And this will be reported duly to you via this information note that we circulate ahead of each disbursement on which you will see more details about what is at the anchor of an analysis again stressing the positive developments but not shying away also for stressing the areas in which we would like to see faster progress. So lastly I think there was a question on well I think I've addressed it already maybe of the MFA as an instrument for the future. So as I said again we believe it will remain relevant but again with this focus on crisis support by complementarity with other tools that already exist and will continue to exist in the future we hope. I'll stop here thanks and I hope I've addressed all the questions.
Kathleen Van Brempt
We still have a few minutes because try to listen really very carefully and of course I do know we have to balance out the fact that there's a lot of geopolitical tension don't have to convince us of that very much aware Egypt's plays a really important role it's a strategic partner of course. We don't ask you to make sure that that in a few years time Egypt is a full-fledged democracy with everything on it but how you were so vague in your response if there are really very good very well internationally established NGO that tells us that there is no progress when it comes to human rights and rule of law that there's even a deterioration. How do you respond to that and more importantly by the next installment what is your what are your tangible achievements that you want to see? Maybe gonna say something stupid but there's thousands of political prisoners. Do you want half of them released or part of them or how do you look at that?
How do we use this as leverage because you speak about spillover effects in Europe and I know you're talking about migration I understand that but making sure that the people over there's life are improved is much more important. So how do you really use that as a leverage?
Bernd Lange
And perhaps in addition regarding Egypt so we have a system where European companies are discriminated in public procurement and in other elements as well where the military is dominating more or less all elements of the economic reality and where corruption is the day-by-day business. So in this environment of course you are saying that Egypt is a strategic partner for the region might be but what is really the concrete effect of our relation with this leverage because of this huge amount of money? Where can you give me some positive examples where the situation on the ground has changed?
So thanks again for these questions. So I think as I said I mean the the picture will remain mixed on Egypt but I think what we could suggest is that we will have at the occasion of the next disbursement again a very thorough assessment of the political precondition.
Stéphanie Pamies
So I mean if there are certain aspects on which you want to discuss more in details, I think I mean we are obviously always always willing to discuss these elements. But as you as you also rightly stressed, I mean the question is really in terms of progress. I mean of course you named some CSOs which stress some some elements, but I mean we could also you know name elements, for example several releases of criminal and political detainees for which authorities announced recently that this this release would take place. There are a number of commitments and progress we see, for example with the recommendations that were issued in the context of the 2025 Universal Periodic Review on the legislative front also we've seen some positive developments. So this is I mean there will be concrete examples that we describe in our next information note, so maybe that will be a basis for for further discussions on this.
I think it's you know it's a difficult it's a difficult balance, but our assessment remains that overall considering all elements we see this this positive trend for the country. And again in terms of of concrete elements, I think it's it's not in the EU interest to have such a large country in our neighborhood find itself in in very difficult situations and having even more instability. So I see this as a as a positive as a positive outcome that we have contributed with our support to ensure that there was yet another country anchor of more stability in a region that on which we have just seen a multiplication of conflicts over the past years, not only since the time we proposed this operation but even now more so as we are implementing it. So we see this as a as a you know tangible tangible elements and clearly in the interest of the EU to have such support. So thank you.
Okay, this concludes the inter-meeting for today and we will have in six minutes the coordinators' meeting in a in camera format.