International talking points

Relations between UK and the EU have improved at political level, although some work is still needed at technical and working level.

The first forum under the MoU on Financial Services took place in October. This was a very positive meeting where they agreed to set up informal working groups on green finance, digital and Basel. Equivalence, which would allow for greater market access, was also back on the agenda but the Commission stated that this was a debate for the next Commission.

Foreign Secretary Lord Cameron was in Brussels for NATO meetings. He also met European Commission Executive Vice President Maros Sefcovic, where he called for closer relations with EU and for the full implementation and ‘exploitation’ of the TCA and Windsor Framework.

In December, the CBI had a number of high-level political engagements on EU related issues, including the following:

• • Dame Angela Eagle MP and Labour members of the UK Delegation of Parliamentary Partnership Assembly
  • Secretary of State Michelle Donelan MP, to celebrate the UK’s accession to HorizonEurope and Copernicus.

BusinessEurope’s Council of Presidents are a great opportunity to meet our counterparts from across Europe, and share experiences, particularly around the challenges facing our respective economies. Mircea Geoana, Deputy Secretary General of NATO, was a guest speaker at the latest gathering at the end of November – and as he said, the power-shift away from Europe and the battle for global dominance between China and the US requires Europe to think differently. That creates both challenges and opportunities for the private sector.

BusinessEurope published a declaration ahead of the forthcoming Belgian Presidency. The top messages included:

• creating a regulatory breathing space in a well-integrated Single Market
• striking the right balance between security and enabling the European economy, and
• flanking the Green Deal with an Industrial Policy, so it acts as a green growth strategy.

It’s worth noting the concern among the European business community on the growing levels of protectionism both within the EU and globally. Many quoted the US’ IRA. But Europe’s approach is being seen as too defensive too, with measures on FDI screening, economic security, anti-coercion legislation, the Carbon Border Adjustment Mechanism (CBAM), and Corporate Sustainable Due Diligence Directive (CSDDD).

The last two of these in particular have implications for the UK and CBI members. While the EU is pursuing stronger rules on due diligence and reporting on human rights and corporate governance, China is also pursuing legislation that would restrict businesses from the China market if they undertake due diligence on human rights and labour standards, so we could find ourselves in a catch-22 situation.

The 13^th round of negotiations took place in September and while both sides admit that the bulk of the negotiations have been completed, some difficult issues remain. It’s unclear when the next round will be. Key points to be aware of include:

• UK offensive measures include more movement from India on data localisation requirements and cost of technology transfer as well as Investment Protection. Agriculture, particularly dairy products, remains a concern.
• Indian’s offensive measures include more movement from the UK on mobility, notably on skilled workers and young professionals, although some changes to the skilled workers visa system have helped. Recent figures on net migration will make it more difficult for UK to move on this politically. The NHS surcharge is also a major issue for India – this has increased by 25% and places great costs on Indian investors.
• India is playing hardball as it sees itself as a growing economic powerhouse and with elections next year, it too will be looking at things through a domestic lens.

CBI has a MoU with Confederation of Indian Industry (CII), so we’re looking at how to work together more closely. Including supporting its delegation of Indian CEOs coming to the UK in May/June, where the theme will be investment.

13 September: European Commission President Ursula von der Leyen delivered her annual State of the Union address, in which she takes stock of achievements and sets out plans for the next year.

The headline announcement was that the European Commission is launching an anti-subsidy investigation into Chinese electric vehicles, amidst growing fear of China’s dominance in the market. If evidence is found to show Chinese EV subsidies are distorting the EU market, the Commission may use tariffs as a punitive measure.

This move comes following significant pressure from the French government to use trade defence measures on Chinese EV imports, whereas Germany and other EU member states fear this could lead to retaliatory measures impacting European manufacturers dependent on Chinese critical minerals (CRMs), technology, EVs and EV components.

An EU-China trade dispute could have significant implications for the UK. It’s worth noting the European business and sectoral  bodies have remained fairly quiet on the announcement, preferring to wait and see the outcome of the Inquiry before taking a stance. Reactions across the EU have been mixed and it is likely that national business and sectoral associations’ positions will reflect those of their respective governments. Whilst the outcome of the inquiry could have indirect consequences for the UK, the extension of the Rules of Origin provisions for EVs and batteries in the EU-UK Trade Cooperation Agreement by the end of the year is a more urgent priority which needs to be addressed.

Other announcements to note:

• At a time when we’re pushing the UK to accelerate progress on realising green growth opportunities, the address included the introduction of Clean Transition Dialogues with industry to support all sectors in decarbonising; a European Wind Power package to include more fast-track permitting and to improve auction systems across the EU
• In an effort to make it easier to do business, legislative proposals towards reducing reporting obligations at the European level by 25% will be put forward next month and an EU SME envoy will be appointed by the end of the year.
• The first meeting of the new Critical Raw Materials Club to take place in October 2023, which the UK has been invited to join.
• The Commission aims to conclude FTAs with Australia, Mexico and Mercosur by the end of 2023, and soon thereafter with India and Indonesia.
• With a bearing on our own work on AI opportunity and governance, von der Leyen also made a commitment to work with international partners towards minimum global standards for safe and ethical use of AI.

9-10 September: G20 leaders met in New Delhi for the G20 Summit and adopted a leaders’ declaration. Overall, the summit resulted in limited concrete outcomes, however the agreement by all on common language addressing the Russian war in Ukraine was heralded as a success. Although this didn’t specifically attribute blame to Russia, leaders maintain that achieving agreement from all is a sign of renewed commitment to the G20 process. This comes following the high profile and recently expanded BRICs summit which took place in August, potentially threatening the relevance of the G20, particularly given Chinese leader Xi Jinping decided not to attend the G20.

G20 recommendations:

The declaration covers a range of areas from sustainable growth to multilateral institutions and technological transformation. On climate – where we believe the UK still has the chance to retake its global leadership – leaders agreed to pursue tripling renewable energy capacity globally by 2030 and accepted the need to phase-down unabated coal power, but made no progress on concrete commitments to phase out fossil fuels. Other outcomes include:

• A voluntary G20 Framework was agreed for the development, deployment and governance of Systems of Digital Public Infrastructure
• The African Union was made a permanent member of the G20, with the summit seeing an increased focus on the Global South
• The Green development pact for a sustainable future was adopted.

B20 Summit:

At the B20 Summit, which the CBI attended, business adopted recommendations to G20 leaders, under the theme of ‘RAISE’; Responsible, Accelerated, Innovative, Sustainable and Equitable Businesses. The communiqué calls on the G20 to pursue significant reform of the WTO, to ensure that COP28 works to accelerate the action and finance needed to deliver the Paris agreement and to give a clear endorsement for reaching a multilateral agreement to modernise the global tax system.

Next steps:

Brazil will take on the Presidency of the G20 next year, with the Brazilian National Confederation of Industry, CNI, taking on the Presidency of the B20. CBI has a good working relationship with CNI and they will hold a virtual kick-off event in January 2024. At the same time, Italy will take over the Presidency of the G7 and our sister federation Confindustria will lead the B7. Emma Marcegaglia, former BusinessEurope President will take on the role of B7 President – she’s someone the CBI has worked with for many years.

India–Middle East–Europe Economic Corridor

A significant outcome to emerge from the G20 was the India-Middle East-Europe Economic Corridor, agreed by the US, EU, India, Saudi Arabia and the UAE. The proposed corridor will connect India to the Arabian Peninsula, which will then be connected to the Mediterranean Sea via a new rail corridor running across the Middle East. Faced with challenges around economic security, we see the EU and the US turning to new coalitions to ensure resilient supply chains and access to critical minerals.

Some commentators have criticised the UK government for not being part of this economic corridor, but it’s worth noting that UK-India FTA negotiations are on-going and it is hoped that any future agreement would include provisions on resilient supply chains and access to raw materials.