BDI/BDA BRUSSELS UPDATETHE GERMAN BUSINESS REPRESENTATION

December 2015

The consummate art ofclimate diplomacy

In early December delegations from 195nations came together in Paris for twoweeks of highly complex negotiations.France orchestrated the preparation andleadership of the conference with greatflair. On the agenda was no less a goalthan a successor agreement to the KyotoProtocol on greenhouse gas emissionswhich expires in 2020.

>> page 2

Environmental Policy

Package for the circulareconomy

The circular economy package compri-ses a general action plan as well as pro-posals for modifications to a series ofwaste directives.

>> page 2

Trade Policy

Council of Trade Ministersin Brussels 

Even more transparency during the ne-gotiations on TTIP was one of the mainresults of the meeting of EU MemberStates’ Trade Ministers.

>> page 3

Raw Materials

Level playing field in rawmaterials trade

The new BDI position paper illustrateswith concrete examples the develop-ments and challenges in raw materialstrade.

>> page 4

European Commission

Start of the EuropeanSemester 2016

The new European Semester on coordi-nation of economic and fiscal policykicked off at the end of November.

>> page 5

Further issues

Consultation on national competition authorities>> page 6Consultation on national competition authorities>> page 6

Platform against clandestine work>> page 6Platform against clandestine work>> page 6

BDI/BDA Brussels Update December 2015 02

The consummate art of climate diplomacyThe consummate art of climate diplomacy

The climate compromise reached in Paris constitutes an import-ant step on the long road to reducing global greenhouse gasemissions.

In early December delegations from 195 nations came togetherin Paris for two weeks of highly complex negotiations. Franceorchestrated the preparation and leadership of the conferencewith great flair. On the agenda was no less a goal than a suc-cessor agreement to the Kyoto Protocol on greenhouse gasemissions which expires in 2020.

Managing to persuade so many countries to agree on a com-mon objective is a success in itself. Unfortunately, at the sametime, the agreement falls short on essential points of whatwould have been necessary to implement appropriate climateprotection efforts fairly and on a binding basis.

A consequence of the Paris Agreement is that Germany andEurope will have to continue to protect their industries againstuneven global competition conditions. Because the Paris textregrettably does not deliver the hoped-for breakthrough to com-

parable framework conditions for companies which are exposedto international competition. As a result, the disappointinglyvague Paris Agreement will do nothing to make the Europeandebate on the course of climate policy simpler.

Agreement has been reached on a five-year mechanism for mo-nitoring voluntarily notified national climate protection measu-res. Yet this can only be a first step towards binding, compara-ble and verifiable efforts of all parties to the agreement.

It has not proved possible to include emerging economic po-wers appropriately in the financing of climate protection: thetwo-way breakdown between old industrialised countries anddeveloping countries has not been adequately addressed, theone-sided division of financing burdens has not been overcome.Despite the high political expectations of investments measuredin billions and investment efforts by the private sector, the invol-vement of business in the further process of necessary firming-up of the provisions agreed in Paris remains unclear. The factthat an agreement has been reached can also be ascribed toagreements between individual nations reached in advance.The idea here is to organise climate protection as an economicprogramme and cooperation.

A positive element is that the agreement foresees market me-chanisms for carbon as part of the solution. Only if such marketeconomy instruments are rolled out worldwide can global cli-mate targets be achieved cost efficiently. In this regard, G20States in particular are encouraged to push ahead resolutelywith the development of market mechanisms such as emissiontrading schemes and to exhaust all possibilities for internationalcooperation arrangements.

Contact:Anne Feldhusen (BDI), a.feldhusen@bdi.eu

Commission presents package for the circular economy Commission presents package for the circular economy

As announced, the European Commission presented the circu-lar economy package on 2 December. It comprises a generalaction plan as well as proposals for modifications to a series ofwaste directives.

With this package, the Commission seeks to bring together thethemes of product design, resource efficiency and preservationas well as waste and recycling under the umbrella of the »circu-lar economy«. For waste management and recycling, the Euro-pean Commission proposes, among other things, recycling tar-gets of 65 percent for municipal waste, 75 percent for packa-ging waste together with a limitation on landfilling of municipalwaste to a maximum of 10 percent of total waste.

Furthermore, the rules for producers’ responsibility should berecast and minimum requirements for the establishment of cor-responding systems should be defined in the Member States.To improve the marketability of secondary raw materials reco-vered from waste, the Commission plans the development ofEuropean quality standards for these materials. In addition, thescope for repairability, durability and recyclability of productsshould be more strongly promoted by placing more weight onthese aspects in implementation of the eco-design directive.

BDI welcomes presentation of the circular economy package. Itopens the way for better use of the raw materials potential inthe European single market to the benefit of consumers and

BDI/BDA Brussels Update December 2015 03

businesses. The availability of raw materials in Europe will beimproved in this way.

The circular economy can promote the efficient use of re-sources through an assessment across the entire lifecycle. Ne-vertheless, this will succeed only if European requirements andlaws are effectively implemented in the Member States. Howe-ver, in reality, waste in many countries continues to end upmainly in landfills.

On this point, the circular economy package must bring aboutfundamental improvements by placing the right accents. Theexample of Germany with its high recycling and recovery stan-dards shows that this is possible. However, the way the circulareconomy is designed must not jeopardise other instrumentswhich function well. It would be counterproductive unilaterally todistort implementation of the eco-design directive through newstatutory recycling requirements. When products are being desi-gned, all aspects must be taken into consideration in a balan-ced way: environmental protection, safety and functionality.

Contact:Dr Alexander Kessler (BDI), a.kessler@bdi.eu

Council of Trade Ministers discusses with Trade CommissionerCouncil of Trade Ministers discusses with Trade Commissioner

Even more transparency during the negotiations on the Transat-lantic Trade and Investment Partnership (TTIP) was one of themain results of the meeting of EU Member States’ Trade Minis-ters on 27 November 2015 in Brussels.

The Luxembourg Council Presidency jointly with the TradeCommissioner Cecilia Malmström announced at the end of themeeting that in future all members of the European Parliamentand of the parliaments of the Member States would be able toconsult the consolidated negotiating texts for the TTIP negotiati-ons. The precise arrangements would still have to be clarifiedwith the US partner. In addition, the European Commission en-joyed broad support among the Member States for its line in thearea of investment protection.

The main thrust of the Commission’s communication »Trade forAll« was also broadly endorsed in the Council. With a view tothe 10th WTO Ministerial Conference in mid-December in Nai-robi, only minimal results were expected in the negotiations onthe Doha Development Round. There was still hope that the ne-gotiations on the revised information technology agreementwould be concluded and that the negotiations on the so-called»environmental goods agreement« could be partially concluded

with an agreement on the list of goods. It was still unclear afterthe meeting whether the EU wanted to press ahead with Mer-cosur on the basis of an offer by the partners to the negotiationsto eliminate import duties covering 87 percent of the trade volu-me. A further examination and an internal discussion on theoffer was announced.

BDI/BDA Brussels Update December 2015 04

Negotiations with Asian partners played an important role in theCouncil meeting. It was announced that negotiations on a free-trade agreement with the Philippines could open soon. In addi-tion, Indonesia would signal an interest in negotiations at thehighest level. The negotiations with Vietnam had officially endedsuccessfully the previous day. However, the text for the invest-ment protection chapter in the agreement was not yet complete.It was nevertheless clear that it was the first agreement to com-prise the European approach of an investment court system.

During the meeting’s lunch break, Trade Ministers held confi-dential talks with the Commissioner on the economic and legalaspects as well as the options for action surrounding the possi-bility of the EU granting market economy status to China. Infor-

med sources report that the Commission would like to present alegislative proposal which would also address the concerns ofthe Member States and the industries mainly affected. In thediscussion, the Council is said to have invited the Commissionto provide information on the legal and economic aspects of thetheme for the purpose of clarification. The Commission announ-ced an economic impact assessment for the end of the year.

Contact:Eckart von Unger (BDI), e.vonunger@bdi.eu

BDI position paper calls for a level playing field in raw materials tradeBDI position paper calls for a level playing field in raw materials trade

Secure and non-discriminatory access to raw materials is ofcentral importance for the competitiveness and future successof German and European industry.

However, over recent years there has been a significant incre-ase in trade barriers which make purchasing raw materialsmore difficult or more expensive. For the first time, the new BDIposition paper »Trade and competitive distortions in the rawmaterials sector« illustrates with concrete examples the deve-lopments and challenges in raw materials trade. Also the Euro-pean Commission has observed an increase in protectionistmeasures from 100 to 858 since 2008.

Several countries have for years been pursuing a targeted rawmaterials policy in order to secure the availability of raw materi-als for their own companies and to increase domestic valuecreation. Yet, whereas protectionist measures by resource-richcountries do not bring about the desired improvement in thecompetitiveness of the downstream processing industries, a su-stainable raw materials sector can be promoted through trust,greater market transparency and fair trading conditions.

While the situation on raw materials markets, especially interms of prices, currently appears to be less tense, structuralproblems in raw materials trade will yet again come to the foreonce the world economy and demand for raw materials picks upagain. In BDI’s view, the German government and the Euro-pean Commission should therefore work consistently for a dis-mantling of trade- and competition-distorting measures, and ad-dress non-discriminatory access to raw materials more stronglyin the framework of G7 and G20.

You can find the German version of the position paper here.

Contact:Anna-Lynn Ratz (BDI), a.ratz@bdi.eu

BDI/BDA Brussels Update December 2015 05

Start of the European Semester 2016 Start of the European Semester 2016

The new European Semester on coordination of economic andfiscal policy kicked off at the end of November with the assess-ment of national draft budgets, the Annual Growth Survey andthe Alert Mechanism Report. Against the background of growingmacroeconomic imbalances, hesitant structural reforms andhigh government debt, the European Commission’s assessmentis extremely mild.

The budget deficit in the Eurozone overall will reduce slightlyfrom 1.9 percent in 2015 to 1.7 percent of GDP in 2016. Debt isexpected to fall from the high point of 92 percent of GDP in2014 to just below 90 percent in 2016. A large portion of this po-sitive fiscal development is thanks to Germany. Without Germa-ny, public debt in the Eurozone would even increase somewhatfrom 2015 to 2016 and be around 100 percent of GDP.

For 2016 budgets, the European Commission has granted EuroMember States generous flexibility. Among other things, it hasannounced that it will accept additional spending linked to refu-gees as special effects. Individual countries have campaignedsuccessfully for reforms and investments to be allowed as ex-ceptional factors in order to increase their deficit targets underthe Maastricht criteria. However, this hollowing-out of the Stabi-lity and Growth Pact ultimately harms the credibility of this rule-book. Despite the generous interpretations of the threshold va-lues, the European Commission sees risks of these being ex-ceeded in a few countries. One major shortcoming: implementa-tion of the country-specific recommendations is a long way be-hind what is required. In the assessment using school classifi-cations there is not a single »very good« or »good«. Nine Mem-ber States are awarded a »satisfactory« and six an »adequate«.In this classification, Germany receives no more than a »satis-factory« and could have exploited a great deal of furtherpotential.

This year’s Annual Growth Report identifies three prioritieswhich were also present last year in a similar form:

• A strengthening of investment activity• Continuation of structural reforms to modernise economies• A responsible budget policy

The Annual Growth Survey rightly places an emphasis in thearea of demographic developments. The cross-border conside-ration of the associated challenges for reforms of social protec-tion systems is necessary and overdue. The same applies tothe call for more investment in education.

In the Alert Mechanism Report, the European Commission iden-tifies imbalances in the current accounts. Similarly the appraisalof public and private debt situations is also critical. Debt reduc-tion is taking place only slowly in a few Member States andnon-performing loans are a burden on financing conditions inthe corporate sector.

In Germany, too, the European Commission sees macroecono-mic imbalances – as it did last year. In 2015 the current accountsurplus will continue to grow and is expected to reach 8.7 per-cent of GDP. This means that the three-year average is consi-derably above the threshold value of 6 percent. The report assi-gns part of the increase to special factors such as the favoura-ble Euro exchange rate. Regardless of this, the threshold valuewill be exceeded. But this is not because German wage policyhas been too cautious. Unit labour costs in Germany havegrown more strongly than the average in the Eurozone. Germanexporters are competitive less on price and more on quality.Rather, the causes of this imbalance should be sought in thepersistent investment weakness which must be addressedmuch more robustly through better economic policy frameworkconditions.

Contacts:Dr Wolfgang Eichert (BDI), w.eichert@bdi.euAlexander Humbert (BDA), a.humbert@arbeitgeber.deAnne Meister (BDA), a.meister@arbeitgeber.de

BDI/BDA Brussels Update December 2015 06

Publisher: BDI - Federation of German IndustriesBreite Str. 29; 10178 Berlin; www.bdi.eu

European Commission wants to strengthen powers of national competitionauthorities European Commission wants to strengthen powers of national competitionauthorities

Until 12 February 2016 the European Commission is conductinga public consultation on whether national competition authoritiesin the EU should have additional instruments for enforcement ofEuropean antitrust law. Once the consultation results have beenevaluated, the Commission will very probably propose legisla-tive measures.

In the Commission’s view, possible improvements in the appli-cation of EU law in the Member States could consist in

• improving instruments available to national competition autho-rities to detect and manage infringements of EU competitionprovisions (»adequate competition toolbox«). For instance, theCommission is critical of the ban that exists in some MemberStates on gathering evidence stored on digital devices such aslaptops or tablet PCs during an investigation.

• guaranteeing effective sanctions for antitrust infringements –for example, some authorities failing to take account of the fullduration of the anticompetitive behaviour when setting the levelof fines.

• ensuring effective leniency programmes in all Member States.

• ensuring the independence of national competition authoritieswhen enforcing EU competition law and guaranteeing the ne-cessary personnel and financial resources.

BDI has repeatedly spoken in favour of coherent procedural ru-les, in particular for leniency applicants. The Commission’s in-itiative could lead to a welcome dismantling of procedural lawhurdles here. However, encroachment into established con-cepts of Member States’ law such as the rules on corporategroup liability should not be enabled through an alignment ofenforcement provisions. In addition, a strengthening of antitrustauthorities’ enforcement powers must always go hand in handwith appropriate procedural rights of the affected companies.

Contacts:Nadine Rossmann (BDI), n.rossmann@bdi.euDr Ulrike Suchsland (BDI), u.suchsland@bdi.eu

Platform against clandestine work: social partners were refused a voting right Platform against clandestine work: social partners were refused a voting right

In November the European Parliament, the Council and the Eu-ropean Commission agreed on a common compromise in thetrilogue negotiations on the establishment of a platform tostrengthen cooperation in preventing and deterring undeclaredpaid work. The preceding decision-making in the European Par-liament’s Committee on Employment and Social Affairs wascomplicated. More than 400 amendment proposals weresubmitted.

The platform is now set to comprise one representative perMember State, a representative of the Commission as well astwo social partners organised at EU level respectively. The vo-ting right is conferred to the Member States representativesonly. The 14 representatives of social partners in sectors obtainan observer status. Their contributions are to be taken into dueconsideration according to the rules of procedure. The platformagainst clandestine work is expected to meet at least twice ayear.

BDA is pleased that parties to the trilogue have decided not toassign any binding effect to the platform’s measures againstclandestine work. This would have meant a one-size-fits-all so-lution, inadequately taking into account the different situations inthe Member States. Nevertheless, BDA criticises the fact thatthe social partners have been refused a voting right in the plat-form against clandestine work. If social partners are to assumeresponsibility as members of the platform and contribute to itswork, they should also have a voting right.

The compromise agreed must now be confirmed by EP andCouncil. The EP plenary will provisionally debate this theme inFebruary 2016.

Contact:Eric Veillerobe (BDA), e.veillerobe@arbeitgeber.de

Photo credits:Fotolia/ Zechal (1, 2), Fotolia/ Alexey Zarodov (1, 3),Fotolia/ anekoho (1, 3), Fotolia/ papa1266 (1, 4),Fotolia/ Sven Hoppe (1, 5) Editors: Joscha Ritz (Responsible in terms of German Press Law), Leonie Dack