NEWSFLASH:ECONOMICS ANDINTERNATIONAL

TRADE

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European Associationof Chemical

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New World Bank report “Global EconomicProspects” On 8 June the World Bank published their latest“Global ‘’Economic Prospects”, forecasting the globaleconomy to shrink by 5.2% in 2020, which wouldrepresent the deepest recession since the SecondWorld War. Economic activity among advancedeconomies is anticipated to shrink 7% in 2020 asdomestic demand and supply, trade, and finance havebeen severely disrupted. Emerging market anddeveloping economies (EMDEs) are expected to shrinkby 2.5% this year, their first contraction as a group in atleast sixty years. Per capita incomes are expected todecline by 3.6%. The blow is hitting hardest in countries where thepandemic has been the most severe and where there isheavy reliance on global trade, tourism, commodityexports, and external financing. While the magnitude ofdisruption will vary from region to region, all EMDEshave vulnerabilities that are magnified by externalshocks. Moreover, interruptions in schooling andprimary healthcare access are likely to have lastingimpacts on human capital development. Under the baseline forecast—which assumes that thepandemic recedes sufficiently to allow the lifting ofdomestic mitigation measures by mid-year in advancedeconomies and a bit later in EMDEs, that adverseglobal spillovers ease during the second half of theyear, and that dislocations in financial markets are notlong-lasting — global growth is forecast to rebound to4.2% in 2021, as advanced economies grow 3.9% andEMDEs bounce back by 4.6%. However, the outlook ishighly uncertain and downside risks are predominant,including the possibility of a more protracted pandemic,financial upheaval, and retreat from global trade andsupply linkages. A downside scenario could lead theglobal economy to shrink by as much as 8% this year,followed by a sluggish recovery in 2021 of just over 1%,with output in EMDEs contracting by almost 5% thisyear.

Economic outlook (part 1/4)The U.S. economy is forecasted to contract6.1% this year, reflecting the disruptionsassociated with pandemic-control measures.Euro Area output is expected to shrink 9.1% in2020 as widespread outbreaks took a heavy tollon activity. Japan’s economy is anticipated toshrink 6.1% as preventive measures haveslowed economic activity. Regional OutlooksEast Asia and Pacific: Growth in the region isprojected to fall to 0.5% in 2020, the lowest ratesince 1967. For more, see regional overview.Europe and Central Asia: is forecasted tocontract by 4.7%, with recessions in nearly allcountries. For more, see regional overview.Latin America and the Caribbean: regionaleconomic activity to plunge by 7.2% in 2020.For more, see regional overview. Middle East and North Africa: forecasted tocontract by 4.2% as a result of the pandemicand oil market developments. For more, seeregional overview.South Asia: Economic activity in the region isprojected to contract by 2.7% in 2020 aspandemic mitigation measures hinderconsumption and services activity and asuncertainty about the course of the pandemicchills private investment. For more, see regionaloverview.Sub-Saharan Africa: Economic activity in theregion is on course to contract by 2.8% in 2020.For more, see regional overview. Download the June 2020 Global EconomicProspects report. With this assessment the World Bank turns outeven more pessimistic than the InternationalMonetary Fund (IMF), which had assumed adecline of 3% in the overall global economy intheir latest publication end of April.

A renewed outbreak of infections triggers a return to lock-downs.World economic output plummets 7.6% this year, before climbing back 2.8% in 2021. The OECD unemployment rate nearly doubles to 10% with little recovery in jobs by 2021.

Global economic activity falls 6% in 2020 and OECD unemployment climbs to 9.2% from 5.4% in2019.Living standards fall less sharply than with a second wave but five years of income growth is lostacross the economy by 2021.

Double-hit scenario: A second wave of infections hits before year-end

Single-hit scenario: A second wave is avoided

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OECD's latest economicoutlook Also the OECD (= Organisation ofEconomic Cooperation &Development) has recentlyreleased their latest economicoutlook which focuses on twoequally probable scenarios – onein which a second wave ofinfections, with renewed lock-downs, hits before the end of2020, and one in which anothermajor outbreak is avoided.

Economic outlook (part 2/4)

European CommissionThe latest forecasts of the EU Commission estimate a 9 to 15% decline in nominal export valuesfor 2020, which would be equivalent to a loss of €282bn to up €470bn in total. The EU´s year-to-date statistics – status: April 2020 – show a 28.2% decrease of exports on ayear-on-year basis; this decline is even more severe than the one of the US (20.5% less exports)for the same period. Since 50-70% of the EU´s Gross Domestic Product (GDP) depend on consumption, it is extremelyimportant to restore the consumers´ economic confidence, which is currently remaining on very lowlevels. BGAGerman Wholesalers´ Association (BGA = Bundesverband Gross- und Außenhandel)reported a loss of 30% in exports and 22% in imports for their area of responsibility in quarterI/2020. In this context it is particularly noteworthy that exports to the UK decreased by over-proportional 42%. Main issues for German wholesalers at the moment are a lack of demand in theEurozone, to a lesser extent also from China, and this trend is expected to continue for the comingmonths. BGA also mentioned L/C issues (due to the fact that banks only accept originals, but not digitalversions), liquidity crunches and sea & airfreight issues, the latter accompanied by boosting priceseven for contracted cargos. 11 million employees in Germany are currently in furlough, which is amuch higher number than during the financial crisis of 2009. 72% of all employees in the hotel,restaurants & cafés´ sector fall under this scheme – this sector is clearly affected most, followed bythe automotive and machinery sectors.

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Economic outlook (part 3/4)

Second VCH survey on economic sentiment in distributionIn a second membership survey conducted in early June, in which 62 companies participated,German national distributors´ association VCH noted a marked deterioration of the economicsentiment in comparison to their previous May poll. This applies specifically to recent order booktrends and expectations for the next 3-6 months. In June, 80% of the respondents reported a decline in incoming orders (May: 60%).Moreover, also the budget impact was rated more pessimistically than beforehand, with 60% of thecompanies describing their situation as “negatively affected” or “very negatively affected”, whereasin May 70% of the surveyed companies had reported no or only a slight impact. Sector-wise thepicture remains almost unchanged: the challenging situation in the automotive sector pays its effecton the chemical distributors with activities in this sector. For the first time companies were also surveyed on the supply and demand situation world-wide inearly June. The replies indicated a rather relaxed supply situation in total with difficulties withimports from China and India. The negative impacts in terms of sales were mainly fed back forEurope.

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Economic outlook (part 4/4)

CBA: economic sentiment in distribution Major decline in order books and sales - employment turns negative The latest Supply Chain Trends Survey from the Chemical Business Association (CBA) shows amajor decline in order books and current sales as well as the industry’s forecast for employmentturning negative.The CBA’s on-line Trends Survey was conducted during the two weeks from 8-19 June 2020 and isbased on responses from 58 member companies.Major take-outs from the survey: CURRENT ORDER BOOKS – Major negative swingMembers are asked if their order books are better, worse, or the same than during the previousthree months. The March survey shows a negative balance of -33% - an adverse swing of 66%since CBA’s last survey in March 2020 which reported a positive balance of +33%. SALES VOLUMES – Sharply negativeRespondents compare their current sales volumes with the preceding three months and indicatetheir expectations for the next three months. Current sales volumes have turned sharply negative at-31%. In March, members companies reported a positive balance of +32%. This represents asignificant decline of 63% in business sentiment. The outlook for the next three months remainspositive at +9% (March 2020, +5%). SALES MARGINS – Barely positive and forecast to turn negativeCompanies compare their current sales margins with the preceding three months and also forecasttheir trend over the coming three months. Current sales margins are now barely positive at +4%, amarginal improvement on the last survey when margins were neutral (at 0%). The outlook for futuresales marginsremains negative at -7%, the same outcome as our last survey in March 2020.

EMPLOYMENT – turned negative for the first timeMember companies are asked if their employment levels will be higher, lower, or remain the sameover the next three months. For the first time, in the eight years of these surveys, membercompanies have reported a negative trend in employment of -8% a reflection of the impact of Covid-19 and the future uncertainty in levels of business activity.

Report from the European Commission to the Parliament and the Council onTrade and Investment BarriersThe report gives an overview of trade and investment barriers directly affecting EU businesses, asreported and addressed through the EU’s enhanced Market Access Partnership between theCommission, the Member States and EU business. In 2019, the overall number of barriers kept increasing, a sign that protectionism has now becomeingrained in trade relations with many partners. With 438 active barriers on record at the end of2019 in the EU Market Access Database, this constitutes a qualitatively different trade context,requiring a paradigm shift in the way the EU pursues and defends its legitimate interests.The EU-27 trade flows affected by the 43 new barriers in 2019 are estimated to reach as high as€35.1 billion, hampering primarily the ICT, automotive and electronics sectors. These are highlystrategic domains related to EU technological sovereignty. EU action to remove barriers was successful, with 40 barriers removed in 2019. Detailedeconometric analysis shows that barrier removal work generated at least €8 billion additional exportfor EU companies, a figure comparable to the benefits of some of our FTAs.At the same time, most breakthroughs took place in the agrifood sector, while removal of keyindustrial and services barriers proved more challenging. This also calls for a reshaping of the EU’sapproach to ensure barrier removal, enforcement and implementation.

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Trade and Investment Barriers report

Geographical breakdown of trade and investment barriers in the MADB

From a geographical perspective, salient points also emerged. In 2019, China ranked again firstwith the highest total number of barriers (38). And while two agrifood barriers were removed, fournew barriers with major economic impact in strategic sectors (data, cybersecurity, telecoms) wereadded. The Mediterranean & Middle East region represents almost half of all the new barriersrecorded in 2019, unfortunately substantiating the fears of increasingly virulent protectionism in thisarea of the world. The situation in Russia remained challenging, while three barriers wereresolved. New and resolved barriers in Australia and South Korea contributed to the 2019 tallyand represented a sizeable share of the EU trade flows potentially affected. Finally, after the large increase in market access barriers in 2018, the situation with the UnitedStates did not improve in 2019. While no barriers were resolved in 2019, our comprehensive effortscontinue. As illustrated in the report, there seems to be a paradigm shift, with protectionism becomingingrained in trade relations, barriers affecting sectors at the heart of the EU’s technologicalsovereignty, increasing challenges in addressing industrial and services barriers, and barriersspreading across specific regions in a sort of contagion effect. This calls for a new EU approach todefending our interests as we stand up for our rights in an increasingly polarised and uncertaintrading environment.

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Trade and Investment Barriers report

Sectorial breakdown of trade and investment barriers reported in 2019 (number of barriers)

Agriculture and Fisheries, 16

Multi-sector, 5

Automotive, 3

Horizontal, 4

ICT, 3

Mineralproducts,1Pharma,

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Wood,PaperandPulp, 2

Cosmetics,1

CeramicsandGlass,1

Otherindustries, 1

Iron, Steeland Non-FerrousMetals, 1

Ship-building,1

TextilesandLeather, 1

Wines&Spirits,1

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Open EU consultations (part 1/2)A renewed trade policy for a strongerEurope On 15 June the European Commission launched amajor review of the European Union's trade policy,including a public consultation seeking input from theEuropean Parliament, Member States, stakeholdersand civil society.Please find the consultation note by clicking here.The Commission's objective is to build a consensusaround a fresh medium-term direction for EU tradepolicy, responding to a variety of new globalchallenges and taking into account the lessons learnedfrom the coronavirus crisis.The results of this consultation will feed into acommunication to be published towards the end of theyear. Have your sayFecc plans to provide aggregated input to theconsultations, which are open until 15 September2020. For this reason, we warmly invite you to sendany comments and suggestions you might have toElias Rito (eri@fecc.org) by Thursday 10 September2020 for consolidation and submission as Fecccomments. In parallel, Fecc members can also provide feedbackon behalf of their own company by 15 September2020 by sending an email to trade-policy-review-2020@ec.europa.eu. In case you take this option,please provide Fecc (eri@fecc.org) with a copy of yourfeedback for the aggregated version of the Feccresponse and to ensure our sector´s feedback to theEuropean Commission is well-aligned.

EU public consultation on the reformof the EU's Generalized System ofPreferences (GSP) scheme The Commission launched a preparatory work inorder to support a possible review of the legalframework governing the EU’s GeneralisedScheme of Preferences (GSP).The objective of the public consultation is to hearthe views, experiences and evidence of a widevariety of stakeholders which can provideprecious insights to the ongoing reflection on thepossible review and complement other analyticalmethods. The findings of the consultation will berelevant to the preparatory work, including anImpact Assessment on possible policy options.

The European Commission has extended thedeadline until 15 July 2020 for the EUquestionnaire on the GSP modernisation proposaland how it affects EU businesses. You mayanswer the questionnaire by clicking HERE.The developments are constantly monitored byFecc. For more information about the GSPscheme, click HERE. Latest developments:

Beneficiaries of the EU's GSP fall under one ofthree arrangements - General GSP, GSP+, or‘Everything But Arms’ - matching benefits andcommitments with level of development.Current stakeholder discussions take intoaccount countries that have changedarrangements, or countries where preferencesare temporarily withdrawn.As previously reported last March at the previousinternational trade newsletter, the partial removalof trade preferences for Cambodia continues tobe in effect.Pakistan has been classified as a GSP+ statuswhich grants full removal of tariffs on over 66%of EU tariff lines.Uzbekistan has applied for GSP+ status and itsarrangement is still under evaluation.

Module 1 proposes the establishment of a generalmarket scrutiny instrument to capture all possiblemarket situations in which foreign subsidies maycause distortions in the Single Market.Module 2 intends to specifically address distortionscaused by foreign subsidies facilitating theacquisition of EU companies.Module 3 addresses foreign subsidies thatcould have a harmful effect on the conduct of EUpublic procurement procedures.

EU consultations on foreign subsidies The Commission presented a White Paper on levellingthe playing field as regards foreign subsidies.It reflects on possible new tools to address the distortiveeffects of foreign subsidies in the single market. This willhelp prepare the ground for a legislative proposal in2021.The paper proposes three approaches, which can becomplementary:

The White Paper also sets out ways to address the issueof foreign subsidies in the case of applications for EUfinancial support. A public consultation on the White Paper has beenlaunched. Comments can be submitted until 23September.

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Open EU consultations (part 2/2)

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State of play The UK press recently commented that renewed talkabout Brexit (of which everyone was tired in 2019) inrecent weeks was almost welcome after months ofnothing but COVID. After the virus struck, there wereno meetings for nearly 6 weeks, but the discussionsbetween Michel Barnier and UK negotiator David Frosthave restarted by videoconference, along with paralleldiscussions with specialised teams online. Progresshas been slow, and last month an ill-temperedexchange of letters between Barnier and Frost madethe discussions even more difficult. The UK is accusingthe EU of demanding too much in return for a tariff-freedeal in terms of a ‘level playing field’ on issues ofcompetition and regulation, and a role for the EuropeanCourt in resolving differences. The other point ofdispute is the demand from the EU side to maintainaccess to UK waters for EU fishing fleets along theChannel and North Sea. The UK considers theseincompatible with the UK’s status as an independentcountry and cannot understand why they cannot havean EU-Canada style agreement. Barnier’s reply pointedto the proximity of the UK and volume of tradecompared with Canada, and that the UK was seekingthe same access to the single market as a memberstate, but the right to pick and choose on regulation. Healso accused the UK of seeking to delay realnegotiation to create a last-minute crisis in the hope ofEU resolve crumbling. By the end of June, each sidewill need to decide whether to go for an extension (upto 2 years), which the UK has officially rejected. It isclear that present progress is too slow for a deal byDecember. Meanwhile the UK has started negotiationswith the US, but faces demands on agriculture andregulation which it will find hard to accept. US electionsin November will soon also make any substantial dealdifficult to achieve.

Brexit updates (part 1/3)Latest news On Monday 15 June, European CommissionPresident Ursula von der Leyen, President ofthe European Council Charles Michel and UKPrime Minister Boris Johnson met during avideo conference. The three parties agreed on aplan to intensify the talks in July and to createthe most conducive conditions for concludingand ratifying a deal before the end of 2020. Time is extremely pressing, because a dealwould need to be concluded by October 2020 toleave sufficient time for the EU-internalratification process, the more so as the UKgovernment has categorically ruled out anyextension of the negotiation time frame beyondend-2020. Meanwhile trade experts in theBrussels bubble regard a so-called “light deal”for goods and tariffs as likely outcome, but alsoa no-deal result could occur. As per Fecc´s previous Brexit newsflashes westrongly recommend contingency planning to allour members to get prepared for theseoutcomes. The next negotiation round starts on29 June. Britain is said to show first signs ofopenness for a potential compromise in whichthe country would face tariffs, if it undercutEuropean regulations.

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In order to give businesses the necessary time toprepare, the UK Government is introducing bordercontrols in three stages for EU goods imported intoGreat Britain. At this moment of writing, it is unlikely theEU will give British businesses exporting to the EU thesame treatment. The stages are as follows: From January 2021:Traders importing standard goods, covering everythingfrom clothes to electronics, will need to prepare forbasic customs requirements, such as keeping sufficientrecords of the imported goods.They will have up to six months to complete customsdeclarations.Where tariffs need to be paid on the import, paymentscan be deferred until the customs declaration has beenmade. There will be checks on controlled goods likealcohol and tobacco. Businesses will also need toconsider how they account for VAT on imported goods.There will also be physical checks at the point ofdestination or other approved premises on all high risklive animals and plants. From April 2021:All products of animal origin (POAO) - meat, pet food,honey, milk, etc. - and all regulated plants and plantproducts, will also require pre-notification and therelevant health documentation.

Brexit updates (part 2/3)

On 13 May 2020 Fecc co-hosted awebinar with law firm Steptoe on"Brexit & the Chemicals Sector: WhatNext?". Three specialists from law firm Steptoe,Darren Abrahams, David O’Sullivan andHannah Widemann, gave an overviewof the status of the Brexit negotiationsand the future challenges for chemicaldistribution on both sides of the Channelafter Brexit. The full summary and thepresentation can be found in the Feccmembers' area.

From July 2021:Traders moving all goods will have to makedeclarations at the point of import and pay therelevant tariffs. Full Safety and Securitydeclarations will be required. For Sanitary andPhytosanitary commodities (SPS), there will bean increase in physical checks and the takingof samples: checks for animals, plants and theirproducts will now take place at GB BorderControl Posts. To help handle the expected 200 million extracustoms declarations, the UK Government hasdeveloped a new £50m package to boost thecapacity of customs intermediaries such ascustoms brokers, freight forwarders andexpress parcel operators. Additionally, the UKGovernment has committed to building newborder facilities in Great Britain for carrying outrequired checks, such as customs compliance,transit and Sanitary and Phytosanitary (SPS)checks, as well as providing targeted support toports to build new infrastructure.

UK government is introducing bordercontrols in three stages for EU goodsimported into Great Britain after 31stDecember 2020. The UK has formally notified the EU that it will neitheraccept nor seek any extension to the current TransitionPeriod ending on 31 December 2020.

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Brexit updates (part 3/3)

UK-based suppliers included in the listestablished under Article 95 of Regulation (EU)No 528/2012 should appoint a representativeestablished within the Union and communicatethis to the European Chemicals Agency(ECHA) (by submitting a “request forcorrection”) in due time, so that the informationon the Article 95 list is updated before the endof the transition period. Suppliers included in the Article 95 list andlocated in third countries with a representativein the United Kingdom should appoint a newrepresentative established within the Unionand communicate this to ECHA (by means of a“request for correction”) in due time, so that theinformation on the Article 95 list is updatedbefore the end of the transition period. UK-based holders of authorisations shouldtransfer the authorisation to a new holderestablished within an EU Member State. UK-basedAuthorisation's holders can trigger theamendment of their existing authorisation bymeans of an administrative change requiringprior notification before implementation. Such achange has to be submitted sufficiently in timebefore the end of the transition period.

Withdrawal of the United Kingdom and EUrules in the field of biocidal products On 17 June the European Commission haspublished a notice to stakeholders on the“Withdrawal of the United Kingdom and EU rules inthe field of biocidal products”. The documenthighlights in particular the following:

Establishment requirementsLabelling Approvals of active substances and theinclusion of active substances in Annex I Data sharing and data protection Authorisations of biocidal products Authorisations granted under article 26 andnotifications under article 27(1) ofRegulation (EU) no 528/2012 (simplifiedprocedure) Treated articlesIT issues – register for biocidal products(R4BP) Parallel trade

The document is structured in three main parts:A. Legal situation after the end of thetransition periodB. Relevant separation provisions of thewithdrawal agreement, andC. Applicable rules in Northern Ireland afterthe end of the transition period

In Part A are provided clear information on thefollowing aspects as regards the biocidalproducts:

Interested Fecc members can visit the ‘Brexit’section on ECHA’s website, as well as theCommission’s website on Chemicals, whichprovide additional information. These pages areregularly updated. For any question, please donot hesitate to contact Simina Dreve atsdr@fecc.org. The notice to stakeholders on the “Withdrawalof the United Kingdom and EU rules in the fieldof biocidal products" can be found here.

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Export restrictions for some personalprotective equipment Several Member States had imposed exportrestrictions for some personal protectiveequipment. The Commission introduced an exportauthorisation system to replace national bans andlimited the scope to protective masks only. TheCommission has granted duty relief for the import ofprotective equipment in big times of the pandemic, butwith a narrow scope, excluding imports for commercialpurposes. EU-US negotiations EU-US negotiations for a limited trade agreement(zero tariffs on industrial goods except cars, reducingtrade barriers and increasing trade and servicesrelating to chemicals, pharmaceuticals and soybeans,and regulatory cooperation) have effectively stalled.There has been no agreement on including agriculturein the talks. Commissioner Hogan has pressed the USto make progress on a mini trade deal. US-China The US and China struck the so-called “phase-one-deal” in January under which China committed to buymore goods, services and energy from the US, and toimprove protection of intellectual property. The raisedtariffs imposed by the US and China saw only minorchanges. During the Corona crisis President Trumpaccused China of having created the virus in one of itslabs which Chinese officials publicly thinking of backingout of the deal. EU-VietnamAfter the positive vote in the European Parliament inFebruary 2020, the Vietnamese National Assembly hasratified the EU-Vietnam Free Trade Agreement(EVFTA) on 8 June; it is now expected to enter intoforce on 1 August 2020.

The trade deal will eliminate virtually all customsduties on exports to and from Vietnam over thenext decade, with 65 percent of exported EUproducts and 71 percent of exports from Vietnamenjoying duty-free access from day one. For theVietnamese, the deal is expected to benefitexport sectors such as textiles, shoes,smartphone & computer parts, while Europe willtake advantage of eliminated tariffs on dairy,vehicles, pharmaceuticals, wine and chocolate.Duties on vehicles, wine, medicine, chicken andpork will be reduced more gradually.

International trade developments(part 1/4)

EU imposes tariffs on Chineseproducers of glass fiber fabric inChina and Egypt The European Union imposed tariffs on Chineseproducers of glass fiber in China and Egyptafter finding they had benefited from unfairsubsidies that allowed them to sell atexcessively low prices in Europe. In a reportpublished on 15 June the Commission laid outthat companies had received preferentiallending, artificially cheap land and electricity aswell as various grants and tax breaks.

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European Parliament's InternationalTrade Committee (INTA)The International Trade Committee (INTA) of theEuropean Parliament listed the following prioritiesfor their working program: fair competition anddefense of the European Single Market, makeEuropean supply chains more diversified andresilient, where Covid-19 has illustratedvulnerabilities, manage current supply & demandasymmetries, put emphasis on SMEs, review tradedefense instruments and expand/intensify free tradeagreement negotiations including with the UK.The partial reframing of the working program tookalso the outcome of a survey of 900 small andmedium-sized enterprises all over Europe intoaccount, which had been asked end of March/earlyApril to identify the major obstacles for theireconomic activities and what would be of most helpto them in the future. All respondents named accessto finance first, referring equally to easy credits andto governmental grants. Secondly, tax cuts scoredvery high to support SMEs in reinvigorating theireconomic power after the crisis, followed byreducing bureaucracy and administrative burden ona Member State as well as on an EU level, forexample via more digital tools and less heavyquestionnaires. Fourthly, education/qualification wasmentioned with special reference to digitalisation.Fifth on the list communication appeared, i.e. moreonline and more multilingual tools, particularly fortaxes.

The Commission is expected to set out in areport (by the end of 2021) the provisionsrequired to extend the current Taxonomy tocover economic activities that are significantlyenvironmentally harmful (i.e. brown = fossil-based taxonomy).The Commission will draft climate delegatedacts, drawing on the TEG recommendations.They should be adopted by 31 December 2020to enter into force in December 2021. Thestakeholder feedback period on detailedtechnical screening criteria will be inSeptember/October.

Additionally, the Commission has launched atargeted consultation on the establishment of an EUGreen Bond Standard. Comments can be submitteduntil 2 October 2020. Environmentalists are pushing for mandatorygreenhouse gas emission reporting obligations “assoon as possible” for companies with more than 250employees. Background: As Fecc has reported in previousnewsletters, the EU Commission is currentlypreparing a new regulation for funding Europe´stransition to a low-carbon economy under theheadline “Sustainable Finance” or “Taxonomy”. InMarch 2020 the Commission has published the finalreport of a Technical Expert Group on SustainableFinance, which contains recommendations relating tothe overarching design of the Taxonomy, as well asguidance on how companies and financial institutionscan make disclosures using the taxonomy. The reportis supplemented by a technical annex consisting oftechnical screening criteria for 70 climate changemitigation and 68 climate change adaptationactivities, including criteria for “doing no significantharm” to other environmental objectives. The basicidea is to incentivize low-carbon technologies andprocesses, whereas fossil-based technologies andprocesses or any production seen as “harmful for theenvironment” will be faced with financialdisadvantages (e.g. higher taxes, tougher credit lines,no access to public funding).

The Platform on Sustainable Finance should beoperational by September 2020 the earliest anda public call for applications will start soon.

Sustainable FinanceIn mid-June the Commission's DG FISMA (Fiscalité)has published, in collaboration with the TechnicalExpert Group (TEG), a comprehensive documentwith FAQs on the final reports on the EUTaxonomy as well as the EU Green Bond Standard.Some key points:

International trade developments(part 2/4)

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On market access cases - The maindiscussion for the current is the proposedRussian labelling scheme. Starting from2019, certain types of consumer goodshave to be marked with special data matrixcodes or Radio-frequency identification(RFID) marks (at the moment the RFIDmarks are only used in the controlidentification chips which are placed on thefur clothes – such labelling was introducedas a “pilot project” in 2016). The EUdelegation in Moscow sent a letter to Russiathis regarding labelling requirement. Theyreported back that EU businesses thatconsider this excessively burdensome. TheCommission was also being pushed to actto better classify the labelling schemesystem to only include products with high-value products. Currently, it has beenreported that chemicals are not affected bythis upcoming labelling scheme as the focusis more on produced and processed goodsthat could be counterfeited. Fecc reportedthat if there are any developments when itcomes to chemicals, the expert group willbe notified.

*EuroCommerce represents retail, wholesale,and other trading companies. Members includenational commerce federations in 31 countries,Europe’s 27 retail and wholesale companies,and federations representing specific sectors ofcommerce.

Brexit: A meeting between the UK, the EuropeanCommission and the European Council took placein the first week of June to discuss the timeline forBrexit. It was discussed that if no concrete plans ontrade have been considered by October,businesses trading both in EU and the UK shouldprepare for a hard Brexit. The EU would want toensure that the UK is as aligned as possible onagreements on state aid, environment and socialaffairs. The UK perspective, however, is currentlyapplying a protectionist approach when it comes tofinancial regulations and other industries such asstate aid and fisheries.On the effect of COVID-19 - Metro reported goodturnovers in the first weeks of the lockdown but hasdecreased dramatically as other establishments(hotels, restaurants, etc.) went into force majeure.Exports to other third countries such as Ukraineand Russia were also limited.On the dual-use negotiations - The current stateof the Dual-use goods regime has been discussed.A coalition of EU organisations has sent a letter(link) to European Commissioner for Trade PhilHogan, imploring him not to backtrack on theCommission’s original position on dual-use goods,which aims to clamp down on exports that can beused in the surveillance of citizens in countries withless than democratic regimes. Such changes in theregime may have an effect on the GPSmodernisation previously discussed in theEurocommerce International Trade call.

Updates from the EurocommerceInternational Trade group (19 June 2020) Fecc representatives Ms Dorothee Arns and Mr EliasRito attended the Eurocommerce* International Tradegroup that discussed the latest updates on exports fromand into the EU. The following points during the callwere discussed:

International trade developments(part 3/4)

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Making the report on the implementation ofFTAs more comprehensiveStepping up communication, outreach andpolitical supportIncreasing availability and accessibility ofinformationReducing administrative requirements andcosts

The actions go across the board of EU policesand many of them will require a bettercoordination between the EuropeanCommission, Member States and otherstakeholders. The European businesscommunity stands ready to play its role to helpimplement the measures and help maximise thepositive impact of EU trade policy on growth,jobs, and sustainable development. The key points from the paper are:

*BusinessEurope is the European associationrepresenting enterprises of all sizes in theEuropean Union and seven non-EU Europeancountries. Members of the association are nationalindustry and employers' organizations.

BusinessEurope’s recommendations on theimplementation of Free Trade Agreements(FTAs) Free Trade Agreements (FTAs) make up a risingshare of extra-EU trade. In 2018, 31% of EU trade ingoods with the rest of the world was covered bypreferential trade agreements and this figure isexpected to rise to over 40% when considering theFTAs that the EU has concluded since. Modern FTAsdo not only reduce tariffs on goods trade but also tacklenon-tariff barriers, liberalise services trade and publicprocurement and create rules for internationaleconomic relations that are fit for the realities of 21stcentury trade. As the number of FTAs concluded by the EU isincreasing, the EU needs to allocate more resources totheir implementation to make sure that businesses of allsizes can seize the opportunities they offer. The annualreport on the implementation of FTAs, which theCommission launched in 2017, provides an importanttool to identify related shortcomings and to measureprogress in tackling these. The economic disruptions caused by the outbreak ofthe corona virus have emphasised the importance ofcountries diversifying their sources for essential rawmaterials, inputs and final products. In the aftermath ofthe crisis, companies will seek to diversify their supplychains and reduce their reliance on one single countryor region to be more resilient to future shocks. EU tradepolicy has an essential role to play for companies toachieve this. The BusinessEurope's* paper seeks to contribute to thediscussion by suggesting a number of actions the EUcould take in different areas to enhance the ability ofcompanies of all sizes to exploit the benefits the EU’sbilateral trade agreements.

International trade developments(part 4/4)

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Energy markets

9 bn. EUR investment in the build-up of localhydrogen production as well as hydrogen importsPlanned exception of hydrogen production from theEEG-surcharges (currently 6.8 ct/kWh)Acknowledgement that a hydrogen-based economycan only be achieved on a super-national level. In2030 an import quota of >80% is expected forGermany, coming therefore significant amounts tobe imported from EU and North-African and Arabiccountries.Memorandum of Understanding with the governmentof Maroc for building a joint hydrogen production sitein Maroc.

Germany's new Hydrogen Strategy On 10 June the German Government has published itsNational Hydrogen Strategy revealing ambitiousguidelines for the build-up of a hydrogen industry andinfrastructure. Some of the key points are:

Click here to access the full press release (in German). The European Commission is currently working on anEU hydrogen strategy at pan-European level, which willbe officially published in early July 2020.

Gas exports plummet at US ports The coronavirus has crushed exports of liquefiednatural gas from US shores, curtailing an importantsales outlet for the world’s largest gas producer. Shipments will have dropped by 60 per cent in Julyfrom their peak in January, the Energy InformationAdministration forecast last week, with the US sendingout the least liquid gas since before a string of newprocessing units opened between Texas and Georgia. Source: APAC

India to get its maiden gas tradingplatform IGX is India’s first automated national leveltrading platform to promote and sustain anefficient and robust gas market and foster gastrading in the country.The platform will featuremultiple buyers and sellers trading in spot andforward contracts at designated physical hubs.IGX is a neutral and transparent market-placewhere both buyers and sellers will trade gas asthe underlying commodity.