EU to Tackle Forced Labour
But also — Supply Chains, Media Freedom Act, SOTEU, Hungary, Competition, Energy
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Lex — Forced Labour; Single Market Emergency Instrument; Media Freedom
It is a busy moment for legislative announcements. In recent days, the European Commission unveiled legislative proposals on forced labour, on new crisis powers to intervene in supply chains, and on media freedom.
FORCED LABOUR • The Commission published a proposal to ban products made with forced labour from the EU market. While the ban applies to all goods irrespective of their geographical origin, China is seen as the main target of the measure.
According to the International Labour Organisation, 28 million people are in forced labour all around the world, and this number is increasing. “This proposal will make a real difference in tackling modern-day slavery (...). Our aim is to eliminate all products made with forced labour from the EU market, irrespective of where they have been made”, EVP and Trade Commissioner Valdis Dombrovskis said.
A first screening will assess if there are substantial reasons to believe that particular products have been made with forced labour. For products at risk, economic operators along the value chain will be closely examined, using all information available. If a company is found guilty of using forced labour, its goods will be withdrawn from the EU market and forbidden to import.
While China’s alleged use of forced labour among the Uyghurs is seen as the main target of the new legal instrument, the draft features an all-encompassing approach. “China is in the air, but of course, we have forced labour in other countries as well”, commented S&D MEP Bernd Lange, rapporteur of a resolution on the issue in June 2022. The approach differs from the US Uyghur Forced Labour Prevention Act which explicitly targets China’s treatment of minorities in Xinjiang by banning any goods produced “wholly or in part” in the region.
Before its entry into force, the proposal will need to be discussed by both the European Parliament and the Council. The Commission expects the legislation to be applied 2 years after it enters into force – a delay that could be a cause for dissent in Parliament.
SMEI • The EU wants to future-proof its internal market chains against supply chain crises triggered by unexpected events such as Covid-19 or the war in Ukraine.
In exceptional times, the Single Market Emergency Instrument (SMEI) would give the Commission the power to require the stockpiling of strategic supplies, to prohibit certain restrictions within the EU’s internal market – such as export bans – and to prioritise essential over non-essential goods in public procurement procedures. In non-crisis times, companies will have to report to the European Commission on their supply levels for key strategic goods.
Before its entry into force, the proposal will need to be discussed by both the European Parliament and the Council.
MEDIA FREEDOM • The European Commission presented the European Media Freedom Act, a new set of horizontal rules designed to “protect media pluralism and independence in the EU”.
Among other things, this legislative proposal would require Member States to “respect the effective editorial freedom of media service providers”, including through public disclosure of information about ownership. Public service media will be closely watched by the EU’s executive arm, which wants to safeguard pluralism and fend-off state-sponsored propaganda in countries such as Hungary and Poland. A European Board for Media Services, composed of national media authorities, will help draft guidelines on how to apply these rules.
The legislation also aims to tackle the issue of concentrations in the media sector. The European Board for Media Services will issue opinions on media market concentrations. The announcement was made just as France’s two biggest broadcasters TF1 and M6 abandoned their plan for a merger which would have given the combined entity a 75% market share in TV advertising.
The Buda Saga — Hungary Under Fire, Again
The rule-of-law battle between Hungary and the European Commission escalated last week. On Sunday, 18 September, the EU’s executive branch proposed to the Council that 7,5 billion euros of EU cohesion funds be withheld from Hungary amidst concerns over rule of law violations.
NO MONEY FOR PHONEYS • The Commission’s move is triggered under the Conditionality Regulation, which allows the EU not to disburse cash when it fears its use might be at odds with EU values and endanger the bloc’s budget. The Conditionality mechanism was born in 2020 out of Member States’ growing concerns that EU money, including that of the 750 billion euro NGEU fund, could end up in the pockets of political allies of leaders such as Viktor Orban.
Triggered for the first time in April 2022 against Hungary, both Victor Orbán’s government and the Commission have since been negotia options to allay fears over Hungary’s public procurement bad habits. The Commission now expects Budapest to come up with further commitments in order to resolve the conflict.
The 7,5 billion euro disbursement represents about a third of Hungary’s cohesion funding – money which is provided to the least economically developed parts of the EU. An additional 7 billion euro of grants, and billions more in loans under the bloc’s Covid-19 recovery fund, could also be affected if Hungary does not address rule of law issues, the Commission said.
EP • The Commission’s proposal follows the condemnation by the European Parliament of “deliberate and systematic efforts of the Hungarian government” to undermine European values. Sitting in Strasbourg last week, MEPs labelled Hungary a “hybrid regime of electoral autocracy”, and lamented that a lack of decisive action by EU institutions had contributed to a “breakdown in democracy” in the country of nearly 10 million people.
The rapporteur for the situation in Hungary, Greens/EFA MEP Gwendoline Delbos-Corfield put it bluntly. “Hungary is not a democracy”, the French MEP stated, calling the report a “wake-up call for the Council and Commission”.
WHAT’S NEXT? • The Council, excluding Hungary, must now decide within the next month whether to adopt the Commission’s proposed measures. The period could be extended by a maximum of two months in exceptional circumstances, and Hungary has committed to implementing the necessary changes, and informing the Commission, by 19 November.
Trustbusters — Google Android; Margrethe in America
ANDROID • The EU’s General Court “largely confirmed” the Commission’s fine against Google in the Android case. The digital behemoth appealed the EU’s competition watchdog’s 4,34 billion euro fine imposed in 2018, which was reduced to (just) 4,125 billion by the General Court on 14 September.
The European Commission fined Google for “having abused its dominant position by imposing anticompetitive contractual restrictions on manufacturers of mobile devices and on mobile networks” to better position its search services.
The case is undeniably a win for Vestager’s DG Competition, whose 2,42 billion euro fine in the Google Shopping case was also upheld by the General Court. Google announced it would appeal the decision before the Court of justice of the EU (CJEU), as the FT reported.
FORDHAM SPEECH • Margrethe Vestager, the EU’s competition sheriff, was in Fordham, in the state of New York, to deliver her speech at the 49th annual conference on international antitrust law and policy.
Vestager saluted the General Court’s decision to uphold the Commission’s decision in the Google Android case : “This was a very important case in the industry – one that will set precedents for our work going forward”. Vestager also gave an update on Amazon’s proposed commitments to refrain from using third-party data to favour its own services and the built-in biases of the Buy Box and Amazon Prime.
Her keynote on “antitrust in the digital age” touched upon the increasing role of data, interoperability or access in antitrust cases : “In most sectors, the role of data and access to that data will become more pervasive. Don't misunderstand me: this is a good thing. Efficiency benefits consumers, after all. But in concentrated markets, or in markets where some firms are able to amass huge amounts of data, competition issues can arise.”
On the upcoming Digital Markets Act, she pressed that it “will not replace antitrust enforcement. It is an important new tool to our toolbox, making sure we have the right instruments to intervene at the most appropriate stage in the cycle – whether that means merger control, DMA enforcement or antitrust action under Article 101 or 102.”
Speech — Von der Leyen Delivers her SOTEU
On 14 September, Ursula von der Leyen spoke before the European Parliament to deliver the annual State of the Union address. In her speech, the President of the European Commission attempted to chart a path out of the energy crisis, to reassert the Union’s support of Ukraine in the war against Russia, and to affirm the Commission’s mission to protect the rule of law across Europe.
Energy and the Green transition were at the top of the agenda. The President announced the creation of a public bank to invest 3 billion euros in hydrogen, with the objective of an annual production of ten million tons by 2030. A reform of the electricity market – which should include price caps – and a drive to secure energy from reliable partners, were mentioned.
Demonstrating continuous European backing of Ukraine was at the forefront of her speech. The beleaguered state’s First Lady, Olena Zelenska, was guest of honour of the Parliament – MPs gave her a standing ovation. Ursula von der Leyen sought to counter doubters of the EU's resoluteness by proclaiming that sanctions against Russia are here to stay.
Against the backdrop of the Commission’s ongoing bras de fer with Poland and Hungary, the President declared that protecting the rule of law is her Commission’s “most noble role”. She listed upholding judicial independence and fighting corruption as priorities, and announced new measures to strengthen the latter.
Politics — Europe Steering Right
In Sweden, the far-right Sweden Democrats party has become the second largest party in Parliament, earning 20,1% of the seats in the recent election. While it will not be enough for the far-right to enter the ruling coalition in Sweden, recent polls suggest that Giorgia Meloni’s Brothers of Italy will emerge as government leader from the upcoming Italian elections.
THE LEFT-OVERS • For the first time in 8 years, Sweden will be ruled by a right-wing coalition. Left-wing leader Magdalena Andersson handed in her resignation as PM on Thursday, despite coming first in the election where her party earned 30% of the votes. The right-wing aisle of parliament won on a razor-thin majority made possible by the far-right Sweden Democrats, who came second in the election. The new government will be led by centre-right MP Ulf Kristersson.
SWEDISH ARM WRESTLING • These results give an edge to the Sweden Democrats for the upcoming negotiations to form a new right-wing government. However, the party is likely to be denied any ministerial appointments, as the Liberals are already opposing any appointment of far-right MPs.
A likely outcome is that the coalition will exclude the Sweden Democrats, therefore relying on a relative majority in Parliament. The Sweden Democrats will then most likely operate on the sidelines, trading their exclusion from the coalition against promises for tougher laws on crime on immigration.
UNIONE EUROPEA • In Italy, far-right coalition leader Giorgia Meloni is leading all polls against Enrico Letta’s left-wing coalition. The leaders have recently displayed diverging opinions on the role of the European Union. “If I win, for Europe, the fun is over”, Meloni declared during a speech at Milan’s Piazza Duomo. Enrico Letta was quick to reply: “Should the centre-right govern, I fear it would be over for Italy”, he answered.
While Meloni advocates for a strict application of the subsidiarity principle, Letta criticises Meloni’s proximity with Poland and Hungary: “In Europe, we want an Italy that counts, not one that protests and vetoes together with Poland and Hungary,” he said. The elections – which will take place on 25 September — will determine Italy’s future stance regarding the EU.
Energy — EP Backs Renewables & Energy Savings
On 14 September, European MPs voted in favour of increasing the share of renewable power generation to 45% of the total energy mix in 2030.
The measure feeds into the broader Fit for 55 aimed at reducing GHG emissions by 55% by 2030. It revises the Renewable Energy Directive, not only by increasing the target share of renewable power in the energy mix but also by raising the bar for energy savings.
Since the start of the war in Ukraine, EU climate-related ambitions have taken a geopolitical aspect, with the REPower EU plan aimed at building independence vis-à-vis Russian oil and gas. "Only the expansion of renewable energy means true independence" said Markus Pieper lead MEP on the renewable energy directive.
What’ve been reading this week
For Intelligencer, Benjamin Hart interviews Doomberg, whose writers sharply criticise European leaders. They hold them responsible for the succession of policy decisions whose entirely foreseeable outcomes have been disastrous and have led the continent to face the greatest energy crisis since the 1970s.
In a wide-ranging interview for the Institut Montaigne, political philosopher Luuk van Middelaar contemplates the historical significance of the war in Ukraine for Europe’s self-perception and coming-into-being as a geopolitical actor.
Meanwhile, for the ECIPE, Matthias Bauer reminds us that the Union’s initiatives to strengthen the bloc’s resilience in the name of “strategic autonomy” entail long-term costs that must be carefully weighed.
Luigi Scazzieri of the CER tells us what to expect from a right-wing Italian government: a softer approach on Russia, a harsher one on immigration, and tensions around economic and fiscal policy. A strategy of open confrontation with Brussels and fellow member states appears unlikely, as the coalition partners have toned down much of the earlier anti-EU rhetoric.
This week’s newsletter is brought to you by Gabriel Kobus, Hélène Procoudine-Gorsky, Matteo Gorgoni, Maxence de La Rochère, Brian Donnelly, and Augustin Bourleaud See you next Tuesday!