European Union

Pay transparency is unaffordable for businesses and employees

A misguided way of fighting the gender pay gap.

The new EU Commission president Ursula von der Leyen has promised to move closer to closing the gender pay gap. The new instrument she intends on using is pay transparency—big mistake.

The European Commission works on creating pay transparency in the European Union. To fight the gender pay gap (which exists if you do statistics wrong on purpose), it wants to lay open the salaries of employees to check for discrepancies. Whether that would mean that businesses have to openly declare their contracts to the government or actually have to publicise salaries and other invoices remains unclear, however, some legislation already exists on the matter.

In Austria, a two-year reporting duty applies to private companies with at least 150 employees. It requires income reports to show gender-segregated mean or median pay in full-time equivalents per job category and qualification level indicated in the collective agreement and the number of male and female employees per job category.

In Belgium, the two-year pay reporting duty, introduced by the Gender Pay Gap Act 2012, is limited to the private sector but addresses companies with at least 50 employees. The data to be reported entail gender-segregated mean basic pay and allowances per employee category, job level, job evaluation class (if applied), seniority and education level.

France requires companies with 50 or more employees (and, in a more detailed form, companies with at least 300 employees) to annually draw up so-called ‘comparative equality reports’ concerning the situation of men and women employed, in terms of qualification, recruitment, training, pay, working conditions and work-family balance. Pay refers to the average monthly wage per job category.

Suppose the European Union decides to iron out the gender pay gap through pay transparency actively. In that case, it will create perverse effects inside companies, killing the incentive to ask for a raise.

Let’s say you write newspaper articles (close to home) and renegotiate the rate you receive per article. You end up receiving that raise. As this creates a gender wage gap within the company you’re working for, all female staff needs to get your raise as well, and – as the balance then tilts the other way – all the other male staff will also receive more.

If the company cannot afford to increase the rates of everyone, it is more likely not to give a raise at all. Ironically, if the company hires ONLY men, then that would be completely legal.

The idea that companies should not discriminate purely based on gender is a correct one. It is an arbitrary principle that has no place in a civilised society. The idea that statistical nonsense of gender wage gap statistics is proof of structural misogyny is utterly ridiculous. Women and men make different choices when it comes to education and the workforce — differences that are not accounted for in these statistics.

Therefore, the European Union’s policy on pay transparency is profoundly misguided and should not be implemented.

Originally published here.

The ConsEUmer Podcast nominated as a top European Union podcast by Welp Magazine

We’re excited to announce that the ConsEUmer Podcast, produced by Consumer Choice Center, was named as one of the best European Union Podcasts of 2021. The list was recently published by Welp Magazine and is intended for everyone wanting to boost their knowledge of everything related to the European Union. 

Various factors played a part in selecting these podcasts and it is worth noting that podcast hosts and guests come from across the political spectrum, so listeners have a chance to hear different points of views about the European Union. The ranking was created using the data provided by ListenNotes, Crunchbase, SemRush and Ahrefs.  

ConsEUmer Podcast is hosted by Bill Wirtz, a senior policy analyst at the Consumer Choice Center. Besides his active role at the organisation, Bill is a pro-liberty freelance journalist who publishes in 4 languages, he has been featured in multiple news outlets around the world. His podcast focuses on consumer issues, such as free trade, science-based policy making, privacy, digital single market, and more. The podcast also offers insightful commentary on the hottest EU related topics. Bill critically examines and evaluates strategies and policies of the EU and its member states. Each episode lasts around 20-40 minutes and features experts and policy makers from various fields. Some of the topics that have been discussed on the podcast include the Polish sugar tax, EU Beating Cancer plan and its effect on vaping, Farm to Fork strategy, the e-scooter revolution, nanny state index, and more. As you can see, the podcast is very diverse in topics and there’s definitely something for every taste. Stay tuned for podcast updates and in the meantime catch up with the past episodes below.

P.S. If you want to find out more about the work we do around Europe, we recommend checking out our European Railway Station Index 2021 as well as the list of Europe’s Most Passenger-Friendly Airports 2020

EP34: SPECIAL EPISODE with the CCC Team! The ConsEUmer Podcast

A special episode this week, feature some members of the CCC team! We talk about: 💉COVID-19 vaccinations 🔌Switching petrol cars for electric, does it work? 🚗The divide in the sharing economy Featuring Maria Chaplia, Liz Hicks, Luka Dzagania! July 29, 2021 Follow ConsEUmer wherever you get your podcasts: Apple: https://apple.co/2HR4TLT Spotify: https://spoti.fi/3l3GZdx Google podcasts: https://bit.ly/3fyyzto Donate: http://consumerchoicecenter.org/donate See omnystudio.com/listener for privacy information.
  1. EP34: SPECIAL EPISODE with the CCC Team!
  2. EP33: Russia bans champagne, DST on hold, and Europe's Cannabis Awakening (w/ Deepak Anand)
  3. EP32: Billionaires in space, Fit for 55, and Georgia in Turmoil (w/ Liza Katsiashvili)
  4. EP31: Euro Tech Demolition Team (Hosted by Yaël Ossowski) — Featuring Bjorn Lomborg
  5. EP30: Electric vehicles, Vaping saves lives, and Belarus sanctions (w/ Adam Bartha)

Who will really pay the “own revenues”?

Spoiler alert: consumers will.

Ever since the recovery package of the European Union was sent on its way through the institutions in Brussels, everyone knew that the joint debt obligations that the EU took up until 2058 need to be paid back somehow. This is particularly true because now that we’ve opened the slippery slope of taking up EU debt, you can rest assured that it won’t be the last time we will do it. The 750 billion Euros are said to be paid by own EU resources, meaning taxes.

On January 1st this year, the EU’s plastic tax has come into effect. The tax charges EU member states for their plastic packaging consumption and demands that a pro-rata amount be sent to Brussels for the EU budget. Also being discussed are a carbon border adjustment (fancy words to describe a CO2 tax), a digital tax, and a financial transaction tax. For many in the EU, this will allow the Union to become more independent from the interests of the European Council, to which the Commission all too often feels, and is, beholden when most of its more integrationist support lies in the European Parliament.

But who will actually pay these taxes? Is it that a digital tax on Microsoft, Amazon, Google, Apple, or Facebook, will be paid by these big corporations from accross the pond and flow into the pockets of Berlaymont? Hardly so. The EU suggests taxing digital services where their transaction occurs, as opposed to taxing in the company’s country of residence. In the case of Apple, European sales are organised through the company’s HQ in Dublin, Ireland, to benefit from Ireland’s more advantageous tax system. In a similar way, Amazon benefits from rules in Luxembourg. Google and Microsoft sell more digital services, in the case of Google advertising services. Here, the cost of a tax would, much like VAT, put on the end consumers. This comes down to much of the free trade argument: the resident consumers pay protectionist tariffs in the country that imposes the tariff, not by the exporting party.

A carbon tax on imports does exactly that. Some goods coming from countries that do not share the EU’s ambitious climate regulations are competitive in price due to the low production costs in those countries. Attempting to push these goods off the market with a carbon tax means that EU consumers will pay more.

A financial transaction tax is an even more egregious example of misguided fiscal thinking. In the eyes of its advocates, it will hit the big players on the international financial markets, when instead it will be paid by low-level investors, low-level shareholders, consumers playing around with investment services that have popped up, particularly during the pandemic. 

It narrows down to the economic reality that companies do not pay taxes; people do. The building of a company cannot pay taxes; but is being paid because either the company reduces its share dividends of its shareholders, pays its workers less, or increases prices for consumers. All too often, the latter is the preferred solution.

The discussed EU taxes are supposed to create independence for the Union and tax big players to reduce inequities. It is more likely to do the former than the latter.

Originally published here.

Une taxe sur le carbone de l’UE est une erreur politique

En novembre 2020, la “European Round Table on Climate Change” a accepté un document sur le concept de taxe carbone prélevé à la frontière, également connu sous le nom de taxe carbone. Il est maintenant largement entendu que l’UE envisage sérieusement de mettre en œuvre un nouveau régime de taxes carbone dans le cadre de sa stratégie écologiste globale. 

En termes simples, il s’agit de taxes sur les marchandises provenant de pays qui ne respectent pas le niveau de protection environnementale de l’UE. Leur principal objectif est d’éviter les “fuites de carbone”, c’est-à-dire le déplacement des entreprises vers des pays qui n’imposent pas de coûts sur le carbone.

Le problème, avant tout, est que les droits de douane sont des taxes payées par les consommateurs nationaux, ce qui signifie que ce sont les consommateurs européens qui vont payer la facture en raison de l’augmentation du prix des produits internationaux. À l’heure où l’Europe tout entière attend la fin de la pandémie et l’inquiétante reprise économique qui s’ensuivra, un ajustement du prix du carbone qui gonflera les prix serait pour le moins gênant.

Les partisans de cette politique soutiendront qu’un ajustement aux frontières aura l’avantage d’encourager les exportateurs à fortes émissions à assainir leurs pratiques et de profiter ainsi à l’industrie européenne. L’idée est que si les produits étrangers deviennent plus chers, les produits européens deviendront comparativement moins chers.

Pour ce qui est d’amener les pays à fortes émissions à respecter les normes européennes en matière de climat, il est naïf de penser que les pays en développement peuvent satisfaire à ces critères. Comme de nombreux acteurs de la politique de développement l’ont souligné à juste titre, le monde développé s’est propulsé vers son statut actuel en se concentrant d’abord sur la croissance, ce qui permet aujourd’hui à l’Europe de s’offrir le luxe d’adopter des politiques de protection de l’environnement. De ce fait, il est peu probable de voir les pays en voie de développement avoir la capacité, à court et moyen terme, de créer les infrastructures nécessaires pour répondre aux normes européennes.

Cela signifie que l’ajustement ne sert qu’à faire pencher la balance en faveur de l’industrie nationale. Si ce changement peut sembler positif pour certains, les tarifs douaniers imposés sous l’administration Trump nous donnent une étude de cas sur les impacts négatifs de ces sanctions douanières. Si l’objectif politique de Trump était d’une toute autre nature, il est important d’observer les impacts d’une hausse des tarifs douaniers sur la population et l’industrie.

Pour les machines à laver, les tarifs douaniers de Trump étaient de 20 % sur les 1,2 million premières unités importées, puis  50 % pour toutes les unités importées au-delà de ce montant. Il en a résulté une augmentation de 12 % du prix des machines à laver et des sèche-linge importés, qui, bien que non taxés, sont souvent vendus par paire. 

Malheureusement, les consommateurs ont également dû faire face à des prix plus élevés pour les lave-linges nationaux, en grande partie parce que les producteurs nationaux ont pu augmenter leurs prix à mesure que les prix de leurs concurrents augmentaient. Pour les consommateurs, le résultat final de cette politique a été une augmentation des prix d’environ 88 dollars par machine, ce qui a représenté une inflation totale des prix de 1,56 milliard de dollars, générant 82,2 millions de dollars de recettes tarifaires.

Les partisans des droits de douane pourraient faire valoir, comme l’a fait M. Trump, que même si les consommateurs payaient plus cher les produits importés, et ironiquement les produits nationaux aussi, cette politique a eu pour effet positif de renforcer l’industrie nationale et de créer des emplois. C’est effectivement vrai, la politique a créé des emplois dans le secteur manufacturier aux États-Unis, environ 1800 nouveaux postes. Le problème est que ces emplois ont eu un coût énorme pour les consommateurs américains, à tel point que ces derniers ont payé 811 000 dollars de prix supplémentaires par emploi créé. Ce chiffre est loin de correspondre à un bon résultat coût-bénéfice.

Nous ne savons pas quel serait le taux de l’ajustement carbone, mais il est probable que, conformément aux règles de l’OMC, il devrait correspondre aux taux actuellement appliqués par cette nation européenne. Si le tarif du carbone devait correspondre à la taxe carbone nationale française de 44,81 euros par tonne d’émissions de carbone, l’impact d’un ajustement carbone serait significatif. Si l’on reprend les chiffres du fiasco des lave-linges de Trump et qu’on les applique à tous les produits importés en Europe depuis des pays à fortes émissions, la facture que les consommateurs devraient payer serait tout simplement astronomique.

Will new EU digital regulations lead us to innovation or stagnation?

A recent event organised by the Consumer Choice Center looked at the role the Digital Services and Markets Acts will play in shaping Europe’s digital innovation future.

In December 2020, the European Commission presented the Digital Services Act (DSA) and Digital Markets Act (DMA). Both are aimed at regulating digital platforms, however, it remains unclear whether they will succeed in boosting innovation in the EU and ensuring fair rules of the game for all participants.

In particular, the DMA puts in place a series of ex-ante restrictions telling tech platforms how to behave and introduces a new “competition tool”. Although noble in its intentions, the worry is that the Act might fail to strike a balance between the need to incentivise European SMEs to innovate while preserving our freedom to choose services delivered by so-called “Big Tech” without excessive burdens.

On 3 March, the Consumer Choice Center hosted a high-level debate on the future of digital innovation in Europe and the role the said acts will play in shaping it. Below are some of the main points raised by our panellists.

“We need to ensure that the DMA doesn’t turn into an anti-American notion. The DMA must not be a protectionist tool used against companies from certain countries, and this is something I will keep an eye on as we move forward with the digital market reform. Digital innovation requires us to stay open, and this is only possible if we cooperate internationally, especially with our democratic partners such as the US. Small players will benefit from this too. However, safeguarding fair competition is pivotal, and that has to be at the centre of our DMA efforts,” said Svenja Hahn, a Member of the European Parliament for Germany (Renew Europe Group).

Eglė Markevičiūtė, Vice Minister at the Ministry of the Economy and Innovation of the Republic of Lithuania, joined the event in her personal capacity to comment on how to improve the alignment on data protection when it comes to the DSA and DMA. “There really is a need for greater flexibility on the enforcement and specific obligations when moving towards a set of criteria that would be applicable over a wide range of platforms and service providers. The goal is not to restrain big online platforms as a source of potential danger but to ensure that consumers as well as small and medium enterprises are protected,” she said.

“Digital innovation requires us to stay open, and this is only possible if we cooperate internationally, especially with our democratic partners such as the US” Svenja Hahn (DE, RE)

“I think the Commission sets out in the DMA to allow platforms to unlock their full potential by harmonising national rules so as to allow end users and business users alike to reap the full benefits of the platform economy and the digital economy at large. What is needed at the EU level is to ensure that harmonisation. To achieve that, I think you have to use objectives and administered rules as you can’t use very subjective or ambiguous standards,” added Kay Jebelli of the Computer & Communications Industry Association (CCIA).

“In the United States we tend to look at things around antitrust or competition using the consumer welfare standard which is basically the question of who’s being harmed. Europe, on the contrary, follows a more precautionary principle that can be summed up as ‘can we get ahead of what we think potential harm might be’, and the American mindset tends to be like ‘why do you want to regulate inefficiency into the system’,” said Shane Tews, a visiting fellow at the American Enterprise Institute.

With the world of technology constantly evolving, it is crucial that the European Union is able to keep up with latest developments, thereby providing European consumers with a wide array of choices.

Originally published here

European Green Deal wird für Verbraucher teuer werden

Eine Folgenabschätzung der Europäischen Kommission legt die Kosten des “European Green Deal” dar – für Verbraucher wird es wohl teuer werden. Von Gastautor Fred Röder.

Der für den Green Deal zuständige Exekutiv-Vizepräsident der EU-Kommission Frans Timmermans bei einer Pressekonferenz, Quelle: Shutterstock

Der European Green Deal (EGD) ist einer der Eckpfeiler der Von der Leyen-Kommission in Brüssel. Es ist in den letzten Jahren klar geworden, dass es größeren Wählerdruck gibt um eine grünere Politik zu betreiben. Auf EU-Ebene hat dies zu hitzigen Debatten beim Thema Freihandel, Landwirtschaftsreformen und Emissionshandel geführt.

Der EGD ist ehrgeizig – er strebt an, bis 2050 null Nettoemissionen zu erreichen, wobei “Wirtschaftswachstum von der Ressourcennutzung abgekoppelt” werden soll. Dies soll durch Strukturreformen im Bereich der Landwirtschaft, die Entkarbonisierung des Energiesektors und die Einführung neuer Besteuerungssysteme zur Vermeidung nicht-nachhaltiger Importe nach Europa erreicht werden. Eine entscheidende Frage wird jedoch ausgeklammert:: zu welchen Kosten? Die zusätzlichen Ausgaben für die Europäische Union werden sich auf satte 260 Milliarden Euro pro Jahr (zwischen 2020 und 2030) belaufen. Es wird allerdings nicht nur der EU-Haushalt belastet, sondern direkten Kosten für Verbraucher werden ebenfalls steigen.

Ende September hat die Europäische Kommission eine Folgenabschätzungsstudie veröffentlicht. deren Ergebnisse sowohl von der Kommission als auch in der breiteren Medienlandschaft weitgehend ignoriert wurden. Das ist jedoch überraschend, denn in fast allen Modellen kommt es zu einem Rückgang des europäischen Bruttoinlandsprodukts. Die teilweise gravierenden Einbrüche werden vor allem durch Rückgänge bei Beschäftigung, Konsum und Exporten verursacht. Besonders verheerend wird der wirtschaftliche Schaden für die Mitgliedstaaten sein, die stark von Exportindustrien abhängig sind und für viele Menschen mit begrenzten Wiederbeschäftigungsmöglichkeiten in diesen Ländern. Deshalb wird insbesondere Deutschland die Folgen dieser Politik zu spüren bekommen Als Exportnation wird es Deutschland härter treffen als weniger von Industrie abhängige Länder..

Bereits bestehenden soziale Ungleichheiten werden durch steigenden Energiepreise für Verbraucher noch extremer werden. Wie die Energiewende in Deutschland bereits zeigte, hat ein überstürzter Umstieg  erneuerbaren Energiequellen, der über Subventionsprogramme und nicht Verbrauchernachfrage erfolgte, die Energiepreise für die Verbraucher stark erhöht. In der Folgenabschätzung der Kommission wird dies anerkannt, allerdings in einer Formulierung die von wenig Mitgefühl für die betroffenen Bürger zeugt: “Ein Nachteil aus sozialer Sicht sind die höheren Energiepreise für die Verbraucher”. Es als “Nachteil” zu bezeichnen, wird den immensen Kosten für einkommensschwache Verbraucher nicht gerecht.

In der Debatte um den European Green Deal wird häufig davon gesprochen, dass umweltpolitische Veränderungen die Schaffung von Arbeitsplätzen und Wohlstand ermöglichen. EGD-Superkommissar Frans Timmermans spricht gerne von “grünen Arbeitsplätzen” und bezieht sich dabei auf die Möglichkeiten, die durch die Pläne der Kommission geschaffen werden. Anstatt dass ihn die COVID-19-Krise einen sanften Ton anschlagen lässt, meint Timmermans, dass “unsere Antwort auf die Covid-19-Krise es uns ermöglicht, Arbeitsplätze nicht für Jahre, sondern für Jahrzehnte zu retten und neue Arbeitsplätze zu schaffen. Wir werden vielleicht nie wieder so viel ausgeben können, um unsere Wirtschaft wieder anzukurbeln – und ich hoffe, dass wir das nie wieder tun müssen”. Wird er es sich jetzt noch einmal überlegen, nachdem die Folgenabschätzung seiner eigenen Kommission drei Wochen nach seiner Rede ergeben hat, dass die Kosten für diese Strategie erheblich sind und insbesondere die unteren Einkommensschichten treffen werden?

Angesichts der angespannten Lage, in der die Wirtschaft und dadurch auch die Bürger besonders leiden, sollten die Diskussion um die Energiewende, wie die des EGD, alle relevanten Aspekte beinhalten – auch die negativen Auswirkungen auf die Konsumenten. Natürlich kann man meinen, dass die Kosten des EU-Plans im Angesicht der klimapolitischen Ziele gerechtfertigt sind, doch man sollte dabei nicht vertuschen, dass Verbraucher, Arbeiter, und kleine Unternehmer besonders unter diesen Entscheidungen leiden werden. Eine offene Diskussion im Sinner der Prinzipien Transparenz und verantwortlicher Regierungsführung ist notwendig, bevor Millionen von Menschen die Rechnung für diese Energiepolitik vorgelegt bekommen.

Originally published here.

Post-Brexit opportunity: making the internet less annoying

They’re cookies, and they’re not the delicious kind: internet cookies pop up on every new website we click on. The pop-up often says something like this: “We use cookies to help our site work, to understand how it is used, and to tailor the adverts presented on our site. By clicking “Accept” below, you agree to us doing so. You can read more in our cookie notice. Or, if you do not agree, you can click “Manage” below to access other choices.” What cookies do essentially is store information on your device on how and where you navigate on their website.

When retrieving the information from your device, the website knows what particularly caught your eye, and they can improve their website structure or marketing based on this data. However, cookies can also be useful to the user, in that it stores your password, and keeps you logged into your favourite social media platform or airline account. The way rules are today, you need to opt-in to allowing cookies to be stored.

It wasn’t always that way. Prior to the “Citizen’s Rights Directive“, users were assumed to having opted-in to the sites cookie policy, automatically and then explicitly opted-out if they wished. In 2009, this directive changed the approach from an opt-out to an opt-in, as it was with the privacy directive since 2002. This has created a wave of annoying pop-ups, that can sometimes block half the screen, and deteriorate user experience.

Part of the directive sets the rules regarding cookie consent, and only implies two instances for implicit consent (meaning you are assumed consenting to the use of cookies), both relating to providing a service that the user specifically requested. For instance, an online shop remembering what you put into your shopping cart, does not need explicit consent.

The reformed privacy regulation of the European Union – ePrivacy Regulation – is set to come into effect this year, but no reform of cookie consent riles is planned. This would continue the cycle of annoying cookies. However, implementations can vary. Germany has an opt-out approach, so long as data collected by cookies immediately undergo pseudonymisation and are kept in a pseudonymised state. Your cookie disclaimer in Germany will also always state that continued use of the website implies consent.

But there is an easier option already on the market. A well-reflected reform would put all cookie use under implicit consent, with the knowledge that users can use often free and already existing software that allows them to opt-out of all cookie use that they deem unsuited for them. This allows consumers to take their data use into their own hands, without an unnecessary and ineffective pop-up on every website. This could also be an integrated feature in browsers, that would allow consumers to easily navigate their privacy rules in one centralised place.

This represents yet another way in which regulatory independence would allow the UK to diverge from bad EU policies.

Bill Wirtz is a Senior Policy Analyst for the Consumer Choice Centre.

Originally published here

MERCOSUR: More opportunities for the EU

EU-Mercosur agreement will significantly boost trade between the EU and the Mercosur bloc. By giving the Mercosur bloc a preferential access to the European food market, the deal would allow European consumers to enjoy a greater choice of beef, poultry, sugar, and honey at a lower price. The EU-Mercosur FTA is undoubtedly a big win for consumer choice.

Attempts to block it on the grounds of climate change not only undermine the significance of this opportunity but also fail to realise the benefits following from this new trade relationship. These are numerous on both ends and include exports too. Duties on exports of wine and industrial goods from the EU would be reduced, meaning that the deal would give European exporters a considerable access to the Southern Common Market.

This should be kept in mind when considering voices against the deal: the EU would pass on the opportunity to grow, foster a closer relationship with a fast-growing foreign partner, and, most importantly, to bring cheaper products to consumers in the 4 Mercosur countries.

Moreover, in terms of much-feared agricultural imports, the deal would define a number of food imports that can be imported tariff-free or at a lower rate. Free trade agreements do not mean an unrestricted flow of goods from abroad. They aim to expand trade while retaining some regulations and keeping in mind potential challenges for domestic producers brought about by foreign competition.

Farmers should adapt to reality

Though these fears raised by farmers across the EU are highly exaggerated. For instance, in 2017, the EU produced about 15.0 million tonnes of poultry meat. Under the EU-Mercosur FTA, only 180,000 tonnes of poultry from the Mercosur would be allowed to be imported tariff-free. The numbers and rates are different and do take into consideration the state of food production in the EU. Therefore, seeing the deal as a dark hour for the agricultural sector in the EU is rather unjustified.

For the Mercosur countries, the historic deal with the EU would open the door to many other trade agreements across the world. Concluding a big trade agreement with such an important player in the field of international trade as the EU would attract other countries to the Mercosur and increase its bargaining power for future trade negotiations. Additionally, the deal would also encourage investments as well as boost consumer choice and enhance international cooperation.

Overall, the EU-Mercosur deal is an exciting opportunity for the EU to put the interests of European consumers first and to send a powerful pro-trade, pro-cooperation message to the world.

Read more here

The EU-Mercosur deal is a chance to put consumers first

The free trade agreement between the European Union and the South American trading bloc Mercosur (namely Brazil, Argentina, Uruguay, and Paraguay) should be celebrated by consumers across the EU. Ideally, by dining out on the suddenly more affordable beef, poultry, sugar, and honey imported from the Mercosur countries. But before that meal comes, the EU-Mercosur free trade agreement (FTA) must undergo a complex ratification process.

Much has been said about the significance of the deal, and not without a reason: it’s a historic event. With 93% of tariffs to be scrapped on both sides, the agreement will not only put cheaper and more diverse products on the shelves, it will also send a powerful pro-trade message to the world.

There have not been many significant global trade agreements since the Uruguay Round of 1986-1993. Every FTA should be thought of as an attempt to put consumers first. The fact that after 20 years of negotiations, the EU-Mercosur deal had been finally concluded signals a crucial thing: the EU has changed the rules of the game in favour of consumers and weakened the power of protectionists. This is a momentous victory as the EU’s determination to protect domestic agriculture is well known and it has blocked numerous trade deals to date.

Winning the battle, however, is far from winning the war. The agricultural lobby will strike again on a member state level, and it is essential that national governments do not fall prey to their calls for special protection. Irish Prime Minister Leo Varadkar has already voiced his concerns that the deal would hurt the beef sector, which is why Ireland is inclined to vote against the deal. Yet the Mercosur bloc would only be able to export 99,000 tonnes of beef into Europe annually, with an average tariff of 7.5 per cent. Since Ireland alone produces 520,000 tonnes of beef annually, Varadkar’s opposition to the deal seems political rather than economic.

All deals involve compromise and difficult choices. In terms of FTAs, the choice is either to protect a vulnerable sector from foreign competition at the expense of consumers, or to shift the benefits to consumers by weakening vested interests. By choosing the former, opponents of the EU-Mercosur FTA would prevent consumers from enjoying lower prices and, therefore, make them bear the costs. Not only is this unfair since consumers are a far larger group, but it also means that choosing protection is more politically profitable.

Why? Because there is an asymmetry of information in place: protected industries know what they are going to lose as a result of free trade agreements while consumers are unaware of how they might benefit them. They therefore have little incentive to organise against protectionists which allows policymakers to act at the whim of special interests.

It cannot go on like this anymore. The failure of Transatlantic Trade and Investment Partnership negotiations and the hostile uncertainty around the current trade negotiations between the EU and the US are signs that the interests of European consumers have been ignored for too long. The EU-Mercosur deal is an fantastic opportunity to finally put consumers first.

The deal is perceived as a threat by many because they fail to recognise there is a difference between ‘free trade’ and a ‘free trade agreement’. Free trade is the unhindered flow of domestic and foreign goods, and FTAs are far from this ideal. Trade agreements these days cover a broad spectrum of issues and represent a commitment to trade liberalisation mixed with a need to retain some regulations.

It’s also important to remember that all changes following from the deal would be implemented over the course of five years. This would give domestic producers time to prepare for an increase in supply from abroad. In the meantime, consumers should keep an eye on the ratification process and continue to emphasise the values of international trade. Trade is about interstate cooperation, increased choice, and cheaper products. Trade agreements such as the EU-Mercosur deal make the world more open, more interconnected, and more peaceful. Now that is something worth celebrating.

Read more here

Interview with Fred Roeder, an overview of the European medication Market

European elections 2019: science at the polls

In the context of the European elections, European Scientist is bringing you an overview of experts from different countries on various topics around science and science policy in Europe, in order to provide a panorama and analysis, which will be useful for the next commission.

The Europeans Scientist: What does the European medication Market looks like at the moment? How about the regulation?

After the United States, Europe is the most important and innovative region for pharmaceutical breakthroughs. Five out of ten of the world’s largest pharmaceutical companies are based in Europe (though only two of them in the EU after Brexit). The regulation and access to medicines in Europe is partially regulated by the EU and partially by Member States. To understand this better it’s important to distinct between mere market authorization, which allows a drug manufacturer to sell its product in a country and pricing and reimbursement decisions which determine the price of the drug and whether the public health insurance covers it.

Market access decisions are either made by the EU or at least regulated uniformly. While the European Medicines Agency (EMA) is currently busy with moving from London to Amsterdam, it has also a central role in the medicines approval system within the EU, Iceland, Liechtenstein, and Norway. If a pharmaceutical company seeks marketing authorization for an innovative drug in even just one EU Member State it has (in most cases) to apply centrally at the EMA for a marketing authorization. Generics and other medicines can be approved by national medicines agencies through either a decentralized method or by mutual recognition of existing marketing approvals in other Member States.

The decision on how much a pharmaceutical company, a wholesaler, and pharmacies can actually charge for drugs is made on either member state level or even on lower regional levels. Traditionally wealthier countries pay higher prices for drugs and cover more innovative medicine than less wealthy member states. There has been recently a push by Italy and also the World Health Organization to bring price controls on to a supranational level. Several EU countries already collaborate in the hope to have a higher bargaining power against pharmaceutical companies in the price negotiations.

ES: Is there a model to follow? Do you recommend more regulation and harmonisation or do you think that each state should keep its difference?

Different numbers show that innovative pharmaceutical companies make over 50% of their global profits in the United States. This has historically allowed Europe to have lower drug prices than the US. The current aggressive moves to bring drug prices even further down in several EU countries might severely harm the future pipeline for innovation in Europe. As a patient I am of course interested in cost control but I am even more interested in new drugs that are able to cure diseases we currently can’t treat. Many politicians run a populist train of cutting profits for pharmaceutical companies. This sounds first sexy but might jeopardize future scientific breakthroughs.

ES: What are your recommendations for the next Commission?

During the stalled TTIP talks there were good idea about more regulatory harmonization between the US FDA and Europe’s EMA. It would be good if the next Commission picks up these conversations and pushes for mutually recognizing market approvals of FDA and EMA. This would put both regulators under competitive pressure: Drug companies would seek approval first at the regulator that promises a better market approval process. Patients in this jurisdiction would benefit from life-saving innovative drugs being earlier available. Another important area were we still need improvements is to allow more patients to have access to potentially life-saving drugs that have not been approved by regulators yet. This is called compassionate use – One of these programs got recently approved in the United States and is called Right to Try. A terminally ill patient should have the right to try experimental (and potential unsafe) medicine if there’s a chance that this drug would save his or her life.  At the same time the Commission should refrain from pushing for unified drug prices in the EU.

Right now less affluent Member States benefit from high drug prices in the ‘North’. If there’s regulatory push to bring drug prices down to the smallest common denominator we risk that some innovative medicines companies just pull out of Europe entirely or massively delay the launch of their drugs in Europe.

Fred Roeder is a Health Economist and Managing Director of the Consumer Choice Center

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