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As the French presidency of the Council of the EU kicked off on January 1, Brussels is looking to Paris with a mix of excitement and mild apprehension.
Emmanuel Macron has unveiled a highly ambitious agenda for the country’s six-month stint at the helm of the Council spanning digital policy, climate, taxation and industrial policy.
Raising the stakes for the French president is his widely expected run for a second term in April’s election. Macron’s political opponents at home have accused him of planning to use the EU presidency to bolster his re-election drive. Meanwhile, some European diplomats expressed concern that France will use their role shepherding negotiations in the Council to twist policy compromises to their advantage.
Here’s a selection of the key policy files France is hoping to push through:
Digital Markets Act & Digital Services Act
Why it matters: France has long been a vociferous supporter of the EU’s proposed regulatory framework for the digital economy, including the bloc’s draft online content rules, the Digital Services Act, and new measures to clamp down on market abuses in the Digital Markets Act. For the Elysée, both files are regarded as important for clawing back a sense of digital independence for Europe, as well as making online ecosystems safer and fairer.
State of play: France pushed for revising October’s European Council conclusions to say that EU members wanted both the DSA and the DMA adopted “as soon as possible.” Ideally, the French would like to see both files wrapped up weeks before the French presidential election in April. The Council has already adopted its stance on the DSA and the DMA, and Parliament has approved the DMA with a vote on the DSA expected in January. After that, the French will be keen on getting negotiators from both institutions around the table at the earliest opportunity next year.
EU fault lines: For the DMA, France has formed an alliance with Germany and the Netherlands that aims to limit the rules to the world’s biggest digital platforms. Parliament is largely in agreement with Council and seeks an even narrower scope. There could be geopolitical pitfalls in store, though, especially if the U.S. administration views the DMA as too targeted toward American firms. As for the DSA, there could be battles in store regarding takedown orders for illegal content. Parliament’s position is likely to put checks on the powers of national authorities to issue such orders, while France has been particularly vocal in giving these authorities more teeth.
Chances of success: 7/10. Speed is of the essence for the French, and there is a concerted effort in both the Council and the Parliament to wrap things up swiftly. The first two months of the year will be crucial for trilogue negotiations on both the DSA and the DMA. If the talks are pushed into the French presidential election period, things could get sticky.
Fit for 55
Why it matters: The European Commission’s landmark Fit for 55 legislative package aims to reduce the bloc’s emissions by at least 55 percent by 2030. The initiative covers vast ground — from cleaning up aviation and maritime fuels to putting a carbon price on the fossil fuels powering cars and heating homes.
State of play: The Commission unveiled the package this summer, and the number of files and their interlinked nature means slow progress. A Slovenian EU presidency progress report published in late November said “work is at a very early stage.” A second slate of Commission proposals was released in December.
EU fault lines: The most controversial file is easily the proposed expansion of the EU’s carbon pricing scheme to cover transport and buildings — a potential change meant to incentivize a switch to electric vehicles and help decarbonize heating. But many EU countries fear a backlash if households face higher costs as a result. France, where a proposed fuel tax sparked the Yellow Jackets protests, has “reservations” about the proposal, pitting Paris against Germany, which backs the idea. A discussion between environment ministers just before Christmas revealed massive divisions. The proposed Climate Social Fund — meant to counteract potential negative effects of the carbon price expansion — is also subject to fierce debate. Countries are arguing over the size of the fund, while some even question the legal basis for the EU to establish such a money pot.
Chances of success: 7/10 for France to make progress on the files. But the negotiations won’t be finished during its presidency. The goal is to have the package adopted before the end of 2022.
Carbon border tax
Why it matters: If there is one pet file for the French presidency, this is it: A new levy targeting high-carbon imports at Europe’s border. The French have been lobbying for it for years, and they finally got it last July, when the European Commission unveiled its own proposal. The potential tax, one of three new levies proposed by the Commission, would slap a price on the CO2 of imported products like steel, iron and power that is linked to what EU producers already pay under the bloc’s cap-and-trade carbon market. The goal is to prevent EU industry from decamping abroad as the EU tightens its climate targets.
State of play: The European Parliament — with the environment and trade committees in the lead — is in the process of concocting its position. Over in the Council, no country has spoken against the proposal, according to Gerassimos Thomas, head of the Commission’s taxation and customs department. But many have doubts. Both sides will have to come to a position before negotiations can start.
EU fault lines: Free traders will seek to ensure the EU’s unilateral attempt to tax the world into climate ambition doesn’t result in a flurry of retaliatory sanctions against their exports, or even lawsuits at the WTO. Industry lobbyists will seek to secure as much protection from it as possible, while trying to keep current gratuities under the EU’s carbon market.
Chances of success: 7/10 on a border levy of sorts seeing the light of day, 5/10 on it being adopted by the end of the year, 2/10 on negotiations closing under the French presidency.
Why it matters: Taxing digital giants and fighting the practice of luring foreign business with low tax rates have been long-standing French demands. These got a boost this year after more than 120 countries backed two major reforms. One is a plan that sets a minimum global corporate tax rate at 15 percent, while the other agrees to tax major digital companies based on where they sell services — not where they are based. Together, the tax updates would force companies like Apple and Google to pay more taxes to EU countries, while making it harder to entice companies away from the Continent with more favorable tax havens.
State of play: Both reforms were endorsed at OECD, G7 and G20 meetings this year. But they will likely take different routes toward enactment. The Commission in December announced proposals that would cement a new global minimum corporate tax rate across the bloc. France also wants to move forward on the digital tax plan. But discussions on that file are still happening at the OECD, not EU, level.
EU fault lines: On paper, all EU countries are on board. That’s an achievement of sorts given that among the low-tax nations, especially Ireland, there had been long-standing opposition to the minimum rate idea. But negotiators finally won them over by promising some carve outs and pledging that the new rules would enter into force gradually.
Chances of success: 7/10. They vary, depending on which reform. France wants both reforms to be operational in 2023, while Brussels could move forward with the baseline corporate levy. In general, it’s a trickier path for the digital tax because OECD countries must wrap up their work, which isn’t expected before the end of June.
Why it matters: France wants the EU to funnel loads of government support to key industries such as microchips, cloud technology, hydrogen and batteries. This ambition, however, often bumps into the plans of an important EU controller of state aid, competition chief Margrethe Vestager.
State of play: France hoped that by giving Vestager oversight of the industrial strategy portfolio, she would quickly tone down her opposition to Paris’ grand subsidy plans. But the Danish competition enforcer is proving a hard nut to crack. The main battleground is the conditions under which one particular instrument — the Important Projects of Common European Interest — can be used to pump money into certain sectors.
EU fault lines: France can count on countries such as Italy and Poland to support more economic planning. Germany has played both sides at times, although former Economy Minister Peter Altmaier tended to agree with France. The strongest opponents are the free-trading nations, mostly the Nordics and to a lesser extent the Netherlands, which tends to preach more than it practices on the issue.
Chances of success: 6/10. While Vestager recently affirmed that “strong competition enforcement is fundamental for businesses and consumers,” she simultaneously opened the door for subsidies for microchip plants in the name of “resilience.” If she follows through, France will be delighted.
Why it matters: European Commission President Ursula von der Leyen has pledged to deliver an EU minimum wage by 2024, making it a central tenet of her platform. Her proposal doesn’t set wages, per se — that would be forbidden under the treaties. Instead, it nudges EU countries to ensure that if they do have a legal minimum pay, they provide for decent living conditions. It also strongly encourages wage negotiations between employers and workers’ unions.
State of play: With both the European Parliament and European Council having adopted their positions, negotiations are set to start in the new year under the French presidency.
EU fault lines: Following stern resistance from Scandinavian countries, the Council ultimately backed the proposal with only two holdouts, Denmark and Hungary. Germany abstained due to its change in government, but the incoming German coalition has said it wants “minimum binding standards” at the EU level. Over in the Parliament, MEPs leading the file have ensured widespread buy-in for the idea.
Chances of success: 7/10 on a deal being struck under the French presidency.
THE EU’S PLACE IN THE WORLD
The Conference on the Future of Europe
Why it matters: In 2019, French President Emmanuel Macron floated the idea of holding broad discussions with citizens on how the European Union should look in five, 10 or 20 years. European Commission President Ursula von der Leyen then picked up the proposal, which soon felt all the more pressing as the EU grappled with a global pandemic. But it’s unclear whether the initiative, formally titled the Conference on the Future of Europe, will be just another discussion forum, or if it will actually lead to legislation or, perhaps, treaty changes.
State of play: EU leaders officially launched the conference in March, with citizen discussions starting in September. Since then, hundreds of Europeans have met — both in person and virtually — to discuss and gather ideas. Topics have ranged from the economy to democracy to climate change and the EU’s role in the world. The conference is expected to conclude its work this spring.
EU fault lines: The conference took months to get off the ground, derailed by behind-the-scenes squabbling, a lack of enthusiasm from some and the pandemic. And given the resurgent pandemic across Europe, it is unclear if citizens will continue meeting physically. EU members also have different hopes for the outcome. Poland and Hungary would likely veto any attempt to revise the EU’s treaties. But Macron and the new German government are committed to showing the conference can deliver tangible results. One particular motivator for Macron: Showing skeptical voters he can help reform Brussels.
Chances of success: 5/10. It depends on how “success” is defined. Altering the EU treaties seems like a long shot, but expect something EU leaders can at least dress up as important progress.
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