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The EU has agreed two sweeping environmental laws despite warnings they would disrupt trade, damage competitiveness and alienate developing countries.
One piece of legislation agreed on Friday will hold companies liable for human rights and environmental abuses in their supply chains, including in China’s Xinjiang region, where Beijing is accused of forced labour. The other law, also approved on Friday, imposes conditions on imports of recycled plastic for packaging.
The China Chamber of Commerce to the EU said it was “particularly worried about the increased bureaucracy and the unbalanced, disproportionate and ambiguous obligations imposed on businesses” by the supply chain law. It also warned of “possible trade disruptions and cost increases due to overly stringent packaging requirements” and urged the EU to stick to World Trade Organization rules and refrain from “erecting market barriers that hinder non-EU producers”.
China has been accused of human rights abuses in Xinjiang including the use of forced labour and large-scale detentions of members of the mainly Muslim Uyghur minority. Beijing denies the allegations, saying its policies in the region are aimed at promoting development and countering terrorism.
Germany, the bloc’s largest economy, denounced the packaging law as “protectionist” because it forces recyclers outside the bloc to process plastic according to EU standards.
BusinessEurope, the lobby group of the bloc’s largest companies, criticised the supply chain law as imposing “harsh sanctions with potential existential implications for companies, and unilaterally expose them to litigation from all parts of the world”.
Both laws are part of a broader EU effort to increase environmental standards for a host of industries and reduce the bloc’s carbon footprint. But the green agenda has also raised costs and bureaucracy and policymakers have come under pressure to impose restrictions on imports from countries with more lax climate regulations, in order to protect domestic producers.
Farmers, who have been protesting across the bloc against what they perceive as red tape and unfair competition from abroad, have demanded “mirror clauses” that would oblige exporters outside the EU to abide by the same rules set by Brussels.
“The farmers’ protests also underlined that they want the same rules to be applicable outside the EU,” said Virginijus Sinkevičius, European environment commissioner. He added, however, that any rules should be “legally sound” and “not create trade barriers”.
Germany, France and Italy all raised concerns about the supply chain law and ensured it covered only companies with 1,000 or more employees and €450mn in annual turnover. In the original proposal, the threshold was at 500 employees and €150mn turnover.
Still, BDI, Germany’s main business lobby, said the law “rests on unrealistic assumptions” and imposes “enormous bureaucratic costs” in what will amount to “a further setback for Europe’s competitiveness” and create new obstacles for Europe’s security of supply and diversification.
The packaging regulation sets mandatory targets for recycled content of bottles and other packaging. To count towards them, recyclers will have to comply with EU domestic emissions and pollution standards — a last-minute addition by France.
In an unusual move, European Commission officials lobbied to take out that addition, arguing it amounts to a de facto import ban because very few processing plants outside the bloc meet EU standards. The officials also raised concerns about increased prices, retaliation by other countries, and possible legal action at the WTO.
David Kleimann, senior research associate for ODI Europe, said that the recycling standards clause “increases the barrage of regulatory burdens” for exporters to the EU and “reinforces external impressions of European economic nationalism advanced under the banner of environmental protection”.
The bloc’s recyclers welcomed the law, with Euric, the trade body, saying it was “vital for ensuring European industrial sovereignty and competitiveness”.
Germany’s coalition government, which includes the Greens, abstained on the supply chain law and backed the packaging legislation in a vote in Brussels on Friday, insisting that it did not set a precedent for future policies and trade agreements.
Berlin, however, recorded its misgivings in the minutes of Friday’s meeting, calling the packaging law “a protectionist instrument creating barriers to trade”.
Both measures are expected to be formally adopted after a European parliament vote in April.
Additional reporting by Guy Chazan in Berlin
Source: Economy - ft.com
