Analytics, EU – Baltic States, Financial Services, Forum, Investments, Markets and Companies

The European Union is a full member in the G7 and takes part in its work at all levels. Since the entry into force of the Lisbon Treaty, the EU is represented by both the President of the European Commission and the President of the European Council.

This year summit takes place in Japan (26-27 May); the European Union is represented by the President of the European Commission (Jean-Claude Juncker) and the President of the European Council (Donald Tusk).

See http://europa.eu/rapid/press-release_MEMO-16-1861_en.htm?locale=en

Short history

The G-7 is a forum for discussion where leaders take commitments to achieve common objectives, putting their credibility at stake. In doing so, the G-7 provides critical leadership to address global challenges.

In 1977, representatives of the then European Community began participating in the London Summit. The first G7 summit was held two years earlier, in 1975 in Rambouillet (France). Originally, the EU's role was limited to those areas in which it had exclusive competences, but this has changed with time. The European Commission was gradually included in all political discussions on the summit agenda and took part in all summit working sessions, as of the Ottawa Summit (1981).

Japan will hand over the Presidency to Italy for 2017; the Presidency will continue in its rotation to Canada in 2018, France in 2019, the USA in 2020 and the United Kingdom in 2021.

More info: G7 summit Japan 2016; Council of the European Union G7 background brief.

Global economy: review

G7 leaders discuss commitments to further strengthening economic policy responses at the time of growing global economic uncertainty, including structural, monetary and fiscal measures.

The EU role: despite a more difficult global environment, the EU’s recovery continues. According to the EU’s latest economic forecast (published on 3 May 2016), the economy in EU-28 states is expected to grow next year, albeit unevenly. Unemployment in Europe is expected to fall below the 10% mark in 2017; and the fiscal outlook is continuing to improve as the general government deficit and the debt-to-GDP ratio will continue to decline gradually in both the euro area and the EU as a whole.

As external factors supporting Europe's moderate recovery are fading, domestic sources of growth are gaining in importance. In its Spring 2016 European Semester package, presented on 18 May 2016, the Commission’s country-specific recommendations focused on three priority areas: investment (still low compared to pre-crisis levels but gaining traction, also helped by the Investment Plan for Europe); faster progress on structural reforms (necessary to boost the recovery and raise the long-term growth potential of EU economies); and the need for all EU states to pursue responsible fiscal policies and ensure growth-friendly composition of their budgets.

Development

G7 leaders will discuss the next steps towards the implementation of the 17 Sustainable Development Goals (SDGs), as set out in the United Nations’ 2030 Agenda for Sustainable Development, adopted in September 2015.

The EU role: the EU has played an important role in shaping the 2030 Agenda for Sustainable Development, through public consultations, dialogue with its partners and in-depth research. The EU will continue to play a leading role as it moves into the implementation of this ambitious, transformative and universal Agenda that delivers poverty eradication and sustainable development for all.

The EU, together with its member states, is the world's largest aid donor, providing more than half of the total Official Development Assistance (ODA) reported last year by members of the Development Assistance Committee of the Organisation for Economic Co-Operation and Development (OECD-DAC).

EU collective Official Development Assistance has increased to €68 billion in 2015 (up 15% from €59 billion in 2014) – growing for the third year in a row. This is the highest share of Gross National Income ever. EU collective ODA represented 0.47% of EU Gross National Income (GNI) in 2015, an increase from 0.43% in 2014.

This is significantly above the non-EU Development Assistance Committee (DAC) country average of 0.21% ODA/GNI. Five EU Member States exceeded the 0.7% ODA/GNI mark: Sweden (1.4%), Luxembourg (0.93%), Denmark (0.85%), and the Netherlands (0.76%) and the United Kingdom (0.71%).

2015 also saw the highest support for development aid amongst EU citizens in 6 years. Almost nine out of ten EU citizens support development (89% – a 4 percentage point increase since 2014), while more than half say that promised levels of aid should be delivered by the EU.

EU development policy seeks to eradicate poverty in a context of sustainable development. It is a cornerstone of EU relations with the outside world – alongside foreign, security and trade policy (and international aspects of other policies like environment, agriculture and fisheries).

Over the last decade, thanks to EU funding, almost 14 million pupils could go to primary school, more than 70 million people were linked to improved drinking water, and over 7.5 million births were attended by skilled health workers, saving the lives of mothers and babies. EU development aid goes to around 150 countries in the world. Since 2014, the EU is phasing out direct aid to large countries that have experienced strong economic growth and managed to reduce poverty, and is focussing on the poorest regions in the world instead. In the period 2014-2020, about 75% of EU support will go to these regions which, in addition, often are hard hit by natural disasters or conflict. EU aid will also focus more on certain sectors such as good governance, human rights, democracy, health, education, but also agriculture and energy.

The EU applies a system of “Policy coherence for development” in policy areas such as trade and finance, agriculture, security, climate change or migration, in order to foster growth and overcome poverty in development countries, by – for example – opening its large single market to these countries, or setting up standards to fight illegal exploitation of natural resources. The EU is strongly committed to making aid more effective. The European Commission is part of the Steering Committee of the Global Partnership for Effective Development Cooperation. Based on European values, the EU promotes, in its relations with partners countries, democratic values and practices such as human rights, fundamental freedoms, good governance and the rule of law. Gender equality is an important element of the EU approach.

More info on EU development aid: http://ec.europa.eu/europeaid/home_en.

Climate action and energy

The G7 will discuss how to lead the efforts of the international community, building on the outcome of the climate change Conference of the Parties (COP21) in Paris, in December 2015. Leaders will also address energy policy issues, against the background of decreasing energy security.

The EU role: the EU was the first major economy to table its commitment in the run up to the Paris climate conference COP21; the EU is now looking forward to having the Agreement ratified and entering into force swiftly.

The EU has the world’s most ambitious commitments on climate change: a reduction target of at least 40% in greenhouse gas (GHG) emissions by 2030 compared to 1990; to at least 27% of total energy consumption from renewable energy; and to at least 27% increase in energy efficiency. The Paris Agreement of December 2015 vindicates the EU's approach.

Implementing the 2030 energy and climate framework as agreed by the European Council is a priority in follow up to the Paris Agreement. Europe has shown that it is possible to act: from 1990 to 2013, EU emissions declined 19% while GDP grew 45%. The EU is currently the most GHG-efficient major economy in the world, and encourages other nations to follow, to match this ambition.

Climate action has been part of the political and legislative agenda for many years and is an integral part of the European Energy Union strategy – one of the present Commission’s priorities.  Other dimensions of the EU’s Energy Union strategy are: = supplying security by diversifying Europe’s energy sources; = fully integrating the internal energy market by enabling energy to flow freely across the EU using interconnectors; = increasing energy efficiency in order to consume less energy and reduce pollution; and = supporting research and innovation in low-carbon technologies.

Turning Europe into a highly energy-efficient and low-carbon economy will also boost the economy, create jobs and strengthen Europe's competitiveness: according to Eurostat (2012 data), the EU already has 4.3 million people working in green industries. This is a real success story for European industry even in times of an economic slowdown. It is estimated that the 2030 climate and energy framework would create up to 700,000 additional jobs in Europe. With more ambitious renewable energy and energy efficiency, net employment could increase by up to 1.2 million jobs. More info on EU Energy Union and Climate policy:

http://ec.europa.eu/priorities/energy-union-and-climate_en.

Tax transparency

Building on the G20 and OECD commitments, G7 leaders are calling for consistent action in the field of tax transparency, in order to restore public trust in tax systems.

The EU role: European Commission’s top priority is to deliver on combating tax avoidance and tax evasion. Significant progress has already been achieved: in 2015, the EU adopted an Action Plan for a fair and efficient corporate tax system in the EU, together with an ambitious tax transparency agenda to tackle corporate tax avoidance and harmful tax competition in the EU.

At the end of 2015, the EU states reached a landmark agreement on sharing information on tax rulings. This was a major step forward that will provide national authorities with much needed insight on aggressive tax planning.

The EU finalised and signed agreements in 2015 on the automatic exchange of financial information of EU residents in Switzerland, Liechtenstein, Andorra and San Marino. Negotiations with Monaco have also been finalised and signature of the related agreement is foreseen in the coming months.

Since May 2015, the 4^th Anti-Money Laundering Directive requires EU states to put in place central registers on beneficial ownership of all EU companies and other legal arrangements like trusts; it has been currently implemented by the member states. In October 2015, a political agreement on the automatic exchange of information on tax rulings among EU states was reached.

In January 2016, the Commission presented its Anti Tax Avoidance package. Key features of the new package included legally-binding measures to block the most common methods used by companies to avoid paying tax; a recommendation to EU states on how to prevent tax treaty abuse; a proposal for the sharing of tax-related information on multinationals operating in the EU; actions to promote tax good governance internationally; and a new EU process for listing third countries that refuse to play fair.

http://ec.europa.eu/taxation_customs/taxation/company_tax/anti_tax_avoidance/index_en.htm

In March 2016, EU states came to a speedy agreement after only forty days on the automatic exchange of information on country-by-country reports of multinational companies.

The Commission also came forward in April 2016 with a new legislative proposal on EU and non-EU multinational groups a yearly public country-by-country reporting on the profit and tax paid and other relevant information. Under this proposal, anyone interested would be able to see how much tax the largest multinationals operating in Europe pay.

The scourge of tax avoidance is an issue of global significance; hence the EU looks forward to pursuing far-reaching strategy towards fair taxation and greater transparency together with all partners in the international arena.

Trade

At the summit, the G-7 members are sending a strong message in support of free trade as a tool to promote jobs and higher living standards, including calling for strengthening the rules-based multilateral trading system and the functions of the WTO.

The issue of global excess capacity, especially in the steel sector, will also be addressed; the summit is an occasion for EU to discuss ongoing trade negotiations with Japan and the US.

Contemporary Commission’s trade strategy “Trade for all” is a key component for EU efforts in creating jobs, growth and investment. The EU is the world’s largest trading bloc and a staunch defender of fair and open trade and of the multilateral trading system.

In autumn 2016, the Commission presented a new EU trade and investment strategy entitled ‘Trade for All: Towards a more responsible trade and investment policy’. The new strategy will make EU trade policy more responsible and based on three key principles: 1. Effectiveness: Making sure trade actually delivers on its promise of new economic opportunities. That means addressing the issues that affect today’s economy, which involves services and digital trade. It also means including provisions for SMEs in future trade agreements. 2. Transparency: Opening up negotiations to more public scrutiny by publishing key negotiating texts from all negotiations, as is being done in the TTIP negotiations. 3. Values: Using trade agreements as levers to promote sustainable development and European values such as human rights, fair and ethical trade and the fight against corruption. This means including rules on human rights, sustainable development and good governance in future trade agreements with third countries.

The overall goal of the EU’s trade policy is to create growth and jobs in Europe, promote development around the world and strengthen ties with important trading partners.

See: http://trade.ec.europa.eu/doclib/press/index.cfm?id=1381. 

The EU has a busy agenda of bilateral negotiations, including for a free trade agreement with Japan. It has concluded a number of other agreements, e.g. recent one with South Korea that has already brought much benefit to European exporters; the EU currently has a number of agreements pending ratification.

The EU is also actively engaged in ongoing multilateral trade initiatives. One of the major ongoing negotiations is the Transatlantic Trade and Investment Partnership (TTIP) with the EU’s most important trading partner, the United States. By building this transatlantic economic partnership, the EU also wants to globally help carve new standards and rules, and safeguard existing ones.

The EU wants to stay at the forefront in developing rules for the global economic trade and to shape globalisation. It was in the framework of the TTIP negotiations that the European Commission developed and proposed a new, modernised approach on investment protection: the Investment Court System. This approach has been included in recent agreements with Canada and Vietnam. See more on http://ec.europa.eu/trade/policy/.  

Investment

G-7 leaders address the global demand-supply gap in investment in order to assist in promoting infrastructure investments and discuss G-7 commitments to invest in areas that contribute to sustainable growth, e.g. green growth, energy and the digital economy.

The EU role: Investment is a top priority for the EU; the brand new Investment Plan for Europe, so-called “Invest-EU” is kick-starting investments of at least €315 billion into the real economy over three years. In less than one year into its existence, the European Fund for Strategic Investments (EFSI) has already mobilised more than €100 billion across the EU states. About 141,000 SMEs will enjoy better access to finance, thanks to the Investment Plan starting to produce structural change.

Until now, European investment has often been dominated by a limited number of large, expensive projects. Today, there are more local projects, which are smaller and more diverse. Public money is mobilising private finance, and supporting structural reforms. There are more interaction between the European Investment Bank and local institutions. In short, the EU is beginning to see the investment that the market has often failed to deliver.

EFSI is helping to find new treatments for Alzheimer's disease; transforming old industrial sites into new offices; bringing energy efficiency into our homes and cutting our bills; and lending a hand to start-ups who were turned away by other lenders. In more than half of our projects, research and development are pushing the boundaries of what we can achieve.

The money for Invest-EU does not solely come from reallocations from the EU budget; EU states, as well as non-EU countries, can contribute either at the level of the risk-bearing capacity, through a brand new European Investment Project Portal (EIPP), which is the online meeting place for project promoters and investors, or by directly co-financing certain projects and activities. More info in: http://ec.europa.eu/invest-eu.

Reference: Commission press release “G7 Summit in Japan: the European Union’s role and actions”, Brussels, 20 May 2016. In:

http://europa.eu/rapid/press-release_MEMO-16-1861_en.htm?locale=en