Incoming European Commission president faces balancing act

Ursula von der Leyen must help the EU assert itself in areas like climate change and multilateralism while coping with the US-China trade war

Incoming European Commission President Ursula von der Leyen faces a difficult balancing act when she takes over on November 1, as the European Union tries to assert itself while being caught in the midst of a trade war between the US and China.

The former German defence minister announced her team of commissioners in Brussels on September 10, and listed in a presentation slide four important items high on the agenda.

She specifically cited bold action against climate change, and ensuring that the EU is the guardian of multilateralism, two areas where the EU currently finds itself in conflict with the Trump Administration.

At the same time, she said that the EU will “build our partnership with the United States” and “define our relationship with a more assertive China.”

One early issue to be tackled will be the issue of cybersecurity, which is a prominent theme given the participation of Huawei in 5G rollout in a number of EU countries.

There could also be a tougher line taken on takeovers of EU companies by state-owned Chinese entities. In June, Brussels-based think tank Bruegel and the European Centre for Foreign Relations published a blueprint for using the European Commission’s existing state-aid toolbox to evaluate the extent of subsidies for companies doing takeovers in the EU.

It also raises the possibility that the EU might be able to take decisions by qualified majority voting when member states fear that a certain investment, while beneficial from a national standpoint, raises concerns for the EU as a whole.

Danish politician Margrethe Vestager was appointed the European Commission’s executive vice president for digital, in addition to continuing for another five-year term in charge of the competition portfolio.

Over the past five years Vestager presided over setting fines against US tech giants Google, Facebook and Apple. Now, with the added role of overseeing digital, she is likely to be taking further action against the US tech companies, which have run into criticism on a range of issues including abusing data protection laws and avoiding taxes.

However, this has little downside with regard to the relationship between the EU and the US government, since the Silicon Valley tech companies are firmly in the anti-Trump camp.

Already last week, in a parallel development, the French finance minister said that the EU would block Facebook from moving into financial services with its Libra digital currency.

There is already tension between EU member states about the stance taken by individual countries on investment from China. For example, in Germany the Vossloh locomotives unit is set to be taken over by CRRC.

Germany seems to view this as acceptable as part of its overall trade and investment relationship with China, but France has spoken out against the deal. The French government was critical of a previous decision taken by the Competition Commission under Vestager to block the merger of the Siemens and Alstom rail units, a move that France saw as an important step to create a powerful European company capable of competing with China globally.

China often prefers to deal with individual countries on a bilateral basis, rather than going via the EU level, and this approach causes irritation in Brussels.

Nonetheless, high on the agenda over the next twelve months will be the finalization of a long sought-after investment agreement. 

From China’s point of view, there is some welcome continuity in the oversight of financial services, where Valdis Dombrovskis of Latvia continues with his previous portfolio, overseeing financial regulation and indirectly having a big say over economic policy. As an executive vice president, he will play an important role with the portfolio which goes under the name Economy that Works for People.

Phil Hogan from Ireland was formerly Agriculture Commissioner and has now been appointed as Trade Commissioner. He is likely to strongly support a multilateral approach via the World Trade Organization, and will also play a key role in finalizing the trade and investment agreement.

Each country sends one commissioner to Brussels, so there is a balancing act to be done when handing out the portfolios. There are 26 commissioners, each of whom will need to be confirmed by the European Parliament. Since von der Leyen is from Germany, there is no German Commissioner on the team. And the UK declined to nominate a commissioner, on the basis that it is supposed to be leaving the EU on 31 October- even if that now looks uncertain.

Von der Leyen created three new Executive Vice President positions for climate, digital and economic issues. And she has created, for the first time, a department to coordinate and oversee defense and space policy.

She arrives at a difficult time for the EU economy. Growth appears to be stalling, and last week European Central Bank President Mario Draghi responded to the weak economy by restarting the Quantitative Easing (QE) programme.

Draghi will leave the ECB at the end of his term in October, to be replaced on November 1 by former IMF head Christine Lagarde.

In some unusual public criticism, last week ECB Governing Council members Robert Holzmann of Austria, Klaas Knot of the Netherlands and Jens Weidmann from Germany cast doubt on whether a new round of QE was a good idea.  

Some analysts believe that the Governing Council could quickly bring QE to an end once Lagarde arrives.

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