The Future of Europe: Six Areas to Watch

Susan
By Susan January 10, 2018 17:33

The Future of Europe: Six Areas to Watch

What’s the future of Europe?

When you mention Europe or the EU in Ireland or in the UK these days, the first thing – and perhaps the only thing – that comes to mind is Brexit. What will happen, what will change, how that change will affect us… There is a lot of uncertainty and it seems this is consuming all of our attention.

However, as an economist I make sure I subscribe to a range of news sources. I also keep an eye on headlines whenever I visit a foreign country (Read more about investing and business opportunities in Vietnam). I’ve noticed a striking difference in recent months, one that many commentators have noted. While we’re focusing on Brexit and only Brexit (or almost only!), the rest of Europe and indeed the rest of the world is analysing and debating many other developments.

Our relationship with Europe is evolving in crucial ways. As voters, business stakeholders or tourists, this is of course highly important for us. Yet, very few are talking about wide-ranging changes that are happening right now, and which will have a considerable impact in the future, both in the short term and in the long term.

Here are six things to watch in Europe.

 

Where are the European Union’s main priorities?

 

All you had to do was read the final paragraph of Juncker’s European Union’s Long-term Budget press release this week to see exactly where the EU’s main priorities lie:

The EU is expected to play a bigger role in new policy areas like migration, internal and external security or defence. And Europe should also preserve its leading role on the global stage, as a major humanitarian and development aid donor and as a leader of the fight against climate change. That must be achieved with an EU budget that will only get smaller following the departure of the United Kingdom.

Michel Barnier has been clear and consistent about the bloc’s priorities. In a speech this week he outlined the key areas of focus for European reform, including:

  • building, alongside the Banking Union, a real Capital Markets Union;
  • investing together in research, innovation and technology;
  • continuing to build a ‘global Europe’, which is preparing to offer our businesses new opportunities to export to Australia and New Zealand;
  • building a European defence initiative, in keeping with the wishes of the European Commission, by proposing a European Defence Fund and Permanent Structured Cooperation.

He also announced very clearly where the Brexit negotiations are and aren’t going:

However, we can proceed by deduction, based on the Union’s legal system and the UK’s red lines. By officially drawing these red lines, the UK is itself closing the doors, one by one.

The British government wants to end the free movement of persons, which is indivisible from the other three freedoms. It has therefore indicated its intention of leaving the Single Market. The British government wants to recover its independence to negotiate international agreements. It has therefore confirmed its intention of leaving the Customs Union. The UK no longer wishes to recognise the jurisdiction of the Court of Justice of the European Union, which guarantees the application of our common rules.It follows that the only model possible is a free trade agreement, which could obviate the need for trade barriers, such as customs duties, and could facilitate customs procedures and product certification.

This is the aim of the transition period requested by the United Kingdom, for which the Commission proposed to the Member States a period of 21 months, from the withdrawal of the United Kingdom on 29 March 2019 to 31 December 2020. That said, the real transition period has already started. My responsibility is to tell you the truth.

Its financial service providers can no longer enjoy the benefits of a passport to the Single Market, nor those of a system of generalised equivalence of standards. This is not a question of punishment or revenge; we simply want to remain in charge of our own rules and the way in which they are applied. As it seeks to regain its decision-making autonomy, the United Kingdom must respect ours.

With all of this in mind, it’s important that, as business people and citizens, we don’t just sit and wring our hands about not knowing what Brexit will bring. We need to be proactive and look further East and South: there is a plethora of interesting developments and opportunities to be seized.

Here are the six key areas that I’m watching. I’m particularly interested in them for several reasons:

  • for business opportunities
  • to share with our Savvy Teens as they plan their future
  • to monitor what technology and innovation we will be leveraging in the future
  • to monitor their influence on the taxes we pay and the services we will benefit from
  • to monitor the changing rules of international trade.

Each one of these can have a direct effect on the strategic decisions we make and it’s important to be vigilant to opportunity and apprehend challenges – and, ideally, to turn the latter into the former.

 

#1 Thing to watch in the future of Europe: Horizon 2020

 

Horizon 2020 iss a huge initiative, set up to drive forward innovation in Europe. Horizon 2020 was designed “to drive economic growth and create jobs by coupling research and innovation (R&I), with an emphasis on excellent science, industrial leadership and tackling societal challenges”.

According to the Department of Business, Enterprise and Innovation, “from the programme’s inception in 2014 to September 2017, Ireland has won €475 million in EU funding under Horizon 2020. Higher Education Institutes accounted for just under €255 million out of this funding. Industry won just over €160 million, of which €98.6 million was awarded to SMEs.”

If you’re interested in building better science, competitive industry and better society in Europe, then there may be opportunities for you to work with others in Europe in a well-funded collaboration. As a starting point, there is a national support network in Ireland comprising 32 European Advisors from ten Irish research and industry agencies. Check out Horizon2020.ie for more information.

 

#2 Thing to watch in the future of Europe: VAT rules

 

On 5th December 2017, the European Commission announced that from 1st January 2019, VAT on cross-border sales under €10,000 a year will be handled according to the rules of the home country of the smallest business. This will affect up to 430,000 businesses across the EU. Further, there will be simpler procedures for cross-border sales of up to €100,000 annually.

As it stands currently, each EU country has a limit as to how much eCommerce you can do before you must register for VAT in that country. Not alone is that a costly compliance burden (in a potentially different language), it also may trigger other administrative requirements in the target country. As a result, it’s often easier to stop selling after a certain level has been reached. Have you ever tried to buy something online, only to reach the final stage of your purchase – and you couldn’t find your country in the dropdown menu? This is the reason for this frustrating obstacle. This move lifts those limits higher and ultimately means that people can sell more into different countries. (Read: Is your online shop shooing customers away?)

In addition, this development enables all companies that sell online to deal with their VAT obligations in the EU through one easy-to-use online portal in their own language. This will make a dramatic difference to online retailers and will also help Member States to recoup the current estimated €5 billion of VAT lost on online sales every year.

 

#3 Thing to watch in the future of Europe: EU-Japan Economic

Partnership Agreement

 

On 8th December 2017, the EU and Japan signed an Economic Partnership Agreement. This means they completed negotiations in preparation for a trade deal which is set to:

  • remove trade barriers
  • help the two titan economies shape global trade rules, in line with agreed standards and shared values
  • send a powerful signal that two of the world’s biggest economies reject protectionism.

In Ireland, we exported EUR1.8 billion to Japan in the first ten months of 2017, which represents about 3% of the entire EU sales of goods to Japan. After China, Japan is Ireland’s biggest trading partner in Asia and is the largest Asian-country foreign direct investor in Ireland.

Enterprise Ireland is strategising to develop Irish sales in the Food & Agri. Business, Aviation & Aerospace, Machinery, and Consumer Sectors with this development. Given that Japan is a market of 127 million people and a $5 trillion economy, it’s understandable why. If you’re interested in pursuing opportunities in Japan, then consider leveraging this EU relationship by reaching out to the EU-Japan Centre for Industrial Cooperation.

 

#4 Thing to watch in the future of Europe: Enterprise Europe

Network

 

I can’t say it enough, Enterprise Europe Network has had an immensely positive impact on our business over the years. From helping us develop our initial contact points in Malta when we made our first foray into export, to subsidising superb trade missions (I’ve gone on one trade mission per year, every year that we have been in business), this initiative has made a visible difference to our company.

If you want to go to a conference or matchmaking event in your sector, either at home or abroad, that is likely to be completely subsidised or very well funded, you should check out the EEN Events page. If you’re looking to distribute your product in other markets, add a cross-sell opportunity to your own portfolio or start up a business by partnering with somebody else in the EU, then check out the EEN database with, at the time of writing, 7427 business opportunities available in total.

 

#5 Thing to watch in the future of Europe: European

Solidarity Corps

 

The European Solidarity Corps is a superb initiative that celebrated its first year in operation in 2017. This structure “creates opportunities for young people to volunteer or work in projects in their own country or abroad that benefit communities and people around Europe”. Young people between the ages of 18 and 30 can participate in projects ranging from natural disaster prevention to dealing with social issues in local communities.

Volunteers are entitled to travel, lodging and subsistence expenses, training as well as insurance coverage for the duration of the activity. Occupational activities involve an apprenticeship or a traineeship, so there may be an employment contract established in accordance with the national regulations of the hosting country, as well as a subsistence allowance provided. This offers young people real work experience that empowers them to make a tangible difference to a cause they feel strongly about; on top of this, it also helps them develop their C.V. and engage in eye-opening experiences around the continent.

The Solidarity Corps requires young people to spearhead and lead the projects. Therefore, those companies and organisations who agree to sign up to its Missions and Principles can tap into a pool of candidates to further social impact. This offers a new source of enthusiastic talent for those who want to pursue true Corporate Social Responsibility. (Read: The busy person’s guide to making a bigger impact)

 

#6 Thing to watch in the future of Europe: European

Monetary Fund

 

Ireland spent a significant portion of this decade under the watchful eye of the IMF (International Monetary Fund). In this arrangement, we were offered loans at a lower interest rate than that being demanded by the market. The IMF promotes economic growth and job creation through policy advice, knowledge sharing and lending. In exchange however, we had to sign up to stringent fiscal reforms in a Memorandum of Understanding. While we did borrow from the ECB and took up bilateral loans from individual countries, those loans didn’t come with the same terms and conditions.

If the EMF was to be set up, this is a step towards deeper fiscal integration: the event of an EU country needing a loan of last resort, they would turn to the European Monetary Fund rather than the IMF. In this case, the lending countries could exert much more influence over the fiscal decisions of a country in what would be a “loans for reforms” arrangement.

This ties in with other wide-ranging structural changes including a single EU Finance minister by 2019. This would be a big departure from the status quo Eurogroup president role, an existing finance minister who chairs a committee of all the finance ministers in the EU states. In the new configuration, that person would become the chairman of all EU finance ministers, responsible for steering the budgetary coordination and surveillance system between member states and be accountable to the European Parliament.

Further, there is a discussion around setting up “budgetary instruments” to prepare countries like Bulgaria and Croatia to become part of the Single Market. All of these are complex decisions: we as Irish people do need to consider them, and we do have to engage in supra-national conversations. They have widespread impact including fiscal discipline, new markets, more complex ratifications, changing centres of power, etc.

Brexit will remain an important topic of discussion and it is essential of course that we are observant and that we actively participate in the discussion. However, the UK has 55 million people and a $2.5 trillion economy, whereas the EU, post-Brexit, will have 440 million consumers and 22 million businesses, as well as a $15 trillion economy.

According to the latest “Monthly Economic Bulletin” produced by the Department of Foreign Affairs, the economy of the euro area expanded by 2.6% year on year, versus 1.7% year on year for the UK.

I’m not for one minute suggesting that you take the UK out of your growth plans for the year ahead (and we’re building our own business in the UK this year), but I am firmly suggesting that you open your eyes wide to what’s happening in the biggest economy in the world, namely the European Union.

 

Positive Economist

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Susan
By Susan January 10, 2018 17:33