UK should not be allowed to indulge in tax dumping, Macron says

15 May 2017 3:27pm

8 May 2017. By Simon Taylor, Poppy Carnell and Joanna Sopinska.

France's new president says the UK must avoid engaging in aggressive tax competition if it wants to secure a trade agreement with the EU after Brexit.

Emmanuel Macron, who was elected yesterday with 66 percent of votes, said during his campaign that all future trade agreements between the bloc and third countries should contain a "chapter on tax cooperation" as a safeguard against "dumping" — cutting taxes to attract global companies, but in a way that other governments may consider unfair.

Macron's program also calls for binding clauses on social and environmental issues so that lowering tariffs on "clean" goods and services would be a priority, as well as trade sanctions for countries that violate social and environmental clauses.

These demands are in line with the stance adopted by 27 of the EU's member states minus the UK toward the Brexit negotiations. Leaders of the 27 countries agreed on April 29 that a future trade accord should "ensure a level playing field" and include safeguards against "unfair competitive advantages" through tax, social, environmental and regulatory measures.

Michel Barnier, the EU's chief Brexit negotiator, has said that a trade deal between the UK and the EU must include safeguards that prevent the UK from indulging in regulatory dumping. If it doesn't, he warned, the 27 national governments and parliaments and the European Parliament might reject the accord.

Macron's program refers specifically to Brexit and outlines plans to defend the integrity of the EU's single market so that all companies selling in the bloc are "subject to the same disciplines."

The references to trade policy come in the section of the program that deals with Europe.

Macron is also seeking to push the EU further toward protectionism, in terms of trade defense and foreign investment. France already strongly favors measures to combat unfairly cheap imports — from China, for example — and the new president will continue this position.

The EU is updating its rules on accelerating and toughening dumping and antisubsidy probes, which Macron supports.

'Buy European'

Macron has said he would go further to make it more difficult for non-European countries to trade and invest in Europe, through his support of a "Buy European Act." This would limit foreign companies' access to the bloc's public procurement markets, unless at least half of their production is in Europe.

This concept was first floated years ago and is unlikely to be realized.

The European Commission said in 2014 that there were no plans to propose such a mechanism. The executive is having a hard enough time today trying to change its public procurement rules to limit access to the EU's market for companies from nations that don't reciprocate in their own market.

Its original proposal, from 2012, was withdrawn due to a stalemate among EU governments. A softer approach was proposed in January 2016, but failed to win support as northern nations that favor trade find the measures too protectionist while more conservative countries say the proposed changes are too weak.

This divide suggests "Buy European" legislation would be very difficult to achieve.

Macron's position on access to public contracts enhances the split not just on the topic of public procurement, but on the EU's approach to tackling unfair trade practices and policy as a whole.

His program also reiterates a call made by his predecessor for a common EU approach to policing buyouts of European companies by China or other countries pursuing an aggressive investment policy in Europe. It argues the EU should develop an "instrument" to be able to better control investments in its strategic companies and industries.

Earlier this year, France, Germany and Italy called on the commission to put forward a proposal for setting up a system to monitor such actions at the EU level. In a policy paper due on Wednesday, the EU executive is expected to shed some light on its plans to address this request.

Brexit Special Report