Europe and the World are in the middle of an unprecedented crisis. Nothing since the end of the Second World War compares to what we are living today. On 20 April, for the first time in history the WTI oil index went negative. Brent was still around $20, so no drama, but still! We’ll continue to monitor the situation so stay tuned for more on this space.
The point is that we do not know what is coming next, how fast our economies will recover and how our lifestyle will change. The IMF defined this period as the ‘Great Lockdown’ and assessed this as the worst economic downturn since the Great Depression. For 2020, the IMF projects global growth to fall to -3 percent, a downgrade of 6.3 percentage points from January 2020. By way of comparison, during the 2009 financial crisis negative growth was of -0.1%.
One concrete risk is a breakdown of global supply chains.
During an exchange of views in the European Parliament on COVID-19, EU Commissioner for Health Stella Kyriakides warned that the EU will need to look at some structural weaknesses in EU medicinal supply chains. The EU will also need to assess the dependence on non-EU countries for pharmaceutical ingredients. Such dependence is likely to be highlighted for products and materials in other supply chains.
An example may be solar panels, whose largest world manufacturer is China. The country gathers more than 60% of the world’s production, according to the International Energy Agency (IEA). Reiterating this point, on 22 April, a joint roadmap by the European Commission and the European Council stated that “we must ensure strategic autonomy of the EU through a dynamic industrial policy”. The roadmap continues by saying that the COVID-19 crisis showed the “pressing need to produce critical goods in Europe”.
In defence of free and fair trade, Commissioner for Trade Philip Hogan spoke via videoconference to MEPs on 21 April. He argued that we should remain realistic on the need for non-EU trade partners. Extra efforts should be made to ensure diversification of supply chains. As a result, the EU trade policy review will start in 2020, one year earlier than planned.
The positions on international trade will have to be clarified in the next weeks and months. Some countries and MEPs are more reluctant than others. Yet, there seems to be a growing support for the idea that the EU’s recovery must be green. The message from 15 EU Member States, 76 MEPs and a number of major European private companies is clear. We need a green transition to build a “fairer and more resilient society”.
On 9 April, 13 Member States published an open letter to the European Commission. On 14 April, Pascal Canfin, French MEP and Chair of the Environment Committee, responded by launching an informal green recovery alliance. Signatories reiterated their commitment to putting climate change at the centre of European economic policy.
As the Ministers for the Environment, energy and climate of the countries which signed the open letter put it: “We should withstand the temptations of short-term solutions in response to the present crisis that risk locking the EU in a fossil fuel economy for decades to come.”
If so many public actors and private stakeholders walk the talk, the pandemic may accelerate the decarbonisation agenda. A recent Bruegel blogpost goes as far as recommending that the EU and governments attach green conditions to the lifting of state aid rules and boost investment to speed up renewable energy projects.
What is clear is that Brussels is more relevant than ever. Relevant for member states, for the EU industry as well as globally, to set the example and lead the way in a post-COVID-19 “green recovery.” This is a pivotal moment. Companies are quickly getting familiar with the fact that the resolution of this crisis starts here. They also realise that public affairs in Brussels is no longer a nice to have. It’s a core element to consider for business, especially in such difficult times.
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May 28, 2020