The EU’s new trade chief has told the US to withdraw punitive tariffs on more than $7bn of EU products or prepare to face additional duties on exports to Europe, as he urged a settlement to the two sides’ 15-year dispute over Airbus and Boeing.
Valdis Dombrovskis, who was formally appointed on Wednesday as the EU’s trade commissioner, told the Financial Times that repairing the transatlantic relationship would be a top priority, and that the US should withdraw its Airbus-related tariffs as a confidence-building measure.
The US last year imposed additional duties on $7.5bn of EU products, ranging from French wines to Italian cheeses and German machine tools, after being handed the right to do so by the World Trade Organization. The tariffs responded to what the WTO confirmed were illegal subsidies to European aircraft manufacturer Airbus.
Brussels has waited with growing impatience for a final WTO decision on its right to hit US products in its parallel complaint against state aid for Boeing. The decision is set to come on October 15, with EU officials expecting the bloc to be awarded retaliation rights on about $4bn of US goods.
While this is less than the volume awarded to the US, EU officials believe that it will still be enough to pack an economic punch.
Brussels has shortlisted an eclectic mix of US products for punitive tariffs including aircraft, diggers, casino tables and fitness machines, as well as sensitive agricultural goods such as blueberries — grown in the US electoral swing state of Florida.
Should the US tariffs be withdrawn or suspended, Mr Dombrovskis said the EU would then stay its hand and the two parties could concentrate on reaching a long-term agreement on aircraft subsidies.
“Of course, if the US is not withdrawing their tariffs we have no choice but to then introduce our tariffs,” he said. “In any case, it’s clear: if we are not seeing clear movement from the US side on withdrawing or at least suspending their tariffs, this will not require much delay from our side.”
Brussels has identified resolving the Airbus-Boeing dispute as key to unlocking a more productive conversation with the US on trade. Aside from this dispute, President Donald Trump has placed additional tariffs on EU steel, and repeatedly threatened to target the car sector.
Mr Dombrovksis has taken over that effort midstream after his predecessor, Ireland’s Phil Hogan, resigned in August over alleged violations of Covid-lockdown rules. A former Latvian prime minister who steered his country through an international bailout, Mr Dombrovskis is one of the EU commission’s executive vice-presidents, with wide-ranging responsibilities over economic policy.
One of Mr Hogan’s last acts in office was to seal the first tariff-reduction deal between the EU and US in 20 years, notably including the elimination of duties on US lobster.
Mr Dombrovskis praised the agreement, but he said that little scope was left for such “mini-deals” on tariffs given the two sides’ different negotiating objectives. European nations have authorised the commission to negotiate a deal with the US on free trade in industrial goods, while the US Congress has been clear that any deal would need to include agriculture — a red line for many EU member states.
“I would not be expecting new mini-deals like the lobster deal, for the reason that our negotiating mandates are not matching,” Mr Dombrovskis said. “Our mandate clearly excludes agriculture and the US clearly wants to discuss agriculture.”
But he said possibilities were broad for co-operation beyond the Airbus-Boeing case, citing ongoing negotiations on how to smooth product conformity checks. Brussels has also pitched the idea to Washington of having an “EU-US Trade and Technology Council” to discuss standards for emerging technologies such as artificial intelligence.
Mr Dombrovskis said he wanted to press ahead with co-operation to resolve “purely legal or administrative issues” holding up trade in some EU and US agricultural products such as European beef — while stressing that this would not involve lowering food-safety standards.
“We have lately had a constructive co-operation on shellfish — both sides are now in the process of finalising the last steps before mutual trade can restart”, he said. “I hope we can intensify our co-operation on other similar issues.”
A central goal of Mr Dombrovskis’s mandate, which runs to late 2024, will be to forge close transatlantic co-operation on reforming and ultimately saving the WTO.
“This turn to unilateralism and this more protectionist approach was clearly something which came with the Trump administration,” he said, while refusing to speculate on what a Biden presidency might bring.
“But in any case we will be engaging . . . and trying to bring the US administration back within the framework of multilateralism.”
Turkey’s marine crisis: ‘death knells are ringing for Sea of Marmara’
For a decade, marine biologist Nur Eda Topcu has fought to preserve delicate corals off the Istanbul coastline, which environmentalists say are threatened by the dumping of industrial waste, fuel and sewage.
Now she fears a new threat may hasten the end of the Sea of Marmara’s coral reefs. A gelatinous substance colloquially known as sea snot has in recent months choked aquatic life, blighted fishing and repelled swimmers.
Long brown streaks of the marine mucilage were still visible across the Marmara in late July, while the gooey foam sank below the surface settling on the rare corals. Scientists warn that the sea, whose mix of Mediterranean and Black Sea currents foster coral usually found at far deeper depths, itself is at risk.
“The death knells are ringing for the Marmara,” said Topcu after surfacing from a recent dive to clean the slime that coated normally fuchsia-hued corals off an Istanbul archipelago. “We can’t stop the mucilage. It’s smothering the gorgonians [and] infecting them with harmful bacteria.” She fears most of Marmara’s soft, red Paramuricea clavata, listed as a vulnerable species of coral, will perish this year.
Factories have nearly doubled the deluge of wastewater they discharge into Turkey’s seas in recent years, according to official statistics. The 50,000 tankers that sail through the Marmara each year illegally dump waste and fuel, according to one municipal monitor. Almost two-thirds of the nation’s industry, including an oil refinery, carmakers, chemical plants and power stations, is concentrated in the region.
Most wastewater from Istanbul, Turkey’s largest city, is only treated to remove solids, then pumped to the bottom of the sea. “We use it as our cesspool,” said Levent Artuz, a hydrobiologist at the Marmara Environmental Monitoring Project and author of a new book A Recent History of the Polluting of the Sea of Marmara.
The situation was not helped by the fact that sea temperatures had climbed by an average two degrees Celsius in the Marmara since the start of this century as pollution trapped heat, he said. A state project that diverted the Ergene River, one of Europe’s most toxic waterways, to the Marmara last year was “the tipping point”.
“The essential problem isn’t mucilage. That’s just a link in the chain of decades of degradation,” Artuz said. “We have zero chance of recovering the Sea of Marmara as it was. What we have to do now is figure out how to prevent the Marmara from harming us.”
In recent years, marine life has died in mass mortality events, and there have been infestations of jellyfish and algal blooms such as red tides and mucilage.
But scientists and fishermen say the current flare-up is unprecedented. Phytoplankton is flourishing because of nutrient-rich sewage and fertiliser from agricultural runoff while overfishing has wiped out populations of small fish and crustaceans that would consume the algae.
Gone are the mackerel, tuna, swordfish and other seafood that Istanbul was known for. This year’s haul was down 90 per cent from 2020 as mucilage clogged and dragged off nets, said Erdogan Kartal, the head of Istanbul’s fishing co-operative. “Even if we could supply fish markets, customers aren’t buying out of disgust.”
Recep Tayyip Erdogan, Turkey’s president, has vowed to crack down on polluters and “save our seas from this scourge of mucilage”. Thousands of cubic metres of the sea snot had been vacuumed up, the country’s environment minister said. In early July, he pronounced the Marmara “cleaner and bluer” than before.
Turkey is the only G20 country that has not ratified the Paris accords on climate change, and grassroots movements to protect the environment are often viewed as provocateurs by the government.
Authorities have refused to register a new Green party eager to fight climate change. Scientists also say that a planned shipping canal from the Black Sea to the Marmara could deplete oxygen in the Marmara and promote hydrogen sulphur gas that would envelop Istanbul with the stench of rotten eggs. Erdogan’s transportation minister argues that the cleaner water coming through from the Black Sea would improve the quality of the Marmara.
Along the way, there have been successes for Topcu and members of Istanbul’s Marine Life Conservation Society (MLCS). They secured protected status for the tiny outcrop of Neandros this April, stopping boats from dropping anchors or trawling for fish near its corals. They spent two summers transplanting fan-like yellow sea whips to Neandros after a nearby colony of the golden Eunicella cavolini was buried in debris from a government construction project.
“We carried them like a heart or kidney for transplant, keeping them in cold water and in the dark to prevent shock,” said Serco Eskiyan of the MLCS. It took more than 100 dives to harvest and replant 300 corals 30 metres down.
But Eskiyan, who has dived the waters off the islands since the 1970s and knows the area “like the rooms in my house”, was unable to locate the transplants in July, blinded by the sea snot that reduced visibility to a metre or two. “It looks like a different planet,” said Topcu.
A generation ago, the Marmara’s rich fauna included seahorses, poisonous scorpionfish and great white sharks, now all gone, though Eskiyan still occasionally confronts a rare angular roughshark when he hunts for “ghost nets” abandoned by industrial fishing boats that choke the corals. The MLCS has collected 32,000 square metres of the meshing since 2015.
“I have faith in the sea’s ability to renew itself from the damage people do. But now I question how much longer it can fight back,” Topcu said.
Ransomware attacks rise despite US call for clampdown on cybercriminals
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In mid-June, US president Joe Biden held talks with his Russian counterpart Vladimir Putin to discuss a recent scourge of cyber attacks against the US, including by Russian-based criminal ransomware hackers.
Biden has said he told Putin in no uncertain terms that “certain critical infrastructure should be off limits to cyber attack — period”. Nevertheless, data show that ransomware attacks continue apace, including in sectors such as healthcare and education. It is unclear whether Biden will take further action in light of this.
Ransomware, which usually involves hackers seizing an organisation’s data or computer systems and only releasing access if a ransom is paid, has long plagued businesses large and small. The first known ransomware virus, PC Cyborg, was recorded in 1989, with victims infected via floppy disk and told to send a $189 cheque to an address in Panama.
Today, these financially motivated hacks are far more sophisticated — and are proliferating fast. Attacks have quadrupled during the pandemic, SonicWall data show, partly because the shift to remote working has left staff more vulnerable than if they were connecting to more secure corporate networks.
Additionally, hackers have swapped demanding cheques for requesting hard-to-track cryptocurrencies, meaning that as the price of bitcoin has risen during the past year, the business of ransomware has become all the more lucrative. It is also easier to launch attacks with little to no technical knowhow, given the growing market for “ransomware-as-a-service”, where hackers maintain their ransomware code but rent it out to others and take a cut of any extortion payouts.
While known attacks have reached unprecedented levels, the story of what we do not know — given that there are few rules around disclosure — may be far worse. Earlier this week, Bryan Vorndran, assistant director of the FBI Cyber Division and other cyber agency officials called for mandatory reporting rules around attacks, so that accurate data can be gathered and analysed by the US government.
Small businesses with little spare resources have tended to be the hardest hit by ransomware attackers. But the matter was thrust into the spotlight earlier this year after several audacious attacks on critical infrastructure such as the Colonial Pipeline, which led to fuel shortages for several days on the US east coast, the Irish health system and Brazilian meat supplier JBS. All of these attacks were believed to originate from Russia-based ransomware hackers, although the US government has accused Chinese state-backed groups of also orchestrating attacks.
The number of ransomware gangs stretches into the dozens and continues to proliferate as the economics remain so profitable. Vorndran said the FBI tracked 100 gangs, using an algorithm to rank them and the effect that each has on the economy. The largest one rakes in an estimated $200m a year in revenues, he said.
To help victims fight the gangs, a cottage industry for “ransomware negotiators” has emerged. These middlemen are tasked by victims with haggling down the ransom payments. As go-betweens, they also collect data on attacks, learning the playbooks of various groups in order to best know how to speak to them.
According to data from Coveware, the average ransom payment has fallen in the second quarter to $136,576, from more than $200,000 in the first quarter, amid an emergence of smaller ransomware groups. But in the majority of attacks — about 80 per cent — hackers are using the newer tactic of threatening to leak data as extra leverage in extorting victims. About half of these “leak threat” victims paid out in the second quarter, Coveware said.
Unfortunately, the negotiators’ services continue to be in high demand. According to data on reported attacks collated by Recorded Future, in the US there have been 10 attacks on healthcare, nine on schools and 10 on public state and local government groups during June and July this year. Despite Biden urging Putin last month to crack down on the criminal groups and warning against attacks on 16 critical entities, attacks on many of these key sectors have continued.
“The volume of targeted attacks on government organisations and enterprises that impact civilians, countries and the global economy will not end without a change in approach,” said Bill Conner, the chief executive of SonicWall.
France delays EDF reforms after failure to agree terms with Brussels
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France has been forced to delay the restructuring of state-owned utility EDF after it failed to agree the terms with the EU, a setback to a major economic reform promised by President Emmanuel Macron.
“Significant progress has been made in our discussions with the European Commission, but to date we have not reached an overall agreement,” said a government official. “Therefore it is not possible to submit a draft law to parliament if the principle points of the reform have not been agreed to in advance.”
Jean-Bernard Lévy, EDF chief executive, on Thursday declined to provide a specific timetable for when the reform could be completed, but analysts said it would likely prove difficult at least until after the French presidential elections next April.
“I regret that this reform that is indispensable to EDF cannot happen now,” said Levy. “Our short term [prospects] are guaranteed, but our medium and long term are not if we want to play in the big leagues, which is what is expected of EDF.”
Dubbed Project Hercules, the planned overhaul of EDF was meant to give it the financial firepower to invest in both nuclear and renewable energy in the coming decades.
An important element would be changing the mechanism and regulated prices at which EDF sells nuclear power, which provides 70 per cent of France’s electricity. France wanted to push through higher regulated prices for nuclear power, so EDF could pay down heavy debts and absorb the high costs of maintaining its nuclear reactors.
But Brussels would have to approve such a change because of its remit to ensure free competition in the energy sector and to prevent member states from unfairly bailing out companies.
The plan would effectively split up EDF by creating a government-owned mother company, EDF Bleu, containing the nuclear assets as well as a hydroelectric subsidiary. Another subsidiary, EDF Vert, would house renewable assets, the networks and services businesses, and would be publicly listed with about a third sold to raise funds to boost EDF’s green energy investments.
Macron has argued that the changes are vital for EDF to flourish and keep up with rivals. Given that France owns almost 84 per cent of the group, the government had also hoped the reforms would lighten the state’s financial burden.
But the overhaul has been caught in wrangling with the commission. Le Monde reported that the key sticking point was how the relationship between the newly created entities would work and whether cash could freely flow between them as if the company were still fully integrated.
The French finance ministry, which has piloted the talks, and the Elysée Palace declined to comment further on the details.
EDF’s powerful labour unions had opposed the plan as a prelude to the group being broken up or privatised, and have also raised concerns that it would pave the way for nuclear energy to be marginalised.
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“We celebrate the knockout punch delivered to Hercules,” the far-left CGT union said. “The only aim of these manoeuvres is to pull off juicy financial transactions at the expense of consumers and EDF employees.”
EDF shares fell as much as 4 per cent on Thursday as the reform’s failure overshadowed strong second-quarter financial results that showed the utility rebounding as economic activity picked up despite the Covid-19 pandemic.
Barclays analysts wrote in a note that investors were being too pessimistic on the outlook for the reform even if its timing was hard to predict.
“We continue to believe that ultimately there will be an agreement between the EU and France on EDF’s reorganisation.”
Additional reporting by David Keohane
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