Sweden heads for clash with EU

Chinese investment in the EU increased by 75 per cent in 2016 and amounted to EUR 35.1 billion, according to the Rhodium Group. Concerns that China could gain control of assets affecting national security have led heavyweight nations such as Germany, France and Italy to urge a rethink of foreign investments in the EU, and in a speech today, Wednesday, European Commission President Jean-Claude Juncker is expected to lay out plans for a more robust screening of trade.

The Swedish government is opposed to more thorough vetting of foreign investments, with EU Affairs and Trade Minister Ann Linde describing the move as “protectionist”. “I believe the opportunities the WTO agreement gives Sweden and other EU member states are adequate,” she says.

In contrast, Thomas Lagerqvist, chair of the Sweden-China Trade Council, welcomes a discussion on tighter screening, saying: “It is naïve of Sweden to believe there is no risk”.

Lift for Swedish business

Prior to last week’s G20 summit Japan and the EU announced an agreement on a free trade deal. The Swedish government expects 97% of Japan’s and 99% of the EU’s tariffs will be scrapped. Ann Linde, the minister for EU affairs and trade, stresses the importance of the agreement, saying that two-thirds of companies exporting to Japan today are SMEs.

Five years ago a similar agreement was signed with South Korea, and since then exports have increased by 55%, according to the minister.

Sweden’s services, retail trade and food sectors could all benefit from the agreement, say experts Dagens Nyheter has spoken to.

EU should not control Swedish forestry

“It is unacceptable that Sweden is entering these negotiations without a clear stance,” write Helena Jonsson, chair of the Federation of Swedish Farmers, LRF, and Sven Erik Hammar, chair of the Federation of Swedish Family Forest Owners in Dagens Industri today of the EU’s negotiations on climate and land use, LULUCF.

Swedish forests absorb 50 million tones of carbon dioxide equivalents, which can be compared to Sweden’s total emissions of 60 million tonnes. Forestry means we can benefit from timber products where if fossil-based products were used instead current CO2 emissions would double.

If the EU Commission has the last word on forest reference levels (annual net absorption of carbon dioxide in the forest) then if felling crosses this reference level the forest will be considered to have net emissions, despite that there is in actual fact net absorption of CO2. They ask the government whether it wants the EU to control Swedish forestry and demand politicians show leadership. The EU directive is a threat to the climate benefits of Swedish forestry.

Vital phase for emission rights

Negotiations are heating up in Brussels and Strasbourg over the EU’s most important tool for lowering emissions of carbon dioxide, emissions trading. Today the parliament will make a decision on the issue. Around 13,000 industries will be affected and together could be forced to pay billions of euros more per year for their emissions up until 2030.

However there are widely diverging views and Jytte Guteland (S), who sits in the environmental committee, says, “Everyone was nervous about how we would bring about a solution. It was tough but it ended with an agreement.”

On Monday the Swedish government raised its ambitions saying that fewer industries should be able to avoid paying for their emissions and that more emission rights would be annulled. However Centre Party MEP Fredrick Federley has attacked the government for raising its ambitions only six days before a decision is to be made, saying it is almost impossible to change the position of members at such short notice.

Time for EU to start delivering

Anders Borg, the former finance minister, has warned of lower growth in the wake of Brexit and wants to see structural reform in Europe, which is lagging behind China and India, where GDP growth is around 5-6%.

Risk has increased following the UK’s referendum, and it is time for the EU to deliver on growth and jobs. “We are not just going to see strong opposition to the EU in the Netherlands and Austria, we will see it in Germany and France as well,” he said in Almedalen on Tuesday.

Mr Borg, who is an advisor to Citi, also said that Sweden needed to sort its housing market out and called on Peter Eriksson, the housing minister, to re-start cross-party talks. He even advised Swedish politicians to take a trip to Finland to study the labour market there.

The former minister stressed the need for Sweden to boost growth, believing that if the country could return to growth of 2.5%, living standards would increase two-fold within 30 years.

Insufficient reform

Sweden’s poor performance in the PISA ratings, a decline the like of which has not been seen in any other OECD country in the past decade, poses a threat to the country’s competitiveness, warns the European Commission in its annual report.

The Swedish government receives praise for allocating more funds to education, but the poor performance of pupils with an immigrant background is a cause of concern.

The government is lauded for its efforts to simplify building procedures but its indecision over amortisation requirements is worrying. The Commission urges the government to give the Swedish Financial Supervisory Authority the necessary powers as soon as possible, warning that other measures will be needed to address Sweden’s imbalances.

EU dashes hopes of rapid growth

The European Commission has lowered its growth forecast for the eurozone and the broader European Union. Gross domestic product is expected to land at 1.6% in 2016 and 1.8% next year, while growth in the region as a whole is expected to hit 1.8% this year and 1.9% in 2017.

Sweden will continue to fare well, the Commission said, upwardly revising its growth forecast for the Scandinavian country, from 3.2 to 3.4%. The budget deficit is expected to be 0.4% of GDP.

“Sweden is not in as deep a recession as the rest of Europe; unemployment is quite high but Sweden has the highest employment rate. This provides a good tax base and strong finances,” Swedbank chief economist Anna Breman has said.

Sweden pays second-highest amount

Following deductions for subsidies and benefits, residents of Sweden pay the second highest fee to the EU, according to a survey by europaportalen.se, which has found that each Swedish resident paid the equivalent of 2,600 kronor to Brussels in 2014.

Residents of the Netherlands pay the most; EU membership cost the equivalent of 3,600 kronor last year. Belgium ranks third, according to the website, with each resident paying just over 2,400 kronor.

Kamprad avoids billions in tax

As IKEA’s plans to expand in India take hold, French MEP, Eva Joly, and her colleagues have produced a report showing the furniture giant has avoided paying at least 1 billion euros, SKr 9.5 billion, in tax over the past six years. The European Commission is now to investigate IKEA’s set-up.

IKEA minimises its tax by moving money between different parts of the group and between different countries. The Commission recently introduced a proposal to tighten legislation on tax avoidance, but according to Eva Joly this will not fill all the loopholes. She says, “It is damaging for all of society. Remember the French Revolution started because the nobility did not pay tax. Today multinational companies and the rich manage to avoid tax and that is a reminder of the old French regime.”

IKEA points out that the company pays its taxes, “completely in accordance with national and international tax regulations”.

Sweden must act constructively

At today’s Brussels summit leaders will discuss the UK’s calls for EU reform, note Moderate economic policy spokesman Ulf Kristersson and Moderate foreign policy spokeswoman Karin Enström in a DI debate piece this morning.

The number of EU citizens living in Britain has increased two-fold in the past decade, and PM David Cameron has proposed that EU immigrants will have to work in Britain for four years before they can claim benefits. The PM has also signalled that he will lead Britain out of the EU unless the proposal is accepted.

It is of vital interest to Sweden that Britain stays in the EU, which is why the Swedish government should now work to ensure that the British focus on important practical issues, instead of seeking treaty changes in the short-term. The Swedish government should also work to ensure that the right to freedom of movement in the EU does not undermine the right of all countries to design their own welfare policy, state the two Moderates.