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Further controversy on the horizon for EU #freeports?

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Le Freeport Luxembourg, a hulking warehouse adjacent to Findel Airport which thanks to a special status allows goods from fine wine to Old Masters to remain untaxed almost indefinitely in its vaults, has been under heavy scrutiny recently.

After a group of MEPs expressed their concerns that the facility could be used “as a hotbed for money laundering and tax evasion”, the European Parliament has put getting rid of the free zones across the European Union at the top of its agenda. So far, however, European Commission President—and former Luxembourgish prime minister, under whose watch Le Freeport was built—Jean-Claude Juncker has responded to MEPs’ objections to the special tax zones with “condescension and dismissal”, as German MEP Wolf Klinz noted.

Juncker’s nonchalance notwithstanding, European journalists and lawmakers have identified a litany of issues with the Luxembourg freeport, from the possibility that looted antiquities from Syria and Iraq may be finding their way into such storage sites to the highly problematic profile of Le Freeport’s majority shareholder and so-called “freeport king”, Yves Bouvier. Bouvier, a shipper of luxury goods turned art dealer, is being sued by a former client in multiple jurisdictions around the world for more than $1 billion of alleged art fraud. He’s also being investigated by the Swiss authorities who believe he may owe more than CHF 165 million in back taxes. Le Freeport’s other shareholders have a chequered history as well—Jean-Marc Peretti apparently has links to organised crime in Corsica, while Olivier Thomas was accused of stealing three Picasso paintings from the renowned painter’s stepdaughter.

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On top of this already-extensive catalogue of problems with the freeport model, a new worry has cropped up. An in-depth investigation reveals that Philippe Dauvergne, CEO of Le Freeport Luxembourg, may have links to individuals involved in the Azerbaijani Laundromat, a multi-billion-dollar money-laundering operation in which Azerbaijan’s ruling elite passed large sums of money through UK-registered shell companies.

Fraud on a massive scale

The $2.2 billion operation which has become known as the Azerbaijani Laundromat ran between 2012 and 2014. Institutions including the Azerbaijani government  and the state-owned International Bank of Azerbaijan (IBA)—which was nearly on the brink of collapse after defaulting on its debt in 2017—pumped huge amounts of money into four UK companies managed by shadowy figures in the British Virgin Islands: Hilux Services, Polux Management, Metastar Invest and LCM Alliance.

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The cash laundered through these foreign firms then went to pay for everything from Azerbaijani elites’ luxury lifestyles to illicit lobbying of European and American politicians. The full details of this large-scale influence operation are still becoming clear. Earlier this year, German MP Karin Strenz was the first European policymaker to face consequences in her home country for accepting undisclosed gifts from Azerbaijani lobbyists, and witnesses have recounted appalling tales of brown-envelope bribes being handed out in the Parliamentary Assembly of the Council of Europe (PACE) before a vote on the human rights situation in Azerbaijan.

Among the key figures in organising this fraudulent scheme, according to the Organized Crime and Corruption Reporting Project (OCCRP), was former CEO of the IBA Jahangir Hajiev. Hajiev is currently incarcerated for 15 years after having been convicted of fraud, embezzlement and misappropriation of public funds. His wife Zamira fled to the UK, only to spend an unprecedented £16 million at Harrods and become the first recipient of an Unexplained Wealth Order under a new UK anti-corruption law.

Hajiev and Dauvergne’s mutual colleague: Khagani Bashirov

Hajiev’s former colleague Khagani Bashirov seems to have taken full advantage of the laundromat as well, according to an investigation by Azadliq, the Azerbaijani branch of RFE/RL. A French citizen of Azeri origin who lives in Luxembourg, Bashirov established a number of companies which received substantial loans from the IBA. These loans were never repaid thanks to Bashirov’s personal connection with Hajiev, according to Azerbaijani journalist Khadija Ismayilova. Instead, a number of companies Bashirov controlled sent and received funds from the UK-based companies which made up the Azerbaijani laundromat.

According to publicly-available corporate registers, Bashirov and Philippe Dauvergne—of Le Freeport fame—collaborated on at least 13 companies throughout the years, from 2008 to 2018, from VES Consultancy and Concept.com in the UK, to Slovalux Investment in Slovakia, to the European Sports and Entertainment Agency in Switzerland. While Dauvergne has left a number of the firms he shared with Bashirov, the two men remain on the board of the Chamber of Commerce Luxembourg-Azerbaijan together. Belgian authorities reportedly believe that there’s a high likelihood that Dauvergne has been associated with some of the companies involved in the Azerbaijani laundromat.

Adding to the weight of evidence against Luxembourg freeport

Dauvergne’s close business connections with Bashirov raise questions about whether he’s the right person to be defending Le Freeport Luxembourg against allegations that the facility, already tarnished by founder Yves Bouvier’s dubious reputation, could be “a black hole” for tax evasion and money laundering, as one MEP described it, and a “crime blind spot”.

Indeed, Dauvergne’s concerning business ties just add to the overall lack of transparency surrounding freeports. As MEPs have pointed out, it’s unclear what goods are being stored in European freeports, who these goods’ real owners are, whether the valuables have been legally acquired, how often the items held in freeports have been sold and for how much, and what taxes have been paid on them. With an estimated €110 billion—a full 1% of the EU’s GDP—laundered each year in the bloc and scandals from 2014’s Lux Leaks to the Azerbaijani Laundromat uncovering the extent to which dirty money has infiltrated European policymaking, it’s understandable that EU politicians like German MEP Wolf Klinz have concluded that the risks of maintaining facilities with a reputational profile like Le Freeport Luxembourg significantly outweigh the benefits.

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Agriculture

Agriculture: Steady increase in EU agri-food trade

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The latest EU agri-food trade figures published show that trade continues to increase steadily, with exports increasing by 7% compared to the first eight months of 2020. The total value of EU agri-food trade (exports plus imports) for January-August 2021 reached a value of €210.5 billion, reflecting a 5.1% increase on the same period last year. Exports rose by 7% to €127.5bn, while imports grew by 2.3% to €85bn, giving a total agri-food trade surplus of €44bn for the first eight months of the year. This is an increase of 17% compared to the corresponding period in 2020. Positive figures were reported in exports to the United States, which grew by €2bn or 15%, largely driven by strong performances from wine, and spirit and liqueurs.

Additionally, exports to China rose by €812 million, while increases in values were also reported in exports to Switzerland (up €531m), South Korea (up €464m), Norway (up €393m) and Israel (up €288m). Exports to the United Kingdom during this period (€116 million) were nearly at the same value as they were last year. Exports to a number of countries declined compared the same period in 2020. The largest decline was seen in exports to Saudi Arabia, which fell by €399m or 16%. Other notable decreases were reported in exports to Hong Kong (down €103 million) and Kuwait (down €101m). Regarding specific product categories, the first eight months of 2021 saw major increases in the export values of wine (up €2.5bn) and spirits and liqueurs (up €1.3bn), representing increases of 31% and 32% respectively. Decreases were reported for exports of wheat (down €892m) and infant food (down €736m). The most notable increases in the value of imports were seen in oilcakes (up €1.1bn), soya beans (up €1.1bn), fatty acids and waxes (up €500m), palm and kernel oil (up €479m), and cocoa beans (up €291m).

The highest decreases in import values, on the other hand, were seen in tropical fruit, nuts and spices (down €669m), fruit juices (down €194m), citrus fruits (down €159m), raw tobacco (down €158m), and rice (down €140m). More information is available here and on EU agri-food trade here.

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European Commission

Trade and security: Commission highlights work to defend EU interests and values

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The European Commission is presenting key findings related to defending EU interests when it comes to export controls and foreign investments in the EU. The Commission screened 400 foreign investments since the new Foreign Direct Investment (FDI) screening legislation entered into force. While only in place since a year, there has been an impressive take-up of this mechanism, meaning that EU interests will be better protected going forward. At the same time, over 30,000 requests for the export of goods with potential military use were reviewed by Member States under the EU Export Control regime, with 603 of these exports blocked. These are some of the highlights announced at the occasion of publication of the first reports on FDI screening and on export controls.

Executive Vice President and Trade Commissioner Valdis Dombrovskis said: “The EU remains open to trade and foreign investment – this is a pillar of our job creation and economic growth. But our openness is not unconditional and it needs to be balanced by appropriate tools to safeguard our security and public order. Foreign investment screening and control of exports of dual use goods help keep the EU safe, while protecting human rights. They are key elements of our open, sustainable, and assertive trade policy. These two reports highlight how these tools can help the Commission and competent Member State authorities to act decisively when the situation demands, defending our interests while promoting our values.”

FDI Screening

This report on FDI screening is the first to be published since the new EU FDI screening regulation came into force a year ago. Under this regulation, member states and the Commission work closely together to ensure that any foreign direct investment which can pose a security risk to EU member states or EU critical assets is effectively screened.

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In terms of key findings, the report highlights:

  • The Commission screened 265 transactions notified by member states under the report until end of June 2021 (now the teller is above 400);
  • 80% of the transactions did not justify further investigation and were thus assessed by the Commission in just 15 days;
  • most notifications for screening from Member States concerned the manufacturing sector, ICT, wholesale and retail;
  • the top five countries of origin of investors among notified FDI cases were companies located in: the United States, the United Kingdom, China, Canada and the United Arab Emirates, and;
  • the Commission issued an opinion in less than 3% out of 265 screened cases.

The report confirms that the EU remains open for foreign investment, while ensuring the protection of EU security and public order. The FDI screening cooperation mechanism works effectively and does not create unnecessary delays for transactions. A growing number of member states have adopted their own screening mechanism – 18 now have a mechanism in place.  The European Commission expects all member states to adopt national screening mechanisms. This will further enhance the effectiveness of the screening system and ensure a comprehensive EU approach to tackle risks related to security or public order.

Export Controls

This is the last report on export controls before the entry into force of the upgraded Export Controls Regulation.

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The report shows that dual-use exports represent about 2.3% of total EU exports. Out of a total number of 30.292 applications for and notifications of exports under licences, 603 transactions (exports) were denied (in 2019) representing about 0.02% of total exports. This would put the value of dual-use trade at €119 billion in 2019.

The new Regulation that entered into force on 9 September this year strengthens export controls further by:

  • Introducing a novel ‘human security' dimension in order to capture emerging dual-use technologies – especially cyber-surveillance tools;
  • simplifying procedures and making the export control system more agile and able to evolve and adjust to circumstances;
  • developing an EU capacity-building and training programme for member states' licensing and enforcement authorities;
  • co-ordinating and supporting robust enforcement of controls, and;
  • setting up dialogues with third countries so as to enhance global security and promoting a level playing field at global level.

Memorandum on Dual Use Controls 9 September 2021.

Background

FDI screening and export controls are part of the EU's renewed trade strategy, that seeks to enforce EU rights and defend its values more assertively. Other initiatives and actions under this strategy include:

  • A proposal on an International Procurement Instrument to help ensure a level playing field in the global procurement market. This is currently with the European Parliament and Council.
  • A legislative proposal for a new anti-coercion instrument due in December 2021 that will allow the EU to respond to attempts by other countries to force the EU or its countries to bring about policy changes.
  • A new tool currently prepared by the Commission, designed to tackle effectively foreign subsidies that cause distortions and harm the level playing field in the Single Market in any market situation.
  • A new ‘Access to Markets' portal launched in October 2020, providing easily accessible and multilingual information to help businesses of all sizes to make the most of EU trade agreements .
  • A Single Entry Point established in November 2020, making it quick and easy for any EU-based stakeholder to lodge complaints about non-compliance by third countries with their international trade commitments vis-à-vis the EU.
  • A more systematic use of the institutional structures established by EU trade agreements to ensure effective implementation of commitments by third countries and the resolution of market access barriers.
  • A more active use of dispute resolution mechanisms to enforce our rights.
  • Continued mobilisation of civil society representatives in the implementation of EU trade agreements and arrangements, notably on trade and sustainable development.

More Information

Report on the screening of foreign direct investments into the Union

Accompanying document to FDI report

Report on the control of exports, brokering, technical assistance, transit and transfer of dual-use items

Factsheet

Brochure

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Agriculture

EU agriculture statistics: Subsidies, jobs, production

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Discover facts and figures about farming in the EU, including funding by country, employment and production, Society.

Agriculture is an important industry for all EU countries and they all receive EU funds through the Common Agricultural Policy (CAP). These funds support farmers directly through the European Agricultural Guarantee Fund and rural areas, climate action and the management of natural resources through the European Agricultural Fund for Rural Development.

Find out how the Common Agricultural Policy supports farmers.

EU agricultural subsidies by country

In 2019, €38.2 billion was spent on direct payments to farmers and €13.8bn on rural development. A further €2.4bn supported the market for agricultural products.

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The rules governing how Common Agricultural Policy funds are spent is determined by the EU’s long-term budget. The current rules run until December 2022, after which the most recent reform of the Common Agricultural Policy will come into effect and run until 2027.

Infographic with map showing the amount of Common Agricultural Policy subsidies per EU country in 2019. Key data can be found under the heading EU agricultural subsidies by country.
The division of the Common Agricultural Policy funds between EU countries  

EU agriculture employment statistics

The agriculture industry supported 9,476,600 jobs in 2019 and 3,769,850 jobs in food production (in 2018) and accounted for 1.3% of the EU's gross domestic product in 2020.

Romania had the most people employed in agriculture in 2019, while Denmark had the most people employed in food production in 2018.

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For every euro spent, the farm sector creates an additional €0.76 for the EU economy. The gross value added from farming - the difference between the value of everything that the EU’s primary agricultural sector produced and the cost of the services and goods used in the production process - was €178.4 billion in 2020.

Infographic showing the employment in agriculture (in 2019) and food production (in 2018) per EU country. Key data can be found under the heading EU agriculture employment statistics.
The food and agriculture sectors in the EU  

Agricultural production in Europe

EU agriculture produces a rich variety of food products, from cereals to milk. The EU has legislated to ensure that the food produced and sold in the EU is safe to eat. The EU’s farm to fork strategy, announced in 2020, aims to ensure that food is also produced more sustainably. MEPs want to cut pesticide use to better protect pollinators and biodiversity, end the use of cages in animal farming and increase land use for organic farming by 2030.

Infographic showing how many tonnes of different foods were produced in the EU in 2019.
Food production in the EU  

Common Agricultural Policy 

Data sources 

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