After Trump, the EU also sees ‘free trade’ differently

February 26, 2020 by No Comments

He may have disappeared from the world stage for a month now, but his ghost still wanders in Brussels. After the protectionist blow that Donald Trump gave to world trade in recent years, the European Union now remains wary and wants to better equip itself for the new political-economic reality.

On Thursday, European Commissioner Valdis Dombrovskis (Trade) presented a new strategy that will guide the EU’s trade policy in the coming years. The text confirms the direction that Europe has cautiously taken in recent years.

The EU continues to defend the importance of open free trade. But it also wants to arm them better against unfair competition and protectionistism, while also addressing the growing internal criticism of free trade agreements.

Dombrovskis himself summarized the strategy on Thursday in the three words “open, sustainable and assertive”. That first word would have been self-evident until a few years ago. But the world of 2021 will not be the same as it was six years ago, when the Commission still hoped for the TTIP agreement with the United States in the previous strategy.

Trump’s arrival in 2017 not only meant an untimely death for TTIP, but it also severely strained trade relations with the US.

And the further rise of China and the departure of the United Kingdom have also changed the position of the EU. More and more often in Europe there are calls to become more autonomous and to better protect their own industry.

Climate central to vision

For that reason too, Dombrovskis clearly emphasized the ‘open’ starting point on Thursday. With the new vision, the Commission’s trade division is also counteracting overly bold ideas of ‘strategic autonomy’. Because in 2021, Europe will still earn a lot from free trade. Dombrovskis: “We need open trade more than ever for the recovery after the corona crisis.”

Nevertheless, there is indeed a new vision on trade, in which climate policy in particular occupies a central place. Criticism of flawed environmental and climate agreements in EU trade agreements has grown in recent years in Europe – including in the Netherlands. Last year, Minister Sigrid Kaag (Foreign Trade, D66) prompted a striking collaboration with France, in which sustainability was central to trade agreements in a joint proposal.

Their proposal to make respect for the Paris climate agreement a condition for new treaties is now also included in the European proposal. Brussels will also investigate the possibility of punishing countries that violate climate agreements. The Commission also reiterates its intention to present a proposal for a carbon border tax shortly, which will tax CO2 emissions from imports.

Unfair competition

In order to guarantee a ‘level playing field’, the EU mainly focuses on reforming the World Trade Organisation. It has led a languishing existence under Trump in recent years, but with the arrival of Joe Biden there is hope for a resurrection – and a joint reform strategy. The appointment of Nigerian Ngozi Okonjo-Iweala as the new director-general this week is also “new momentum”, according to Dombrovkis.

First of all, Brussels hopes that the American blockade of the Appellate Body of the WTO will be solved quickly. A thorough reform of the WTO should also put the climate high on the agenda there. But above all, it should provide a firmer response to “unfair competition as a result of state intervention in the economy” – a clear blow to China.

That emphasis on reforming the WTO to make world trade ‘fairer’ is understandable, but also risky. Whether it really succeeds in changing the trade organization depends on whether the EU can mobilize a coalition. While Biden’s appointment means a friendlier tone, the interests of the new US president do not simply coincide with those of the EU.

In the meantime, Brussels is therefore also continuing to work on instruments that should give weight to the ‘assertive’ part of the strategy. A new anti-coercive mechanism, for example, with which the EU can, in extreme cases, also impose sanctions without WTO approval, is still in the plans. Just like a new instrument that protects the European market against unfair competition from companies funded by state aid. Another way to fight unfair trade is an upcoming European proposal to hold companies accountable for misconduct in their supply chain, such as forced labour.

“We want to use the next four years as much as possible to move forward,” an EU official acknowledged on Thursday. “But we need to build up more tools, because the situation could be more turbulent in the future.”