Free traders buckle up for French EU presidency

Diplomats from liberal, free-trading nations already fear pushback from protectionists in Paris.

BY BARBARA MOENS AND GIORGIO LEALI July 5, 2021 5:15 pm

Attention, les Français débarquent! The French are closing in!

France’s presidency of the Council of the European Union is still six months away, but the cries of alarm are already going up about what will happen to trade policy from January, with the French finding it hard to shake off their reputation as the bloc’s arch protectionists and dirigistes.

Diplomats from liberal, free-trading nations say they now face a race against the clock to try to push through as many files as possible under the Slovenian presidency. “Nobody expects anything to happen on trade once the French are in charge,” said one national official in charge of trade policy.

After all, President Emmanuel Macron is hardly likely to want to upset French farmers by throwing his political weight behind trade deals with agricultural powerhouses like New Zealand, Australia and Latin America just as he faces re-election in April. A free trade agenda could lose him votes.  

These tensions between liberals and the French are ages old, but they have gained added ferocity because of growing internal divisions about “strategic autonomy” — EU plans to cut dependence on the U.S. and China, reshore production and rear home-grown industrial champions.

To the free-traders, the danger is that the French see this as a prime opportunity to start building up lumbering industrial giants that distort open competition in the single market. A big, politically cosseted champion would, for example, be able to impose tougher terms on contractors across the EU.

“The goal is simple: we have to get as much done as possible before the French are in charge,” one EU trade diplomat from a free-trading country said.

French trade veteran Pascal Lamy, who was both EU trade commissioner and chief of the World Trade Organization, dismisses these concerns from the EU’s liberal camp. He calls it “diplomatic paranoia, which can be considered either as a disease or as the heart of the diplomatic profession,” which consists of “seeing that there are plots everywhere against their country, and that it is important to denounce them.”

Lamy said the liberal countries’ fixation with French protectionism was something of a “fable.”

“It is quite revealing that a certain number of so-called commercially liberal countries continue to see France as a protectionist Raminagrobis [a disagreeable cat from La Fontaine’s fables], which is an exaggeration,” he said. 

Jörgen Warborn, a Swedish lawmaker in the European Parliament from the center-right European People’s Party, had a typically Nordic suspicion of France’s agenda but was skeptical that the Council presidency would give Paris much extra power to enforce its will. As an entrepreneur himself, he said he was “generally worried about the French and their proposals for protectionist measures.” However, he said he was not so concerned about the French presidency as “they won’t have much leverage given the limited files.”

The Bogeyman cometh

Whether paranoia or not, the fear in the Brussels trade bubble is palpable.

The Portuguese, who handed over the presidency to the Slovenes on July 1, played up these worries about the protectionist French bogeymen as a way to clinch a deal on public procurement in early June, according to another EU trade diplomat, closely involved in those negotiations. 

The procurement negotiations focused on creating a new tool to demand reciprocity from trade partners in major public tenders. If an Asian country, for example, closes its market to EU contractors for roads, railways and other major infrastructure, the big idea is that the EU should be empowered to exclude companies from that country from European tenders.

The French are vocal advocates of a strong international procurement instrument, under heavy pressure from the likes of the train maker Alstom, in order to close European markets in retaliation. More liberal countries see this measure as too protectionist, potentially denying Europeans the most effective global contractor and locking them into deals with overpriced and less efficient European companies. 

Once the Germans decided they broadly supported the French reciprocity plan, the debate centered on how protectionist the final measure would be. In order to haul the skeptical liberal countries to a deal, the Portuguese reminded them that they’d better strike a deal now, so that trilogues with the European Commission and the European Parliament would be led by the Slovenes, instead of the French, according to the diplomat involved in the file, who added that “this really helped to get some countries over the line.”

Still, the European Parliament has not yet settled on its position on the file. This is sparking renewed fears that the endgame will end up with the French anyway. Reaching consensus with the other EU institutions will be hard if Paris leads the negotiations, a third EU trade diplomat said.

The procurement instrument isn’t the only file that aligns with the French push for more trade defense. EU capitals also have to agree on the Commission’s proposal to tackle foreign subsidies and discuss the upcoming proposal on a carbon border levy, which is meant to restrict imports from countries that have laxer environmental standards than the EU.

Beyond the trade deals

Trade negotiations are going to be an obvious sticky area because France is always worried about meat, wine and dairy produce pouring in from the southern hemisphere and undermining its own producers. The EU is currently negotiating free-trade agreements with Australia and New Zealand. The negotiations are making progress, and both Canberra and Wellington have indicated that they want to conclude the negotiations before the end of the year. 

That deadline is primarily a way for them to put pressure on Brussels, but on the other side of the world, it is clear that sealing a free-trade deal with the French will be challenging, according to some with knowledge of the negotiations, especially as both Australia and New Zealand are pushing for more market access in farming.

That’s not to say it’s impossible. Concluding a trade deal also comes with prestige, which suits the Elysée. After a visit of the Kiwi trade minister to Paris in mid-June, his French counterpart Franck Riester lauded the talks with New Zealand, speaking of “our shared priority for sustainable development.” 

A more fiddly territory is the wording of the EU’s long-term trade strategy, which EU trade diplomats would prefer to see secured during the Slovenian presidency before the French takeover.

An immediate problem is that the trade strategy contains a reference to concluding a deal with the Latin American Mercosur bloc, which Paris opposes. “I don’t see a French president in an election campaign reviving the Mercosur agreement or the CAI [the investment deal Brussels concluded with Beijing in December],” Lamy said.

The other big sticking point is the overarching vision of the post-pandemic trade strategy itself, as it centers around “open strategic autonomy,” which covers the bloc’s push to increase self-sufficiency while at the same time supporting an open trading system.

At their last meeting in May, the EU’s trade ministers failed to articulate what this somewhat internally contradictory vision really meant. In a surreal semantic discussion, the French did not want the word “open” before “strategic autonomy” and wanted the text to refer to earlier Council conclusions that mentioned, “strategic autonomy while preserving an open economy.” 

This linguistic hair-splitting throws into sharp relief the fundamental ideological positions of two blocs within the EU, because the French push for greater self-sufficiency infuriates Nordic free trade advocates. And it’s not just the Nordics: Sweden, Finland and Denmark are now teaming up with the Netherlands, Germany, the Czech Republic, Estonia and Ireland to push back against the French-led camp, which favors a more centrally planned approach to economic policy.

Parlez-vous français?

The diplomatic heft of France only adds to the fear of Paris at the wheel. 

“For smaller EU countries, being an honest broker comes naturally, as they are less inclined to push through their own political agenda,” a fourth EU diplomat said. “That’s just harder for the big member states. Germany definitely tried, but in the end, still pushed through their own agenda via the China deal.” 

The same diplomat noted that many of his colleagues from other smaller EU countries are worried about the French plans to hold Council meetings in French. “In smaller permanent representations, there are often only a handful of people who speak fluent French. In our job, every word matters. So this is definitely stressing people out.”

Lamy, however, stressed the limited powers attached to the rotating presidency in shaping EU policies. 

“There has always been and there still is a considerable disproportion between the idea that a country is presiding the EU for six months and reality,” Lamy said, noting that the power of the French minister overseeing Council meetings “is not null, it is simply marginal, of a procedural nature, such as placing this or that item on the agenda of a deliberation.”

Lamy went even further, adding that: “If we look at the timetable for important decisions on trade policy, it is difficult to see a major decision in the pipeline that would take place under the French presidency.”

Sarah Anne Aarup contributed reporting.

Link to the Politico Article