Striking accords worldwide is a core EU competence but it’s never been so politically toxic.
by Barbara Moens·1 HOUR AGO· 10 MINUTE READ
Striking trade deals is only getting tougher for the EU.
Under previous European Commission President Jean-Claude Juncker, Brussels’ trade negotiators were on a deal-making roll, concluding or signing landmark pacts with Canada, Japan, Vietnam, Singapore and Mexico.
That seems a distant memory now for the world’s biggest trade bloc. Concerns about human rights in China and fears about deforestation in Latin America mean that the EU’s free trade agenda is running out of steam.
Doing trade deals is no longer just about keeping German carmakers and French farmers happy — which was often challenge enough. EU trade officials must now also please young climate marchers, union leaders and human rights activists — and that’s before they even start to haggle over tariffs and quotas with the negotiators across the table. The growing litany of public objections to trade means that the European Parliament and EU capitals are increasingly unwilling to sign off on deals that the Commission has struck with politically unpalatable partners like Beijing’s Xi Jinping and Brazil’s Jair Bolsonaro.
That all begs a big question: Can the EU ever reel in another trade deal?
Certainly the liberal-minded, swash-buckling global adventurism of the Juncker era is not the priority it once was. Increasingly, European countries are signaling a more protectionist path that prioritizes trade defense strategies such as reshoring manufacturing, strategic autonomy in key technologies and blocking imports from countries with low environmental and labor standards.
That doesn’t mean the Eurocrats are entirely giving up their hopes of reviving their omnipotent glory days. It is, after all, one of the core competences of the European Commission to strike deals on behalf of the 27 member countries. EU officials are, for example, hoping to revive the trade engine bygrabbing back powers from meddling national capitals. In ratifying its pact with Mexico, the European Commission wants to cut out national parliaments in core parts of the deal to move forward. That’s not going down well in EU national capitals.
But even if the Commission wins that power struggle, it still has to face the European Parliament. The Parliament’s trade committee has indicated it will immediately vote down major deals such as the free-trade deal with the Latin American Mercosur bloc and the investment deal with China if they are presented in their current forms.
And even the European Commission itself — long famous known for its ideological commitment to free trade — is shifting gears. Despite 85 percent of economic growth expected to come from outside the bloc, it is increasingly looking inward in its post-pandemic trade strategy.
“Following the wave of new agreements in recent years, the Commission will focus its efforts on unlocking the benefits of the EU’s trade agreements, coupled with assertive enforcement of both its market access and sustainable development commitments,” the strategy reads.
The scale of ambition is a long way from the Commission’s Global Europe strategy in 2006, which actively pursued trade liberalization and market access. In its 2021 trade strategy, the buzz phrase is “open strategic autonomy,” which fits with the bloc’s push to increase self-sufficiency and boost its own industry in the wake of the coronavirus pandemic.
While the catchphrase might sound like an oxymoron, the EU’s free trade proponents point out that it is no accident that “open” is the first word. They battled against the more protectionist forces in the Commission (and Internal Market Commissioner Thierry Breton in particular) to guarantee that order.
There is now a replay of that fight in the Council of the EU, where France is pushing to move the word “open” behind the strategic autonomy bit, much to the frustration of other EU capitals. The French push leaves diplomats from countries who take a more liberal stance on trade wondering when openness went out of style.
Transatlantic tipping point
The anti-trade sentiment is not new. In a speech in Singapore in 2010, the then trade commissioner, Karel De Gucht, quoted the British historian Thomas Macaulay, who nearly two centuries earlier had lamented that “free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular.”
And that was even before De Gucht launched negotiations with the U.S. in 2013 on the Transatlantic Trade and Investment Partnership (TTIP) — the prospective mega-deal between the EU and U.S. that was hailed by proponents as the biggest bilateral trade agreement ever.
At the outset, the path to that deal looked straightforward — such were the huge potential economic benefits for both sides. But the mammoth trade pact stirred fears that hormone-treated beef and chlorine-treated chicken would flood the European market — or more generally, undermine European regulations. Hundreds of thousands took to the streets to protest and politicians took notice.
“TTIP was a tipping point in the way the EU conducts trade deals,” said Ferdi De Ville, a professor in European political economy at the University of Ghent.
“Before TTIP, the EU’s trade policy was handled by DG TRADE [the Commission’s trade department,] a number of civil servants from EU countries and some lobbyists. The public debate around TTIP changed that,” De Ville said. “The EU’s trade policy got politicized and the number of players involved exploded: politicians and academics, but also NGOs, consumers’ organizations and civil society in general.”
The TTIP negotiations formally ended in 2016 when U.S. President Donald Trump abandoned them, but they changed the EU’s handling of trade policy. To shrug off the image of closed back-room deals, Brussels promised more transparency during its trade negotiations. (As part of that, it’s even avoiding toxic acronyms such as TTIP and CETA, as the EU-Canada deal was known.) Civil society and politics had grabbed a firm hold on EU trade deal-making.
“There is definitely a before and after TTIP,” said Anna Stellinger, head of international and EU affairs at the Confederation of Swedish Enterprise. As a business representative in an EU country that is one of the strongest proponents of free trade, she worries about the “dark clouds” that now linger over such talks.
TTIP was so septic that that there’s no real hope of resuscitating full EU-U.S. trade talks any time soon, despite new U.S. President Joe Biden. Instead, Brussels pushed Washington to set up a far lower level initiative, the Trade and Technology Council, which will kick off at the end of September to try to hammer out joint standards.
Stellinger hopes for progress on the ongoing negotiations with Australia and New Zealand, which both countries aim to wrap up before the end of the year. “That would not have a huge effect economically, but from a business perspective it’s important to see that the EU is moving ahead with free trade agreements,” she said.
But Canberra, like other potential EU trade partners, is less excited about the EU’s increased focus on anchoring climate and human rights concerns into trade deals.
Australian Trade Minister Dan Tehan told POLITICO earlier this year that free-trade agreements should be first and foremost about “trade liberalization and freeing up investment flows and freeing up services flow.” Referring to the extra considerations brought to the table by the EU, he said, “these new issues which are making their way into free trade agreements, but what they shouldn’t do is get in the way of the core rationale for free trade agreements.”
The EU’s shift toward a more sustainable and ethical trade policy has not happened overnight. Even in the early days of Juncker’s Commission in 2015 the change of messaging was evident in a strategy entitled “Trade for all – toward a more responsible trade and investment policy.”
“Previous Commissions loved bilateral deals such as Vietnam or Singapore to put up big shows,” said Pascal Lamy, a former EU trade commissioner and chief of the World Trade Organization. “Climate played a role, but definitely not as big as today. Human or workers’ rights were less a focus, for a simple reason: Sweden and Bangladesh share the same earth and the same atmosphere but not the same working conditions. That evolution, those concerns (on trade and sustainable development chapters), will only increase over time. We won’t return to the way it was anytime soon.”
The current Commission, with its flagship initiative of the European Green Deal, has moved climate policy from the margins to the center of trade policy. “Making globalization more sustainable and fairer should be the underlying driver of trade policy, delivering on the expectations of Europeans and other people around the world,” the Commission’s 2021 trade strategy says.
That’s easier said than done.
“Classic trade policy is about limiting trade barriers and lifting tariffs. If you lower your tariffs on carrots, then I’ll lower mine on cars. You don’t need historians or philosophers to say whether carrots are good or bad,” said Lamy. “But if you want to enforce human rights issues or climate ambitions in exchange for access to your single market, things become more complicated.”
Free trade proponents argue that engaging with third countries will yield more positive change on issues like workers’ rights than economic navel-gazing. They suspect that climate and sustainability concerns are sometimes a front for protectionism and they regularly mock the Parliament’s trade committee for consisting mostly of anti-traders.
Exporting the EU’s green and social agenda hampers European exporters, they argue. “The left sometimes forgets that we don’t trade for others, but for ourselves. Overloading trade agreements can hurt us economically,” said one former trade official, who requested anonymity.
‘More than just trade’
But much to the frustration of the free traders, the EU tanker is now steering in a different direction.
When convincing the European Parliament of his trade credentials, the EU’s current trade chief Valdis Dombrovskis said that “in today’s world, trade is about much more than just trade. European trade policy must do more to help us meet the great challenges of our time.”
Trade policy is more about policing current obligations, rather than opening new frontiers.
“Negotiating trade agreements has been an important tool to create economic opportunities and promote sustainability; implementing those agreements and enforcing the rights and obligations contained in them will be much more significant,” the 2021 text said.
A newly appointed chief trade enforcement officer is tasked with ensuring that trade partners face sanctions if climate and human rights stipulations aren’t met.
More assertive trade defense instruments are being set up, like a carbon border levy to increase the cost of imports whose production produces lots of emissions, and a mechanism to police recipients of state subsidies outside the EU.
“There has been a shift from the strong focus on liberalization as the main objective of trade policy to more of a level playing field,” said De Ville, pointing to climate change and China as the major triggers.
For years, the West — and the EU in particular — hoped to convert China into a liberal market economy via the World Trade Organization. But Brussels has realized it can’t just count on the World Trade Organization to shield itself from unfair competition from Beijing, especially with an increasingly isolationist United States. The EU has been “a little naive” in its relationship with China, admitted EU foreign affairs chief Josep Borrell in May last year.
On top of that, the coronavirus pandemic dealt another blow to the EU’s belief in free trade. The pressure on supply chains reinforced the arguments of proponents of the EU’s strategic independence, trade defense and diversification of supply chains. In a world where imports of crucial goods could be cut off overnight, the EU should become more self-sufficient, their argument goes.
Can the EU ever do a new free trade deal? Trade partners will continue to grumble over the EU’s expanding list of requirements, but the sheer size of the EU’s market means it is worth many of them going the extra mile (or 10) for a deal.
And for the EU too, using trade policy to project the bloc’s values on human rights and sustainability only works if that policy makes it into the text of new trade deals.
Those deals will happen, but with so much politics in the mix, they will likely have an even longer and more tortuous birth than in the past.