Redefining EU interests in international trade

This is an excerpt from Global Counsel's latest publication Europe in the Global Economy, which can be downloaded in full here. 

The next European Commission will inherit a trade policy agenda strained by disillusion about globalisation at home and protectionist measures abroad. The incoming trade commissioner will be expected to defend further trade liberalisation, while forging a new consensus between member states on trade defence and retaliation measures. The European Parliament will also ensure they enter negotiations with third countries, seeking more extensive assurances about social and environmental protection. But in a world where other markets do not share these objectives — or do not like to see them treated as EU demands — the EU may have to pay a price for them and standing firm could come at the cost of market access aims. This has important implications for a full docket of free trade negotiations, including a future EU-UK trade settlement, as well as the EU’s approach towards an increasingly unpredictable US trade policy.

Commitment to the EU’s global role in market liberalisation will also be challenged by a sharper sense of producer interests. Until now, European protectionist voices have mostly been reflected in a defensive agenda, primarily blocking the Transatlantic Trade and Investment Partnership and delaying ratification of the EU-Canada agreement. Both of those dossiers initially reflected an entrenched belief in the overall economic benefits of liberalisation within the Commission and centrist political groups in the parliament, but their focus on consumer and importer interests may struggle in the face of producer and exporter-focussed approaches now setting the agenda in both the US and China. This will initially be manifested in pressure on the next Commission to more aggressively tackle “unfair trade practices” with trade partners, but also in more explicit pressure to act unilaterally to protect European strengths in new technologies and value-adding employment, and to tie EU openness to direct ‘reciprocity’ from trading partners. Areas such as investment screening and trade defence will be in focus.

The reform of the World Trade Organisation is a possible route to a new consensus on trade, but not an easy one. Over 10 years since the collapse of the WTO Doha Round negotiations, reform and modernisation of the WTO is often seen as a possible solution to mitigating trade tensions between the US, the EU and China. France has formally called upon these countries, as well as Japan, to update the WTO rulebook on a range of politically sensitive issues, including subsidies, intellectual property and social and environmental standards. The EU can be expected to lead such a push and hand such a mandate to its next trade commissioner, but it is less clear how enthusiastically others will follow. In any case, the glacial pace of WTO evolution could easily absorb policy-making and negotiating energy for years — with uncertain results.

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