EU trade policies, Latest news

The new EU trade strategy: self-centred multilateralism

European Commission vice-president Valdis Dombrovskis will oversee the new strategy’s deployment.  Credit: EC.

The European Commission is officially releasing a long-announced new international trade policy strategy today.

To those who are closely following the European Union’s trade policy there is little that is properly surprising or genuinely new in the text, but it confirms the continent’s shift towards a more defensive approach to trade policy focused on advancing its domestic policy agenda in a context of rising international tensions.

‘Open’ strategic autonomy

International relations professionals, anti-protectionist constituents and old-school Atlanticists have already picked up on the EU’s ‘strategic autonomy’ language, the new ‘geopolitical’ outlook coming out of the European External Action Service and the European Commission.

The EU’s premise for its trade policy going forward is the following: “The EU will need to operate in a new multipolar global order marked by growing tensions between major players.”

The Directorate-General for Trade within the Commission is seeking to fight the internal fight in the EU institutions and member states over the need to keep that strategic autonomy “open” – its victory in these internal tussles is not always a given.

“Open strategic autonomy emphasises the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting its strategic interests and values,” reads the trade strategy communication.

“It further signifies that the EU continues to reap the benefits of international opportunities, while assertively defending its interests, protecting the EU’s economy from unfair trade practices and ensuring a level playing field.”

“It builds on the importance of openness [highlights in the original text], recalling the EU’s commitment to open and fair trade with well-functioning, diversified and sustainable global value chains.”

Whether the ‘openness’ message can be sustained or go under in visible initiatives that do not signal openness and grate trading partners is another matter.

On the same morning the EU published its new strategy, the Commission announced new initiatives. It is seeking an extension of its three-year steel safeguard introduced in 2019 in response to US steel and aluminium tariffs.  It is also getting the ball rolling on a new ‘anti-coercion instrument’ that should deter foreign governments from actions such as… sanctions on Germany for going ahead with Gazprom’s Nord Stream 2 pipeline or Section 301 tariffs on potential digital taxes in the EU.

World Trade Organization focus

An interesting new development in the EU’s trade strategy is a shift away from thinking in ‘bilateral’ trade terms, an approach that has dominated trade policy for the last fifteen years.

Instead the text expounds a global approach in rolling out the EU’s domestic political priorities, especially its environmental and digital plans, but also its interest in sustaining a multilateral order. Commission officials who have worked on the document see themselves as playing the long game. This probably explains why they have put an overhaul of the World Trade Organization, the fulcrum of the multilateral trading system, at the heart of its new strategy.

The EU’s ideas are spelt out in a 17-page annex to the strategy dedicated exclusively to WTO reform (we will report on this separately).

China and the United States are discussed expressly only briefly. In contrast, the EU lingers extensively on how the European Union is planning to roll out its ‘Green Deal’ and its approach to the digital economy. A genuine novelty in the document is a new emphasis on enforcing labour rights and eradicating forced labour.

“Building a fairer and rules-based economic relationship with China is a priority”, the Commission writes. “Ensuring that China takes up greater obligations in international trade, and dealing in parallel, with the negative spillovers caused by its state-capitalist economic system will be central to the EU’s efforts to rebalance the bilateral trade relationship.”

On the United States, the message is as follows: “The new US administration provides an opportunity to work together to reform the WTO, including by reinforcing its capacity to tackle competitive distortions and to contribute to sustainable development. It also offers new prospects to cooperate closely on the green and digital transformation of our economies.”

Asia gets short shrift

The only geographical areas the EU is focusing on explicitly as a region requiring specific attention are is its immediate neighbourhood and Africa.

Beyond China, Asia gets the short shrift. Japan is mentioned in a footnote of the core text. The word ‘Korea’ does not appear. The promise made to Taiwan in the 2015 predecessor strategy ‘Trade For All’ that it would get an investment agreement with the EU once an agreement with China is agreed has disappeared. ASEAN as region is not mentioned once. India is only mentioned once as part of a paragraph on WTO reform.

This non China-Asian region and Latin America are generally mentioned as part of the EU’s already existing FTA strategy, General System of Preferences policy overhaul and ‘sustainability’ priorities.

“It is … important to create the conditions for the ratification of agreements with Mercosur and Mexico, and to conclude ongoing negotiations, in particular with Chile, Australia, and New Zealand, which are well on track”: that is about all the Commission says about relationships and partnerships with these countries.

Neighbours and Africa

“From a broader strategic perspective, it will be important for the EU to reinforce relationships with countries in and around Europe and to deepen engagement with the African continent and African states,” the strategy paper says.

“Supporting stronger economic integration with the Western Balkans and the Eastern Partnership countries will be of particular importance,” the Commission writes.

“The EU will strengthen its close economic partnerships within the European Economic Area,” the European Commission writes.

“The EU looks forward to working closely with the United Kingdom to use the full potential of the Trade and Cooperation Agreement. The EU also looks forward to the modernisation of its trade and economic relationship with Switzerland as well as with Turkey, provided the right conditions are met.” Russia gets no mention in the text.

Africa receives extensive attention.

Notable language on the EU’s approach to the region: “This stronger relationship with Africa should be fostered at all levels, including through political dialogue with the African Union and its members, through widening and deepening the economic partnership agreements, and through developing bilateral relations with individual countries to promote sustainable investment in agriculture, manufactured goods and services.”

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