A week in Brussels, Industrial policy and raw materials, Latest news, Turkey & Med, United States

Week in Brussels : Strategic autonomy rentrée, southern neighbours

The atmosphere in Brussels in this 2021 European Union trade policy back-to-school week has been marked by deepening uncertainty over where the United States, Europe’s key security ally and largest trading partner, is heading. By Iana Dreyer and Rob Francis.

United States trade policy seen as “disabled” and “retired as benign hegemon”

Assessments of the trade policy situation with the United States are rather dire.

Columbia University-based economic historian Adam Tooze, who spoke at think tank Bruegel’s Annual Meetings, said: “Right now what seems to me very striking about Washington’s position is … how little the Biden administration wants to say about it.”

“The single most important crucial take-away for the rest of the world thinking about this is just how disabled the United States is on trade policy right now and this ripples through into every other dimension of their strategic interaction with the world,” said Professor Tooze.

The European Commission’s director-general for trade Sabine Weyand, who spoke on the same panel as Tooze, said: “What we see is a tectonic shift in the global order. We talk of the rise of China as a political and economic power and the fact that the US has retired as a benign hegemon”.

Weyand went on to pitch her institution’s new concept of Open Strategic Autonomy which it is adopting as a compass in designing its policies going forward. The guiding principles are: “We work with others where we can, we act alone where we must” – dixit Weyand.

In terms of trade and economic policy, the fallout from this will perhaps less be led by DG Trade, but by those in the Commission in charge of the internal market and of digital trade policy.

The industrial policy spot to watch

A big space to watch is the recently revised EU industrial policy, whose contours are fuzzy, but might become less so over time.

The Directorate-General for Internal Market, Industry, Entrepreneurship and has started communicating more clearly about how and in which direction it wants to take policy going forward.

Back in May 2021, the EU identified fourteen ‘economic ecosystems’ where it wants to intervene in future to decrease its ‘strategic dependencies’ on imports and other risks of being held to ransom by malign powers and players. The fourteen ‘ecosystems’ identified by the Commission are agri-food, aerospace and defence, construction, cultural and creative industries, digital, electronics, energy-intensive industries, renewable energy, health, mobility (transport and automotive), “proximity, social economy”, retail, textiles and tourism.

DG Grow’s Director General Kerstin Jorna held up a mug during a Bruegel panel discussion displaying a colourful graph showing, solar system, atom or virus-like – you choose – fourteen smaller dots circling around a large blue-green big dot.

What policy will come out to intervene in those sectors still remains vague as the Commission is still trying to better study and understand the networks and supply chains shaping the fourteen sectors in question. So far the Commission is focusing only on a selection of five or six areas that matter for health, security and the digital sector.

We are also starting to get some clues. To Jorna, “strategic autonomy” is “a tool”. “It’s all about resilience”. The aim is to support entire ecosystems with “money, collaboration and regulation”.

The focus now will be on tackling some ‘strategic dependencies’ identified last spring. “We make sure that the supply chains are fit, that there is match-making” among producers to ensure there is a functioning all-EU supply chain. Jorna wants to build on the experience gained in the area of vaccine production, which was ramped up rather successfully and quickly in the EU over the last year. Jorna: “We built it all in the last six months”.

Jorna said that there are some particularly challenging tasks ahead. For example reducing the EU’s dependencies in the area of rare earths used for magnets and other inputs into renewable energy production, from sourcing to refining. “We are totally dependent on China for this,” said Jorna.

And here Jorna is putting up hopes in the coming EU-US Trade and Tech Council – TTC – whose first meeting is scheduled at the end of September. “That’s a debate I expect to have under the TTC with the Americans: how we can build supply chains that are solid, from the material itself to the processing.”

Franco-Dutch convergence on strategic autonomy

The match-making under the strategic autonomy heading is not only industrial: it is also political.

This week we witnessed a rather unusual match when it comes to all things geo-strategic outlook and views on international trade including resilience of supply chains: the Dutch and the French government. Dutch premier Mark Rutte was in Paris this week and both talked about the French presidency of the EU, which will be held in the first half of 2022.

In a joint declaration, Mark Rutte and French president Emmanuel Macron said they adhered fully to the idea of the EU developing its ‘strategic autonomy’.

“France and the Netherlands attached great importance to the development of the European Union’s strategic autonomy, whilst preserving an open economy,” reads the statement.

We further read: “France and the Netherlands support initiatives to strengthen the capacities and autonomy of the European Union in matters related to technology, as key elements of the digital and green transition, in order to develop a more competitive Europe.”

Full statement (in French) here.

MEPs discuss trade with southern Mediterranean

Parliamentarians in the European Parliament’s International Trade Committee this week expressed their support for a February 2021 European Commission’s Joint Communication on the Southern Neighbourhood, which covers Algeria, Egypt, Israel, Jordan, Lybia, Morocco, Palestine, Syria and Tunisia.

The communication, which is wide-ranging in scope and accompanied by an Economic and Investment Plan for the region, establishes a Neighbourhood, Development and International Cooperation Instrument which covers funding for the region for the period 2021-27.

Trade is referenced in the communication, but as was pointedly noted by the Spanish Liberal MEP Jordi Canas during today’s discussion, does not have a dedicated section and therefore, in his view, does not seem to be a priority of the Commission.

The document itself aims to reduce non-tariff barriers in the region, of which there are over 50, fully implement existing trade agreements such as the EU’s Association Agreements with eight of the members, and launch dialogues to modernise the countries’ trade and investment relations with the EU.

In 2020 bilateral trade between the two regions was worth €142 billion, €50 billion of which covers services (2019 figures), with the Southern Neighbourhood being the EU’s sixth largest trading partner.

During this week’s exchange of views MEPs emphasised the importance of encouraging trade both with and within the Southern Neighbourhood as a means to foster peace and prosperity.

Concerns were raised, however, regarding whether EU funding genuinely reaches all strata of the population, the current hiatus in the DCFTA negotiations with Morocco and Tunisia, and the degree to which environmental aspects are taken into account.

“The EU’s influence in the region is waning,” said far-left MEP Emmanuel Maurel, who also called for more funding to be available and urged the EU to rethink its approach to trade agreements in the region, which civil society on the ground views as being outdated.

In the coming months MEPs will debate and adopt a non-legislative report on the Southern Neighbourhood.

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