The year 2023 should offer political space for key trade policy files involving the European Union, the United Kingdom and the United States to come to fruition ahead elections in 2024. Global trade policy is in a parlous state: this should also be a year for serious reflection about what comes next.
There is a long-held belief across the trade policy community that major progress, such as closing in on free trade agreements, cannot happen in the immediate run-up to particularly important elections.
Oddly though, few seem to have ever wondered about the consistency between this belief and a similarly held belief, sometimes by the same people, that trade liberalisation is popular.
When one looks at EU and US politics in particular, for the time being it seems that any such inconsistency has been solved: trade liberalisation is currently very few politicians’ idea of a vote-winner.
Spain’s upcoming general election, to be held by the end of the year, is not one in which the popularity of trade is going to be widely tested. But the overlap between this event and Spain’s EU presidency in the second half of 2023 may presumably cause some issues.
2024 on the other hand, is set to be a bumper year for elections that will likely have a significant effect on trade policy. Every 20 years EU and US elections coincide, as they will in 2024, on top of which the UK is also likely to go to the polls.
This coincidence of 2024 elections sets the scene for the year ahead, one of simultaneous efforts to finish implementing current programmes, and thinking ahead to the major themes for the future.
For the EU key issues will be putting the finishing touches to its ‘open strategic autonomy’ initiatives while also thinking about the bloc’s position on issues looking likely to dominate years ahead, in particular its relationship with other major powers.
For the UK and the EU there is a window of opportunity to put post-Brexit issues on a stable basis or wait in the hope of a more pragmatic UK approach.
Both will be engaging particularly with the US and China.
EU: towards ‘rules-based assertiveness’?
Key EU files to be completed before the end of this European Commission’s term have been covered extensively in Borderlex. These include major new instruments such as the Carbon Border Adjustment Mechanism and the Anti-Coercion Instrument, the free trade agreements programme in particular with Australia, Mexico and Mercosur, while negotiations with India and Indonesia intensify.
All in all the next EU commission will have considerably more trade policy firepower than this one inherited. Of course, having the tools is one thing, quite another is how they are used, whether they achieve their desired objectives, and what else is needed if they don’t. Collectively it is this whole which will define open strategic autonomy.
Late last year nervousness in EU political and business circles was perceptible. There was worry that the autonomy tools would not prove be enough, that rising energy prices and global subsidies in particular would lead to further interventions to protect the EU’s economy. This is a source of worry to those more inclined towards free trade.
The picture wasn’t all bad, however. Even under such pressure, there is much talk of respect for global trade rules and the World Trade Organization as an institution.
In Europe, just as the phrase open strategic autonomy sought to create a space for those with differing views on EU trade policy, so at this stage one could see a similar compromise after 2024, something like ‘rules-based assertiveness’.
This however is part of the debate which needs to intensify in the year ahead, and for which relationships with various other countries will be central.
Fighting your allies?
One of the ironies of the EU explicitly pursuing ‘autonomy’ is that the international inter-linkages of trade policy, even for major powers, are becoming ever more evident. To provide an obvious example, the success of the CBAM in preventing carbon leakage will depend on the reaction of other countries. As can be seen with the US Inflation Reduction Act these partners also want to ensure manufacturing jobs are protected.
Also, while the EU, US, and UK are all supposed to be mostly concerned about the rise of China, in reality they are spending more time focused on the actions they don’t like in their supposed allies.
Between the UK and EU there are hopes that 2023 finally sees the resolution of issues around the Northern Ireland protocol, and thus finally a stable platform established. This though is hardly guaranteed as neither side seems yet ready to compromise sufficiently.
US-EU relations were on something of a rollercoaster during 2022, but ended it on a slightly more optimistic note with a suggestion that IRA implementation would take some account of global sensitivities.
Yet the continuing retreat of the US from interest in global trade rules and the WTO, through a combination of protectionism and anti-China sentiment, seems here to stay for the coming years.
President Biden’s administration would argue that while such an agenda may not suit the EU and WTO, it has been repeatedly endorsed by voters. This indicates perhaps the greatest challenge facing open traders in the EU in 2023: how to create a popular trade programme for 2024.
Making trade popular – beyond the ‘trade-and’ agenda
Just prior to Christmas, long-time USTR lead negotiator with both EU and UK, Dan Mullaney, retired. The now ex-US official would well recall the number of meetings he held around Europe making the case for trade in general and a Transatlantic Trade and Investment Partnership in particular between 2013 and 2016. Such efforts couldn’t deliver that agreement – but did help with others such as CETA with Canada.
Such efforts may soon be required again.
One of the responses to the perceived unpopularity of trade has been the inclusion of FTA chapters covering various issues from animal welfare to gender, and the strengthening of those covering environment and labour. In the policy world, this has helped maintain support for FTAs, but is arguably barely noticed outside – and perhaps even distracts from the centrality of trade to global stability.
Trade barriers are starting to go up, and for political reasons many in the US, UK and EU who proclaim themselves free traders are supporting this trend. Ultimately this will have a negative economic and likely political impact, indeed in the case of the UK the results can already be seen by the general public.
There is a double challenge for supporters of free trade in 2023: to recognise that they are currently on the losing side, and to put together a plan for 2024 as to how to tackle this.
David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.