Internal EU politics, Latest news, Perspectives

Perspectives – Wanted: A European trade commissioner

As EU institutions return to life after the elections, there is a need to rethink how trade policy is handled. With fewer new FTAs the role of the European Commission’s directorate-general for trade has become unclear. But the EU would best be served by restoring a commissioner dedicated to openness and rules-based trade.

Phil Hogan resigned as the European trade commissioner four years ago, in August 2020. The European Commission’s executive vice president Valdis Dombrovskis took over his portfolio.

There is a growing view in Brussels that the commission’s directorate-general for trade – aka DG Trade – has lost considerable power since then.

To some degree this trend was predictable regardless of who runs the trade portfolio.

‘Open strategic autonomy’ had become the direction of travel from 2019. New free trade agreement negotiations became a victim of their own success, with Brussels making ever greater demands on ever fewer willing partners.

A new emphasis on trade rule and agreement enforcement with a dedicated deputy director general since 2020 was bound to change the nature of EU trade policy.

DG Trade has lost its identity as the entity in the commission arguing for open trade. Other DGs gained more power to block openness as the new EU regulatory agenda affecting trade was rolled out. Balance has been lost.

Concern from trade liberal member states and businesses about the EU closing to competition are justified. If Europe is to be globally competitive, it has to be open.

At least one commissioner needs to be making the openness case internally. Logically, that should be a dedicated head of DG Trade.

EU trade in a new context

Many stakeholders just want to turn the clock back. For the EU that would be to the pre-2019 situation where negotiation of new free trade agreements dominated activity. Renegotiating existing deals is considered nothing like as important.

That constituency must recognise that this world has passed.

A more pertinent starting point is to recognise that multi-functional trade policy is now a reality.

For many countries trade is expected to help deliver economic growth, support the fight against climate change, deliver manufacturing jobs, and much more.

International negotiations are becoming more difficult in this environment. Domestic demands on trade policy are increasing across the world, whether it is to protect agriculture or to prevent other countries from engaging in what is perceived as unfair behaviour. ‘Open strategic autonomy’ was an inevitable reaction to these domestic politics.

The institutional consequence is that as trade policy covers ever more issues, so is responsibility spread further across the EU’s commission. Increasingly powers relating to trade are also held by those responsible for the internal market, data and digital, relations with neighbours, and climate, mechanically weakening DG Trade’s role.

A more negative narrative around trade

As well as substance, there was also great symbolism to the trade commissioner in negotiating FTAs. This was at the heart of encouraging the EU to be a global trade player.

Trade defence was of course always a part of the trade policy work. Stopping others from breaching rules has long been seen as essential for maintaining support for trade.

But the emphasis has now changed. There seems to be a broader EU assumption that other countries will cheat and fail to enforce commitments, and that preventing this happening should be a priority of DG Trade.

Similarly, FTAs are too often also couched in negative terms first, as protecting the EU market.

If no EU commissioner now unequivocally makes the case for open trade, then progress is unlikely.

This is when one can be sympathetic with Chancellor Scholz of Germany recently saying “I am not satisfied with the results of the European Union’s trade policy – something has to change dramatically.”

Arguably Germany has not made a sufficient case for open trade either. But Scholz’s point is fair.

What needs to change is that DG Trade must return to being the part of the EU that stands for trade openness, a DG which sometimes works with and sometimes opposes other directorates to make this happen.

Economic security demands effective balance of trade and other issues

Back in the early 2010s there were finely balanced discussions on engagement with China involving security and economic interests above all. Those of us on the trade side recognised the importance of seeking a balance.

Such issues are obviously now much more important in the wake of the Covid-19 pandemic and Russia’s invasion of Ukraine.

Indeed, there is an active debate in Brussels as to whether there should be a commissioner who has ‘economic security’ in their job title.

There may be a good case for this. Thinking about how supply chains affect economies and their potential vulnerabilities is indeed important work.

Economic security and trade have many overlaps. They should not however be confused.

Rather, there have to be discussions as to whether open trade is helpful or not to economic security challenges such as pandemics and future prosperity.

Someone needs to put the case that trade has been essential to beating the pandemic and finding alternate sources of energy to Russia.

Of course, a stand-alone commissioner for trade openness will be outnumbered. Many of their colleagues will be arguing for a Europe whose walls are built higher, as we have recently seen. This is indeed a natural response to security challenges.

Defending international trade norms is similarly essential but fraught. There will be those arguing security requires rules must be ignored. The contrary view, that they are essential for security, also needs to be put forward.

In a different political environment one could talk about mainstreaming support for trade openness and rules throughout institutions. Realistically though, this is not possible at the moment. Even to try is to risk further turning away from trade, as we have seen in the last five years.

As trade policy becomes more complex, clarity is ever more important. A simple message is needed, with an EU trade commissioner unambiguously seeing their job as arguing for openness.

 

 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.

 

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