Shifting political winds warp EU trade policy
Activists in Berlin battle an inflatable monster meant to represent the CETA trade agreement | Sean Gallup/Getty Images
U.S. President-elect Donald Trump, Brexit and public skepticism are challenging the EU’s trade agenda.
The good news is: Brussels hasn’t lost control of the situation.
POLITICO recently gathered a group of politicians, experts and newsmakers to discuss what steps the EU should take on trade and how to address the rise in anti-trade sentiment. The conversation came just a few weeks after the drama with the Belgian region of Wallonia, the region that almost capsized the EU’s landmark deal with Canada.
“Nobody has stopped talking to us, there is no slowdown in any of the negotiation processes,” one participant said. However, there was also broad agreement in the room that “what we saw with the ratification process for [the Comprehensive Economic and Trade Agreement with Canada] is not a model to work on in the future.”
One major concern the group voiced was that “if the EU is no longer considered as a credible trade negotiator, it will also impact on our ability to negotiate internationally on human rights or environment standards.”
Participants took part under the premise that comments from the discussion would not be attributed to individuals in order to encourage a frank and lively debate.
Besides the lessons learned from the Canada agreement, the participants discussed the future of a moribund transatlantic trade pact after the election of Donald Trump and scenarios for post-Brexit relations between the EU and the U.K. Their debate also pivoted around trading relations with China, which claims to hold the status of a “market economy” since December 11, making it much more difficult for the EU to protect its industries from dumping without violating international trading rules.
1. Mistrust, fear and unemployment rattle Europe
The EU and its member countries face “a fundamental problem:” A growing number of citizens doubt current policies can shield them sufficiently from the negative impacts of globalization, participants unanimously agreed.
Even in economic powerhouse Germany, people feel “they’ve lost control of the development of their future.”
“We are dealing with a loss of competitiveness,” one participant said. “Europe is losing its supremacy over manufacturing and [large parts] of the commercial activity for the first time in 500 years. We see all the symptoms of a declining empire.” In this setting, trade is often “the proxy for a much deeper underlying problem.”
One solution: Both the European Commission as well as EU countries must improve their policies to mitigate the negative impacts of globalization, and better support those losing out from new trade deals.
Yet, the worries across Europe are very different. Whereas Germany might fear a loss of control, in Portugal “the matter is jobs,” another participant argued. “Companies need to have the conditions to create jobs in Europe. And this is why trade agreements are still important.”
2. Commission and Parliament unwilling to take up the fight
Faced with growing fears or even non-factual “post-truth” arguments against global trade, which culminated this summer in the opposition to the EU-Canada agreement, the EU reacted poorly, several participants of the working group agreed.
In their view, the Commission committed a major mistake when it gave in to pressure from EU countries and presented CETA — against its own legal understanding of competences granted by EU treaties — as a “mixed” agreement, which also enabled some 38 national and regional parliaments across the EU to vote on the accord.
“This is something unprecedented, which I thought I would never see,” one participant said. “The guardians of the treaties have decided to give up.”
The European Parliament took a beating, too. Although the 2009 Lisbon Treaty allocated the debate and scrutiny of trade agreements to parliamentarians in Brussels and Strasbourg, those lawmakers did not defend their privileges when EU countries started to strip them away. “The European Parliament is not showing, together with the Commission, the full political will to defend its prerogatives.”
The European Court of Justice is expected to rule early next year whether trade agreements fall under the exclusive competence of the EU or whether national parliaments should also have a say on those treaties.
“If politics won a battle, it did not win the war,” one expert said. “The law is going to come back, it’s going to stay with us.”
3. TTIP is not dead, and neither is regulatory cooperation
Many have argued that the stalled Transatlantic Trade and Investment Partnership has no future under Trump, but members of the working group saw things differently.
One participant mentioned that Trump, while railing against all sorts of trade deals and countries during his campaign, mentioned neither TTIP nor Europe as a trading partner during his campaign.
Yet, resuming negotiations might depend on whether Washington — following the latest CETA drama — still has faith a TTIP deal could survive political ratification in Europe.
“No doubt the new president-elect will be briefed by the new team in terms of whether it is worth investing in TTIP going forward given the likelihood of it being ratified in a reasonable time.”
Another attendant said the pause in TTIP talks offered time to reflect and develop new proposals that better respond to citizen’s demands and bring more transparency in the negotiations.
Even if the transatlantic trade pact is not continued, some of the substantial work on regulatory cooperation will go on anyway, two participants pointed out. “For example, the [Food and Drug Administration] — European Medicines Agency cooperation and the joint audits of manufacturing facilities would continue.”
An urgent recommendation for British Prime Minister Theresa May: “Fire Liam Fox.” Nobody defended the trade secretary, with several agreeing he would be little help to London when Article 50 negotiations are expected to kick off in March.
The general mood in the room was that the U.K. is headed for stormy waters regarding both its relations with the EU as well as other trading partners.
Even Trump, whose advisers have argued for a fast-track trade pact with London, “will learn pretty quickly that doing a quick deal with the U.K. is not quite as simple as he may imagine … for all the reasons we know.”
At the same time, an important market leaving the EU “will have an impact on the value of the offers on the table.” While Canada decided to pursue CETA regardless, “I don’t see the United States arriving at the same conclusion,” one participant remarked.
The bottom line: “The EU will be smaller, so less attractive, less powerful in global trade” and the Commission’s DG Trade might need to divert resources to the complex Brexit talks.
Not all discussion partners agreed. “It shouldn’t harm our position too much,” one said.
Beijing’s demand to be considered a market economy, following its accession to the World Trade Organization 15 years ago, puts trading partners around the globe under pressure: If they followed the rules, they could no longer apply the current mechanism for protecting their markets from Chinese dumping in sectors such as steel or ceramics. Japan and the U.S. already said they will ignore the Chinese request.
The EU chose a third path by introducing a new anti-dumping methodology, which it claims to be both in line with WTO law and guaranteeing the current level of protection. Inside the working group, not everyone agreed that plan will work.
Some said the proposal “is really intelligent” and “provides for quite a good balance,” but another participant remarked some elements are “quite vague” and many open questions remain for Europe’s industry. Meanwhile, China will continue to have a serious overcapacity problem.
All sides agreed that China’s growing role in the world economy must go hand in hand with more responsibility on the international scene.
Beijing claimed the status of a developed economy when it suited its interest, but downplayed its role to a developing nation when it helped avoid obligations, participants criticized.
“This ping-pong has to stop.”
This working group report is a summary of key findings from a conversation led by POLITICO moderator with the following participants:
Christian Oliver, agriculture and trade editor, POLITICO
Alberto Alemanno, trade lawyer/Jean Monnet Professor of European Union Law and Regulation, HEC
Hendrik Bourgeois, vice president European affairs & general counsel, GE Europe
Peter Chase, senior fellow, The German Marshall Fund of the US
Véronique De Waele, communications & government relations BASF Group, head of economic, trade & social policy BASF
Ana Escobedo, director of International Government Relations, ArcelorMittal
Anthony Gardner, U.S. ambassador to the European Union
Monique Goyens, director general, BEUC
Bernd Lange, chair, INTA Committee, European Parliament
Hosuk Lee-Makiyama, director, ECIPE
Artis Pabris, member, INTA Committee
Mauro Petriccione, deputy director general, DG TRADE
Luisa Santos, director for international relations, Business Europe
Marietje Schaake, member, INTA Committee
Cécile Toubeau, director, Better Trade and Regulation, Transport & Environment
Hans Von Der Burchard, reporter, POLITICO
Fabian Zuleeg, chief executive, European Policy Centre