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State of play in EU trade policy

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Euractiv | 1 August 2022

State of play in EU trade policy

By János Allenbach-Ammann

After a slow year, the EU’s free trade agenda is picking up speed under the Czech EU Council presidency. Nevertheless, more momentum still seems to be on the unilateral trade measures currently being negotiated in the bloc.

In early 2021, the European Commission presented a new trade strategy, arguing for an “open, sustainable, and assertive trade policy.” However, from these three goals, “the openness has been a little bit neglected”, a senior EU diplomat told EURACTIV.

One reason for this is structural. In a geopolitically more tense environment where trade dependencies are levered for political purposes, assertiveness seems more urgent than further opening up.

The other reason was timing, with the French government having blocked any major trade deal ahead of the French presidential and parliamentary elections earlier this year.

That is why member state trade ministers focused on toughening up EU trade policy under the French presidency of the EU Council. They made access to public procurement in the EU dependent on mutual access, agreed on a regime to restrict the distorting influence of foreign subsidies, and started to discuss the proposal for an anti-coercion tool.

More sustainability

The EU also moved on to the sustainability pillar of its trade strategy. In June, the Commission presented a proposal to strengthen the role of trade and sustainable development chapters in free trade agreements.

The proposal was welcomed by the European Parliament’s trade committee and is not being discussed among member states. “Council Conclusions on the sustainability review are possible in November,” a senior EU diplomat said, adding that, so far, discussions had not brought to light many contentious issues.

On the free trade front, meanwhile, some movement was seen in June with the start of negotiations over a free trade agreement with India and with the conclusion of free trade negotiations with New Zealand.

And there is more in the pipeline. A free trade deal with Chile, blocked by France last year, is now ready to be signed, but it is yet unclear whether the new Chilean government will want to get some changes into the deal.

Progress with relatively small trade partners

Moreover, there will be an essential negotiation round with Australia after the summer. “There is good momentum,” one diplomat said, adding that negotiations might only be concluded in 2023.

The modernisation of the trade agreement with Mexico is currently held up by worries about the deal’s architecture, namely whether the investment agreement should be treated separately or not.

While there is a chance that the FTAs with New Zealand, Chile, Australia, and Mexico will be signed and ratified by the end of next year, these are small trading partners for the EU. As for the two biggest partners, the US is unlikely to move towards more free trade, and the investment deal with China seems stuck for the foreseeable future.

“The hurdles for ratification of more controversial trade agreements like Mercosur or the investment agreement with China remain very high, and it seems unlikely that they can be overcome anytime soon,” Niclas Poitiers, a trade expert at the economics think tank Bruegel, told EURACTIV.

The fate of the Mercosur agreement – comprising Argentina, Brazil, Paraguay, and Uruguay – will also be determined by the outcome of this October’s presidential elections in Brazil.

Moreover, trade relations with the EU’s trading partners number three (UK) and four (Switzerland) remain brittle for political reasons. With no dispute solution, trade relations may even deteriorate with these relatively essential markets.

Unilateral is easier

Thus, even though the free trade agenda is picking up some steam in the EU, the opening up is slow and directed at relatively small markets.

“The situation is more promising for unilateral trade measures, where no concessions to third parties have to be made,” Bruegel’s Niclas Poitiers said, arguing that the tools by which the EU unilaterally imposes its sustainability criteria or by which it deters economic coercion will remain more important in the coming months.

For example, both member state governments and the EU Parliament might agree on a negotiating position this autumn regarding the anti-coercion tool. This would pave the way for the first discussions between member state governments and the European Parliament on this tool already this year.

“This unilateral approach allows the EU to further its objectives in a more muscular way,” Poitiers said. However, he added, “it risks fractioning global trade and creating conflicts with trade partners”.

 source: Euractiv