EU arms for future trade conflicts
Faced with Brexit, a Trump presidency and a new realism towards China, the European Union next week is set to lay out its new future trade policy to help it deal with partners it distrusts..
Enforcing global rules and ensuring equal market access will be the cornerstones of a new strategy to be promulgated by the European Commission, which is strikingly harsher in tone than the mantra «Trade for everyone», sounded in 2015.
As focal point for the 27 EU countries, the Commission wants trade to support environmental and digital recovery, while also emphasizing greater resilience to a future pandemic and fair play, the so-called requirement «level playing field», which became a bone of contention in negotiations with the UK after Brexit.
«We are strengthening our toolbox to be able to react in the event that third countries do not play by the rules, so we are better equipped to protect ourselves», – said last week the European Commissioner on trade Valdis Dombrovskis (Valdis Dombrovskis).
Dombrovskis did not name these third countries, but there is little doubt that China and the United States are in the spotlight. Taking action to enforce common rules was already gaining momentum in 2019 when the EU first announced China «systemic rival» and when the administration Donald Trump paralyzed the Appellate Body of the World Trade Organization (WTO) by removing the supreme arbiter of world trade.
«Trump’s unilateral action is what prompted the EU to respond by strengthening its ability to act, not outside the WTO, but in a faster and more decisive manner.», – said Andre Sapir (Andre Sapir) Senior Research Fellow, Brussels think tank Bruegel.
EU regulation on compliance with existing provisions acts as the final result, explained by these events. It will take effect in a few weeks and will allow the European bloc to retaliate if a third country blocks a dispute resolution, for example, by filing an appeal against a WTO Commission decision to its defunct Appellate Body..
The EU has agreed on an interim appeal system with trading partners, including China, but not the US. A system conceived with Trump’s trade tactics in mind could conflict with the new US administration Joe Biden.
The international procurement mechanism, which is likely to be agreed upon this year, is another such element in the EU’s arsenal. This will provide an opportunity to punish trading partners who do not open their government tenders to others, to the same extent as the European Union does..
It is intended to nudge China towards reciprocity, but could also question Biden’s new decree «Buy american».
The law was first put forward in 2012, but has been blocked by EU countries. However, now Germany and other members of the bloc have changed their views..
With the new law enforcement agency, the European Union will also raise disputes with its free trade partners to ensure that transactions are fully implemented, not only in terms of market access, but also in terms of issues. «sustainable development», such as labor rights and environmental policy.
The block began operations in 2021 with an arbitration panel ruling in its favor in a dispute with South Korea, which the European Union said failed to fulfill its labor rights obligations in a trade agreement that came into force a decade ago..
Apparently, a series of new litigations is coming concerning the export of timber from Ukraine, and another one concerning the export of poultry meat to South Africa..
The EU Trade Agreements with the UK and China Investment Agreements concluded at the end of December are models for how to reach agreements with partners who do not really trust each other, and both contain sections on how to resolve these disputes..
The European Union wants to advance its values by insisting, for example, that all free trade partners have signed the Paris Agreement on Climate Change.
It remains to be seen whether this enforcement clause has strength enough. Critics say that while disputes over market access may lead to sanctions, enforcement of environmental or labor standards, such as in deals with South Korea and China, takes the form of panel discussions, which is more of an unwanted practice..
New "arsenal" EU regulatory instruments may also never be used, especially against potential new US allies, and rather serve to increase influence in trade-related discussions.
«EU chose the diplomatic route», – said Guillaume van der Loup (Guillaume Van der Loo), Researcher, think tanks, European Policy Center (EPC) and Egmont Institute. «Will he now use his "bazookas"? I think only as a last resort. He’ll go in other directions first».
Who will dominate the future? – the EU