Choppy waters ahead for EU trade policy by Sam Lowe
The strategic case for new EU free trade agreements is strong. But delivering them requires accommodating the European Parliament and winning over an inwardly focused agriculture lobby. The relative stability of the world trading system over the last two decades increasingly appears to have been an aberration. Trade and geopolitics have never been distinct, but Donald Trump has underlined their inter-dependence with his attacks on China and the EU, and his efforts to undermine the rules-based trading order. The US no longer views World Trade Organisation (WTO) rules and processes as adequate means to hold China to account. And its efforts to contain China bilaterally have spilled over into the rest of the world’s national security, digital and foreign policies.
Image: © European Union, 2019
The EU is caught in the middle. So far, the EU has benefitted from the turmoil created by Trump’s trade war, which provided the political impetus to conclude trade agreements with Japan, Canada, Mexico (upgrade), Singapore and Vietnam; but the waters ahead look choppy. To navigate the international and domestic political storms, EU trade commissioner-designate Phil Hogan will need to make the strategic case for a resilient trade policy. But he will face a European Parliament looking for greater reassurance that the EU’s trade policy complements its environmental ambitions, and an inwardly focused European agriculture lobby. In an increasingly uncertain international setting, the EU needs to lock in binding economic ties
with other nations. While the reform of the WTO and its appellate body should remain an EU priority, these efforts are likely to fail, at least in the medium-term. Equally, the current EU strategy of stalling until Trump is no longer in power is flawed. Even post-Trump, the EU should not assume that economic ties with the US will return to ‘normal’. The Democrats will probably run on a trade platform that has many of the same flavours as Trump’s, if not his outright antagonism to Europe. The EU should try to de-escalate the trade war, but from a strategic perspective its long-term focus should be on increasing the options available to its exporters by opening new markets elsewhere. Hogan should prioritise the completion of free trade agreements with Australia and New Zealand, on the basis that they enlarge the EU’s footprint in the region. In combination with its existing deals with Japan, Canada, Mexico, Peru, Singapore, Vietnam and Chile, the new FTAs would cement rules-based trade relations between the EU and the majority of remaining Trans-Pacific Partnership countries. Furthermore, the EU should take another look at its neighbourhood. It should give greater impetus to upgrading its association agreements with North African countries such as Egypt and Morocco. Turkey’s relationship with the EU (and US) is strained, but the EU should focus on the strategic