May 24. 2024. 5:18

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Commission trade chief: EU cannot only trade with ‘like-minded countries’

Europe must strengthen its network of free trade agreements (FTAs) beyond liberal democracies, Sabine Weyand, head of the European Commission’s trade unit (DG TRADE) said in Berlin on Tuesday (28 February).

It is not only security policy that has gone through a ‘Zeitenwende’ – or turning point – but also trade policy, Weyand said.

However, this was not mostly due to the Russian aggression in Ukraine, but long-term trends, she continued, citing tensions between the USA and China, fragmentation of supply chains as well as a broader systemic competition between liberal democracies and autocratic regimes.

“We need reliable partners,” Weyand said at a Berlin conference on ‘greening trade policy’, adding that “reliable does not mean ‘like-minded’”.

“The west against the rest” would not be a solution, she said, as the “club of liberal democracies is just too small” – there would simply not be enough trading partners.

A fragmentation of global trade would also “not be the right strategy to solve our political problems”, Weyand continued.

“We should not give up the WTO [World Trade Organisation],” she continued. The WTO’s appeals body has been at a stalemate since 2019 due to the blocking of the appointment of new judges by the USA.

As proof that some issues can still be addressed at the multilateral level, she cited an agreement against fisheries subsidies struck in the WTO last year. This has been “more ambitious than anything ever agreed in bilateral or plurilateral agreements”, she said.

At the same time, the EU also wants to strengthen its “network of free trade agreements”, Weyand said. This would include the currently finalised agreement with Chile, the soon-to-be-concluded deal with Mexico and Australia, and the agreement with the Mercosur bloc (Argentina, Brazil, Paraguay, Uruguay).

Such agreements need a “credible instrument” to ensure workers’ rights, climate protection and fighting deforestation, the director general said.

Negotiations with India and Indonesia, too, should move forward, she underlined. For other countries, other forms of cooperation might be beneficial, Weyand said, pointing to the Trade and Technology Council (TTC) with the USA and the EU’s global gateway programme.

Stronger screening of foreign investments

Meanwhile, Weyand also highlighted that the EU’s trade policy has gone through a shift, saying that it now focuses on “openness, sustainability and assertiveness”.

Foreign Direct Investments (FDI) should more closely be scrutinised by European authorities, Weyand said, announcing that the European Commission will make another proposal for a stronger “European dimension” of the instrument.

So far, FDI screening was done at the national level, but differences for instance on the partial takeover of a terminal at Germany’s largest port in Hamburg have exposed conflicting interests between the EU executive and national governments fighting for their business location.

Other instruments, too, have been strengthened, Weyand said, pointing to the “enforcement regulation” meant to surrogate the WTO’s paralysed appellate body, the new regulation to take action against foreign subsidies distorting the single market, and the “anti-coercion instrument” against economic blackmail.

This shift was supported by the German ministry of economic affairs and climate protection.

“Geopolitics needs to permeate all areas of policy, including economic and especially trade policy,” said Franziska Brantner (Greens), state secretary at the ministry, also speaking in Berlin on 28 February.

Putin’s aggression has shown that for autocracies, geopolitics would always trump economic interests, she said.

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Germany not giving up on WTO reform

Brantner, too, underlined that the WTO should not be abandoned. Many have given up on WTO reform, she said, but “we are not doing that”.

“We are not giving up this multilateral organisation,” she said, pointing at “baby steps” made in that direction last year.

Aside from the WTO and bilateral agreements, so-called plurilateral agreements, focused on specific issues, could offer a solution, she said, citing the EU’s proposed ‘critical raw materials club’ as an example.

This could also be a response to the US Inflation Reduction Act (IRA), Brantner said.

Its objective would however, “explicitly”, not only be an agreement between the EU and USA, but also with Japan, Australia, Canada, Indonesia, China, and other interested countries.

Its objective would be “to set common standards, but in exchange also allow access to markets, also to financial support,” she said, in reference to the controversial ‘Buy American’ clauses in the IRA.

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Optimism on Mercosur agreement, despite French opposition

Brantner spoke highly of the free trade agreement in the works with states of the Latin-American ‘Mercosur’ bloc.

“I am very optimistic, that we will find a common solution” with regard to deforestation, Brantner said.

“Lula is very clear, that he wants to protect the rainforest,” she said of the newly-elected Brazilian president.

“Now we have to prove, that we are a partner, too, that we mean it seriously,” she added.

French President Emmanuel Macron lately set the bar very high, by calling for “mirror clauses” which would oblige Latin American countries to introduce the same environmental standards as the EU.

Weyand, in contrast, was more careful, saying that there was a chance “to complement the already negotiated agreement in the coming months with a credible instrument”, which would include “legally binding requirements for compliance with labour standard as well as the implementation of the Paris [Climate] Agreement, and in particular the fight against deforestation.”

In June 2022, the EU Commission changed its approach to trade and sustainability chapters of free trade agreements to make sustainability commitments more easily enforceable.

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