For those who believe in free trade – and in the principle that the EU should be a force for promoting free trade around the world – the last few years have been disappointing. The focus of the von der Leyen Commission on expanding the vast new ‘Green Deal’ has seen a return to protectionism. New barriers to trade and free enterprise have been erected in the name of defending the environment, and yet the cost has been borne mostly by the EU’s closest allies, and the Global South.
There are however signs that the tide is turning. A recent paper authored by Sweden and Finland sets out clearly the problems caused by this anti-trade agenda and highlights that with this approach the EU risks sinking further into international irrelevance. The paper points out that green trade barriers “have an adverse impact on the EU’s capability to negotiate trade deals” and that they should be replaced with “positive incentives and market-driven solutions”.
Both Sweden and Finland have long been associated with the EU’s more pro-trade wing. However, it is clear that trade has shifted out of the EU’s focus, in part because the European public seems to have lost its appetite for the topic. An EU Barometer poll conducted ahead of the EU elections on the voting habits of the European public found that trade didn’t feature at all in the minds of the people. Only when addressing the role of Europe’s place in the world did respondents to the poll mention trade, and even then underneath other issues.
The sense however is that the EU has reached a tipping point when it comes to talking about trade, especially when it comes to the issue of the green deals adverse impact on relations with the global south. The Financial Times recently reported that the Green Deal has “colonialist overtones” and that “the issue has jeopardised trade deals the EU is trying to sign”. The New York Times wrote that the new regulations may be “killing jobs in Malaysia” by forcing hundreds of thousands of small farmers out of EU supply chains.
Many countries in the global south, when given the choice between a deal from the EU or a deal from Russia or China, are increasingly turning away from the EU due to concerns that the regulatory burden could stall economic growth. Where once the EU could argue trade as source of soft power in the developing world, its new top down paternalistic approach to climate policy has instead become a deterrent.
The political landscape in Europe is also changing: Green parties across the continent are struggling in the polls as voters turn away from what they have seen as too much regulation in too short of a period of time. The European Parliament that has emerged from Junes elections now represents a much less ecologically driven Europe – but still struggles with the challenge of protectionism from elsewhere.
There are however signs of a gradual shift in attitudes. EU member states are starting to pull the brakes on new environmental legislation, with some quarters of the European Parliament even considering rolling back certain less desirable measures. Indeed, even the much-awaited Draghi Report highlighted the need to reduce the regulatory burden to make Europe more competitive.
There are however steps that can be taken to reduce the barriers to trade. This starts with scrapping planned benchmarking of ‘high risk’ and ‘low risk’ nations, which will increase costs and bureaucracy and further stoke resentment among trading partners. At the same time there should also be recognition of existing standards that align with EU rules, to build in a ‘fast-track’ lane.
Countries in South-East Asia for example already adhere to strict zero-deforestation policies, which exceed the rules already set by the EU. Yet many key industries in the region are unfairly demonised when instead there could be an easy mutual recognition of standards. Take as an example Malaysia, a country that has strict standards to prevent deforestation in the palm oil industry – laws that in many ways go further than European standards, and yet has fallen victim to the EU’s deforestation regulation.
Brazil, a member of Mercosur, is another example of a country that has higher environmental standards than the EU when it comes to the use of biofuels, and yet is singled out repeatedly by the European Union. In many ways there is more that the EU could learn from these examples, and through mutual recognition than by arrogantly imposing punitive barriers on so called ‘high risk’ nations.
Second, there should be a broad commit to not extending or broadening existing trade barriers. Directives and Regulations are constantly revised, and too often act as a ‘ratchet’, becoming more restrictive and adding more trade barriers over time. The forthcoming revisions to various Green Deal regulations should focus on how to ease burdens and smooth out supply chains. A revisiting of the policy of ‘one in one out’ when it comes to EU regulation in general would be welcome, but especially so when it comes to easing barriers to trade.
Third, re-commit to a genuine trade agenda and Free Trade Agreement negotiations. The UK has already demonstrated that it can pursue an ambitious trade agenda of its own by joining the CPTPP trade deal in the Pacific, while EU negotiations in the region are stagnant. Deals with India and Malaysia in particular should be much further advanced than they already are. Resetting the focus back to reducing tariffs and opening markets, and away from ‘Trade and Sustainable Development’ chapters is a necessary precondition for this approach to work.
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