The European Union should be using trade policy to reassert its status as an economic heavyweight — not to save the planet.
That’s what two of the bloc’s most ardent free traders — Sweden and Finland — think. Frustrated by a lack of progress on trade deals and what they see as a protectionist mindset increasingly taking hold in Brussels, they want the EU to get its trade mojo back or risk sliding further into international irrelevance.
Europe’s deal-making has indeed slumped from the heyday of striking a landmark accords with Canada in 2016 and finalizing talks with Japan in 2017. The complaint from free-trading countries is that more protectionist nations such as France now want to use trade policy more as a weapon to restrict cheap imports, ranging from food to green technology from China.
In a discussion document, seen by POLITICO, the two Nordic nations lamented the EU’s “more defensive and restrictive” trade policy and complained that, as a result, the bloc’s economic weight is declining in relation to other trading powers.
“The EU runs the risk of being seen as an economically less relevant and more defensive actor by our trading partners,” reads the paper, which is due to be discussed informally by trade diplomats on Friday.
“To reverse this trend and to maintain the EU’s position as one of the leading players in international trade and regulatory policy, we must find a new balance and level of ambition in our trade policy.”
Stockholm and Helsinki delivered their message just as EU leaders, meeting for a summit in Brussels Thursday, reviewed an in-depth report by former Italian Prime Minister Enrico Letta on how to boost competitiveness in the EU single market. Letta’s 147-page report only addressed external trade issues tangentially.
Carrot and stick
As the term of Ursula von der Leyen’s Commission draws to a close, its legacy on trade deals is shaping up to be a story of the ones that got away.
Trading partners such as the Latin American Mercosur bloc, Indonesia or India have all balked at green conditions that the EU wants to attach to deals — like its carbon tax or deforestation regulation — at the behest of more protectionist member countries led by France.
Those tools have “an adverse impact on the EU’s capability to negotiate trade deals and to deepen its partnerships with third countries,” the paper reads.
The two Nordic countries want to put an end to using trade for other policy goals — and rely “more on positive incentives and market-driven solutions.” In other words, “there should be a carrot, in addition to a stick, in the EU’s toolbox.”
Another idea pitched by Stockholm and Helsinki is to deepen ties with the Asia-Pacific region, including with trade blocs such the Indo-Pacific CPTPP trade bloc and the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF).
More controversially, perhaps, is the intention also to turn to the Regional Comprehensive Economic Partnership (RCEP), a free-trade agreement in which China is a member. At a time when Brussels is desperate to ‘de-risk’ its supply chains from Beijing, this is unlikely to go down well with the EU executive.
“Much of the recent progress in the field of market access and the development of rules has taken place in the context of Asia-Pacific regional deals (CPTPP, RCEP, IPEF). In the meanwhile, the EU is taking a bilateral approach,” the three-page paper adds.
“This approach should be readjusted, if the EU wants to maximize the access of its companies to Asia-Pacific regional markets and value chains.”