EU’s new trade agenda aims to achieve ‘open strategic autonomy’

In the next months, the EU institutions plan to make progress with the objectives outlined in “Trade Policy Review - An Open, Sustainable and Assertive Trade Policy” which was published in February 2021. According to this document, the European Union is the number one trading partner for 74 countries around the world.

Three core objectives were outlined in this “Trade Policy Review”, namely:

• Supporting the recovery and fundamental transformation of the EU economy in line with its green and digital objectives;
• Shaping global rules for a more sustainable and fairer globalisation; and
• Increasing the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed.

In pursuit of these goals, the EU aims to extract full benefit from existing trade agreements and ensure that partners do honour their commitments. The appointment in 2020 of the EU Chief Trade Enforcement Officer (CTEO), Denis Redonnet, demonstrated the desire of the von der Leyen Commission to ensure stronger enforcement of existing and future trade agreements. Sanctions may be deployed where needed.

Nevertheless, in a recent exchange with the European Parliament, Mr Redonnet flagged that the Commission is considering suspending certain EU dumping measures, due to the latest changes in the market conditions in an economy rendered unpredictable by the Covid-19 crisis. The legal basis is the little-used Article 14.4 of the Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union.

The creation of the CTEO post was just one of the important developments in a Commission trade team that has been reshuffled considerably following the resignation of former Trade Commissioner Phil Hogan last year. The new team reports directly into Executive Vice President Dombrovskis who has assumed direct responsibility for the trade portfolio inside the Commission.

Another priority for his team will be the finalisation of outstanding negotiations such as the free trade agreements with MERCOSUR, New Zealand or Australia (the latter recently complicated by French anger over the American-Australian Aukus submarine deal). This debacle has fuelled concerns among free trading nations that France may use the opportunity of the forthcoming French Presidency of the EU, in the first half of 2022, to pursue a more protectionist trade agenda especially in the run-up to French Presidential elections in April 2022.

Conditionality in EU-China trade

High on the agenda for the rest of the year will be the EU’s pivotal trade relationships with the U.S. and China. Political agreement on an EU-China Comprehensive Agreement on Investments (CAI) was reached at the end of 2020. Its ratification, foreseen for the first quarter of 2022, will depend on effective implementation of market access, sustainable development provisions and other level playing field commitments.

Although the Chinese have informally raised the prospect of a future EU-China Free Trade Agreement, the EU institutions have not expressed any public enthusiasm for pursuing this in the short term.

In a European Parliament resolution on a new EU-China strategy, adopted on 16 September, MEPs underlined that “investment and trade conditionality by itself is not enough to counter Chinese assertiveness. ” Parliamentarians suggested that the “EU should increase strategic autonomy by addressing other dimensions of the EU-China relationship, notably digital and technological sovereignty (…)”. Additionally, MEPs called for a bilateral investment agreement to be negotiated between EU and Taiwan, including essential cooperation on critical supplies such as semiconductors.

Re-booting transatlantic talks

With respect to the U.S., a public hearing on US trade policy will take place in the European Parliament’s International Trade Committee (INTA) on 27 September. The EU Ambassador in Washington, Stavros Lambrinidis, will deliver a keynote speech followed by two panel discussions about the US approach to global fair trade and the enforcement of international labour commitments.

On 29 September, the United States and the European Union will have the inaugural meeting of the “Trade and Technology Council” in Pittsburgh. The event will be co-chaired by U.S. Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, and Trade Representative Katherine Tai, together with European Commission Executive Vice-Presidents Margrethe Vestager and Valdis Dombrovskis.

The EU-US Trade and Technology Council comprises 10 working groups and will meet periodically at political level to “expand and deepen bilateral trade and investment and avoid new technical barriers to trade”, among other objectives. Although initial indications have suggested that these bilateral meetings focus will be more on tech than trade, proponents of close transatlantic trade cooperation will be hoping to remedy this in the coming months.

Meanwhile Manfred Weber, the leader of the European People’s Party (EPP) group in the European Parliament, called for the negotiation of an “EU-US trade emergency programme for the mobility sector, mechanical engineering and the digital economy as soon as possible”.

Proposals in the pipeline

In addition to the Carbon Border Adjustment Mechanism (CBAM) presented in July 2021, in the coming weeks the Commission is expected to publish the long-awaited proposal of Sustainable Corporate Governance (including due diligence), aimed to ensure that supply chains are responsible and sustainable.

In this regard, European Commission President, Ursula von der Leyen, announced during her recent State of the Union address: “We will propose a ban on products in our market that have been made by forced labour. Human rights are not for sale – at any price.”

However, some policy practitioners in Brussels and beyond have expressed concern that while the current emphasis on social and environmental objectives in EU trade policy is to be welcomed, there is a risk that this focus might obscure the traditional objective of dismantling trade barriers and opening market access.

Francine Cunningham and Lluis Girbau Cabanas are members of the integrated European Union, competition, trade and public affairs practice in Bird & Bird’s Brussels Office which is active in all key fields of EU competition, litigation and trade law, while providing tailored public affairs support for our clients in relation to the European institutions and Member States.