Trade for All: The Future of EU Trade Policy

Europäisches Parlament © David Hughes/Fotolia

Trade creates economic growth and jobs. But not everyone in the EU has benefited equally from trade. The EU wants to change that. In its “Trade for All” strategy, it has set the course for achieving that goal. There is much that is right and good in the EU’s plans. However, all efforts are likely to fail if inner blockades cannot be overcome.

In 2015, the European Commission presented its trade policy goals in its “Trade for All” strategy. Two years later, its most prominent project – the Transatlantic Trade and Investment Partnership (TTIP) – is off the table. A series of negotiations on free trade agreements have stalled, including discussions with India, Malaysia, and Thailand. At the same time, multilateral trade liberalization and rules-setting via the World Trade Organization appears to have ground to a halt shortly before the Eleventh WTO Ministerial Conference in December 2017.

Clear Rules for Trade and Investment

In his State of the Union address in mid-September 2017, Jean-Claude Juncker, the president of the European Commission, drew attention to the opportunities offered by trade and the ambitious negotiation agenda of the Commission. The conclusion of Free Trade Agreements (FTAs) creates jobs and economic growth, he underlined, noting that with such agreements, the EU can export European values and standards to other countries in areas such as workplace safety and environmental protection. Juncker said that, ideally, he would like to see negotiations with Japan, Mexico, and the Mer-cosur states concluded by the end of the year. In regards to Australia and New Zealand, he would like free trade agreements to be finalized no later than 2019.

The difficult ratification process of the trade agreement between the EU and Canada (CETA) underlined the need to clarify the competencies of the EU and its Member States. Against this background, Juncker spoke out in favour of trade agreements, which are restricted to areas that lie within the exclusive competence of the EU. This implies a separation of trade and investment agreements. The European Commission, the Council of Ministers, and the EU Parliament would decide on the former, while the national parliaments would co-decide on investment agreements. Moreover, he emphasized his intention to improve the transparency of EU trade policy-making. For example, he called for a timely publication of the negotiation mandates of the European Commission. The draft mandates for the FTAs with Australia and New Zealand have already been made public.

Another important element of current EU trade policy is the shaping of investment relations with third countries. This includes the negotiation of bilateral investment treaties (BITs), for example with China. Moreover, Juncker supports the Commission’s plans for a multilateral court to settle investment disputes between companies and states. For its part, the European Commission would like the EU Member States to more closely coordinate their national controls over foreign direct investments from third countries. The goal is to better protect European interests.

Industry Supports a Transparent and Sustainable Trade Policy

The Council of Ministers and the European Parliament largely support the Commission’ trade strategy, even if fundamental decisions about how to design future FTAs and deal with negotiating mandates have not yet been made.

The EU is likely to continue to count on the World Trade Organization (WTO) in future. The multilateral organisation is indispensable; it is the guardian of world trade. It not only offers its members a negotiation platform for more market access but also monitors national trade policies and helps its members to settle disputes. FTAs are a useful supplement to the WTO in order to open markets and establish new regulations – not least as long as negotiations in the WTO remain stalled. But FTAs are by no means an easy sell; many negotiations have proved arduous. And support for new FTAs is anything but guaranteed among the population of the EU.

The trade strategy of the Commission offers many good approaches towards increasing acceptance of trade agreements within the Union. They include more transparency of negotiations and adding a greater social and environmental dimension to trade agreements.

Industry supports an open, transparent, and rules-based trade policy of the EU. However, stricter controls over foreign direct investments or an instrumentalisation of FTAs for other political aims are not the right way to go. FTAs can help spreading social and environmental standards worldwide, for example, by incentivizing companies to undertake voluntary commitments. Joint committees in FTAs can assist in monitoring the implementation and enforcement of standards. Trade agreements should promote the economic and social development of partner countries. In this way, there will be more scope for higher social and environmental standards. On the other hand, rigid sanctions mechanisms in FTAs or comprehensive preconditions for launching FTA negotiations will not have the desired results.