Europe is prepared to step up its response to unfair trade practices and push for a renewed WTO, aiming to display a more assertive stance towards its partners in the future.
The multilateral and rules-based order upheld by the World Trade Organisation has come under criticism since Donald Trump took over as US President.
“We have a crisis, so let’s call it a crisis,” Maria Åsenius, head of cabinet of Commissioner for Trade, Cecilia Malmström, said on Wednesday (16 October), referring to the lack of progress on reforming the WTO.
Despite the US’s blockade to renew the organisation’s appellate body, Åsenius is confident that reform was possible, she told an audience in an event organized by Euractiv.
“It is quite clear that there is a deep crisis in the WTO,” agreed Anna-Misel Asimakopoulou, vice-chair of the European Parliament’s Committee on International Trade.
The Commission has proposed an interim solution once the appellate body stops functioning in mid-December. Canada is on board, Norway is “in the making”, and Singapore has expressed an interest, Åsenius explained.
On Monday (21 October), the EU and Norway notified the WTO of their interim agreement. In this way, both partners will have a binding dispute settlement for any potential trade disputes under the WTO law, once the appellate body stops being operational.
But the mechanism will have little value if countries with a big number of disputes with the EU don’t get on board, Malmström’s head of cabinet admitted.
“The WTO is in crisis because we don’t have a sufficient agreement,” said Maria Demertzis, deputy director at Bruegel, a think-tank.
As the rules-based order dangerously turns into the Wild Wild West, the EU is leaving behind its naïve posture from the past, and is increasingly showing its teeth.
One of the first priorities is to better enforce the current rules and clauses included in the 41 trade agreements signed by the EU covering 72 countries.
“You have to be willing to go the extra mile, and impose sanctions if necessary,” said Asimakopoulou.
Would that mean going against China?
“Absolutely,” Asimakopoulou responded. “Nobody will take you seriously if you are not willing to go until the end to defend what you had agreed.”
Luis Colunga, deputy secretary-general of IndustriAll, a European Trade Union, agreed that the bloc should go “as far as possible” to enforce our trade agreements, in particular to ensure labour rights with trading partners.
He explained that, in some fields like the steel sector, the big issue is neither the US or China, but countries like Russia or Turkey.
Demertzis agreed that the EU should be “a little bit more aggressive, more proactive in the way we engage in the global multilateral system”. “And for that, we need to speak with one voice.”
“What it is at stake is much more than trade,” she told the audience.
“We want to protect the welfare system, and we want to ensure a functioning multilateral system,” she explained.
Kari Hietanen, Executive vice president at Wärtsila, a Finnish company, supported this new “proactive role” the bloc should pursue in its trade relations over the next years.
But he questioned whether the EU should include strict environmental and human rights chapters in its trade deals.
“Trade has to be fair and transparent, but I don’t think that trade can fix all the other problems in other areas,” he said. “There are other things that might be important, but when we have a big bag of other things, we might lose sight on the trade objective,” he explained.
Asimakopoulou wondered where the EU should draw the line when it comes to promoting its values through trade policies. “I don’t want a trade partner that has child labour”, she said, but she asked whether the bloc should enforce labour rights, climate or gender balance issues through our trade agreements.
Europe would not be the first one to use trade instruments for different purposes. US President Donald Trump has “weaponized” trade since he arrived at the White House by triggering a global tariff war, especially against China.
The EU and the US, together with Japan, are cooperating to tackle the issue of industrial subsidies and the forced transfer of technology, considered as some of Beijing’s main unfair trade and economic practices.
Åsenius pointed out that “we need to bring China into the discussion,” because they won’t simply accept the imposition of these new rules once they are taken to the WTO.
Moreover, Demertzis said that, as China becomes the largest economy in the planet, Beijing would not want to be a rule-taker but a rule-maker. The Chinese government will want “to hold the pen when the rules are written,” she explained
But some, including Asimakopoulou are sceptical about what to expect from China in terms of rebalancing its trade and economic relationship with Europe. For that reason, she wants a “stronger Europe, a clearer Europe, a determined Europe”.
US support is essential to reform the WTO and rein in China. But these efforts come against the backdrop of the transatlantic relationship, which is currently being put to the test.
On Friday (18 October), Washington hit European goods worth $7.5 billion with new tariffs, the largest amount of duties ever imposed on the EU. The punitive measures, authorised by the WTO, were a response to the subsidies given by European countries to Airbus.
The EU is ready to impose similar duties on US products as soon as the WTO confirms its rights in the context of the Boeing case, after the Commission failed to find a negotiated solution for the airplane subsidies dispute.
Before that happens, most likely early next year, Åsenius is still hopeful about opening talks with the US.
She explained that Europe is still trying to push for a positive agenda with the US, our largest trading partner. But the Trump administration is not interested if the Europeans don’t open its market to US farmers.
“Our relation is being tested in various ways,” Asimakopoulou said, but “there is plenty of room for us to sit down and cooperate.”
[Edited by Samuel Stolton]