Does the new EU trade communication deserve to be called a ‘strategy’?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Cecila Malmström [European Parliament]

The new EU trade strategy, Trade For All, seeks to please everybody, but fails to confront the most difficult issues ahead of EU trade policy, argues Iana Dreyer.

Iana Dreyer is the Editor-in-Chief of Borderlex.eu, a news website dedicated to EU trade and investment policy.

Can one really call a political document that shows the EU Commission is trying to keep everyone happy a ‘strategy’? The title of the new EU trade strategy released on 14 October 2015, Trade for All, rings hollow.

The document proposes “a trade and investment policy based on values”. Its subtitle announces “a more responsible trade and investment policy”. Promoting more open markets, greater competition, and all sorts of rules inspired from EU law, that’s what the EU has done so far in its trade strategy and trade diplomacy. Is that ‘less responsible’ and not ‘based on values’?

What the Commission is in fact doing is officially taking on board an NGO and radical left agenda that has dominated the debate on TTIP. On the other hand, on substance, the concrete proposals it makes, including and monitoring sustainable development, human rights and worker rights in trade deals are not really new. The real novelty on this front is the official promotion of the new EU dream of an international investment court.

Transparency

The Communication announces greater transparency in EU trade negotiations and policy. The text is responding to ‘transparency’ calls in TTIP from some national governments like those in Paris or Berlin – which above all want to know whether the key interest groups they protect are being sold out. The document is also a response to calls from civil society groups.

More transparency in EU policy, including in trade policy, is a valuable goal and should contribute to reducing the risk that specific interest groups shape the outcome of deals like TTIP in their own favour. But is the Commission the real problem here? The document’s proposals do not address the more fundamental problems with transparency on trade policy making in the EU: how trade policy objectives are formulated before negotiations are started, i.e. at the stage when the 28 member states set a mandate. The document does not tackle how lobbies – be they businesses or well-financed campaign groups – win over MEPs, who now ratify trade deals. An interesting development, though, is the announcement of greater transparency in the EU’s trade defence practices.

Services focus

That said, a lot in this strategy makes sense from an economist’s perspective. The strong focus of the document on services trade liberalisation and on the promotion of professional mobility, as well as on digital trade, is squarely in tune with the needs of the EU economy.

There are a few fresh ideas, such as simplifying its own and partners’ customs procedures and focusing on trade facilitation measures. A potential simplification of the EU’s rules of origin in its free trade agreement is in sight. The Commission also rightly calls for a reinvigoration of the World Trade Organisation, and for the conclusion of sector-specific deals therein, not least the trade in services agreement – TiSA.

Inevitably, the conclusion of the Transpacific Partnership by the United States has refocused the Commission’s minds as regards its strategy towards Asia. Contrary to what commentators have said, the EU is not “pivoting” to Asia. It already did so years ago. What the Commission is doing in its new document is reviving an old idea initiated under then-Commissioner Peter Mandelson in 2006: a region-to-region free trade agreement with the South East Asian grouping ASEAN. Trade talks with Japan – a crucial TPP member – are ongoing. In fact, the real response to TPP is TTIP. TTIP is the major priority of the EU Commission in practice.

The real novelty is the announcement of fresh free trade negotiations with Australia and New Zealand, as these two economies are pivotal in TPP. Another novelty is the inclusion of Taiwan and Hong Kong as potential partners for a bilateral investment treaty, though the prospect has been pushed back to after the (unlikely) conclusion of a BIT with China. For the first time, the Commission mentions the idea of a bilateral free trade agreement with China. The Commission also lingers on Africa. Clearly the goal is to cover the entire world with EU FTAs….

China and Russia missing pieces

But now to the big missing pieces in the puzzle of EU trade strategy: China and Russia.

Nowhere in the strategy is there an articulation of a coherent approach to China, the EU’s second largest trading partner and arguably one of the most divisive topics in EU trade policy. The big issue to be resolved is whether the EU should agree to recognising China as a market economy by next year – which would reduce the Asian giant’s exposure to the EU’s activist trade defence policy. But market economy status – MES – is not mentioned once in the document.

How can the Commission believe it will convince China to sign up to liberalising its services sector and investment markets in a BIT with the EU without it being recognised as a market economy? How is it going to articulate the MES issue with the EU’s failed antidumping reform? How is the EU going to engage China in its drive to reinvigorate the WTO at a time when WTO deals linger on agreement between the US and China – sidelining the EU – as shown in the conclusion of ITA-II this summer? How is the EU planning to convince the United States to include China in TiSA? Total silence.

Russia. The EU’s third trading partner. A looming threat of seeing Ukraine’s trade preferences lifted by Russia in January 2016 after Ukraine starts implementing its DCFTA with the EU. Negotiations towards a settlement with Russia on this matter are not going well. What will the EU do to help Ukraine in January 2016, when Russia gets real on its threats? What is the EU planning to do with Russia’s Eurasian Union? How is it planning to link any resumption of trade relations to its current sanctions and foreign policy towards Russia? Silence. Only language on Russia saying it is “a challenging partner”.

Conclusion? This ‘strategy’ is a response to TTIP criticism and reflects the style of governance of Ms Malmström: more inclusive, less controversial. Politically, this style is partly welcome after her predecessor, Karel De Gucht, was seen as ruffling too many feathers. But the document offers a laundry list of about 80 measures that aim to respond to the lobbying efforts of trading partners (Australia, New Zealand, Taiwan, the FTA calls of China – to name a few), of some member states (for example, the UK on an FTA with China), of NGOs, of businesses. It has pleased many, too many people, already.

This is why this document cannot be called a ‘strategy’. A strategy offers an articulated view and diagnosis of a situation. It offers priorities.  It states how the proponent of a strategy intends to achieve certain goals. A strategy – a real one – is bound to displease some people. There is no sign of any of this in the document.

This is scary. In not daring to be confrontational, the document only reveals how weak the Commission has become in the face of increasingly brutal political pressure from all sides. By wanting to be more ‘political’, the Commission risks becoming the victim of its own politicisation.

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