EUROPEUM Institute for European Policy

2021 brings with it a host of new challenges on the EU’s trade front. Recently appointed EU Trade Commissioner, Valdis Dombrovkis, has the hefty task of navigating the EU’s ever difficult trading landscape in an even more economically and politically tumultuous time.

Of particular note is the EU-UK Trade and Cooperation Agreement concluded late December 2020 at the eleventh hour. This year will offer a glimpse into how the outcomes of the Agreement might benefit or disadvantage either side. From the European side, the Agreement is “protecting European interests, ensuring fair competition, and continued cooperation in areas of mutual interest”.[1]

Given the Deal was rushed through, taking a mere nine months to negotiate, expect to see the word ‘Brexit’ appearing frequently as many aspects of it require regular reconsideration. Avoiding a hard Irish border and the free flow of goods seem two of the real positives. Yet there are some areas that will be revisited, such as access to fishing waters which will be annually renegotiated over a five and a half year period.[2]

The EU will continue to work away at trade agreements currently under negotiation. The EU-China investment deal is proving to be contentious. The EU wants fairer investment conditions in China for European companies, similar to those that Chinese businesses enjoy in Europe. Trade Commissioner Dombrovskis has made clear his intentions to address this “imbalance”.[3] The dividing point is in relation to China’s human rights record with some European politicians believing the EU ought to incorporate some sort of conditionality in the agreement that would force China’s hand to better address this issue. The Deal was completed on December 30 2020 although it remains to be passed in the European Parliament.[4]

Australia and New Zealand, two of the EU’s more like-minded partners, are also negotiating preferential trade agreements. Both countries, among other things, want their trade agreements with the EU to grant them better access to Europe’s markets for their agricultural products. This is proving to be a real sticking point in negotiations as the EU has some of the most protectionist agricultural trade policies in the world.[5] Australia and New Zealand’s agricultural sector are concerned about the EU’s imposition of its geographical indications policy, which would force producers to change the names of certain products, for example feta or Parma ham.[6]

Many of the EU’s automotive exports face significant tariffs upon arrival to Australia, something the EU would undoubtedly like to minimise. The European automotive industry is substantial and Australia, a relatively wealthy country, is a lucrative export destination. To gain better access, the EU might have to compromise on something else, perhaps agriculture.

In the grander scheme, the EU, as a proven normative power and global climate action leader, could look to incorporate come green transition initiatives in its agreement with Australia, whose reliance on non-renewable forms of energy is considerable.

The EU’s trade agreement with Canada, known as CETA – while completed, is yet to be fully ratified. As is the case with EU trade agreements, they must be passed in the parliaments of each Member State for it to come into full force, without which it remains only provisionally applied. In December 2020, Ireland deferred its vote on ratifying CETA with some parliamentarians taking issue with the Investor Court System outlined in the Deal. The proposed system would allow companies to sue national governments in an external court where they believe state regulations unfairly hinder their business.[7]

Agricultural lobby groups in Canada have also expressed some dissatisfaction with CETA. Statistics show that since the signing of CETA in 2017, Canada’s agricultural exports to Europe have actually decreased rather than increased.[8]

January also earmarks a new era of trade relations between the EU and the US. The trading relationship has been hampered in large part due to President Trump’s nationalist trade policies and rhetoric. President Elect Joe Biden has a hefty task on his hands to resume a more mutually beneficial trading landscape. One thing the EU will be eager to quickly reverse in coordination with Biden is the recent imposition of US$7.5 billion in tariffs on European alcohol and aircraft parts. On the flip side, the EU hit the US with US$4 billion worth of tariffs on imports. Comments from industry representatives indicate these tariffs are both unnecessary and unfair, imposing further costs on industry at an already difficult time in an economic sense.[9]

Economic recovery in the wake of the COVID-19 pandemic is a key priority for the EU. Thus, successfully navigating the challenges mentioned could prove to be pivotal in ensuring the Europe’s revival on a variety of fronts.

Tom Baker

 

 

[1] EU-UK Trade and Cooperation Agreement: Protecting European interests, ensuring fair competition, and continued cooperation in areas of mutual interest. (2020, December 24). European Commission. https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531. Accessed 19 January 2021.

[2] Matthijs, M. (2020, December 28). What’s in the EU-UK Brexit Deal? Council on Foreign Relations. https://www.cfr.org/in-brief/whats-eu-uk-brexit-deal. Accessed 19 January 2021.

[3] Amaro, S. (2021, January 6). China’s investment deal with the EU has raised 3 big concerns in Europe. CNBC. https://www.cnbc.com/2021/01/06/china-eu-trade-deal-what-it-is-and-why-it-might-fail.html. Accessed 19 January 2021.

[4] Ibid.

[5] Swinbank, A., & Daugbjerg, C. (2017). The Changed Architecture the EU’s Agricultural Policy Over Four Decades: Trade Policy Implications for Australia. in Elijah et al (eds.). Australia, the European Union and the New Trade Agenda. Canberra, Australia: ANU Press.

[6] Kneller. E. (2020). EU‐Australia FTA: Challenges and potential points of convergence for negotiations in geographical indications. The Journal of World Intellectual Property 23(3-4), 546-578.

[7] Horgan-Jones, J., & Taylor, C. (2020, December 14). Vote on contentious EU-Canada trade deal deferred after Green TD concerns. The Irish Times. https://www.irishtimes.com/news/ireland/irish-news/vote-on-contentious-eu-canada-trade-deal-deferred-after-green-td-concerns-1.4436381. Accessed 19 January 2021.

[8] Montgomery, M. (2020, September 30). CETA trade deal: Three years later, Canadian agriculture still dissatisfied. Radio Canada International. https://www.rcinet.ca/en/2020/09/30/ceta-trade-deal-three-years-later-canadian-agriculture-still-dissatisfied/. Accessed 19 January 2021.

[9] Lawder, A. S., David. (2021, January 12). New U.S. tariffs on French, German aircraft parts, wines to start Tuesday. Reuters. https://www.reuters.com/article/us-usa-trade-eu-aircraft-idUSKBN29H007. Accessed 19 January 2021.

 

 

 

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