Synopsis: The trade strategy session examined the difficulties EU trade is facing within the current economic climate. With a nod to difficulties with trade agreements with the US, the EU focused on the need to diversity to decrease the dependency that currently exists on the American market. The EU-Japan agreement was posed as an example of an agreement that has opened up trade in goods and services to create opportunities for both SME’s and large companies. The next step is to look for different partners to continue these kinds of agreements on the global scale.
Below you will find a full summary, prepared by Professor Dr. Sven Van Kerckhoven of Vesalius College.
International trade is in peril. It is slowing down, and in particular, advanced economies are struggling. The panel discussed how Europe could help to strengthen international trade. As stated by the European Commissioner of Trade, Cecilia Malmström, this has created both opportunities and challenges. In these tough times, the EU Commission has concluded an Economic Partnership Agreement with Japan and was just given the mandate to start negotiations with Australia and New Zealand. In these agreements, the EU takes a broad perspective, taking on board its internal values, which are shared by many. At the same time, the standstill at the WTO, Brexit and the current protectionist stance of the US, which has just recently imposed tariffs on steel and aluminium challenge the progress aimed at reviving international trade.
As the panel discussed, businesses often focus too much on making a quick buck. This means that to address unfair trade practices, companies often request politicians to step in. However, businesses are also responsible to address these in their business practice. The same holds true for different member states, who try to attract businesses by imposing more lenient policies. This allows businesses to do some venue shopping.
International trade should not just be an end by itself but as a way to increase welfare. In order to ensure that this increase of welfare benefits all, fair and sustainable practices deserve more attention. Distribution of trade benefits and the protection against unfair practices should be on top of the priority list. Louisa Santos, Director of Business Europe, stated that businesses in Europe play by the rules, but also sees some challenges by doing so, in particular with regards to China. The US leap towards protectionism could also be seen as in breach of the idea of playing by the rules.
As the Commissioner stated, the EU would consider going to the WTO if the US creates more obstacles to free trade. However, the WTO dispute settlement body takes a significant time to conduct its work. European businesses cannot wait two years before the WTO releases his findings. The EU is the most open economy in the world but this might also come at a price in terms of dependency on trade. Diversification could help to decrease the dependency of European markets on particularly the American market. The Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU will stay in the freezer for now. As MEP Schaake stated this could also help developing countries as they might be able to move closer to the EU, as the latter is looking to diversify its export/import portfolio. MEP Lambert stated that the European focus on exports has made the EU too dependent on economies such as the United States.
The discussion continued with a focus on the EU-Japan agreement. This agreement has allowed to open up trade in goods and services, in doing so creating opportunities for both large companies and small companies. SMEs, the backbone of the European economy, were given ample attention in the EU-Japan agreement. The EU-Japan agreement is economically the largest trade agreement, but also strategically important, as Japan and the EU have common stances with regards to a rule-based multilateral regime and the fight against protectionism.
The EU thus has to play a leading role in ensuring that trade frictions are alleviated. However, this is not the easiest role to play seeing the current US administration. The EU has been the champion of a rule-based multilateral governance system and should continue to do so, but might need to look for different partners to make this happen on the global scale. Of course, economies are more intertwined than ever, in particular the European member states. Businesses need trade to be able to grow, and European businesses have been creating high-quality goods. This should help the EU to provide the leadership currently needed.