Hello from Brussels, where we have some argy-bargy about how the EU should deal with Russia but no burning trade controversies to report here just for the moment. There’s more attention on the delayed Euro 2020 football tournament and the perennial “could this be the moment Belgium finally lives up to its potential?” question after the team’s played-three-won-three record so far. (Not that European football manages to be without political controversy of its own, of course.)
With the six-month presidency of the council of EU member states just about to pass from Portugal to Slovenia, today’s main piece takes a look at how that idiosyncratic rotating-presidency system affects trade policy, the answer being more than people outside the EU probably think. In the meantime, Allez les Diables Rouges!
Charted waters looks at the diminishing importance of the G7 in global trade flows over the past 20 years. No prizes for guessing why.
The complicated choreography of deals with China
For a lot of policy types outside the EU, it’s probably all they can do to remember what the Council of the European Union is (the ministers of the EU member states getting together) and that it’s separate from the European Council (ditto but EU heads of government plus presidents of the European Council and European Commission) and the Council of Europe (something entirely different, nothing to do with the EU). Knowing that the Council of the European Union is chaired in rotation every six months by one of the 27 member states is one for the institutional aficionados.
Holding the presidency is often seen as a matter of prestige of hosting a bunch of meetings while extolling your country’s cultural virtues, but it also gives the presiding country some freedom in setting the agenda. And there are, occasionally, some significant implications for trade policy.
Trade is largely a centralised EU competence, but sometimes the council presidency matters, particularly if it’s a big member state such as Germany or France. As an example, the final huge push on the Comprehensive Agreement on Investment (CAI) with China, for instance, occurred when Berlin last had its turn during the second half of 2020.
Talks, which had been dragging for years, accelerated rapidly in December and the outline deal was finally signed on December 30. As Raphaël Glucksmann, a French member of the European Parliament strongly opposed to CAI, told Trade Secrets: “It was presented to us as a Christmas miracle.”
During Portugal’s presidency, EU trade policy has remained somewhat preoccupied with dealing with a poisoned chalice that is the draft CAI with China.
Now, it’s true that, in an attempt to speed up talks that had dawdled for years, Brussels and Beijing had set a target date of the end of 2020 to complete the outline of CAI. But artificial deadlines in trade talks are rarely binding. It wasn’t fidelity to an arbitrary zero hour that had negotiators working flat out around Christmas. It was the desire to get it done during the council presidency of Germany, which expired on December 31, partly because of September’s German national elections (no one loves CAI more than German multinationals) and partly because Berlin had more weight to bounce other EU member states into line.
The second half of the CAI choreography was supposed to see the deal ratified and signed in the first half of 2022 under France’s council presidency. French president Emmanuel Macron, himself up for re-election next April, joined in the big push — including joining the concluding video call with China’s president Xi Jinping on December 30.
In fact, as Glucksmann points out, the December 2020 timing was seriously inopportune for other reasons. The deal cut across transatlantic solidarity, with Joe Biden having been elected in the US but not yet taken office, and it came a few days after the EU had put sanctions on Chinese businesses and individuals over human rights abuses against the Uyghur ethnic minority. Indeed, it was Chinese retaliation to these sanctions that led to the CAI being slung into the deep freeze.
With the CAI frozen, Paris is casting about for another trade deliverable during its presidency, perhaps related to the corporate due diligence initiative for supply chains. It isn’t going to be ratifying the EU-Mercosur trade deal disliked by French environmentalists and beef farmers, for which the EU seems in little hurry to find a fix.
Does this jockeying for credit and avoidance of blame actually matter? Well, it can do, because it affects perceptions of legitimacy. Even before the CAI was frozen, the European Parliament and some member states had been irritated by the high-handed way Brussels and Berlin drove the deal through. Particularly ill-advised was the triumphant tweeting of the German European Commission president Ursula von der Leyen about the deal levelling the commercial playing field with China.
Having had trade policy during its presidency overshadowed by the CAI dispute, you might think Portugal would steer clear of starting more controversial deals with economic behemoths. In fact, Lisbon decided that a big summit with India would be a good idea, one thing led to another and EU-India trade talks that had been abandoned in 2013 were relaunched — without much evidence that a deal will be possible without both sides substantially lowering expectations.
At least all right-thinking people can take some comfort that the Slovenian presidency in the second half of 2021 seems to be taking a level-headed approach, pushing forward existing projects rather than haring off in new directions or insisting on notching up big wins. More power to them. We’re all in favour of member states taking responsibility, but distorting the painstaking business of trade policy to get a PR bump during a six-month turn at the tiller doesn’t strike us as the smartest way of doing it.
Charted waters
The big global macroeconomic story of recent decades has been the rise of China and (to a lesser extent) some of the other large emerging markets.
That’s also had a huge impact on trade flows. As the chart below shows, the big rich advanced economies — as represented here by the G7 grouping — still account for the bulk of exports and imports. Yet to a far lesser degree now than they did at the turn of the millennium. That is almost entirely down to China’s rise. Claire Jones
Trade links
The excellent Trade Experettes (@TradeExperettes on Twitter) network of female trade gurus formally launches with a high-powered set of supporters
Looks like the sausage wars might be over for now. The EU and UK are close to agreeing a truce on chilled meats trade to fix the argument over the Northern Ireland protocol.
The US has banned imports of some solar products manufactured using forced labour in Xinjiang, marking the Biden administration’s latest attempt to pressurise Beijing to improve its treatment of the Uyghur minority.
The boss of Siemens is the latest senior business figure to bemoan global supply chain logjams and shortages, comparing them to a “rollercoaster” as prices of key materials continue to whipsaw.
The European Council on Foreign Relations has an interesting report about how the EU can create a legal anti-coercion instrument to impose rapid economic countermeasures on trading partners trying to threaten it. Alan Beattie and Claire Jones
Source: Economy - ft.com
