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Hello from Brussels in the midst of the annual “rentrée” — the return to work after the usual French-style long break in July and August. We always thought golf was a daft sport, and so it proves. While we were gone, EU trade commissioner “Big Phil” Hogan managed to lose his job over attending a golf dinner (and sundry other bits of travel) during the Covid-19 lockdown in Ireland. Today’s main piece assesses what EU trade policy will look like without him.
Tall Tales of Trade examines the claims by Robert Lighthizer, the trade commissioner’s US counterpart, of what’s been undermining the World Trade Organization. Our chart of the day looks at how the EU’s increasing need for raw materials could expose it to supply squeezes from China.
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A heavyweight gets knocked out
Well, that escalated quickly. One minute Big Phil was proudly announcing a mini-deal (more a micro-deal if we’re honest) with the US over lobster tariffs. The next he’s out of office, done in by a very unwise travel schedule and a pile-on by Irish politicians wanting to signal uncompromising support for the country’s Covid-19 rules. Member states don’t get to say who can and can’t stay as commissioner. But Hogan had already irritated European Commission president Ursula von der Leyen with his abortive attempt to run for WTO director-general, and he was out.
My more knowledgeable Brussels colleagues are ably writing about reshuffles and replacements, so we won’t rehash that. The question for us is: what does this mean for EU trade policy, and particularly the famed “open strategic autonomy” we’ve (albeit satirically) discussed before?
The jaded Brussels view we’ve heard from several people is not much, especially since Sabine Weyand, head of the Directorate-General for Trade, runs everything anyway. The commission is going through one of its periodic reviews of trade policy. But while there have been some changes in recent years — revising trade defence instruments, beefing up specific tools to use against China — few people seem to think the review is going to add a lot beyond that.
Sure, there are calls by some MEPs, member states and campaigners to become a lot more interventionist. But there’s strong institutional inertia in DG Trade, not to mention international companies, against fundamental change. We’ve had an advance look at the submission to the review from the Confederation of Swedish Enterprise, one of the most active and articulate business associations on trade policy. It’s a determined and detailed statement about the importance of resisting the renewed pressure for protectionism arising from the coronavirus crisis.
We’re not quite that sanguine (or quite that gloomy, depending on your view) that it will be business as usual. The issue is not the current structure of trade policy as such. It’s the constraints on implementation — if anything more internal than external — that a political heavy hitter with experience of trade could have helped with, along with checking the potential spread of trade-distorting policy in the EU.
Concerns about deforestation of the Amazon have long aroused opposition among some EU countries to the Mercosur deal © Christian Braga/Greenpeace
Internally, the obvious example is ratifying the Mercosur deal that Hogan, in his previous role as agriculture commissioner, helped to get to signing stage. Concerns about deforestation of the Amazon — driven by a desire to trade more commodities such as beef and soyabeans — have long aroused opposition in France and Ireland (which, by extraordinary coincidence, also have beef industries threatened by Brazilian imports). But in recent weeks, Germany has made serious noises about not ratifying the deal in its current state either. Given that Berlin at present holds the Council of the EU presidency and hence responsibility for starting the push for ratification, this is a real blow, and Hogan won’t be around to do a charm counter-offensive.
More generally, there’s an internal EU tussle going on about how to respond to the pandemic and whether there should be official support for repatriating supply chains — a subject involving industrial as well as trade policy. (We’ll be writing more about this soon.) While in office, Hogan was fairly openly pushing back against the interventionist instincts of Thierry Breton, the internal market commissioner. One of the intellectual-bureaucratic battles that the commission does so well is warming up, and the anti-interventionist camp could really have done with Hogan active on their side.
Internationally, as we detailed yesterday, Hogan overcame a combative start and seemed to be working out some kind of functional relationship with US trade representative Robert Lighthizer, as evinced by the concord on crustaceans. The overwhelmingly important event for EU-US relations is who wins the White House in November’s election, not who the European trade commissioner is. Still, even under a more congenial Joe Biden administration, there would be some delicate work to do in reconstructing a transatlantic alliance to put pressure on China. Hogan was at least a known quantity in Washington, and a known Irish quantity at that, which, as we noted yesterday, never hurts there.
A big shift in Europe’s trade stance as a result of Big Phil leaving? No. A substantive difference in its ability to get things done? Maybe. It’s not good news for the EU, in any case.
Charted waters
The European Commission is worried that the EU’s over-reliance on imports of critical raw materials could undermine crucial industries and expose the bloc to supply squeezes by China and other resource-rich countries, write Michael Peel and Henry Sanderson. Raw materials needed for electric cars are a particular concern, with China dominating processing of the materials before they go into batteries, making European carmakers reliant on Chinese suppliers.
Tall tales of trade
US trade representative Robert Lighthizer has blamed restrictive trade practices by the EU for helping to undermine the WTO © Nicholas Kamm/AFP /Getty
As if in response to the continual moaning from other countries that the US has lots of complaints about the World Trade Organization but no solutions, US trade representative Robert Lighthizer fired off a whole bunch of ideas a couple of weeks ago. We’ll look at them and the future for the WTO in detail next week, but today let’s quickly examine one claim. Lighthizer says the proliferation of preferential trade agreements (PTAs) has undermined the WTO. He adds that the EU imposing restrictive practices, such as geographical indications on food via a network of trade preference schemes to its former colonies, is one of the main culprits.
Hang on there. The critique of PTAs has long been mainstream, if almost entirely ineffectual: widely ignored prophets of doom such as the academic Jagdish Bhagwati have been howling imprecations against them for decades. But the EU’s fault? The big push for substantial PTAs came from the US. Specifically, Republican USTR Robert Zoellick articulated the “competitive liberalisation” strategy in the early 2000s, which ironically helped undermine momentum for the multilateral “Doha round”, a hare-brained scheme of which Zoellick was also a champion. The EU only followed suit several years later with its Global Europe strategy. The EU postcolonial agreements Lighthizer seems to be talking about are essentially recent reformulations of longstanding preference schemes which many countries, including the US, pushed Brussels to do in order to meet WTO rules. As for using bilaterals to export restrictive practices, we give you the intellectual property rules in successive US PTAs written by the American entertainment and pharmaceutical industries. And as others have pointed out, the share of trade taking place under PTAs is higher for the US than the EU. Finally, let’s not forget Donald Trump’s instinctive bilateralism, including his literally impossible wheeze for a trade deal with Germany. Arguing against PTAs: fine. Blaming Europe: really quite disingenuous.
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Tokyo talk
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Source: Economy - ft.com
