New EU Trade Policy

The EU builds on its Green Deal and Digital Strategy in mapping out how to remake its trade policies.

The European Commission (EC) has released a detailed update of its trade policy, that includes a complex set of interlocking near-term and medium-term actions to place the European Union on better footing visa vis other nations and areas of the world. This policy statement fits into the EC’s new direction under the leadership of EC President Ursula von der Leyen, particularly her focus on a European Green Deal and a bloc-wide sea change in digital policy and regulation in its European Digital Strategy. The EC is trying to take a longer view in setting course and policy and is projecting where the EU would like to be in 2030 and the policy changes needed now to get there.

In “Trade Policy Review: An Open, Sustainable and Assertive Trade Policy,” the EC is folding recovery from the COVID-19 pandemic into its Green Deal and Digital Strategy aspirations with an eye towards achieving sustainable growth that positively affects the EU and the world. This is an ambitious goal, to say the least, especially given all the unknown unknowns yet to be known (I figure a bit of Secretary of Defense Donald Rumsfeld helps all proceedings from an epistemological perspective.) Nonetheless, the EC asserted

Making the right policy choices in designing a trade policy for the world of 2030 means taking into account recent political, economic technological, environmental and social shifts and the global trends emerging from them.

These are fairly obvious ground for making policy, one would hope. Additionally, the EC’s call for multilateralism and international cooperation are standard fare from Brussels. The EC goes on to condemn unilateralism, possibly a shot at both the United States (U.S.) (at least under former President Donald Trump) and People’s Republic of China’s (PRC) foreign policy approaches, but then diagnoses the causes of such unilateralism. As our focus is on technology policy, politics, and law, I will only excerpt those that are immediately and directly relevant:

• First, globalisation, technological evolutions and the build-up of global value chains have had a dichotomous impact on economies and societies. On the one hand, they have created massive efficiency gains, fuelling (sic) sustained, trade-led economic growth in many parts of the world. This has helped to lift millions of people out of poverty. On the other hand, these developments sometimes have had a strong disruptive effect leading to growing inequalities and leaving some individuals and communities behind. What were expected to be transitory adjustment costs have sometimes turned into permanent losses in living standards, employment opportunities or wages and other working conditions. In many cases, governments are perceived to have been insufficiently responsive to economic adjustments and mitigating their negative impacts. This has led to calls for de-globalisation and to the rise of inward- looking and isolationist reactions.
• Second, the rapid rise of China, demonstrating global ambitions and pursuing a distinct state- capitalist model, has fundamentally changed the global economic and political order. This poses increasing challenges for the established global economic governance system and affects a level playing field for European companies competing globally and at home.
• Fourth, the digital transformation is another key enabler of sustainable development, but also a space of competition and inadequate multilateral governance. As it embarks on its Digital Decade, supporting Europe’s digital transformation is a priority both in internal and external policies including trade policy and instruments. At the same time, the nature of trade will continue to evolve. It will become more innovation-driven, supported by intellectual property (IP) protection, with an increasing role of services trade compared to goods. Services not only contribute directly to the value chain (financial services, telecommunication, IT, transport and logistics) but – often even more importantly – they contribute by being incorporated in manufacturing products. The servicification (sic) of the economy and the rise of digital technologies have created well-paid and high quality jobs and have fuelled (sic) economic growth.

The EC then detailed “A Trade Policy That Supports The EU’s Open Strategic Autonomy” and started by stressing the need for “Open strategic autonomy,” a path aside and apart from the U.S., PRC and other nations, that “emphasises the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting its strategic interests and values.” The EC added:

Open strategic autonomy is a policy choice, but also a mind-set for decision makers. It builds on the importance of openness, recalling the EU’s commitment to open and fair trade with well-functioning, diversified and sustainable global value chains. It encompasses:

• resilience and competitiveness to strengthen the EU’s economy;
• sustainability and fairness, reflecting the need for responsible and fair EU action;
• assertiveness and rules-based cooperation to showcase the EU’s preference for international cooperation and dialogue, but also its readiness to combat unfair practices and use autonomous tools to pursue its interests where needed.

The EC stated “[t]he EU is built on openness, both internally and externally” and:

Openness and engagement are a strategic choice that also cater for the European Union’s well-understood self-interest. Openness brings prosperity, competitiveness and dynamism. At the same time, an open economy needs to be combined with decisive action to mitigate and adapt to climate change, protect the environment and strong social and labour policies, responding to the expectations of EU citizens. Only this will allow us to spread the benefits of openness fairly and facilitates adjustment to the transformations of the global economy so that no one is left behind.

The EC noted the next element of its updated trade policy: “[s]trengthening the resilience and sustainability of the EU economy, and its supply chains is a pillar of the European Union’s drive towards open strategic autonomy.” The EC added that “[c]lose cooperation with partners will be important in supporting multilateralism and the rules-based international order.”

The EC detailed the “[t]hree core objectives of trade policy for the medium term:”

• First, supporting the recovery and fundamental transformation of the EU economy in line with its green and digital objectives.
  • In the context of recovery efforts, EU trade policy should continue to perform its core function of facilitating the exchange of goods and services in a manner that creates opportunities and economic welfare. The focus must be on benefits for citizens, workers and business. At the same time, EU trade policy should help transform the EU’s economy in line with the green and digital transitions. It should unequivocally support the Green Deal in all its dimensions, including the ambition to achieve climate neutrality by 2050. At the same time, the EU’s long-term competitiveness, prosperity and global position will depend on its ability to embrace and harness the digital transformation. The green and the digital transitions should therefore be a key priority for multilateral and bilateral trade policy. For the EU to retain and enhance its influence in shaping the rules necessary in this respect, it needs to develop a more strategic approach to international regulatory cooperation. This calls for closer policy integration between trade policies and internal EU policies.
• Second, shaping global rules for a more sustainable and fairer globalisation.
  • Global trade rules are in urgent need of being updated to reflect today’s economic environment and the challenges the global community faces. Making globalisation more sustainable and fairer should be the underlying driver of trade policy, delivering on the expectations of Europeans and other people around the world. EU trade policy should use all the tools at its disposal to support social fairness and environmental sustainability.
  • Leading efforts to reform the World Trade Organization and improving the effectiveness of the multilateral framework for trade governance should be the key priority for the EU to achieve this objective. Strengthening stability and rules-based trade will be the central pillar of the EU’s actions, as it is only in such an environment that trade can thrive and international cooperation can develop in the interest of a global sustainable future. At the same time, there is a need to ensure that the rules respond to current economic realities and are well equipped to respond to competitive distortions and ensure a level playing field.
• Third, increasing the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed.
  • Negotiating trade agreements has been an important tool to create economic opportunities and promote sustainability; implementing those agreements and enforcing the rights and obligations contained in them will be much more significant. This will include ensuring that the EU has the right tools at its disposal to protect workers and businesses from unfair practices. It also implies a greater effort to ensure the effective implementation and enforcement of sustainable development chapters in EU trade agreements, to level-up social, labour and environmental standards globally. By strengthening the implementation and enforcement of its agreements, the EU’s trade policy creates the conditions for businesses to develop, grow and innovate; and secure high-quality jobs in Europe and beyond. Supporting multilateralism and being open for cooperation is not in contradiction with the EU being ready to act assertively in defending its interests and enforcing its rights. The EU should strengthen its toolbox as necessary to defend itself against unfair trading practices or other hostile acts while acting in accordance with its international commitments.

The EC explained “[t]o deliver the three objectives outlined above, the Commission will focus on six areas…[and] [f]or each of these areas a number of headline actions to be accomplished during the Commission’s current mandate:

• Reform the World Trade Organization (WTO)
• Support the green transition and promote responsible and sustainable value chains
• Support the digital transition and trade in services
• Strengthen the EU’s regulatory impact
• Strengthen the EU’s partnerships with neighbouring, enlargement countries and Africa
• Strengthen the EU’s focus on implementation and enforcement of trade agreements, and ensure a level playing field

Regarding the third point above on the “digital transition and trade in services,” the EC provided much more in the way of detail:

• Supporting Europe’s digital agenda is a priority for EU trade policy. The objective is to ensure a leading position for the EU in digital trade and in the area of technology, most importantly by promoting innovation. The EU should continue to lead the way in digital standards and regulatory approaches, in particular as regards data protection, where the EU’s General Data Protection Regulation is often seen as a source of inspiration. To achieve this, the WTO needs to set the rules for digital trade and the EU needs to play a central role in creating them. Once they have been agreed, the EU should support further plurilateral WTO negotiations to liberalise trade in services in sectors going beyond e-commerce.
• The EU will also need to step up bilateral engagement and explore stronger frameworks for cooperation on trade-related digital issues with like-minded partners. It will seek to deepen its regulatory dialogues with like-minded partners.
• The question of data will be essential for the EU’s future. With regard to cross-border data transfers and the prohibition of data localisation requirements, the Commission will follow an open but assertive approach, based on European values and interests. The Commission will work towards ensuring that its businesses can benefit from the international free flow of data in full compliance with EU data protection rules and other public policy objectives, including public security and public order. In particular, the EU will continue to address unjustified obstacles to data flows while preserving its regulatory autonomy in the area of data protection and privacy. To better assess the size and value of cross-border data flows the Commission will create a European analytical framework for measuring data flows.

This suggests the EU sees the WTO as a mechanism by which its view on the regulation of the digital world may become even more influential. The next point regarding bilateral engagement and trade agreements probably refers to the current efforts to finalize the EU’s trade deal with the United Kingdom (UK), which includes an adequacy decision to continue the flow of EU personal data to the UK. But, it is likely also a reference to the state of data flows between the U.S. and EU, which are inhibited by the Court of Justice for the European Union having struck down the adequacy agreement in Schrems II. Not surprisingly, the EU opposes data localization and will look to ensure that international data flows will not disadvantage EU businesses.

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