EU must rebuild trading relations with developing nations

The main problem is simple to identify: the pace of new Free Trade Agreements (FTAs) has slowed significantly – in some cases to a standstill – over the past five years. The dynamic, proactive trade agenda of the Lamy and Mandelson years feels a distant memory. This matters because access to new markets is critical for EU exporters in an era of low economic growth and growing geopolitical competition.

At first glance, the solution is also simple to identify. The regions where FTA progress is most-needed are well-known – ASEAN, India, Latin America. The regions where progress is most desirable, because of fast-growing economies and rising demand for EU imports, are also well known – ASEAN, India, Latin America. It’s a match. ASEAN, for example, will be the most important market for import growth anywhere in the world over the next 3 years, according to the IMF.

Unfortunately, the core problem with EU trade policy is also simple to identify (but not to fix). The von der Leyen Commission has spent much of the past five years alienating those same regions by enacting Green Deal legislation specifically targeting commodities produced in those countries. Predictably, the EU’s reputation as a trusted partner has taken a battering. Malaysia has filed, and won, a WTO complaint against EU restrictions on palm oil exports. Malaysia’s Prime Minister Anwar Ibrahim has said that he is determined to “fight discrimination against palm oil” in the EU’s Deforestation Regulation.

India’s Commerce Minister Piyush Goyal has described the same Regulation as “biased” and told a recent WTO meeting that trade and environmental regulation should be “two separate issues” instead of conflated as Brussels prefers. Countries as diverse as Brazil, Nigeria, Malaysia, India, Argentina, Indonesia and Guatemala have publicly expressed similar complaints. The Deforestation Regulation and the carbon border tax (known as CBAM) seem to be the primary problems.

How can these relations be rebuilt?

Undoing the damage directly by amending or repealing the offending Green Deal legislation is a non-starter: almost of all of it is now settled EU law. Recognising the problem, and showing some humility, is a good start – Sabine Weyand from DG Trade admitted recently that “We should learn some lessons from the opposition we are currently facing with respect to the deforestation regulation” – but this could be seen as fine words with little action behind them.

There is a policy approach the Commission could take to bridge the gap between words and actions. It could explore the opportunities for mutual recognition, or unilateral recognition, of existing sustainability standards in third countries. This one step could potentially lower costs and reduce burdens on EU businesses, mitigate future price rises for consumers, and rebuild trust with trading partners by offering genuine and substantive cooperation.

The certification systems exist already in many countries, and often cover the same commodities targeted under the Green Deal. In Brazil, the AgroBrasil+ Sustainable Platform and the Cecafé-Serasa Experain exist for coffee and soy production, among others. America famously has USDA beef certificates; Malaysia has the mandatory Malaysian Sustainable Palm Oil (MSPO) standard. Under implementing regulations for the Deforestation Regulation, could an assessment regime be designed to accept certain certifications as compliant and in alignment with EU rules?

Not all would qualify, of course. Given its national reach and commitment to zero-deforestation, Malaysia’s palm oil standard would certainly qualify. Brazil’s coffee standard perhaps not. Others would be determined case-by-case, based on the existing known criteria.

This idea has worked before: under the Renewable Energy Directive (RED), existing systems such as the International Sustainability and Carbon Certification (ISCC), based in Germany, was able to recognise sustainable commodities including Malaysian palm oil and European rapeseed. This provided a fast-track into the EU market for those proven to meet the sustainable standards. Why not adopt the same principle, more widely?

The goal would be to rebuilt trust and partnership with key trading partners. There would be no reduction in EU standards – those would still apply – but best practices would be recognised and rewarded through easier and lower-cost market access. For those standards not immediately compliant, it would serve as an aspirational pathway.

If we are not prepared to take such bold action, and to be proactive at repairing the damage done by some of the protectionism of recent years, then the EU’s trade stagnation will continue and others – our competitors and enemies – will access those fast-growing markets instead.

By Alexander Seale, as seen in: The Independent, Flipboard, Radio France Internationale (RFI), Slate France, The World from PRX, TRT World, Le Magazine Causeur, The Connexion (France), The European Times News, Le Spectacle du monde and Journaliste indépendant, TV & Radio à Londres pour @bbcafrique, @LesNews24, @RadioCanadaInfo, @TVANouvelles, @lpost10, @TRTWorld & @Independent.

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