Will EU trade policy meet the demands of society?
The European Union’s Free Trade Agreements (FTAs) have the main goal of increasing economic activity by liberalising trade and removing trade barriers, but there are also secondary goals. Since 2014, all the EU’s comprehensive trade agreements systematically include a separate chapter on Trade and Sustainable Development (TSD). The TSD chapter aims to promote specific labour and environmental standards and to encourage trade which supports sustainable development. Currently, the EU is in the process of reviewing the TSD chapters via a public consultation with the outcome expected in early 2022. A range of voices, including the French and Dutch governments, are pushing for trade policy to play a stronger role in supporting social and environmental goals.
Challenges of our time?
Concerns about the human rights and environmental impacts of EU supply chains has led to a focus on the role trade policy can play to address these issues. The review of TSD chapters provides an opportunity for the EU to revisit the broader goals of its trade policy beyond just facilitating trade. This means grappling with a number of key questions.
For example, should trade policy only exist to maximise profit for companies? Or should it also support those companies which wish to be leaders in their sectors and are already cleaning up their supply chains, paying fair wages and mitigating the environmental damage of their business activities? This poses the question of how the EU can restore a level playing field between the frontrunners and those companies wishing to continue business as usual.
There is also the question of whether the EU should become more assertive in using its trade policy to promote labour and human rights around the world and strengthen the multilateral system it relies on for its global influence. Furthermore, how does the EU wish to go about enforcing its trade policy?
With a growing need to green the world economy, how does the EU plan to promote the trade in raw materials, semi-finished products and goods that have been sourced and produced in such a way as to minimise environmental damage? Finally, how does the EU plan to honour the increasing consumer preference for goods that are fairly produced?
What are the EU’s trade policy options?
When it comes to establishing a level playing field, the EU could award countries that implement internationally recognised labour and environmental standards with additional access to the EU market. It could also look to incentivise sustainable and fair production methods by rewarding those companies that are frontrunners in their sector with enhanced market access.
The EU’s plan for anti-coercion trade measures and the recent launch of the Trade and Technology Council (TTC), a joint forum with the United States, has signalled a more geopolitical approach to trade. One of the working groups of the TTC focuses on global challenges and aims to align the trade approaches of the EU and the USA in “promoting and protecting labour rights and decent work, and, following further consultations, trade and environment issues”. However, it’s important that such a convergence of approaches should also be reflected in the EU’s overall trade policy and the review of the TSD chapters.
Looking at the enforcement of standards via trade agreements, the EU wishes to become more assertive through its Chief Trade Enforcement Officer and its complaints mechanism, called the Single Entry Point (SEP). The SEP allows EU-based entities to lodge complaints with the EU when the human rights and environmental standards stipulated in the TSD chapter are not met.
Finally, there seems to be a lack of focus on consumers’ interests and their demands for green and fairly-produced goods. The EU could be a frontrunner in this space if the right incentives are put into place, such as the development of the EU Human Rights Due Dilligence legislation which aims to clean up the global supply chains of companies. In addition, the recently presented Deforestation Regulation, which requires companies to conduct due diligence to ensure products placed on the EU market are not linked to deforestation, will also play a key role. This regulation focuses specifically on palm oil, soy, timber, beef, leather, cocoa and coffee, which are found in many food and consumer goods we use on a daily basis.
The future of trade policy
The EU needs to answer these questions in order to develop a trade policy which does not operate in a silo, but is able to also promote the interests of its citizens, reduce environmental damage, support the frontrunners in our economy and incentivise fair production methods around the globe. The EU is not alone in this endeavour; the UK and USA have also presented ideas for reform. However, if the EU is able to develop a trade policy that lives up to the demands of society, its regulatory spillover effect will almost certainly also encourage other countries to follow in its footsteps.
Radboud Reijn works in public affairs in Brussels and coordinates GSP Platform