It’s The End of Trade Policy As We Know It (Or Is It?)

international trade compreIt’s very easy to be extremely pessimistic about Europe’s trade policy these days. From the outside, it would seem to lurch from crisis to crisis.

Timing is everything in politics and one has to wonder why on earth the European Commission chose to put the spotlight on the EU-Canada (CETA) deal just days after the UK Brexit referendum decision?

It would be an understatement to suggest that trade policy does not have its fair share of detractors for the moment. You would only have to open a window at the Berlaymont to get an ear-full of the jeers of the anti-traders. Add to that the ability of team Commission to postpone dealing with controversial legislation when needed and one wonders why a discussion on CETA could not simply wait until autumn. The pronouncement expected then by the European Court of Justice on the division of competences – if any – on the EU-Singapore deal would hopefully offer the legal clarity needed. However, those were tumultuous days in European politics.

A mixed affair

“The credibility of Europe’s trade policy is at stake” proclaimed European Commission President Jean-Claude Juncker on the day he buckled to pressure from Germany and France to pronounce the EU-Canada (CETA) trade deal a ‘mixed agreement’. This means that the Commission accepted (despite Juncker’s earlier pronouncement) that the agreement contains provisions that fall under member state responsibility meaning that individual member states also have to ratify the agreement alongside the EU according to their national ratification procedures.

German Social Democrat leader Sigmar Gabriel – who has had an erratic love and hate relationship with EU trade policy since taking office as German Vice-Chancellor in 2013 – was yet again displaying his extraordinary ability to change political direction like a weather-vain. He argued that by-passing national parliaments would be a crazy move given the anti-trade sentiment in a number of EU countries – especially Germany, Austria and France.

Juncker and Gabriel were both right about their observations and were both wrong about their subsequent actions.

Both fell foul to the modern political disease of trying to follow public opinion at every tweet and turn. There needs to be a balance of listening and responding to public opinion measured with a healthy dose of sticking to your political beliefs to ensure you are a credible politician. The rule of law is a fundamental principle of the EU and the very cement which binds our Union. We ignore it at our peril.

President Juncker claimed to want to fight for the credibility of trade policy yet undermined his own credibility and that of the Commission’s legal service in one single move. Sigmar Gabriel spent the first months of his office as trade chief of Europe’s most important exporting country silent on the benefits of trade – especially CETA and TTIP – as the anti-traders dominated and subsequently poisoned the German public debate.

So, the few times when he has publicly recognised the benefits of trade, he has – at best – being paying lip service to key international partners such as Canada. Both examples show how you cannot have it both ways. And that is THE problem at the heart of the EU’s trade crisis today: a lack of unity in the union.

You cannot be both a supporter and detractor at the same time. It is not credible and provides those who are fundamentally opposed to global trade the ammunition they need to slowly but surely chip away at public trust in trade as well as at trust in government more generally. The anti-traders were given a free hand to fear monger – especially with their ability to dominate the use of social media platforms which are more adapted to spreading criticism than support. You simply cannot hope for a successful EU (trade policy), if on the European and international stage as a President or Prime Minister you push for trade deals; recognise their importance for the European economy; applaud the collective effort to achieve them but go home and attack them and allow even your trade minister to do so. Sound all too familiar doesn’t it?

On the one hand, EU Member states know full well that the European Commission is legally competent on trade matters yet repeatedly attack the Commission and the Union’s trade policy which they themselves signed off upon – if it serves to win them a few political points back home. A single unified external trade policy (which by the way is formed through regular discussions between the Commission and EU government’s trade representatives who are overseen by EU trade ministers) is the natural reflection to the EU’s successful single market.

Many commentators would argue that it is hardly the first time that divisions surface among member states on an EU policy front. However, it is one of the few times when there has been such a power grab by member states toward an EU legally held competence where the EU Commission has largely been recognised as doing a successful job over the decades. Numerous explanations can be given for this change but most important – in my mind – has been the unforeseen consequences of the impact of the Lisbon Treaty on EU trade policy.

Stuck in the middle

In short, the Lisbon Treaty gave the European Parliament a much greater say and role in forming and implementing trade policy. This is naturally a good thing. A more powerful European Parliament meant MEPs flexed their muscles in a show of democratic strength – for example with the rejection of ACTA. Meanwhile, back in all member state capitals – bar none – governments had been caught off guard by the public outcry over ACTA with even some of the EU trade ministers not even knowing what ACTA was about (and we wonder why the general public lose faith in politicians…sigh).

The real result of greater democratic oversight of EU trade policy has been a turf war. For member states, ACTA was a wakeup call which made them realise that they needed to show their citizens that their governments had a more visible role over trade. Yet no one seemed to realise that such an objective was – in itself – a rejection of the European Parliament’s legitimate right since the Lisbon Treaty to represent the 500 million citizens of Europe on EU trade issues.

The European Commission – stuck somewhere in the middle between the members states and the European Parliament – took a beating.

So, it would appear pretty gloomy for the future of trade policy….or would it?

Perhaps, one of the few silver linings of Brexit for many in Brussels is the fact that the UK’s future divorce with the EU has put trade firmly back on the map. Everyone is talking about trade. A few media organisations are even bolstering the number of expert journalists covering the trade beat. And most importantly, the vast majority of politicians and commentators seem to be recognising and learning just how important (and complex) intra-EU as well as international trade is for both the future EU economy as well as the UK as it goes it alone.

But it’s probably too soon to put in an order for two hundred boxes of ‘I LOVE TRADE’ t-shirts from China just yet….now which tariff line would they be under?

John Clancy is Senior Director at FTI Consulting in Brussels and was the EU Trade spokesman for EU Trade Commissioner Karel De Gucht from 2010 until 2014.

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