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EU’s pretending to be an honest trade cop

EU’s pretending to be an honest trade cop

EU’s pretending to be an honest trade cop

Anchal Vohra is a Brussels-based international affairs commentator. She lived in Beirut until recently.

As farmers from France, Italy and Belgium spent the last month blocking key streets around the European Parliament, protesting rising costs, excessive regulations and cheap imports, concerned diplomats from various countries were engaged in trade talks with the EU.

Allocated a third of the the bloc’s budget, European farmers are heavily subsidized. They also constitute a strong lobby across the Continent, which is currently negotiating Free Trade Agreements (FTAs) with several agricultural powerhouses in Latin America and the Indo-Pacific.

Given these power dynamics, the protests resulted in two key concessions: First, the EU put its trade talks with Mercosur nations Brazil, Argentina, Paraguay and Uruguay on hold. Second, it carved out a rule that would have forced farmers to leave part of their land untouched, resting the soil and hopefully allowing biodiversity to flourish. “Its good for nature but not for me,” said Amoury, a young Belgian farmer standing near the Parliament.

Overall, these concessions prove European farmers are a group Brussels can’t ignore. They demonstrate that countries negotiating FTAs will have to prepare for European negotiators driving a hard bargain on food products. But most of all, they expose just how quickly the EU ducked under pressure at home, while continuing to play climate savior elsewhere.

In June 2022, the EU inked a deal with New Zealand that, for the first time, included a provision for trade sanctions in case of noncompliance with international labor and environment standards.

“Our trade agreements give us clout on the world stage and support economic growth and sustainable development — but as of now, we want to make them an even bigger driver of positive change,” European Commissioner for Trade Valdis Dombrovskis said. “We will step up our enforcement, and we will resort to sanctions if key labor and climate commitments are not met.”

Sure, the EU may well genuinely be trying to promote a “greener, fairer” world here, but diplomats and experts in the global south — as well some in Europe — say the bloc has ended up encumbering trade agreements, resulting in neither much of a trade deal nor a reduced carbon footprint.

Similarly, emerging economies agree that an increase in trade, coupled with Western green-tech support and the EU funds pledged to help with the green transition, will enable them to pull themselves out of poverty and pave the way for sustainable practices. But instead of meeting these financial commitments and increasing business through FTAs, the EU is adding to the cost of trade and threatening sanctions.

Discussing the matter over a cup of tea, an Indian diplomat who spoke to POLITICO on condition of anonymity said Delhi was “shocked and spooked” at the possibility of sanctions. Another diplomat from an emerging economy added that the notion that “sanctions can compel countries” to adopt sustainable solutions “is bogus.” Meanwhile, Brazilian President Luiz Inácio Lula da Silva views them as a “threat,” and has warned there can be no such “impositions or punishments.”

Essentially, the EU’s acting like a global trade police force, belittling future partners who publicly profess they’re just as keen on saving the planet but are unable to afford it like their European counterparts.

For example, in hopes of reaching net zero by 2050, the EU announced a set of measures including a carbon emission tax. And to make sure European manufacturers don’t lose out to foreign competition, it has imposed the same tax on exporters through the Carbon Border Adjustment Mechanism (CBAM). But, as emerging economies note, the EU has historically been a bigger polluter, and they say it’s unfair to ask them to split the costs evenly.

“Our trade agreements give us clout on the world stage and support economic growth and sustainable development,” Trade Commissioner Valdis Dombrovskis said | Kenzo Tribouillard/AFP via Getty Images

According to a diplomat negotiating an FTA with the EU and requested to remain anonymous, Brussels has essentially “internationalized” the cost of its green transition, and “undermined” the principle of “common but differentiated responsibility,” which was agreed on in the Paris agreement.

Along these lines, in December, a group of countries including Brazil and India officially protested the carbon tax at the U.N. Climate Change Conference COP28 held in Dubai, describing it as a “unilateral” measure.

And although it’s unclear how exactly CBAM will impact FTA calculations, or to what extent the prospect of sanctions will derail negotiations, even European experts agree that the EU is imposing conditions that may soothe environmentally conscious Europeans, but won’t lead to anything of substance. 

Holger Görg, a professor of international economics at the University of Kiel, told POLITICO that labor rights and sustainability goals shouldn’t be a part of FTAs but rather pushed through different instruments. “[A] trade agreement should be about trade, and if you’re worried about these standards — as one rightly might be — then I think these should be negotiated separately. Putting all these aspects together in one basket is just too much, and loses sight of the ultimate goal,’ he said.’ 

Ultimately, FTAs were meant to create new markets, break down trade barriers, reduce tariffs and create opportunity. But in the current environment, they’ve now gained an added geopolitical dimension.

For instance, the EU’s talks with Mercosur, Australia and India are in keeping with its preference for trade deals with democracies rich in human capital and key minerals. And these deals are important for a Europe that wants to diversify away from authoritarian countries like Russia and China. However, as Jakob Kirkegaard of the German Marshall Fund pointed out, FTAs are primarily about commercial viability.

“Certainly, there are political groups and parties in the EU that are very serious about climate goals. But the question is, are they strong enough to block a deal if everything else is adding up? Probably not.”

In short, the EU is overregulating — and it’s overreaching. So, when it comes to FTAs, instead of using a stick, maybe it should be adopting a different approach this time.

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