The first five years of Ursula von der Leyen were not a great success for EU trade policy. Yes, her Commission managed to conclude a trade deal with the UK, avoiding a “no deal” Brexit that would have disrupted trade badly, while minimizing the amount of new bureaucracy in trade between the UK and the EU. Still, when it comes to opening up external trade with the rest of the EU, there was pretty much a standstill, while the EU even came up with new protectionism of its own, as for the example the climate tariff Carbon Border Adjustment Mechanism (CBAM). Recently, in a number of policy areas, we can witness some hopeful signs that change may be on its way.
Labour’s return to power in the UK appears to have an impact on EU-UK relations. New PM Keir Starmer has vowed that his country will not re-enter the EU in his lifetime, while also excluding that it would rejoin the EU’s single market or customs union. Despite this, the new government is clearly more open to sacrificing sovereignty in order to reduce trade barriers than the previous Conservative government.
One area where this is the case, is with Labour’s plan to sign a sanitary and phytosanitary (SPS) agreement with the EU, which means that the UK would basically shadow EU food and agriculture regulations, in return for the EU scrapping border bureaucracy.
In theory, the EU had always said that it was against such an arrangement, as it would signify partial access to the EU’s single market in return for partial rule-taking. Then, in practice, the EU-UK agreement following Brexit is already full of similar “pick and choose” arrangements.
Ideally, the EU would have preferred the UK to sign up to the arrangement Norway, Iceland and Liechtenstein have agreed with the EU: receive full access to the EU single market in return for taking over all of the relevant EU legislation without being able to have a say over it. Obviously, this is complete political science fiction, which is why it did not happen – despite all kinds of people supporting it. Once, Jens Stoltenberg, when he was PM of Norway, called his country a “fax democracy”, because of the clear democratic downsides of this model. To be fair, it must be added that Norway does in practice haggle over whether a certain piece of EU regulation is “relevant” or not, enabling it some say after all.
Switzerland
With Starmer’s approach, the EU-UK relationship will more closely resemble the EU-Swiss relationship, which revolves around a whole series of bilateral arrangements, whereby the Swiss have negotiated sector-by- sector rule taking in return for EU market access. Because the EU’s never ending attempts to push the Norwegian model, or anything hostile to national sovereignty, onto Switzerland, these bilateral arrangements are not being updated. As a result, the Swiss-EU relationship is in an impasse. Negotiations on updating the relationship were re-opened earlier this year, but the EU came once again up with its demand to – indirectly – impose its own top court – the European Court of Justice – as the arbiter for the relationship, once again sowing the seeds for years of gridlock, as this will provoke opposition in Switzerland.
At least, it is hopeful to see that the EU is reportedly open to more “pick and choose” in the relationship with the UK – at least when it comes to such an SPS agreement, even if it has warned that apart from copying EU rules, the UK would also need to accept a role for the European Court of Justice. The UK has so far only accepted the latter for aspects related to Northern Ireland. Labour has suggested that it wants to take a similar approach in other sectors, with chemicals at the top of the list, so this is an interesting development, which also Switzerland should monitor.
Of course, as I wrote 6 years ago, the only sensible model for EU-UK relations is the EU-Swiss "pick and choose" model https://t.co/asoYX16B54 https://t.co/Y04UadZNQD
— Pieter Cleppe (@pietercleppe) August 4, 2024
Failing EU trade policies
Perhaps the EU’s openness can serve as an indication that it is slowly realizing how poor its performance on opening up external trade has been in recent years, with attempts to conclude or ratify trade deals with Latin American trade bloc Mercosur and Australia failing.
A key reason for this was that the EU would overload them with all kinds of demands. In the case of Mercosur, the EU demanded to add a sustainability annex to a trade deal that was already agreed, something which the likes of Brazil, Argentina, Uruguay and Paraguay did not appreciate at all.
The EU’s new deforestation regulation, which aims to export the EU’s standards to fight deforestation the rest of the world, has also managed to unite the whole world against the EU, from the United States, which demanded in June that the EU should delay the implementation to South East Asian palm oil exporters Malaysia and Indonesia, who have frozen trade talks with the EU in response. These countries find it particularly unfair that despite NGOs like Global Forest Watch praising them in 2023 for achieving a sharp reduction in forest loss, the EU refuses to declare their standards as equivalent. The fact that already an estimated 93% of palm oil imported into Europe is sustainable and that the UK does accept Malaysia’s anti-deforestation standard as equivalent has so far not convinced EU policy makers.
A more flexible EU?
A hopeful sign is that Sabine Weyand (picture), the European Commission’s Director General for Trade, recently questioned the EU’s handling of its deforestation directive, when she stated in April: “We should learn some lessons from the opposition we are currently facing with respect to the deforestation regulation … we have to recognize that the means are extremely burdensome and very difficult to meet for developing countries and notably for small and medium sized businesses and smallholders in these countries.”
Interestingly, she added: “The Global South and the emerging and developing economies, they do not simply want to copy our legislation and they say, who has appointed you world regulator? So I think we have to take on regulatory cooperation. We have to take a proper cooperative approach.”
More recent positive news is that according to diplomats, European Union and South American negotiators will meet early September in Brasilia in the first in-person talks since April, in order to try to conclude the EU-Mercosur trade deal this year.
We can only hope all of this signifies a change in the EU’s attitude, so the European Union can once again become a force for good when it comes to opening up global trade.
EU-Mercosur to meet in September signaling movement in trade talks https://t.co/MGH4LFMrA1
— Euractiv (@Euractiv) August 7, 2024
