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A recent letter from former high-ranking European Commission officials to the current Commission President Ursula von der Leyen raises various trade and market protection concerns and urges the Commission to take certain actions.
The letter raises legitimate areas of concern both as regards the current crisis in global trade and EU trade policy more generally.
However, it is less than clear that the letter accurately identifies either the real problems or the best solutions. For example, it focuses attention on the EU trade defence (anti-dumping and anti-subsidy) measures and suggests speeding them up. However, the EU's trade defence measures address only a very small percentage of imports in the first place (less than 0.3% on average of total annual EU imports 2014-2017) and thus procedural changes as suggested would in no case bring important new protection to the EU. Also, recent amendments (June 2018) have already enhanced the efficiency and protective effect of the trade defence rules, including shortening investigation periods, while maintaining crucial legal/procedural requirements. While it is correct that the WTO does not impose a minimum duration for investigations, the WTO (AD and CVD Agreements) and fundamental principles of EU law require the collection of relevant data from all interested parties, objective assessment of the evidence submitted, disclosure of findings and adequate statement of reasoning, respect of rights of defence, etc. – all of which require time to comply with. Moreover, Commission consultation with Member States is an essential element of any EU action which, while adding to the time needed, is indispensable in the European context.
But the emphasis on the speed of trade defence proceedings is probably the least important of our concerns about the former officials' letter. It also appears wrongly to assume that speedier trade defence cases will help protect areas of the EU economy which will be essential for future economic growth ("digital, 5G telecommunications, transport (industry and services), medicines, etc."). While these are indeed critical sectors and should be protected appropriately if at risk, the EU trade defence instruments are designed to target unfairly low-priced imported goods (not services), meaning that risks to these named sectors are better addressed by different, more suited to purpose instruments. Further, the letter mischaracterizes when and how the EU can resort to safeguard measures, and then infers that Member States will be able to adopt external (commercial policy) safeguard measures on their own volition if the EU does not. While the Member States retain certain powers, for example concerning the management of export controls, they do not have powers to individually apply trade defence safeguard measures or other restrictions on imports. Commercial policy measures are the exclusive domain of the European Union.
In our view, a more useful and convincing call to action would emphasize a need rather for rounding out and effective enforcement of a set of EU policy instruments able to address the emergence of new market threats (whether from the US, China or elsewhere, whether in the form of unilateral measures outside the WTO context, massive subsidies or other elements of unfair competition). This larger EU toolbox (including investment screening, international procurement, subsidy effects in competition, etc.) would thus supplement the traditional trade defence measures to fill the current gaps and help ensure a more level playing field for EU industry, whether acting within the Single Market or abroad. This broadening of EU trade and market instruments is already in process, with enhanced foreign investment screening rules coming into effect in October – though the COVID-19 crisis may give rise to some fine-tuning. Other proposals are in the decision-making process, while wholly new proposals (e.g., dealing with the competitive effects of foreign subsidies) are expected soon. It is the Commission's responsibility to continue to assess the relevance and effectiveness of the current toolbox and to propose additions or adjustments as appropriate. However, it will remain essential for the institutional decision-making process and balancing of views within the Union to be respected, without short-cuts. Beyond the Commission, the support also of the Member States and European Parliament is needed, with a view to developing the essential dialogue and agreement to support the Commission’s various recent and coming proposals to help close the level playing field gaps.
In this respect, the von der Leyen Commission's decision to appoint a high-level Trade Enforcement official within DG Trade is certainly a welcome step. The EU is the world's largest trading bloc and has led the way in continuing to promote smart trade liberalization in recent years in spite of global trends towards more protectionism. However, rigorous enforcement of the commitments contained in those agreements - whether in relation to climate change, sustainability or workers' rights - will be very important.
More specifically concerning the huge subsidies being granted, however understandably, to counteract the economic effects of the COVID-19 crisis, rigorous application of the EU's own state aid rules will be essential to the credibility of any measures we want to take against subsidies practised by our competitors. These rules have, rightly, been temporarily relaxed in the current crisis. However, an early return to the original regime will be imperative if we are to avoid a major disruption of competition within the Single Market where richer countries would be able to subsidise their companies to the detriment of companies in countries with fewer resources.
Crucially, the EU state aids and supplemental internal market protection measures must be designed and implemented fairly and consistent with applicable international law in order to avoid claims of pure unilateralism and protectionism. The temptation to expand the notion of national security must be avoided. Current US trade policy shows the risks of stretching the national security exemption to suit purely economic considerations. Further, the internal EU measures must be accompanied and balanced by essential external initiatives, with a view to building effective bilateral and pluri-/multilateral instruments whenever possible. The EU's support for effective reform of the WTO and continued WTO governance of the international trade order must be maintained.
Finally, what we would see as a potential danger in the former officials' letter is their exhortation for the EU to "move away from our slow and sometimes excessively legalistic approaches."* While a fair and level playing field for EU industry at home and abroad is important to deploy to help ensure the future economic security of the EU, the suggested shortcuts are dangerous. If the EU starts to curtail its preparatory analyses on new legislation, foregoes consultations and ignores rights of defence for stakeholders, the EU will not only betray its own legal foundations but also the vital calls to its trading partners globally (and occasionally to some Member States) to respect the rule of law and democratic institutions. As the world's largest trading block, with a unique dependence on the freest possible flow of both imports and exports, the EU has a particular stake in the continued functioning of the rules-based international trading system.
*The former officials' letter states, "It is said that 'things cannot continue as before.' That may be true, but we must prove it by being ready to move away from our slow and sometimes excessively legalistic approaches."