The European Commission’s Communication on an Open, Sustainable and Assertive Trade Policy

The European Commission published its Communication on An Open, Sustainable and Assertive Trade Policy on 18 February 2021 (the Communication). This follows a consultation on the EU’s Trade Policy Review which closed in November 2020. The Communication seeks to reset the course of the EU’s trade policy in the context of global uncertainty and increased competition. Its key theme is “open strategic autonomy”, a concept characterized by three main elements: 1) furthering openness and engagement by making strategic use of the size and attractiveness of the EU Single Market; 2) enhancing the resilience and sustainability of value chains. The Commission in this regard seeks as a priority to identify strategic dependencies in supply chains, also to be addressed by industrial policy reviews; and 3) demonstrating assertiveness and encouraging rules-based cooperation in the implementation of EU trade policy to further support the EU’s geopolitical interests. In line with its overarching objective of open strategic autonomy, the Communication suggests that the EU’s trade policy will focus on three core priorities:

1. support the recovery from the pandemic and the fundamental transformation of the EU economy in line with its green and digital objectives;
2. shape global rules for a more sustainable and fairer globalization; and
3. increase the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed. In this regard, the EU will seek appropriate means to ensure effective implementation and enforcement of provisions on sustainable development in EU trade agreements, to level-up social, labor and environmental standards globally, but also to defend itself against unfair trading practices.

To achieve these objectives, the Communication confirms a range of key proposal priorities, including:

• A new legal instrument to protect the EU from potential coercive actions of third countries. The EU is currently seeking feedback on such a mechanism;
• A legal instrument to address distortions caused by foreign subsidies on the EU’s internal market;
• A proposal on mandatory due diligence to promote sustainable and responsible value chains, including effective action and enforcement mechanisms to ensure that forced labor does not find a place in the value chains of EU companies;
• Restoring a fully-functioning WTO Appellate Body and promoting climate and sustainability considerations within the WTO. The EU will in addition seek a rapid conclusion of an ambitious WTO agreement on digital trade, including rules on data flows. EU thinking on WTO reform is set out in detail in Annex I to the Communication;
• Seeking commitments from G20 partners on climate neutrality, and proposing to make the respect of the Paris agreement an essential element in all future agreements;
• Developing a closer transatlantic partnership on the green and digital transformation of our economies including through the EU-US Trade and Technology Council; and
• Deepening trade and economic relations with partners in Western Balkans, the EU’s Southern Neighbourhood and in Africa.

Lastly, in the Communication, the tone clearly is set for the EU’s relations with its main trading partners:

• In its relations with the US, the Commission highlights the transatlantic relationship as the “biggest and most economically significant partnership in the world”. The Commission considers that President Biden’s administration provides opportunities to work more closely on reforming the WTO, tackling competition distortions, and on the green and digital transition;
• At the same time, the Commission acknowledges China’s rapid rise as a challenge to the established global economic governance system. Therefore, it makes a priority of “building a fairer and rules-based economic relationship” while noting that ratifying the Comprehensive Agreement on Investment will require a clear engagement towards implementing provisions on “market access, level playing field commitments and on sustainable development”. Importantly, the Commission in this context does not make any references to human rights or labour issues with China, which are currently undermining discussions on the agreement’s ratification.

Conclusions The Communication was published in a difficult context, strained by shortfalls in the EU’s roll out of vaccines, and criticism against the Chinese investment agreement in view of the absence of sufficiently stringent provisions on human rights and labor protection. Based upon the Communication, the EU is seeking to equip itself with the tools that will enable a more assertive trade policy, better adapted and responsive to difficult situations. The Communication (including its proposal to create a new mechanism to deter coercive actions of third countries) follows on the entry into force of stronger EU trade enforcement rules, and the Communication on fostering the openness, strength and resilience of Europe's economic and financial system, which enhanced implementation of EU sanctions regimes and EU resilience to extra-territorial third-country sanctions. The EU has also adopted a new a global human rights sanctions regime, the so-called Magnitsky Act. Indeed, the Communication notes that the new sanctions regime will “have a role to play to ensure compliance with human rights”. The Communication leaves open the issue of  how to address forced labor practices in one of its main trading partners, notwithstanding its commitment to take “effective action to ensure that products linked to forced labor are excluded from the value chains of EU companies”. This issue could be be dealt with in the upcoming proposal on mandatory due diligence on which Commissioner for Justice Didier Reynders is leading. The Communication was welcomed by the S&D and Renew Europe groups, while the Greens expressed disappointment in its failure to include more concrete commitments on sustainability objectives. MEPs sitting the Committee for Trade will discuss the strategy and enclosed proposals with Executive Vice President Dombrovskis on 24 February 2021.