Summary
President Macron is throwing his weight behind efforts to establish regulatory ‘mirror clauses’ in EU trade agreements to combat ‘environmental and social dumping’. However, despite strong European Parliament support, there is no consensus among EU member states governments on the scope and practicality of such a ‘mirror clause’ approach. ACP exporters and governments need to define where their interests lie within these EU regulatory discussions, so as to be able to protect and promote ACP producer interests within these policy debates.
There is a strong political dimension to the current debate on EU due diligence regulations, as recent interventions by French President Macron have highlighted. Under President Macron the French government is drawing up plans to restrict food imports into Europe from countries which fail to address child labour, deforestation, and the use of chemicals in agricultural production in line with EU requirements. The motivation for this is linked to the French President’s desire to ensure ‘a level playing field on trade to ensure EU food is not undercut by cheap rival imports produced with lower standards’ (1).
The push to ensure all products which enter the EU respect EU standards enjoys strong support in the European Parliament. However, it is unclear how trade measures targeting ‘production techniques rather than the quality of the final product’ can be implemented. Production technique requirements are quite different from requirements linked to food safety or minimum pesticide levels and other contaminants. In regard to the latter the rules and how they should be applied are ‘fairly well understood’, with countries and regulatory authorities in common customs areas having considerable autonomy in determining the standards, provided these are applied universally and do not discriminate against imports. However, for production process requirement it is much more difficult of find a method of application consistent with WTO requirements (1).
This being noted, such production process requirements are easier to apply under preferential trading arrangements which extend preferences beyond the standard WTO treatment. Within EU FTAs President Macron is reportedly favouring what is referred to as ‘mirror clauses’. Put simply this requires producers seeking to place goods on the EU market to adhere to EU standards and requirements, with national production standards ‘mirroring’ those of the EU. These ‘mirroring’ requirements are seen as being applicable to phytosanitary standards (the current situation) environmental issues (deforestation commitments and actions – aspirational) and labour requirements (e.g., the abolition of child labour – aspirational) (1).
Politically, the French President’s initiative is being depicted as a fight against ‘environmental and social dumping.’ Considerable emphasis is being placed on the EU exporting its standards rather than ‘having foreign standards imposed on its own common market’ (1). This political dimension needs to be seen against the background of the poor showing of President Macron’s ‘La République en Marche’ in regional elections, which saw the LREM’s support collapse to just 11% of the votes cast, placing it in 5th place. In contrast, both the centre-right Republicans and their allies and the Greens and Socialists showed a marked resurgence, gaining 29% and 30% of the vote share respectively (2).
Against this background, positioning himself as a champion of French and European food, social and environmental standards, could play well for President Macron in the forthcoming 2022 French Presidential election.
However, at the European level, despite support in the European Parliament, there is no consensus amongst member states on this issue, with widely divergent national interests being in play. What is more 3rd country governments are only likely to ‘accept strict level playing field conditionality’ if the EU allows growing volumes of duty-free access to EU markets in exchange (1).
| Comment and Analysis Given the wider political considerations in play, what are the implications for ACP exporters of current debates within the EU around stricter due diligence regulations and where do the interest of ACP countries lie within these debates? The first point to note, is with it being easier to apply production process requirements under FTAs and unilateral preference schemes than under WTO disciplined MFN arrangements, ACP countries would appear to be particularly vulnerable to any ‘mirroring’ process for EU production process regulatory requirements. Virtually all ACP countries trade with the EU under reciprocal preferential FTAs or unilateral preference arrangements (such as the EBA initiative). ACP producers could thus be among the first to face ‘mirroring’ requirements. This raises the question: what implications would this carry for the competitive position of ACP suppliers of the affected products compared to exporters under the EU’s MFN trade regime, where such requirements could be more difficult to enforce? This needs to be seen in the context of a sector such as cocoa, where ACP supplier account for over 90% of EU imports of beans and basic cocoa products, while MFN tariffs are zero for beans and low for simple value-added cocoa products (cocoa butter and cocoa paste). It is far from clear how the EU could effectively enforce ‘mirroring’ requirements for preferential suppliers such as those in the ACP, while limiting enforcement of ‘mirroring’ requirements for non-preferred suppliers. An additional complication arises for ACP exporters if the quid pro quo for ‘mirroring’ commitments were to be a significant expansion of duty-free access for non-ACP exporters. This would erode the margins of tariff preference enjoyed by ACP exporters on the EU market (e.g., in the sugar sector) and undermine their competitive position. This could not only carry implications for current trade flows, but also future patterns of investment. Internally within the EU there is an absence of consensus on the desirability and scope of ‘mirroring clauses’ among EU governments. This complicates somewhat the French effort to promote a framework for the definition and application of ‘mirroring’ regulatory requirements. Individual EU member states have different interests in this area. Major agri-food traders such as the Netherlands (and to a lesser extent Belgium) have a marked reluctance to complicate and add costs to trading processes. To put this in context the Netherlands is the leading agri-food exporter by value, given its role as an entry point and clearing house for internationally traded agricultural products. These smaller EU member states also have less powerful farming lobbies compared to France. Thus, we find even in the less controversial area of SPS measures the Dutch authorities adopt quite different, often minimalistic, approaches to phytosanitary controls on products such as citrus fruit, when compared to the more ambitious controls implemented in countries like Spain, which go substantially beyond EU minimum requirements. This approach is reflected in Dutch government positions on strengthening EU minimum requirements for SPS import controls. The Netherlands and Belgium both have major trading interests in products derived from sectors which are likely to be subject to rigorous deforestation and human rights requirements (e.g., on child labour). This being noted strongly organised civil society bodies are championing both environmental and socially responsible business practices along supply chains supplying the EU market, with this exerting a counterweight to narrower trading interests (see companion epamonitoring.net article, ‘Circumvention of the LID Highlights the Need for an Ambitious and Effective EU Human Rights and Environmental Due Diligence Regulation’, 30 June 2021). Against this background, the question arises: where do the interests of ACP producers lie within the debate on ‘mirroring’ EU production process requirements, be it linked to combatting deforestation, promoting sustainable farming practices, meeting minimum living income requirements, or ending the use of child labour? There would appear to be a need for the establishment of sector specific working groups of concerned ACP governments, industry stakeholders and exporters, so as to enable the concerned ACP governments to get to grip with the policy issues and challenges faced within the EU’s emerging ‘mirror clause’ production process approach in those areas where EU regulatory initiatives are under preparation. |
Sources:
(1) politico.eu ‘Macrons recipe for fair trade food’, 27 May 2021
https://www.politico.eu/article/emmanuel-macron-fair-trade-food-gastronomy-france-election-2022/
(2) Economist, ‘Another slap in the face’, 26 June 2021
https://www.economist.com/europe/2021/06/24/french-voters-punish-presidential-poll-favourites