Summary
The EC is proposing a ‘more assertive’ trade policy, emphasising the need for partner countries to fully live up to commitments entered into under trade agreements their governments have signed on to. There are concerns the more assertive promotion of EU trade and economic interests will dominate other EU trade policy objectives. The EC’s ‘Open Strategic Autonomy’ concept seeks to reconcile the EU’s ‘managed trade’ import regime applied in sensitive agri-food sector, with the need for more open markets for EU exporters. There is a contradiction at the heart of EU agri-food sector trade policy, with the EC seeking to deny ACP EPA signatories the right to use trade policy tools to regulate imports in trade with the EU which the EC itself routinely uses to manage imports from other major agri-food sector competitors. This contradiction is likely to come to the fore in the coming years as the EC seeks to operationalise its ‘more assertive’ trade policy. This will be especially the case if the application of full UK border controls on goods crossing from the EU, generate the kinds of agri-food sector disruptions which have affected UK exporters since 1 January 2021. This could then see surges in EU exports to ACP markets for livestock products such as poultry meat and milk powders.
The EC is stressing how the EU’s revised trade policy will be ‘more assertive’ in defending EU ‘interests and value, including through new tools.’ In this context the EC maintains ‘the EU will adopt a tougher, more assertive approach towards the implementation and enforcement of its trade agreements, fighting unfair trade and addressing sustainability concerns’ (1). In this context the EC emphasises how ‘trading partners need to make sure their rules reflect the commitments they have signed up to on market access’ for EU exporters. In this context the EC highlights the need to strengthen the work of the ‘Market Access Advisory Group, Market Access Teams in EU Delegations, and Civil Society Dialogues’ in identifying violations of trade agreement commitments and bringing them to the attention of the EC through a ‘one-stop shop complaints mechanism’ (2).
In promoting EU economic and trade interests, it is stressed how the EU will act multilaterally wherever it can but autonomously (unilaterally) wherever it must. Emphasis is placed on making ‘use of all policies and measures to bring real benefits to EU companies and workers’, including in regard to the implementation and enforcement of trade agreements. The EC also proposes the adoption of ‘an anti-coercion instrument to respond to coercive practices by non-EU countries’ (3).
As part of the trade policy review the EC has further refined its concept of ‘Open Strategic Autonomy’. This concept was developed in the context of the Covid-19 crisis and the perceived threat to strategic supply chains, (see epamonitoring.net article, ‘How Helpful is the ECs Orientation in EU Trade Policy Review Consultation in addressing Post Covid-19 Recovery Challenge in ACP Countries?’, 3 September 2020). This refinement of the concept seeks to reconcile calls for ‘more autonomy’ in strategically important supply chains, with the EU’s need for access to open markets to fuel renewed economic growth. The elaboration of the ‘Open Strategic Autonomy’ concept seeks to do this by focussing on openness and transparency and shifting the focus to ‘managing’ trade inter-dependencies. Emphasis is placed on how ‘trade policy can help by making it easier to diversify sources of supply’ (3)
According to the EC communication the EC’s ‘Open Strategic Autonomy’ concept ‘emphasises the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting its strategic interests and values’ (1). It stresses how this will allow the EU to continue to ‘reap the benefits of international opportunities, while assertively defending its interests, protecting the EU’s economy from unfair trade practices and ensuring a level playing field.’ It is emphasised how this ‘Open Strategic Autonomy’ concept will allow the EC to strengthen the ‘resilience and sustainability of the EU economy, and its supply chains’ (4). The EC sees the concept of ‘Open Strategic Autonomy’ as ‘a compass for EU trade policy at a time of economic transformation and geo-political instability’ (3).
As an integral part of its ‘more assertive’ trade policy, since Autumn 2020, a centralised contact point has been established for the reporting of violations of trade policy commitments entered into by partner countries. This includes complaints about ‘barriers to market access in non-EU countries’, or non-compliance with commitments made by trade partners in regard to ‘workers’ rights, tackling climate change, or the environment.’
Intricately linked to this the EC emphasises the role of the ‘Chief Trade Enforcement Officer (CTEO), whose role is to lead efforts across the Commission to strengthen implementation and enforcement, drawing on a range of available tools’ (2). These tools include:
- Taking up ‘high-level contacts with partner countries at political level’.
- Launching of ‘dispute settlement procedures, either under a bilateral agreement or in the World Trade Organization.’
- The use of the ‘updated Enforcement Regulation (Feb 2021) in cases where dispute settlement is blocked’.
- Active use of the ‘Trade Barriers Regulation’ which allows the EC to ‘investigate specific problems identified by EU companies.’
- The use of ‘trade defence measures such as anti-dumping, anti-subsidy and safeguard measures to protect EU stakeholders from unfair practices or sudden surges in trade flows’, the use of which to date has been seen as vital in protecting ‘more than 340,000 jobs in the EU’ (2)
The EC emphasises how it is only when ‘diplomatic action fails’ that the ‘EU uses dispute settlement procedures.’ However, it is also highlighted how ‘since the end of 2018 the EU has started to use the dispute settlement procedures under its bilateral trade agreements’, with amongst the four launched to date 1 targeting the Southern African Customs Union (SACU) (2). This relates to the SACU’s use of EPA safeguard provisions in the poultry sector (see epamonitoring.net article “EU Formally Challenges Application of SACU Safeguard Duties in the Poultry Sector’, 27 June 2019).
In prioritising cases to be pursued 3 of the 5 criteria identified by the EC relate to: ‘the economic impact of the measures on EU firms and jobs’; ‘the case’s broader, systemic impact’, ‘whether the issue is a market access barrier or the failure to meet commitments related to trade and sustainable Development’ (2).
| Comment and Analysis The EC’s proposed ‘more assertive’ trade policy raises questions as to how this will impact on the interpretation and implementation of EU trade agreements with ACP countries, given a multiplicity of ACP governments make use of trade policy tools in ways which could be brought into question under the various EPAs they have signed. This will critically depend on how commitments previously entered into by ACP governments are to be interpreted and applied in the future by the EC.The principal areas of concern in regard to commitments entered into by ACP governments relate to:o Tariff Standstill commitments entered into, which limit the ability of signatory ACP governments to raise tariffs within their WTO ‘bound’ ceilings on goods imported from the EU, from the levels applicable at the date of the signing of their economic partnership agreement (EPA). o ‘Prohibition of Quantitative Restrictions’ provisions, which limit the ability of o ‘National treatment’ provisions, which require signatory governments to accord o The restrictive interpretations placed on ‘anti-dumping’ and ‘safeguard’ For example, ‘national treatment’ provisions could be interpreted in ways which limit the use of regional trade preferences (e.g., in the Caribbean poultry sector). Or, for example, the EU could interpret ‘prohibitions of quantitative restrictions’ provisions as requiring smaller economies in regional groupings to abandon seasonal import restrictions or other forms of quantitative controls on imports from their larger neighbours, established in the interests of promoting more balance regional development (e.g., in the face of the dominant position South African enterprises play in the overall SACU market, the application by smaller SACU members of seasonal or quantitative limits on South African access for sensitive products, ranging from poultry meat, sugar, horticulture products and certain cereals). This will critically hinge around how the EC seeks to apply in practice its ‘more assertive’ trade policy in the pursuit of EU trade and economic interests. The EC’s focus on initially taking up trade policy disputes through high level political contacts in partner countries is something which ACP Trade Ministers and concerned civil society bodies will need to pay close attention to. In many ACP countries Trade Ministries are relatively junior Ministers, whose policies can easily be overturned by EC interventions at a higher political level (Presidential or Prime Ministerial level or even at the level of Finance Ministers). In this context, when pursing trade policy initiatives which form a part of wider sectoral or macro-economic initiatives, Trade Ministers will need to ensure they have the full and conscious support of other key government departments and Ministers, including the President or Prime Minister. It is noteworthy how in this regard, the EC highlights how it is only when ‘diplomatic action fails’ that the ‘EU uses dispute settlement procedures.’ In the agri-food sector the EC’s ‘Open Strategic Autonomy’ concept needs to be seen in the context of the EU’s commitment to managed import arrangements in sensitive product areas (e.g., poultry meat, sugar, and dairy products). These EU ‘managed trade’ arrangements make extensive use of high MFN tariffs and tariff rate quotas to regulate access to the EU market, in light of EU market conditions. The EU’s trade ‘openness’ is therefore qualified when it comes to imports of sensitive agri-food products, with there being clear limitations to the EU’s concept of openness in the agri-food sector. Indeed, the EU shows a distinct preference for ‘managed trade’ arrangements, which ensure markets for EU agricultural producers are not disrupted by imports. In some sectors the level of trade protection afforded EU domestic producers through this ‘managed trade’ regime has important impacts on the EU export price competitiveness. A case in point is the EU’s export trade in poultry parts. The trade policy protection around EU poultry meat markets is such that premium poultry meat cuts can be sold at price levels far above what would otherwise be the case in the absence of the EU’s managed trade regime for poultry meat. This allows EU poultry parts (for which there is only a limited market in the EU), to be exported at prices which bear no correlation with underlying EU production costs. This can then undermine the markets for locally produced poultry meat in targeted ACP markets (most notably in sub-Saharan Africa – see epamonitoring.net articles, ‘An Alternative View on EU-West Africa Poultry Sector Trade: A Review of the European Commission’s West Africa-EU Poultry Sector Briefing’, 11 March 2021 and ‘South Africa Poultry Producers Seek Further Anti-Dumping Duties’, 9 March 2021). This underlying trade reality in sensitive agri-food sectors is entirely ignored by the EU as it seeks to remove unfair restrictions on EU access to third country markets. This is certainly the case through the current challenge to the SACU’s use of safeguard measures on frozen chicken meat imports from the EU (see epamonitoring.net articles, ‘South Africa’s Poultry Sector on the Road to Recovery as Stricter Trade Regime Applied’, 3 December 2020 and ‘EU Formally Challenges Application of SACU Safeguard Duties in the Poultry Sector’, 27 June 2019). Compared to the structural approach the EC applies to imports affecting sensitive EU agri-food sectors, the EU takes a different approach in relations with ACP countries, where ACP governments seek to defend sensitive sectors against a rapid increase in EU exports. Use of the types of quantitative controls applied to imports into the EU in sensitive sectors from major agri-food sector competitors, are explicitly prohibited from being applied to EU products by ACP governments under the various EPAs concluded. This is the case, even though the EU is major agri-food sector trade power. In the coming years, this contradiction at the heart of EU agri-food sector trade policy is likely to come increasingly to the fore, as the EC seeks to more assertively enforce existing trade policy commitments entered into by ACP countries. In the agri-food sector this is likely to be particularly the case in relations with sub-Saharan Africa, given the staggeringly large growth in agri-food sector demand which is underway. In the short term this could become particularly pertinent if the full implementation of UK border controls on goods crossing over from the EU have the same impact on EU exporters as the application of EU border controls have had on UK agri-food sector exports to the EU (5). If comparable levels of trade disruptions are experienced, then across a range of sectors, but particularly for livestock products (6), EU27 exporters are likely to be left searching out alternative markets for products which are displaced from the UK market. Poultry meat and dairy products are potentially the most severely affected sectors, with in both instances sub-Saharan African markets already having a disproportionate significance in overall EU exports in specific product categories (poultry parts and milk powders). It is in this context, the use of currently tolerated trade policy tools by African governments, could be brought into question under the EC’s new ‘more assertive’ trade policy, given the pre-existing EPA policy commitments a range of African governments have entered into. |
Sources:
(1) EC, ‘Commission sets course for an open, sustainable and assertive EU trade policy’, press release, 18 February 2021
file:///C:/Users/Paul/Downloads/Commission_sets_course_for_an_open__sustainable_and_assertive_EU_trade_policy.pdf
(2) EC, ‘An open, sustainable and assertive EU trade policy: Implementation’
https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159435.pdf
(3) EC, ‘An open, sustainable and assertive EU trade policy: Open Strategic Autonomy’
https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159434.pdf
(4) EC, ‘Commission sets course for an open, sustainable and assertive EU trade policy’, Communication Brussels, 18 February 2021
https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159438.pdf
(5) The Guardian, ‘Data shows collapse of UK food and drink exports post-Brexit’, 22 March 2021
https://www.theguardian.com/business/2021/mar/22/data-shows-collapse-of-uk-food-and-drink-exports-post-brexit
(6) BMPA, ‘New Impact Report reveals the real cost of Brexit to the UK meat industry’, 24 March 2021
https://britishmeatindustry.org/industry-news/new-impact-report-reveals-the-real-cost-of-brexit-to-the-uk-meat-industry/