EU:the world’s sleeping trade giant

Barroso II showing lack of ambition on agri-trade agenda

Those having observed EU trade policy over the last five years will have been left in little doubt over the bloc’s commitment to a free trade agenda. The EU has been the proponent of the WTO’s Doha Round, and has recently accelerated a raft of free trade pacts with developing and developed economies, while sending out feelers to other potential partners in all four corners of the globe.

With the political balance in member states and in the European Parliament having shifted significantly to the right over the last five years, a continuation and strengthening of the liberal trade agenda would seem inevitable. But few would have predicted the ease with which Barroso and his designate-team are steering their ideas through the Brussels filter.

The worry is that the EU could be sleepwalking into an unambitious, unquestioning agri-trade policy, at a time when the challenges have never been greater.

Who holds the reins?

With so much at stake, the identity of Europe’s agri-trade policy-makers takes on added importance. Barroso has assigned the trade role to Belgian Liberal Karel de Gucht, the agiculture portfolio to Romanian ex-farm minister Dacian Ciolos, and the food safety dossier (under Health and Consumer Policy) to Maltese centre-right politican John Dalli.

Last week’s hearings saw all three come through relatively unscathed, despite failing to spell out an answer to one of the key conundrums Europe faces: how can trade policy facilitate/regulate the flow of foodstuffs in and out of Europe in a way that helps secure European and global farm livelihoods, while bolstering the global food supply against a backdrop of growing climate and resource constraints. The question is by no means a simple one, but the smooth ride given to the new team raises questions about the ambition of MEPs.

Ciolos set out his stall as a “reformer”, but left most of the detail at home. Not that he needed it: by the sound of their questions, MEPs were just relieved to hear someone defend a strong CAP budget after circulation of a recent Commission ‘non-paper’ suggesting that plans are already in motion for scaling it back.

While he took a cautious line on trade deals that could pose a threat to European farmers, his two wingmen – De Gucht and Dalli – came across as liberal free-marketeers to the core.

De Gucht was unabashed in his defence of a free trade agenda, declaring that the only way for the world’s poorest countries to drag themselves out of poverty is to open themselves up to the global economy.

Dalli meanwhile painted himself as a consumer champion, vowing to fight misinformation. However, when pressed he implied that he would do so by facilitating more information and letting the consumer choose, rather than raising the bar on health, hygiene and welfare standards.

The three appear to complement each other: De Gucht will endeavour to push a Doha deal through with a “development outcome” (trade liberalisation as a spark to development), while Ciolos will ensure that the EU offers no more agricultural concessions than it already has. Dalli’s information onslaught will meanwhile help to steer European consumers towards ‘sustainable’ home-grown produce as the continent seeks to compete with increasing food imports in a low tariff environment.

Carbon tariffs: ducking the big questions

They have the makings of a successful partnership, but only if success is measured in terms of getting the greatest European value out of a flawed global system.

What was lacking was an ambitious long-term vision placing trade alongside the major climate and demographic challenges, an exercise that would necessarily call into question the core principles of trade liberalisation, either to endorse them radically, to suggest adaptations to new circumstances, or to erect the right protective barriers.

In some of their most penetrating questions, MEPs asked De Gucht to consider carbon tariffs at the EU border as a means of incentivising stronger environmental regulation in countries which wish to continue trading with the EU.

The manner of his response was telling. The Belgian rejected the idea as “unfeasible”, warning that it would risk sparking a tit-for-tat trade war. His replies may have come across as seasoned realpolitik, but they also displayed a worrying lack of ambition. The underlying message was that a policy is not worth pursuing if it could anger the EU’s trading partners.

Ciolos was equally unambitious when it came to joining up his visions of European food safety, food security and trade policy. He vowed to “stick to the science” on GMO approvals, but hinted that GMO soya imports should probably be allowed into the EU because we are heavily dependent on them for animal feed.

Coupled with Dalli’s ‘information not regulation’ stance, the prevailing feeling was that the new team will not be courageous enough to make a clear judgement call on what is safe and what is not. Nor will they be willing to use border adjustments to encourage what production methods are seen as desirable.

Price to pay for raising the baseline?

The pragmatist vision played well with MEPs, but ultimately did not answer their own recurrent questions (in both the agriculture and trade hearings) about how the EU can strive for high environmental, animal welfare and food safety standards, while competing with lower cost foreign produce in a liberalised trade environment.

Carbon tariffs may be untested and prone to challenge from other WTO members , but few other ideas offer as comprehensive a means of compensating producers (agricultural or otherwise) for raising the environmental baseline.

They at least represent a way of making EU trade policy more honest with itself; if food imports are to be taxed heavily in any case (pending a Doha deal), why not spell out the real – and perhaps valid – reasons why, by drawing a clearer link between EU import duties and the price of meeting stringent production rules.

Can EU wield its trade power for good?

The basic principle of using trade policy as a lever for non-economic goals should at least have merited a fuller response from De Gucht. Or is the EU content to drop any ethical aspirations from its trade agenda?

This would surely be a mistake. While Europe continues to grapple with the question of how to wield its power (hard, soft or otherwise) on the world stage, it has quietly developed into the world’s biggest market, giving it huge leverage on trade issues.

The EU’s subsidy and tariff regimes have a major impact not only on its own farmers but on global agricultural livelihoods. With this economic power comes the ability to project standards. The EU’s food safety rules are a key piece in the puzzle: the core standards imposed are – at least in principle – applied to all non-EU produce entering that market. EU rules on pesticides and GMOs therefore reverberate far beyond European borders. The EU’s scepticism towards biotech crops is arguably one of the last remaining shackles on the global advance of genetically modified crop production.

If the EU does hold aspirations such as fighting climate change or alleviating world hunger, then trade is surely the arena where it can set the agenda.

MEPs fail to press nominees

The hearings saw weak and disparate questioning from all parties, and failed to challenge the Barroso II team to go beyond a basic support for the status quo and its worrying imbalances. Ciolos ventured the idea of a trading system based on “balanced multipolarity”, but MEPs failed to push him on the nitty-gritty, and what this would mean in real terms (rule harmonisation, tariffs, local preference).

Instead, piecemeal issues reigned supreme: MEPs exacted vague commitments from De Gucht over Geographical Indications (the labels which act like copyright for local wines, hams and cheeses), while Ciolos – at the request of Agriculture Committee bad-boy José Bové – vowed to fight for a reduction in America’s punitive tariffs on Roquefort cheese.

The parliamentary hearings are of course only the first insight into the new Commissioners, and can be misleading.

The Doha Round will no doubt rumble on in the coming months and the EU’s position is almost certain to remain static. The WTO is nonetheless likely to see some form of debate on carbon tariffs in the near future, whether the issue is initiated by the EU, the US or others. And feed constraints will continue to cast a spotlight on the EU’s GMO import policy, perhaps eventually prompting a clear response on where the EU stands more generally on biotech crops, and the role they should play in the global food security equation.

Meanwhile, the advance of bilateral negotiations with India will be an interesting litmus test; moves towards an FTA (Free Trade Agreement) with the Asian giant have previously threatened to run aground on issues such as child labour. The recent EU-Korea deal is thought to be pioneering in regard to labour standards, and could be built on in the Indian context. Or will the EU drop its social concerns and bag a crucial chunk of market access in a growing economy?

A chance to see the true colours of the De Gucht-Ciolos-Dalli team will be eagerly awaited.