For a New EU Trade Agenda
Designing modern trade policy strategies for an industrially competitive Europe
September 2024
Trade policy recommendations for the next EU Commission
The incoming European Commission will face intensified global competition, growing industrial overcapacity and international market distortions, as well as increasing geopolitical upheavals. Adapting to this new environment will require a comprehensive and modern trade policy agenda.
The BDI continues to believe in the idea of free trade and the central role of free trade agreements (FTA’s). FTA’s and the open European market are both prerequisites for maintaining and expanding Europe's economic base and the prosperity of its citizens, and key to ensuring the EU's competitiveness. Simultaneously, the EU must increase the resilience of its industrial sector, as well as protect it from unfair competition. A restructuring of EU industry towards climate neutrality and securing EU competitiveness can only be achieved if the growing foreign trade policy challenges and the EU's own offensive and defensive interests are addressed.
These structural challenges posed by changing global political conditions require new approaches, as does the transformation of global industry. Policy initiatives for reforms, diversification and greater resilience must be accompanied by a pragmatic roadmap for implementing new approaches in trade policy and a forward-looking regulation. Firstly, initiatives for reform require an intensive review and potential adjustment of long-held positions. Secondly, they require adjustments to the formulation and implementation of trade policy itself. And thirdly, policy-makers may wish to consider breaking with orthodoxy where necessary, e. g. by thinking trade and other policy areas together
From the perspective of German industry, a modern trade agenda must comprise the following elements:
Swiftly concluding ongoing FTA negotiations. These include the agreements with the MERCOSUR countries, Indonesia, India and the modernization of the agreement with Mexico. Policymakers must also resume talks with Australia. It is imperative that the EU shows more flexibility in the negotiations and that member states more clearly communicate the advantages of these agreements to secure the backing of the European population. The key objectives here must be the complete liberalization of customs duties on industrial goods and the creation of a level playing field.
Examining “mini” free trade agreements and sector-specific trade agreements as possible options for developing or maintaining partnerships with third countries. Such agreements must comply with WTO rules. While FTA’s should remain our priority, policy-makers should lend their support to potential initiatives by the Council and the European Commission for mini deals providing immediate benefits
A new balance between sustainability requirements and economic interests in FTA negotiations. Sustainability chapters must be manageable for both sides, avoiding undue burdens. The EU must make realistic demands and consider the different starting positions and needs of its partners. There can be no “one size fits all” approach to free trade agreements. EU regulatory proposals must be examined at an early stage with a view towards their compatibility with FTA’s and possible implications for partner countries (a current example is the deforestation regulation). In recent years, autonomous EU instruments with an effect on trade have strained relations with (potential) trading partners. Furthermore, policy-makers should refrain from incorporating sanctions mechanisms (e.g. the suspension of tariff liberalization) in the event of violations of any provisions on trade and sustainable development.
Strengthening global trade and the resilience of international value chains. To create a level playing field, the EU Commission should pursue multilateral, plurilateral (ideally within the WTO framework) and bilateral efforts (e.g. with the MERCOSUR countries) to open up new markets. The BDI is concerned about the future effectiveness of the WTO and reaffirms its support for a rules-based multilateral trading system. A comprehensive reform of the WTO remains a priority. Until significant progress is made, the EU should conclude plurilateral agreements within the WTO and work to ensur e that the WTO moratorium on customs duties on e-commerce is made permanent for all WTO members. Until a fully functional WTO dispute settlement system is (re-)established, we encourage the EU Commission to continue its efforts to strengthen the Multi-Party Interim Appeal Arbitration Arrangement (MPIA).
Splitting FTA’s into EU-only and mixed agreements would enable some agreements to be concluded more quickly. It would also help to reduce the excessive complexity of individual agreements and to refocus negotiations on clearly defined issues of trade in goods and services.
Launching new trade and investment initiatives. The EU must take a leading role in strengthening the multilateral trading system. In particular, policy-makers must devise attractive offers to developing countries in terms of trade, investment and raw materials policy. One example could be the “Free and Fair Trade and Investment Club” proposed by the Business7 (B7) group under the Japanese presidency, with the G7 members and the EU at its core. The G7 must better align and strategically apply its industrial and trade policies.
Enforcing effective trade protection. Growing overcapacity, especially in Asia, is increasingly distorting international trade and leading to disruptions in the European market. The EU must find effective solutions to address non-market practices Available instruments must be consistently applied and where necessary refined Protection from non-market practices must not distract from the crucial challenge of improving competitiveness across the EU.
Strengthen protection against unfair competition and focus on market access for attractive economic developments. The EU has developed trade defense instruments to establish fair and competitive conditions across the EU market. In doing so, it has always remained on the ground
of WTO rules. The BDI fully supports this approach, which offers a balanced, transparent and inclusive process for defending against unfair competition to all stakeholders As new structural distortions emerge, so must the EU further develop its trade defense instruments. In doing so, policy-makers should give due consideration to the interests of European industry.
However, the EU must not focus exclusively on protecting its own market. The three pillars of the European strategy for economic security – promote, protect, partner – must be balanced against each other Market access to third markets must remain a core component of EU industrial policy. Better strategies for accessing third markets, cooperating with partner countries and comprehensive de-risking are essential. The EU must address the question of how to deal with those countries that do not adhere to the established rules of trade policy.
Strategically align trade and development policy to open new markets without overburdening agreements with non-trade-related requirements or new hurdles. Collectively, EU Member States represent the largest donor for international development cooperation, but so far have failed to utilize their position We believe that the budget for development cooperation should also serve our agenda for sustainable trade with new partners.
Rethinking the role of agriculture in FTA’s through innovative regulatory and negotiating approaches. However, this must not lead to further protectionist measures on the part of the EU. Global subsidies should be prevented from reaching ever greater heights (the FAO estimates the level of global subsidies to reach $1.8 trillion by 2030). The WTO rules for agricultural trade should also be modernized to meet the current and future challenges of sustainability and climate neutrality. As long as trading partners are not subject to the same competitive rules, future free trade agreements cannot lead to a further opening of the EU market.
Accelerating the implementation and improving the financial basis of Global Gateway projects. Policy-makers must ensure equal and unbureaucratic access to projects for all companies, as well as ensure the financial resources for Global Gateway projects. Likewise, where financing is split between several European credit institutions stakeholders should be given access to onestop solutions Both international development assistance and Global Gateway projects must be executed exclusively through local or EU companies rather than benefiting companies from third countries.
Strengthening the supply of European raw materials: Existing EU raw materials partnerships should be revitalized, and further supply markets developed. National policy-makers must coordinate more closely with their EU counterparts to ensure a sustainable supply of raw materials. Private sector initiatives should receive political support and greater incentives through interlinked instruments of development financing and foreign trade promotion. Further dismantling of trade barriers will likely reinforce efforts at diversification.
Imprint
Bundesverband der Deutschen Industrie e.V. (BDI)
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Editorial
Matthias Krämer
Head of Department
External Economic Policy
T: +49 30 2028-1562
M.Kraemer@bdi.eu
Patricia Schetelig
Senior Representative
External Economic Policy
T: +32 2 792 1008
P.Schetelig@bdi.eu
BDI-Dokumentennummer: D 1939