Sabine Weyand, the newly appointed Director General in DG Trade at the European Commission, is no stranger to the hot seat. She was the trusted confidante of Michel Barnier, the EU’s chief Brexit negotiator, and the mastermind behind the withdrawal agreement with the UK. Her political skills and mastery of detail will be essential in future trade deals with the UK and other partners.
The EU has had a good record under the current Commission, completing free trade agreements with Japan, Ukraine, Georgia, Singapore and Vietnam, with several more in the pipeline, including with Australia and New Zealand. But the EU is now facing a major challenge to its commitment to free trade and a multilateral approach to resolving issues via the WTO with the ‘America First’ policy of President Trump
‘If only Juncker or Tusk played golf,’ lamented one senior EU trade official at a recent party. She went on to say that while the Japanese could offer a golf game with Prime Minister Shinzo Abe, a meeting with the new emperor and a sumo wrestling tournament to flatter Donald Trump, and the Brits could offer the pageantry of a state banquet with the Queen, the EU could only offer fines on Google and Microsoft to get the US President’s attention.
But given Trump’s trade obsession with China, it might not be a bad strategy for the EU to keep a low profile. At present there is an uneasy truce in EU-US trade talks, or rather talks about talks. While Trump continues to impose 25% tariffs on European steel and aluminium, he has delayed for six months a threat to impose new tariffs on European cars on the basis of these imports being ‘a threat to US national security’. Trump has demanded that agriculture be included in transatlantic trade talks, something that the EU has resisted. Trade ministers have only agreed a modest mandate to discuss reducing industrial tariffs and seeking to align conformity assessments.
Meanwhile the EU is being caught up in the crossfire of the growing US-China trade war. Global supply chains are being affected as the US seeks to impose sanctions on countries and companies continuing to buy from China’s technology giant, Huawei, or sell China semiconductor chips.
Senior EU officials are surprised that Trump has not tried to mobilise the EU (and Japan) in a concerted effort to get China to reduce industrial subsidies. A plan to work on a trilateral basis, initially to press China on reducing its steel surpluses, was agreed at the G20 in Argentina. But little progress has been made as the three parties have not only become embroiled in an internal tariff war but the question of subsidies has become part of the fractious negotiations about reform of the WTO.
In a meeting in Paris last week EU Trade Commissioner, Cecilia Malmstrom, met with her US and Japanese counterparts. They again reiterated common concerns about China but then disagreed on how to move forward. Apart from divisions over the WTO, the unresolved Airbus-Boeing dispute on subsidies and US extra-territorial sanctions (think Iran and Cuba) also sours transatlantic trade relations.
EU-China trade talks were supposed to pick up speed after the April summit but there is little sign of the Chinese accepting the level playing field that the EU has been pushing for some time. Reciprocity is now the official mantra and if there is no movement on Beijing’s part then the EU is ready to deploy a range of instruments, from tougher anti-dumping rules to screening of Chinese FDI.
Fragmented European Parliament
The results of last week’s elections to the European Parliament are also likely to make it more difficult for the EU to agree new trade deals. The influx of new Green MEPs will lead to demands for more attention on the climate change, labour and human rights records of trade partners. Proponents of a greener agriculture will increasingly be demanding trade partners to conform with the EU’s own environmental and sanitary rules. This is already apparent in ongoing negotiations with Australia, New Zealand and Mercosur.
The new Parliament will have an early test in securing the ratification of the FTA with Vietnam which is due to be signed before the end of the Romanian presidency on 30 June. Further down the line are the FTAs with Australia and New Zealand. The latter is more advanced and both sides hope to complete negotiations before the end of the year. New Zealand has a big plus in that PM Jacinda Ardern is a big favourite with EU leaders. The same cannot be said for Australia’s Scott Morrison who is perceived in Brussels as too close to Trump on key issues. His unexpected re-election last week was not greeted with great enthusiasm in the EU institutions.
Weyand will of course have to wait and see who will be her next boss. The trade portfolio is always one where the Commissioner can make a real difference. He or she will have to deal with not only a more fragmented European Parliament but also seek to build a coalition of like-minded partners to preserve the multilateral trading system that has served the EU well for the past half century. It will be a tough challenge.
Fraser Cameron is Director of the EU-Asia Centre and a Senior Advisor to Cambre Associates