The impact of the new geopolitical context on European trade policy

On May 19th, The European Studies Centre welcomed Ignacio Garcia-Bercero to deliver a speech entitled “The impact of the new geopolitical context on European trade policy.” Garcia-Bercero is the Director in charge of Multilateral Affairs, Strategy, Analysis and Evaluation at the Directorate-General for Trade in the European Commission. Active within the European Commission since 1987, he participated in the Uruguay Round negotiations and was the Chief Negotiator for the EU-Korea and EU-India Free Trade Agreements.

The event was chaired by Othon Anastasakis (St Antony’s College, Oxford) and Jonathan Scheele (SEESOX) acted as a discussant. As the talk was convened jointly by the European Studies Centre and the Russian and Eurasian Studies Centre, Roy Allison (St Antony’s College, Oxford) was also present to ask questions before the official Q&A session.

Garcia-Bercero began his presentation by outlining the connection between the global trading system and worsening geopolitical tensions. In 2021, he co-authored a document on the direction in which EU trade policy should develop in the context of worsening US-China relations. The paper made three important arguments. Firstly, the WTO needs to be reformed. Secondly, there ought to be a closer connection between EU trade policy and EU economic priorities. Thirdly, the EU must put together a toolbox for autonomous economic action that will enable the body to act more assertively when faced with pressure. These proposals combine openness, sustainability, and assertiveness as goals for European trade policy.Garcia-Bercero went on to say that the EU has been developing its trade policy very actively these last three years. Free trade agreements have been reached with Chile and the UK, and a new one is in the works with New Zealand. New regulations on foreign subsidies as well as new measures ensuring sustainability have been adopted, and novel legislation has been passed on investment screening. Furthermore, the EU has managed to pass 10 sanctions packages against Russia despite the necessity to reach such decisions unanimously.

Russia’s war in Ukraine continues to pose a threat to the world economy. At the same time, China-US tensions have been growing worse, the Biden presidency notwithstanding. These recent trends have had a terrible impact on developing and vulnerable countries, especially those not integrated into the world economy. The question, Garcia-Bercero stated, was what this means for the trade strategy adopted in 2021. Is it no longer valid? Or are we still operating within the same parameters?

The speaker argued that the basic parameters of world trade remain the same but that they need to be adapted. He explained that trade is enacted in three main ways: multilaterally, bilaterally, and autonomously. The challenge in each of these areas is whether policy can be adapted to account for increased geopolitical tensions.

With regards to multilateral institutions, the most pressing issue is the question of WTO reform. There are some voices in the USA that doubt the necessity of the WTO, which they would rather see replaced by an economic NATO or an alliance of democracies. Their belief is that the US and China cannot operate within the same trade organisation. Garcia-Bercero, however, voiced his disagreement with this view for two reasons.

Firstly, although the WTO should be reformed, the rules adopted in 1995 continue to be valid and provide a basic framework for global stability. This stability is necessary for the existence of trade relations and helps to ensure that conflicts will not escalate. Secondly, talks of separating the world into economic blocs are at odds with global economic realities. The separation of the world into trading blocs would be destructive, erasing 7% of global GDP. Also, this loss would be borne asymmetrically, with the US suffering the least and developing countries the most. Simply put, there is no alternative to the global trading system based on the WTO.

To reform the WTO, Garcia-Bercero continued, it is necessary to define its purpose and vision in three important ways: through stability, sustainability, and development. The maintenance of stability depends on the USA’s and China’s willingness to adhere to common rules. Neither wants to be blamed for the potential failure of the WTO’s reform, and the USA’s allies should stress to the US that maintaining stability is their key geopolitical interest. As regards sustainability, the WTO must be reformed to help the attainment of Net 0. Finally, development continues to be a fundamental part of the WTO’s mission. The WTO needs to integrate countries outside of global trading system and pursue a more productive approach to development. China also cannot continue to receive preferential treatment in the WTO.

Moving on to the bilateral level, Garcia-Bercero argued that the major agreements reached in recent years probably belong to the last generation of “big trade agreements.” When negotiating these agreements, the EU always considers geopolitics, economics, and sustainability, finding most the common ground with other OSCE members. Unsurprisingly, such agreements take many years to negotiate, and Garcia-Bercero believes that the times call for more flexibility and nimbleness, so as to facilitate work on single issues.

Finally, the speaker talked about autonomous trade instruments. He said the EU’s anti-dumping legislation is already quite extensive, and that the EU is well equipped to ensure a level playing field in terms of trade. The EU also does well in investment screening. When it comes to defending economic security, however, the EU’s toolbox is incomplete. In fact, the EU is set to publish a new whitepaper to begin a discussion with the European Parliament. Export controls, on the other hand, receive little treatment on the European level and are dealt with by member states.

In his speech, Scheele raised questions about each of the three policy levels Garcia-Bercero described. He highlighted the 1990s as the pinnacle of multilateralism with the founding of the WTO and the USA’s toleration of the new dispute mechanism. In the EU, multilateralism still remains the main pillar of trade policy. Does the primacy of multilateralism still hold? And if the WTO is to be reformed, will China be prepared to give up its preferential treatment?

As regards bilateral measures, Scheele asked whether increased reliance on this level of policymaking was a response to the actions of other countries. Is bilateral trade policy a way to deal with the WTO’s perceived weakness or is it simply a better way of using the EU’s economic leverage? Finally, is the turn to autonomous trade measures a permanent shift or is it an ad hoc response to the pressures of war? In other words, will we see a return to the previous balance between the three levels of trade policymaking?

Garcia-Bercero responded that the multilateral policy agenda has indeed declined with the weakening of the WTO and decreasing interest from the USA. From 2008 until the Trump presidency, the USA’s priorities shifted from the WTO to establishing an active bilateral trade agenda. However, even this era of negotiations between megaregions (such as the EU and the USA or the TPP). Nevertheless, the increased role of political considerations does not mean stability should be abandoned. A rule-based trading system with a more complex architecture can still be achieved.

The rest of the Question-and-Answer Session happened under Chatham House rules.

Ladislav Charouz (Research Assistant)