_metamorworks_shutterstock__xlarge.jpg "Making friends in far-flung places")
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Making friends in far-flung places
This is the first of a two-part series on the EU’s bilateral relations – particularly the myriad trade deals that have recently been concluded or are under negotiation.
These agreements, which are seemingly being churned out at a breathtaking speed, reflect the EU’s broader strategy of diversifying its partnerships in the face of global uncertainty and an increasingly tenuous relationship with the US.
Why so contentious?
In the space of just a few months, the bloc has concluded trade agreements with the fourth most populous country in the world – Indonesia – and now, even more crucially, with the global number one – India. Other agreements in the pipeline include those with Australia, the United Arab Emirates and, of course, the Mercosur countries.
In the current context, the more agreements, the merrier – right? Well, not according to Theresa Kofler, an expert on trade policy and international relations at Attac Austria. Attac is an NGO that has been advocating for ‘fair globalisation’ over ‘neoliberalism’ for more than 25 years.
Our colleagues at Agora ask Kofler what lies behind the sometimes-heated disagreements between EU member states (and even between different sectors within member states) regarding proposed trade agreements. Her take on this is that there are two sets of interests at play here: economic and political.
So, let’s start with the economy.
Theresa Kofler, Trade and International Relations Expert (in German):
“One of the economic reasons is simply that countries have varying degrees of dependence on exports and international trade. Austria, for example, is not as heavily dependent because we know that 85 per cent of our jobs still rely on trade with other EU countries. In Germany, though, we know that the automotive and chemical industries, in particular, are very strongly advocating for new agreements because they need new markets for cars, which are no longer sold in large numbers here, or for pesticides that are already banned in the EU.”
And on the political side?
Theresa Kofler, Trade and International Relations Expert (in German):
“On the political side, it naturally makes a difference whether a country is governed by a more economically liberal, social democratic, or green government. We know that trade agreements come with significant social and environmental costs, and that social democratic or green governments tend to keep a close eye on these issues, either demanding improvements or rejecting an agreement altogether if they conclude that the text is detrimental to the climate and social justice.”
It is perhaps not fair to imply that all governments to the right of the political spectrum are unconcerned about environmental or social issues. What can be said is that Attac Austria is firmly opposed to what they would term ‘neoliberal trade agreements’, such as the ones with Mercosur, India or Indonesia.
Theresa Kofler, Trade and International Relations Expert (in German):
“The debate has shifted, especially since the US has declared trade wars its preferred foreign policy instrument. There are currently many very vocal voices across the EU who believe that, now more than ever, we need to conclude more trade agreements. The argument is that this is the only way to counter the US trade wars. […] Trade agreements are supposedly the only way to improve international relations. And what is missing from this debate is any discussion of other possibilities. For example, agreements that focus on phasing out fossil fuels or child labour.”
https://www.agora.at/news/detail/den-handel-neu-verhandeln
For the sake of balance, it feels important to mention that one of the reasons the EU gives for its proactive approach to trade agreements is that it uses them to promote environmental protection and the protection of labour rights worldwide, as highlighted in the Commission’s June 2022 communication on the power of trade partnerships.
Seeking another perspective on the merits and demerits of trade agreements, Žinių Radijas speaks to Vilnius University economist Algirdas Bartkus. He explains why he considers them so important right now. In a nutshell: geopolitics.
Algirdas Bartkus, Economist at Vilnius University (in Lithuanian):
“If we, Europe, take Latin America – Brazil, Argentina, etc. – and India along with us, we are breaking up that two-polar world, with the USA on one side, making claims on this, that and the other, and on the other side, the Russian Federation manipulating everyone. Because India's reputation has been very badly damaged by the activities of the Russian Federation. So, in a way, this agreement with India is the best possible step.”
India
Let’s take a closer look at the shiny new EU-India Free Trade Agreement, then. An agreement that has been in the pipeline for decades… but all of a sudden saw the light of day last Tuesday (27 January), when it was finally signed.
Both sides have granted the other a large tariff reduction on a wide range of products. Indeed, most current export lines, in both directions, are included in the deal, with many tariff lines benefitting from immediate duty elimination.
According to Brussels, the agreement could double the value of EU goods exported to India by 2032, with the bloc’s main exports currently machinery, appliances, transport equipment and chemicals. Meanwhile, Europe imports Indian steel, leather goods, textiles, tea, coffee and spices, sports goods, jewellery, software, pharmaceuticals… and the list goes on.
In particular, this deal provides an opportunity for European car makers to gain far greater access to this potentially huge market. And vice versa, of course.
Commission president Ursula von der Leyen and Council president António Costa were in New Delhi to conclude negotiations on the EU-India agreement last week, and VDL coined a catchy new soundbite when she hailed it “the mother of all deals”.
Constantino Xavier is a senior fellow at the Centre for Social and Economic Progress, an independent public policy think tank based in New Delhi. He specialises in India’s role as a regional power and how the country is navigating the geopolitics of a changing world order.
In an exclusive interview with Renascença, the Portuguese expert stresses that the agreement that was just fast-tracked between the EU and India is the best possible one for both parties in the circumstances. And that it would never have happened without Trump’s tariff war.
Constantino Xavier, Senior Fellow at CSEP (in Portuguese):
“The main explanation for the acceleration in negotiations that resulted in this agreement is the pressure coming from President Trump and the tariff war he has been waging against the European Union – and also against India. There was a great sense of urgency in both Brussels and New Delhi to secure alternative trade partners and economic partners beyond the United States. This acceleration of negotiations over the last year has led to an agreement after almost 25 years of talks. The first formal negotiations date back to 2007, but Brussels and New Delhi have been dreaming of this agreement since the first major EU-India summit in Lisbon in 2000.”
India has long been very protectionist when it comes to its agriculture, a sector that employs 40 per cent of its working population. Primarily in the interests of speed, this sector is largely excluded from the deal, along with a number of other sticking points, as Xavier explains.
Constantino Xavier, Senior Fellow at CSEP (in Portuguese):
“This agreement can be summed up as ‘the best is the enemy of the good’. It is an agreement with several limitations, for example in terms of agriculture, intellectual property rights and labour rights, which is something the EU likes to emphasise in its trade agreements. However, both sides made concessions and, in doing so, sought a pragmatic agreement – a limited but meaningful one – because they realised that a quick agreement was needed rather than striving for the ideal, robust agreement that would be very difficult to achieve.”
But even though the agreement essentially excludes agriculture, it does include removing the duty from key EU agrifood products such as olive oil, chocolate, fruit juices, pastries and other high-quality processed foods, and reducing tariffs on wine, beer and spirits. It has therefore been pretty well received by the EU’s main agrifood lobby.
The Luxembourgish government has come out firmly in favour, as Xavier Bettel, the country’s minister for foreign affairs and trade tells national broadcaster 100,7. He clearly sees big opportunities for his country here.
Xavier Bettel, Luxembourg’s Minister for Foreign Affairs and Trade (in Luxembourgish):
“Above all, in finance, where we see great opportunities, but also in other areas, such as in research or the satellite sector, where we have already been exchanging. I also plan to go to India this year with an economic delegation to prepare further exchanges over the coming years: in 2027 or 2028. I would also be keen to organise a state visit to India at some point over the next two years. I believe this would be in Luxembourg's interest.”
https://100komma7.lu/news/Bettel-iwwer-EU-Indien-Handels-Accord-Letzebuerg-ass-dofir?pd=noriichten
The agreement still has to be approved by member states in the council, and by the European Parliament.
Time for a ‘Brexorcism’?
Deals with these far-flung heavyweights are certainly important, but what about the EU’s immediate neighbour and third-largest trading partner: the United Kingdom?
While not a trade deal as such, there has also been a real rapprochement between London and Brussels over the course of the last year, with European Parliament president Roberta Metsola just this week expressing her desire for a major reset in EU-UK relations.
Roberta Metsola, President of the European Parliament (in English):
“Ten years on from Brexit – it has been ten years – and in a world that has changed so profoundly, Europe and the UK need a new way of working together, on trade, customs, research, mobility, and on security and defence. This is about looking forward, and doing what makes sense for Europe and for the UK today. It is time to exorcise the ghosts of the past, reset our partnership, and find solutions together. That is realistic pragmatism, anchored in values, that will see us all move forward together.”
Metsola’s address to the Spanish Senate on Tuesday (3 February) came in the context of British prime minister Keir Starmer’s increasing talk of closer economic and defence cooperation.
Our colleagues at The Europeans recently spoke to British MP and cabinet office minister Nick Thomas-Symonds, who is leading this ‘reset’ from the UK side.
In this interview, Thomas-Symonds stresses that while Westminster has no plans to rejoin the single market or return to freedom of movement, they are looking at concrete ways of rebuilding a closer relationship with the bloc.
Nick Thomas-Symonds, British Minister for the Constitution and EU Relations (in English):
“I've been extremely pleased with progress. I have a very close, constructive relationship with my EU counterpart, Maroš Šefčovič. And indeed, across Europe, the reset is visible in terms of that much more positive relationship. Only last week, I was in Paris for a very productive discussion with my counterpart there, Benjamin Haddad [France’s minister delegate for Europe], discussing a range of issues in the UK-EU reset, including security and energy that in my view are absolutely critical, both for the EU and the UK.”
While Metsola talks of “realistic pragmatism”, Thomas-Symonds opts for a “ruthlessly pragmatic” approach. What he means by this, he says, is a move away from ideological arguments to an absolute focus on what is best for people on both sides of the Channel.
Nick Thomas-Symonds, British Minister for the Constitution and EU Relations (in English):
“That's exactly the approach I've taken that delivered the Common Understanding back in May of last year, and that delivered just before Christmas, which I'm very proud of, the reaccession of the United Kingdom to Erasmus+, which I think will produce benefits for thousands of people – both here in the United Kingdom, but across Europe as well. But also the opening of talks on electricity trading, which can be critical both for energy security, and one of the tools we can use to bear down on energy prices too.”
That’s right, Britain is seeking to participate in the EU’s internal energy market, of which it used to be a member, with talks expected to start in the coming months. They also want to strengthen defence ties by negotiating access to the Security Action for Europe (SAFE) programme, a loan scheme designed to boost defence-industry procurement across Europe.
But is the UK government just tinkering around the edges here? Not at all, insists Thomas-Symonds.
Nick Thomas-Symonds, British Minister for the Constitution and EU Relations (in English):
“I would challenge the idea that this is simply a modest reset. The food and drink agreement is going to be worth billions of pounds to the economy. But also the emissions trading system linkage, which will have that exemption from the carbon border adjustment mechanism, which will mean British businesses will be able to save hundreds of millions of pounds in carbon taxes they would otherwise have had to pay.”
The food and drink agreement he refers to involves the mutual recognition of sanitary standards, which, once agreed, will ease cross-Channel trade and increase the number of British food products that can be sold into the EU.
But despite all of this, our colleagues ask, why is either side even bothering to hammer out new long-term commitments when the polls indicate that the next UK government could well be a Reform UK one led by Nigel Farage.
This is precisely why we need to act now, the Labour minister responds.
Nick Thomas-Symonds, British Minister for the Constitution and EU Relations (in English):
“If you are conducting and delivering international agreements, as we are, that produce material benefits on both sides, then logic would tell you that they become very hard to unpick by subsequent governments. And that is why it is so vital now we do move towards, as we are, implementation to deliver that tangible change.”
https://www.europeanspodcast.com/all-episodes/the-uk-and-the-eu-best-buds-again
On Monday (2 February), Thomas-Symonds met with trade commissioner Maroš Šefčovič at a joint EU-UK committee in London to take stock of the progress achieved so far in the various bilateral negotiations underway, which they hope to conclude by the time the next EU-UK summit comes around.