In a climate of global uncertainty fuelled by geo-economic tensions and supply chain issues linked to the pandemic, the French Presidency of the European Union is pressing ahead with trade initiatives designed to enhance the EU's "open strategic autonomy". This Brussels concept points to an EU trade policy that goes beyond the traditional goal of removing barriers and ensuring market access, in favour of a broader approach taking into account environmental goals and sustainable development. It is an approach already outlined in the European Commission's February 2021 Communication on the Trade Policy Review, which put forward a more assertive role for trade policy in support of the EU's green and digital transformations of the economy.
France is taking the opportunity of its six-month Presidency of the Council of the EU to make progress towards "strategic autonomy" and further with the Union's ambition to become a global standard setter in the field of trade. The French Presidency's more assertively protective approach to trade is evident in its proposal to introduce "mirror clauses". Such clauses would require trade partners to mirror the EU's own production standards so that European farmers, for example, are not undercut by the prices offered by producers from other third countries who are not obliged to adhere to the same environmental rules. The French presidency programme explains that the aim is to "ensure that imported products are subject to the manufacturing standards in force within the EU, whenever this is necessary, to heighten protection of health and the environment, in compliance with WTO rules" by proposing mirror clause measures to ensure reciprocity in trade standards.
In a speech to the European Parliament on 19 January to launch the French presidency, President Macron emphasised that Europe should include mirror clauses "every time" it makes an agreement with a third country. This implies that reciprocity in production standards could therefore be included in future negotiations on trade deals. However, the idea appears to have received a cautious response from the European Commission. When asked about the "mirror clauses" at a recent press conference, the Commission's Executive Vice-President Valdis Dombrovskis referred to strict WTO rules. Members of the World Trade Organisation (WTO) currently have the legal right to block entry to food products at the port of entry when they do not meet the phytosanitary standards, but until now there has not been action to block products based on sustainable production standards. The "mirror clause" concept may therefore meet resistance from the most free-trade minded members of the WTO who could be concerned about new restrictions disrupting trade flows.
Furthermore, some MEPs appear to be concerned that this sustainable trade agenda could be a pretext to prioritise a more protectionist trade agenda. Business organisations have also highlighted the need to finalise and/or ratify long-awaited trade agreements, such as the ones with New Zealand, Chile, and Mexico. Yet the "mirror clause" concept is likely to be well received by French farmers in the run-up to the national Presidential elections in France in April.
In the meantime, free trade-minded Member States may have received some reassurance during the French Presidency conference on "EU-Africa trade relations: towards new partnerships" organised on 10 January. The conference indicated a willingness to deepen trade partnerships between the European Union and Africa. The forthcoming EU-Africa summit on 17-18 February could present a further opportunity to strengthen the trade relationship between the regions.
From a regulatory perspective, the main trade-related legislative initiatives that the French Presidency aims to make progress on during the next months are the following:
- The revision of the Generalised Scheme of Tariff Preferences (GSP);
- The foreign subsidies regulation (Please click here to read our dedicated article about this proposal);
- The Carbon Border Adjustment Mechanism (CBAM);
- The regulation on deforestation-free products to combat imported deforestation;
- The future initiative on Sustainable corporate governance, expected to be presented by the Commission on 15 February; and
- The regulation on the protection of the Union and its Member States from economic coercion by third countries (Anti-coercion instrument).
Discussions underway on proposed Anti-Coercion instrument
High on the trade agenda for the next months is the European Commission's proposal for an Anti-Coercion instrument. Published in December 2021, this proposal aims to counteract situations in which a third country seeks to pressure the Union or a Member State by threatening or applying measures affecting trade or investment. It is viewed as a crucial tool to protect the EU's "open strategic autonomy."
The European Parliament and Council recently started work on the proposal and their discussions can be expected to continue in the coming months. Once approved, the Regulation will empower the Commission to apply "trade, investment or other restrictions towards any non-EU country unduly interfering in the policy choices of the EU or its Member States".
The draft Regulation proposes a phased process for tackling third country coercion:
- Examination of the measure: the Commission will examine whether the relevant third country measure qualifies as a coercive measure. In this assessment, the criteria that will be examined include the intensity, frequency, duration, breadth, and magnitude of the measure. The Commission can request information from third parties to aid in their assessment.
- Engagement with third country: if a coercive measure is found, the Commission will engage with the third country to resolve the issue. This can involve direct negotiation, mediation, arbitration, or international adjudication.
- Adoption of countermeasures: in cases where a solution or agreement has not been reached, and if action is deemed necessary and in the Union's interest, the Commission will adopt proportionate countermeasures.
Possible countermeasures, from the suspension of any tariff concessions and the imposition of new or increased customs duties to the introduction or increase of restrictions on the import or export of goods, are listed in Annex I of the proposed Regulation.
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