Tit for Tat Financial Times, Trade Secrets, How governments can help with supply chain diversification
Tit for tat Emily Rees, fellow at the European Centre for International Political Economy, joins us to answer three blunt questions.
Does European anger at deforestation in the Amazon mean the EU-Mercosur deal is dead on arrival when it comes up for ratification by EU member states in the autumn?
Illegal deforestation is devastating wherever it occurs, be it within the Brazilian Amazon basin or Poland’s primeval forest. Europeans and Latin Americans share a moral responsibility to curb embedded deforestation from illegally entering into supply chains. By enshrining the Paris Agreement and introducing the precautionary principle to environmental matters, the EU-Mercosur trade deal offers an unrivalled opportunity for both regions to tackle these issues together, rather than apportion blame. How would Europe snubbing Mercosur after 20 years of negotiations provide a remedy? Rebuffing it equates to accepting the status quo. Latin American soy already enters the EU at zero tariff; if anything, the agreement would introduce sustainability standards for such imports. Failing to ratify the treaty would weaken, rather than reinforce, Europe’s environmental leverage in a region where it has consistently been losing influence to China.
Do environmental concerns and post-pandemic reshoring mean the EU will become increasingly protectionist?
The imposition of a carbon border levy and twisting of competition rules to support re-industrialisation were on the table prior to COVID-19. The pandemic simply made these policies more palatable, with state aid less of a taboo. Unless encouraged by an unfair government incentive, the reshoring of a supply chain is a business decision that does not equate to protectionism. The bigger issue is how Europeans’ genuine concern for environmental protection is being captured by nationalistic movements. This trend is particularly noticeable for food where gastro-protectionism is being revived on the narrative that buying local is the climate-friendly choice. The onus is now on EU authorities to ensure that the implementation of the European Green Deal does not translate into a series of protectionist measures that unfairly harm foreign producers, particularly in less developed countries.
How will the rest of Phil Hogan’s term as EU trade commissioner turn out, now he’s decided not to run for director-general of the WTO?
The uncertainty generated by the EU trade chief mulling over the WTO’s top job should spark redoubled efforts to spearhead an ambitious trade policy overhaul. Nobody enjoys feeling like the second choice, EU governments included. Phil Hogan must rapidly build trust in his ability to deliver results, and this should start with swiftly negotiating a truce with the United States on civil aviation subsidies. With member states already flirting with protectionism, Hogan will have to forcefully argue that fortress Europe is a losing strategy, particularly in a post-pandemic downturn. Ultimately, the stress-test of Hogan’s term of office could turn out to be his saving grace. Building consensus on the Mercosur deal, an agreement he actively participated in sealing, provides an opportunity to show he acts on behalf of the bloc’s economic interests rather than those of special interest groups, including Irish beef farmers.
