Past, present, and future EU trade policy: a conversation with Commissioner Malmström

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During this event, European Commissioner for Trade Cecilia Malmström joined Bruegel Senior Fellow André Sapir for a conversation centered around trade policy. As one Commission reaches the end of its term, the EU finds itself entering a new chapter of policymaking and priorities. With the European elections, and the formation of a new administration, questions arise surrounding the agenda concerning trade in the new European Parliament. 

The conversation started with Malmström making the observation that the WTO and multilateral systems are under attack such as increased unilateral actions being taken and protectionism. According to the Commissioner, part of the reason to these attacks can be viewed as a failure of the WTO to deliver for developing countries. Another issue Malmström raised is the number of countries that are classified as developing countries. Currently two-thirds of WTO members classify themselves as developing. Malmström proposes a system is needed to graduate countries that are currently classified as developing to reclassify themselves as developed. Malmström discussed the need for is writing new rules within the multilateral system to address state capitalism countries like China. The Commissioner views most urgent issue is the applet body where the USA has been blocking the appointment of the arbitrators because if the nothing happens, unfortunately likely, The WTO will die on the 12th of December. The driving force behind the USA’s complaint is the perceived overreach of the judges, despite the fact that the USA has won 86% of their cases. Malmström notes in case of a WTO collapse there are measures currently being discussed such as a parallel system without the USA or a bilateral conflict resolution based on current statutes of the WTO. Guntram makes the point that bilateral trade agreements can be an insurance policy in case of the WTO breaking up. Malmström argued that reforming the WTO from within is the best option and not to let it collapse and hope something arises. The Commissioner fears that a world without a multilateral system will be a jungle with the strongest prevailing.
The discussion then turned to the USA and China. The USA frustration with China over steel is a frustration that Europeans also share, but the Commissioner does not understand the notion that European allies, many European countries are NATO members, are a security threat to the USA through the European’s steel and car exports. The methods of the USA are not appropriate or legal according to Malmström. The EU doesn’t use methods like the USA but have sharpened their trade defence instruments such as an investment screening mechanism. One step that has been taken is, with the USA and Japan, the EU are trying to draft new rules to engage with China and others. On China, the Commissioner asserted that China has benefited immensely from the multilateral system and China wants to preserver it. Therefore, China should take more of a leading role. Malmström stresses that the EU should not be a mediator between China and other countries. The Commissioner views China as rival for the EU but also a partner.

Malmström highlighted the success the EU has had on trade agreements with likeminded countries such as Canada and Japan. As well, negotiations with the USA on conformity assessment, WTO reforms, and industrial goods have started and progress is being made. Such agreements are beneficial for both sides as the USA and EU trade “every second” but it could be easier.

Malmström stressed that for the next parliament climate change will be a pressing issue. Malmström personally views a carbon tax as a good idea, but implementation will be complicated and there will be a need for a border adjustment tax. The Commissioner lamented the pause on the plurilateral initiative, called the environmental goods agreement, that would take away tariffs on environmentally friendly goods and techniques.

Some closing remarks that the Commissioner provided were that the EU trade agenda has strong support and unity between EU member states, that a trade agreement with Latin American countries can be reached before the end of this current administration, and Malmström’s advice to the next European Commissioner for Trade is never under estimate the European parliament.

Notes by Akira Soto