EU’s Juncker Calls for Advancing Suite of Trade, Economic Goals As Bloc Prepares for 2019 Transitions

13 September 2018

EU Commission President Jean-Claude Juncker called for developing a “more united Europe” during his final State of the European Union speech, outlining a series of proposals which he said would be key to achieving this goal. He also told EU lawmakers on Wednesday 12 September that a stronger bloc will be better equipped to navigate geopolitical tensions, negotiate ambitious trade accords, and tackle threats to multilateralism. 

The 28-nation bloc is due to see a series of shake-ups next year, including European Parliament elections, the selection of a new head of the European Commission, as well as the UK’s official exit from the EU in late March. Meanwhile, debates are set to continue at the wider international level over how to shore up multilateralism, lower trade tensions, and modernise the global trading system so it is better equipped to deal with new challenges and a changing economy. 

Speaking in Strasbourg, France, on Wednesday during the European Parliament plenary, Juncker called repeatedly for developing further a type of “European sovereignty” and solidarity that has already served in setting up the bloc’s “position as a trade power.” 

He also said that a stronger, more unified EU would be an even better champion of the bloc’s shared objectives both internally and abroad, including multilateralism and climate action. Juncker stressed that strengthening the EU’s internal ties, and thus presenting a united front abroad, would be key to boost the bloc’s deal-making capabilities going forward, especially in contentious situations. 

“The world today needs a strong and united Europe. A Europe that works for peace, trade agreements, and stable currency relations, even as some become more prone to trade and currency wars. I am not in favour of a selfish unilateralism that defies expectations and dashes hopes,” he said. 

“For some, the agreement I struck with [US President Donald Trump] came as a surprise. But it should be no surprise that Europe succeeds when it speaks with one voice. When needed, Europe must act as one,” said Juncker, referring to a deal he reached with the American leader in July to help lower trade tensions between the trans-Atlantic partners.

While saying that this unity was key in negotiating with the US on trade, he also credited European unity as a force that has played a key role in achieving long-term sustainable development objectives as well, such as by “defending the Paris Agreement on climate change.”

Cementing trade, investment partnerships

Trade and investment policy featured heavily in the EU Commission chief’s speech, with Juncker calling for the bloc to ratify its trade accord with Japan in time for a 9 May 2019 summit of European leaders in Sibiu, Romania.

The EU-Japan deal is the largest commercial pact ever negotiated by the European bloc, and was signed by leaders from both sides in July. At the time, they expressed their hope that the deal can enter into force next year. (See Bridges Weekly, 19 July 2018)

The Sibiu summit will take place after Brexit, which is due by 30 March 2019. EU chief negotiator Michel Barnier said this week that he hopes to have a deal agreed with his UK counterparts on the “Brexit treaty” at some point “within six or eight weeks,” and suggested that this would be a realistic goal, according to comments reported by the Guardian.

Juncker, for his part, said on Wednesday that the EU’s negotiators “stand ready to work day and night to reach a deal,” while welcoming UK Prime Minister Theresa May’s statement earlier this summer that “the starting point for such a [future] partnership should be a free trade area between the United Kingdom and the European Union.”

“The United Kingdom will never be an ordinary third country for us. The United Kingdom will always be a very close neighbour and partner, in political, economic, and security terms,” Juncker said.

While not officially confirmed, a special EU leaders’ summit on Brexit is reportedly expected for mid-November, which could lay out the contours of the future EU-UK relationship on key topics such as trade.

That said, the effects of an exit of a major member of the European Union are still expected to ripple well beyond the European continent, having implications for the EU’s trading partners and for international markets. It also poses a key test for the remaining 27 EU members as they work to shore up their union, largely deemed to be the world’s most deeply integrated economic and political coalition. 

Along with supporting a smooth Brexit and the ratification of the EU-Japan trade deal, Juncker said that he would like to see the EU pursue a revised, comprehensive approach to its trade and investment relationship with the African continent. 

The EU currently has a series of Economic Partnership Agreements (EPAs) with different groups of African countries, usually negotiated on a regional basis. Some of these EPAs have been signed and are pending ratification; others are pending signature; and still others are provisionally in force. These trade accords are also intended to have a development and regional integration dimension in their design and application.

Juncker said on Wednesday that he would like to see a “continent-to-continent free trade agreement, as an economic partnership between equals,” which would replace the region-focused accords currently in place. 

A separate press release from the Commission indicated that this continent-to-continent agreement would use as a stepping stone the African Continental Free Trade Area (AfCFTA), which was launched earlier this year by over 40 countries and is now in the process of being ratified, though second-phase negotiations are still planned to address a range of outstanding issues. (See Bridges Weekly, 22 March 2018 and 24 May 2018

“To prepare this, Economic Partnership Agreements, Free Trade Agreements including the Deep and Comprehensive Free Trade Areas on offer to the countries of North Africa, and other trade regimes with the EU should be exploited to the greatest extent, as building blocks to the benefit of the African Continental Free Trade Area,” the Commission document says. 

The EU Commission chief also said that the European bloc should put in place an “Alliance for Sustainable Investment and Jobs between Europe and Africa,” providing financial support towards objectives such as skills training and setting up devices to lower investment risks. 

Aside from the existing EPAs, the EU has preference schemes in place such as the Everything But Arms (EBA) scheme and the Generalised System of Preferences (GSP), which allows certain developing countries to sell their products to the EU without being subject to duties. Which programme a country is eligible for depends on certain factors, such as income levels. Various African countries are participants in one of these preference programmes. 

EU-US trade dynamic in the background

As Juncker noted in Wednesday’s speech, he had met with US President Donald Trump in July to mitigate trade tensions, with the two leaders announcing the launch of an “Executive Working Group” that would tackle topics such as WTO reform and eliminating industrial tariffs on non-automobile products, among other areas for cooperation. (See Bridges Weekly, 26 July 2018

Earlier in the week, the top trade officials from the US and EU met in Brussels, Belgium, to begin charting a concrete path forward, building on the Juncker-Trump discussions. Trade tensions between the two sides had spiked earlier this year after the US imposed near-global tariffs on imported steel and aluminium and chose not to include the EU among those exempted. The two sides have also sparred publicly over the possibility of US tariffs on imported automobiles. In both cases, US officials have cited national security as a justification for imposing or considering such measures. 

EU Trade Commissioner Cecilia Malmström called this week’s meeting with her US counterpart “forward-looking,” and said on Twitter that the two trade officials had “discussed how to move forward and identify priorities on both sides, and how to achieve concrete results in the short to medium term.” 

She also suggested that the two sides will be corresponding frequently through the end of the year, with another ministerial-level meeting planned for late September. 

US Trade Representative (USTR) Robert Lighthizer’s office issued its own statement, deeming the talks “constructive” while suggesting that ministers are hoping to endorse a set of agreed “outcomes in a number of areas” at some point this November. Non-tariff barriers and tariffs would be an important focus area, the statement continued. 

He will also be notifying Congress under the Trade Promotion Authority (TPA) legislation for launching formal talks with Brussels, he said. 

Details of their progress were otherwise scant, and the two statements made no mention of other priorities identified by Juncker and Trump when they met in July, such as increasing exports of liquefied natural gas (LNG) to the United States or discussing possible ways to modernise the World Trade Organization. 

Along with discussing WTO reform in their bilateral working group, the two trading partners are also reviewing ideas with Japan in a trilateral format, while the EU is also discussing WTO modernisation ideas in a separate working group with China. Meanwhile, Canada is convening a potential coalition of trading partners on the same subject in late October, according to Bloomberg News. 

The tensions between two major economic powers, along with the US and China imposing hefty tariffs on each other’s products in a separate but parallel row, have fuelled concerns that smaller and medium-sized economies will feel the fall-out. Indeed, International Monetary Fund (IMF) Managing Director Christine Lagarde told the Financial Times this week that the US-China situation may ultimately “shock” emerging economies and that continued “uncertainty” could spiral further, to potentially damaging effect. 

ICTSD reporting; “Canada Pushes Alliance to Buffer WTO Against U.S. Protectionism,” BLOOMBERG, 11 September 2018; “Barnier says Brexit deal could be struck in next two months,” THE GUARDIAN, 11 September 2018; “Lagarde warns of US-China trade war ‘shock’ to emerging markets,” FINANCIAL TIMES, 11 September 2018.

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