EU must act faster to agree more global deals, trade chief says

The EU’s trade chief has vowed to accelerate efforts to boost the union’s network of trade deals, as Brussels responded to member state calls to strengthen global supply chains, wean itself off Russia and deepen links with key allies.

Valdis Dombrovskis, EU trade commissioner, said geopolitical pressures were “shifting our perspective on trade policy”, adding that he was intensifying work aimed at landing deals with “like-minded partners” in a bid to bolster the EU’s economic resilience.

Goals include a deal with Chile before year-end and an agreement with Australia in the first half of 2023, on top of efforts to ratify deals with Mexico and New Zealand and push ahead talks with counterparts such as India and Indonesia.

“We can use our network of free trade agreements (FTAs) to face the current geopolitical challenges, to diversify away from Russia’s supplies, to strengthen the resilience of supply chains,” said Dombrovskis. “If we want to reduce our dependence on raw materials from some providers we need to broaden our base.”

The commissioner, an EU executive vice-president, is seeking to re-energise the bloc’s free-trade agenda, which has sputtered as major economies erected barriers and sought to shelter domestic industries.

France has just completed its six-month EU presidency, during which Paris dragged its feet on trade deals while seeking to harden trade defences and shore up the union’s so-called strategic autonomy.

Some 15 member states including Germany, Italy and Spain wrote to Dombrovskis last month complaining that the EU’s process on negotiating, signing and ratifying trade deals was taking too long and that the union must “take advantage of windows of opportunity when they open, otherwise others will.”

The EU’s trade agreements cover only a third of its external trade, the letter said, and that “we need to do better than this” given 85 per cent of the world’s future growth is projected to occur outside the bloc.

In his reply, seen by the Financial Times, Dombrovskis agreed that accelerating its push for trade deals would increase the EU’s “credibility as a serious trading partner”, writing that the bloc needed to find ways of speeding up its own procedures for bringing new deals into force.

In the interview, Dombrovskis defended EU efforts to be “more assertive” on trade, saying the union was in a “more confrontational geopolitical landscape than before” and that it needed tools to respond when other countries were not playing by the rules.

The EU has been pursuing a range of instruments aimed at addressing unfair trade and investment practices, including foreign investment screening, tougher trade defences and a crackdown on investment by state-subsidised foreign companies.

“We will act multilaterally whenever we can but we can act unilaterally if we must,” Dombrovskis said.

At the same time, Dombrovskis argued that pursuing fresh bilateral trade agreements would also make the EU economy more robust and resilient, in particular by permitting it to reduce its dependency on a handful of commodities superpowers such as Russia and widen its range of suppliers.

He pointed to Chile, and its vast stocks of lithium, as the EU seeks to sign a deal updating a 2002 agreement. The EU also wants an agreement with Australia, another raw materials powerhouse, by next summer. “Having a wide network of FTAs is a source of diversification and thus a source of resilience,” Dombrovskis said.

The EU last month concluded an agreement with New Zealand which according to Dombrovskis contained unprecedented provisions on sustainability and labour rights.

The commissioner said the EU would “draw inspiration” from the high standards agreed with Wellington but that this did not mean it would seek to impose the same provisions in all its negotiations, saying there would be a “tailor-made approach” depending on the partner in question.

He stressed, however, that when it came to talks with G20 countries, which have an outsized impact on greenhouse gas global emissions given the scale of their economies, the EU would seek a commitment to climate neutrality.

That means that, in principle, the EU would expect Australia, Indonesia or India to have climate targets that are ambitious enough to reach the goals of the Paris accord that aims to limit global temperature rises.

EU demands for deals with significant environment protections and labour rights can make it harder to reach agreement with some developing countries. But without this Brussels can struggle to convince national parliaments to ratify them.