After the summer break, the European Union is slowly returning to its dynamic rhythm, in which the formation of the new Commission under the leadership of the incoming President Ursula von der Leyen will be crucial.
The redistribution of portfolios among the 26 Commissioners from each Member State will be important, with a number of states expressing interest in strong economic portfolios. One of these is the international trade portfolio, which has been allocated to long-serving Slovak Commissioner Maroš Šefčovič. Although the signing of international free trade agreements is the exclusive competence of the Commission, member states have the final say in the ratification process.
The EU has preferential trade agreements with dozens of countries around the world, accounting for almost 32% of the EU’s foreign trade. As of 2019, the EU has signed 5 such agreements (Vietnam, UK, New Zealand, Kenya, Angola) and 8 have entered into force (Singapore, Japan, Vietnam, UK, New Zealand, Kenya, Angola, as well as the EU-Central America Association Agreement (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama)).
Today, the EU is the largest exporter in the world, with 30 million jobs dependent on external trade. However, 90% of global growth is expected to take place outside Europe over the next 5 years.
However, EU economic diplomacy faces the fragmentation and regionalisation of the world trading system with preferential agreements and the increasing frequency of tariffs and trade wars, such as the recent imposition of tariffs on Chinese electric car imports by the EU, the US and Canada.
The former President of the European Central Bank and former Italian Prime Minister, Mario Draghi, published his long-awaited report on the future of EU competitiveness, in which he outlined the role of EU economic diplomacy. According to him, “the EU will will have to coordinate preferential trade agreements and direct investment with resource-rich countries, build stocks in selected critical areas and create industrial partnerships to secure the supply chain of key technologies”. Also, “to reduce its vulnerability, the EU must develop a genuine ‘foreign economic policy’ based on securing critical elements.”
Ursula von der Leyen in her new vision for the Commission for 2024-2029 mentions three pillars of a new economic diplomacy. First, the Commission plans to increase competitiveness and invest in research capacities for strategic and dual-use technologies. At the same time, the EU must be more assertive in protecting its economy, with the emphasis on ‘risk reduction’ rather than ‘decoupling’.
The second pillar emphasises fair trade, mentioning the need to reform the World Trade Organisation and the emphasis on critical elements.
In the third pillar, it is the new Global Gateway to be taken to the next level, with the EU proposing an integrated offer (package) to its partners, including investment in infrastructure, trade and macroeconomic support.
Future developments are not only about the issue of the US elections, but also about the EU’s ability to act in a more united, dynamic and strategic way. It will also be a new relationship with China, on which the Member States do not have a united position.
Last but not least, it will be the ability to negotiate international free trade agreements and, above all, to have the political will of the Member States to ratify these agreements. One such example is the EU-Mercosur (Brazil, Argentina, Uruguay, Paraguay and Bolivia) free trade agreement, which has been negotiated since 1999. Here it is extremely important that Slovakia, as an EU member, is at the negotiating table and has the opportunity to influence and shape this policy.
The implementation of the vision of the new trade policy of the new President of the European Commission, as well as of the new Commissioner for the next 5 years, remains crucial. The ability to achieve unity among Member States will be questionable.
Author: Filip Šandor, Faculty of Natural Sciences, Comenius University Bratislava, EXPORT ANALYTICA
