In September, the UN stated that, according to the intra-industry trade index in manufacturing, the European Union is among the most interconnected and therefore most vulnerable economies to changes in U.S. trade policy (after Canada and the United Kingdom). Before the summer, von der Leyen proposed a redesign of the World Trade Organization (WTO), and in her September State of the Union address she called for doubling efforts in trade diversification and partnerships, as well as creating a coalition of “like-minded” countries to reform the global trading system. EU Trade Commissioner Maroš Šefčovič has been tasked with this mission for almost a year now.
Šefčovič’s Liberal Crusade
The Union must pull together, and despite differing views among member states on elements of individual free trade agreements, the EU must now demonstrate speed, flexibility, and, above all, unity at the negotiating table (in the end, both the EU Council and the European Parliament must agree to the deal). After all, these are markets with over two billion people. At this moment, Maroš Šefčovič’s liberal crusade (the push for free trade agreements) is a strategic interest of the entire EU.
The Slovak trade commissioner recently stated that the EU has made progress in negotiations with Indonesia, while other ASEAN countries (Vietnam, Thailand, Malaysia) are also highly interested in cooperating with the EU—unsurprising given the level of U.S. tariffs in the region. Efforts are also underway in Latin America and the Middle East. The biggest player, however, is India, with which the EU aims to reach a deal already this year. This crusade in the name of free trade and diversification represents an unprecedented pace of progress in negotiating free trade agreements.
The Law of Action and Reaction
The world is in motion. Efforts to secure advantageous agreements are taking place everywhere. South Korea is considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (12 countries in this free trade bloc). Von der Leyen specifically mentioned this bloc in her September 10 speech. The United Kingdom has concluded a deal with India. At the BRICS summit, the Chinese president declared that “we must continue to support the building of an open global economy,” while back in June China announced zero tariffs for all of Africa.
The law of action and reaction did not take long: new projects are emerging in other territories as well. A new group—the Partnership for Future Investment and Trade (FIT-P)—is expected to bring together about 10 countries. The founding members will be the United Arab Emirates, Singapore, and New Zealand, with others expected to include Morocco, Rwanda, Norway, Uruguay, Costa Rica, Panama, Paraguay, and Malaysia. The group’s goal is to strengthen economic ties among member countries while respecting international trade rules.
It is evident that geo-economically we are witnessing fragmentation alongside efforts to preserve free trade. And geopolitically? While the joint photo of the top leaders of China, India, and Russia is, at this stage, more public relations than genuine power realignment (historic tensions, disagreements, and even recent border conflicts limit cooperation between India and China to pragmatism), it remains true that, as the Finnish president bluntly warned, “we will lose this fight” if the transatlantic community does not adopt a more cooperative and dignified foreign policy toward the Global South.
The EU Is Slipping—Numbers Don’t Lie
A year ago, Mario Draghi drew up a plan to boost the EU’s competitiveness, but it seems that only 11% of his recommendations have been implemented so far. Moreover, the EU’s economic engine is struggling. The German Bundesbank reports a loss of competitiveness among German exporters on global markets, facing mounting competition especially from China.
Austria is responding with a financial support package for exporters seeking entry into new markets such as Mexico, Vietnam, India, Japan, Southeast Asia, and the Western Balkans. Poland’s economy is performing exceptionally well, targeting a coveted spot in the G20 with an economy approaching €1 trillion.
And Slovakia? Yes, the government has signaled the introduction of short-time work (kurzarbeit) for Slovak carmakers due to U.S. tariffs. In economic diplomacy, we are reopening some embassies while closing others. Although geographically they are being located in geo-economically trending regions of Africa and Asia, the plan to increase the number of economic diplomats from 17 to 43 still lags behind Hungary (which has 115 economic diplomats in 83 countries).
Export support, also thanks to the EU, can bring interesting opportunities in new, rapidly growing markets as well as in the reconstruction of Ukraine (especially infrastructure and energy). Therefore, this period of consolidation paradoxically also represents an opportunity—a chance to reset goals and perspectives. However, with the second type of consolidation being presented, Slovakia will likely squander it.
Commentary by Filip Šandor, analyst and co-founder of EXPORT ANALYTICA for SITA
