EU trade policies, European Parliament, Latest news

European Elections 2019: change of direction in EU trade policy?

European Elections voting box
Is the European Parliament going to become more protectionist after the elections?

Despite the increasing trade tensions at the global level, as well as political instability across the continent, a majority within the European Parliament supported key trade agreements with Canada, Japan and Singapore. Is the European Parliament going to become more protectionist after the elections?

Overall, the next European Parliament is going to be more fragmented than the current one. Small groups will become bigger and big groups will become smaller, meaning that it will be more difficult to form coalitions and find majorities for the Commission’s proposals. With sophisticated statistical methods, VoteWatch Europe has been collecting MEPs’ votes, and is able to assess the main stances taken by policy-makers. This article summarizes our forecasts on the impact of the EU elections on the future balance of power on trade policy.

Free-trade advocates are bracing for seat losses

The two biggest supporters of free-trade in the European Parliament, the European People’s Party (EPP) and the European Conservative and Reformists (ECR), are set to lose over 40 seats in the elections. Together, the two groups are expected to get about a third of seats (33%) in the next European Parliament.

Some of the losses for the free-trade groups are set to be compensated by the gains of the Alliance of the Liberals and Democrats for Europe (ALDE), whose liberal component is very supportive of free-trade policies (ALDE votes in the same way as EPP and ECR on trade over 95% of times). The centrist group is projected to gain over 30 seats after the elections.

However, most of the gains for ALDE are due to the rise of Macron’s party La République en marche (LREM), which would like to reshape and rebrand the ALDE group into a new political force. The strengthening influence of Macron on the direction of ALDE is likely to swing the balance of power within the group to the benefit of the most protectionist side, since the French President tends to be more critical of trade liberalization than most ALDE members, in particular when the French agricultural interests are at stake (United States, Mercosur).

The new ALDE-Renaissance group is set to become the kingmaker on most policy issues in the next European Parliament and its relative strength vis-à-vis the other big groups in the European Parliament, the EPP and the Socialists and Democrats (S&D), will rise. Support by ALDE-Renaissance will be needed in order to pass trade agreements through the plenary in Strasbourg, which will provide Macron with a bigger leverage on EU trade policy than he currently has.

Socialists and Democrats likely to provide helping hand, with strings attached

Still, even EPP, ECR and ALDE-Renaissance combined are likely to fall short of a majority in the next European Parliament (between 45% and 49% of seats). This means that free-trade oriented forces will have to rely on other partners in order to find a majority, most likely the Socialist and Democrats (S&D). While the group is likely to incur significant losses in the elections (over 30 seats lost), it will still play an important role as the second largest group in the next European Parliament.

However, Social-Democrat MEPs can be considered as only slightly supportive of free-trade agreements, due to their stronger focus (compared to ALDE and EPP) over ratification of international agreements on labour conditions or climate change, whose role is gaining importance, even within trade policies. This is the case of the EU Singapore FTA, which saw a strong opposition from some Social Democratic members because of Singapore’s missed ratification of key ILO conventions (International Labour Organization).

At the same time, we observe an increasing focus on climate change, also with regards to EU-US trade relations. Indeed, a majority of MEPs (including members of the Social Democrats), support proposals to require impact assessments on CO2 emissions in line with commitments from the Paris Agreement.

While support by S&D should not be taken for granted, the group is often divided when voting on disputed trade files, meaning that individual group members tend to vote in a different way. For instance, the group was remarkably split during the final votes on the agreements with Canada and Singapore. Austrian, Belgian and French members tend to be rather protectionist, whereas Spanish, Portuguese and Romanian members tend to be more free-trade oriented. These internal divisions within S&D decrease its negotiating power with the other groups and provide the advocates of free-trade with more room for manoeuver.

Right-wing nationalists to provide variable support for free-trade

While right-wing nationalists are expected to make significant gains on Sunday (Salvini and Le Pen’s group alone is projected to gain over 40 seats), they could still fall short of breaking their isolation in the European Parliament. Their increasing strength in the Parliament would not be sufficient to force the other groups to talk to them. While right-wing nationalists are still likely to be sidelined during the negotiations on the top positions in the European Parliament, they will still have the numbers to swing key votes in case of divisions among the other political forces (as it was already the case during the ending term).

Here, there is room for manoeuver for advocates of free-trade, as right-wing nationalist parties do not always see-eye-to-eye on these matters. Some of the parties, such as Marine Le Pen’s National Rally, are seen as a firm opponent of free-trade, whereas Alternative for Germany tends to be more supportive (depending on the content of the trade agreement). An important aspect to keep in mind is that these parties tend to look at trade agreements from a nationalist perspective. If a trade agreement is seen as overall beneficial for their country, they could support it. For instance, Matteo Salvini’s Lega voted in favour of the EU agreement with Japan, but voted against the agreement with Canada.

The content of the agreement is key. For instance, these movements do not easily welcome clauses that may curtail the regulatory powers of single EU member states, such as the establishment of new regulatory or arbitration bodies.

Brexit unlikely to harm free-trade supporters in European Parliament

The UK withdrawal from the EU is still shrouded in uncertainty. What we currently know is that the United Kingdom took part in the elections in May and is supposed to leave the EU a few months later. In case the withdrawal does occur, the UK is supposed to drag its 73 MEPs out of the Parliament premises. However, differently from what is usually thought, British MEPs are not among the biggest supporters of free-trade, since only the British Tories can be seen as core supporters of free trade, whereas the rising Farage-led Eurosceptic faction is less supportive of the Commission trade agenda. As the free-trade-oriented Conservative are likely to lose seats after the EU elections, the departure of British MEPs is not expected to decrease the level of support for free-trade policies in the European Parliament.

 

Doru Frantescu, CEO & Co-founder of VoteWatch Europe
Doru Frantescu, CEO & Co-founder of VoteWatch Europe

This is a first article of a series on the European elections and trade in partnership with Votwatch.EU. Follow Doru Frantescu, CEO & Co-founder of VoteWatch Europe, at @dorufrantescu or the official account @VoteWatchEurope.

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