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Comment: Greener or messier EU trade policy going forward?

European Elections 2019 – Election night: Ska KELLER, and Bas EICKHOUT, Greens lead candidates for the Presidency of the European Commission. Credit: European Parliament.

Will the EU make its trade policy greener in the coming years?  If anything, the politics of green trade will become messier, reckons Iana Dreyer.

Greta effect

Ann Linde, Sweden’s current trade minister, talked of the “Greta effect” when asked  how Stockholm sees the impact of this week-end’s European elections on her country’s view on trade. Clearly, climate change and environmental topics are increasingly a top political priority for European voters. But will the Greta effect – in reference to the Swedish teenage climate activist who obtained the Nobel peace prize this year – really translate into trade policy? If so, how?

Ann Linde, Sweden’s Europe minister, at the Foreign Affairs Council (Trade) on 27 May 2019. She proposes eliminating import duties on “climate smart” products. Credit: Secretariat of the Council of the European Union

Trade and globalisation find little support in public opinion if and when they are seen as destroying the planet or violating human and workers rights – all causes the Greens in Europe have strong views on. Also, with populism and nationalism on the rise, proponents of traditional free trade are on the defensive across the continent.

So, will EU trade agreement negotiations become even more complicated than they already are due to increasingly frequent cases of collision with environmental, human or labour right activism? Can we expect the introduction of a border adjustment carbon tax? Will we see more RED-II type regulations that ban palm oil based fuels from mandated EU biofuels mixes but, strangely, not those based on soy oil (produced in Trump’s United States), or rapeseed oil (produced in Europe)? And will the EU continue removing trade preferences to developing countries as it recently started to do for Myanmar and Cambodia for human rights reasons?

The big news of this year’s European elections is, as we know, the decline of the big two centre-right and centre-left political families in the parliament, the surge of centrist or ‘liberal’ parties, the rise of ‘green’ parties, all this alongside the continued rising popularity of right-wing populists. The EPP is now set to count 177 MEPs instead of 217 previously. The S&D group lost 37 seats and will only send only 149 MEPs. The two groups lost their previously held common majority.

When discounting the – shrinking – far left and the – rising – far right groups, the working majority of the next parliament will count the centrist ALDE group with its ally La République en Marche also known as Renaissance (107 MEPs), the Greens (69 MEPs) and the right-wing/eurosceptic ECR (62 MEPs).

How much of a green surge is this really?

The surprise success of France’s Europe Ecologie les Verts party led by Yannick Jadot, French president Macron’s party entry into the European parliament boosted by campaign promises that focused on environmental topics, and the slap on the face to Germany’s government coaltion that is the triumph of Germany’s Die Grünen are indeed remarkable developments. Let’s also not forget Britain’s Greens’ own surge – yes the Brits are still amongst us. Clearly, greener trade is coming?

In fact, the winners in this parliament are not so much the Greens. “The big winner of these elections is ALDE-Renaissance,” reckons Doru Frantescu from the think tank VoteWatch.eu. The group’s position has become vital for making any sort of coalition. “No matter how you combine the political forces, you simply can’t skip ALDE-Renaissance if you want to reach a majority,” writes Frantescu.

So, does this mean the Greens won’t influence policy that much?

This is clearly a point of view defended by the Kiel Institute’s new boss the economist Gabriel Felbermayr. In a note released on Monday Felbermayr said: “The new EU parliament has become somewhat more protectionist, and the debates around free trade will certainly harden.” The legislative chamber “will however remain able to take decision and is capable to find pro free trade coalitions”. Felbermayr thinks that the big problem for the strictly ‘green’ cause is the fact that environmentalist parties are split in the parliament, with many Nordic greens being affiliated with the hard left groupr GUE/NGL and thus part of a non influential group.

Green only if it also protects farmers and declining industry?

But this also doesn’t give us the full picture.

To be a kingmaker, ALDE-Renaissance needs to stay united. But it is extremely difficult to imagine this group remaining cohesive. The 21 MEPs Macron’s party will send to Strasbourg were elected on a pledge to green the EU and its trade policy – including by introducing a carbon tax at the border applying to all imports. Macron also pledges to change the EU’s competition policy and allow the EU to authorise Alstom-Siemens types of mergers. The ALDE group is mainly made of low-tax pro-competition parties which will certainly not support ‘macronomics’.

So this brings us back to the notion of a greener trade policy. A split ALDE-Renaissance group will most likely give greener voices greater leverage in the making of EU trade policy. ‘Green trade conditionality’ will most likely increase.

Bikes parked in Stockholm. Credit: European Parliament.

The hotly contested issue of whether ‘trade and sustainable development chapters’ in trade agreements can remain as they are now, i.e. not subject to the same enforcement procedures as the rest of the agreement, is bound to reappear. And it’s likely that the political gravity in the parliament will shift towards toughening up conditions for trading partners.

A test case will be the ratification process of the EU Vietnam free trade agreement – which will be the first trade deal the new MEPs will have to scrutinise sometime this autumn or early next year. Count on the newcomers in Strasbourg to seek to put their mark on the deal. It is not entirely unimaginable that the deal gets voted down or the parliament asks for more guarantees from Vietnam on labour and environmental rights before agreeing to the text. We shall see.

With the support of powerful farm groups, proponents of a greener agriculture will increasingly be demanding on trading partners regarding their conformity with the EU’s own environmental and sanitary rules. This is an already notable trend in ongoing trade negotiations e.g. with Indonesia, Australia, or Mercosur. As quid pro quo for obtaining very small extra market share in the EU for meat, sugar, fruit and vegetables, expect these countries to see bureaucratic barriers, reporting requirements and requests to apply specific EU regulations or directives increase.

One could imagine a trade policy that is both liberal on the trade front and environmentalist. Sweden’s Ann Linde said her government would now start pushing for the removal by the EU of import tariffs on what she termed “climate-smart” products. She cited items that currently face high import duties: bioethanol (ca 40% ad valorem duties), e-bikes (see here), and bicycles (14% duties + antidumping tariffs on Chinese bikes).

But neither Germany’s Grünen, nor Jadot’s EELV, let alone the Netherlands’ Bas Eickhout have such measures in mind. None of them have proposed reviving trade negotiations on ‘green goods’, for example. The ‘Environmental Goods Agreement’ attempted in the WTO a few years ago is now fully forgotten. We can count on the Macron group to defend French sugar beet farmers and cattle raisers, the ‘Battery Alliance’ network of supporters within the Commission and member states, as well as Western European bike companies to successfully push back against what they would certainly term ‘neoliberal’ and ‘naive’ ideas.

All in all we could well end up with more ‘greenwashed’ protectionism – if not on a grand scale. Whether that will help the planet at all is another matter.

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