If we want a green and digital economic recovery post COVID-19 we need international trading partners such as Mexico and rules-based trade with a reformed World Trade Organization at its heart, argues Kevin Verbelen.
The economic crisis induced by the coronavirus calls for strategic choices. The European Union is working on a green and digital way forward. At the same time it is scrutinising its dependence on imports from foreign countries. ‘Technological sovereignty’ and relocation of production are subject to debate.
Many suggest that the pursuit of open markets and international trade is the opposite of what is green, digital and sovereign. Nothing could be further from the truth.
If the recovery is to succeed, we need a favourable investment climate at home, open and easy access to other markets and a stable international trade environment based on internationally enforceable legal rules.
Making smart choices
This crisis presents the EU with different choices. These choices will determine the future of economic activity.
Subsidies granted today and choices made by entrepreneurs will have short-, medium- and long-term economic effects. How much we spend and what we spend on are no longer innocent questions.
What do we want to continue to produce tomorrow and what do we want to focus on? What about our food supply? Is the circular economy our future and what do we need for that? If we really go digital, will we be able to delay the development of an operational 5G network for much longer?
Certainly, if we use technology innovatively we will be able to lead even the most traditional sectors into the 21st century. The agricultural sector is a textbook example of this. Thanks to technology, people in a number of countries have been experimenting with “vertical agriculture” for years.
Without changing the genetics of agricultural products, without over-fertilisation and without using hundreds of hectares of farmland, they manage to grow vegetables in a way that uses 95% less water. It is a green and digital story and without doubt agriculture of the 21st century. So what subsidies do we want to give to our farmers; for what and for with which goal?
Another example is that of the autonomous vehicle. It is conceivable that in the near future we will be able to own a car, but no longer need to. Car sharing can be more cost-efficient and can lead to less pressure on road infrastructure. In addition, ecologically sound drivetrain innovations can be introduced to the market more quickly, as cars will also be used more optimally.
But the cost of developing that future means cooperation across borders is required. Volkswagen cooperates with Ford. Tesla cooperates with Daimler. Volvo was bought by Geely and JLR belongs to Tata. Even Uber, Google and Apple work with partners on autonomous cars. In short, innovation costs and data must be shared and intellectual property must be properly protected across borders more than ever.
The Walloon Parliament recently debated the modernised EU-Mexico Global Agreement. It is an agreement that contains an important trade chapter, but also deepens EU-Mexico cooperation on research and development, intellectual property protection, human rights, social and environmental standards, police and judicial cooperation.
Even before the European Commission was able to publish the agreement’s final texts on its website, the Walloon parliament is already convinced that this agreement does not deserve support. With this, Belgium threatens to repeat 2016, when it was the last to agree to the signing of the free trade agreement between the EU and Canada. This is a pity: do we need a repeat of the Belgian CETA saga at the very moment companies are evaluating their value chains, assessing suppliers and sales markets and are diversifying to spread risks?
Mexico is a unique partner country for the EU.
It is an open economy that lives off its more than 40 different free trade agreements. Mexico is deeply integrated into the North American economy. But the renegotiation of the North American Free Trade Agreement under US president Donald Trump has created opportunities for Europeans in the Mexican economy and vice versa.
Opportunities for European aerospace, logistics, the broad technology industry, telecom, tourism and digital services will only be strengthened if this agreement is approved. It will enable European manufacturers to diversify their markets and find new competitive suppliers outside South-East Asia.
In addition, Mexico is a net importer of agricultural goods. The country does not pose a threat to Europe’s subsidised and little adapted agricultural sector.
Mexico is also an advocate of climate-friendly policies. It is one of the most bio-diverse countries in the world and has signed all the core conventions of the International Labour Organisation. It is a partner that thinks and acts as we do in Europe.
Post COVID-19 international agenda
In order to sustain production in Europe and support innovation, we need partners both inside and outside the EU. Moreover, we have learned from the 20th century that working together across borders leads to economic stability which has raised prosperity to the highest level in history.
The future may be even more prosperous, but technological innovations require the exchange of data and the protection of intellectual property across borders. Digital commerce needs to be embraced more than ever. Even if we are committed to a circular economy, supplies are needed from all corners of the globe.
This is why we need free trade based on modern rules of international trade law. This is why the World Trade Organization needs to be modernised. This is why we need to reduce tariffs on environmental goods. And this why bilateral trade agreements, such as the one with Mexico, need to be modernised in order to manage the trade of today and tomorrow.
The message is clear: we need to think long term. We cannot just look back. We have to keep current technological developments in mind when taking decisions. Innovation costs money: and the small economies of Europe, like the ones of Belgium, have no chance of succeeding in a de-globalisation scenario.
The EU will be international or it will not be.
More than the US or China, we need partners. We do this best by relying on modern international trade rules with partners who act in a similar way.
Kevin Verbelen is a Company Lawyer – Expert International Trade at Agoria, the Belgian Association of Technology Companies, and Coordinator of the International Organisations pillar of the Brussels Diplomatic Academy.
Views expressed on Borderlex.eu are those of their authors only.