Remarks by Executive Vice-President Dombrovskis on the Trade Policy Review Communication at the European Parliament's International Trade Committee

Met dank overgenomen van Europese Commissie (EC) i, gepubliceerd op woensdag 24 februari 2021.

Honourable Mr Chair, Honourable members,

We are the biggest trader in the world.

And it serves us well: trade supports 35 million jobs in the EU.

This is one in six jobs.

And these are better-payed jobs, about 12% higher than average.

But in the next decade, 85% of global growth will take place outside of the EU.

And we need to address some of the biggest challenges we face.

More of the same is not good enough.

Therefore, I am grateful for this opportunity to discuss the new direction of the EU trade policy.

Its keywords: open, sustainable, assertive.

Open, because trade must work for our people and our economies.

Sustainable, because trade policy must work for our planet.

Assertive, because we must have the tools to defend our values and interests.

I want to thank all of you for your important contributions.

This Communication takes into account the headline items covered by the Commission Work Programme, and the commitments I made to you in the hearing.

The review reflects many of the priorities outlined by this committee in recent months, as Chairman Lange already acknowledged.

I am especially grateful for your resolution on the Trade Policy Review, as well as other individual and group contributions.

You recognised the need to pursue a new strategic direction for EU trade policy.

Let's face it: the world of trade is changing fast.

In recent years, we have seen:

  • escalating global tensions;
  • deepening paralysis of the World Trade Organisation;
  • the continued rise of China and Asia more generally;
  • widespread level playing field and unfair trade issues; and
  • a general growth in the weaponisation of trade policy for geopolitical purposes.

On top of that, we now face a global recession due to the Covid-19 pandemic. We need trade to support the creation of growth and jobs.

And it has become increasingly clear that trade needs to play its role in the green and digital transformation of our economy.

This communication is a consolidated European response to these challenges. It is our platform for building a new consensus, both at home and at global level.

To shape this new approach, we consulted widely and inclusively, because trade policy affects every EU business and citizen.

We received over 400 responses in our public consultation, and we held events throughout the European Union. We held debates in the Plenary and in the INTA committee.

Our answer is a distinct European approach based on the idea of “Open Strategic Autonomy.”

Let me explain what this will mean in practice.

The first keyword: open.

We are re-affirming our commitment to open, fair and rules-based trade. It is not just EU idealism: it is economic and political necessity.

Openness is already serving Europe well.

In 2019, the EU exported over €3.1 trillion Euro's worth of goods and services and imported €2.8 trillion Euro's worth. This substantial trade surplus is a real economic success story.

But, as indicated: 85% of global growth will take place outside of the EU in the next decade.

So, even if the current crisis feeds the temptation to look inward, this is not the answer.

The right answer is to keep trading with our global partners.

This is the right way to support our recovery from Covid-19 and ensure Europe's prosperity.

We want to exploit the full potential of global markets to support our entrepreneurs to grow their businesses and create jobs.

In addition to the new Access2Markets portal, we are proposing several new tools to support our exporters, especially SMEs.

The Chief Trade Enforcement Officer has a specific mandate in this respect.

While we aim to ratify agreements and conclude ongoing negotiations, we will put a much stronger focus on extracting maximum value from existing deals.

This means ensuring that our partners play by the rules, not only on market access, but also regarding our joint commitments to sustainable development.

At the same time, there should be no doubt that openness and engagement with our trade partners is essential if we are to succeed in our broader objectives.

It is only through dialogue and cooperation that we can build alliances to exert influence at the global level.

And yes, the World Trade Organization needs to change.

Because open, fair and resilient global trade requires proper global rules.

For decades, the WTO has provided the stability that is necessary for trade to expand, allowing countries to develop by integrating into the global economy.

But the global rulebook is outdated.

The WTO is unable to maintain a level playing field.

And it is unfit to respond to the sustainability and digital challenges.

Therefore, we have published a detailed EU agenda for reform of the WTO.

It needs to be recast as a forum for tackling the most pressing problems of today's world, such as:

  • tackling the effects of the Covid-19 pandemic;
  • supporting environmental and social sustainability;
  • updating the rules for digital trade; and
  • addressing unfair trading practices.

Our agenda addresses all three core WTO functions:

  • negotiation;
  • monitoring and deliberation;
  • and dispute settlement.

On negotiations, we suggest that the increased use of open plurilateral forums could allow members to develop new rules in areas of common interest.

On monitoring, we will present ideas to improve Members' notification of - and discussion about - their respective trade policies.

On dispute settlement, we acknowledge some concerns raised by the U.S. which are valid, and stand ready to negotiate a reformed Appellate Body, with the Walker Process as a good basis.

The EU is playing a leading role in the initiatives currently being discussed and is ready to engage with like-minded countries to bring forward work in the area of competitive neutrality.

There is a new administration in Washington D.C., and new WTO Director-General, Dr Ngozi Okonjo-Iweala, now confirmed in Geneva.

The entire WTO membership needs to engage towards a successful 12th Ministerial Conference later this year.

And all this creates the required momentum.

The second keyword: sustainable.

For the first time, the Commission is explicitly putting sustainability at the heart of trade policy.

And we are setting out a plan to leverage our global influence in support of this goal.

Already, a new global coalition for climate action is starting to take shape. A growing number of G20 i members are making climate neutrality as explicit economic goal.

This can create an unstoppable momentum.

And the EU is ready to lead from the front.

The Communication outlines a number of concrete actions, these include:

  • a trade and climate initiative at the WTO;
  • Seeking commitments from G20 countries to achieve climate neutrality as the basis for concluding agreements; and
  • Making full use of our trade deals to accelerate cooperation on biodiversity, pollution, circular economy, and sustainable food systems.

Future trade deals will include Paris climate commitments as an essential element.

We also plan to propose a carbon border adjustment mechanism, in full respect of the WTO rules.

In our bilateral relationships, we want to be sure that our partners live up to their agreed obligations on trade and sustainable development, including commitments on climate and labour rights.

You have been very vocal about this point, and rightly so.

Accordingly, we are conducting a review of our action plan to make the implementation and enforcement of trade and sustainable development chapters more effective.

The results of this review will help to determine our next steps.

We will be looking at the scope of commitments, monitoring mechanisms, the possibility of sanctions for non-compliance, the essential elements clause as well as the institutional set-up and resources required.

We will make sure that the outcome of the review will feed into ongoing and future negotiations.

As part of the review of the TSD action plan, we are launching a study to assess how different countries implement and enforce TSD commitments in their trade agreements, and identify best practices from around the world.

We are launching this study in the next weeks.

In parallel, we will launch a broad stakeholder consultation to inform the review. We plan to involve civil society throughout the process.

We will also have a continuous dialogue with the European Parliament and our Member States.

The scope of the review will be broad, to cover all aspects of implementation and enforcement.

We will enhance our support for labour rights through the development of due diligence legislation. This includes determined action to combat forced labour.

Products manufactured with forced labour should not be allowed in our market.

Now, moving to digital policy.

Here too, trade must step up.

We need to strengthen the EU's regulatory impact; in other words, our ability to shape new regulations and standards, in line with our democratic values.

We have traditionally been good at exporting our standards, thanks to the strength of the single market.

Due to ongoing geopolitical shifts, our future success will depend on our ability to cooperate with like-minded partners, starting with the United States.

There is much analysis of the "Brussels effect” or the “Beijing effect.”

But it is clear that “Brussels-Washington effect” will be decisive in shaping the technological standards of the future to ensure that they comply with our norms and values, including the respect for human rights.

Accordingly, we have made a proposal for a Trade and Technology Council, centred on transatlantic leadership.

And we will continue to vigorously pursue e-commerce negotiations at the WTO.

The issue of data flows will be central in this important negotiation.

And the Trade and Cooperation Agreement we concluded with the UK points the way forward.

It is the first EU deal containing ambitious rules on data flows, while ensuring full protection of our high privacy standards and the GDPR.

The last keyword: assertive.

Our trade policy is only as strong as our tools for implementation and enforcement.

We need to strengthen our own capacity to level the playing field, and defend ourselves when our partners do not play by the rules.

So what will we do about it?

First, we are preparing an anti-coercion instrument.

Second, we will propose a legal instrument to address distortions by foreign subsidies in our internal market.

Third, we will shortly launch a feasibility study on an EU strategy for export credits.

And finally, we will continue to push for an International Procurement Instrument to open third country procurement markets.

These actions will build on our recent achievements like the update of the enforcement regulation and the creation of the Chief Trade Enforcement Officer.

All these actions are spelled out in the Commission Work Programme and have been a regular feature in my engagement with you.

What can be said: every new tool strengthens our hand.

Pursuing all these goals will require stronger engagement with our global partners.

So first let me start on how the outcome of the U.S. elections will impact our trade.

We already proposed a fresh transatlantic agenda to pave the way for a reset with the Biden administration.

We want to rapidly resolve our trade disputes and restore EU-U.S. leadership as the engine for positive global change.

This work can be proceeded in parallel tracks. We can work at bilateral level to remove tariffs imposed by the Trump administration, while at the same time advancing fast on multilateral issues.

The bottom line is simple: whatever challenges the EU and U.S. face, there is no stronger values-based alliance in the world.

When it comes to China, we need to restructure our partnership to be reciprocal, balanced and fair. Your resolutions on China have consistently called for this to be a priority.

The recent conclusion of negotiations on the Comprehensive Agreement on Investment must be seen through this lens, as one element of the wider China strategy.

This strategy has to do justice to the complexity of China and to the EU's relationship with this country, which is at the same time a negotiating partner, an economic competitor and, increasingly, a systemic rival.

CAI enshrines sustainable development commitments, including the fight against climate change and respect for core International Labour Organisation principles. This is the first time China has agreed to such concessions in a deal with a global partner.

While CAI can address many issues, it is not a panacea to deal with all the challenges presented by China. We will continue to pursue our wider strategy on all fronts.

We will work closely with like-minded partners, including the U.S. on levelling the playing field as well as other issues of concern like human rights and forced labour.

And we will continue to press ahead with our autonomous measures:

  • First, to protect our security through FDI screening and export control;
  • Second, to protect against unfair competition through the use of trade defence, a new legal instrument on foreign subsidies in the internal market and the International Procurement Instrument; and
  • Third, to defend and promote human rights and core labour standards through, amongst others, due diligence legislation;
  • Finally, the new EU Global Human Rights Sanctions Regime will enable us to target individuals and entities committing human rights abuses worldwide.

Closer to home, we will place a strong focus on our neighbourhood region and Africa. This is an important strategic pivot for the EU.

These countries are our nearest neighbours, with strong economic and cultural ties to Europe.

Moreover, they have long-term strategic and economic growth prospects.

We will therefore take every step to enhance our strategic trade and investment relationship, for our mutual benefit.

We do not forget our commitment in other parts of the world.

Particularly the rapidly developing Asia-Pacific region, the source of so much global growth.

We reaffirm our commitment to conclude a series of FTAs with partners in the region, notably with Australia and New Zealand.

And we continue to advance our work in Latin America, where we are working towards ratification of deals with Mercosur and Mexico. We are also committed to conclude the agreement with Chile.

In the case of Mercosur, we are in active talks to enhance cooperation on sustainable development. Implementation of commitments on the Paris Agreement and deforestation are crucial.

Open. Sustainable. Assertive.

Honourable members, the Commission has presented you with a strategy that I hope can deserve your ownership and support.

Open Strategic Autonomy encapsulates all our priorities, because openness and strategic autonomy are not mutually exclusive.

We will work multilaterally whenever we can, but we will act autonomously whenever we must.

This is how Europe will express our leadership in trade policy, at home and abroad.

Thank you very much, and I look forward to hearing your views.