Reviving trade is key to a global recovery – here’s how Europe can help

Trade wars aren’t good or easy to win. US President Donald Trump’s breezy approach to trade conflicts is as dangerous as it was two years ago –  and as deadly as his advice on the health benefits of disinfectants.

Ensuring a rapid recovery requires all hands on deck. Even before Covid-19 wreaked havoc across the world, the fall-out from US-China trade and tech tensions had hurt growth, spooked financial markets and destabilised global supply chains.

Pandemic panic has made governments across the world slap restrictions on face masks, pharmaceuticals and ventilators to achieve “medical supply independence”.

Not surprisingly, the global economic outlook is dire. The International Monetary Fund (IMF) predicts the world’s worst recession since the Great Depression, surpassing devastation triggered by the 2008 financial crisis.

The World Trade Organization (WTO) says global trade will fall by between 13% and 32% in 2020. EU trade experts predict a decline of 9.2% in EU exports and 8.8% in imports in 2020.

As countries begin to exit lockdowns, seeking to rebuild their shattered economies, the case for free trade as a driver for recovery has never been stronger.

Yet champions of free, fair and open trade are few and far between, their silence in stark contrast to the clamour of anti-multilateralism, anti-globalisation crusaders and “my country first” nationalists.

Can the EU step in?

Encouragingly, EU Trade Commissioner Phil Hogan and Bernd Lange, Chair of the European Parliament’s Trade Committee, are adamant that open trade is key to a future global recovery.

“The leadership we display in restoring global dialogue will be closely watched by others”, Hogan told an online meeting of EU Trade Ministers on 16 April.

But that’s easier said than done. Europe’s reputation, both at home and abroad, took a beating at the start of the crisis as European governments slapped controls on exports of protective gear, including against fellow EU members.

Since then, an EU-wide export authorisation scheme for protective gear, brought in on 15 March – and now being replaced by a more selective 30-day EU regime – meets the G20 test of being “targeted, proportionate, transparent, and time-limited” and appears to have stopped intra-EU competition, say officials.

There are other encouraging signs. A New Zealand-Singapore bilateral deal ensures that markets stay open for medical supplies and equipment, while a wider pact signed by the two countries as well as Canada, Australia, Chile, Brunei and Myanmar promises to keep supply chains open and remove restrictive measures on essential goods.

Hogan’s suggestion of a plurilateral agreement which liberalises tariffs on essential medical equipment has also solicited wide international interest.

Yet more can and should be done. EU leadership is urgently needed not just to ease trade during the current emergency but to engineer a bold new global trade conversation which can enable a rapid and sustained recovery.

Here’s an incomplete – and subjective – wish list of how Europe can help:

• The EU should stand loudly and clearly for open markets, both in internal discussions and in the G20, WTO and other multilateral fora. Reports of the death of globalisation and multilateralism are highly exaggerated. The EU is the child and major beneficiary of an inter-connected and inter-dependent world. European leaders should therefore be working to manage globalisation’s weaknesses, not predicting or accelerating its demise.
  While doing so, EU policymakers must end the confusing cacophony of conflicting views and statements over Europe’s future trade conduct. EU trade policy can only be effective and meaningful if the EU trade chief is firmly in the driving seat – and respected and viewed as Europe’s only voice on trade matters.

• That means putting a halt to pontificating on Europe’s ‘strategic autonomy’ in medical supplies or its alleged “morbid dependency” on foreign suppliers of medicines. Over-reliance on one country or one region is risky. But the complexity of global supply chains means that calls for a mass repatriation or re-shoring of health equipment to Europe is both unattainable and self-defeating.
• The EU’s strategic assets, including healthcare capacities and vaccine development requires intra-EU cooperation and improved information screening of foreign investments. Global recovery will require, however, that the EU remains an important global investor and stays open to foreign investments.

Given the economic impact of the current health emergency on emerging nations, the EU should also:

• Introduce a Covid-19 related Generalised System of Preferences (GSP), to be granted to countries whose supply chains – and economies – have been most disrupted by the pandemic.
• Speed up lagging WTO discussions on new rules on e-commerce and facilitating the global health community’s access to digital technologies and data through new rules to support cross-border digital services trade and digital exchanges in health. Health workers should also be allowed to move quickly across borders through flexible regulatory measures, special visas, and work permits.
• Work harder to win wider support for the EU proposal for a ‘Multi-Party Interim Appeal Arbitration Arrangement’ as a stop gap measure following the effective collapse of the WTO’s Appellate Body last December.

Finally, it’s time to change the narrative around trade. Countries, rich and poor, must grow and prosper if they are to have the resources to buy European products. Keeping markets open is not about charity or altruism – nor just about the global common good. It’s about Europe’s enlightened self-interest.

• Friends of Europe: Rethinking global governance
• Europe’s World: Has globalisation gone too far, or have we fallen behind?, by Katarzyna Nawrot
• Debating Europe: Has capitalism done more harm than good?