EU shifts focus from making trade deals to enforcing them

7 January 2019 9:27pm

31 December 2018. By Joanna Sopinska.

After pushing to strike major trade deals in recent years — including with Vietnam, Canada and Japan — the EU is shifting its focus to policing its agreements.

Signaling this new approach, EU officials are raising concerns about a level playing field in the bloc’s trade deal with South Korea, and considering activating a safeguard measure to limit surging rice imports from Myanmar and Cambodia.

There has been mounting pressure on the European Commission, which has responsibility for the bloc’s trade policy, to step up enforcement of its trade agreements.

One of the latest examples is a request by Italy to reinstate a duty of 175 euros per metric ton on imports of long-grain Indica rice, which was abolished for Cambodia and Myanmar under the EU’s Generalized Scheme of Preferences.

The GSP is a preferential tariff system that allows duty-free imports of most goods from developing countries into the EU. Cambodia and Myanmar both benefit from the most generous version of the EU’s GSP scheme, the “everything but arms” or EBA program, which does away with tariffs on everything except military goods.

After an eight-month investigation, however, EU officials recommended reinstating the bloc’s duties for three years. If it follows this recommendation, the EU executive would for the first time in the history of the GSP activate the safeguard clause against countries participating in the EBA program.

The commission has until March 16 to take a final decision.

Some politicians and development organizations oppose the idea as overtly protectionist. “I don’t like protecting Italian farmers at the expense of the world’s poorest,” Christofer Fjellner, a liberal EU lawmaker from Sweden said on Twitter.

The recommendation coincides with the commission move to suspend Cambodia’s participation in the GSP scheme on grounds of serious human-rights violations. It is also considering similar restrictive measures against Myanmar.

― Level playing field ―

After months of inconclusive talks with Seoul, the EU executive last month triggered a dispute-resolution mechanism under a bilateral trade deal with South Korea to address its failure to ratify certain International Labour Organisation conventions.

This is the first time it has tried to address its "level-playing-field" concerns in the field of sustainable trade by opening a state-to-state consultation. The commission said its objective was to find a “solution acceptable to both sides.”

Labor standards and environmental-protection obligations are included in the sustainable-development chapters that the EU has been adding to its trade deals since the early 2000s.

In case of violations, the parties may opt for bilateral talks, as provided for in the EU's agreement with South Korea. Or it could refer the matter to a panel of experts, as allowed in its accords with Peru and Colombia, for example. Neither mechanism foresees any sanctions, instead relying on the goodwill of the parties to the agreements.

Critics see this system as inefficient and toothless. Some member states, such as the Netherlands, and lawmakers including Bernd Lange, chairman of the European Parliament's trade committee, favor a revamp. But the commission appears to be reluctant and has pledged instead to enforce the current provisions more strictly.

― Closing loopholes ―

The EU has also stepped up efforts to address shortcomings of trade deals that have been in place for some time. Faced with many complaints from European producers, the commission asked EU governments last month to authorize the reopening of its trade deal with Ukraine, which entered into force on Jan. 1, 2016.

The proposal aims to close a loophole in the accord that allows for duty-free imports of certain cuts of poultry from Ukraine.

The EU uses high tariffs and import caps to shield its farmers from too much competition from imported chicken breasts — one of the most valuable poultry cuts.

But Ukrainian poultry-meat producers created a non-standard cut ― breast caps with a small piece of the wing ― which falls under the zero-duty tariff line agreed in the EU-Ukraine FTA.

The cut is being exported into the EU and sold at a lower price than standard products. This prompted many complaints, with EU producers accusing Ukraine of abusing the trade accord’s provisions.

The commission had accepted a political dimension to the EU-Ukraine trade deal, presenting it as part of its strategy to help the country overcome economic difficulties that emerged following Russian military aggression that began in 2014 and annexation of the Crimea region in 2015.

But the commission now acknowledges that the modification is needed to better ensure the intended protection of EU poultry producers. Negotiations are expected to start early next year, and if the EU executive's newfound attention to enforcing trade-deal terms is anything to go by, it will be playing hardball.