Square pegs in round holes? Using trade policy for non-trade objectives - Editorial
COVID-19 has accentuated international tensions and a shift in global world order. In a more polarised world, Europe strives to assert itself as a geopolitical power. This is a major challenge with 27 member states and complex decision-making processes. Global Europe brands itself as both self-interest and value-driven. It has a toolbox at its disposal to interact with the rest of the world. One of the most essential tools in the kit is trade policy. But is this the most effective tool to export these values or rather a square peg for round holes?
ECDPM together with a group of well-respected academics from across Europe, under the leadership of Bernard Hoekman at the European University Institute, embarked on a 3 year research project financed by Horizon 2020 entitled: ‘Realising Europe’s Soft Power in External Cooperation and Trade’ (RESPECT). This magazine presents some of the ‘Great Insights’ of the research produced so far.
Lisa Lechner describes how non-trade objectives have become an essential pillar in EU trade agreements, and that over time the agreements might get more teeth to enforce these values. The non-paper published by the Dutch and French Ministry of Foreign Affairs is a case in point. It calls for the EU to step up its ambition in linking trade and sustainable development in all its dimensions.
Basedow, Fiorini and Hoekman and Yildirim summarise the results of an extensive stakeholder survey on the perceptions and preferences regarding the effectiveness of policy linkages to attain non trade policy objectives (NTPOs).
Paola Conconi and her team find that there are serious limitations to use both positive and negative conditionality in trade agreements to convince partner countries of the EU to make commitments in policy areas such as human rights or labour and environmental standards.
Ubaldi & Borchert argue that uncertainty linked to the conditionality on NTPOs embedded in the EU preferential market access schemes can actually discourage trade and have the opposite effect of what Europe seeks in terms of development.
Magntorn, Holmes and Rollo focus on what it takes for Europe to exert ‘smart’ power.
Pelkmans observes some convergence in terms of environmental standards between Europe and China, that cannot necessarily be ascribed to Europe’s influence.
Hoekman and Fiorini draw six lessons in terms of policy coherence from the COVID-19 crisis and the trade policy reactions that ensued highlighting the significant negative spill-over effects on EU’s trading partners, particularly developing countries.
Van Seters and Bilal identify how existing trade and investment tools, like the European Enterprise Network, can contribute to make better use of trade policies to deliver results for consumers, workers and business, with respect for the planet and human rights.
Rojas-Romagosa finds that not only preferential trade agreements increase bilateral FDI, but the inclusion of civil and political rights provisions has an additional positive effect on investment.
The tenuous link between export promotion and unemployment is the focus of Olarreaga and Ugarte’s research. And finally, Kamala Dawar argues that the COVID-19 crisis has accentuated the urgent need for a clear regulatory framework for official export credit support.
These articles illustrate how the EU considers its trade policy as an instrument of external relations. The jury is out on whether these are the most effective means of achieving its broader objectives. Trade policy in conjunction with other interventions holds more promise.
Kathleen Van Hove
Senior Policy Officer
Economic and Agricultural Transformation Programme