8 steps to a renewed EU trade policy

Published: 22/10/2020

Take a moment – think of your favourite food and drink.

Coffee, orange juice, wine, or beer? Chocolate, cheese, pineapple, or ham? The list is endless, and of course everybody will have their own preference. But one thing we all have in common is that most days our taste buds will benefit from a product that has been traded across borders, oceans and probably continents too.

For centuries, international trade has enriched our lives with the exchange of culinary and cultural traditions. But apart from these very personal benefits, it is worth reminding ourselves about the importance of trade to the EU as a whole:

  • The EU is the world’s #1 exporter and #2 importer of food and drink.
  • In 2019, food and drink exports reached a value of €120 billion to more than 200 markets.
  • Exports support about 1.6 million EU jobs as well as many more outside the EU.
  • One in ten EU food and drink companies exports outside the EU (>22,000 companies), of which 91% are SMEs.
  • The food and drink industry processes 70% of the EU’s agricultural output but manufacturers also rely on imports of key ingredients such as coffee, cocoa, spices, fruits and nuts, from safe, secure and traceable supply chains.
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Rules-based international trade and the EU’s network of Free Trade Agreements (FTAs) with more than 70 global partners, provide EU food and drink companies with opportunities to internationalise and diversify, as well as the necessary legal certainty and predictability to take effective trade and investment decisions.

As the European Commission is setting the course for a renewed EU trade and investment policy, we have outlined a number of key focus areas we believe are necessary to establish a more stable, predictable and rules-based system fit for 21st century challenges.

1. Be ambitious

The European Commission should be ambitious, deploying all efforts to establish a more stable and predictable rules-based international trade environment, improve market access conditions in both traditional and emerging markets, maintain fair terms of competition, strengthen the implementation and enforcement of trade agreements, and contribute to sustainable development.

2. Ensure resilience

General calls for the shortening of supply chains and reshoring of industries, triggered by the Covid-19 pandemic, should be met with caution. Self-sufficiency is no shield from domestic shocks and crises; ensuring a fully functional Single Market complimented by open international trade provides more options in terms of risk mitigation through diversification. Diversification is fundamental both in terms of access to export markets i.e. additional revenue sources, and security of supply.

3. Consult stakeholders

It is essential to meaningfully involve stakeholders as early as possible in the design stage of trade policy, throughout the negotiating process, enforcement and implementation. As a former member of the multi-stakeholder expert group on EU trade agreements, the food and drink industry supports the establishment of a similar platform to serve the current Commission mandate in all strategic trade-related matters. This should be complementary to the Domestic Advisory Groups whose mandate is to monitor the implementation of the Trade and Sustainable Development provisions in EU trade agreements.

4. Promote rules-based trade

For over two decades, the World Trade Organisation (WTO) has played a vital role in enhancing openness, stability and transparency in global trade. However, the international trade environment has shifted significantly over time with the emergence of new global players, rising protectionist tendencies, and the proliferation of unilateral trade measures. In order to revive the rules-based trading system, the EU and other WTO members need to agree on a way toward WTO reform, dispute settlement, and meaningful outcomes on agriculture. Meanwhile, one should commend the efforts of the WTO to keep track of its members’ Covid-19 related trade measures, provide estimates on the impact of the pandemic on global trade, and the continued work of the WTO secretariat and its different committees.

5. Improve access to markets

It is essential that EU trade agreements continue to (a) improve access to third country markets, (b) facilitate security of supply, and (c) promote investment. Open trade must go hand-in-hand with fair terms of competition and a level playing field for domestic EU producers.

Trade barriers, trade disputes, and illicit trade, all put EU jobs and growth at risk, and the EU should continue to tackle these issues in a systematic manner irrespective of whether an FTA is in place. Moreover, efforts should be directed towards the swift ratification of new FTAs, the modernisation of older agreements, and better implementation and enforcement under the leadership of the EU’s Chief Trade Enforcement Officer.

Negotiations should be prioritised towards reaching a comprehensive and ambitious trade agreement with the UK, restoring a positive trade agenda with the US and lifting damaging retaliatory tariffs on agri-food products as a result of the WTO civil aircraft dispute, as well as to engage with China and many other traditional and emerging partners and growth markets around the world.

6. Support sustainable development

Trade plays a crucial role in supporting the UN Sustainable Development Goals. The EU’s commitment to include Trade and Sustainable Development chapters in all EU Free Trade Agreements is an opportunity for trade partners to agree on shared sustainability principles, such as the protection of biodiversity, climate change mitigation. Specific supply chain issues such as tackling deforestation and establishing more sustainable and responsible business practices rank highly for the food and drink industry. The review of the General System of Preferences scheme may provide a further opportunity to align unilateral trade preference criteria with environmental ambitions.

Considering the global dimension of trade and sustainable development, the EU should consider to consult WTO members on the possibility of negotiating a Trade and Sustainable Development framework at WTO level.

7. Digital trade rules

It is important to support the digital transition to facilitate companies’ access to new markets and consumers through e-commerce, greater use of digital documents and processes for customs, and avoiding barriers to trade that would reduce the efficiencies gained from new technologies such as blockchain.

8. Boost opportunities for SMEs

There remains significant untapped potential to boost the internationalisation of EU SMEs and hence the growth and employment impact of trade policy. To achieve this, the EU’s trade policy needs to include meaningful SME chapters in FTAs, involve SMEs on trade missions, and facilitate access to valuable information on tariffs, customs procedures, rules of origin etc. as provided through the recently launched Access2markets web portal. SMEs should also continue to benefit from complementary and supportive Commission initiatives such as the EU promotion policy. All this is hugely important and can support SMEs in the internationalisation process.

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On 20 October 2020, FoodDrinkEurope submitted its full contribution to the EU Trade Policy Review consultation.

I invite you to take a look at our detailed paper or to check out the short version, for your convenience.

By Louis Hinzen

Senior Manager, Economic Affairs, Trade & Market Access Lead