Opening remarks by Sabine Weyand, Director General for Trade, European Commission
American Institute for Contemporary German Studies, Johns Hopkins University, 15 September 2020
- Thank you very much Peter, and good morning to the United States, and good afternoon to listeners in Europe. I am very happy to be here and I think you have already perfectly introduced the subject by explaining exactly what we mean with “Open Strategic Autonomy.”
- Now, why are we using the concept? It is because we are undertaking a fundamental review of our trade policy. This is something we last did in 2015, and I think that in itself is an explanation of why we are doing it. The world around us has changed a lot in the last five years, and that needs to be reflected in our trade policy.
Addressing Trade Challenges
- I just want to indicate briefly some of the major changes that we’ve seen in the composition of trade.
- Trade in manufactured goods is down compared to trade in services. Digital trade is the name of the game. We have a geographical re-composition of trade, notably towards the East Asia region and, of course, the rise of China. We have also seen an increase and rise in the U.S.-China confrontation over the last few years. And all these issues have been accentuated by the current crisis. So these are the external reasons that have to lead us to update our trade policy.
- Now, internally we are struggling with many of the issues which I think concern societies around the world. While we have a strong public support for open markets and trade policy – we had a Eurobarometer which measured support across the EU last Autumn, so before the COVID crisis, and it turned out that there was very strong support in principle –, at the same time, the expectation that trade policy has to do more to contribute to a fairer, more sustainable globalization has grown. These expectations are there and are as of now unmet. So the whole issue of fairness and sustainability, but also enforcement of trade rules that have been negotiated, have risen very much on the agenda of the EU.
- Now, as you said, we are using the concept of Open Strategic Autonomy as an analytical prism, or an aspirational goal of our trade policy, and it indeed means that we are keen as EU to chart our own course in world affairs, the world economy, and the world trade in line with our interests and values. At the same time, it’s called Open Strategic Autonomy in order to counter an idea that sometimes you feel that autonomy is mistaken for autarky, or closing in on oneself.
- In fact, for us, if we want to deal with the challenges I have briefly referred to now, it requires cooperation with others, and we need more global cooperation if we want to deal with the health issues raised by the pandemic, the economic crisis raised by the pandemic, or the climate crisis, any of the issues that require more cooperation with others rather than less. And that requires building strong alliances. So, that is the way in which we approach this updating of the “why” and the “what” of our trade policy. And, of course, in all this the transatlantic relationship is fundamental.
EU-US Trade: the Artery of the World Economy
- And, sometimes, through all the noise over the Atlantic, we are at risk of forgetting the fundamentals. And, the transatlantic relationship remains the artery of the world economy. And, we have a relationship where trade in goods and services accounts for more than 1 trillion dollars two-way trade every year. Around 2/3 of that trade is intra-firm trade or trade in capital goods.
- So the transatlantic relationship is also key to the global value chains that we need in order to function in today’s economy.
Reforming the WTO
- So what are the priorities we want to work on, or we see as the main challenges? And here the WTO remains a centrepiece of world trade and the cornerstone of our trade strategy because we need a functioning rules based trading system for predictability and confidence around the globe. We have together, the EU and the US, shaped this global trading system for decades and I think we ought to have the joint responsibility to update it to deal with today’s challenges. And, from the EU side, we are deeply convinced that the WTO needs fundamental reform across all of its three functions.
- Most importantly, we have a rulebook that dates back to 1995 which does not reflect today’s realities, and notably the emergence of China as a major player, which is not reflected in today’s rulebook. So we need to update that rulebook in order to make it work for a membership of 164 WTO members with very diverse economic developments, diverse interests, etc. And so we need to look at the issues of level-playing field, and that means notably introducing rules on industrial subsidies – that is more important in the current crisis because if you look around, you see that a lot, basically all of the developed countries and a lot of emergencies economies that have the means have taken to substantive fiscal stimuli and this has the potential, if it is not framed by a set of rules, to lead to protectionist reaction by others.
- So we have an interest, increased by the crisis, to develop disciplines on subsidies and of course also to deal with the effect of China’s state capitalist system on the rest of the world. We also need to update the rulebook to deal with the issues that are important today, and that is the whole question of digital trade and, I already mentioned to look at how we can create WTO rules that help us deal with the climate emergency, that help with the distribution and proliferation of environmental goods and services, and clean technologies, etc., to help us save our planet. This is for the negotiating function.
- Then we also see a need to reform the dispute settlement. We are in crisis because of the paralysis of the appellate body, but this being said, we also have to recognize that the dispute settlement system as it has been functioning is not good enough. It takes far too long to get final adjudications of disputes, so we need to work on that. We need to restore a two-stage dispute settlement. We want to do that with the US because we think that the system has served the US very well. And that we need to recreate the system while addressing some of the dysfunctioning that we have all seen emerging, and make sure the system functions as it was intended to function in 1995. So we want to go back to 1995, we do not want to go back to 1947, not to find a point about that.
- The third function is the regular monitoring function, and I think here again, the WTO could do a lot more, and we’ve seen that with the crisis where the WTO secretariat was rather timid in the beginning, to monitor the trade restrictive measures that have been taken by different members. And I think the regular monitoring function has a key role to play to prevent the emergence of disputes and more can be done in this respect.
- Overall, we want the WTO to work more in sync with SDGs, and that is why we think a down payment of confidence building in the WTO is to get an agreement on discipline in fisheries subsidies – I think that is extremely important. We EU-US need the WTO.
Repairing the EU-US trade relationship
- And that is why, in order to be able to work together to reform the multilateral trading system, we also have to repair and renew our bilateral relationship. That is the backdrop to the small tariff package that we have agreed with USTR. The package as such is a bit more than a couple of hundred million dollars in tariffs in two way trade, which in itself is good, but it is small, I mean, that’s very clear, but at the same time it is the first tariff liberalization that we have done in over 20 years. We are also doing this in full compliance with WTO rules, which is extremely important to us. So I think this will hopefully be a package that will build confidence and help us deal with a number of thorny issues that have been besetting the transatlantic relationship for quite a while.
- This requires settling our disputes. We’ve made again a recent offer through our Executive Vice President and Acting Trade Commissioner Valdis Dombrovskis who has written to USTR Lighthizer with a proposal to settle the Airbus/Boeing dispute.
- Over and above that, we still have to deal with the 232 measures on steel and aluminium and with new investigations into other sectors or related sectors, plus 301 actions. So there is a lot we need to do in order to calm down tensions in our relationship.
- And, as I said, we need to make our relationship future-proof. That is why we have proposed a trade, security and technology oriented trade and tech council to work transatlantically and to look at issues from exports of dual-use goods to investment screening for security purposes, etc. There is a lot more that unites us than separates us, but we need to put an end to the conflicts that have been besetting us, and that will be part of the challenges, and for us, strong transatlantic cooperation is part and parcel of our strategic autonomy.
- The EU wants to be a partner that acts assertively but at the same time in cooperation with others. We are also updating our rules. As I said, we face certain contestations in the public where sometimes companies but also civil societies have the impression that our openness is taken for granted, for instance the commitments we negotiate on labour and climate are not sufficiently and seriously implemented. And here we have created the function of chief trade enforcement officer who will look exactly into updating or enforcing rules that we have negotiated and make sure they are respected by following them up with our partners.
- These are basically the future building blocks of our future trade strategy. There is a lot more in the consultation document that we have put out in June. The public consultation has been extended by Executive Vice President Dombrovskis in order to have time to engage himself with stakeholders and hear the expectations around this review before drawing the conclusions in the trade strategy that probably will see the light of day in very early 2021.
- That’s what I wanted to say by way of starting the discussion, and I am looking forward to a lively discussion.
Watch the entire event here.