Is the EU becoming more unilateralist?
This article is based on a presentation made to the Montreal/Statale University 2018 Summer School in bilateral trade relations between the EU and North America, given on 28 May in Montreal Canada.
Trade of meat into the EU
To be able to export meat to the EU, the European Union has to be certain that the meat meets EU internal or single market health and safety standards.
What does the EU do to ensure that meat from third countries meets EU standards?
First. The EU must have confidence in the capacity of the third country competent authority to implement health and safety policies.
This means in turn that the competent authority has credible systems of inspections and controls in respect of every step along the supply chain from the source of ova and semen through elevation, feeding, medicines, animal health, transport, slaughter, slaughter house conditions, animal welfare, cutting packaging and transport again.
The standards that have to be met along the chain are EU standards or their equivalence. The country or regions of the country must be free from certain diseases.
For a competent authority to show it is competent it must be a member of the OIE, the Organisation of Animal Health. It must meet that organisation’s standards and reporting obligations.
It must have a public health programme to monitor not only the elements mentioned above but also residues of veterinary medicines, pesticides and contaminants.
Each year the competent authority must submit its system to the EU for review and prior approval.
If the country meets these tests then the EU will send veterinary inspectors (The Health and Food Audits and Analysis Office) out to the country to audit the system and then, if the country is in line with these requirements, to authorise specific slaughterhouses for export of meat to the EU.
The point I want to emphasise is that the EU evaluates and controls the quality of law and its enforcement in third countries. And this is done in an exacting and thorough manner before a good (in this case meat) even approaches the EU border. In other words, before there is trade.
I do not want to go too much into what then happens at the EU border. There are documentary, identification and physical checks. Imports can only take place through approved ports. The EU’s General Food Law (Regulation 178/2002) requires traceability which in essence means that the meat must be traceable back to the field and the animal and the ova and the semen.
Supermarkets don’t seem to think that this externalisation of internal EU law is inappropriate. On the basis of the needs of their consumers, they impose private standards and require certification to show compliance with the standards.
The Single Market
The system of pre-controls and border controls for the import of meat is an external aspect of the EU’s Single Market.
External policies are a mere reflection of the internal policies. The EU has policies to ensure that meat coming from Greece or Germany or Malta meets EU standards and it has policies to ensure that third country meat does so to.
General Food Law says that EU food law is based on Science. The EU has two famous food policies that are clearly not based on science. These are the bans on natural hormones in meat production and on certain uses of genetically modified organisms (GMOs). But the EU has internal bans and thus, despite the WTO and the OIE and the Codex Alimentarious, the EU toughs it out on the international level and does not in any way allow international rules to undermine internal policies.
The Single Market is expanding daily. The more we have internal policies the more we have, and will have, external policing policies as we have for food.
Border taxes and Climate Change
The EU has one of the most extensive and costly CO2 reduction policies. There are very strong forces pushing the EU to exceed its commitments under the Paris Agreement. The EU is currently designing the implementation of the policy for the period 2020 to 2030 period. It is clear that the policy will become significantly more expensive in the first half of the next decade.
Current policies which lessen the financial cost on some industries so that they won’t relocate production to countries with a lighter environmental cost are being reconsidered and there is a growing consensus, in business, in the Member States, with NGOs, that some sort of Border Tax on imports is necessary to equalise the costs of production of goods in the EU and in third countries and ensure a level playing field for EU industry.
The EU is built on law and not on the traditional power of the sovereign. The EU cannot adopt law unless underlying law allows it. So, in implementing a Climate adjustment policy at the border the EU will want to comply with WTO law.
To be compatible with WTO law a border tax must not discriminate. This in turn that CO2 cost born by the imported good cannot exceed the CO2 cost of the equivalent domestic good.
To implement an equivalence of costs system so as to avoid a charge of discrimination in WTO law, the EU will have to measure not only the quality of the climate policy in a third country but to work out the exact cost of that policy per tonne of steel or aluminium or kilo of beef imported into the EU.
This will require a system of evaluations, controls, monitoring and inspections at least as sophisticated as the system already in place for the health and safety of meat.
As a direct consequence of the Single Market the EU will develop an external policy to enforce standards. This external consequence of the Single Market is distinct from the what might be called traditional trade or environmental policy. Whatever approach the EU takes in further COP climate negotiations or in trade negotiations with Canada or the United States, it will be constrained by the external consequences of its internal policies.
There is now a growing strand of unilateralism in EU trade policy.
The EU is committed to the multilateral trade framework and in particular the WTO. It has completely changed its agricultural policy so as to allow it to be a demandeur in future WTO negotiations. Essentially the EU wants the WTO to adopt the Singapore issues and make government procurement part of the single undertaking. But we know the multilateral process is frozen.
The EU has concluded or is currently negotiating trade agreements with most countries around the world. As Canada knows because of CETA, these agreements go behind the border to address technical barriers to trade and social and labour and environmental standards embracing the idea of sustainable development. They are incorporating, more or less, many of the Singapore ideas.
The EU is imposing many of its standards and values on third countries by means of these agreements. The EU can do so because of the attractiveness of the EU market. Most third countries view the prize of access to the world’s richest and in some senses biggest market as worth the burden of agreeing to include these new issues.
But to the extent that these FTAs do not include clear provisions on labour, on the environment on social or sustainable goals the EU is moving towards a Unilateral trade policy that will impose these standards anyway.
The Single Market is not under threat
You will all be aware of Brexit and the struggle the UK has in deciding to be in or out of the EU’s Single Market.
But if you look closely at the other so called Eurosceptic forces in the EU, Orban in Hungary, Law and Justice in Poland, Cinque Stelle and La Lega, Le Pen, AfD, none are calling for a roll back of the single market. There are two core complaints: immigration and austerity. But there is no real challenge within the remaining 27 Member States to the four internal market freedoms, to the setting of most economic and product standards at the EU level, at the increasing power of the EU to set social, labour and environmental standards.
This internal cohesion will be reflected in the unilateral implementation of internal policies abroad.
Enforcement of Trade and Sustainable Development chapters in EU FTAs
In addition to the external aspects of the Single Market, the EU is taking steps on the implementation and enforcement of the Trade and Sustainable Development Chapters of existing FTAs.
You will see that the key focus of this relatively recent debate is on enforcement and sanctions. This approach goes beyond the external consequences of Single Market policies which is the core basis of EU unilateralism. But again, it shows that the EU is more willing to put in place policies which control and evaluate third countries policies and will act on the basis of those evaluations.
The future of EU unilateralism
Unilateralism is an expression of power. The EU has never been comfortable with the idea of power. Even if the EU is currently exploring, gingerly, the creation of a European Defence Force within a Common Security and Defence Policy and a European Defence Agency the history of Europe will keep these traditional power initiatives limited.
The EU is, however, becoming more comfortable with and enforcing certain values in a changing world.
As Merkel said in May 2018: ‘We [Europeans] must take out fate in our own hands’. ‘We know we must fight for our future on our own, for our destiny as Europeans’.
As the US seems to be abandoning certain values the EU sees the benefits and the importance of its own values.
More and more there is the collective will to ensure that the internal, Single Market, expression of our values and ideas is reflected in our external actions.
I chose Health and Safety and Climate Change as the two examples on which to base my understanding of the future of EU trade policy because they show unity of purpose across society. EU citizens firmly believe that the EU has the best health and safety set of rules and policies and will stop TTIP even on the ignorant suspicion that chlorinated chicken might enter the EU. The same is true of Climate change. Business and NGOs are united on the need for stronger and more effective internal and external control policies.
These external consequences flow from domestic political agreement.
What does this mean for the EU’s North Atlantic trade policy
Besides the problem of the inability of the WTO to adopt rules to reflect the needs of the world’s largest trading nations, we are currently faced with the possibly more radical problem of the deliberate undermining of the WTO’s functioning. Multilateralism is not in good shape.
Are FTAs in much better shape? CETA got through. But TTIP did not. It seems that if the US does not impose duties on Steel and Aluminium, the quid pro quo will only be a very light tariff-only Free Trade Agreement between the EU and the US and not a revised comprehensive CETA style FTA. Policy makers in Brussels and Washington might see the advantages but most politicians don’t seem to have the fight to push it through.
So, from an EU perspective that leaves us with unilateralism. Overall, I don’t think this need necessarily be bad for Canada.
I have not mentioned equivalence. Despite extensive provisions on equivalence in the WTO and in FTAs, many countries, and certainly the EU, do not seem to consider that recognition of equivalence in practice and in relation to a specific standard (whether health and safety or social or environmental) is possible.
I see this changing. Particularly in trade between countries with similar economic development and societal values and expectations. In other words, between the EU and Canada.
I see equivalence more problematic in relation to the EU and the United States. It is not just GMOs and Hormones. Canada and the EU differ on these issues too. It is more that there is a lack of confidence among EU citizens that the US shares the same values with the EU in the same way that Canada does.
Whatever the accuracy of this perception it is a common perception and perceptions count.
The content of this article is only for information and does not constitute professional advice.
For further information contact Bernard O’Connor.