28th May 2023

EU pushes WTO reform and Paris agenda in new trade plan

  • Deforestation. The EU Commission said diligence rules should be mandatory to tackle forced labour and environmental harm in value chains of EU companies (Photo: Basil & Tracy Brooks)

The European Commission on Thursday (18 February) presented a revision of the bloc's trade policy, saying sustainability will be at the core of its new "open, sustainable and assertive" strategy.

Brussels will seek a commitment from all G20 countries on achieving climate neutrality as soon as possible, urging them to reflect this ambition on their national targets under the 2015 Paris Agreement.

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"We will seek that adherence to Paris Agreement and meeting [its] commitments ... is an essential element in free trade [and investment] agreements with third countries," said EU commissioner for trade Valdis Dombrovskis.

The bloc's trade strategy for the next decade prioritises World Trade Organization (WTO) reform.

The EU wants to push for a "strong environmental agenda" at the WTO, with initiatives that include the liberalisation of trade in selected green goods and services, the greening of aid-for-trade, or agreements to reduce fossil fuel subsidies.

Moreover, the commission said that restoring the WTO Appellate Body stage, a binding dispute-settleent system which is the ultimate arbiter on global trade, and which was paralysed by the previous US administration, is "crucial".

EU officials said that reform of global commerce rules will require a lot of "alliance building" and cooperation with Nigeria's Ngozi Okonjo-Iweala - who was appointed as the new WTO director-general on Monday.

"The EU will give priority to strengthening its partnership with the US," said the commission in its communication, arguing that new administration in Washington provides an opportunity to reform the WTO, tackle competitive distortions and contribute to sustainable development.

The EU executive also said that it would propose making diligence rules mandatory to tackle forced labour and environmental harm in the value chains of EU companies, as well as rules to avoid distortions of competition due to state intervention.

Meanwhile, the commission wants to examine the impact of the EU's trade agreements on key environmental aspects - such as deforestation, by deepening data-collection efforts.

The EU consumption of commodities such as soy, palm oil, beef, rubber and cocoa causes the deforestation of some 72,900 km2 annually, an area larger than Ireland, according to a commission report.

Last year, the European Ombudsman launched an investigation into the Mercosur trade negotiations, following a complaint from several NGOs who argued that the commission had ignored its obligation to conduct a sustainability impact assessment.

Carbon border tax?

As a part of its Green Deal, Brussels wants to put forward a carbon border tax to avoid its climate policies being undermined by carbon leakage.

This instrument would allow the EU to protect Europe's economy and industry against carbon-emitting competitors from outside the bloc while increasing its 'own resources' - Brussels' terminology referring to money that the EU itself directly collects.

Current efforts are focussed on ensuring that a carbon border tax is compatible with the WTO rules and engaging with partners, Dombrovskis said.

The commission has previously said that this tax would be an alternative to the measures that currently address the risk of carbon leakage in the EU's Emissions Trading System - the bloc's internal carbon market.

A legislative proposal for the carbon border tax for selected sectors is expected in mid-2021.

Trade supports 35 million jobs in the EU. In 2019, the EU exported over €3.1 trillion worth of goods and services and imported €2.8 trillion of goods and services.

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