How the EU can remain competitive in the changing trade landscape

The EU must rethink its strategy for global trade if it wishes to remain competitive in the global scene, panellists at the EU Industry Days event have announced.

Ill-effects from the Covid-19 pandemic have shown that integrated, global supply chains may not always be feasible during a time of global crisis, particularly when aspects of those chains are unsustainable in the face of any pressure.

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The pandemic primarily exposed fragility to the EU's open trade policies and focus on cost-cutting as well as how much its industries are dependant on foreign goods, not only for raw materials but also intermediate products for manufacturing.

The EU has been particularly emphasising both bilateral and unilateral trade agreement with countries such as the UK, Japan and US in order to strengthen its ties to the global market.

However, relations with both the UK and US have been strained in recent years owing to the fallout from Brexit, the EU's poor handling of vaccine rollout and the Nord Stream 2 and Boeing-Airbus disputes with the US.

“Trade is very important for Europe and by the end of this, we must be prepared to negotiate trade with partners and with as many countries as possible," said L'Oréal CEO Jean-Paul Agon, referring to the collapse of a number of bilateral trade agreements in recent years.

He added: "We have to repair the transatlantic relationship with the US. The US and EU are historical partners. I totally agree with ratifying a fair and steady agreement with China and other partners, such as south-east Asia.

"We have seen it before, and South-East Asia may become a major global player in the coming years in the same way India has in the last few decades."

His sentiments were echoed by Denis Redonnet, a chief trade officer for the European Commission, who said the EU must refocus its efforts on a number of areas within the next few years.

He said: "The first focus should be the EU repairing and shoring up its world-space trading system, which marks the baseline of its single-market and free trade. This will go hand-in-hand with reforming and adhering to new rules pertaining to the World Trade Organisation (WTO).

"Global trade should support both the green transition and industrial transformation, which is going to require global cooperation and both unilateral and bilateral trade deals - however, we must be careful not to overburden trade bodies. We could also look outside of trade deals for other measures which could bring in potential partners.

"We must also look to make a strong case as to how we can enforce our regulatory impact of the single market. By doing this, we should hopefully be able to continue to influence global standards and deeper economic integration."

Redonnet also briefly touched on strengthening key partnership with potential partners such as Africa, which has become a focal point for future trade with the EU as well as ending the so-called "weaponisation of trade" - creating a level playing field for all parties.

The twin transitions of green and digital transformation have become central to many global leader's recovery platforms.

“We need to invest in climate-neutral production to help invest in value change. We are central in helping decarbonise Europe. We should look to the EU industrial strategy in helping put the wheels on our trade," said Neil Carr, the representative for the European, Middle Eastern and African markets for chemical company Dow.

He said: "We need to look at models that are more coherent under the European Green Deal. For instance, there is currently a large market for more durable and resilient products, but growing global trends hint at a shift toward increased degradability and being disposable or recyclable.

"The power of the single market is also fading which requires a coherent policy framework which helps us utilise the single market to deliver the Green Deal."

He added: "International trade for the chemical industry is a two-way street. We rely heavily on suppliers for raw materials and inventory for production, and a number of countries rely on our exports.

"Despite increased company revenue, our market share has halved to 15% in the last 20 years. The key question is how to remain competitive in a sector that is still performing well in Europe."

Commissioner Redonnet added the EU should take advantage of bloc-wide regulation for controls where they are necessary and justified, such as in cases of cyber-control.

"The EU should ensure it is not threatened by forms of digital protectionism," he added.

The semiconductor shortage has caused supply for electricals and the shift for industries such as the automotive sector towards greener engines and increased digitalisation to be stunted.

According to Jeorg Wuttke, the president of the EU's chamber of commerce in China, Beijing has been clamping down on foreign trade and tech and hoarding semiconductors for use in electricals and its switch to net-neutral.

He said: “China is taking steps to remove technologies from global governments as part of a security detail, and so I see a divide on the software side to ensure there is not a single Chinese developer engaged and it’s the same over here.

"There is also its monopoly on minerals such as rare earths, which they could also withdraw as they did with Japan in 2012."

Rare earth minerals are also essential in the production of electronic devices.

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This has led to a number of companies having to shift production to in-house, or cutting their targets in line with production shortages owing to a lack of available chips.

However, it is unlikely this shortage will hinder the automotive sector's switch to net-zero for long, with companies like Nissan switching battery production to within the EU, as part of the UK's post-Brexit trade deal with the bloc.

Regardless, the coronavirus pandemic's effect on global trade cannot be understated, and it is likely things may never truly return to normal.

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