“Free trade is our only goal…”

Cecilia Malmström har varit en mycket bra handelskommissionär. Här ett av hennes sista tal i den befattningen från den 4 september.

Gemensamt för de flesta av Malmströms tal och artiklar är det pedagogiska innehållet. Medan många politiker (och andra) oftast levererar till intet förpliktande floskler och syrefattiga abstraktioner ger Malmström både fakta och riktiga argument.

“So today I want to talk to you about a few things in trade – specifically: the things that feel intuitively true, but are in fact not, and what lessons we can draw from this for the future.

The biggest misconception I have seen on the rise is about tariffs. People who advocate for tariffs seem to base their argument on two things: The first is that tariffs target foreign businesses – when they in fact target the consumer. Tariffs are the tool of narrow interests seeking to protect industries at the expense of broader society.

The second is that if we make a product at home, we save money, strengthen the economy and create jobs. This is a tempting argument, but it is not true.

A basic principle of trade – that of comparative advantage, that specialisation is more efficient – seems to be increasingly forgotten these days. This type of thinking could lead to:

  • unsustainable business models
  • higher prices for ordinary citizens
  • and a more fragile economy in the long run

Tariffs are not the answer to a transforming global economy – they are rarely the answer to anything – they are the equivalent of shooting yourself in the foot to hurt the shoe salesman.

Another big mistake people make these days is confusing a trade balance with a bank balance. They misread “exports” to mean profits and “imports” to mean losses. This ignores a range of economic realities.

For example, the increasingly service-oriented economies in Europe, or the fact that getting hold of low priced and reliable imports is vital for our companies. Or that in a modern global economy, good will cross borders many times before they are finished – bringing prosperity and jobs wherever they go.

In fact, a surplus in trade can be a bad sign. It is a sign of weak domestic demand – this can make countries sensitive to changes in the global economy. Balancing the books on trade is not like a household budget.

Another common misperception is that trade is only for big companies. But I know a few people who would disagree with that – Laura Fontan and Diego Cortizas, for example. They are the Spanish owners of Chula Fashion, a company based in Hanoi. They are a family-owned company with 68 employees. Our agreement with Vietnam will simplify rules of origin to make it easier to export to the EU.

Trade is important to companies, both big and small. However, it is true that small and medium-sized companies are underrepresented in global trade. Exporting can be hard. In a new market there are many barriers – customs, language, marketing. Throw tariffs and other trade barriers in and it becomes very difficult indeed.

Often larger companies can absorb these costs, but smaller companies might not be able to. This is why we have started to include provisions focusing on them in our trade agreements. These often include measures like:

  • providing information online on market requirements
  • an SME Helpdesk, where EU companies can protect themselves from unfair practices
  • access to helpful contacts, like the Enterprise Europe Network

In the coming years, it is estimated that 90% of global growth will originate outside the EU. Developing and emerging markets will account for 60% of world GDP by 2030. Smaller companies are well placed to take advantage of that – taking up their role in global supply chains. Trade is not just for the big guys – it is an opportunity for all.

Another presumption is that trade is automatically bad for the environment. In fact, the picture is much more complicated than that. For example, it is better for the climate for northern Europeans to buy tomatoes from Spain, despite the transport costs involved – it cuts back on other causes of emissions, such as heated greenhouses.

Lamb from New Zealand has been similarly shown to have its transport emissions offset by other factors. Both are counter-intuitive but that doesn’t mean they aren’t true. We must aim for a lower environmental impact – but we should keep our approaches evidence-based. Trade can have other indirect, positive spill-overs on the environment too:

  • encouraging innovation
  • spurring investment in low-carbon production to meet standards in other countries
  • lowering the costs of environmental goods and services
  • Indeed, a critical part of fighting climate change is improving local production processes. Trade and investment liberalisation can provide firms with incentives to adopt the high standards from elsewhere. Changes needed to meet these requirements, in turn, flow backwards along the supply chain. This stimulates the use of cleaner production processes and technologies throughout a country.

To encourage this, we have inserted environmental provisions into our agreements. Each of our comprehensive agreements has a chapter on Trade and Sustainable Development. Crucially, this helps us lock in commitments to implement international climate conventions, such as the Paris agreement. This is partly why our recent agreement with the four Mercosur states is so important.

It binds these four countries together with the EU at a time when the US has left the Paris accord and is encouraging others to do so. Nevertheless, there are times when the evidence is there right before our eyes. We all saw the reports over the last couple of weeks of the fires raging in the Amazon rainforest.

This is deeply worrying – the Amazon provides much of the world’s oxygen and must be protected. I firmly believe that the EU-Mercosur agreement can be part of the solution. But I want to make it very clear that we expect Brazil to live up to its commitments on deforestation. These are not just empty words.

Unfortunately things currently seem to be going in the wrong direction – and if it continues this could complicate the ratification process in Europe.

Looking forward, the new Commission President-elect Ursula von der Leyen has said that she would like to look at border adjustment measures on carbon. This could encourage our trading partners to reduce their CO2 emissions. Instinctively, many have voiced doubts, referring to international trade rules. Any measures must be non-discriminatory and WTO compliant, of course, but that is not to say that it cannot be done. New challenges mean looking beyond what we think we know and breaking down our preconceptions. As ever with trade, the devil will be in the details.”

 

 


Kategorier: EU