Europe

EU foreign policy must stop alienating our trading partners

For an EU Commission that began with a grand statement of ‘geopolitical’ ambitions, the foreign policy strategy under Ursula von der Leyen and Josep Borrell has been worryingly insular. The COVID pandemic necessitated a sharp focus on domestic affairs, it is true – and that is not the fault of the Commission leadership – but the foreign relations efforts before and during the pandemic still leave much to be desired.

It seems increasingly clear that the Union’s diplomatic strategy is less focused on benefitting European citizens – increasing exports, creating jobs, opening markets – and more focused on domestic protectionism, creating new trade barriers under the banner of sovereignty and trying to define new restrictive regulations as ‘progressive’.

The end result of this is the very opposite of a ‘geopolitical’ Union. It is one that alienates trading partners, diminishes the EU’s standing as a force for openness and trade, and allows others – even the recently-departed UK – to gain ground at our expense.

This is perhaps most apparent in the EU’s relations with the Indo-Pacific. HRVP Borrell explained during his visit to Jakarta in June this year “We have opened a new chapter in our relations with ASEAN, and the EU is putting a stronger focus on the Indo-Pacific region.”. This is welcome – the Indo-Pacific is fast-growing and has a huge market of consumers for European goods and services. The United States and the United Kingdom have both made similar ‘pivots’ in their foreign policy priorities, for the same reasons.

The difference lies in the execution. The United States has listened to its partners and offered a relationship based on those needs. The most obvious demonstration of this is the new security partnership with India, Japan and Australia known as ‘the Quad’. India desperately needs to upgrade its security and defence posture to address the growing antagonism in its relations with neighbouring China. The American response to this is smart diplomacy, and it is not a coincidence that India is now expected to spend tens of billions of dollars on American defence equipment.

Similarly, the British government noted the frustration in ASEAN over the EU’s trade barriers that discriminated against the region’s exports of palm oil. British Foreign Secretary Dominic Raab, on a visit to Jakarta announced that the UK’s Due Diligence regulations would respect Indonesian local laws and would provide a path to recognition for the Indonesian government’s palm oil certification standard, known as ISPO. The response was immediate: Indonesia and the UK will move ahead with a Joint Trade Review (JTR) as a precursor to a trade agreement, and Raab’s words were met with positive media coverage and a warm response from Indonesian Ministers.

Regrettably, European leaders have not learned from our colleagues from Washington and London. HRVP Borrell’s visit to Jakarta, only a few weeks after the British, was weighed down with the palm oil issue due to pandering to protectionist lobbies in Brussels. Borrell recognized that “our relations stagnated because of a dispute over palm oil exports”, but the claimed that “We have not instituted any trade ban”, a position that according to Indonesian media lacked any credibility (Member State Ministers and MEPs are on record as welcoming the EU’s ban on some palm oil imports).

 It is simply not realistic to expect a strong relationship with a country, or a region, if the EU consistently erects barriers to the region’s largest export. That has real-world consequences: contracts and exports that may flow to American or British firms instead of European; the loss of reputation could weaken our collective diplomatic and security interests in Asia.

“We have to find a solution”, Borrell suggested, when his Indonesian counterpart, Retno Marsudi, Foreign Minister of Indonesia, complained again about the EU’s treatment of Indonesia’s exports. Unfortunately, the ‘solution’ that is coming is more protectionist barriers. Unlike the UK, whose Due Diligence regulation is light-touch and respectful of trading partners’ sovereignty, the European Parliament’s demands for EU Due Diligence would erect arbitrary and widespread new barriers and bureaucracy impacting our partners in Indonesia, India and around the world.

The good news is that the situation is resolvable. President von der Leyen and HRVP Borrell have secured an upgrade in the EU’s status, to ‘Strategic Partner’ with ASEAN. This opens up significant diplomatic – and probably commercial – opportunities. The recent EU-India summit produced multiple areas for potential future collaboration and mutual economic benefit. Our in-built advantages are huge – the world’s largest free single market, a global leader on trade and environment, a valued partner on development financing and arguably the best diplomatic networks that exist anywhere.

These advantages, on their own, will not get us where we need to go. The Commission must now engage in the detail: listen to our trading partners and understand what they need to hear from us.  In Europe, we need to grow our way out of debt after the pandemic: and to do that, we need to be at the vanguard of penetrating these new markets. The stubbornness over palm oil and other such issues needs to end.

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