Sam Lowe / Oct 2019
Phil Hogan’s path to becoming the EU’s trade commissioner has been relatively obstacle-free. However, the Green/EFA group’s decision not to endorse his nomination foreshadows stormy waters ahead. If Hogan is to secure the EU’s economic security in the face of challenges to the international trading order; navigate the tricky intersection of trade, technology and national security; and cement new bilateral trading arrangements with Mercosur, Australia and New Zealand, he will need to convince the European Parliament that the EU’s trade agenda is compatible with its environmental ambition.
Hogan will not find it easy to bring the increasingly climate-conscious European Parliament onside, but it is possible. As I argued in a recent CER paper, the EU should explore the possibility of a border carbon tax, but approach the issue with care to avoid inflaming international tensions further. Any border carbon tax should be transparent, non-discriminatory vis-à-vis alternative means of carbon pricing, and come with financial commitments attached to reduce help affected businesses.
Hogan should also consider beefing up the environment and labour commitments in EU trade agreements. In practice, it is not necessary to overhaul the EU’s entire approach to trade and sustainable development, nor does this mean making every single one of the EU’s environmental and labour commitments enforceable under the dispute settlement provisions of EU FTAs. Instead, deal-breaker environmental or labour issues could be identified and directly linked to specific trade concessions, when appropriate.
In the case of Mercosur, EU tariff concessions on agriculture could be made conditional on the Mercosur members hitting their carbon reduction targets as per their respective national commitments under the Paris Agreement. For example, Brazil would need to abide by its commitment to reduce greenhouse gas emissions by 37 per cent below 2005 levels by 2025. In the event that Brazil looked likely to miss its target in the run up to 2025, the first step should be consultation and engagement between the parties, with a view to the EU providing assistance where appropriate. The EU would only be able to suspend tariff preferences having explored all other avenues.
Explicitly linking trade concessions to environmental or labour outcomes is not unprecedented.
In its recent trade negotiations the US has sought to more explicitly link trade concessions to labour outcomes. When negotiating the Trans-pacific Partnership (a plurilateral trade agreement which Trump has since pulled the US out of), the US negotiated three bilateral labour agreements with specific TPP countries, which clarified the criteria partner countries were expected to meet, increased the levels of monitoring, and allowed for the US to withdraw tariff concessions in the event of non-compliance. In the case of Vietnam, for example, after five years of the agreement being in place, if the US were to adjudge that Vietnam has failed to ensure the rights of workers to freely form and join and labour union of their choosing the US could withhold or suspend tariff reductions.
While doing so might make would-be trade partners slightly more reluctant to strike FTAs, it could lead to increased European public and parliamentary buy-in, making ratification more straightforward. Such an approach would not cause problems vis-à-vis trade negotiations with New Zealand and Australia (and indeed may not even be necessary). In the case of Mercosur, the benefit to Brazil, Argentina and others is that the agreement might now pass the European Parliament, safe in the knowledge that it contains an effective ratchet clause guarding against backtracking on international climate commitments.