The European Union (EU) is in the midst of an aggressive reevaluation of its role within global trade. It is turning out to be a surprising forceful champion of liberalized global trade. Now, the United States’ blatantly America-first agenda under President Trump has set in motion this dangerous shift. Its impacts have measurably disrupted business as usual in international trade. The U.S. is now imposing these tariffs, which would slash global exports by nearly $40 billion. In answer, nations around the globe are joining together to reduce their vulnerabilities and pursue emerging opportunities.
The EU is increasing pressure on the U.S. to finalize trade agreements that promote economic cooperation and lower tariffs. It has notably brought to conclusion long-standing negotiations with the Mercosur bloc of South America. In addition to this, it signed comprehensive agreements with Mexico and Switzerland. Separately, the EU is re-launching negotiations with Malaysia and starting new negotiations with the United Arab Emirates. These moves reflect the EU’s strategy to establish itself as a heavyweight liberal trade bloc that is open for business.
Trade Agreements in Focus
International shipping and global trade are at a critical tipping point. In synchrony, the World Trade Organization (WTO) estimates a 0.2 percent drop in trade volumes this year. In light of this, EU member states such as France, Belgium, and Austria are increasingly viewing trade deals as essential to geopolitical stability.
The EU very much wants to get rid of these tariffs with the United States. A sweeping free trade agreement (FTA) between them any time soon appears out of the question. Marie-Pierre Vedrenne emphasizes this point, stating, “It doesn’t make sense to remain fixated on Mercosur, which was negotiated on good terms overall.” Rather, infuriatingly, she calls for a new direction in trade negotiations to reflect the new reality of the global stage.
The EU’s ambition doesn’t stop there — it’s pursuing closer agreements with several other countries and trading blocs as well. Perhaps the most ambitious of these initiatives is a new push, both in Japan and internationally, on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The EU’s eagerness to explore these options reflects its commitment to expanding its market reach while navigating an increasingly complex international trading environment.
Urgency for New Trade Routes
The desire to be first to the finish line with new trade partners is acute among EU member states. Benjamin Dousa highlights that “there is a sense of urgency among member states that we have to open new trade routes, we have to sign new free trade agreements.” This prevailing mood highlights the growing understanding that diversifying our trade partners is critical to long-term economic prosperity.
The EU’s most economically liberal member states are especially encouraged by the momentum swinging towards free trade policies. First, there is growing member state consensus that strengthening diplomatic and economic ties with countries outside the EU will provide significant economic dividend. This strategy will more importantly improve their geopolitical standing.
Jean-Luc Demarty notes that Trump’s policies have prompted a recalibration in attitudes towards trade within Europe: “Trump’s policy will lead everyone to agree to develop trade relationships with the rest of the world and therefore further increase the number of free-trade agreements.” This move is part of a larger trend to realize that isolationist policies fail in our connected world.
Future Trade Prospects
Now the EU is upping its ante, focusing on a half-a-dozen trading partners. It strives to negotiate replacement accords with the United Kingdom, China, and Switzerland. On top of that, they want to conclude an FTA with India by the end of this year. As protectionist sentiments grow across the globe, the EU is moving in a forward direction on trade. There are growing calls for tighter protections to maintain its fragile single market.
Demarty points out that while some member states lean towards protectionism, many swing states are moving towards supporting free trade initiatives. “We have the free-traders, Sweden, Nordic, Baltic countries. We have some protectionist countries. Then we have some swing states in the middle,” he explains. The resulting factionalism within the EU reveals how difficult it is to create meaningful trade policy. It takes a deft hand to navigate the competing desires of their 190+ member states.
As the EU continues to build its portfolio of free trade agreements, it remains vigilant about potential challenges posed by U.S. tariffs on global merchandise trade, which could reduce volumes by an estimated 3 percentage points this year.
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