The Future EU: Donald Trump’s Not Alone in Eschewing Free Trade

by Stuart Burns on JANUARY 12, 2017

There are many in the business community who share a sense of anxiety as to what trade policies the new administration of President-elect Donald Trump will introduce in the year ahead but, if it’s any consolation, the U.S. is not alone in pandering to populist calls for limits on free trade.

Here in Europe there is a quieter but no less disturbing war being fought between the European Union Commission and the European Parliament and the E.U. member states. Historically, the European Commission handled trade negotiations on behalf of the single market, but the 2009 Lisbon Treaty, intended to make the EU more efficient and transparent, also gave all the EU’s 38 National and regional parliaments essentially the right of veto on any new trade accord.

Anyone Can Veto… Anything

As Carnegie Europe in a recent post observed the sheer complexity of trade deals, which cover many topics that are not included within the European Commission’s powers, means that ratification is becoming a de facto requirement of any new trade deal. As politics becomes more populist in the E.U., as in the U.S., an array of interest groups can challenge any deal on the grounds of environmental, health, cultural, employment concerns, or any combination of the above.

CETA the E.U.-Canada trade deal very nearly collapsed late last year following objections by the regional government Wallonia, surviving only after arm-twisting from the E.U. and Canada. Even without Donald Trump’s opposition to the Transatlantic Trade and Investment Partnership (TTIP) it seems unlikely the myriad parties with a final say over the treaty would pass it to ratification.

As a result, it’s hard to see TTIP going anywhere this year and that raises the question as to whether the E.U. will ever conclude any significant trade deals in the future. Certainly for the next two to five years, the E.U. will be locked in what, without doubt, will be fraught negotiations with the U.K. over a post-Brexit free trade deal. It Is clear the British government has no intention of adopting an existing trade relationship with the E.U. such as Norway or Switzerland’s, which would allow them open access in return for budgetary contributions or the continuation of open borders.

Throughout her time, or maybe because of her time, as Home Secretary in charge of security, the U.K.’s new Prime Minister, Theresa May, is dead-set on controlling immigration after Great Britain leaves the E.U., almost regardless of the economic consequences.

What Did Brexit Really Mean?

The government wraps this approach in the cloak of voters wishes expressed in the referendum — although it is far from clear whether voters genuinely wanted a ban on all immigration or simply a reduction to more manageable levels. Nevertheless, free movement of labor is categorically not in the cards for what remains of the U.K. post-Brexit and, as such, the U.K. will not remain in the single market by the end of this decade. Whether the U.K. and E.U. can negotiate some kind of free trade agreement? One has to hope they can, for the sake both parties, but the growing reluctance of voters and interest groups to accept the compromises inherent in any free trade agreement suggests that even if such an agreement could be reached it would struggle to pass ratification by all 38 National and regional governments.

Southeast Asia, alone, seems open to the concept of free trade and maybe, not surprisingly, remains keen to secure access to European and North American markets. They will however almost certainly find the odds are stacked against them for the balance of this decade.