Holier than thou EU gives Canada a lesson in trade liberalisation

By rolling out its army of lawyers to confront Canada at the WTO, the EU is being highly hypocritical in protecting their own domestic producers against competition from developing nations.

Will the EU realise just how hypocritical it is being?
On 22 September 2011 13:52

The European Union, the supranational institution that brought you the Common Agricultural Policy, once described by Britain’s former ambassador to Poland as “the most stupid, immoral state-subsidised policy in human history, give or take communism,” has lodged a WTO complaint against Canada over subsidies to renewable energy producers. 

It’s seldom worth expending words on the EU’s trade hypocrisy, simply because it’s all too pervasive. However, given the ongoing discussions between Canada and the EU to establish a free trade agreement, this dispute merits some discussion if we consider the EU’s overall approach to trade.

To start, as a fervent supporter of the proposed EU-Canada free trade agreement, the EU’s decision to lodge this complaint with the WTO should be welcomed. 

If the EU and Canada are to move towards a more harmonious and free trade relationship, matters pertaining to protectionist subsidies obviously have to be addressed. However, Canada might suggest the EU cleans up its own shop before dictating the parameters of global free trade.

At some point the EU must do some self-examination, some might say it is actually the trade bully of the world, fighting against developing nations who simply want access to global markets in industries that they can compete in. But then when a country that might be described as their trade peer moves to protect their own domestic industries (like Canada), the EU calls in the WTO (when convenient) to act as an independent arbiter. 

But like most bullies, they eventually encounter someone willing to fight back. To date, 20 complaints against the EU have been filed with the WTO by developing nations, with additional complaints being considered by Malaysia, Indonesia and Brazil over the EU’s own renewable energy policy.

The Renewable Energy Directive (RED) is a good case in point. Designed to increase the percentage of the EU’s energy consumption from renewable sources, including biofuels, RED dictates what member states can count as “sustainable” and add up to reach their individual targets. 

It comes as no surprise that domestically produced feedstocks such as rapeseed score much higher on the sustainability score board drawn up by the European Commission. Their information source? The NGOs of course, who are bent on misrepresenting foreign feedstocks such as sugarcane from Brazil or palm oil from Malaysia as environmentally unfriendly, manipulating evidence that says otherwise and with little to no regard for the economic benefits these industries bring to such developing nations.   

The EU claims that its trade policy is designed to ensure that “developing countries are able to benefit from access to its own markets and from the openness of the global economy.” In practice, it actually uses its economic muscle to squeeze out economic rivals from developing nations, stopping them from competing on a level playing field.

The EU carries this out by stealth - implementing green protectionist measures and even funding NGOs whose campaigns helpfully characterise competitive foreign industries as “unsustainable”. This is an area where the EU’s policies and NGO positions are inseparable – resource rich nations in the developing world owe more to Western thirst for environmental legislation than they do to providing economic opportunity for their own people.

Malaysia and Indonesia should use their own negotiations with the EU for Free Trade Agreements to push back against the EU’s bullying tactics.

And they should not hesitate any longer to take their complaints concerning the EU’s Renewable Energy Directive (RED) to the WTO. Particularly as Europe continues to dream up more ways to enhance REDs “sustainability credentials”, the latest being a concept called indirect land use change – a measure even Energy Commissioner Gunter Oettinger calls uncertain, and even domestic producers oppose.        

Perhaps as it rolls out its army of lawyers to confront Canada at the WTO, the EU will have an epiphany and realise just how hypocritical it is being in protecting their own domestic producers against competition from developing nations. 

But then again, subsidised pigs might fly…

Raheem Kassam is the Executive Editor of The Commentator and tweets at @RaheemJKassam

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