First of all, I strongly believe that we should not resign ourselves to this shift from a rules-based order to a power-based order. We have every interest in opposing this shift because rules-bound international trade is the cornerstone of a system which protects everyone from arbitrary discrimination. Consequently, its questioning is detrimental to countries and businesses engaged in international trade and we must work towards the revitalization of global economic governance, which is not functioning very well at the moment.

For the European Union, it means that it is more important than ever to proceed with a dual integration of all the Union’s exterior actions — of which trade policy is a part — and which must be understood as the implementation of a true international European economic policy. What I call dual integration corresponds on the one hand to the integration of everything we do in the economic realm at the international level — within a geopolitical perspective — and, on the other hand, to the intermingling of external and internal policies such as industrial policy, internal market policy, competition, or even research policy. In other words, in order to be a global actor, we depend on the strength and coherence that we are capable of deploying within the Union.

Within this paradigm, how can we give ourselves the means to implement this kind of integrated economic policy? First of all, I would say that we are not starting from scratch and that our ability to project the power of our internal market on the international scene is a true strength. Today, the Union is already implementing economic sanctions in the service of policy goals. As such, our bilateral trade agreements include elements of cooperation at the global level, ranging from nuclear weapons non-proliferation to the fight against forced labor, respect for human rights, and even adherence to the Paris Agreement. Obviously, adapting these measures to current challenges is an ongoing struggle as they are greater than they were a few years ago, but I want to emphasize that we are not starting from scratch on these matters. We have the instruments which allow us to effectively integrate these policies into our external actions.

There is now, however, a greater challenge to be faced in this shift towards an international order based on power which consists of better defending our values and acquiring the ability to act in accordance with our interests within this new framework. This dual objective leads us to combine several instruments aimed at revitalizing multilateralism, but also to develop autonomous instruments to defend our interests in the absence of cooperation from others. It’s this second axis which is relatively new in European policy.

I believe that we must accept this duality, whereby we continue to defend a multilateral order based on rules, but also accept that it is essential to do so from a stronger position, equipping ourselves with all necessary instruments.

In this shifting order, two parallel yet contradictory trends seem to be emerging. First of all, we live in a world of significant interdependence, characterized by global value chains which both guarantee our prosperity but create considerable mutual vulnerabilities. Paradoxically, the international governance and regulatory framework governing these interdependencies is becoming increasingly fragmented and asymmetric. How does the notion of open strategic autonomy, developed by the European Commission, seek to concretely address these contradictions?

Let us perhaps begin with a semantic consideration, since this notion of strategic autonomy was imported from the field of security policy. Obviously, when we transpose this concept to the economic field, it means that we have to take certain specificities into account. The notion of strategic autonomy must not be confused, in economic terms, with autarky, self-sufficiency, or the idea of turning inward. When we talk about strategic autonomy, there is sometimes the tendency to interpret this as the need to produce everything we need on the European continent. I believe that this ambition is doomed to fail and would be as unrealistic as it would be costly.

However, if we define an actor’s strategic autonomy as its ability to defend and pursue its interests, not alone, but without undesirable dependence and without excessive constraints, it means that this strategy, in the economic field, is above all based on a principle of openness to the world. Our prosperity depends on our ability to connect — especially after this pandemic and the economic crisis it caused — to international growth poles, 85% of which are located outside of the Union. Openness is therefore essential. The question, however, is to know on what basis Europe will engage with the rest of the world and what limits should be placed on this openness. This is where trade policy — both multilateral and bilateral — plays a role, as well as the autonomous instruments that protect us from those who take advantage of our openness. I believe that it is this understanding of strategic autonomy which is guiding European trade policy.

This openness is absolutely necessary, not only to create jobs and foster growth, but also if we wish to reaffirm our leadership position with regards to critical international challenges such as climate change, the fight for technological leadership and the securitisation of exchanges. To face these challenges and truly influence global public goods, we need this shared commitment with the rest of the world. We need more international coordination because we cannot do it alone.

Since 2016, the Union has been progressively strengthening its trade defense instruments and seeking to identify as well as reduce its dependencies in an international context characterized by an increasingly asymmetric and mercantilist trade environment. Given these changes, do you believe that the Union is conducting a long-term reorientation of its trade policy? In other words, is the notion of sovereignty back into the European Weltanschauung?

The Union’s policy is in constant evolution. The context which you are referring to is characterized in particular by the need to adapt to two types of development: external and internal.

On an external front, we are facing the emergence of a growing technological and economic rivalry between the United States and China, which is also clearly a political rivalry. We are witnessing a rise in economic nationalism in other parts of the world as well. This is an extremely costly dynamic that we want to limit at all costs. Paradoxically, the multilateralism crisis coincides with this phenomenon. At a time when we have a growing need for strong international governance in order to face new challenges, this same governance is weakened, including by its own architects! We have to acknowledge that the order established after the Second World War — which was largely created by the United States and its allies, including Europe — has been destabilized by the emergence of China, which has not been adequately bound by rules. This has led to the United States losing confidence in the World Trade Organization (WTO) system’s ability to regulate and discipline Chinese practices. We are therefore confronted with this paradox of an unprecedented need for governance, but with a weaker international system that is under more threat than at any time in the postwar period. This is a powerful external trend, to which we must now add the pandemic and its economic consequences.

Within the Union, there is the colossal challenge of the dual transformation of the European economy, namely the green and digital transitions. We are therefore clearly in a context of adapting trade policy to a new paradigm; but this is neither the first nor the last time we will have to adapt. Does this represent a significant shift? Yes, but not an unusual one.

What are the implications of these challenges for the Union? There is clearly a renewed interest in revitalizing and reforming multilateralism. There is also a strong resolve to use our bilateral trade agreements as a vehicle for cooperation across all global challenges. This strategy is not without risk, as there are huge expectations regarding European trade policy and our actions have substantial consequences for third-party countries. But I believe that this approach fulfills a need shared at the European level: to take advantage of all the platforms and opportunities available to nurture the healthiest possible cooperation with these countries. I feel that this determination is stronger than before.

There is also a greater willingness to ensure the implementation of what we have negotiated with our partners. This is Denis Redonnet’s role, who is the Chief Trade Enforcement Officer within the Directorate-General for Trade. This recently created position reflects the attention given to our partners’ respect for their commitments as well as their implementation. From this point of view, we want to preserve trade policy as an engine for growth while ensuring that this growth is truly sustainable, which entails focusing our efforts on improving production methods. In this sense, even if the reorientation as presented in the Communication adopted in February 2021 on the Trade Policy Review 2 is not unusual, it is perhaps more consequential than five years ago, when European trade policy was last revised.

You regularly stress the need to strengthen the relationship between trade and industrial policy while preserving a fair and pro-competitive single market. To what extent is this ambition of strategic balance shared amongst Europeans and how do you see it being articulated beyond the sometimes contradictory policy goals expressed in the public debate?

I believe that the Union is a continual work in progress. We just mentioned the reorientation of trade policy. In the same way, we are in the process of adapting tools in all other policy areas. Competition policy today, in light of the pandemic and the Green Deal, is not the same as it was three or five years ago. The same is true for industrial policy. There are, therefore, elements that to me seem to cut across these areas, starting with the need to guarantee a level playing field in global trade.

There is also the question of securing supply of the raw materials needed to implement the Green Deal, for example, which is as much a question of trade policy as of industrial policy, and which is a real challenge for the Union’s overall policy consistency.

I also think that there is a clear synergy between the industrial strategy adopted by the Commission this past spring and the trade policy strategy adopted a little earlier. This is particularly the case insofar as industrial policy is based on a single, open, integrated and competitive market, coupled with competition and trade policies which, together, stimulate economic recovery and the dual ecological and digital transformation.These three areas of action are being adapted as simultaneously as possible to this new framework and these new challenges. Does this mean that there is always full consensus on policy orientation within the Union? No, because the right balance must be struck on a case-by-case basis, depending on each initiative. But I think that within the Commission we have the necessary instruments to safeguard this consistency. The very structure of the Commission reflects this aim; the Trade Commissioner is also Executive Vice-President for the Economy. From this point of view, in preparing legislative initiatives, there are mechanisms that help us to aim for an appropriate equilibrium, even if it is not guaranteed from the start. It’s a balancing act, but it’s our responsibility.

The Commission is currently working on deploying a new instrument that would allow Brussels to impose sanctions on any country that seeks to economically coerce the Union. If successful, this instrument could make a significant contribution to Ursula von der Leyen’s stated geopolitical ambitions and would potentially give the Commission true power as a foreign policy actor. Can you tell us more about this project?

Indeed, this instrument is one element of the response to this gradual shift in the international order towards a system based on power relations. We have noticed that we do not necessarily have instruments that enable us to defend ourselves against acts of coercion. As we are an actor based on law, our response has always been structured around the legal opportunities that would allow us to assert our interests and values in international forums, particularly the WTO. However, it is clear that we now live in a world in which we do not have the means to firmly respond if another country withdraws from international law and exerts pressure to prevent us from defining our policies according to our own interests and values.

What the Commission is proposing is first and foremost a dissuasive instrument which, by its very existence, should give pause to third-party countries that may be tempted to pressure us. This means that we are always interested in pursuing a dialogue with a country that is considering such measures. Should the dialogue prove unsuccessful and the country in question continues to be confrontational, we then intend to have a variety of protective measures available to the Union. These could include countermeasures such as imposing customs duties, placing restrictions on services, excluding countries from European public procurements, or restricting access to EU program funding. In that sense, this instrument seems to me to be a perfect example of the idea of open strategic autonomy because it gives us the ability to act according to our interests while preserving our openness. The goal is not to turn inward, but to develop a mutually beneficial relationship with third-party countries, where we are in a stronger position, backed by a wide range of protective measures. What is important in this respect is to clearly understand that we are developing an instrument to protect our interests in case a third-party country withdraws from international law. However, any European response to such a violation will always be in keeping with international law.

This proposal has been on the negotiating table for a month and is attracting a lot of interest. I am counting on the French Presidency of the Council of the European Union to move the debate forward on this matter, but it is a complicated legislative initiative that requires a high degree of cohesion within the Council as well as the involvement of the European Parliament. We are not there yet, but, with this proposal from the Commission, the message sent to third-party countries is strong.

The French government has signaled its intent to advance several trade-related issues during its presidency of the Council of the European Union, particularly as to ensure consistency with European climate ambitions. In addition to finalizing the Carbon Border Adjustment Mechanism, the French government wants to push for the implementation of mirror clauses in order to ensure that environmental standards in trade agreements with third-party countries are consistent and that trade rules are reciprocal. The implementation of a tool to combat imported deforestation would follow the same logic. What is your assessment of the progress made on these issues and their chances of success in the short term?

This subject illustrates the evolution of the trade policy debate. In the previous century, trade policy was almost exclusively concerned with the removal of physical and technical barriers. Today, there is much more discussion of issues related to the conditions of production within the jurisdictions of different countries. As such, I believe it is necessary to take a granular approach to the issue of mirror clauses, which are often superficially addressed in the public debate.

First of all, it is important to remember that all products on the European market, whether they are manufactured inside or outside the Union, must comply with its criteria and standards that concern the characteristics of the product itself. It is out of the question that a product containing pesticides banned in Europe circulates on the European market. Things get more complicated when we talk about production methods in a third-party country that do not impact the characteristics of goods stricto sensu. For example, what should we do when a pesticide that is not authorized in Europe is used in a third-party country without ending up in the end product? In such cases, the solutions are much more complex and our new strategy on mirror clauses aims to address this issue. There are situations where we believe it is appropriate and legitimate to insist that certain characteristics be respected in production methods. This applies in particular to global challenges such as climate change. Since there is international consensus on the fight against global warming, it is vital that everyone acts to ensure the effectiveness of this global action. It is also imperative to not support the use of harmful products. It is this rationale that is also behind the proposal for the tool to fight imported deforestation.

Given that there is a strong cross-border and international dimension to this debate, it is critical that measures do not arbitrarily discriminate and that they are proportional to desired goals. It seems to me to be the case with this proposal because the proposed rules allow deforestation-free trade to continue unimpeded and without discrimination, while at the same time offering mechanisms to make it easier for producer countries to comply with our regulations. When these mirror clauses are justified by an international challenge such as environmental protection, and when they do not create arbitrary obstacles to trade, they appear legitimate and can be envisioned in the framework of our trade agreements.

Is this the best approach? This question must be addressed on a case-by-case basis. If we only regulate the conditions under which forest-based products can enter the European market, we are ultimately dealing with a relatively small percentage of the overall production that risks being fueled by deforestation. If we wish to take more meaningful action — and not only on products exported to the EU — we need to look for other means of international cooperation in forums intended for this purpose. In other words, autonomous legislation alone can never replace cooperation — for example within the framework of the Paris agreements — but it can act as a supplementary incentive. I believe that if we really want to influence and improve production standards, we must do so by working with third-party countries to encourage them to raise their standards, and not simply by trying to impose our production methods on them.

We must also recognize that the European Union does not always have a monopoly on good regulation and that it is important to respect the regulatory sovereignty of others if we are going to rightly demand it for ourselves. For example, it is entirely possible to imagine that a pesticide which is banned in the EU is authorized in a third-party country which combats a tropical disease that does not exist in Europe. In this case, do we have the right to prohibit this country from using a very effective means to fight a tropical disease that does not affect us even if it has been used in the production process, provided that this pesticide is not present in the finished product that will circulate on the European market? The need for mutual respect with third-party countries is crucial to ensure the kind of cooperation that will significantly contribute to environmental protection, as opposed to simply adopting autonomous measures concerning imports into the EU market. As you can see from these examples, everything is about striking a balance and what kind of signal we are sending to our partners in the area of trade reciprocity.

With regard to the Carbon Border Adjustment Mechanism (CBAM), the new German government seems willing to commit to this project and the United States seems to be more receptive to the idea than before. Do you think that this mechanism will be completed in the near future? What impacts do you foresee in EU trade relations? Will the revenue be considered as true own resources which will feed the European budget?

This project has been in progress for several years now, and I think it is a very good example of cross-sectoral cooperation within the Commission. It has led to a solid proposal that serves the climate objective of preventing imports from undermining the Union’s ability to pursue an independent climate policy. This project is an incentive for third-party countries to work with us in order to increase their carbon pricing ambitions. You mentioned the German government’s coalition agreement which, in fact, supports the idea of a climate club that would be organized around a principle of cooperation with other countries in order to increase global climate ambitions.

Initial reactions to this mechanism have generally been positive, but some third-party countries are still concerned because they feel that this tool could amount to a kind of green protectionism. It is very important to explain our approach in a pedagogical manner in response to these concerns. In this sense, it seems to me that the CBAM meets the criteria I outlined earlier, namely that it is in line with an international consensus, that it does not arbitrarily discriminate, that it does not restrict trade beyond what is strictly necessary to achieve this goal, and that it is complemented by offers of cooperation with third-party countries. More and more countries are already working in the same direction, such as Japan, Canada, and countries that are closer to us, such as Ukraine. We also have the advantage of the European Union Emissions Trading Scheme (ETS), which is open to other countries. I believe that this is a good example of our ability to make progress on stand-alone measures that are simultaneously an incentive for more overall cooperation.

That being said, we cannot underestimate the technical challenge of implementing a policy that links different systems such as the CBAM and the EU-ETS. For example, the United States seems to be moving in the direction, not of carbon pricing, but mainly of regulatory action. It is therefore very difficult to convert their actions to match our carbon pricing mechanisms. There are still a number of technical issues to be resolved, which is why it is appropriate that we give ourselves enough time by including a transitional experimentation period before the system comes into full effect, as well as sequencing the deployment of the mechanism, focusing first on the most polluting sectors.

On the budget question, the recent proposal for the next generation of own resources aims to devote 75% of the revenue generated by the CBAM to the European budget. I think this is appropriate because it is a European system based on European objectives and priorities. It is only natural that its revenue should go to the EU budget.

Since May 2021, the Comprehensive Agreement on Investment with China (CAI) has been suspended, particularly as a result of the Chinese authorities’ disproportionate reaction to European sanctions in connection with the Uyghur situation. Furthermore, the German coalition agreement is indicative of a much firmer stance towards China than during the Merkel era. What do you see as the next steps in this matter and in the dynamics of the broader EU-China relationship?

First of all, we must acknowledge that the political context has changed significantly, as you rightly mention in your question. There is a recently renewed consensus within the European Council to maintain the general approach adopted in 2019, which is to consider China as both “a cooperation partner, an economic competitor, and a systemic rival.” I believe that the balance of this three-pronged approach has shifted a bit to the third element, that of systemic rivalry, which is increasingly visible in the Chinese regime’s actions, both domestically and internationally. On this point, it is very clear that the Union will not yield to any form of coercion or blackmail.

We remain convinced that CAI is a very good agreement and will help to correct many of the imbalances that still characterize our relationship with China.This will notably include some of the distortions created by the Trump Administration’s Phase 1 agreement, which the Biden Administration continues to defend. There is no doubt that if the agreement were in place today, we would be in a better position vis-à-vis China. That being said, there is no prospect of ratification at this time for the reasons you rightly point out, at least as long as members of the European Parliament remain under an unacceptable sanctions regime.

Faced with this deadlock, we are seeking to create new instruments as we develop our autonomous toolbox, which are not targeted at any particular country, but could be applied to China and would be useful in defending ourselves against countries that abuse our openness. At the same time, it is imperative to engage in a dialogue with China about lifting the restrictions that are currently negatively impacting our economic relationship, because cutting ties with China or refusing to engage in dialogue is not an option. But the need for dialogue is no reason to sacrifice the respect of human rights and our defense of fundamental rights on the altar of our economic interests. I believe that the Union must be able to strike a balance and act on both fronts, with China or any other country. If we only engage with countries that fully share our values and our worldview, we will soon find ourselves very much alone. This would also mean letting the world fall prey to the confrontation between China and the United States, which can only result in the weakening of our values and the sidelining of Europe.

With regard to China, there is therefore clearly a new context, which is reflected in the positioning of the European institutions and the member states, as well as a recognition of the need to preserve the twofold imperative for a firm commitment and an open dialogue. I can illustrate our approach with a very recent example. We have just launched a WTO case against China for its discriminatory trade practices against Lithuania. Such measures are not acceptable and violate WTO rules. They threaten the integrity of the internal market, as they affect intra-EU trade and EU supply chains. Although we are pursuing this legal action, parallel diplomatic outreach and efforts to de-escalate the situation will continue.

In this context, how do you understand Global Gateway, the new European strategy that aims (without naming it) to offer an alternative to China’s Belt and Road Initiative? Is this project ambitious enough to produce results and to concretely help the Union to better position itself in the global infrastructure and connectivity race?

What is important about Global Gateway is that it offers an alternative to third-party countries in the sense that it will facilitate financing, but it is also more environmentally and financially sustainable than the Belt and Road Initiative. I believe that by establishing synergies between actions at the European level and those of the member states, this alternative model could prove to be very attractive. This is at least the wish expressed by the Commission. It will be imperative, however, to ensure this project’s proper implementation in the long term. We still have a lot of work to do in this area.

In June 2021, the Trade and Technology Council (TTC) was launched with muted enthusiasm by the United States and the European Union in order to expand and strengthen bilateral trade and investment following four years of considerable tensions. What are the expectations on both sides of the Atlantic for this forum, and will it be enough to repair the transatlantic relationship?

I believe that we managed to get the transatlantic relationship back on track in 2021, despite a difficult global and bilateral context with the United States. We put aside disputes over the Airbus-Boeing file as well as over the steel and aluminum dispute. We created the TTC as a means of transatlantic coordination, consultation, discussion, and exchange on major challenges such as technological leadership, managing disruptions in value and supply chains, and reducing unilateral dependencies, which prevent us from acting in the full defense of our interests and values. The TTC should therefore be seen as a platform that allows us to not dwell on past transatlantic relations, but to resolutely look to the future.

Our first meeting saw a strong and determined commitment from political leaders, but also the creation of working groups that will allow us to truly take up the challenge of the dual transformation of the European economy, and for which it will be imperative to work with like-minded partners. This dynamic has raised many expectations and we are actively consulting with the various parties involved to see what objectives should be pursued within this forum. The aim is for this forum to serve as a concrete means of developing our economy’s competitiveness in a world where technological and climate issues are increasingly important. We are currently preparing the next session, the exact date of which has yet to be determined, but which will be held in the spring. Until then, we will continue to develop the areas of cooperation identified in the fall, particularly in the areas of export controls, investment screening, supply chain resilience, artificial intelligence, and, more broadly, on global trade challenges.

In the end, I believe we have created a mechanism that allows for true engagement of all actors on both sides of the Atlantic. In the past our cooperation has particularly suffered from a lack of engagement among executive agencies and stakeholders, beyond governments. In the future, the goal is to not spend too much time seeking regulatory common ground in areas where each side has decided to pursue its own objectives, but rather to focus our efforts in areas where both sides are developing regulations from a perspective of mutual understanding and to avoid the emergence of new barriers to transatlantic trade. We have a long way to go, but we are on the right track.