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EU must act faster to agree more global deals, trade chief says

The EU’s trade chief has vowed to accelerate efforts to strengthen the union’s network of trade deals as Brussels responded to calls from member states to strengthen global supply chains, cut itself off from Russia and strengthen ties with key allies to deepen.

Valdis Dombrovskis, EU trade commissioner, said geopolitical pressures “changed our perspective on trade policy”, adding that he stepped up his work to forge deals with “like-minded partners” in an effort to strengthen the EU’s economic resilience.

Targets include a deal with Chile before the end of the year and an agreement with Australia in the first half of 2023, alongside efforts to ratify deals with Mexico and New Zealand and continue discussions with counterparts such as India and Indonesia.

“We can use our network of free trade agreements (FTAs) to address current geopolitical challenges, to diversify beyond Russian supply, to strengthen supply chain resilience,” Dombrovskis said. “If we want to reduce our dependence on raw materials from some suppliers, we need to broaden our base.”

The commissioner, an executive vice-president of the EU, is trying to revive the bloc’s free trade agenda, which sputtered as major economies erected barriers and tried to protect domestic industries.

France has just completed its six-month EU presidency, during which Paris dragged its feet on trade deals as it sought to strengthen trade defenses and bolster the union’s so-called strategic autonomy.

Some 15 member states, including Germany, Italy and Spain, wrote to Dombrovskis last month, complaining that the EU process to negotiate, sign and ratify trade agreements was taking too long and that the union “must seize the opportunities when they open, otherwise others would.”

The EU’s trade deals cover only a third of its foreign trade, the letter said, and that “we need to do better” as 85 percent of the world’s future growth is expected to take place outside the bloc.

In his response, seen by the Financial Times, Dombrovskis agreed that speeding up its pursuit of trade deals would increase the “credibility of the EU as a serious trading partner”, writing that the bloc needed to find ways to improve its own procedures for accelerate the closing of new deals into effect.

In the interview, Dombrovskis defended the EU’s efforts to be “assertive” on trade, saying the union was in a “more confrontational geopolitical landscape than before” and that it needed tools to respond when other countries did not follow the rules.

The EU is pursuing a range of tools to tackle unfair trade and investment practices, including screening of foreign investment, strengthening trade defenses and cracking down on investment by state-subsidized foreign companies.

“We will act multilaterally when we can, but we can act unilaterally if we have to,” Dombrovskis said.

At the same time, Dombrovskis argued that pursuing new bilateral trade agreements would also make the EU economy more robust and resilient, in particular by enabling it to reduce its dependence on a handful of commodity superpowers such as Russia and expand its supply of suppliers.

He pointed to Chile and its huge supplies of lithium, as the EU wants to sign an agreement to update a 2002 agreement. The EU also wants an agreement with Australia, another raw materials powerhouse, by next summer. “Having a broad network of free trade agreements is a source of diversification and thus a source of resilience,” Dombrovskis said.

The EU signed an agreement with New Zealand last month that Dombrovskis said contained unprecedented provisions on sustainability and labor rights.

The Commissioner said the EU would “draw inspiration” from the high standards agreed with Wellington, but that this did not mean it would want to impose the same provisions in all its negotiations, and said there would be a “tailor-made approach” , depending on the partner in question.

However, he stressed that when it comes to talks with the G20 countries, which have an excessive impact on global greenhouse gas emissions given the scale of their economies, the EU would aim for climate neutrality.

That means that in principle the EU would expect Australia, Indonesia or India to have climate targets ambitious enough to meet the goals of the Paris agreement, which aims to limit global temperature increases.

The EU’s requirements for agreements with significant environmental protection and labor rights may make it more difficult to reach an agreement with some developing countries. But without it, Brussels may struggle to convince national parliaments to ratify them.

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