Trade protectionism high on EU leaders’ summit agenda

EU leaders will consider introducing trade measures to better protect European industry on Friday amid divisions among member states about the EU’s future trade policy.

The second day of an EU leaders' summit is expected to be dominated by trade, though the discussion is likely to be overshadowed by continuing uncertainty about the EU-Canada deal which has been thrown into disarray by the rejection of the deal by Belgium's Walloon parliament last week. Frantic behind-the-scenes talks were ongoing on Thursday night to try and broker a compromise between the Belgian regional parliament, the Belgian prime minister Charles Michel and the European Commission which would allow Wallonia to sign the deal.

While all EU member states have signed off on the provisional application of the agreement, Belgium cannot ratify the agreement without the agreement of all five regional parliaments.

With Canadian prime minister Justin Trudeau due to fly to Brussels next week for an EU-Canada summit on Thursday, pressure is on to secure full EU agreement by Monday night at the latest.

Moment of truth

Arriving at the EU summit, Mr Michel said the new proposals had been sent to the Walloon regional government, adding the “moment of truth was close” for the EU-Canada deal. He said he hoped a deal could be reached in the coming hours and days.

The controversy has opened up serious questions about the ability of the European Union to strike trade deals with third-party countries, an issue that could also have implications for Britain which hopes to agree a trade compact with the EU when it leaves the bloc.

The EU-Canada trade deal, which the European Commission says will remove 98 per cent of tariffs on goods sold between the two regions and will open up greater opportunities for business, has been under negotiation for seven years.

EU leaders will also consider so-called trade defence instruments – economic tools that can be used to slap tariffs on imports. The commission wants to bolster the bloc’s trade defences by introducing tougher trade measures, but some free-trade countries are dubious about any move towards protectionism. In a communiqué released on the eve of the summit, the commission said it had already been deploying existing trade defence instruments “to their full force”, but Jean-Claude Juncker said “we have reached the limit of what is feasible under the existing legislation”.

In particular, the commission is looking to alter the existing “lesser duty rule” which caps the anti-dumping duties the EU can put on imports.

Cheap steel

The troubles of the EU steel industry are informing the debate. Ahead of the summit, more than 50 European steel companies wrote to the commission, urging Brussels to toughen its trade measures, particularly against China which has been accused of flooding the market with cheap steel. The prospect that China will gain "market economy status" in December under World Trade Organisation rules which would reduce further barriers with the EU is also increasing pressure on Brussels to act.

Friday’s discussion is also taking place against a wider background of public opposition to free trade. The issue, which has surfaced during the US presidential campaign, has made agreement on the EU-US trade deal known as the Transatlantic Trade and Investment Partnership (TTIP) less likely. EU officials have conceded an agreement is unlikely before the end of President Barack Obama’s tenure.

Speaking ahead of discussions, a senior EU official said that, while trade brings benefits to citizens, it was important to communicate this to the public and ensure that European interests are also protected. “The solution is to regain the trust of European citizens but we also need to protect, defend legitimate European interests against unfair practices.”