August 15, 2019 | by Glen Hodgson Print

Glen Hodgson, Founder & CEO of Free Trade Europa, writes for Atlas Network about the need for the right policy approach within the EU to complete the Single Market and facilitate trade relationships globally. The views expressed in this editorial are solely those of the author and do not necessarily reflect the views of Atlas Network.

As the new European Parliament has been elected—and the new European Commission are set to take their seats in November—it is an ideal time to look at where the free trade opportunities exist in Europe and where more needs to be done. The European Union (EU) represents the largest economy in the world at USD 20 trillion, and its rules and regulations set precedents internationally. In this vein, the European Single Market has been one of the EU’s greatest achievements. Over the past two and a half decades, tariffs and quotas have been reduced between the EU Member States while trade and economic growth have flourished. Since the economic crisis - and in response to an increase in populist forces - however, we have seen a rise in non-tariff barriers, and a reluctance to truly complete the European Single Market through widening and deepening. 

What the EU can do internally

Within the EU there is a need to sharpen the industry’s competitive edge, particularly in light of an uncertain economic climate. Services represent one key area where great strides could be taken. EU legislation exists on services markets, but this needs updating and is currently too weak and too restricted. Studies show that by creating a true EU Single Market for Services (including professional services and public service procurement) we could add USD 430 billion to the EU economy. This represents 2.3% of the overall EU GDP.

Similarly, the EU Single Market needs to fully encompass the digital reality of the economy. Facilitating, while protecting, the flow of data is the lifeblood of the new economy in the technology age. Removing barriers to a functioning EU Digital Single Market is crucial and should be top of the agenda for incoming EU politicians and policy-makers. The reform of the eCommerce Directive and further regulation facilitating the transfer and treatment of data will be required in addition to the General Data Protection Regulation.

The EU is also planning a new industrial policy, ostensibly to raise the competitiveness of EU companies against the background of a tariff-wielding U.S. and a more commercially aggressive China. This approach raises serious concerns. There is a tendency for EU countries (led by France and Germany) to pick winners and try and create national/European champions. This approach must be resisted. Creating European (or national) champions wastes resources and ensures that consumers and other businesses lose out. The lack of competition often leads to higher prices, less choice, and poorer products due to a lack of innovation.

The need to retain an international perspective

Looking internationally, the EU has signed free trade agreements with Canada, Japan, Vietnam, and Mercosur in recent times. These represent excellent feats and should be expanded over time. Discussions are ongoing with Australia too, and the EU should maintain a focus on the bigger picture: not allowing details like minor environmental concerns to get in the way of signing an over-arching deal which will be mutually beneficial.

Similarly, the EU foreign investment screening legislation will come into force in October 2020. There is a risk that this may allow for political meddling and arbitrary bans on certain forms of trade and investment. The EU needs to show that it is open for business, and not take a too restrictive stance here.

Finally, any drive to close the EU borders, reduce international trade, and create a “Fortress Europe” should be rejected. The EU’s external tariff wall should be reduced over time and more international trade should be facilitated. This will be particularly beneficial when it comes to agricultural products, and will also have the effect of helping many developing countries. In this way, the EU can use trade —rather than aid—as a longer-term, more sustainable and mutually advantageous support mechanism.  

Glen Hodgson portrait
With over twenty years’ experience in communications, public affairs, and lobbying, Glen is the founder of the think tank Free Trade Europa, which focuses on promoting free trade, liberalization, and the rule of law within the European Union and internationally. Learn More about Glen Hodgson >