World Economy

EU wants tougher global trade rules to fend off populist threat

Arthur Beesley
A container ship in Hamburg, Germany.
Krisztian Bocsi | Bloomberg | Getty Images

Europe will press the US and China for tougher world trade rules in a fresh effort to fend off the inequalities of globalisation that have been seized on by hard-right nationalists such as Marine Le Pen of France.

In a paper on Wednesday that rejects the kind of isolationist turn advocated by US president Donald Trump, the European Commission will call for stronger global rules and institutions to promote trade fairness while urging EU member states to bolster innovation and education. It wants tougher anti-dumping rules and a tribunal to settle international investment disputes.

Relief in Brussels at the defeat of Ms Le Pen in the recent presidential election is tempered with anxiety that job losses and factory closures linked to globalisation will continue to fuel support for European populists.

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Although Ms Le Pen's loss follows the failure of her ally Geert Wilders to gain traction in the Dutch election two months ago, there is concern that the EU remains vulnerable to anti-establishment movements that whip up public support by attacking free trade and open markets.

Despite losing by a big margin to Emmanuel Macron, Ms Le Pen's tally of almost 11m votes was more than double the number gained by her father Jean-Marie Le Pen in the 2002 election. "This movement is still there. If we can't deliver it will come back to bite us," said a senior Brussels official.

The commission's push to assert more political control over globalisation comes amid tension in world trade over Mr Trump's demands for a shake-up of global commerce.

Mr Trump continues to advance an aggressive "America first" trade policy, imposing tariffs on some Canadian imports even as he pulls back from more radical steps such as declaring China to be a currency manipulator.

The commission specifically rejects protectionism, a stance supported by most EU member states, raising questions as to whether Europe could marshal US support for a new drive to strengthen trade rules. Any such effort would require the support of China for measures that might weaken its economic power.

Still, Brussels will argue that the global rule book remains far from complete and should be expanded. While calling for a global investment court to settle disputes, the commission will also assert the right to impose punitive tariffs whenever products such as cut-price steel from China are dumped on European markets.

Although the commission will make the case that globalisation is a positive force that boosts economic growth, it will say the benefits are spread unequally and fan social polarisation. It will also cite research that suggests a majority of Europeans view globalisation as a threat to their country's identity.

The commission will also say globalisation will contribute to a further widening in inequalities unless further steps are taken to curb its downsides.

The effort to recast globalisation is part of a wider drive to revitalise the EU after the Brexit shock. This includes parallel plans for a social policy agenda, boosting workplace protection and efforts to reinforce the foundations of the single currency.

The commission will say European citizens are concerned they will not be able to determine their own futures due to the perception that their governments are no longer in control of the global economic system.

It will argue, however, that the temptation of isolationism should be resisted and that most Europeans recognise that protectionism does not protect. The closure of European borders to trade would prompt other powers to do the same, making exports less competitive and putting more jobs at risk.