The EU and Trade as a Tool for Foreign Policy

Photo by Markus Spiske on Unsplash  

In an increasingly multipolar world, where traditional power dynamics are shifting and the emergence of new actors, the European Union is redefining its trade policy to become a strategic tool to advance its geopolitical interests and solidify its position on the global stage.

The EU has long recognised the nexus between trade and foreign policy. At its core, the EU's trade policy is not just about economic exchange; it is deeply intertwined with its broader foreign policy objectives. The bloc consistently leverages its trade agreements to promote its positions on human rights, labour standards and governance. By embedding these provisions into its agreements, the EU seeks to encourage partner countries to align with its values.

With the world's largest single market, the EU possesses significant economic clout. Access to this market can be a powerful incentive. For example, the Generalised Scheme of Preferences (GSP) offers preferential access to the EU market for developing countries based on their abiding by international conventions on human and labour rights. The EU leverages this position, negotiating concessions on issues such as regulatory alignment, intellectual property protection, or adherence to international norms.

In order to achieve its foreign policy and trade goals, the EU has developed a range of instruments. Free Trade Agreements (FTAs) are the cornerstone of the EU's trade policy. These FTAs cover sectors such as services, investment, public procurement, competition, and sustainable development. The EU has agreements with Canada (the Comprehensive Economic and Trade Agreement), Japan (the Economic Partnernship Agreement), and Vietnam, demonstrating the bloc's ambition to set high-standard rules and promote a level playing field. Then there are Trade Defence Instruments (TDIs). These instruments (including anti-dumping and anti-subsidy measures) are meant to protect EU industries from unfair trade practices. They can also send strong signals to trading partners about adherence to international trade rules and fair competition, influencing their economic behaviour.

Lastly, there is the Global Gateway Strategy. Introduced in 2021, the Global Gateway Strategy aims to mobilise investments in infrastructure, digital, climate, energy, transport, health, and education globally. Although not strictly a trade instrument, Global Gateway supports the development of sustainable and resilient supply chains, diversifies economic partnerships and indirectly strengthens the EU's trade and geopolitical influence in Africa and Asia.

In a modern era characterised by geopolitical competition, the European Union has established trade as an indispensable tool for its foreign policy. By strategically deploying its vast market access and comprehensive trade agreements, the EU advances its economic interests and actively contributed to shaping the global landscape in line with its values. The EU's approach shows that trade is no longer just about commerce; it is a fundamental pillar of statecraft.