Germany wants upcoming Commission to pursue ‘EU only’ free trade agenda

German Chancellor Olaf Scholz said the next European Commission should clinch more free trade agreements (FTAs) with third countries even without requiring unanimous consensus among EU member states.

While attention in Brussels is focused on the announcement of the EU’s top jobs when the bloc’s 27 heads of state and governments meet on Thursday and Friday (27 and 28 June), EU leaders are also expected to adopt a five-year ‘strategic agenda’, setting out priorities for the upcoming legislative mandate.

Speaking at a conference held by German industry organisation BDI on Monday (24 June), Scholz called for a more marked shift towards leaner trade agreements—known as “EU only”—that do not require ratification by all EU countries.

“We have not given responsibility for trade policy to Europe so that no more agreements are concluded,” Scholz (SPD/S&D) said, “but so that more agreements are concluded.”

“This is not the case at the moment,” he said, “[and] this is unacceptable in the geopolitical situation we find ourselves in.”

Urging “the next Commission and also the other member states to get their act together and finally move forward,” Scholz said “EU only” deals could “prevent years of delays caused by the ratification processes” at national level.

Due to the EU’s exclusive competence on trade policy over member states, the Commission is the sole negotiator for trade agreements with third countries, which then only require to be ratified “qualified” majority of EU countries.

However, if policies beyond the perimeter of trade are affected – in deals that, for example, could include investment protection clauses – these agreements are considered to be of “mixed” competence and thus require unanimous approval by member states and ratification by national – and sometimes regional – parliaments.

“We need a little more pragmatism and more speed in this matter,” Scholz said. “And if we then have free trade agreements that do not contain everything we could wish for, but that are […] concluded quickly, then we all stand to gain,” he added.

The point was echoed by the country’s Vice Chancellor and Economy Minister Robert Habeck – who, unlike other members of the Greens, has been a vocal proponent of securing more trade deals.

He said he would “rather [see] an 80 per cent good trade agreement that is quickly concluded than […] perfect free trade agreements that [are] never concluded.”

Habeck’s seven-point wish list

Pushing for more trade deals was one of seven priorities Habeck laid out for the next EU mandate’s economic agenda.

As part of his wish list, Habeck called for the EU’s threshold for SMEs to be increased from 250 employees to 500. This would extend benefits such as subsidy schemes and exceptions from reporting obligations to medium-sized companies—a crucial point for German Mittelstand, which represents a key player in the country’s economy and has been stressed repeatedly by the government.

Alongside the need for more active joint defence and critical resource policy, Habeck called for changes to the EU’s competition rules to assess mergers “according to the global market” instead of the EU one—something that the Commission’s competition chief Margrethe Vestager warned against just last week.

Habeck also stressed the need to reform the bloc’s state aid rules, arguing that the currently leaner rules for poorer EU regions should be extended to wealthier ones.

“Mixing industry and competition policy with cohesion policy may make sense within Europe so that the regions that are not so strong can also generate growth,” he said. But “geopolitically, there are other competitive situations”.

“In the end, it is not so decisive whether a region in [Denmark’s] Jutland is on a level playing field with a region in Baden-Württemberg, but whether Europe is competitive with Texas or the Chinese provinces,” Habeck said.

Under current rules, regions with a GDP of below 75% of the EU average (known as category ‘a’), as well as regions affected by energy transition (known as ‘c’ regions), are granted more flexibility when it comes to the allowed level of state aid – which Germany does not benefit from, as it has no category ‘a’ regions.

Habeck also called for some aspects of the “Temporary Crisis and Transition Framework” – which currently also gives EU countries more leeway to afford state aid to green sectors – to be made permanent.

One aspect of the framework, in particular, establishes that “the EU sets the standards and the member states implement them and don’t run back to Brussels and ask ‘Have we met the standards?’” Habeck said.

“Let’s take that out of the point and make it a general principle,” he added, arguing that this could cut state aid procedures from three years to just one.

Several small EU countries, particularly Denmark, have repeatedly called for the exceptional rules, initially adopted to react to the energy crisis and later extended for green investments, to be “stopped”.

[Edited by Anna Brunetti/Alice Taylor]

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