148. The EU’s new trade policy, with Sabine Weyand of DG Trade

Episode Summary

Executive Summary: The episode centers on EU trade policy under Sabina Vayand, especially the EU-China investment agreement (CAI), transatlantic cooperation under the Biden administration, forced labor and supply-chain enforcement, the Airbus-Boeing dispute, digital services taxes, strategic autonomy, and the EU Green Deal. Vayand argues CAI rebalances market access without constraining EU policy space, and that the EU is now better positioned to work with the U.S. and others on subsidies, technology rules, climate, and WTO reform.

Main Topics: EU-China CAI and market access (Priority: 5/5): Vayand defends the Comprehensive Agreement on Investment as the product of a long negotiation aimed at rebalancing access, improving treatment of EU firms in China, and adding labor/climate commitments. Transatlantic cooperation with the Biden administration (Priority: 5/5): The discussion explores how the EU and U.S. might coordinate on China-related issues through mechanisms like a trade and technology council, despite past coordination problems. Subsidies, WTO rules, and China (Priority: 4/5): The interview examines trilateral work with the U.S. and Japan on updating WTO subsidy disciplines, the effect of COVID-era support measures, and the need for a joint statement initiative. Forced labor and EU enforcement tools (Priority: 4/5): Vayand outlines the EU’s emerging toolkit, including a global human rights sanctions regime and planned due-diligence legislation to prevent forced-labor goods from entering the EU market. Airbus-Boeing dispute (Priority: 4/5): She argues both sides should suspend sanctions and settle the long-running aircraft subsidy dispute quickly, acknowledging structural differences in how the U.S. and EU support aircraft makers. Digital services taxes and OECD talks (Priority: 3/5): The conversation covers U.S.-EU tensions over DSTs, with Vayand insisting the WTO, not unilateral tariffs, is the proper venue and expressing support for the OECD process. Open strategic autonomy and climate policy (Priority: 5/5): Vayand explains the EU’s concept of open strategic autonomy and links it to the Green Deal, carbon leakage prevention, climate alliances, and WTO-compatible carbon border measures.

Key Arguments: CAI was not a surprise or a concession made under pressure; negotiations had been ongoing for seven years and concluded when the EU had met its mandate. The agreement aims to rebalance a relationship where the EU market is already open but China remains more restrictive, especially on investment and non-discrimination. CAI does not remove EU policy space: the EU can still regulate, screen foreign investment for security, and deploy its autonomous trade tools. China gains confirmation of EU market openness; EU gains new access in sectors like electric vehicles, private hospitals, and cloud services, plus commitments on forced technology transfer. The EU’s China policy has evolved materially through investment screening, foreign-subsidy work, and plans for a trade and technology council. On industrial subsidies, the EU wants to restart substantive work with the U.S., Japan, and others to update WTO rules rather than rely only on unilateral pressure. Forced labor requires a multi-pronged response: sanctions, due diligence rules, import controls, and ILO engagement. The Airbus-Boeing dispute should be paused and settled with a short timeline because both sides need stable rules for future aircraft subsidies. Digital services tax disputes should be handled through the OECD and WTO, not unilateral U.S. tariffs. Open strategic autonomy means cooperating multilaterally where possible and acting independently where necessary, without pursuing autarky. Climate policy should prioritize cooperation, efficiency, green goods, and targeted action among major emitters rather than broad sanctions-based trade measures.

Data Points: Duration of EU-China investment negotiations: 7 years - Vayand says negotiations on CAI began seven years earlier and were dormant until recently. EU policy paper description of China: 3 roles: cooperation partner, economic competitor, systemic rival - She cites the EU’s China strategy adopted in 2019. EU foreign direct investment screening mechanism: 5 months in operation - Used as evidence that EU policy toward China has changed in practice. EU legislative proposal on foreign subsidies: Middle of this year - The Commission plans a proposal following a white paper on foreign subsidies. EU trade and technology council: Proposed with the new U.S. administration - Suggested as a forum for export controls, FDI screening, AI, and connected cars. EU global human rights sanctions instrument: Brand new - Presented as a new tool for dealing with forced labor and human rights abuses. EU due-diligence law on forced labor: Draft law expected in the middle of this year - Would seek to prevent products derived from forced labor from entering the EU market. Airbus-Boeing dispute length: 17 years - The dispute is described as long-running and costly for lawyers on both sides. EU emissions target: 55% reduction vs. 1990 - Part of the Green Deal framing for climate policy. Climate neutrality target: 2050 - EU commitment cited as central to the Green Deal. EU recovery program: 1.8 trillion - Recovery funds are oriented around digital and green transitions. EU share of global emissions: 8% - Used to argue the EU cannot solve climate change alone.

Pivotal Quotes: "China at the same time as a cooperation partner, an economic competitor and a systemic rival." — Sabina Vayand: Describing the EU’s 2019 China strategy and how Beijing reacted to it. "Open strategic autonomy ... means we act together with others, multilaterally or bilaterally, wherever we can, and we act autonomously wherever we must." — Sabina Vayand: Defining the EU’s broader geopolitical and trade-policy philosophy. "You cannot just impose." — Sabina Vayand: On climate policy and the limits of sanctions-based trade tools for changing behavior abroad.

Implications: The EU is signaling a more assertive, but still cooperative, trade stance: tougher on China, more aligned with the U.S., and more willing to use trade tools on labor and climate. Expect more WTO, OECD, and allied-rulemaking efforts, plus new EU enforcement measures.