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With mounting frustration over globalisation, there are growing calls in the EU for better protection and less free trade.
Donald Trump’s return to the White House has led to a new wave of tariffs, intended to defend the ultimate goal of “making America great again”. The United States is moving towards increasing isolationism and its protectionist economic policies are causing ripples around the world.
Will tomorrow’s world be dominated by protectionism? The answer to this may depend to a large part on the direction chosen by the European Union. As a single market and an economic bloc with a sizeable combined GDP, the EU is a major world economy. Indeed, it takes a podium spot alongside the world’s other two powerhouses, China and the US. So what role will the EU choose to play in this context, at a time when calls for greater protection are also growing within the bloc?
Protectionist wave
Free trade is deeply rooted in the EU’s DNA. The bloc has a long trading history, from the Roman Empire to the Hanseatic League in the Middle Ages. And after the Second World War, when its founding members agreed to build an economic community, the aim was to deepen economic interdependence in order to prevent new wars. This project has gradually been extended, globally, with the EU now seen as the world’s champion of rules-based trade.
Yet against this backdrop, the revolution brought about by technological innovation and globalisation, which has become increasingly complex to manage, has set back the development of a rules-based global trading order. And the biggest blow to the free-trade ideal may be the slow-but-sure collapse of the WTO after the accession of China and its state-run economy.
The contrast between the European model and the Chinese model has led to Europe losing many jobs, and much investment, with whole industries going in search of bases with lower taxation and less stringent social and environmental regulations.
Spyros Blavoukos, Professor at the Department of International and European Economic Studies of the Athens University of Economics and Business, Interview by Nikos Andritsos & Marianna Pliakostamou, SKAI (in Greek)
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“Globalisation’s losers are visible both at the national level, in our country [Greece], and at the European level. Many industries, businesses and companies have been forced to adapt their production methods, including at the global level. North, South, developing countries, developed countries…”
As a result, public support for free-market capitalism has begun to waver in the West.
Enter Donald Trump and his heavy-handed tariff policy…
Iuliu Winkler, Member of the European Parliament – EPP, Romania, Interview by Horia Daraban, Radio România (in Romanian)
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“Into this new, highly volatile situation, one involving wars, came President Donald Trump, the President of the United States, with a clearly expressed desire to reconfigure global trade and economic relations. This reconfiguration is a policy by force, after all, and we are seeing this. It runs counter to the interests of the European Union.”
Scepticism towards trade liberalisation is not limited to the United States. Even some years back, the proposed trade deal between the EU and Mercosur, the Comprehensive Economic and Trade Agreement (CETA) with Canada, and the Transatlantic Trade and Investment Partnership (TTIP) with the US were all met with fierce hostility from European civil society. In the latter case, the opposition was so strong that negotiations were abandoned.
The pandemic exacerbated this trend, as it exposed the vulnerability of supply chains in key sectors and highlighted strategic dependencies – for example, in the field of medicines. And the pandemic was swiftly followed by Russia’s invasion of Ukraine. This has dealt a further blow to the EU economy by restricting the bloc’s energy supply and pushing up electricity prices and, therefore, inflation.
With mounting public frustration intensifying calls for greater protection for EU citizens, the European elections duly ushered in more representatives favourable to such measures. So, in the face of its disgruntled population, should the EU fold, or stick to its free-trade guns?
Free trade champion… who said?
It’s fair to say, however, that the European Union is not actually a great example of free trade – there are certain key sectors that the bloc has never fully liberalised.
Dr. Teodor Yalamov, Associate professor in business economics; deputy dean of the Economic Department at the Sofia University St. Kliment Ohridski”, Interview by Lilliya Goleminova, BNR (in Bulgarian)
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“There is protectionism in Europe. It has existed and will continue to exist – in agriculture and a number of industries, for example – for many political reasons that can be described and accepted as ‘non-economic’. This is the case, for instance, when it comes to food quality, where there are requirements regarding the presence or absence of certain fertilisers, or certain elements in animal feed, and so on.”
In tandem with developing regulations to promote high social, climate and environmental standards in its domestic market – a move that has increased production costs for European companies – the bloc has sought to safeguard its local industries from “unfair competition” in the form of imported products, which are often manufactured at lower prices thanks to less stringent standards and even public subsidies. The bloc is also learning to better protect its industries from unfair foreign competition by gradually refining and expanding its trade defence toolkit beyond customs duties and quotas.
These moves appear to reflect the expectations of many European citizens. In a 2024 Eurobarometer survey, 35 per cent of respondents said that the main use for the EU’s trade policy should be to protect the health of people, animals and plants, 27 per cent to defend national security, 18 per cent to protect the bloc’s sensitive technologies and 17 per cent to combat climate change.
Brussels is gradually identifying ‘strategic industries’ – ones it considers vital to the bloc’s security and general wellbeing – and earmarking them for special protection and support.
Andreas Marchetti, Director of politglott, Honorary professor at the University of Paderborn, Assistant lecturer at Sciences Po, Interview by Sina Wollgramm, AMS (in German)
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“We must ensure that we can continue to produce essential goods ourselves, that we have them in stock, so that in the event of a crisis – which can arise very quickly – we are not dependent on the goodwill of third parties, who may not prove to be reliable suppliers or sources of support. [This shows] a certain tendency to take a step back and ask ourselves what skills and production capacities we really need in our own economy, our own market. This will remain a priority that we must continue to address.”
In a sense, this strategy sets the upper limits for the EU’s economic liberalisation. Indeed, it could even be said to mirror Beijing’s more ‘controlled’ approach to globalisation, whereby certain markets are opened up while public control is maintained in key sectors.
Yet even with this shift towards increased protectionism, demands for more radical action persist, emanating particularly from the two extremes of the political spectrum. Many of these parties’ manifestos contain pledges of economic nationalism – in other words, the desire to protect local jobs and industries by way of tariffs and import barriers.
Does protectionism protect?
Now for a fundamental question: does protectionism actually protect?
Mikael Petitjean, Professor at UCLouvain, at Polytechnic University of Hauts-de-France and Ghent University, Interview by Gaspard Timmermans, Euradio (France)
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“In the past, we have always had difficulty determining whether it was trade that increased growth or whether it was the increase in growth that opened borders and allowed trade to develop. Either way, there is a correlation between the two. We have seen in the past that international trade develops when growth is strong, and it is during these phases that, in general, we have experienced much more sustained periods of prosperity than during phases of protectionism.”
Academics and experts say that customs duties are generally an inefficient and harmful form of taxation, given the imbalance between the revenue they generate and their cost to consumers and industries, not to mention the uncertainty they generate.
It would thus be imprudent for Europe to abandon its fundamental principles of free trade and the single market, or to attempt to emulate the United States.
Leonardas Marcinkevičius, Expert at the Lithuanian Free Market Institute, Interview by Augustė Lyberytė, Žinių Radijas (in Lithuanian)
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“I’d say this would be a big mistake. If we laugh at the US and say that they are making economic policy mistakes and shooting themselves in the foot, I cannot understand why Europe would follow suit. If the US is foolish to do this, if US consumers are finding themselves burdened with additional taxes, then Europe, by introducing extra tariffs on US or other goods, will simply burden Europeans with additional taxes too.”
The subsequent economic crisis could in turn generate greater challenges, including to our long-held values.
Manuel Pôejo Torres, Analyst and expert in international and defence affairs, Former NATO official, Interview by Alexandre Neves, Radio Renascença (in Portuguese)
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“Naturally, employment, the welfare state and, ultimately, the major parties that traditionally formed governing coalitions in various countries are under threat. This is giving rise to new movements and new groups that advocate more nationalist, anti-patriotic and anti-European ideals, and ultimately undermine the spirit of coordination and solidarity within the European Union.”
Rather than turning to isolationism and protectionism, it might be wiser to seek to strengthen and encourage international cooperation and international institutions.
Vlad Vasile-Voiculescu, Member of the European Parliament – Renew, Romania, Interview by Horia Daraban, Radio România (in Romanian)
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“Economic protectionism, isolationism, leads to armament, and armament leads sooner or later to war. Isolationism cannot be a solution in any way. It is very simple. There are serious problems like climate change, like poverty, like migration. All these phenomena cannot be solved by lone countries or even blocs of countries. They all require international cooperation.”
The EU seems to be heading down this path, as the bloc tries to negotiate a comprehensive trade agreement with the United States and avoid having its exports across the Atlantic subject to new tariffs. The question is what compromises it is willing to make to achieve this, and whether it will succeed in protecting its strategic sectors and maintaining its standards. If not, it risks provoking discontent among its population.
- Author: Hermine Donceel, Euranet Plus News Agency
