Trade partners see red over Europe’s green agenda

The EU’s green ambitions are, for its trading partners, turning into a case of the road to hell being paved with good intentions.

Developing nations, especially, worry that Brussels is throwing up trade barriers in its pursuit of climate neutrality and sustainable food production. To them, it looks like all the EU can export is rules that will hold back their own economic progress.

Indonesia, for example, has warned the EU should not attempt to dictate its green standards to countries in Southeast Asia. “There must be no coercion, no more parties who always dictate and assume that my standards are better than yours,” Indonesian President Joko Widodo told European leaders at the EU-ASEAN summit last month.

In another striking example of the anger provoked by the EU’s green agenda, Malaysia has threatened to stop exports of palm oil to the bloc over new rules aimed at fighting deforestation.

The EU’s ambitions to become climate neutral by 2050 — its so-called Green Deal — herald a huge economic transformation for the world’s largest trading bloc. 

Now that the Green Deal is being translated into actual legislation, developing nations are waking up with a hangover of its effects. 

One diplomat from a third country said Brussels is mishandling the power of the EU’s single market instead of respecting the sovereignty of its trading partners.

“We see a regulatory imperialism by the EU whereby Brussels sees itself as an exporter of rules to third countries — as the legislators of the world,” said Philippe De Baere, managing partner at law firm Van Bael & Bellis.

The Green Deal goes beyond the so-called Brussels effect, in which multinational companies use EU rules as global standards. De Baere said Brussels had gotten “drunk on its success” and started exporting environmental objectives to developing nations, “which are unable to comply economically, or if they comply, it is with an enormous economic cost.”

Imposing new taxes 

The EU’s carbon border levy is the latest, and most symbolic, measure to upset the EU’s trade partners. The idea is that producers importing carbon-intensive products into the bloc will have to buy permits to account for the difference between their domestic carbon price and the price paid by EU producers.

The goal of the levy, called the Carbon Border Adjustment Mechanism (CBAM), was to level the playing field for EU producers and avoid companies moving their production over lower climate standards — so-called carbon leakage. For Brussels, the sense of climate urgency is too high to wait for others to follow suit, or to reach a deal at the multilateral or global level. 

But there is a difference between the intent and real-word outcomes, said Milan Elkerbout of the Centre for European Policy Studies: “If you’re not in the internal logic of the European debate, this will just look like the perfect example of the EU having a protectionist intent.”

Brazil, South Africa, India and China have jointly expressed their “grave concern regarding the proposal for introducing trade barriers, such as unilateral carbon border adjustment, that are discriminatory.” The measure is likely to be challenged at the World Trade Organization.

Mohammed Chahim, a Dutch MEP who helped craft the CBAM, said the measure should be offset by the delivery of tens of billions in annual public financing promised for climate projects in the developing world.

“I think they are absolutely right in their complaints about the EU (and other developed countries) not fulfilling their pledges,” he said of these emerging economies. But it would be impossible for the EU to end protections for heavy industry at home while granting exemptions to other countries.

Even for the poorest countries, Chahim said, an exemption “would be the wrong signal, they also have to decarbonize their industry to make it futureproof.” But under the newly minted regulation, those countries were eligible for support to comply, he added.

Making imports harder 

The carbon border levy is far from the only measure to make exporting to the world’s biggest trading bloc harder. 

Brussels’ Farm to Fork strategy seeks to prioritize sustainability in agriculture by slashing pesticide risk and use in half by 2030. A plan announced last September to ban imports of products containing residues of harmful neonicotinoid insecticides from 2026 has drawn “unprecedented” criticism from other countries, according to a senior European Commission official. 

As the Green Deal tightens rules on pesticide use in the EU, new trade barriers are going up, said Koen Dekeyser of the European Centre for Development Policy Management (ECDPM). “Certain farmers can make those investments. Other, more small-scale farmers are likely to seek other markets, for example in Asia,” said Dekeyser.

The EU’s effort to stop deforestation is likely to have similar results. 

Under new rules, it will be illegal to sell or export certain commodities if they’ve been produced on deforested land. 

One third-country diplomat said it was easy for the EU to take a stand on deforestation in the developing world, having already deforested its own land in the past.

Countries in Latin America, Africa and Southeast Asia have lobbied hard against the proposal, calling it “discriminatory and punitive in nature” and arguing in a letter to Commission President Ursula von der Leyen that it will result in “trade distortion and diplomatic tensions, without benefits to the environment.” 

In technology, where the 27-country bloc has passed a series of rules to promote its standards on privacy, online competition and social media to the wider world, other countries, too, have chafed at what they see as overly bureaucratic rules that favor well-resourced regulators within the EU. These can be difficult to implement in developing countries with less expertise and money at their disposal.

More far-reaching legislation is still underway. The EU is also preparing a sustainable production law for companies to police their supply chains against forced labor and environmental damage. Brussels wants to hold companies responsible for abuses throughout their supply chains. 

Same goal, different roads 

In their deforestation letter, the group of developing countries touch on a sensitive point. While they agree with the EU’s climate goals, they regret that Brussels is imposing its own measures instead of forging an international deal.

The Paris climate agreement is based on the logic of common, but differentiated, responsibilities. At least, that allows countries to move at their own speed and determine their policies toward the same goal.

“Now, not only is the EU telling them what to do, but a lot of developing countries also feel they are now prohibited to do what Western countries have done for decades: industrialize without thinking about pollution and subsidizing infant industries,” said Ferdi De Ville, a professor in European political economy at the University of Ghent.

The unilateral character of a lot of these measures is creating resentment, argues De Ville, especially given the bloc’s huge market power.

“In Brussels, everyone looks at these measures separately,” said another diplomat from a third country. “But who looks at it together and thinks about what it means to us? CBAM, deforestation, the Farm to Fork strategy. These are all unilateral measures which are making things harder for our exporters.” 

European officials stress, however, that Brussels is not inflicting its Green Deal on the rest of the world.

But Brussels is also being pushed by NGOs to lead by example. “Europe is one of the major contributors to the current crises related to climate, biodiversity, energy and human rights violations around the world. Therefore we consider it the responsibility of the European Union and other countries in the Global North to urgently start tackling these crises through lawmaking,” said Jill McArdle from the NGO Friends of the Earth.

Agreeing on new rules on the multilateral front remains the EU’s first best option. But, in the absence of a well-functioning World Trade Organization, Brussels has little choice but to go at it alone, EU officials and diplomats argue. “If we want to achieve the Paris targets, there is no time to wait,” one EU official said.

Mark Scott contributed reporting. This story has been updated.