Weathering geopolitics - the contribution of EU trade policy

Can trade policy help the EU thrive in a geopolitical world? How can the EU thrive in a world where trade is increasingly weaponised by major powers?

Our Associate Professor in International Political Economy Dr Robert Basedow has published a new study in the LSE Public Policy Review, which argues that while the EU has developed an impressive range of new trade tools in response to the rise of geopolitics, its success ultimately depends not on trade policy but on whether it can defend itself and revitalise its economy.

Abstract

"Global trade governance has reached an inflection point as rules-based multilateralism gives way to geopolitical power dynamics. This study examines how the European Union (EU) has responded to this fundamental shift through its trade and foreign economic policy. Under the paradigm of ‘Open Strategic Autonomy’, the EU has developed an extensive array of new policy instruments over the past decade, including the Anti-Coercion Instrument, foreign direct investment screening mechanisms, reformed export controls, the International Procurement Instrument, and the Global Gateway initiative. Additionally, measures at the trade-environment nexus – such as the Carbon Border Adjustment Mechanism and deforestation regulations – are emerging as potential geopolitical tools. While these innovations demonstrate remarkable EU dynamism in adapting to a more geopolitical world economy, the study concludes that trade policy can only play a supportive role in Europe’s strategic positioning. The EU’s ability to thrive ultimately depends on addressing two structural challenges: building military and defence autonomy to reduce reliance on external security guarantors, and implementing domestic reforms to revitalise economic growth and innovation capacity."