CETA agreement in the Bundestag: reshaping globalization – but how?

Today the Bundestag is discussing the EU’s CETA trade agreement with Canada, which has long been controversial in the coalition. It is also about the question of how trade and globalization should be shaped in the future.

World trade is jerky. Since the Corona crisis, companies worldwide have been struggling with delivery problems. These problems have been exacerbated by the war in Ukraine, as well as by Western sanctions against Russia. Which leads to fundamental questions: With whom can we still trade in the future? Which trading partners are reliable?

In the opinion of Franziska Brantner, Parliamentary State Secretary in the Federal Ministry of Economics, these questions are also being intensively considered in the boardrooms of companies. “Many are noticing that the supply chains are currently far too fragile, that they are so dependent on individual regions, even on individual countries, that the whole thing is not healthy,” she says.

Warning of the costs of extreme security thinking

A lack of energy supplies from Russia, a lack of primary products from China and above all the high prices. All of this means that companies are looking for alternatives to position themselves more crisis-proof. The key word here is resilience. However, Stefan Kooths, Vice President of the Kiel Institute for the World Economy, considers this trend to be problematic. It is dangerous if, under the immediate impression of a crisis, you take measures that could become very expensive in the long term. “My concern is that we’re going too far to the extreme of safety thinking, that we’re putting resilience above all else and giving up important advantages that have built our prosperity here,” he says.

As a country with few raw materials, Germany in particular lives from its strong integration into the global economy. This also includes taking advantage of cost advantages in retail. The economist Kooths is therefore critical of the tendency to concentrate trade on friendly states, as suggested by US Treasury Secretary Janet Yellen.

Despite the setback caused by the Russian attack on Ukraine, the idea of ​​”change through trade” should not be abandoned. Trading, even with difficult partners, offers no guarantee that they will “adopt our values ​​with flying colours,” says Kooths, “but in the long run, the constant dripping wears away the stone.” Simply because people from authoritarian regimes got to know western culture. Sealing off “all the problematic regimes that unfortunately exist” will not lead to a better world – neither politically nor economically. Ultimately, a new form of protectionism is threatening, warns Kooths.

Rethink globalization

The Green politician Brantner sets a clearly different accent. Looking at the economic advantages of trade should not neglect political aspects. The globalization of the coming years must be rethought – also with consequences for prosperity. “Prosperity is not decreasing, but different,” says Brantner. It’s no longer about maybe having a new cell phone every year, but about repairing it from time to time. The goal is also higher social standards: “That means that we no longer get our clothes from forced labor.”

In this sense, the federal government has also agreed on the approval of the free trade agreement with Canada. Social and ecological goals are to become binding in the CETA agreement via an additional agreement. This corresponds to the new line of the traffic light coalition in trade policy issues. According to State Secretary Brantner, they stand under the motto “free and fair”: If countries do not participate in climate protection, tariff concessions could also be lost. “Finally, climate protection, biodiversity and core labor standards can no longer only be enforced, but also sanctioned – that’s a giant step forward.”

Years of struggle for CETA agreement

The trade agreement with Canada was negotiated back in 2016 and provides for the almost complete elimination of tariffs in trade between the EU countries and Canada. However, some EU countries have not yet ratified the agreement, partly because of criticism of the regulations on investment protection. This is particularly about the role of arbitral tribunals, which companies can turn to if investments are jeopardized by subsequent political decisions. There should still be talks about the interpretation of the agreement. The federal government wants to prevent subsequent legal changes, for example in climate protection, from being made more difficult by the investment protection.