How the EU has used the environment as a protectionist weapon

Iain McKie
THE EU has long claimed a reputation as a promoter of free trade – for breaking down boundaries, and allowing capital and goods to flow across borders without hindrance. But protectionism hasn’t disappeared; it’s just taken on a more subtle form. The EU has been using the environment as a trade weapon.

Late last year, Russia lodged its first ever complaint with the World Trade Organisation (WTO), which it joined in 2012, claiming that the EU was in violation of the anti-dumping provisions of the WTO agreement. The issue stems from an “energy adjustment”, imposed by the EU in 2002 on Russian exports of steel and fertiliser products.

Russia claims that, in the application of the adjustment (which, it says, penalises its companies for the low energy prices they enjoy), the EU is able to give domestic producers an unfair advantage, costing Russia hundreds of millions of euros each year in lost opportunities.

The dispute is ongoing, but the EU is likely to argue that, as European manufacturers are subject to stricter energy-based regulation, Russian products are both unfairly cheap and environmentally damaging. Imports should therefore be restricted to level the playing field – both in the marketplace and for the sake of the environment. Put simply, Russian steel is cheaper because its producers can pollute the skies. This is rampant protectionism. But it is no surprise.

The EU regularly uses the principle of “common ownership” of the environment as a trade and revenue weapon. Common ownership means that every country shares in the environment, and must share in the cost of looking after it. Calling upon this principle, the EU has tried to enforce a carbon tax for all flights inside and into Europe, suggesting that the whole of the flight should be taken into emissions consideration.

As part of this, it tried to incorporate, and therefore tax, Chinese-owned aircraft flying over Chinese territory for its carbon liability. Dressed as environmental protection, the EU would have disadvantaged international carriers bringing imports into the EU, while supporting domestic producers that fly goods over shorter distances or use rail and road networks. Once China decided to cancel orders for the new Airbus, the EU backed down. But this only stalled, rather than cancelled, the proposed carbon tax.

The EU is now considering the inclusion of shipping into a similar system. Again, this would give EU producers advantages over foreign production that is sea freighted into Europe.

The environment is a powerful weapon, since protecting it enjoys wide appeal and politicians can claim to be acting in the interests of future generations. But we should be wary. EU environmental legislation has begun to look like it has little to do with nature, and more to do with creating barriers to trade. Soon every import could be subject to a form of carbon-importation tax, and the EU will claim it is all in the name of protecting the planet. But the reality is that it is all about protecting European producers from competition.

Iain McKie was a carbon credits trader between 2006 and 2013, and is now a Ukip parliamentary candidate.