Looking for Partners: The EU and Germany’s Answer to Changing Trade and Supply Chains

by Franziska Korn

Economic policy in Germany and across Europe faces a twofold challenge today that resembles a tumultuous dating market for countries: to restructure their economies in the face of the climate crisis, both Germany and the EU must win over trading partners to secure necessary resources and technologies. At the same time, these efforts are complicated by the fact that world trade is in upheaval due to geo-economic competition and coercive behaviour by major powers. In this new context, it is more crucial than ever that Germany and the EU make attractive offers to countries in Asia, Africa, and Latin America.

To achieve their objectives, Germany and the EU increasingly rely on international partnerships (see Figure 1). These differ significantly from free trade agreements and World Trade Organization rules. That is because these partnerships aim to secure resources, inputs, and export markets for the German economy and for Europe as a whole by reducing barriers to trade, but also seek to strengthen local value creation and sustainable development in partner countries through additional measures.

Win-win for Everyone?

The goal behind the new partnership approach is clear: Resource-rich countries should sell their prized products primarily to the EU and Germany rather than to our geo-economic rivals such as China and the US. On the one hand, this strategy seeks to ensure a resilient supply of the critical raw materials, green hydrogen, and sustainable energy that are vital for the German and European economy. On the other hand, this should also have a positive long-term economic impact for partner countries. In the best-case scenario, these partnerships bring benefits to both partners.

But how can such a win-win situation be achieved? What do countries in the Global South demand from these partnerships? And to what extent must the EU’s trade and supply chain policies be reformed to make this possible? Our new study “Competitive International Partnerships”, conducted in collaboration with the German Trade Union Confederation (DGB), explores these questions. It examines the partnership policy instruments used to date, highlights how they affect partners, particularly trade unions, civil society, and academics in Asia, Africa, and Latin America, and formulates recommendations on the changes needed in trade and supply chain policy to make Europe an attractive partner.  

Huge Promises, Too Little Substance

Although such partnership agreements are a political priority, the study shows that they lack legal force, are fragmented, non-transparent, and, above all, underfunded. Drawing on insights from a series of workshops with our progressive partners in the key regions of Africa, Asia, and Latin America, the study emphasizes that progressive partners welcome the new partnership approach in principle but call for Germany and the EU to take their pledges of mutually beneficial partnerships for more sustainable development seriously. If partnerships on an equal footing with vast promises are announced, they must also be implemented as such in practice. As the workshops also noted, if it fails on this front, the EU runs the risk of becoming less credible and antagonizing potential partners, thus driving them into the arms of the other major powers with which the EU is currently competing.  

More EU Competitiveness Requires More Attractive Partnerships

The study clearly indicates how the EU needs to act to be competitive: Declarations of intent made to date must be backed up by tangible industrial policy instruments and appropriate funding. That is the only way to stimulate local economies, for example by priming the pump for a shift to local value creation, and to attain sustainable development for partner countries. In addition, these principles should be extended to trade and investment agreements, which have greater legal force but currently still all too often run counter to the new partnerships’ ambitions. Last but not least, partnerships should be accompanied by viable, legally binding, inclusively determined human rights and sustainability provisions for European companies. This includes, for example, maintaining effective EU legislation on supply chains which already addresses partners’ concerns effectively.

The study identifies four core areas for reform to make the EU’s partnerships more successful, resilient, and competitive vis-à-vis Europe’s geo-economic rivals in future:

1. EU and German policy instruments should be structured more coherently within the new partnership approach.
2. Partnerships should be supported through specific industrial policy measures to strengthen partners’ local economies.
3. A more inclusive approach to decision-making and more participation should safeguard partnerships on an ongoing basis and boost their legitimacy.
4. Comprehensive protection of human rights and environmental rights is crucial to attain resilient and mutually beneficial partnerships in the long term.

These recommendations are relevant for both the new European Commission and the recently elected German government. Berlin and Brussels wish to continue deepening and expanding partnerships in the new legislative period, but also face economic pressure to move in this direction, given the current fragile world order. The EU’s new Clean Trade and Investment Partnerships in particular represent a huge opportunity for much-needed reforms. At the same time, negotiations are underway at the European level that may in future jeopardise the EU’s Corporate Sustainability Due Diligence Directive. In this context too the study, drawing on valuable partner insights, also highlights the Directive’s significance for the future of partnerships.