Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Liberal Sweden put to the test as transatlantic trade war looms

Liberal Sweden put to the test as transatlantic trade war looms

Promoting free trade is a priority for Stockholm, but it may find it has an EU-US trade fight on its hands.

On timing, Sweden could be forgiven for cursing its luck.

Just as the country embarks on its EU presidency, the bloc is facing not only an economy-hammering war on its doorstep, but also increasingly blustery headwinds from a nascent trade war with Washington.

A liberal stance on trade and strong transatlantic ties are two core tenets of Sweden’s global outlook. But those priorities look set to be severely tested as the U.S. embarks on a massive program of state support for home-grown industry.

President Joe Biden responded to EU pleas in early December with a vague promise of special treatment, but it is unclear how far he will go to placate European allies. And with Brussels teeing up its own subsidy war chest, hopes of drawing a line under the brutal trade wars of the Donald Trump era are fading.

As the Swedes take up their six-month stint at the helm of the Council of the EU, billions of dollars in U.S. subsidies created by the Inflation Reduction Act will become available to American consumers for electric vehicles and other “Made in U.S.A.” green tech under legislation backed by President Joe Biden.

“The bomb is going to explode, but not until the Swedish presidency,” an EU diplomat said of the unfolding transatlantic trade dispute.

With EU protectionists spitting with rage at Washington’s move, the pressure to shield the bloc’s industries from the $369 billion package of state support may prove too strong for the Nordic free-traders to resist. France and Germany are already vowing to retaliate against Washington with their own set of government handouts.

Commission President Ursula von der Leyen, signaled earlier this month what many saw as a protectionist shift in EU trade policy. She argued that Europe would have to respond to what she called the “new assertive industrial policy” of competitors, adding that, “Europe will always do what is right for Europe.”

How the bloc responds will be an urgent question as the Swedes pick up the reins, but there will be differences of opinion among the 27 EU members, says former European Trade Commissioner Cecilia Malmström, who is now at the liberal PIIE think tank.

“The Swedish government — whatever the color — tends to be very keen to have a good transatlantic relationship. They will certainly try to use their influence,” she said.

“What it has to handle is, of course, the internal discussions — you know, ‘should the EU do the same thing? Should we strike back?’ There are lots of differences internally in the European Union. Not a majority [of] members [want] a big reciprocal act, I think.”

Sweden’s new Trade Minister Johan Forssell told POLITICO that the country will do “what we can to improve the relationships between the EU and the U.S.” He did, though, acknowledge at a recent meeting of EU trade ministers in Prague the concerns in European capitals that the Inflation Reduction Act is discriminatory, describing key elements of it as “worrying.”


Free (trade) love


With protectionism on the rise globally, Sweden’s love of free trade makes it something of a rarity.

Selling goods abroad proved a lifeline when Sweden was poor and it is now a source of great wealth for a country where 88 percent of GDP relies on foreign trade. “Sweden has a disproportionate amount of very international companies, which makes us historically pro-trade,” said a Swedish diplomat — those include major global brands like IKEA, Volvo and Ericsson.

And unlike in some European countries, support for free trade extends to both the left and right of the political spectrum. “Trade has not been controversial among different parties,” said Jonas Kasteng, a senior adviser to the Swedish National Board of Trade. “This is also the case for employer organizations and the trade unions — about 30 percent of all employment in Sweden is due to trade.”

Politicians on the left recognize that wealth generated by free trade has propped up the country’s generous welfare state. “The Social Democrats — and more generally governments in Sweden — have relied on social policy and the welfare state to protect workers from the ups and downs of the international economy, rather than regulating markets to achieve that end,” said Johannes Lindvall, a professor of political science at the University of Gothenburg.

The new government, which for the first time depends on parliamentary support from the far-right Sweden Democrats, restated that commitment to more liberal trade rules. “With our open and export-dependent economy, it is in Sweden’s interest to strengthen … the EU’s position as a trade bloc,” Prime Minister Ulf Kristersson told parliament in October, a few days after the coalition government was formed.


Trade for Ukraine and beyond


In the trade spat with the U.S., Stockholm will try to pacify things on the sidelines but won’t have much say as bulkier countries fight it out. But aside from calming behind-the-scenes diplomacy, Stockholm will have other liberal goals in its sights.

European Commission President Ursula von der Leyen signaled that “Europe will always do what is right for Europe” when it comes to trade policy


Kristersson made clear that an overarching priority will be support for Ukraine. “We must provide as much support as possible to war-torn Ukraine,” he told parliament in October, “politically, economically and in terms of security.” On the trade front, that translates into extending zero tariffs on Ukrainian products entering the bloc into next year and perhaps making the tariff cuts permanent.

Sweden also plans to speed up trade talks on other fronts and ratify as many deals as possible during its six-month stint. It will attempt to wrap up the finishing touches on the EU’s trade pact with the Mercosur countries of Brazil, Argentina, Uruguay and Paraguay. Now that left-wing President Luiz Inácio “Lula” da Silva is back in office in Brazil, the race is on for the two blocs to agree on a new protocol to strengthen the deal’s green credentials and boost the terms for Brazil’s industry — one of Lula’s campaign promises.

The Swedish presidency may also push for EU countries to ratify a new agreement with New Zealand and revamped deals with Chile and Mexico — as well as trying to reinvigorate talks with Australia, Indonesia and India.

Another area where the Swedes will hope to make progress is the modernization of the generalized system of preferences, a program that allows low-tariff access to the EU single market for developing countries. That would benefit Sweden-based retailers like fashion heavyweight H&M, which rely on manufacturers in countries such as Bangladesh for their supply chains.

A revamp of the scheme is bogged down in the Council because Spain and other agricultural countries want to protect their own rice and sugar production against cheap imports. Countries are also fighting over whether to link preferential access to the EU market to the recipient countries accepting the return of illegal immigrants.

Beleaguered free-trade sympathizers such as the Netherlands and the Baltics have been looking forward to having a like-minded nation at the Council helm to make progress on some of these deals. “After years of a defensive agenda, now it’s time to turn to trade,” said Fredrik Erixon, an economist at liberal think tank ECIPE. “The Swedish presidency has been talked up a lot on these issues,” he said.

It may be just Sweden’s luck that a transatlantic trade bust-up blows those liberal trade ambitions off course.

Newsletter

Related Articles

Budapest Post
Close
0:00
0:00
Tennessee Bill Would Imprison People for 3 Years If They 'Lie' About Rape to Get an Abortion.
Charlie Munger, calls for a ban on cryptocurrencies in the US, following China's lead
Shell reports highest profits in 115 years
EU found a way to use frozen Russian funds
First generation unopened iPhone set to fetch more than $50,000 at auction.
WARNING GRAPHIC CONTENT - US Memphis Police murdering innocent Tyre Nichols
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
What is ChatGPT?
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
China is opening up for foreign investors.
Tesla reported record profits and record revenues for 2022
Germany confirms it will provide Ukraine with Leopard 2 tanks
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
Hungary ready to sue EU over cuts to Erasmus funding
EU against democracy: Hungary's mail-in poll on Russia sanctions dismissed by Brussels
2023 - The Year of the Rabbit
Israelis rally in three cities against Netanyahu legal reforms
Tesla slashes prices globally by as much as 20 percent
Japan prosecutors indict man for ex-PM Shinzo Abe murder
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Dirty bomb fears as URANIUM is found in cargo at Heathrow
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
International medical experts speak out against COVID-19 restrictions on China
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Saudi Arabia’s female ambassadors: Who are the five women representing the Kingdom?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
×