Geoeconomic Turbulences, Trade Wars and the Green Transition: The Weaponization of EU Trade Policy in Defense of the European Green Deal

The paper explores the impact of the recent geoeconomic turbulences on the European Green Deal (EGD). Geoeconomics typically refers to the weaponization of the economy for political ends. The paper focuses on institutional transformation of the EGD, asking whether the EU has replaced its complex market governance process of a liberal ‘green growth’ strategy with a more foreign policy-like, often neomercantilist-minded process of strategic economic statecraft. Consequently, the paper argues, the EU appears to rely increasingly on strategic unilateralism and selective neomercantilism as opposed to WTO-governed multilateralism and negotiated partnerships. The paper examines several instances of weaponized use of trade instruments related to trade and green energy. Energy has always been a strategic issue in the world economy, often exempted from the rulebook of the liberal trading system. Yet, until recently, green energy was an exception. Today, the prospect of global green energy trade war is no longer unthinkable. The paper examines this transformation. It focuses on direct confrontations such as antidumping tariffs used to shield European green industries against alleged Chinese subsidized exports (e-vehicles, solar energy, wind energy) to more structural transformations, such as imposition of climate border adjustment tariffs (CBAM), and enactment of traceability import requirements. The ‘leakage problem’ – the fear of an ambitious climate policy will deteriorate European competitiveness– is now seen as a fundamental threat to the EGD. A new policy conviction seems to have emerged; the EGD cannot work without subsidies or trade restrictions. This turn is justified as ‘a necessity’. The EU argues that it must protect itself as much as possible to save the EGD and the green energy transition, rather than promote trade and investment in green energy. The paper examines this transformation with respect to CBAM, energy subsidies, green import restrictions and requirements. However, the EGD not only risks mixing two contrasting logics; the green ‘liberal’ vs. ‘neo-mercantilist’ strategies, the EU policy process and corresponding external engagements are also being transformed. This is a potential risk to the EGD itself, as it remains highly controversial both inside and outside Europe. Critics perceive CBAM as both WTO inconsistent and technically impossible. The EU must explain itself better, despite mounting pressures from geoeconomic turbulences, and remain open to ensure constructive engagements with its trade partners. Trade wars cannot promote the green transition. Nor can the EU complete the green transition on its own.