European Commission appoints its first Chief Trade Enforcement Officer

At a Glance…

On 24 July 2020, the European Commission appointed Mr Denis Redonnet as the first Chief Trade Enforcement Officer (CTEO). The CTEO is a new post created by the Commission to strengthen the enforcement of EU trade agreements. The CTEO will be in charge of implementing and enforcing EU trade agreements, both within the EU and outside the EU, under direct guidance of the Commissioner for Trade.

The appointment of the CTEO reflects the high emphasis placed by the von der Leyen Commission on better enforcing compliance with existing and future trade agreements. This is likely to result in some of the existing EU concessions (duty relief) being removed, and possibly in the imposition of rebalancing duties against the EU’s trade partners, especially those countries with a less ambitious climate agenda. This is something that non-EU companies trading with the EU are advised to follow closely.

Authors: Yves Melin, Jin Woo Kim

Creating the new post of CTEO

The Chief Trade Enforcement Officer (CTEO) is a new post created by the European Commission (Commission) to strengthen the enforcement of European Union (EU) trade agreements. In July 2019, Ursula von der Leyen, then President-nominee of the Commission, proposed a new role within the Commission to monitor the implementation of EU trade agreements,¹ which was a long-standing demand from French President Emmanuel Macron. When announcing an ambitious climate policy, the so-called “European Green Deal”, in December 2019 to make Europe the first climate-neutral continent in the world by 2050, President von der Leyen confirmed that the EU’s efforts to enforce the sustainable development commitments of EU trade agreements would be further enhanced with the appointment of a CTEO. The Commission officially created the post of CTEO on 12 December 2019,² but it took some time to complete the selection procedure for this position and to adjust the organisational structure of the Directorate-General for Trade (DG TRADE) accordingly.

Appointing the first CTEO and restructuring DG TRADE

On 24 July 2020, the Commission appointed as the first CTEO Mr Denis Redonnet,³ who also serves as one of the three Deputy Director-Generals in DG TRADE. Just before the appointment, Mr Redonnet, a French national, was the Director for WTO Affairs, Legal Affairs and Trade in Goods in DG TRADE. Mr Redonnet has been promoted to a Deputy Director-General. As the first CTEO, Mr Redonnet will lead DG TRADE’s Directorates F (Enforcement Market Access, SMEs, Legal Affairs, Technology and Security) and G (Trade Defence).

Before appointing the CTEO, the Commission restructured the organisation of DG TRADE so that a number of directorates could assist the CTEO in performing his enforcement functions. Interestingly, the Commission merged former directorates F (WTO Affairs, Legal Affairs and Trade in Goods) and G (Trade Strategy and Market Access) into one new Directorate F (Enforcement Market Access, SMEs, Legal Affairs, Technology and Security) and maintained a Directorate for trade defence without any changes.⁴ Both new directorates now fall under the CTEO, who will be in charge of World Trade Organization (WTO) litigation, other multilateral legal projects (e.g., multilateral investment court), foreign direct investment (FDI) screening and trade defence investigations.

The following directorates and units in DG TRADE will assist the CTEO:

The CTEO’s expected role

The CTEO will work under direct guidance of the Commissioner for Trade, to monitor and improve the compliance of EU trade agreements – both within the EU and outside the EU – and regularly report all developments to the European Parliament and the Council.⁵

Based on President von der Leyen’s mission letter to Commissioner for Trade Phil Hogan (who has now resigned) and the recent restructuring of DG TRADE, the CTEO is expected to be responsible for:

• Monitoring trading partners’ commitments and producing monitoring reports
• Conducting consultations over alleged violations by trading partners of their commitments under the WTO and bilateral or plurilateral free trade agreements
• Initiating dispute settlement procedures under WTO agreements and/or EU trade agreements to challenge the alleged violations
• Supervising the EU-wide FDI screening mechanism under the EU Foreign Investment Screening Regulation (see our previous alert on Regulation 2019/452⁶)
• Overseeing trade defence investigations and strengthening the trade defence instruments to protect EU industry from unfair trade practices
• Enforcing the sustainable development commitments of the EU and its trading partners under EU trade agreements (e.g., labour rights, environment, deforestation)
• Supporting EU exporters, in particular, small and medium-sized enterprises, to gain more benefits from EU trade agreements.

Looking ahead

The appointment of the CTEO is a clear sign of where the EU’s trade policy is going: better enforcement of existing and future trade agreements and, generally, a more aggressive and protective use of its trade tools (e.g., trade defence, dispute settlement proceedings, rebalancing duties). 

As a matter of fact, this had already started before the appointment of the CTEO. On 4 July 2019, the EU requested the establishment of a panel of independent experts against the Republic of Korea (Korea), alleging that Korea had failed to ratify the four fundamental International Labour Organization Conventions and, thus, Korea acted inconsistently with the labour commitments under the EU – Korea Free Trade Agreement.⁷ This is the first time that the EU has initiated dispute settlement procedures under a trade agreement to challenge the alleged violations of a trade partner’s sustainable development obligations.

With the appointment of the CTEO, the EU is expected to more readily bring new complaints against trading partners in breach of their sustainable development obligations under EU trade agreements, and be more willing to use unilateral measures (in the form of rebalancing duties) when compliance is not forthcoming.

Having said that, whether the EU could unilaterally suspend trade concessions (or impose rebalancing duties) when a third country does not comply with its labour and environmental obligations under EU trade agreements and, if so, under what legal basis, remains controversial. The EU trade agreements and the EU Trade Enforcement Regulation (Regulation 654/2014)⁸ do not (yet) empower the EU to unilaterally suspend trade concessions in such a scenario.

However, businesses should pay close attention to the amendments to the EU Trade Enforcement Regulation, which are currently being discussed by the European Parliament, the Council of the EU, and the Commission. (see our previous alert partly covering the amendments of Regulation 654/2014) If the recent past is any guide, changes to the EU Trade Enforcement Regulation are likely to give the CTEO and the Commission the powers they need to protect the EU market, and coerce third countries into compliance.

***

Any questions? Please do not hesitate to contact Reed Smith’s trade and customs team.

1. Politico, Von der Leyen promises to appoint chief trade enforcer, 15 July 2019.
2. European Commission, Commission reinforces tools to ensure Europe’s interests in international trade, 12 December 2019.
3. European Commission, European Commission appoints its first Chief Trade Enforcement Officer, 24 July 2020.
4. European Commission, DG TRADE, Organisation chart.
5. President von der Leyen’s mission letter to Phil Hogan, 10 September 2019.
6. Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (OJ L 79I , 21.3.2019, p. 1–14).
7. European Commission, EU moves ahead with dispute settlement over workers’ rights in Republic of Korea, 5 July 2019.
8. Regulation (EU) No 654/2014 of the European Parliament and of the Council of 15 May 2014 concerning the exercise of the Union’s rights for the application and enforcement of international trade rules and amending Council Regulation (EC) No 3286/94 laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community’s rights under international trade rules, in particular those established under the auspices of the World Trade Organization (OJ L 189 27.6.2014, p. 50).