Von der Leyen confronts trade policy deficit as Phil Hogan resigns

Von der Leyen confronts trade policy deficit as Phil Hogan resigns

Phil Hogan’s resignation from the EU’s trade portfolio leaves Ursula von der Leyen in an invidious position as the European Commission president seeks to fill one of the most powerful and diplomatically sensitive posts in Brussels at a time of global economic turmoil.

Mr Hogan was seen as one of the strongest performers in Ms von der Leyen’s “college” of commissioners. But his resignation on Wednesday over potential violations of coronavirus restrictions in his home country of Ireland means that the commission faces a forced change in its top team at a delicate moment. 

His departure comes as the commission attempts to broker a compromise in its fractious relationship with the US over state support for aerospace giants Airbus and Boeing, while also navigating febrile relations with China, the upheaval within the World Trade Organization and the Brexit trade talks. 

“Hogan is a loss for Ursula von der Leyen,” said Fabian Zuleeg, chief executive of the European Policy Centre in Brussels. “She needs to have a heavyweight trade commissioner, not only for Brexit but also looking ahead for a potential opening with the US if Biden is elected.”

Mr Zuleeg stressed that the commission still had a team of strong senior civil servants, led by trade director-general Sabine Weyand, which could ensure policy continuity.

It’s frustrating to see commissioner Hogan step down just as the United States and the EU were starting to build momentum on their trade talks

But Mr Hogan was managing to make particular progress in his relations with the Trump administration. Last week, he and US trade representative Robert Lighthizer announced the first joint tariff reduction for two decades — an admittedly narrow accord covering a handful of products, including US lobster, that EU officials predicted could yield “trickle down” benefits in higher value policy areas, including aerospace. 

That agreement was the first fruit of an intensive effort by the Irishman to find common ground with Washington in a bid to avoid the kind of escalating disputes that had dogged the mandate of his predecessor, Cecilia Malmstrom. While Ms Malmstrom publicly clashed with US commerce secretary Wilbur Ross in the wake of an American decision to impose punitive tariffs on European steel, Mr Hogan hoped to accelerate work on a common transatlantic trade agenda that had been sketched out in the latter stages of the last commission mandate. 

Clete Willems, a former Trump trade official and now a lawyer at Akin Gump, said: “It’s frustrating to see commissioner Hogan step down just as the United States and the EU were starting to build momentum on their trade talks with the recent tariff deal and the US show of restraint on the Airbus-related tariffs.” 

EU diplomats have stressed that keeping the EU-US process on track is crucial to the bloc’s economic recovery. Potential flashpoints are looming, however, with the WTO set to rule next month on what retaliation the EU can take against US subsidies for Boeing, with Brussels facing tricky political calculations about how to manage the situation.

“It will be really difficult to find a candidate with his outstanding credentials”, said Lourdes Catrain, a partner in the trade practice at the law firm Hogan Lovells in Brussels. “I worry that the EU-US trade dialogue is going to suffer,” she said, noting the “chemistry” that Mr Hogan enjoyed with Mr Lighthizer.

EU officials noted that Mr Hogan brought to the role not just strong credentials as an Atlanticist, but also his previous record as the EU’s commissioner for agriculture. It was hoped that this pedigree would help to convince a reluctant European farm sector to support a pioneering trade deal with the South American Mercosur bloc. The deal was negotiated last year, but still needs to be ratified. 

Names in the frame to replace Phil Hogan

Mairéad McGuinness and Simon Coveney have already been mentioned as likely contenders © Reuters, EPA-EFE

Ireland faces a daunting challenge in the selection of a new commissioner in the hope that Phil Hogan’s successor can make a claim for the prestigious trade portfolio, writes Arthur Beesley in Dublin

With the names of several senior politicians and technocrats already circulating, a senior government figure said Dublin’s main “objective” is to hold the trade post. “We can all have objectives, but we have no guarantees of anything. It’s a matter for the president (Ursula von der Leyen) to consider who gets what.”

One likely contender is European Parliament first vice-president, Mairéad McGuinness, who, like Mr Hogan, represents the Fine Gael party led by deputy premier Leo Varadkar. 

Ms McGuinness’s elevation would suit the commission’s demand for more female candidates in top posts. But it would require the Fianna Fáil party of prime minister Micheál Martin, which has more seats in the Irish parliament, to acquiesce, and there is no certainty that it would. 

Another Fine Gael name in circulation is that of Simon Coveney, the foreign minister who is deeply involved in the Brexit talks between the EU and UK. However, none of the three government parties would welcome a by-election so soon into the tenure of a coalition that has been beset by turmoil since taking office in late June. “No one wants a by-election,” the senior government figure said.

Some observers believe that Mr Varadkar himself might be tempted by the Brussels post, but he is already scheduled in December 2022 to resume office as taoiseach, the highest position in Irish politics. 

Among possible contenders from the ranks of retired Irish senior diplomats or EU technocrats is David O’Sullivan, a former EU ambassador to the US who served as the bloc’s top trade official and was secretary-general of the European Commission. The name of another former commission secretary-general, Catherine Day, has also been mentioned. 

But the discussion is at an early stage. Government insiders said the matter had not yet been formally discussed at the top level. The question of the next commissioner did not feature in talks this summer on the formation of the three-party coalition because no one anticipated a vacancy.

Earlier this year Mr Hogan sent a ripple of alarm through Brussels by entering the race to be the next head of the WTO, before pulling out when it became clear he did not have sufficient support. His departure from the Brussels executive this week throws a fresh cloud of uncertainty over Ms von der Leyen’s college, less than a year after she took over from former president Jean-Claude Juncker. 

Officials said the early presumption was that Dublin would seek to keep hold of trade — one of the most coveted slots in the commission — which would allow Ms von der Leyen to avoid the complex and politically contentious task of reshuffling portfolios. But in a statement on Thursday morning, the commission president insisted she would determine the final allocation of portfolios at a later stage.

Valdis Dombrovskis, the executive vice-president who oversees the economic and financial business of the commission, will oversee the trade portfolio on an interim basis, she confirmed. Whoever is chosen to replace Mr Hogan on a permanent basis will still need to navigate hearings in the European Parliament and a plenary vote of approval before taking office, meaning it could take weeks before she or he takes office.

In the meantime, the commission is in the advanced stages of a wholesale review of its trade policy that Mr Hogan accelerated as he sought to lead discussions on how to toughen the bloc’s defences against unfair trade practices, notably by China. 

It is also entering a make-or-break period in negotiations with Beijing on an investment treaty that Brussels has pinned its hopes on as a way to level the playing field between EU companies and Chinese rivals. 

EU diplomats noted that, in addition to his meaty portfolio responsibilities, Mr Hogan was a crucial counterweight within Ms von der Leyen’s team to more protectionist voices — part of a delicate political balancing act by the commission president to divide up major economic posts between political families and regions of the EU.

She could hardly have imagined that a key member of that team would fall away so soon.

Additional reporting from Aime Williams in Washington