ECB Study Exposes EU's Deepening Trade Ties with Authoritarian Regimes

According to ECB, the EU has steadily increased its trade with authoritarian and non-democratic regimes over the past 25 years.

The European Union often presents itself as a bastion of democratic values and human rights, both internally and in its global relations. However, a new study published by the European

Conducted by ECB economists Claudia Marchini and Alexander Popov, the study tracks the EU’s trade patterns between 1985 and 2023, focusing on the democratic character of its trading partners. The researchers developed a new metric - the Democracy-Weighted Trade Index (DWTI) - to quantify how closely aligned the EU’s external trade is with its democratic values. The index combines the share of EU imports from each country with that country’s score on the international Liberal Democracy Index. A DWTI closer to 1 suggests trade is primarily with democratic nations, while values near 0 indicate a stronger tilt toward autocratic regimes.

The data reveals a two-part story. From 1985 to 1999, the EU increasingly traded with democratic countries, benefiting from the global wave of democratization, particularly in Eastern Europe and Latin America. The DWTI peaked in 1999, reflecting a high point in values-based trade. But since then, the trend has reversed. By 2022, the index had fallen to its lowest recorded level, suggesting that EU trade policy has progressively favored regimes that restrict freedoms and violate human rights.

A natural assumption might be that this decline is largely driven by growing trade with China, a country with consistently low democratic scores. China's accession to the World Trade Organization in 2001 spurred a dramatic rise in trade with the EU, and today, China accounts for about 20% of EU imports. While the researchers confirmed that China played a significant role in the downward trend, they also found that the decline persisted even when China was excluded from the data - indicating that the issue runs deeper and reflects a broader pattern.

The study divides this regression into two distinct phases. From 1999 to 2012, the EU gradually shifted its imports from more democratic to less democratic countries. After 2012, the countries it traded with remained largely the same - but many of those partners themselves became less democratic over time. The result, whether due to changes in partners or in the nature of those partners, is the same: a steady erosion of the EU’s values-driven trade profile.

This divergence between rhetoric and reality raises serious concerns about the EU’s consistency. The Union frequently proclaims its commitment to «sustainable and value-based trade» that respects human rights and fundamental freedoms. Yet for a quarter of a century, the actual trade patterns suggest otherwise.

Beyond the ethical contradiction, the shift carries significant geopolitical risks. Increasing dependence on authoritarian regimes - particularly those with aggressive or destabilizing policies - can strengthen anti-democratic forces and pose threats to global stability.

There’s also a practical dilemma, especially when it comes to the EU’s green transition. Key technologies for fighting climate change, such as electric vehicle batteries, rely on raw materials like lithium, cobalt, and nickel - most of which are sourced from authoritarian states. These supply chains are often linked to serious human rights abuses, including child labor and forced labor.

The ECB study by Marchini and Popov offers no easy solutions, but it delivers a clear warning: the European Union must critically reassess its trade policy. It faces a fundamental question - whether it is truly prepared to prioritize its core values over short-term economic gain.