TRADE POLICY OFTHE EUROPEAN UNION

EU’s Role in Global Trade

Current Challenges in Trade Policy

• Globalisation – Including fragmentation of value chains

• Emergence of new economic powerhouses – China, India, Brazil

• Economic downturn – Trade is part of the solution

EU as a Trading Power

The EU in World Trade: Export Partners

The EU in World Trade: Import Partners

The EU in World Trade: Share in World Trade in Goods

Investment going into and from the EU

EU’s Investments in the World

Trade Policy of the EU

What is trade policy?

• Trade policy (or commercial policy) is a set of rules and regulations that are intended to change international trade flows, particularly to restrict imports.

• The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners.

• Multilateral and bilateral agreements

Trade Policy of the EU

• The EU manages trade and investment relations with non-EU countries through the EU's trade and investment policy.

• Trade policy is executed by DG Trade• EU's exclusive powers covers not just trade in

goods, but also:– services– commercial aspects of intellectual property– foreign direct investment

• The European Parliament decides jointly with the Council on the framework of EU trade policy – through the ordinary legislative procedure.

• While the Commission maintains the right of initiative, for its proposals to be formally adopted, agreement has to be reached between the co-legislators.

• International agreements are adopted by the Council, after the Parliament has given its consent.

Trade Policy of the EU

Negotiation of Trade Agreements

Evolution of EU’s Trade Policies

Trade Policy based on Regionalism

• Formation of the EEC in 1957 and EFTA in 1960: the first remarkable examples of regional trade agreements.

• EEC trade policy priority in the 1970s and 1980s was preferential trade agreements mainly with neighbouring countries (enlargement, EFTA, Turkey, Israel)

EU Trade Policy and WTO• Establishment of the WTO in 1995 flourished the

expectations that a world trading system based on common rules and multilateral liberalization can be formed.

• EU turned its attention to multilateralism• Pascal Lamy appointed as the Commissioner for

Trade in 1999.• EU maintained an effective suspension on the

opening of bilateral or regional negotiations to conclude FTAs, and championed the multilateral trading system.

• Lamy explained this policy as one “pursuing all existing mandates for regional negotiations with vigour and fairness, but not to begin any new negotiations”.

• two reasons: – it favored the multilateral approach of the Doha

Development Agenda and the EU did not want to take any initiative that might detract from its completion;

– EU had a ‘deep integration’ approach in FTAs and these agreements were complex and time-consuming to negotiate

• Increasing the number of bilateral agreements has been labeled as ‘spaghetti bowl’ of overlapping trade rules

Disturbances to EU’s Multilateral Position

• USA had started to pursue an activist FTA policy based on ‘competitive liberalization’, the Bush Administration had restored the Fast Track Negotiating Authority in 2002, which had expired and not been in effect since 1994.

• DDA, which was set to conclude in December 2006, started to show significant slowdown in progress towards multilateral liberalization.

Push for a New Trade Policy

• Expansion of Trade flows– Increasing global trade in goods and services

• Fragmentation of global value chain production in goods and services– Production through global value chains dominated

by multinationals. – 2/3 of world imports concern intermediate inputs

• The rise of the emerging economies

Current Trade Policy of the EU

New Trade Policy of the EU

• DDA officially suspended in July 2006.

• Multilateralist position of the EU has lost its ground and the Commission has been forced to change its trade policy focus.

• New trade policy “Global Europe” revealed in October 2006

Global Europe• “rejection of protectionism at home, accompanied

by activism in creating open markets and fair conditions for trade abroad”

• focuses on the need to identify and remove tariff and non-tariff barriers (NTBs) to market access for goods and services that are important for the European exporters.

• influence the forces driving change, to seize the opportunities of globalization and to manage the risks and challenges posed by the emerging economies especially in Asia and South America.

• Economic criteria: market potential and the level of protection (tariffs and NTBs) against EU export interests

• Target countries: – Prior FTA partners: ASEAN, Korea and Mercosur– Countries of direct interest: India, Russia and the Gulf

Cooperation Council – Country of special attention: China

• Coverage: the highest possible degree of trade, investment, and services liberalization, in addition to a ban on export taxes and quantitative import restrictions. regulatory convergence, non-tariff barriers and stronger provisions on intellectual property rights and competition

Global Europe: Criteria for FTAs

EU’s FTAs• Agreements with neighbours: (EFTA, Turkey, Central and Western

European countries and West Balkans - Association Agreements for potential future EU countries)

• Agreements designed primarily to foster stability around the EU borders: (Mediterranean countries, Gulf States, Ukraine)

• Agreements with a historical and development focus: (EPAs with African, Caribbean and Pacific (ACP) regions)

• FTAs with strategic partners: countries and regions where EU’s objective is to neutralise potential discrimination against EU exports and investments resulting from FTAs between third countries or to secure commercial benefits via increased market access (e.g Korea, Chile, South Africa, Singapore etc.)

• Globally more than 200 FTAs • Covering more than 35% of global trade • FTAs top up what can be done in WTO • ‘Extended’ regionalism

EU’s FTAs

Trade Agreements in Europe• Norway - 01 July 1973 (EEA)• Iceland - 01 April 1973 (EEA)• Switzerland - 01 January 1973 • Faroe Islands - 01 January 1997• Macedonia - Stabilisation and Association Agreement, 01 May

2004• Albania - Stabilisation and Association Agreement, 01 April 2009• Montenegro - Stabilisation and Association Agreement, 01 May

2010• Bosnia and Herzegovina - Interim Agreement on trade and trade

related matters, 01 July 2008• Serbia - Interim Agreement on trade and trade related matters,

01 February 2010

Trade Agreements in the Mediterranean Region

• Palestinian Authority - Association Agreement, 01 July 1997• Syria - Co-operation Agreement, 01 July 1977• Tunisia - Association Agreement, 01 March 1998• Morocco - Association Agreement, 01 March 2000• Israel - Association Agreement, 01 June 2000• Jordan - Association Agreement, 01 May 2002• Lebanon - Interim Agreement, 01 March 2003• Egypt - Association Agreement, 01 June 2004• Algeria - Association Agreement, 01 September 2005

• Mexico - Economic Partnership, Political Coordination and Cooperation Agreement, 01 July 2000

• South Africa - Trade, Development and Co-operation Agreement, 01 January 2000

• CARIFORUM States - Economic Partnership Agreement, Provisionally applied• Chile - Association Agreement and Additional Protocol, 01 February 2003

(trade) / 01 March 2005 (full agreement)• Madagascar, Mauritius, the Seychelles, and Zimbabwe Interim Partnership

Agreement signed in August 2009• Korea - New Generation Free Trade Agreement, signed 06 October 2010• Papua New Guinea and Fiji - Interim Partnership Agreement ratified by Papua

New Guinea in May 2011• EU-Iraq - Partnership and Cooperation Agreement, signed on 11 May 2012• Colombia and Peru - Trade Agreement, signed 26 July 2012• Central America - Association Agreement with a strong trade component,

signed 29 June 2012

Trade Agreements in Other Countries

Customs Unions

• Andorra - 01 July 1991• San Marino - 01 December 1992• Turkey - 31 December 1995

Generalised System of Preferences (GSP)allows exporters from developing countries and LDCs to

pay lower duties on their exports to the EU• Standard GSP scheme: tariff reductions to developing

countries. partial or entire removal of tariffs on 2/3 of all product categories.

• GSP+: full removal of tariffs to countries which ratify and implement international conventions relating to human and labour rights, environment and good governance

• Everything but Arms (EBA): scheme for LDCs, duty-free quota-free access to all products, except for arms and ammunitions

EBA

• Pursue active negotiating agenda– Multilateral Trade Agreements (Doha Round) – Bilateral Trade Agreements (ASEAN, India, Canada,

Euromed, Mercusor, Gulf States) • Deepen relations with strategic partners – USA, China, Russia, Japan, India, Brazil

• Enforce EU rights, tackling trade barriers

Trade Policy Agenda

• Trade is no longer just about tariffs… – Standards – Licensing practices – Domestic taxes – Investment

• Trade is not just about trade… – Environment – Human Rights – Labour Rights

Beyond the Borders