eu trade policy 2020

FACULTY OF BUSINESS ECONOMICS

SEMINAR PAPER

Title: EU Trade policy 2020

Mentor: Student:Prof. dr Miroslava Filipović Danica Vučković 86/10

Seminar paper EU trade policy 2020

Sremska Kamenica, 02nd March, 2011

Table of contents

TABLE OF CONTENTS...................................................................................................................................2

1. INTRODUCTION..........................................................................................................................................3

2. BASIC ORIENTATION................................................................................................................................4

3. A TRADE AND INVESTMENT POLICY READY FOR FUTURE CHALLENGES...........................4

3.1 FAST FORWARDING FOR THE FUTURE: SMART GROWTH............................................................................43.2 SUSTAINABLE GROWTH IN EU AND ABROAD.............................................................................................7

4. NEGOTIATING AGENDA...........................................................................................................................7

4.1 CONCLUDING DOHA...................................................................................................................................74.2 COMPLETING THE ONGOING FREE TRADE AGREEMENTS (FTA).................................................................74.3 STRATEGIC ECONOMIC PARTNERS..............................................................................................................8

5. ENFORCEMENT OF TRADE RULES.......................................................................................................9

6. PUBLIC CONSULTATIONS.....................................................................................................................11

7. EXTERNAL RELATIONS.........................................................................................................................11

8. CONCLUSION.............................................................................................................................................12

9. Bibliography..................................................................................................................................................13

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1. Introduction

With the sixth enlargement of the European Union from 25 to 27 member states, EU market increases to about 470 million people.1 Bearing in mind the EU enlargement with countries that are at the level of development well below the average of countries in the EU, next decade in the EU (2007-2017) will be the decade of adjustment and the resolution of regional problems in the Union. This market is larger than the U.S, and was cleared of unnecessary barriers between member states and represents an attractive market environment for a number of challenges.

Trade is an engine for global growth. It contributes to long-term jobs in EU and around the world. It has a real impact on the lives of people and businesses in Europe and offers a path of development to those in need.2

The European Union is great global player in international trade and investments and the great challenge in the fast changing world is to maintain and improve its position.

People generally feel that Europe is well placed today, but fear of its future position and capability to compete with fastest growing economies. These concerns are legitimate, because thirtysix million jobs in Europe depend today, directly or indirectly, on trade.

With the right policies in place, EU can fuel its growth. By completing the trade deals on the table and engaging more strategic partners, trade policy can increase the size of EU's economy by around 150 billion €. This would make a major contribution to the Union's wider agenda for smart, sustainable and inclusive growth.3

European Union has to find new ways of working with other key trading partners, where challenges are all about regualtion rather than traditional tariffs. It is important to ensure that everyone plays by the rules.

The renewed EU trade policy will make trade voice louder an clearer. This policy, building on EU's commitment to an open, fair and rules- based trading system, will deliver jobs and growth for Europe.

The major challenge of the Europe 2020 strategy is the communication between its two crucial elements- sustained economic growth (which can create more jobs) and lifting the growth potential of EU's economies.

1 Acin, Đ. Međunarodni ekonomski odnosi, peto izmenjeno i dopunjeno izdanje, Pigmalion, Novi Sad, 2007,str. 3352 http://www.ec.europa.eu/trade/publications;Trade, Growth and World Affairs. Trade policy as a core component of the EU’s 2020 strategy. Foreword3 ibid.

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2. Basic orientation

The EU’s economy is the largest in the world. It is also the biggest exporter. EU’s firms 1,6€ trillion of goods and services in 2009, which is about 13% of EU’s GDP. European Union is also the most important provider and host of foreign direct investments (FDI)4

Once all FDAs have approved that are under negotiation or under consideration, the EU will have preferential trade agreements with the large majority of WTO members. It is equally important for EU to depen its trade and investment links with the other big economies in the world: US, China, Russia, Japan.

Trade should also drive improvements in social inclusion both around the world and in the EU. Developing countries that have entered global trade have seen incomes and employment grow rapidly as well as significant decrease in poverty. EU is also helping the poorest economies providing unilateral trade preferences.

On the one hand trade openess boosts employment and wages in developed economies, including in the EU, but on the other the costs of adjustment in particular areas are high, so the Union needs appropriate social and labour market policies to help workers and businesses adjust. This concern shoud be projected in budgetary priorities.

3. A trade and investment policy ready for future challenges

3.1 Fast forwarding for the future: smart growth

An effective global supply chain cannot exist without the support of transport, telecom, financial, business and professional services. Services represent 70% of world output, but only one fifth of the world trade. This is the result of the trade barriers. EU will seek greater openess for its service providers, while its market will be open for service providers from third countries, according to 2005 UNESCO Convetion on cultural diversity.

4 http://www.ec.europa.eu/trade/publications;Trade, Growth and World Affairs. Trade policy as a core component of the EU’s 2020 strategy.

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Table 1: Estimated tariff equivalents of services barriers (in %)

Telecom Constr Trade Transport Finance Businessservices

Other

DEVELOPEDCOUNTRIES 24 42 31 17 34 24 26

ASIA 33 25 17 8 32 15 17EU25 22 35 30 18 32 22 27USA 29 73 48 14 41 34 7DEVELOPINGCOUNTRIES 50 80 47 27 57 50 34

TOTAL MEAN 35 58 38 21 44 35 29MAX 119 119 95 53 103 101 54

Source: DG TRADE/ CEPII. Based on gravity modelling of services trade flow data.

There has been an enoromous increase in capital movements and FDI.5 The European Commission has proposed investment policy that will better address the needs of investors from all Member States. It will also seek to integrate investment protectiono together with investment liberalization into ongoing trade negotiations.

Public procurement is an area where foreign markets are especially closed for EU companies. While EU market is largely open, those of its trade partners are less so, especially at regional and local levels . EU will continue to press for more opening of procurement abroad and will fight against discriminatory practice. The Commission will present in 2011 a legislative proposal for an EU instrument to increase level of symmetry in accsses to public procurement markets in developed and large emerged economies. Likewise, there should be more symmetry in research and development programmes in third countries to match EU’s high level of openness.

Table 2: Public procurement market in key trading partners


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EU US Japan Canada Korea Brazil* Argentina* India*Total PublicProcurementmrket(n bin €)

2088 1077 565 225 106 133 15 64

(% of GDP) 16% 11% 18% 22% 14% 13% 8% 8%Total PublicProcurementaove GPAtreshold(in bin €)

370 279 96 59 25 42* 3.7* 20*

(% of GDP) 3% 3% 3% 6% 3% 4%* 2%* 2.5%*PP offered to GPA(in bin €)

312 34 22 2 15 na na na

(% of above treshold PP market)

84% 12% 23% 3% 60% na na na

Source: European Commission estimates6 * = not GPA members. DG Markt estimates of potential public procurement market subject to commitments if the countries were to join the GPA.

Regulatory barriers to trade goods, services and investment between the partners of the EU are particularly harmful, if we take into account EU’s investments and volume of trade with them.7 Countries have the right to establish their own level of public protection and to regulate accordingly, but sometimes they may be an important source for business costs for EU’s companies abroad. Enhanced regulatory cooperation is an important aspect of EU’s trade relationship particulary with its main partners, but much has to be done. Also quite a few third countries recognize the advantages of tne EU’s system of regulation for the Single Market and have adopted their own rules.

Temporary movement of people to provide services contributes to making EU’s service providers and more competititve, both in EU and abroad. Bringing the best people from around the world is essential to EU companies and research centres to remain on the cutting edge of innovation. Likewise, EU’s companies need to be able to move European managers and experts abroad.

6 Data for China is not available7 http://www.ec.europa.eu/trade/publications;Trade, Growth and World Affairs. Trade policy as a core component of the EU’s 2020 strategy.

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3.2 Sustainable growth in EU and abroad

It is important for EU to ensure support of green growth and climate objectives such as reduced emission of carbon- dioxide into atmosphere. EU’s industry should be able to compete in sustainable economy of the future, including the fisheries and agriculture sectors, which will see further reform..

EU will continue to give particular attention to the implementation of sustainable growth in its trade agreeements, and to cooperation with civil society.The sustainable and undistorted supply of energy and raw materials is of strategic importance for competitiveness of the EU economy. Concernig energy, the EU will use both bilateral and multilateral negotiations to include provisions that will help them to diversify energy supplies, free transit, and promote trade in sustainable energy.

4. Negotiating agenda

The EU’s priority in trade policy must be to gain access to the largest and fastest- growing economies in the world, particularly through trade agreeements.

4.1 Concluding Doha

In spite of the slow progress, completing the Doha Round remains EU's top priority. Doha represents a potentially sizable boost to the world economy. The successful conclusion od the Doha negotiations would confirm the central role of multilateral trade liberalisation. It would also confirm the WTO as a powerful shield against protectionist backsliding. There is a long-term systemic benefit in strengthening the WTO as a central institution to adress the challenges of global economic governance alongside the G20.

4.2 Completing the ongoing free trade agreements (FTA)

The Global Europe agenda of new bilateral trade agreements with important trading partners is a tough undertaking, but this agenda is the right course to follow, and it has started to bring results. This is a significant and highly challenging agenda, because these new trade agreements go beyond import tarrifs, addressing regulatory barriers in goods, services and investments, intellectual property rights, goverment procurement, the protection of innovation, sustainable development and other important issues. But the benefits should be substantial. On the assumption that all these ongoing negotiations are successfully concluded:

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About half of the EU’s esternal trade will be covered by free trade agreements; The average tariff faced by EU exports would fall by around one half (to about 1,7%)

and the average EU import tariff by nearly a fifth (to 1,3%)8; Taken together these various FTAs should, as a part of future policy’s contribution to

growth, add up to 0,5% to EU GDP in the longer run9

In parallel the EU will continue to pursue Deep and Comperhensive Free Trade Agreements (DFTAs) with Eastern partners and Euro- Mediterranean partners. This remains a powerful agent of change via regulatory convergence and the removal of tariff and other barriers.

4.3 Strategic economic partners

The EU Council identified enhancing trade with the EU's strategic partners as a crucial objective. Because of their economic size and their influence on the global economy , EU's trade policy need to pay attention to the US, China,Russia, Japan, India and Brazil. The EU is in the middle of negotiations with India for an FTA and will soon transform its relationship with Brazil when, the recently re-launched, negotiations are concluded.

Table 3. The Major EU Trade Partners8 http://www.ec.europa.eu/trade/publications;Trade, Growth and World Affairs. Trade policy as a core component of the EU’s 2020 strategy.9 ibid.

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Leading Partner Countries of the EU27 in Merchandise Trade (excluding intra-EU trade)

The Major EU Trader Partners

EU Imports+EU Exports 2009 2008 2007 2006 2005

Rank.

Mio euro

Rank.

Mio euro

Rank.

Mio euro

Rank.

Mio euro

Rank.

Mio euro

Extra EU27:

2.294.713

2.874.764

2.673.942

2.512.887

2.232.289

USA 1364.278

,6 1436.895

,5 1443.215

,3 1444.691

,0 1416.194

,4

China 2296.312

,5 2326.349

,8 2304.591

,5 2258.726

,3 2212.152

,5

Russia 3180.990

,1 3282.788

,8 3233.595

,7 3213.244

,1 3169.287

,5

Switzerland 4162.313

,4 4178.332

,6 4169.794

,6 4159.429

,0 4149.162

,6

Norway 5106.343

,6 5139.689

,8 6120.212

,5 6117.664

,8 6101.054

,0

Japan 691.819,

9 6117.340

,3 5122.191

,8 5122.281

,6 5117.813

,2

Turkey 779.951,

4 7100.125

,4 799.650,

8 791.757,

8 780.706,

9

South Korea 853.547,

6 865.132,

2 866.153,

5 863.678,

4 854.676,

7

India 952.894,

8 1061.084,

8 956.076,

3 947.006,

0 1040.408,

6

Brazil 1047.223,

1 962.244,

3 1054.132,

2 1144.972,

3 1140.181,

0

Canada 1140.208,

1 1149.939,

0 1149.169,

6 1046.451,

7 941.277,

6

Singapore 1235.019,

3 1738.175,

5 1439.012,

0 1438.980,

9 1435.864,

5

Algeria 1332.009,

6 1243.621,

7 2131.835,

7 1634.123,

3 1731.380,

5

South Africa 1431.025,

5 1442.583,

8 1241.391,

8 1538.426,

1 1634.940,

7

Saudi Arabia 1530.493,

5 1343.263,

9 1538.561,

7 1241.001,

5 1238.183,

5

Australia 1629.874,

6 1936.372,

9 1734.516,

5 1832.519,

1 1930.321,

4

Hong Kong 1729.173,

9 2232.609,

8 2031.880,

5 1733.798,

3 1831.154,

9

U.A.Emirates 1828.880,

4 1837.591,

3 1932.956,

3 1931.035,

2 1535.417,

9

Taiwan 1927.515,

7 2035.669,

0 1339.363,

1 1339.934,

0 1337.168,

0Libyan Arab

Jamahiriya 2026.464,

1 1540.883,

8 2231.559,

1 2029.744,

0 2323.403,

0

Source: Eurostat (Comext, statistical regime 4); http://trade.ec.europa.eu/doclib/html/122530.htm

5. Enforcement of trade rules

The EU must step up its efforts to enforce its rights under bilateral and multilateral agreements. Proper enforcement of trade rules is of crucial importance. It ensures that trade agreements on paper can be translated into concrete results for people and companies on the ground.

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At the global level the EU will pay particular attention to trading partners' actions in the recovery from the economic crisis. The G20 commitment in 2008 not to introduce protectionist measures has been largely respected by partners. The EU will call upon its G20 partners to take action to roll back the trade restrictive measures introduced during the global financial crisis.

Regarding bilateral agreements, the EU will prioritise the implementation of free trade agreements, particularly regulatory component and non-trade barriers.As announced in the Europe 2020 Communication, the EU will produce an annual trade and investment barriers report which will monitor trade barriers and protectionst measures in third countries.

In 2005, the Commission proposed legislation on origin marking for imported and products to provide more information for consumers, so the EU will work witi major partners in order to strengthen and better co-ordinate consumer safety actions.Particular attention will be paid to international customs co-operation. Efficient customs procedures reduce compliance costs for traders, facilitate legitimate trade and help us to address rising security and safety.

It is very important that intellectual property linked to EU goods, services and FDI, is adequatly protected. Concerning this, the EU will review its 2004 strategy on the enforcement of intellectual property rights in third countries. The EU's companies and right holders need more effective protection of intellectual property (IP), including geographical indicators, across foreign markets, especially in emerging economies.

European Union's commitment to open trade depends on fair competition between domestic and foreign producers based on genuine comparative advantages. Protection of EU production from international trade disruptions is a need. It is being achieved by applying trade defence instruments in complience with WTO rules. The EU will apply these instruments to new forms of distortions, such as subsidisation of strategic sectors. Also, the EU will continue to apply its rigorous legal and economic standards and expect its trading partners to do the same.

Absence and ineffectivness of competition and state aid rules in third countries limit market access for EU exporters. Therefore, EU has a strategic interest in developing international rules to ensure that European firms will not suffer from unfair subsidisation or anti-competitive practices.

The European Union will do more to address the problems of Small and Medium Enterprises (SME's). They often face problems with cost-intensive trade defence investigations either as importers, users or importers. The Commission will present in 2011 a Communication on possible support measures to help SMEs that want to develop their international activities.

The role of EU Delegations as contact points for EU business abroad will be enhanced. Also, specific business support structures in third countries will be created, where appropriate.

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6. Public consultations

Consultations with civil society is a fundamental part of EUs policy-making and they provide feedback to those who have responded to its public consultation processes, where it is feasible.

The EU will pay particular attention to wide consultation and involvement of civil society in the sustainability impact assessments that it carry out during trade negotiations. When negotiations are concluded and before signature, an analysis of the concequences of the proposed deal will be prepared for the Parliament and Council. In order to help monitor the impacts of existing EU trade agreements, ex post evaluation will be carried out on a more systematic basis.

7. External relations

Trade policy has its own economic logic and contribution to make to the external action of the Union.10 Trade and trade policy reinforce the EU's international influence and concentrated action should pursue EU economic interests in third countries. Union's trade and foreign policies can and should be mutually reinforcing.

Other tools of external action, such as EU Delegations, should help accomplish our trade agenda and support our companies abroad.11

Another example of the interaction between trade policy and external action is export control system for dual-use goods which serves a foreign security policy goal.12 Although strong progress has been made over the last twenty years, there is still a lot to be done. The EU will continue to develop export control measures aimed at simplifing and making more transparent business environment for EU exporters.


11 ibid.12 ibid.

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8. Conclusion

This communication sets out how European Union intend its trade policy to contribute to sustainable economic growth which should create more jobs and safeguard its welfare state.

In summary, the EU will:

Pursue its negotiation agenda- the aim is to conclude the Doha round of negotiations; also, the aim is to make significant progress with ongoing bilateral negotiations, launch new trade negotiations with ASEAN countries and propose self- standing investment negotiations with key partners; pursue negotiations with EU’s neighbours towards bringing all neighbours gradually closer to Single Market.

Depen its strategic partnerships Take Trade policy forward- the EU will make a legislative proposal for an EU

instrument to help secure and increase symmetry in access to public procurement markets in developed countries and large emerging market economies ; also, it will conclude the debate with Member States and the European Parliament on a new investment policy for the EU; European Union will present its views on how to develop the mutual supportiveness of internal and external market opening, in particular in goods and services regulations; present a Communication on possible support measures to help SMEs that want to develop their international activities.

Enforce its rights- it will review its strategy on the enforcement of intellectual property rights in third countries; it will produce from 2011 onwards an annual trade and investment barriers report for the Spring European Council as its key instrument to monitor trade barriers and protectionist measures and trigger appropriate enforcement action.

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9. Bibliography

1. Acin, Đ. Međunarodni ekonomski odnosi, peto izmenjeno i dopunjeno izdanje, Pigmalion, Novi Sad, 2007.

2. http://ec.europa.eu/trade 3. http://www.wto.org

http://www.cepii.fr

BB. Conclusionsr tomorrow’s

challengesinvdy for tomorrow’schallenges

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http://www.wto.org/

http://ec.europa.eu/trade

eu trade policy 2020

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