The external dimension of the Single Market of the European Union

EU Centre-RSIS Summer Programme“The European Union in Asia – Reflections on

European Integration, Institutions and Influence”4 – 30 June 2012

Anne Pollet-FortEU Centre Associate Fellow

Introduction• Originally, internal dimension of single market

dominated over external dimension (inward-looking attitude)

• External partners placed the external dimension of Single Market on political agenda– Concerns over impact of SM and formation of

“Fortress Europe”• Europe response• SM should be open to 3rd countries• EU will seek greater liberalisation of international

trade

The EU, a major trading partner

• 16.8% of world trade in 2010• First exporter (16.2% in 2010)• Largest importer (17.3% in 2010)• Leader in Foreign Direct Investment

– EU-27 receives € 218.7 bn in 2010 • Main trading partners

– USA, China, Russia, Switzerland– Canada (11th), Singapore (12th), Indonesia (33rd), Bangladesh (48th)

The EU Trade PolicyCompetence, decision-making and instruments

Competence• External trade policy is an exclusive European

competence– MS are precluded to conclude individual trade policies– EU institutions competent to adopt EU trade legislation and

enter into bilateral or multilateral trade agreements• However, European competence depends on definition

of scope of EU external trade policy– Since 1958, scope of EU competence has changed several

times and was subject of debates between EU and MS– Lisbon Treaty clarifies the EU competence. All key aspects of

trade, goods & services, trade related aspects of intellectual property & FDI fall under exclusive competence of the EU.

EU trade policy - dimensions

MultilateralMultilateral Bilateral/Bilateral/RegionalRegional

UnilateralUnilateral

3 3 DIMENSIONSDIMENSIONS

Unilateral dimension

Unilateral instruments• Common external tariff

– EU’s average tariff on industrial imports is now 4%– Higher import tariffs on agricultural products, food, textiles &

clothing• Common rules for imports

– Imports into EU are free & not subject to QR– Stricter surveillance for products from certain countries – Since 2005 no more quota on textile & clothing

• Trade Defense instruments– Anti-dumping– Anti-subsidy– Safeguard measure

• Market Access Instruments• GSP, GSP + and Everything But Arms

Decision makingUnilateral instruments

• Community method applies:– Commission proposes– Council and EP co-decides following the Ordinary

Legislative Procedure– Qualified Majority Voting– Subject to judicial review by ECJ

• EU trade policy is a real common policy where Commission plays central role

• Increased role of EP may lead to a more politicized EU Trade policy

Anti-dumping policy• EU had frequent resort to anti-dumping

measures, esp. in the 90s.– 2001: EU had the 2nd largest number of product

categories with ADD in force after the USA.– Most affected products: iron and steel products,

consumers electronics and chemicals– In last years, fewer cases in EU & elsewhere– Use of ADD often criticised by EU’s trading partners as

protectionist measures• Revision of the system announced but difficult to

find consensus among MS

Market Access Strategy• Trade Barriers Regulation

– tool for tackling trade barriers in export market• Market Access Strategy

– Creating new opportunities for EU exporters – Market Access Partnership - cooperation between the

Commission, Member States and businesses – local expertise make trade barriers easier to identify and address

– Market Access teams created – Market Access Database (MADB) as an important tool to

record barriers under examination in EU trading partners – Export Helpdesk

Generalised Systems of Preferences

• Generalised System of Preferences (GSP)– provides autonomous preferences to 176 Developing Countries

on over 6300 tariff lines;

• GSP+– offers additional preferences to support vulnerable developing

countries in their ratification and implementation of international conventions on good governance, human rights, labour standards, environmental standards

• the Everything But Arms arrangement,– provides Duty-Free, Quota-Free access for the 50 Least-

Developed Countries (LDCs).

• GSP system under review

Multilateral dimension

Multilateral dimension• The EU has been one of the key players in the

negotiation and establishment of multilateral global trade regime (including in DDA)

• The EU acted with a single voice in each of the GATT rounds of negotiations

• The EU saw multilateralism & WTO as a mechanism for managing globalisation– use SM as a model for a global trade liberalisation. – Widen definition of trade issues & include services,

investment, IPRs, competition policy – Put itself as leading champion of multilateral trade syst.

• Position of EU is however more difficult in area of agriculture than in area of industrial goods

• Multilateral trade liberalisation remains EU top priority!

Bilateral dimension

Bilateral dimension

• Historically EU was an early, major promoter of preferential FTAs– 60s: Yaounde Agreements & 75 Lome Treaties – 70s: agreements with Mediterranean countries and 6 EFTA

countries & EC generalised system of preferences– Late 80s: another wave of regionalism with conclusion of

Association Agreements (CEECs) & cooperation agreements with CIS countries.

• In the mid-90s, EU began to give priority to multilateralism of WTO over bilateral FTAs

• Doha suspension => EU announced its intention to enter into more FTAs (Global Europe)

Decision-makingTrade agreements

• The Commission negotiates– On behalf of the 27 Member States– Regular reporting to the Council and the EP

• The Council– Decides on directives for negotiations– Follows negotiation process (Special committee made up by

MS civil servants assists Commission)– Council approve the results of the negotiation (generally by

qualified majority) – sometimes MS ratify as well • The EP

– Gives consent on trade agreements since Lisbon Treaty– Impact on trade policy since greater role given to issues such

as human rights and social standards

The New EU Trade Agenda

Global Europe: Competing in the World• October 2006: Commission announced a new trade

policy – Reasons behind the shift in EU trade policy:

• Difficulties of WTO negotiations• Development in other countries trade relations (ex: US FTAs)• Burgeoning economic growth in Asia and related conclusion of a range

of FTAs – Strategy is part of the Lisbon Strategy & links both internal

and external aspects of the SEM• To support efforts to foster economic growth and create jobs. • EU needs to adapt its policies if wants to reap benefits of globalisation

and needs to take into account the changes of the world economy– Process of production is fragmented– Emergence of major new economies creates huge opportunities for

growth & development BUT also creating new pressures on traditional industries and natural resources

New policy on FTAsPartners

• Core of strategy: comprehensive FTAs should be negotiated with EU’s most important trading partners in the world

• Partners identified – according to economic criteria:

• Market potential (economic size & growth)• Level of protection against EU exports

– First tier: South Korea, India & ASEAN• Combine high levels of protection with largest market potential• Are active in concluding FTAs with EU competitors

– Second tier: Mercosur, Russia, and the Gulf Cooperation Council

– China also meets criteria but requires special attention– Canada was added as priority partner

New policy on FTAsCoverage

• Comprehensive & ambitious coverage– aiming at highest possible degree of trade liberalisation– Need to include issue areas such as

• IPR since insufficient IPR protection reduces value of market access• Services as cornerstone of EU economy• Investment as investment conditions must be improved• Public procurement as it is an area of untapped potential• Competition provisions including provisions on state aid control

– Must provide for regulatory convergence to combat NTBs• State of playhttp://trade.ec.europa.eu/doclib/docs/2006/december/

tradoc_118238.pdf

Global Europe after 5 years1. A successful conclusion of DDA out of reach2. Progress in new FTAs, but hard on issues going beyond tariffs3. Progress in EU/US dialogue on regulatory issues4. With China, main challenge remains creation of level-playing field

(public procurements, IPR, subsidies)5. IPRs enforcement largely addressed6. New Market Access Strategy led to concrete results7. Public Procurement remains sensitive issue for partners8. No progress on review of trade defense instruments due to lack of

consensus between MS

Future trade policy

Future trade policy• Two factors for a redefinition of EU trade policy

– Entry into force of Lisbon treaty • that considers trade policy as integral part of Union’s overall external

action• Trade policy must therefore address development, environmental and

social objectives– Europe 2020 strategy

• How can EU trade policy further help achieving EU 2020 objectives ie achieving smart, sustainable and inclusive growth

• Process– After a public consultation, Commission published a

Communication in Nov. 2010 on a revived trade strategy– Accompanied by 2 more documents

• Progress achieved on Global Europe 2006-2010• A working paper "Trade as a driver of prosperity’

Today’s context

• Globalisationhas put trade issues at the centre of citizens’ concerns

• Emergence of new economic powerhouses

• Economic downturnTrade is part of the solution to exit crisisAlso impacts the way trade policy is perceived in the EU

Trade, Growth & World Affairs• Pursue active negotiating agenda

– Multilateral Trade Agreements (Doha) – Bilateral Trade Agreements (Korea, ASEAN, India,

Canada, Central America, Andean Community, Ukraine, Euromed, Mercusor, Gulf States, Libya, China)

• Deepen relations with strategic partners– USA, China, Russia, Japan, India, Brazil

• Enforce EU rights, tackling barriers

Fighting protectionism abroad

• “We should be open, but not naïve”– EU announced that it would fight protectionism,

which is on the rise as a consequence of the global economic downturn

– In particular, EU will demand more “reciprocical commitments” from trade partners

– EU Trade Commissioner and EU Commissioner for the Internal market have proposed new instrument in the area of public procurement

Protectionist pressures at home

• Economic slowdown lead to rising anxiety among European population– Benefits of open trade policy questioned by

European population

• European support for open markets can only be guaranteed if accepted by public at large

• Member States in the Council and the European Parliament will need to take account of public concern

Eurobarometer on trade

An opinion survey on international trade found that:Europeans think trade is good for Europe and Europe is good at trade …

65% of Europeans think EU has benefited a lot from international trade64% of Europeans think that European goods and products are competitive

… but they are less confident about the future71% of Europeans think that in the coming years, trade will benefit more and more emerging economies like Brazil, China and India 45% of Europeans think that the EU will be secondary economic power

…and they want trade to deliver jobs and consumer benefits61% of Europeans believe that the priority for future EU trade policy should be to create employment

Conclusion

• New strategy key message:more assertiveness, enforcement, reciprocity and

mutual benefits• EU remains the world’s major trading block• Difficulties of the eurozone

– Have consequences on economies of EU partners– Have affected the EU’s reputation as a major power

• A major difficulty for the EU will be to find back some leverage in trade negotiations with its trade partners when it will address its priority issues