The European Union Trade Policy. March 2011. Content. The EU in world trade EU trade policy – Basic features EU trade policy – How it works EU trade policy – Competing in the world A renewed strategy for Europe Agenda for 2011: Next steps. EU IN WORLD TRADE.
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The European Union Trade Policy March 2011
Content • The EU in world trade • EU trade policy – Basic features • EU trade policy – How it works • EU trade policy – Competing in the world • A renewed strategy for Europe • Agenda for 2011: Next steps
1. A few facts about world trade GLOBALISATION TECHNOLOGICAL TRADE DEVELOPMENTS OPENING • IMPLICATIONS • Opportunities for growth, but sometimes adjustment costs • Need for global governance -> multilateral rules and institutions to ensure level playing field and better distribution of benefits • Need to reinforce the competitive position of the EU economy
1. A few facts about world trade Evolution of Word* Trade: 1999-2009 Source: Eurostat (Comext, Statistical regime 4), IMF, WTO; * World exports (imports) except Intra-EU27 Trade
1. The EU in world trade A major trading power…
1. The EU in world trade A major trading power (2009) Source: Eurostat (Comext, Statistical regime 4)
2. EFTA € 150.0 billion 5. CIS € 123.7 billion 1. NAFTA € 290.1 billion 6. Japan & Korea € 71.7billion 4. China & Hong Kong € 140.0 billion 3. MED (10) € 141.9 billion 10. SAARC € 42.0 billion 8. GCC (6) € 64.7 billion 9. ASEAN € 60.6 billion 13. Andean Community € 7.9 billion 7. ACP € 68.7 billion 11. MERCOSUR € 40.1 billion 12. Australia & New Zealand € 29.5 billion 1. The EU in world trade EU27 Trade in goods: Exports by region (2010) Source: Eurostat (Comext, Statistical regime 4)
4. EFTA € 166.9 billion 3. CIS € 195.9 billion 2. NAFTA € 202.5 billion 5. Japan & Korea € 103.4 billion 1. China & Hong Kong € 292.9 billion 6. MED (10) € 102.4 billion 9. SAARC € 45.7 billion 11. GCC (6) € 33.5 billion 7. ASEAN € 86.2 billion 13. Andean Community € 12.2 billion 8. ACP € 64.7 billion 10. MERCOSUR € 43.9 billion 12. Australia & New Zealand € 12.6 billion 1. The EU in world trade EU27 Trade in goods: Imports by region (2010) Source: Eurostat (NewCronos) – provisional value
Russia € 0.0 billion Canada € -0.8 billion Switzerland € 39.6 billion Japan € -0.0 billion United-States € 75.1 billion China & Hong Kong € 8.2 billion India € 3.1 billion Brazil € 7.6 billion 1. The EU in world trade EU27 Foreign Direct Investment: Outflows by main partners(2009) Source: Eurostat (NewCronos) - provisional value
Russia € 3.3 billion Canada € 11.5 billion Switzerland € 26.2 billion Japan € -1.2 billion United-States € 97.8 billion China & Hong Kong € 1.7 billion India € 0.8 billion Brazil € 0.3 billion 1. The EU in world trade EU27 Foreign Direct Investment: Inflows by main partners (2009) Source: Eurostat (NewCronos) - provisional value
1. The EU in world trade Share of (current) GDP in World GDP (2009) Source: UN (National Accounts Main Aggregates Database); Share = GDPi / GDPw
1. The EU in world trade Trade dependence (2009) Sources: Eurostat (Comext, Statistical regime 4), WTO, UN nama Database; Ratio = (Imports+Exports, excluding Energy) / GDP
1. The EU in world trade EU27 Imports from Developing Countries… … and Least Developed Countries Source: Eurostat (Comext, Statistical regime 4)
1. The EU in world trade EU27 Exports to Developing Countries… … and Least Developed Countries Source: Eurostat (Comext, Statistical regime 4)
EU TRADE POLICY BASIC FEATURES
2. EU trade policy - basic features Being the leading trade region • Strong interest in: • Open markets • Clear regulatory frameworks • Responsibility to: • EU citizens • Rest of the World Need to reinforce EU competitiveness on world markets
Policy concept A competitive European economy in an open world trade system organised by multilateral rules 2. EU trade policy - basic features • Ensure that the European economy is open to the world and competitive in foreign markets • Secure real market access in foreign countries • Support a strong multilateral trading system • Most effective means of managing trade and enforcing rules • Promote European values • on democracy, rule of law, environment, social rights... Enforce sustainable development
Historic development … to “behind the border” issues 2. EU trade policy - basic features From tariffs and quotas... The new shape of trade policy Developed from trade liberalisation in goods… … to services and rules on investment, intellectual property, public procurement Evolution reflected in the EU Treaties Extended the EU trade competence to services and commercial aspects of intellectual property rights with qualified majority voting
Bilateral/ Regional Multilateral Unilateral 2. EU trade policy - basic features 3 DIMENSIONS
Multilateral • Includingthe promotion of EU values : • Environmental concerns • Food safety • Cultural diversity • … and how to promote core labour standards ? 2. EU trade policy - basic features Mostly implemented in the framework of the WTO (= the most effective means of managing trade) aiming at promoting marketaccess with rules, in the context of effective global governance.
The core of the multilateral rule-based system Unique forum for trade negotiations, rule setting, resolution of disagreements • Objectives • To boost international economic growth • To ensure business confidence • Core principles • No country may apply quantitative restrictions or similar measures • Non-discrimination - ‘Most Favoured Nation’ principle • National Treatment - no country may discriminate between its own products and imported products • Transparency - all rules affecting trade must be transparent; publication, notification, discussion, trade policy reviews Functioning Consensus = each country on an equal footing 2. EU trade policy - basic features
2. EU trade policy - basic features • Membership • Quasi universal: 153 member countries • Covers 95% of world trade • Enforcement controlled by Dispute Settlement Mechanism • All WTO members can seek redress • Dispute Settlement Body (DSB) rulings are binding • DSB may authorise retaliation • Regulatory framework • Trade pillar of global governance • Rounds and agreements
A round of trade negotiations launched in 2001 • To pursue market opening • To strengthen rules, improve global governance • To integrate developing countries in world trade • A development round • Special and Differential Treatment • Addressing developing countries’ concerns • Aid for Trade • Special measures for LDCs Development - a key component of the WTO round 2. EU trade policy - basic features The DohaDevelopment Agenda
Opening markets • Agricultural goods • Industrial goods • Services • EU seeks real new MA Development Sustainable development (to respond to concerns of developing countries and civil society) Regulatory framework Improving existing rules (e.g. anti-dumping, geographical indications) and creating new rules (e.g. “trade facilitation”) 2. EU trade policy - basic features The 3 legs of the DDA
The Cancún setback (September 2003) Meant as a half-way point of the Round, the Ministerial broke up without decision. Serious divergences on agriculture and Singapore issues. 2. EU trade policy - basic features • New balance of power in the WTO: • Emergence of vocal developing country groupings (G20, G90) • Rise of Brazil and India as key members of the WTO • => New negotiating dynamics: different G progressively to replace “old” Quad
2. EU Trade policy - basic features After the suspension (July 2006): relaunching the Round • EU remains committed to a successful and reasonably ambitious outcome to: • Create business opportunities and market access, • Improve multilateral trade rules, • Contribute to development • All key Members confirmed their commitment to the DDA • No real alternative to the WTO • Objectives: narrow the gaps between Members on agricultural tariffs, agricultural subsidies and industrial tariffs • In the short-term: to seek agreement on package of development initiatives and resume technical work in Geneva
Bilateral/regional 2. EU Trade policy - basic features In addition to the WTO's multilateral negotiations, the EU concludes bilateralagreements with third countries and regional areas. Many of the World’s countries potentially linked to the EU by regional trade agreements. • Key EU bilateral agreements include: • Economic Partnership Agreement with the Caribbean and in negotiation with other ACP countries • Free Trade Agreements with some Balkan countries, the EFTA countries, the Mediterranean countries, Korea (not yet ratified), Chile, Mexico, South Africa... • Customs Unions with Turkey, Andorra and San Marino • On-going negotiations with India, Mercosur, Ukraine… • EU policy rationale for bilateral agreements • Trade expansion and rules-making (WTO+) • Fostering development and... • … promoting regional development
Unilateral 2. EU Trade policy - basic features The EU implements unilateral measures as an additional trade policy instrument in the interests of development and/or political stability in line with the Union’s key political priorities: General System of Preferences (GSP): the classic instrument for fostering development is by granting tariff preferences. Products imported from GSP beneficiary countries enter the EU either duty-free access or with tariff reduction. “Everything But Arms” initiative (EBA): a special GSP arrangement for the least developed countries. Grants duty-free access to imports of all products from LDCs without any quantitative restrictions (except to arms and munitions). Asymmetrical preferences e.g. for some Balkan countries and Moldova, with the aim of ensuring peace, stability, freedom and economic prosperity in the region.
Key Facts on the General System of Preferences (GSP) 2. EU Trade policy - basic featuresThe EU is the most open market for poor countries 176 developing countries and territories are beneficiaries of the EU’s GSP. In 2008, EU imports benefiting from GSP preferences amounted to €68 billion. Bangladesh leading beneficiary country followed by China, Pakistan, Brazil, Malaysia and India. GSP guidelines for 2006-2015 in place providing stability to traders and economic operators. The scheme is implemented following cycles of 3 years. The 49 Least Developed Countries (EBA - "Everything But Arms") benefit from duty-free and quota–free access for practically all exports of originating products to the EU for an unlimited period of time.
2. EU Trade Policy – basic featuresThe GSP system 2006-2015 : simplifies graduation mechanism and reduces the system to 3 schemes • General scheme: increase of product coverage from 6900 to 7200 (mainly agriculture and fishery sector of interest for developing countries). • Special scheme for Least Developed Countries: Everything But Arms. • New special GSP+ for vulnerable countries = duty free on 7200 products if the country meets criteria : • Ratification and implementation of 27 key international conventions • “Vulnerable” • A poorly diversified economy.
The reduced rate provisions of the GSP The GSP provides tariff reductions without quantitative limitations. Reductions are modulated according to the sensitivity of products. While non-sensitive products enter the EU market duty free, the MFN rate for sensitive products, with some exceptions, is reduced by 3.5 percentage points. Special incentive arrangement (GSP+) honour beneficiary countries’ efforts to comply with certain internationally agreed environmental and labour standards. Meant to foster sustainable development by providing additional trade preferences. Duty free access for the products covered by the scheme. 2. EU Trade policy - basic features
EU TRADE POLICY HOW IT WORKS
How it worked before Lisbon Treaty • The Commission is the negotiator • On behalf of the 27 Member States • The Council is the decision maker • Mandate = determined by the Council on the basis of a Commission proposal • The Commission negotiates on the basis of this mandate • The Council approves the result of the negotiation (generally by qualified majority) • The European Parliament • Is informed by the Commission of trade policy developments • Gives “assent” on major treaty ratifications (covering more than trade) 3. EU trade policy - how it works The negotiating process
EP plays greater role in trade negotiations Further extension of qualified majority voting for trade agreements To extend the scope of trade policy to all foreign direct investment PROPOSALS IN THE EU CONSTITUTION To increase parliamentary control: co-decision for all autonomous acts of legislative nature, assent for major trade agreements 3. EU trade policy - how it works How it has changed …
The trade defence instruments 3. EU trade policy - how it works “Defensive” instruments to ensure fair trade and defend the interests of European companies… ... have been designed in line with specific WTO agreements recognising the right of members to counter unfair practices: Anti-dumping measures created to counter dumping practices, the most frequently encountered trade-distorting practices. Dumping occurs when manufacturers from a non-EU country sell goods in the EU below the sales price in their domestic market, or below the cost of production. Anti-subsidy measures designed to combat subsidies, which are made available to manufacturers by public authorities and which can also distort trade when they help to reduce production costs or cut the prices of exports to the EU unfairly. Safeguards: A WTO member may restrict imports of a product temporarily if its domestic industry is seriously injured or threatened with injury caused by a surge in imports.
The trade defence instruments Since 1995, EC AD/AS activity is stable, with yearly fluctuations • For the past 10 years, the EU was the n°3 global initiator of new AD/AS investigations • Top of the league is India (over 400 cases) then the US (over 300) and EU (over 200). Less than 1% of total imports of goods into the EU are covered by AD/AS measures. Key Facts on Anti-Dumping (AD) and Anti-subsidy (AS) activity(as at 31/12/2005) Most EU AD/AS cases initiated over the last 10 years were in the iron & steel, chemicals & allied, textiles & electronic products sectors. In terms of the principal users by AD/AS measures in force, the EU is a modest user of TDI The biggest target of AD/AS measures is China. The EU is ranked in 2nd place. 3. EU trade policy - how it works
The offensive trade policy instruments 3. EU trade policy - how it works “Offensive” instruments to open markets and eliminate obstacles to trade... … across the multilateral, bilateral and unilateral fronts: The Trade Barriers Regulation (TBR) gives EU industry the opportunity to lodge a complaint with the Commission when encountering trade barriers that restrict their access to third country markets. The TBR is then used to investigate whether there is evidence of violation of international trade rules, resulting in adverse trade effects -this could lead to the initiation of the WTO dispute settlement mechanism. Market Access Strategy of which the EU’s Market Access Database provides: information about market access conditions in non-EU countries; a systematic way for the Commission to follow up complaints from business about barriers to trade in non-EU countries; and a means of ensuring that our trading partners abide by their international commitments.
The offensive trade policy instruments 3. EU trade policy - how it works • Monitoring of third country trade defence measures: • Ensuring third countries do not misuse the trade defence instruments (anti-dumping, anti-subsidy, safeguard) against EU exporters. • Given the overall escalating use of these instruments important that there is full compliance with international rules. • The Commission provides information and advice to all interested parties, identifies individual and systemic infringements of WTO rules by third countries, addresses these issues in the appropriate bilateral or multilateral forum.
The trade policy instruments Towards a new generation of FTAs: “WTO++” 3. EU trade policy - how it works • Opening markets for trade in goods • + investments, services, rule-making, standards, non tariff measures
4. EU trade policy - competing the world * Based on SITC Rev. 3 Nomenclature: Manufactures: 5, 6, 7, 8, excl. 68, excl. 891; Iron and steel: 67; Chemicals: 5; Other semi-manufactures: 61, 62, 63, 64, 66, 69; Office and telecommunication equipment: 75, 76, 776; Transport equipment: 78, 79, 713, 7783; Other machinery: 71, 72, 73, 74, 77, excl. 713, excl. 776, excl. 7783; Textiles: 65; Clothing: 84; Other manufactures: 81, 82, 83, 85, 87, 88, 89, excl. 891 Source: Eurostat (Comext, Statistical regime 4); EU excluding Intra-EU Trade
4. EU trade policy - competing in the world Good performance in high-quality products Ratio quality products / exports (%)
4. EU trade policy - competing in the world Market shares trends in world trade… Source: Eurostat (Comext, Statistical regime 4), IMF, WTO; EU27 (excluding Intra-EU27 Trade)
4. EU trade policy - competing in the world Comparative trade balance trends… Source: Eurostat (Comext, Statistical regime 4), IMF, WTO; EU27 (excluding Intra-EU27 Trade)
4. EU trade policy - competing in the world EU trade not focused enough on rapidly growing markets Source: Cepii
Towards fairer trade... 4. EU trade policy - competing in the world Globalisation has put trade issues at the centre of citizens’ concerns Opening markets can provide opportunities… … if EU economy sustains competitiveness … if harnessed by collective rules
5. A renewed strategy for Europe New EU trade strategy adopted 9 November 2010 - Why a new trade policy? The previous strategy “Global Europe” generally on the right track BUT • Europe 2020 called for Trade and Investment to play crucial role in achieving growth objectives • Changing economic environment • Impact of economic crisis and public opinion