EU external trade policy

1
EU external trade policy

• Lecture objectives
• To highlight the main features to EU trade and
  specialisation patterns
• To discuss the instruments used in the EUs
  Common Commercial Policy
• To discuss the main issues in the EUs trade
  relations with its main partners
• To identify some of the main trade policy issues
  now facing the EU

2
Key issues

• What is the significance of the fact that EU
  trade policy is now about much more than tariffs
  and extends into an increasing number of
  regulatory areas?
• How sensible is the EUs highly complex pattern
  of trade relations which have arisen partly
  because trade policy has been a surrogate for an
  EU foreign or development policy?
• How do WTO disciplines constrain EU trade policy
  and how should the EU try to shape WTO trade
  rules?

3
The structure of EU trade

• The worlds largest trading bloc 18.4 of world
  trade compared to US 15.4 and Japan 8.5
• More dependent on trade that US or Japan (31
  share of exports plus imports to GDP compared to
  19 for US and 18 for Japan.
• Trade with developed and developing countries
  almost of equal importance
• While intra-EU trade has grown faster than total
  trade, extra-EU trade has grown in absolute
  terms, suggesting the customs union was on
  balance trade-creating rather than
  trade-diverting.

4
The structure of EU trade

• Trade has contributed to the processes of
  structural change
• Inter-industry vs. intra-industry trade
• Trade in high-technology products
• Trade in low-skill intensive products (e.g.
  textiles and clothing)

5
EU trade decision making

• Legal basis in Articles 131-134 (ex Articles
  110-116) of the Treaty of Rome
• Common Commercial Policy
• Based on uniform principles
• Refers to illustrative list of measures (tariffs,
  trade agreements etc)
• Trade in goods falls unambiguously within the
  Communitys competence
• Use of QVM in application of trade policy
  measures
• Commission takes lead in negotiating trade
  agreements
• Role of Article 133 Committee (ex Art 113
  Committee) in discussing trade policy and
  advising Commission on trade negotiations

6
EU trade decision making

• The extending range of trade agreements to cover
  more than trade in goods created competence
  problem for EU
• ECJ was asked to rule on division of competences
  with respect to services and intellectual
  property rights (IPR) following conclusion of
  Uruguay Round Agreement
• 1997 Amsterdam Treaty gave Commission power to
  negotiate agreements on services and IPR but only
  on basis of unanimity
• 2001 Nice Treaty introduced QVM for some but not
  all of these trade areas
• Essentially protects Member State veto on future
  multilateral and bilateral trade agreements

7
CCP instruments

• Tariffs
• Low on average although slightly higher than US
  or Japan
• Tariff peaks remain on sensitive commodities
• Tariff escalation is also a problem
• Nontariff barriers
• Quotas such as those on imports of textiles and
  clothing
• Anti-dumping measures
• Countervailing duties
• Safeguards

8
CCP instruments

• Regulatory barriers
• Technical regulations (e.g. restrictions on
  tobacco)
• Standards
• Conformity assessment procedures
• Regulated by the WTO Agreement on Technical
  Barriers to Trade and the Agreement on Sanitary
  and Phytosanitary Standards
• Trade rules for services
• The WTO General Agreement on Trade in Services
  (GATS)
• The non-discrimination rule (but with temporary
  exceptions)
• The national treatment rule (only where members
  have made positive offers)
• Controversy over trade in public services

9
Regional trade agreements

• Single market agreement (European Economic Area)
• Customs union agreements (Turkey, Andorra, San
  Marino)
• Free trade area agreements (Mediterranean, South
  Africa, Chile, Mercosur under negotiation)
• Partnership and Cooperation Agreements
• Non-reciprocal contractual agreements
  (Lome/Cotonou Agreement with ACP countries)
• Non-reciprocal autonomous agreements (GSP,
  Western Balkans)
• Purely MFN treatment (Australia, Canada, Japan,
  New Zealand, Taiwan, Hong Kong, Singapore, United
  States, South Korea)

10
Issues with regional trade agreements

• Why the attraction of RTAs to the EU, despite
  their evident breach of the WTOs MFN principle?
• Why the attraction of RTAs with the EU for third
  countries, despite fears of trade diversion?
• Trends in EU policy on trade relations
• Regionalism vs multilateralism
• Non-reciprocal vs reciprocal trade agreements
• The role of rules of origin in restricting the
  benefits of access

11
Trade relations with developing countries

• Key agreements
• Barcelona process with Mediterranean countries
• Regional economic partnership arrangements
  foreseen with ACP countries under the Cotonou
  Agreement
• GSP dictates the conditions of access for all
  other developing countries
• Substantially weaker preferences than the Cotonou
  Agreement
• Everything but Arms initiative for the least
  developed countries
• Key issues
• Preference erosion as multilateral trade
  liberalisation continues
• The broadening scope of agreements beyond trade
  preferences
• The implications of reciprocity

12
Trade relations with the United States

• The US is the EUs single largest trade partner
  (22 of combined extra-EU imports and exports)
• Many frictions in this trade relationship
• Steel, hormone-treated beef, Airbus subsidies,
  GMOs, bananas, agricultural subsidies, FSC export
  subsidies
• Potential attractions of a transatlantic
  marketplace
• Significance of EU-US leadership in the WTO trade
  negotiations

13
Trade relations with Japan

• Tensions arise from EUs persistent trade deficit
  with Japan
• Exacerbated by focus of Japanese exports on
  limited number of sectors
• And by complaints of the lack of openness of the
  Japanese market to EU imports
• EU approach to trade policy with Japan has been
  marked by more consultative rather than
  confrontational approach
• Some easing of tensions in recent years
  particularly as investment flows between the two
  regions have increased.

14
EU objectives in the Doha Round of WTO trade
negotiations

• To further liberalise access to overseas markets
  for EU goods and particularly services
• To strengthen coverage of WTO rules in areas such
  as investment, competition, transparency in
  government procurement, intellectual property and
  trade facilitation.
• To ensure more assistance is provided to
  developing countries to help their integration
  into the world economy
• To get the WTO to focus more on issues of public
  concern such as the environment, animal welfare
  and food safety

15
Trade and intellectual property rights

• The growing importance of intellectual property
  (IP) in the value of trade
• Knowledge and reputation goods
• .. Leads to negotiations on safeguarding IP
  rights
• The pros and cons of requiring legislation on
  minimum standards of IPRs, as mandated by the WTO
  TRIPS Agreement
• Case study effect of trade rules on access to
  medicines in developing countries

16
Trade and competition policy

• As government trade barriers to market access are
  reduced, the behaviour of private firms in
  restricting market access becomes more important,
  e.g. Japan.
• Should countries be required to have a national
  competition policy? What role for cooperation in
  controlling international mergers and cartels?
• WTO Working Group on trade and competition policy
  established in 1996 at Singapore
• EU agreed to remove item from the Doha Agenda
  following the Cancún breakdown

17
Trade and the environment

• Trade policy a significant component of a
  countrys environmental policy
• Endangered species, hazardous waste
• Use of import restrictions on goods whose
  production creates negative trans-border
  environmental externalities.
• Tuna/dolphins, turtles/shrimps, unsustainably
  produced timber
• Environmental arguments open to abuse by domestic
  protectionist arguments
• WTO law distinguishes between the product and the
  process of producing the product

18
Trade and the environment

• Environmental legislation affects competitiveness
  and producers may lobby for a level playing
  field
• Pollution havens, ecological dumping
• Rising volume of trade itself a threat to the
  environment
• Unilateral trade policy usually an inappropriate
  response to protect the environment compared to
  international agreements and domestic policy
  measures
• WTO Committee on Trade and the Environment
• Doha Agenda limited to relationship between WTO
  rules and multilateral environmental agreements,
  plus commitment to negotiate reduction in tariffs
  on environmental goods and services, with
  particular reference to fisheries

19
Trade and labour standards

• The case for a social clause in international
  trade rules, to allow countries to restrict
  imports from countries deemed to violate minimum
  labour standards
• How effective? Worst abuses take place in the
  informal sector. Prohibiting child labour could
  worsen position of children.
• Danger of abuse. Argument that low labour costs
  are a form of social dumping and should
  legitimise protection.
• How to promote core labour standards? Role of WTO
  vs. International Labour Organisation.
• EU wants to ensure trade liberalisation does not
  worsen working conditions. Supports greater role
  for ILO, codes of conduct, voluntary labelling
  schemes. Also uses social incentives in its
  regional agreements.

20
Key issues

• Shifting balance in trade policy between negative
  integration (removal of tariff and nontariff
  barriers) and positive integration (rules
  imposing obligations on governments)
• Regionalism still a strong focus for EU trade
  policy, but what will be its future?
• Increasing heterogeneity of EU membership may
  make it more difficult to reach agreement on
  trade policy, strengthening case for further
  centralisation of competences.

21
Key issues

• Maintenance of high employment levels critical to
  support for the trade liberalisation agenda.
• Public support for trade liberalisation is fickle
  and cannot be taken for granted. Hence importance
  of addressing consumer concerns in trade policy,
  e.g. precautionary principle, links between trade
  and environment and trade and labour standards
• The stakes in the trade policy debate are high.
  The removal of uncertainty in international trade
  is one of the main contributors to economic growth