1. 1 European Union Trade Policy

2. 2 Contents 1. A few facts about World Trade 2. The EU in world trade 3. EU Trade Policy - basic features 4. EU Trade Policy - how it works 5. EU Trade Policy - WTO context 6. Enlargement: the implications 7. Conclusion

3. 3 1. A few facts about world trade IMPLICATIONS Opportunities for growth, but disruptive effects Need for global governance -> multilateral rules and institutions To ensure level playing field and better distribution of benefits GLOBALISATION TECHNOLOGICALTRADE DEVELOPMENTSOPENING

4. 4 REACTIONS 63% of EU citizens in favour globalisation and over half believe that can become more advantageous for them 62% of EU citizens believe the process of globalisation can be effectively controlled and regulated, with 58% positive about the European Commission negotiating on behalf of all Member States on trade matters 1 in 2 EU citizens foresee an optimistic future for themselves and their families should globalisation intensify - 56% of the respondents view the opening-up of markets as a good opportunity for domestic industry and 57% of EU citizens believe globalisation is positive for economic growth. See more: Flash Eurobarometer on “Globalisation”, October 2003 available at http://europa.eu.int/comm/trade/issues/newround/pr171103_en.htm 1. A few facts about world trade GLOBALISATION TECHNOLOGICALTRADE DEVELOPMENTSOPENING

5. 5 1. A few facts about world trade

6. 6 2. The EU in world trade 20% of world trade: 19% world trade in goods, 24% world trade in services First exporter Second largest importer Foreign direct investment (FDI): EU-15 source of 46% of the world’s FDI (€235 billion) and hosts 20% of the world’s FDI (€119 billion) A MAJOR TRADING POWER

7. 7 A MAJOR TRADING POWER 2. The EU in world trade

8. 8 NAFTA: 277 186 2. The EU in world trade EU-25 Trade in goods: Exports by region (2002, million euro) Andean: 7 335 MERCOSUR: 19 105 EFTA: 97 598 ACP: 39 734 CIS: 46 688 China: 52 893 Japan+ Korea: 58 560 ASEAN: 39 814 Australia+ N.Zealand: 18 792 GCC6: 35 722 MED9: 73 670 SAARC: 16 412

9. 9 Andean: 7 907 EFTA: 107 259 Australia+ N.Zealand: 11 283 CIS: 75 058 MERCOSUR: 25 851 ACP: 45 785 China: 98 595 Japan+ Korea: 96 844 SAARC: 21 287 ASEAN: 68 578 MED9: 65 777 GCC6: 18 333 2. The EU in world trade EU-25 Trade in goods: Imports by region (2002, million euro) NAFTA: 207 015

10. 10 2. The EU in world trade EU Foreign Direct Investments by region (2002, million euro)

11. 11 2. The EU in world trade

12. 12 2. The EU in world trade

13. 13 Imports from Developing Countries (Million euro) Imports from the Least Developing Countries (Million euro) 2. The EU in world trade

14. 14 2. The EU in world trade Exports to the Least Developing Countries (Million euro) Exports to Developing Countries (Million euro)

15. 15 3. EU Trade policy - basic features Being the leading trade “bloc” Strong interest in:  open markets  clear regulatory frameworks Responsibility to:  EU citizens  rest of the World

16. 16 3. EU Trade policy - basic features Policy concepts to contribute to sustainable development by integrating more countries in world trade Promote European interests and defend European values On democracy, rule of law, environment, social rights, public services, cultural diversity, food security... Open world trade markets, through: the progressive abolition of obstacles to international trade and the lowering of customs barriers Harness globalisation by: agreeing on a set of rules to regulate markets, and ensuring compatibility of trade opening with other societal values

17. 17 3. EU Trade policy - basic features multilateral bilateral/regional unilateral 3 dimensions

18. 18 3. EU Trade policy - basic features multilateral Mostly implemented in the framework of the WTO with the aim of promoting market access with rules, in the context of effective global governance. For example - for trade in goods: policies such as “tariff reduction” and technical barriers to trade. But not forgetting the promotion of EU values, including: environmental concerns food safety cultural diversity … and how to promote core labour standards ?

19. 19 3. EU Trade policy - basic features bilateral/regional In addition to the WTO's multilateral negotiations, the EU concludes bilateral agreements and devises specific trading policies with third countries and regional areas. 121 countries are potentially linked to the EU by regional trade agreements, many negotiated in the 1990s. EU policy rationale for bilateral agreements trade expansion and rules-making (WTO+) fostering development and... … promoting regional development new ideas for “Neighbourhood” policy/ “Wider Europe” Key EU bilateral agreements include: Economic Partnership Agreements in negotiation with ACP countries (Cotonou) Free Trade Agreements with EFTA, EEA, Euromed, Mercosur (in negotiation), Mexico, South Africa... Customs Unions with Turkey, Andorra and San Marino Partnership and Cooperation Agreements with Russia and Ukraine

20. 20 3. EU Trade policy - basic features unilateral The EU also 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 classical instrument for fostering development is by granting tariff preferences. The EU's GSP grants products imported from GSP beneficiary countries either duty-free access or a tariff reduction depending on the sensitivity of the product and the GSP arrangement enjoyed by the country concerned. “Everything But Arms” initiative (EBA) - EBA is a special GSP arrangement for the least developed countries. EBA 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 the Balkans and Moldova, with the aim of ensuring peace, stability, freedom and economic prosperity in the region (cf. “Wider Europe”).

21. 21 3. EU Trade policy - basic features 178 developing countries and territories are beneficiaries of the EU’s GSP. The EU is, by far, the principal donor of preferences of all OECD members. In 2002, EU imports benefiting from GSP preferences amounted to €52 billion. China was the leading beneficiary country followed by India, Indonesia, Viet Nam, Brazil and Thailand. Special arrangements exist for the 49 Least Developed Countries (EBA - "Everything But Arms") as classified by the UN. They benefit from duty-free and quota–free access for practically all exports of originating products to the EU for an unlimited period of time. The extension of the current GSP to the end of 2005 provides stability to traders and economic operators. Key Facts on the General System of Preferences (GSP)

22. 22 3. EU Trade policy - basic features The reduced rate provisions of the GSP Special incentive arrangements honour beneficiary countries’ efforts to comply with certain internationally agreed environmental and labour standards. They are meant to foster sustainable development by providing additional trade preferences. They provide a reduction of a further 5 percentage points. 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 rate for sensitive products, with some exceptions, is reduced by a flat rate of 3.5 percentage points.

23. 23 4. EU Trade policy - How it works Historic development From tariffs and quotas... … to “behind the border” issues 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 Treaty of Nice (2001) Extended the EU trade competence to services and commercial aspects of intellectual property rights with qualified majority voting

24. 24 4. EU Trade policy - How it works The EC Treaty establishes the overall aims and objectives of EU trade policy: How it works NOW Article 2 sets the general aims – including to promote the development of economic activities, high employment and competitiveness, and environmental protection. Articles 131 and 133 explain the way in which the common commercial policy shall operate in principle – “to contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and the lowering of customs barriers”, instruments and scope.” Article 133 sets out the scope, instruments and decision-making procedures. Article 300 establishes the current inter-institutional procedure for concluding international agreements – principally by the Council, who is not legally obliged at present to consult the European Parliament on trade agreements, but consultations do, however, take place.

25. 25 4. EU Trade policy - How it works Article 133 of the EC Treaty provides in more detail for the common commercial policy How it works NOW Rests on: Shared, uniform concept of policy A decision-making process based on a mixture of ‘exclusive and shared competences’ Comprises: Trade in goods, services and trade-related aspects of intellectual property rights special provisions for specific fields (e.g. audiovisual, cultural, educational, social and health services)

26. 26 4. EU Trade policy - How it works How it works NOW The negotiating process The Commission is the negotiator On behalf of the 25 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 (when covering more than trade)

27. 27 4. EU Trade policy - How it works How it works NOW The 133 Committee = a special committee provided for by Art. 133 of the EC Treaty appointed by the Council to assist the Commission = a permanent dialogue and sounding board between the Commission and the EU Member States on trade policy Civil Society dialogue = regular consultation with business, trades unions and civil society

28. 28 4. EU Trade policy - How it works How it works NOW Note that the exclusive Community competence covers trade policy; for now, the rest is left to the EU Member States. Examples of Member State trade activity include: organising trade fairs; organising trade fairs; promoting national exports; promoting national exports; promoting inward investment promoting inward investment providing tailored advice on importing and exporting to/from their country. providing tailored advice on importing and exporting to/from their country.

29. 29 4. EU Trade policy - How it works PROPOSALS IN THE DRAFT EU CONSTITUTION To extend the scope of trade policy to all foreign direct investment To introduce the “legislative procedure”: trade autonomous measures covered by qualified majority voting To increase parliamentary control: co-decision for all autonomous acts of legislative nature, assent for major trade agreements EP to be informed of negotiations like Member States How it might change in the EU…

30. 30 4. EU Trade policy - How it works How it works: a comparison between the EU and the US Exclusive EU competence Council acts on the basis of QMV Member States usually stick to common line Congressional constitutional responsibility, “leased back” to Administration Congressional ‘fast track’ procedure time- limited, politicised Community mandate from Council European Parliament only plays a limited role (but due to change) Congress retains final say thanks to constitutional responsibility Legal texts quite complicated following the adoption of the Treaty of Nice Political debate over Trade Promotion Authority (adopted in 2001) heightened public awareness, allowed debate on trade policy priorities EfficiencyTransparencyLegitimacyEU US

31. 31 4. EU Trade policy - How it works The trade policy instruments “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: SafeguardsSafeguards: 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. Anti-dumpingAnti-dumping measures were 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-subsidyAnti-subsidy measures were 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.

32. 32 2003 saw the lowest level of anti-dumping activity since the WTO was created in 1995 4. EU Trade policy - How it works The trade policy instruments In 1999, the EU was the no.1 global initiator of AD investigations Now the EU is only 4th in the top-10 with 51 investigations outstanding Top of the league is India (167 cases) then the US (130) and China (52). In terms of the principal users by measures in force, the EU ranks 3 rd behind the US and India. Most AD cases in 2003 were in the chemicals, food and agricultural products sectors. The number of cases in the steel sector has been declining over the last 3 years. Only 0.3% of total imports of goods into the EU are covered by AD and anti- subsidy measures. The biggest target of AD cases is China. The EU is ranked in 2 nd place. Key Facts on Anti-Dumping activity (as at 30/06/2003)

33. 33 4. EU Trade policy - How it works The trade policy instruments “Offensive” instruments to open markets and eliminate obstacles to trade... … across the multilateral, bilateral and unilateral fronts: The Trade Barriers Regulation (TBR) gives industry the opportunity to lodge a complaint with the Commission when there is reason to believe that companies are encountering trade barriers that restrict their access to third country markets. The TBR can also be used to evaluate 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 (see later) Market Access StrategyMarket 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 businesses about barriers to trade in non-EU countries; and, is a means of ensuring that our trading partners are abiding by their international commitments.

34. 34 4. EU Trade policy - How it works The trade policy instruments Towards a new generation of FTAs: “WTO++” opening markets for trade in goods opening markets for trade in goods + investments, services, rule- making, standards, non tariff measures + investments, services, rule- making, standards, non tariff measures >> EU-Chile an example

35. 35 5. EU Trade policy - WTO context & DDA Global governance & the role of the EU Trade Pillar WTO 1 state/ 1 vote EU, member dominant actor Financial Pillar Bretton Woods, IFIs + BIS 1 dollar/ 1 vote EU indirect role (MS on the board) Normative Pillar ILO, MEAs, WHO, FAO, Codex Alimentarius ITU, WIPO... 1 state/ 1 vote EU Member, participant or observer

36. 36 5. EU Trade policy - WTO context & DDA 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 Functioning Consensus = each country on an equal footing 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

37. 37 5. EU Trade policy - WTO context & DDA Membership – Quasi universal: 148 member countries – covers 95% of world trade Regulatory framework – trade pillar of global governance – rounds and agreements Enforcement controlled by Dispute Settlement Mechanism – all WTO members can seek redress – Dispute Settlement Body (DSB) rulings are binding – DSB may authorise retaliation PS – a very biased 'pro-WTO' vision of its work. DR

38. 38 5. EU Trade policy - WTO context & DDA Key Facts on use of the WTO Dispute Settlement System The United States … 76 cases brought in the WTO Around 18 of those cases have been against the EU 10 of the cases v. EU have been won or considered successfully resolved, a success rate of 56%. The European Union … 63 cases brought in the WTO Around 25 of those cases have been against the US 16 of the cases v. US have been won or considered successfully resolved, a success rate of 64%. The statistics show a rough parity between EU/US use of the Dispute Settlement System, but that the EU has a higher success rate N.B. Cases settled are considered as "won" by the complainant when a mutually agreed solution is notified or the complainant otherwise acknowledges that it considers the issue solved. Cases that go through litigation are considered as "won" when the complainant prevails in at least one of the claims.

39. 39 5. EU Trade policy - WTO context & DDA The Doha Development Agenda Development - a key component of the WTO round A new round of trade negotiations – 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 – access to medicines – trade-related technical assistance – General System of Preferences: “Everything But Arms” initiative; GSP + “Drug GSP” + social incentives and environmental solutions

40. 40 5. EU Trade policy - WTO context & DDA The Doha Development Agenda Regulatory framework – creating new rules on fair competition, investment, government procurement, trade facilitation (“Singapore Issues”) Opening markets – agricultural goods – industrial goods – services Responding to the expectations of civil society – transparency, sustainable development

41. 41 5. EU Trade policy - WTO context & DDA The WTO Ministerial Meeting in Cancún September 2003 Cancún conference strategy paper* the fundamental objectives of the EU in this negotiation remain valid Following the failure of the September 2003 Cancún conference and after intense consultations with with EU Member States, the European Parliament and all European stakeholders (business, trade unions and civil society), in November 2003 the European Commission adopted a strategy paper* aimed at contributing to the re-launch of the Doha talks. The Commission concluded that the fundamental objectives of the EU in this negotiation remain valid: a clear preference for a multilateral trade system a strong rule-making component alongside market access the need to ensure that the negotiations do deliver a development round * Available at http://europa.eu.int/comm/trade/issues/newround/pr261103_en.htm The Council has endorsed the Commission approach

42. 42 5. EU Trade policy - WTO context & DDA The WTO Ministerial Meeting in Cancún areas where there is room for flexibility in the EU’s position - for example, on the so-called Singapore Issues, trade and environment, Geographical Indications and commodities But refreshed and updated negotiating position But to take into account what happened in Cancun and since, the Commission recommended a revised strategy to achieve EU objectives, in the form of a refreshed and updated negotiating position in several areas: areas where the EU has already put forward ideas for movement - for example on agriculture and cotton and where more movement is necessary from others- for example on industrial tariffs and trade in services ideas for limited reforms of the organisational and procedural aspects of the WTO - for example the management of future WTO Ministerials, and the participation of smaller Members in the negotiations

43. 43 6. Enlargement: the implications Some introductory facts: 1st May 2004 enlargement of the EU to Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, & Slovakia Objective to welcome Bulgaria and Romania as EU members on 2007 EU enlargement will secure political stability, democracy and respect of human rights on the European continent as a whole

44. 44 6. Enlargement: the implications Trade-related issues The new members apply the EU’s Common Commercial Policy = all EU bilateral agreements, the Common external tariff and EU trade defense measures The acceding countries take on board EU openness in external trade = overall reduction in applied tariffs: from 9% to 4% Large economic benefits to be drawn by third countries, including non-neighbouring ones = after enlargement, the EU has 455m inhabitants; GDP of €9,500bn (26.7% of the world) and significant increase in FDI expected In the WTO, the EU speaks for 25 member states instead of 15. The new member states take over the EU’s multilateral trade commitments and obligations

45. 45 Conclusion Globalisation has put trade issues at the centre of citizens’ concerns Opening markets can provide opportunities… … if harnessed by collective rules Towards fairer trade... Well – others see globalisation as a system that is 'fair' if you're rich, and 'unfair' if you're the exploited poor people! DR