Differentiating Trade Instruments for Development: What role for the EP? Jodie Keane and Raphaëlle Faure Overseas Development Institute, London

Overview 3 European Think-Tank Group: Our Collective Interest: Why Europe’s problems need global solutions and global problems need European action. Trade out of Poverty Group, UK/ ODI: Trade policy is not just about promoting the EU’s direct commercial interests: it is also a key tool to stimulate economic growth in the developing world in a mutually beneficial way. This presentation: 1. Changing Context EU Trade Policy EU2020 Strategy and country differentiation – Upgrading to new partnerships? – Upgrading trade surveillance/dialogue mechanisms? 2. Normative and Institutional Considerations  Start setting some standards

4 The EP has gained new powers since 2009 Trade legislation International trade agreements

The EP’s use of its new powers to promote PCD 5 Some good things: –Commitments to PCD –Standing Rapporteur –Biennial report on PCD Some room for improvement: –Limited cross-committee work –Addressing policy incoherence internally (e.g. CAP) Some challenges for the future: –Larger share of anti-aid and anti-EU MEPs

Changing Context in Trade Policy Recent Trends Transformation of global trade patterns Fragmentation of trade and productive structures across countries as the economic globalisation process has gathered pace; and Coordination and consolidation of particular nodes of production and marketing structures by few lead firms, inc. European. End result = intra-firm trade, within global production networks. Not “wine for cloth” anymore, between nation states All governments grappling with implications, e.g. G20 – Ability to influence private sector / governance / tax 6

7 Changing Context in Trade Policy Recent Trends 1. Global recovery since the global financial crisis (GFC) of 2008 = fragile. 2. Socio-economic dislocation in Western countries has increased 3. Contested Global Public Goods Provision: Global Trade, Finance and Climate Change rules

Investment Policy Landscape is Changing Global investment patterns changed as new actors have emerged. – Subsequently emerged as key investment players. Distinct business models and forms of engagement. Global investment policy landscape: Fragmented – But, increasing interest in regulating investment. State regulation becoming visible across strategic industries. EP now has exclusive purview services, trade related aspects of Intellectual Property Rights (IPR) and Foreign Direct Investment (FDI) Policy incoherence = adverse signalling effects. – External and Internal 8

How is EU Policy Adapting? EU Trade and Development Agenda for 2020 – Recognised that the landscape of trade and investment has changed dramatically in recent years – Proposed major reforms to its trade and development instruments Main priorities: – Focus trade preferences towards LDCs – Target Aid for Trade towards LDCs – Put in place complementary investment agreements – Conclude FTAs, inc. EPAs – Continued support for conclusion of DDR 9

How is EU Policy Adapting? – No clear approach towards differentiation LDC focus enough? UN Classification. Need to engage UMICs: MICs receive more AfT than LICs – New Partnerships: In name or practice? How do you incentivise? – Standards less enforceable within FTAs than GSP+? – Aligning Offensive/Defensive interests: Example of anti-dumping Solar Panels Define “community interest” – Inadequate dialogue mechanisms Weak and inadequate: based on old mode of trade Sustainability Impact Assessment, limited country ownership, including within the EU. 10

How is EU Policy Adapting? 2020 Strategy meant to focus on bilateral trade deals with larger trading partners But limited progress with BRICS – Brazil: EU negotiations with Mercosur ongoing, re-launched in 2010 – Russia: Partnership and Cooperation Agreement, renewal negs halted in 2010 – India: EU-India FTA negs ongoing – China: EU-China investment?… or trade? – South Africa: Negs conc. For for SADC comprehensive EPA Contrast EU approach with BRICS and their trade/aid partnerships: mutually reinforcing, less divisive? 11

Normative and Institutional Considerations Normative considerations – Role of EU within ;ulti-polar world and position within global production networks Articulate a vision of sustainable development – Align instruments accordingly Develop a ‘Gold’ Standard? Institutional considerations – Have to adapt to the rise of the rest Engage EP and constituents: update dialogue mechs Avoid silo approach to trade and development 12

Concluding Remarks The EU is right to articulate its vision of sustainable development within its legislative processes – But it needs to be consistent – Ensure that statements are backed up with action Assume a new, more positively influential role within a multi-polar global economy. – Internal and external signalling effects Stark choice: win friends and influence people, or lose friends and alienate own people. – EU’s own self-interest to do the former. 13

Links to recent papers ETTG: The EU can only benefit if the rest of the world, and developing countries in particular, pursue a path of successful sustainable development – See: collective-interest-global-solutions-ettg-memorandumhttp:// collective-interest-global-solutions-ettg-memorandum Trade Out of Poverty: Trade policy is not just about promoting the EU’s direct commercial interests: it is also a key tool to stimulate economic growth in the developing world – 10 Priorities for the new Trade Commissioner Forthcoming 14

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Inter-committee requests for opinion between DEVE and INTA Authors’ elaboration