EU Trade Policy Common Commercial Policy - Article 113 of the Treaty of Rome: 1.Community tariff regime 2.Common trade agreement with third countries

Pattern of Trade EU25 EXPORTS IMPORTS

Differences among Member States

Composition exports and imports

What with whom?

Institutions Trade policy is an exclusive competency of EU. –Customs Union requires COORDINATION. Trade in goods: Commission has responsibility for negotiating, Council of Ministers sets “Directives for Negotiation.” –Catherine Ashton (Trade Commissioner). –Council accepts/rejects final deal by Qualified Majority Vote. Commission in charge of surveillance and enforcement of 3 rd nation commitments to EU. –Trade disputes with US, China, etc.  European Parliament has no explicit powers. It’s only informed.

QUALIFIED MAJORITY VOTE Each member state has a fixed number of votes roughly determined by its population, but progressively weighted in favour of smaller countries. To pass a vote by QMV, all three of the following conditions must apply: 1.the proposal must be supported by 255 votes from a total of about 74% of the votes; 2.the proposal must be backed by a majority of member states; 3.the countries supporting the proposal must represent at least 62% of the total EU population.

Treaty of Rome only gave Commission power over trade in goods. Treaty of Nice (& Amsterdam) extended Commission’s authority to some aspects of services trade and intellectual property rights. It made QMV the rule in Council on such matters. Also: “Parallelism”: if the issue would be subject to QMV in Single Market considerations, it’s subject to QMV on trade matters, and same for unanimity voting.

Contingent Protection (anti-dumping&anti-subsidy) WTO allows members to raise tariffs to: 1. Counter ‘unfair’ trade practices, e.g. –Antidumping –Countervailing duties 2. Provide temporary protection “safeguards.” (Iron, steel, consumer electronics, chemicals) The various WTO articles on these require a procedure; in EU the Commission is in charge of these procedures, but the final decision is subject to QMV approval of the Council. Tariffs and preferably price undertaking. Trade-off between consumers welfare and produces welfare.

EU External Trade Policy EU has special deals with 139 nations; often more than one per partner.

EU External Trade Policy European-Mediterranean area: 1. West, Central and Eastern Europe = Single market in industrial goods; EU + EFTA (4 freedoms) 2. Euro-Med10 Association Agreements: Morocco, Algeria, Tunisia, Egypt, Israel, the Palestinian Authority, Lebanon, Jordon, Syria and Turkey. Bilateral duty-free trade in industrial goods Asymmetric (EU cuts its tariffs faster) Turkey unilaterally set its industrial import tariffs at EU level. –Asymmetric dependence (e.g. 70% of Morocco’s exports to EU, but <1% of EU to Morocco) HUB & SPOKE –EFTA’s mimic EU to avoid discrimination (Part of the HUB)

EU External Trade Policy Former Soviet republics & Western Balkans 1. Partnership and Cooperation Agreements (PCAs). –Generalised System of Preference - GSP plus. –Russia, Ukraine, Georgia, Belarus, Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova and Uzbekistan. 2. Stabilisation and Association Agreements (SAAs). –Former Yugoslavian states. –Croatia has started membership; others likely to follow.

Preferential arrangements with former colonies Colonial preferences conflicted with Common External Tariff. –EU made exception for these nations to avoid imposing new tariffs; signed “unilateral PTAs” Yaoundé Convention and Arusha Agreement –When UK joined 1974 extended to many Commonwealth nations. “ACP nations” (Africa, Caribbean & Pacific); the new agreement = Lomé Convention. Duty-free but subject to quota for sensitive items (sugar, banana, etc.). These didn’t help the ACP nations. When Lomé Convention renewed in 2000, the EU and the ACP nations agreed to modernise the deal. Cotonou Agreement; eventually reciprocal free trade.

Regional groups, ACP nations West AfricaCentral Africa East South Africa Southern Africa CaribbeanPacific Benin Burkina Faso Caper Verde Cote d’Ivoire Gambia Ghana Guinea Guinea Biss. Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leona Togo Cameroon Central Africa Chad Congo Equat. Guinea Gabon Sao Tome e Principe Burundi Comoros Congo (Rep Dem) Djibouti Eritrea Ethiopia Kenya Malawi Mauritius Madagascar Rwanda Seychelles Sudan Uganda Zambia Zimbabwe Angola Botswana Lesotho Mozambique Namibia Swaziland Tanzania Antigua Bahamas Barbados Belize Dominica Domin Rep Grenada Guyana Haiti Jamaica Sta Lucia St Vincent St Ch and Nevis Surinam Trinidad and Tobago Cook Is Fed Micron Fiji Kiribati Marshall Isl Nauru Niue Palau Papua NG Samoa Solomon Is Tonga Tuvalu Vanuatu

Preferences for poor nations: GSP 1971 GATT provision. EU grants GSP-generalised system of tariff preferences- to almost all poor nations. 1. General GSP. 2. “Super-GSP” more generous on market access. 3. ‘Everything but Arms’ for least developed nations. On paper, EBA grants zero-tariff access all goods, except arms and munitions. –Goods in which these nations’ are most competitive are in fact excluded from the deal. –Tariffs on bananas, rice and sugar – products where these poor nations could easily expand their EU sales – are to come down only in the future. –Moreover, even though all tariffs on these items will be gone by 2009, the exports quantities are limited by bilateral quotas. 49 nations qualify for EBA in principle in 2005.

Non-regional free trade agreements Mexico, Chile, and South Africa, done. Ongoing with Mercosur, & the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates). No more agreements until DOHA ROUND is conclude.

Non-preferential trade About 1/3 EU imports are not granted some sort of preferential treatment (US, Japan, etc.). Average CET 6.5% Average industrial goods 4.1% Average on agricultural imports 16.5% with huge variation Cynical way to arrange agreements

EU Common external tariff

Current facts… “Traditionally, there has been a divide between northern liberal countries, such as Britain and Sweden, and protectionist founder members, such as France and Italy”. The Economist Dec 26 th. USA and EU blaming each other for failure in trade negotiations. “What they're saying is that for every dollar that they strip out of their trade-distorting farm subsidies they want to be given a dollar's worth of market access in developing country markets," Commissioner Mandelson said. "That is not acceptable to developing countries and it's a principle that I on Europe's behalf certainly couldn't sign up to either." US trade representative Susan Schwab insisted the US remained "fully committed to multilateral trading system”.

Some remarks World Trade policies are fundamental to diminish poverty and inequality. Poverty is the main cause of violence Disparities in trade policies increase the gap among countries. Globalization and technology make more difficult the migration control. Restrictive policies are not the solution… eliminating miserable conditions from certain areas in the world is.

EU-US trade and investment Disputes over issues as varied as bananas, beef, trade legislation and subsidies to aircrafts. Economic dimension : a) population 455 million EU25 and 278 million US b) land area 4.3 million sq Km EU and 9.4 for US c) €11.1 billion EU and € 10.9 US. EU and US are the most important world traders. EU share in goods trade is 22.8% and 27.3% in services. US shares are 19.1% and 20.2% respectively. Each other largest trading partner: US accounts for 17.7% (24.2%) of EU15 total imports (exports) of goods. While EU accounts for 24.2% of total US trade of goods.

Share in EU15 FDI flows Inflow s