EU BILATERAL AGENDA WITH STRATEGIC TRADE PARTNERS

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EU BILATERAL AGENDA WITH STRATEGIC TRADE PARTNERS Razeen Sally European Centre for International Political Economy/ London School of Economics

EU BILATERALS Trade and FDI patterns EU bilateral trade policy: Global Europe; Trade, Growth, World Affairs FTAs in Asia EU bilaterals: policy issues

EU BILATERALS EU and strategic trade partners -- Bilateral trade and FDI -- Comparative trade barriers

Leading EU27 Import & Export Countries Merchandise trade - Excluding intra-EU trade (2010) Country EU Imports + Exports EU Imports from EU Exports to Rank Mio euro % world World 2 840 684 100.0 1 492 175 100,0 1 348 509 USA 1 411 649 14.5 2 169 297 11.3 242 353 18.0 China 395 106 13.9 281 996 18.9 113 111 8.4 Russia 3 241 424 8.5 154 909 10.4 4 86 515 6.4 Switzerland 189 556 6.7 5 84 123 5.6 105 432 7.8 Japan 6 108 554 3.8 64 845 4.3 43 709 3.2 Brazil 10 63 566 2.2 32 290 9 31 277 2.3 India 8 67 784 2.4 32 991 34 793 South Korea 66 584 38 602 2.6 27 981 2.1 Canada 11 46 609 1.6 15 20 045 1.3 14 26 564 2.0 Singapore 12 42 638 1.5 17 18 658 23 981 1.8 Malaysia 23 31 926 1.1 20 684 1.4 28 11 241 0.8 Thailand 25 27 172 1.0 19 17 188 1.2 32 9 985 0.7 Indonesia 33 20 065 13 690 0.9 38 6 375 0.5 Vietnam 14 072 9 401 0.6 45 4 671 0.3 Philippines 9 113 43 5 373 0.4 49 3 739 ASEAN - 6   144 986 5.1 84 994 5.8 59 992 4.4 Source: Eurostat

Leading EU27 Import & Export Countries Services trade - excluding intra-EU trade (2009) Country EU Imports + Exports EU Imports from EU Exports to Rank Bln euro % world World   1194.6 100,0 542.9 651.7 USA 1 246.3 20.6 126.5 23.3 119.8 18.4 Canada - 19 1.6 8.2 1.5 10.8 1.7 China 2 32.4 2.7 13.6 2.5 18.8 2.9 Japan 3 29.9 13.3 2.4 16.6 Brazil 15.7 1.3 6.5 1.2 9.2 1.4 India 7.6 9 Korea* 12.2 1.0 4.4 0.8 7.8 ASEAN 38.7 3.2 18.3 3.4 20.4 3.1 Source: Eurostat and WTO International Trade Statistics 2010 * Services figures taken from 2006 and based on 2008 for % world figures.

EU 27 OFDI and IFDI Stocks with Main World Partners (2009) in billion of euros Source: Eurostat

EU 27 OFDI and IFDI Flows with Main World Partners (2009) in billion of euros Source: Eurostat

Average MFN Applied Tariffs and Bound Rates by Major Sector (2009) Country/ economy Binding Coverage (All Goods) Bound Tariff Rate (All Goods) Applied Tariff Rate (Manufactures) Applied Tariff Rate (Agriculture) Overall Applied Tariff (All Goods) EU 100.0 5.2 4.0 13.5 5.3 US 3.5 3.3 4.1 Canada 99.7 6.7 10.7 4.5 Japan 5.1 2.5 21.0 4.9 Brazil 31.4 14.1 10.2 12.1 Korea 94.6 16.6 6.6 48.6 11.9 China 10.0 8.7 15.6 9.6 Hong Kong 45.6 0.0 Malaysia 84.3 24.0 7.6 8.4 Thailand 75.0 28.2 8.0 22.6 9.9 Indonesia 95.8 37.1 6.8 Philippines 67.0 25.7 5.8 9.8 6.3 Vietnam 11.4 9.7 18.9 10.9 Taiwan 6.4 6.1 Singapore 69.7 10.4 0.2 India 73.8 48.5 10.1 31.8 12.9 Pakistan 98.7 59.9 13.4 17.1 13.9 Bangladesh 15.5 169.2 14.3 17.6 14.7 Sri Lanka 38.1 30.2 9.2 24.8 11.2 Source: WTO World Tariff Profiles 2010

World Ranking Ease of Doing Business (2011)   Ease of Doing Business Starting a Dealing with Constr. Permits Registe ring Property Getting Credit Protec ting Investors Paying Taxes Trading Across Borders Enfor cing Contracts Closing Singapore 1 4 2 15 6 13 Hong Kong 56 3 United States 5 9 27 12 62 20 8 14 Denmark 10 30 28 Canada 7 29 37 32 41 58 Korea, Rep. 16 60 22 74 49 Japan 18 98 44 59 112 24 19 Thailand 95 72 91 25 46 Malaysia 21 113 108 23 55 Vietnam 78 100 43 173 124 63 31 China 79 151 181 38 65 93 114 50 68 Indonesia 121 155 116 130 47 154 142 Brazil 127 128 122 89 152 132 India 134 165 177 94 164 182 Philippines 148 156 102 61 118 153 Source: World Bank Ease of Doing Business 2011

Indicators for Trading Across Borders (2011)   Ease of Trading Across Borders (World Ranking) Documents for export (number) Time (days) Cost to (US$ per container) Import import Cost to Singapore 1 4 5 456 439 Hong Kong 2 6 625 600 Korea, Rep. 8 3 790 7 Thailand 12 14 13 795 United States 20 1,050 1,315 Japan 24 10 1,010 11 1,060 Malaysia 37 18 450 Canada 41 1,610 1,660 Indonesia 47 704 27 660 China 50 21 500 545 Philippines 61 15 675 730 Vietnam 63 22 555 645 India 100 17 1,055 9 1,025 Brazil 114 1,790 1,730 OECD - 4.4 10.9 1,058.70 4.9 11.4 1,106.30 Source: World Bank Ease of Doing Business 2011

The Enabling Trade Index (2008) Country Overall Rank Market Access Border Administration Transport and Communications Infrastructre Business Evironment Rank Score Singapore 1 6.06 5.97 6.56 7 5.74 2 6.00 Hong-Kong 5.70 16 5.12 6 5.96 5 5.79 5.94 Denmark(EU) 3 5.41 95 3.76 6,22 8 5.71 Canada 5.29 25 4.85 17 5.61 20 5.24 18 5.45 US 19 5.03 62 4.17 5.60 11 5.49 37 4.86 Japan 4.80 121 3.20 5.65 14 34 4.91 Korea 27 4.72 111 3.63 24 15 5.37 44 4.65 Malaysia 30 4.71 31 4.57 4.95 51 4.59 China 48 4.32 79 3.87 4.53 43 4.13 41 4.74 Thailand 60 113 3.48 4.61 40 4.19 71 4.24 Indonesia 68 3.97 4.21 67 3.99 85 3.28 4.42 Vietnam 3.96 50 4.41 88 46 3.62 64 4.34 India 84 3.81 115 3.42 3.98 81 3.24 58 4.48 Brazil 87 104 3.72 80 3.70 66 3.64 83 4.00 Philippines 92 74 3.82 3.31 103 3.61 Source: The Global Enabling Trade Report 2010

EU BILATERALS EU bilateral trade policy - Global Europe: economic/commercial rationale; WTO plus; but also non-trade motives; differences with EPAs/MENA - Trade, Growth, World Affairs: Update and fleshing out; more emphasis on big trading partners, stronger provisions on regulatory market access in bilateral agreements and stronger trade enforcement - Benchmarks for (relatively) strong, clean FTAs and non-FTA frameworks with other strategic trade partners - How serious is the economic/commercial logic? - Market access and non-trade motives (labour/environmental standards; “sustainable development”; climate change etc.) - Comparisons with US FTAs on WTO plus issues; implications for EU trade policy after the Lisbon Treaty - Overall context: no substitute for intra-EU reforms and multilateral progress; otherwise narrow mercantilism, trade diversion, spaghetti/ noodle bowls

Status of EU FTAs and their share of EU trade (%) REGIONS AND FTA STATUS Industrial products* Agricultural products** Imports (%) Exports (%) OPERATIONAL FTAS 22.3 27.7 24.3 29.1 Chile, Mexico, South Africa Developing country FTAs 2.5 3.4 5.7 2.2 Andorra, San Marino, Turkey, Iceland, Liechtenstein, Norway, Switzerland EFTA and customs Unions 14.6 15.9 11.6 Caribbean ACP EPAs 0.3 1 0.6 Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Occupied Palestinian Territory, Tunisia Mediterranean countries, FTAs 4 5.9 4.5 7.9 Albania, Bosnia and Herzegovina, Croatia, Former Yugoslav Republic of Macedonia, Montenegro, Serbia Western Balkans, Stabilisation and Association Agreements 0.9 1.5 3.7 FTA NEGOTIATIONS CONCLUDED BUT NOT YET APPLIED, ONGOING AND PLANNED FTA NEGOTIATIONS 21.8 25.6 56.2 26.2 Bolivia, Ecuador, Peru, Colombia Andean Community 0.4 5.3 Source: European Commission DG Trade (2010). Trade, Growth and World Affairs: Trade Policy as a Core Component of the EU’s 2020 Strategy, COM (2010) 612.

Cont. Status of EU FTAs and their share of EU trade (%) REGIONS AND FTA STATUS Industrial products* Agricultural products** Imports (%) Exports (%) Cont. Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam ASEAN 5.4 4.6 9.8 4.2 Costa Rica, El Salvador, Guatemala, Honduras Nicaragua, Panama Central America 0.2 0.4 2.8 Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates Gulf Cooperation Council (GCC) 2 5.3 0.3 5.1 Argentina, Brazil, Paraguay, Uruguay MERCOSUR 1.5 2.5 20.9 Armenia, Azerbaijan, Canada, Georgia, India, Korea, Libya, Moldova, Syria, Ukraine Other FTAs 10 9.1 7.2 8 ACPs less Caribbean EPAs 2.3 3.2 10.5 6.6 NO FTAS 55.8 46.7 19.5 44.7 Australia, China, Japan, New Zealand, Russia, United States Major trading partners 50.3 38.6 16.6 35.8 Rest of the World (~ 70 countries) 5.5 8.1 2.9 8.9 Source: European Commission DG Trade (2010). Trade, Growth and World Affairs: Trade Policy as a Core Component of the EU’s 2020 Strategy, COM (2010) 612.

FTAs IN ASIA FTAs - Context: stalled liberalisation; creeping regulatory protectionism (partly crisis-related); from non- discriminatory liberalisation to discriminatory FTAs - Proliferation in Asia; catch up with other regions - Motives: foreign policy; WTO stalled; building blocks to regional and global economic integration? - Trade-lite FTAs (except with USA and EU?): focus on tariff liberalisation/elimination – but neglect of non-tariff and regulatory barriers; risks of trade distortions but limits to trade/investment creation and dynamic gains

FTAs IN ASIA Asian FTA players -- China: trade-lite (eg., China-ASEAN to partial-scope agreements) -- Japan: also trade lite; unambitious on market access and big carve outs -- South Korea: more serious, e.g. US and EU FTAs -- ASEAN: Singapore the exception, otherwise weak FTAs; bilaterals take priority over ASEAN+1 FTAs -- India: v. weak FTAs; part of overall defensive trade policy

REGIONAL ECONOMIC INTEGRATION IN ASIA - APEC: diverse, unwieldy, diffuse agenda; FTAAP unlikely - ASEAN: Visions galore, but where’s the beef? CEPT progress; AFAS, AIA weak; little progress on regulatory barriers; AEC and ASEAN Charter: paper tigers? - SAFTA: v. trade-light (excludes over half of trade); risks trade diversion; throttled Indo-Pak trade - TPP: Building bloc to wider Asia-Pacific FTA?; odds against a deep-integration FTA; US demands on labour and environmental standards; excludes China – divisive economically and geopolitically?

REGIONAL ECONOMIC INTEGRATION IN ASIA Regional economic integration (cont.) - Wider regional integration initiatives: Northeast Asian FTA; ASEAN plus 3; ASEAN plus 6 - The case for a region-wide FTA: specialisation; economies of scale and dynamic gains; reduce trade diversion from noodle bowl; all depends on a comprehensive, WTO-plus FTA - But it could compromise global integration, esp. processing trade and extension of global supply chains - Huge economic and political differences in Asia make clean, strong FTAs very unlikely; rather trade-light FTAs adding to noodle bowl - Conclusion: FTAs unlikely to contribute much to regional economic integration; reliance on bilateral FTAs; disintegration dangers

EU BILATERALS EU bilaterals: policy issues -- USA: tariffs and NTBs -- Canada: FTA -- Mercosur and other FTAs in Latin America -- GCC -- Russia and Ukraine -- Low-income countries and LDCs (EPAs, GSP, GSP+, EBA)

EU-ASIA FTAs EU-Korea -- Estimated effects: tackling NTBs -- Comprehensive tariff elimination; short transition periods -- Ban on export restraints -- Sector-specific agreements to tackle NTBs -- FDI, GATS-plus, govt. procurement, IPR enforcement, competition (state aids), dispute settlement -- Trade and Sustainable Development -- Regulatory transparency

EU-ASIA FTAs EU-ASEAN - Estimated FTA effects: crucial to tackle NTBs and have major services liberalisation - Existing bilateral cooperation framework: TREATI and PCAs - From TREATI to FTA - EU-ASEAN talks failed: v. low ASEAN common denominator and lack of common negotiating machinery - EU-Singapore FTA: strong FTA likely - EU-Malaysia/Vietnam/Indonesia/Philippines/Thailand: big challenge to negotiate strong FTAs - Limited gains from such bilateral FTAs; risks of trade distortions

EU-ASIA FTAs EU-India - Estimated effects - Extreme difficulty of negotiating strong FTA with India, esp. on NTBs and regulatory issues - Issues: agriculture; NAMA; services; investment, other WTO plus issues, NTBs - Indian concerns on labour and environmental standards

EU-ASIA FTAs EU-Japan -- Tariffs and NTBs: views from both sides -- Lack of Japanese ambition -- Moving towards an FTA negotiation?

EU BILATERALS - FTA not on the cards EU-China - Existing bilateral cooperation framework (PCA, regulatory dialogues up to HLD): too soft; how to strengthen? - Avoid non-trade linkages; don’t exaggerate macroeconomic issues (bilateral deficit and exchange rate) - Focus on market access, esp. regulatory issues - Both EU and China have legitimate market-access issues

EU BILATERALS EU-China (cont.): issues -- Raw materials and export restraints -- Services -- Investment (both ways) -- IPR -- Government Procurement -- Norms and standards (both ways) -- Subsidies -- MES and trade remedies -- Better prioritising and constructing quid pro quos

EU BILATERALS EU-China: Conclusion -- Better prioritising and constructing quid pro quos -- Constructive reciprocity vs. destructive reciprocity (threatening punitive measures) -- Better bilateral relations if stalled domestic reforms are revived