EU Trade Policy

Pattern of trade: facts

The role of EU in international trade EU More than 20% of the overall trade flows done by it. Second importerFirst exporter

The institutional framework of international economic agreements  1947 – GATT formed by 23 coutries including USA.  WTO – 1995  WTO – International organization  WTO – 159 member states that run aproximatively 94% of global trade flows.  HQ at Geneva, has legal personality and a staff of over 600 employees.

Main principles of the commercial system developed by the WTO The main principles of operating the commercial relationships between the 159 members Non- discrimination in trade The gradual liberalization of trade through negotiation Promote free competition Encouraging development and economic reforms Predictability and transparency Openness

WTO Members Members, dually represented by the European Union European Union Observes Non- Members

Issues addressed in the GATT negotiations and the results towards trade liberalization Time periodPlaceIssues addressed Number of participing countries Results Geneva (Dillon Round) Tariffs264,400 tariff concessions Geneva (KennedyRound) Tariffs Anti-dumping procedures 62Reducing tariffs of over 6300 headings by more than 35% Geneva(Tokyo Round) Tariffs Non-tariff barriers Framework agreements 102Tariff concession. Reducing tarifs by an average of 35% Geneva(Uruguay Round) Tariffs Non-tariff barriers Services Intellectual property rights Creating WTO 123Reducing tariffs by 40%. Reducing export subsidies by more than 36%.

Arguments in favor of a Common Trade Policy  Increasing the negotiating power of the Community on the International market.  Reducing diffusion effects.  Maintaining internal market integrity through common trade policy instruments.

Common Trade Policy Established by the Treaty of Rome (1957). The current framework established by the Maastricht Treaty (1992), amended by the Treaty of Amsterdam (1997).

Common Trade Policy Long term Promoting foreign trade Protecting national economies from EU Short and medium term Improving trade structure Enforcing protection fore some sectors of the economy Maintaining the overall balance of trade

Common Trade Policy The main areas covered by CTP Changes in the tariffs levels Trade agreements Harmonization of the liberalization policies Export policies Measures for protecting trade

Common Trade Policy Instruments Tariff instruments Non – tariff instruments Stimulating instruments Aim to restrict imports Aim to boost exports

Tariff instruments Indirect taxes imposed by a state on goods when they are crossing the custom borders of that country. Classification: – Considering taxation purpose: Fiscal tariffs ( low), protectionist tariffs (high). – Considering the taxation object: import, export and transit tariffs.

Non - tariff instruments Quantitative restrictions (import licenses, export limitations) Limiting imports through the price mechanism (price limits). Customs and administrative formalities State participation in commercial activities: state trading, the state monopoly upon foreign trade Technical standards applied to imported products.

Stimulating instruments Stimulating measures: Negotiating some trade and navigation treaties; Direct or indirect support of the companies in participating at international exhibitions; Commercial representation abroad; Providing information services and external clients orientation.

Measures of stimulating exports Budgetary measures : direct subsidies to exports. Fiscal measures : certain tax incentives that are granted directly to companies involved in export Banking measures: buyer credit, credit lines

The Common External Tariff (CET) The main pillar of the Common Trade Policy of EU. Entered into force in Established upon the average tariffs of the founding states of EU. Initially CET was higher that the one of Japan or USA. Currently, CET is set around 3%.

Preferential arrangements With European Mediterranean Trade Area – Euro-Med Association Agreements (Med 10). With ACP – The Cotonou Agreement – Economic and trade cooperation aimed at fostering development in the ACP nations. With European Economic Area (Norway, Iceland, Liechtenstein).

Preferential arrangements Former Soviet republics and the Western Balkans – GSP treatment plus PCAs (Partnership and Cooperation Agreements) – The EU has lowered its tariffs on most exports from these nations without requiring that the PCA partners lower theirs. GSP – allows rich countries to voluntarily charge lower tariffs on imports from poor countries. SAAs – GSP + financial assistance, trade in services.

Preferential arrangements GSP EU uses SGP with more than 178 countries. Main beneficiares of this system. China, India, Brazil. (2002) EU is the main user of this system from all OECD countries. Offers stability to the main trading partners.

Preferential arrangements Preferences for poor countries: General GSP: which is available to all developing nations; Super GSP: which involves extra EU unilateral preferences for nations that the EU wishes to encourage.

Anti-dumping procedures Dumping – selling of exports below some normal prices. The most important commercial instruments. Introduced in 1968 along with CET, but they were first applied in The European Commission is in charge of investigating dumping complains. If the Commission finds that: Dumping has occurred; That material injury to EU producers has or might happen Impose a provisional duty

Trade policy instruments Measures Anti - dumping Anti - subsidy 1064

Institutions involved in the management of the Common Trade Policy of EU The European Commission; The Council of Ministers; Consultative Committees.

Trade policy in perspective Successes under GATT Policy coordination between GATT members Reducing by 90% the average tariffs Facilitate the access of developing countries in tradeing manufactured goods Expansion of trade in services Goals of WTO Gradual liberalization of FDI flows; Better management of disputes between countries; Policies coordination in what concerns trade with agricultural goods