Berlin, 22 May 2007, FHTW

„Global Europe – Europe‘s Trade Strategy vis-à-vis

the Developing World“

Marita Wiggerthale

The EU is largest exporter / first investor abroadThe EU is largest exporter / first investor abroad

http://ec.europa.eu/trade/gentools/downloads_en.htm

The EU as a „Global Player“

EU2518%

USA12%

Rest of the world39%

China9%

Japan8%

Canada5%

Exports of Exports of goodsgoods

2004 excluding intra EU trade

Switzerland3%

Canada3% Japan

5%

Rest of the world39%

USA22%

EU1528%

Exports of Exports of servicesservices Australia

4%Canada5%

Japan7%

USA38%

EU2540%

FDI OuflowsFDI Ouflows

Source: Fortune magazine

Top 100 companies worldwide

(according to turnover in 2005)

EU USA Japan China LA Asia(without Japan)

47(plus 3 CH, 1 Norway)

31 9 3 3 (Venezuela

Mexico, Brazil)

6 (China und South

Korea)

Source: Die Zeit, 20.4.2006

Prospects till 2050

(Share of international economic performance)

2004 2025 2050

EU 34% 25% 15%

USA 28% 27% 26%

Japan 12% 7% 4%

China 4% 15% 28%

India 2% 5% 17%

Laying the basis: Lisbon Agenda

Make the European Union “the most dynamic and competitive knowledge-based economy in the world” by 2010, starting in 2000

9 core tasks („New Lisbon Agenda“, 2005): Extend and deepen the internal market Improve European and national regulation Ensure open and competitive markets inside and outside

Europe Expand and improve European infrastructure Increase and improve investment in Research and Development Facilitate innovation, the uptake of ICT and the sustainable use of

resources Contribute to a strong European industrial base Attract more people into employment and modernise social

protection systems Improve the adaptability of workers and enterprises, and the

flexibility of labour markets

What Global Europe is about

Objectives of Global Europe

Removal of trade barriers (incl. NTBs) Secure access to raw materials and energy Stricter rules on intellectual property rights Accelerated opening of services markets Enforcement of unhindered freedom of establishment Liberalisation of government procurement markets for EU exporters Introduction of competition policies in third countries, where they can be

useful for supporting European companies’s market access

”Not a plan for competitiveness, but a plan for exporting inequality and poverty” (Oxfam International)

“No to the new EC communication on ‘competing in the world” (see

Good for Business, bad for the World, Seattle to Brussels Network)

             

             

„New generation of FTAs“

Far reaching bilateral FTAs and investment agreements 5 draft negotiation directives adopted at 24 April 2007

Free Trade Agreement with ASEANFree Trade Agreement with South KoreaFree Trade Agreement with IndiaAssociation Agreement with Central AmericaAssociation Agreement with Andean Community

Trade Agreements with other blocs/countries in process or envisaged: MERCOSUR, China (update), (ACP), Russia (update), Ukraine (update)

Extra-EU Exports

2005, Extra-EU EU-Agrarexporte

in Mio. Euro (in %)

EU-Gesamtexporte

in Mio. Euro (in %)

Mercosur 699 (1,1%) 20.676 (1,9%)

ASEAN 2.378 (3,7%) 45.017 (4,2%)

China 1.230 (1,9%) 51.646 (4,8%)

AKP 4.323 (6,7%) 49.939 (4,6%)

Indien 197 (0,3%) 21.092 (1,9%)

Investment: tying hands of governments I

FDI flows in 2005: 334 bn US$ (all-time high) Concentrated in few sectors and small group of DCs: Sectors oil &

gas, telecommunications, financial services; DCs …. BUT, high volumes of FDI do not guarantee development! Experience: economic development in DCs, where entry was allowed

only for those investors that met the development needs of their economies (“pre-establishment rights” prevent such screening)

Conditions were set: “Performance requirements”, joint partnerships with local firms, technology transfer, upgrading skills of employees, buy intermediate inputs from local suppliers (ban through FTAs, limitation through TRIMs/WTO)

Regulation of capital flows: large flows of capital can provide much needed funds for local businesses; if missing risk of destabilisation of economy (see Asian crisis late 1990s), but US FTA with Chile, Singapore limits use of capital controls to situations of national emergency only

Investment: tying hands of governments II

170 countries signed international investment agreements that provide foreign investors with the right to turn immediately to international investor-state-arbitration to settle disputes. Consequence: a government acting in public interest can be sued

Example of Argentina 2001-2002: financial crisis, amid dramatic increases of

unemployment and a precipitous decline in the value of household savings

Government emergency measures were installed: they forced foreign investors to stop charging dollar-equivalent rates for basic utilities such as water and gas

Investor-state-arbitration: 39 groups of foreign investors have lodged compensation claims, some successfully, for revenues lost

Current outstanding claims are estimated at 18bn US$

Undermining poor people‘s access to services

Example: financial services IMF and UN studies: opening up the banking sector leads foreign banks to

„cherry pick“ only the most lucrative customers, leaving the poorer and higher-risk customers for local banks

Consequence:a) Local banks are driven out of businessb) Small and medium sized businesses and many of the poorest people are left without access to finance

Example: Mexico (liberalisation in 1993) Foreign ownership increased to 85%, but lending to Mexican businesses

dropped from 19% GDP to 0,3% in 2000 Southern Mexico: access of small farms with access to credit halved, if

lending at exorbitant rates State of Sonora: lack of access to finance drove 70% of community

farmers to sell out to large-scale commercial enterprises

Access to energy and raw materials

Energy resources: EU, 50% of imports (prospect: 70% by 2030; oil 90%, gas 80%)

Raw materials: since 2003 hausse in raw materials, peak: beginning 2006; prospects: doubling of world demand within next 30 years

Germany: 100% dependence on imports of metallic minerals

Source: EU-COM (2006): European Industry: A Sectoral Overview

EU

Value of German raw material imports

Source: BGR (2005): Geostandpunkt, Rohstoffe

Origin of raw materials for Germany

Source: Bundesanstalt für Geowissenschaften und Rohstoffe, Hannover

FTAs: a threat to Development Strict IPR rules: reduce poor people‘s access to live-saving medicines,

push prices of seeds and farming inputs beyond reach of small farmers and reduce technology transfer in DCs

Liberalisation in services: threaten to drive local firms out of business, reduce competition and extend monopoly power of large companies

Liberalisation in investment: prevent DCs from requiring foreign companies to transfer technology, train local workers, or source inputs locally investment then fails to build national linkages, create decent employment, or increase wages (instead inequality exacerabates)

Deep tariff liberalisation in industrial goods: a key tool for development is taken away; all countries in the world used tariffs to protect nascent industries; no possibility to develop an industrial future

Tariff liberalisation in agriculture: small farmers are driven out of business, not possible to develop food industry in future, food inse-curity!

Turning the tide: development first

No reciprocity in FTAs and no WTO+ provisions Enable DCs to adopt flexible IPR legislation Exclude essential services (education, health, water,

sanitation) from liberalisation Recognise the right of governments to impose capital controls

on foreign investment Include enforceable commitments by governments to protect

and promote core labour standards (see ILO) Exclude agricultural tariffs from liberalisation (food security,

rural livelihoods!), right to use permanent safeguards Enable DCs to use tariffs, subsidies, and other measures in

support of industrial policy and to modify them as their economies develop

Ensure democratic, transparent and participatory negotiation processes with participation of all stakeholders