1
The EU's external competitiveness: The
trade and regulatory policy framework
Presentation by Dr. Andreas Schwarz*
European Commission; additional input by
Prof. Dr. Paul JJ Welfens, EIIW at the University of Wuppertal (www.eiiw.eu)
*This presentation does not necessarily present the official position
of the European Commission.
Trade (w)
• Trade generates benefits in three forms:
– Specialization gains
– Economies of scale of better exploited (e.g.
automotive, steel, computer chips etc.)
– Higher diversity of products (utility is raised)
• In a 2 country model of world economy
(e.g. EU country I, country II China) the
current account surplus of II implies a
current account deficit of country I;
sustained CA deficit= rising foreign
indebtedness – how long can it continue? 2
Schumpeterian Dynamics Intensified in
Enlarged Transatlantic Market (!?)
Intensification oftransatlantic & global Innovation process=
more patents
Intensification oftransatlantic & global Innovation process=
more patents
Patent thickening asstrategy of MNCs: =
Barriers to entry
Patent thickening asstrategy of MNCs: =
Barriers to entry
3
Trade Liberalization Perspectives 2013-
2015• 1) Doha WTO round has not made
progress
• 2) New Approaches with Bilateralism
which later might help to jumpstart the
Doha WTO Round again
– 2013: EU-Singapore; later EU-Thailand
– July 8, 2013: EU-US negotations on
Transatlantice Trade and Investment Par-
tnership Initiative (TTIP); much on trade, but
more on Non-tariff barriers (NTBs) – could
generate about 0.5 to 1% economic growth in
the US and the EU, respectively4
Background on TTIP
• 1) There is a Transpacific Partnership
Project (TPP) which involves since 2011
US+Canada+Mexico and 9 Asian
countries – including Japan (since 2013).
• 2) EU-US transatlantic liberalization talks
(TTIP) stand for counter-balancing the US
pivot to Asia: TTIP has started in July
2013 and will have a strong focus on non-
tariff barriers and investment. Rules of
origin are a major issue, standards also
5
TTIP Perspectives
Merchandise liberalizationMerchandise liberalization
Services liberalization
Services liberalization
6
Services liberalization with special
challenges• In the WTO services are in the special
regime of GATS (general agreement of
trade in services)
– Limited implementation of Most-favored
national clause (MFN = giving to all
partners the best condition you give to any
of your trading partners)
– Non-discrimination
– Opening up sub-sectors
7
Importance of TTIP
Glo
ba
l P
erp
se
citve
Glo
ba
l P
erp
se
citve
US & EU standards = global standards
US & EU standards = global standards
Last opportunity on transatlantic initiative
before China dominates?
Last opportunity on transatlantic initiative
before China dominates?
Growth impulse for EU with its problems of
stagnation
Growth impulse for EU with its problems of
stagnation
8
Selected Problems
Regu-lations
US withinterdependent
agencies
e.g. Telecom-
munications(FCC)
Financial Markets
(FED, FDIC)
EU with partlyprivate sector
institutions
Telecom-
munications, etc.
9
Options of How to Deal with Different
Regulations
Mutual Recognition
Mutual Recognition
Common
Recognition
Common
Recognition
JointlyAccepted
Procedures ofRecognition
JointlyAccepted
Procedures ofRecognition
10
Facing Large CA Deficits
• Large current account imbalances –
relative to GDP – will become a problem
– Large CA deficits have to be corrected by
restrictive fiscal policy (fall of government
real consumption or public investment or rise
of income tax rate or value added tax rate;
measures which are not popular:
• Y –[C(..)+G+I(..)=Xnet; Xnet is net export of goods
– If CA deficit cannot be reduced very quickly
IMF loans might be necessary
• IMF support is conditional; e.g. will require to
improve productivity, raise income tax rate 11
• Trade impediments:
– Import tariffs (at least relative price signals
still working); or export tariffs
– Quantitativ restrictions = worst: welfare loss
– Technical restrictions,
– Local content requirements
• For small country optimum import tariff=0
• For big economy optimum tariff >0; EU is
big country; import tariff>0 causes
excess supply in world market, world
market price p* falls = advantage for EU12
• Will the EU – or any other regional
integration club (eg NAFTA, ASEAN –
both are free trade areas – or MERCOSUR
etc.) become more protectionist as more
member countries join?
• A) Role of EU trade policy (policymakers)
• B) Role of industry interest; if mainly
MNCs import intermediate products = no
big interest in import tariffs
• C) Role of World Trade Organization WTO13
Free Trade Area =Stumbling Bloc vs. Building Bloc• Regional integration could be
• A) stumbling blocs for global regional trade?
logic of optimum tariff which is zero for
small economy; EXPLANATION is that only
big economy could reduce world market
price if import tariff imposed (welfare gain!)
• B) building blocs for global regional trade:
good example of cutting intra-regional tariffs
= impulse for global trade liberalization; EU
eastern enlargement = trade diversion for
Russia but EU27 has +growth=imports grow!
• WTO: There are regular Trade Policy
Reviews – read the review of the EU14
Welfare loss from subsidy (partial
equilibrium analysis): imports will fall
• The initial supply curve is shifted down-
wards (subsidy rate is s‘); domestic
production increased and imported
quantity is falling (distance G‘F instead of
GF under free trade)
15
Import Tariff
16
P
P0
SS0
DD0
q
G F
E
P
P1
P0
SS0
E
J K P*
0(1+τ’)
q
P*0 F H G
DD0
q0s q1
s q1
d q0
d
Area JKIH is tariff revenue
I
Protectionism
• Import protecionism is coming up in periods
of sectoral crisis or economy-wide recession
• Import tariffs imposed in sector i, lobbying
by sector j to also impose import tariff =
increase of negative welfare effects = reduction of real income = induced fall of imports
• Quantitative restrictions are worst in terms
of welfare lass („improvement“ is to switch
from quantitative restriction towards import
tariff = price signal is still working (and
redeced welfare loss)17
Vertical Trade etc.
• Increasing share of global trade is trade
in intermediate products = reflecting
the splitting up of value-added chain
across space and countries,
respectively = force contra import
tariffs (multinational companies which
dominate trade in intermediate
products push for free trade in many
countries)
• Intra-industrial trade dominates in
OECD countries 18
Macro Perspective (General
Equilibrium) of Tariff Protectionism
• 1) Free trade = specialization gains for
country I and II (in two country model) =
real income gain for country I and II
• 2) Import tariffs reduce trade volume =
reduction of specialization gains; if
many sectors impose import tariffs
there will be fall of real income and this
shifts demand curve in all markets to
the left so that imports reduce further
(=fall of exports of country II so that Y*
in country is falling!) 19
Trade, Imports and Subsidies
(s‘ is the subsidy rate); Imports fall to G‘F
20
Subsidization under Flexible Exchange
Rates• Subsidy for domestic industry reduces
import value; net exports therefore will
increase = nominal appreciation of the
currency
• Appreciation reduces the costs of
imports in all sectors so that subsidy has
unclear effect on current account
• Subsidy has to be financed through
higher taxes; subsidy would be justified
only if the respective sector has positive
externality (e.g. through innovation) 21
Trade and Specialization
• Countries (firms) specialize in accordance
with comparative advantage [Ricardo]
• Countries can be classified according to
factor endowment:
– High ratio K/L (capital intensity k:=K/L); say
EU or US or Japan; production of
automotives is capital intensive, production
of textiles is labor intensive
– Low ratio K*/L* (* for foreign countries); e.g.
China [but China‘s government also
intervenes: e.g. China builds air & space
products for „strategic reasons“] 22
Opening up of economies (Heckscher-Ohlin Approach;
assumes idential technologies in both countries, 2 sectors, 2
production factors – say labor and capital: 2x2x2 model!)
Openingup
• Structural Change in country I
• Capital intensive production of good i in country I will increaseand it will be exported, output of good j falls
Country II
• The country with relatively low capital intensity will specialize in labor intensive products; these will be exported
• Structural change in country II as well
NOTE
• Note: Assumption in Heckscher-Ohlin approach is that there isfactor (e.g. labor) mobility within each country (across sectors), but not across countries
• In reality technologies across countries differ (not in OECD!?)
23
Governments have an impact on
specialization and thus on trade
Institutions (& rules)
promotingforeign directinvestmentinflows (and
outflows)
Governmentpromotion of
R&D.
There could berestrictions in
market accessof foreign firms
Geographyalso matters:
size of country(import for
economies ofscale sectors)
24
Trade Policy Review (Report by EU)
• EU adopted in 2010 programme Europe 2020
which is kind of follow up on Lisbon
Agenda 2010 program (from 2000)
• There are 7 specific flagship initiatives:– 1) Digital Agenda for Europe
– 2) Innovation Union
– 3) Youth on the Move
– 4) An agenda for new skills and jobs (labor market reforms)
– 5) European platform against poverty and social exclusion
– 6) An integrated industrial policy for the globalisation era
– 7) A resource-efficient Europe
Read EU Annual Economic Report 2005 (on globalization)25
26
Contents1. Theoretical Starting Points
2. Institutional Aspects – EU2020
3. A few facts about World Trade
4. The EU in world trade
5. Trade policy – The WTO context
6. EU Trade Policy - Basic features
5. Trade defence instruments
7. EU Trade Policy - How it works
8. EU Trade Policy – Outlook
27
1. A few facts about World Trade
28
IMPLICATIONS
• Opportunities for growth, but disruptive effects
• Need for global governance -> multilateral rules and institutions to
ensure level playing field and better distribution of benefits
• Need to reinforce the competitive position of the EU economy
GLOBALISATIONTECHNOLOGICAL TRADE
DEVELOPMENTS OPENING
29
Evolution of world trade
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
2000 2005
Evolution of world trade : 2000-2005(world trade = exports + imports, except intra-EU trade)
So urces: Euro stat , OM C
Bn €
World PVD EU
3030
But now new context
• Globalisation and economic downturn
– Global growth : 0.5% (IMF)
– Global trade to fall : 2.8% (IMF)
– EU GDP to fall -2.5%
– EU exports down 3.5% (Nov) / Japan 35%
• Collapse in trade finance
• Trade is part of the solution?
– G20 commitment
– WTO monitoring
31
2. The EU in World Trade
3232
EU remains a trading power…
19% of world trade in 2007,
17% (goods),
27% (services)
First exporterSecond largest
importer
2007 leader in foreign direct
investment:
EU-27 provides €1100 bn (44%)
and recieves € 1100 bn (32%) in
2007.
A MAJOR
TRADING POWER
33
3434
The EU in world trade –
10 major EU import partners (2008)
1. China
2. USA
3. Russia
4. Norway
5. Switzerland
6. Japan
7. Turkey
8. Korea
9. Brazil
10.Libya
16%
12%
11%
6%
5%
5%
3%
3%
2%
2%
3535
The EU in world trade 2007Share of (current) GDP in World GDP
36
2. The EU in world trade
A MAJOR
TRADING
POWER
Others
49,4%
China
8,9%
Japan
7,0%
United
States
17,2%
EU25
17,5%
SHARE IN WORLD TRADE IN GOODS (2005)
EU25
26,0%
United
States
18,4%Japan
6,9%
China
3,8%
Others
44,9%
SHARE IN WORLD TRADE IN SERVICES (2005)
Source: Eurostat
37
EU Foreign Direct Investments by region in 2004
2. The EU in world trade
38
57
3
30
40
26
5
6
6
0
135
21
60
64
36
4
6
8
8
MANUFACTURING
Machinery
Transport
equipment
Chemicals
Textiles and
clothing
Iron and steel
Paper and articles
of papers
Non-metal.mineral
manuf.
Other products
1999
2004
Source: Eurostat, by Sitc groupings
Trade Balance (Billions euros)
39
Ratio quality products / exports (%)
Good performance in high-quality products
0
10
20
30
40
50
60
Japan
EU15
USA
Emer
ging m
arke
ts India
Russia
Brazil
China
Source: Cepii
40
Source: Eurostat, IMF, all products in value, excluding intra-EU trade
0
2
4
6
8
10
12
14
16
18
20
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
EU25
USA
Japan
China
Market shares trends in world trade (%)
41
-600
-500
-400
-300
-200
-100
0
100
200
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
EU25
USA
Japon
Chine
Comparative trade balance trends (bn euros)
Source: Eurostat, IMF all products in value, excluding intra-EU trade
42
EU trade not focused enough on rapidly
growing markets
% of total exports to more/less
rapidly growing markets
Contribution to
growth in world
imports
1995-2002US Japon EU25
10 most rapidly
growing markets
79% 76% 48% 93%
20 least rapidly
growing markets
8% 12% 13% -5%
Source: Cepii
From the EU Trade Policy Review 2011
• After the strong
recession 2009
EU economy
rebounded;
growth rate of
2010 was 1,8%
• EU external
merchandise trade
(excl. Intra-EU) grew
by 23% in 2010,
following the previous
decline of 20% in 2009
• Top 4 merch. export
countries of EU: US,
China, Switzerland,
Russia; on import
side China is No. 1
(deficit € 108 bill.)
• EU stood for 26%
of global trade in
commercial
services in 2009:
surplus € 64 bill. 43
44
3. Trade policy – The WTO context
45
6. EU Trade policy - WTO context
Global governance & the role of the EU
Trade Pillar WTO 1 state/
1 vote
EU, member key
actor
Financial
Pillar
Bretton
Woods,
IFIs + BIS
1 dollar/
1 vote
EU indirect role
(MS on the board)
Normative
Pillar
ILO, MEAs,
WHO, FAO,
Codex
Alimentarius
ITU, WIPO...
1 state/
1 vote
EU member,
participant or
observer
46
6. EU Trade policy - WTO contextThe core of the multilateral rule-
based system
Unique forum for trade negotiations, rule setting, resolution
of disagreements
Objectives
– To boost
international
economic growth
– To ensure business
confidence
Functioning
Consensus = each
country on an equal
footing
Core principles
– No country may apply quantitative
restrictions or similar measures
– Non-discrimination - ‘Most Favoured
Nation’ principle
– National Treatment - no country may
discriminate between its own products and
imported products
– Transparency - all rules affecting trade must
be transparent; publication, notification,
discussion, trade policy reviews
47
6. EU Trade policy - WTO context
Membership
– Quasi universal: 149
member countries
– Covers 95% of world
trade
Regulatory framework
– Trade pillar of global
governance
– Rounds and
agreements
Enforcement controlled by
Dispute Settlement Mechanism
– All WTO members can seek
redress
– Dispute Settlement Body (DSB)
rulings are binding
– DSB may authorise retaliation
48
6. EU Trade policy - WTO context
Key Facts on use of the WTO Dispute Settlement System
The United States V
• 84 cases brought in the WTO
• Around 21 against the EU
• 10 of the cases v. the EU won or solved, success rate of 48%.
The European Union V
• 73 cases brought in the WTO
• Around 30 against the US
• 18 of the cases v. the US won or solved, success rate of 60%.
The statistics show a rough parity between EU/US use
of the Dispute Settlement System, but that the EU has
a higher success rate
N.B. Cases settled are considered as "won" by the complainant when a mutually agreed solution is notified or the complainant otherwise acknowledges that it considers the issue solved. Cases that go through litigation are considered as "won" when the complainant prevails in at least one of the claims.
49
4. EU Trade policy – Basic features
50
Objectives and accountability
Being the leading trade region
Strong interest in:
� Open markets
� Clear regulatory frameworks
Responsibility to:
� EU citizens
� Rest of the World
Need to reinforce EU
competitiveness on world
markets
5151
TRADE POLICY AGENDA :
GLOBAL EUROPE – Global Trade Talks (Doha Development Round)
– A new relationship with developing countries
(particularly ACP)
– Bilateral Trade Agreements
• Korea, ASEAN, India, Central America, Andean
Community, Ukraine, Euromed,
• Mercusor, Gulf States, Libya, China
– Strategic partners
• Russia, China, Brazil
– Defending European interests
– Promoting European values
52
The EU’s external trade policy contributes to
Europe’s competitiveness in foreign markets.
Being an open economy, the EU aims at securing
improved market access for its industries,
services and investments, as well as enforcing
the rules of free and fair trade (intellectual
property rights, trade defence rulesV)
(Commission Communication on «Global Europe:
Competing in the World» of 4 Oct. 2006)
53
The three levels of EU Trade policy
Multilateral Bilateral/Regional
Unilateral
3
DIMENSIONS
54
3. EU Trade policy - basic features
Multilateral
Mostly implemented in the framework of the WTO (= the most
effective means of managing trade) aiming at promoting market
access with rules, in the context of effective global governance.
Including the promotion of EU values :
• Environmental concerns
• Food safety
• Cultural diversity
• R and how to promote core labour standards ?
55
6. EU Trade policy - WTO context
The Doha Development Agenda
A round of trade negotiations launched in 2001
– To pursue market opening
– To strengthen rules, improve global governance
– To integrate developing countries in world trade
Development - a key
component of the
WTO round
A development round
– Special and Differential Treatment
– Addressing developing countries’ concerns
– Aid for Trade
– Special measures for LDCs
56
6. EU Trade policy - WTO context
The 3 legs of the DDA
Regulatory framework
Improving existing rules (e.g. anti-dumping,
geographical indications) and creating new rules
(e.g. “trade facilitation”)
Opening markets
– Agricultural goods
– Industrial goods
– Services
EU seeks real new MA
Development
Sustainable development (to respond to concerns of developing countries and civil society)
5757
The Doha Development Round (DDA)
The big questions
• Where are we today?
• Will this make a difference for
development?
• Will this be a good deal?
• And will we get there in the end?
5858
Bilateral relations (FTAs)
Context
• Globally more than 200 FTAs
– (36% of global trade).
• FTAs top up what can be done in WTO.
• ‘extended’ regionalism
The big questions
• Impact on the WTO system?
• Spaghetti bowl effect?
59
3. EU Trade policy - basic features
Bilateral/regional
In addition to the WTO's multilateral negotiations, the EU concludes
bilateral agreements with third countries and regional areas. 121
countries potentially linked to the EU by regional trade agreements,
many negotiated in the 1990s.
EU policy rationale for bilateral agreements
• Trade expansion and
rules-making (WTO+)
• Fostering
development and...
• R promoting regional
development
Key EU bilateral agreements include:
• Economic Partnership Agreements in negotiation with ACP countries (Cotonou)
• Free Trade Agreements with EFTA, EEA, Euromed, Mercosur (in negotiation), Mexico, South Africa...
• Customs Unions with Turkey, Andorra and San Marino
• Partnership and Cooperation Agreements with Russia and Ukraine
60
3. EU Trade policy - basic features
Unilateral
The EU implements unilateral measures as an additional trade policy
instrument in the interests of development and/or political stability in
line with the Union’s key political priorities:
General System of
Preferences (GSP): the classic
instrument for fostering
development is by granting tariff
preferences. Grants products
imported from GSP beneficiary
countries either duty-free
access or a tariff reduction.
“Everything But Arms” initiative
(EBA): a special GSP
arrangement for the least
developed countries. Grants
duty-free access to imports of all
products from LDCs without any
quantitative restrictions (except to
arms and munitions).
Asymmetrical preferences e.g.
for the Balkans and Moldova, with
the aim of ensuring peace,
stability, freedom and economic
prosperity in the region.
61
3. EU Trade policy - basic featuresThe EU is the most open market for poor countries
178 developing countries and territories are beneficiaries of the EU’s GSP.
In 2003, EU imports benefiting from GSP preferences amounted to €50 billion. Bangladesh leading beneficiary country followed by China, Pakistan, Brazil, Malaysia and India.
The 49 Least Developed Countries (EBA -"Everything But Arms") benefit from duty-free and quota–free access for practically all exports of originating products to the EU for an unlimited period of time.
The GSP is implemented following cycles of 10 years, providing stability to traders and economic operators. New guidelines for 2006-2015 prepared.
Key Facts on the General
System of Preferences
(GSP)
62
3. EU Trade Policy – basic features
New GSP system 2006-2015 : simplifies graduationmechanism and reduces the system to 3 schemes
• General scheme: increase of product coverage from 6900 to
7200 (mainly agriculture and fishery sector of interest for
developing countries).
• Special scheme for Least Developed Countries: Everything But
Arms.
• New special GSP+ for vulnerable countries = duty free on 7200
products if the country meets criteria :
• Ratification and implementation of 27 key international
conventions
• Few benefits under the GSP
• A poorly diversified economy.
63
3. EU Trade policy - basic features
The reduced rate
provisions of the
GSP
Special incentive arrangementshonour beneficiary countries’ efforts to comply with certain internationally agreed environmental and labour standards. Meant to foster sustainable development by providing additional trade preferences. Provide a reduction of a further 5 %.
The GSP provides tariff reductions without quantitative limitations. Reductions are modulated according to the sensitivity of products. While non-sensitive products enter the EU market duty free, the rate for sensitive products, with some exceptions, is reduced by a flat rate of 3.5 %.
6464
Who are we negotiating with?
Economic Partnership (EPAs) with ACP
65
5. Trade defence instruments
6666
EU Trade policy – standing up for
European Interests
The trade defence instruments
“Defensive” instruments to ensure fair trade and defend the interests of European companiesO
... have been designed in line with specific WTO agreements recognising the right of members to counter unfair practices:
SafeguardsAnti-dumping Anti-subsidy
– Cutting edge of globalisation debate
– Green Paper Review exercise 2006-2007
67
4. EU Trade policy - How it works
The trade defence instruments
“Defensive” instruments to ensure fair trade and defend the interests of European companiesO
... have been designed in line with specific WTO agreements recognising the right of members to counter unfair practices:
Safeguards: A WTO member may
restrict imports of a product temporarily
if its domestic industry is seriously
injured or threatened with injury
caused by a surge in imports.
Anti-dumping measures created to
counter dumping practices, the most
frequently encountered trade-distorting
practices. Dumping occurs when
manufacturers from a non-EU country
sell goods in the EU below the sales
price in their domestic market, or below
the cost of production.
Anti-subsidy measures designed to
combat subsidies, which are made
available to manufacturers by public
authorities and which can also distort
trade when they help to reduce
production costs or cut the prices of
exports to the EU unfairly.
68
4. EU Trade policy - How it works
The trade defence instruments
Since 1995, EC AD/AS activity is stable, with yearly fluctuations
• For the past 10 years, the EU was the n°3 global initiator of new AD/AS investigations
• Top of the league is India (over 400 cases) then the US (over 300) and EU (over 200).
In terms of the principal users by AD/AS measures in force, the EU ranks 3rd behind the US and India.
Most EU AD/AS cases initiated over the last 10 years were in the iron & steel, chemicals & allied, textiles & electronic products sectors.
Only 0.45% of total imports of goods into the EU are covered by AD/AS measures.
The biggest target of AD/AS measures is China. The EU is ranked in 2nd place.
Key Facts on Anti-
Dumping (AD) and
Anti-subsidy (AS)
activity(as at 31/12/2005)
69
4. EU Trade policy - How it works
“Offensive” instruments to open markets and eliminate obstacles to trade...
O across the multilateral, bilateral and unilateral fronts:
The Trade Barriers Regulation (TBR) gives EU industry the opportunity to
lodge a complaint with the Commission when encountering trade barriers
that restrict their access to third country markets. The TBR is then used to
investigate whether there is evidence of violation of international trade
rules, resulting in adverse trade effects - this could lead to the initiation of
the WTO dispute settlement mechanism.
Market Access Strategy of which the EU’s Market Access Database
provides: information about market access conditions in non-EU
countries; a systematic way for the Commission to follow up complaints
from business about barriers to trade in non-EU countries; and a means of
ensuring that our trading partners abide by their international
commitments.
The offensive trade policy
instruments
70
4. EU Trade policy - How it works
Monitoring of third country trade defence measures:
• Ensuring third countries do not misuse the trade defence
instruments (anti-dumping, anti-subsidy, safeguard) against
EU exporters.
• Given the overall escalating use of these instruments
important that there is full compliance with international rules.
• The Commission provides information and advice to all
interested parties, identifies individual and systemic
infringements of WTO rules by third countries, addresses
these issues in the appropriate bilateral or multilateral forum.
The offensive trade policy
instruments
71
4. EU Trade policy - How it works
The trade policy instruments
Towards a new generation of FTAs: “WTO++”
• Opening markets for trade in goods
• + investments, services, rule-
making, standards, non tariff
measures
>> EU-Chile an example
72
5. EU trade policy – how it works
73
Historic development
From tariffs and
quotas...
V to “behind the
border” issues
The new shape of trade policy
Developed from trade liberalisation in goodsR
R to services and rules on investment, intellectual
property, public procurement
Evolution reflected in the Treaty of Nice (2001)
Extended the EU trade competence to services and
commercial aspects of intellectual property rights with qualified
majority voting
74
The EC Treaty establishes the overall aims and
objectives of EU trade policy:
How it works NOW
Article 2 sets the general aims – including to promote
the development of economic activities, high employment
and competitiveness, and environmental protection.
Articles 131 and 133 explain the way the common commercial
policy shall operate in principle – “to contribute, in the common
interest, to the harmonious development of world trade, the
progressive abolition of restrictions on international trade and the
lowering of customs barriers”, instruments and scope.” Article 133
sets out the scope, instruments and decision-making procedures.
Article 300 establishes the current inter-institutional procedure for
concluding international agreements – principally by the Council, not
legally obliged to consult the European Parliament on trade agreements,
but consultations do, however, take place.
75
4
Article 133 of the EC Treaty provides in more detail for
the common commercial policy
Rests on:
• Shared, uniform concept
of policy
• A decision-making
process based on a
mixture of ‘exclusive and
shared competences’
Comprises:
• Trade in goods, services
and trade-related aspects
of intellectual property
rights
• Special provisions for
specific fields (e.g.
audiovisual, cultural, educational,
social and health services)
How it works NOW
76
The negotiating process
The Commission is the negotiator
• On behalf of the 25 Member States
The Council is the decision maker
• Mandate = determined by the Council on the basis of a
Commission proposal
• The Commission negotiates on the basis of this mandate
• The Council approves the result of the negotiation (generally by
qualified majority)
The European Parliament
• Is informed by the Commission of trade policy developments
• Gives “assent” on major treaty ratifications (covering more than
trade)
How it works NOW
77
How it could change …
PROPOSALS IN
THE EU
CONSTITUTION
To extend the
scope of trade
policy to all
foreign direct
investment
Further extension of qualified majority voting for trade agreements
To increase parliamentary control: co-decision for all autonomous acts of legislative nature, assent for major trade agreements
EP to be
informed of
negotiations like
Member States
78
A comparison between the EU and the US
• Exclusive EU
competence
• Council acts on the
basis of QMV
• Member States usually
stick to common line
• Congressional
constitutional
responsibility, “leased
back” to Administration
• Congressional ‘fast
track’ procedure time-
limited, politicised
• Community
mandate from
Council
• European
Parliament only plays
a limited role (but due
to change)
Congress retains
final say thanks to
constitutional
responsibility
Legal texts quite
complicated following
the adoption of the
Treaty of Nice
Political debate over
Trade Promotion
Authority (adopted in
2001) heightened
public awareness,
allowed debate on
trade policy priorities
Efficiency Transparency Legitimacy
EU
US
79
7. EU Trade Policy – Outlook
80
• Multilateral vs. Plurilateral vs. The
bilateral track
• How to deal with China?
• Transatlantic economic area?
• The use of trade defence instruments?
• Are EPA‘s working?
• Decision-making in case of Lisbon
treaty
• Regulatory co-operation
