EU AND THE WORLD TRADING SYSTEM
Razeen Sally
European Centre for International Political Economy/
London School of Economics
www.ecipe.org
EU AND THE WORLD TRADING SYSTEM
• How EU trade policy works
-- Highly centralised: at heart of EU
economic and foreign policy
-- Customs union; old issues; new issues
-- Commission; Council of Ministers;
member-states; Article 133 Committee
EU AND THE WORLD TRADING SYSTEM
• EU in global trade and investment
• EU and WTO
• EU and FTAs
• EU internal market and external trade
• The new members in EU trade policy
EU AND THE WORLD TRADING SYSTEM
• EU in global trade and investment
-- Market size; shares of trade and FDI
-- EU trade and FDI relations with key partners
-- Comparative trade barriers
-- Pockets of EU protection: agriculture; industrial goods;
services; trade remedies; standards
Table 11: Economic and Trade Indicators 2005: Main Countries
Countries/ economy
GDP
(US $
bn)
GDP
Growt
h
(%)
Populatio
n (mn)
Per
Capita
GDP
(US$)
PPP
GDP
(US$
bn)
Merchandi
se Exports
(US$ bn)
Service
Exports
(US$
bn)
Total
Merch
Trade
(US$ bn)
Service
Trade
(US$ bn)
Trade/
GDP
(%)
FDI
Inflow
(US$
bn)
FDI/
GDP
(%)
World
44384,8
3,6
6400,0
6835,1
61027,5
10431,0
2415,0
21214,0
4760,0
47,8
916,3
2,1
EU**
12815,6
***1.8
459,3
27902,5
12097,3
1333,7
494,1
2806,4
919,0
21,9
421,9
3,3
US
12445,1
3,2
296,5
41973,4
12409,5
906,0
354,0
2641,0
635,2
21,2
99,4
0,8
2228,9
9,9
1304,5
1708,6
8572,7
761,9
73,9
1422,0
157,1
63,8
72,4
3,2
Indonesia
287,2
5,6
220,6
1302,2
847,4
86,2
5,1
155,7
22,3
54,2
5,3
1,8
Malaysia
130,1
5,3
25,3
5134,4
274,8
140,9
19,0
255,6
40,5
196,5
4,0
3,1
Philippines
98,3
5,1
83,1
1182,9
408,6
41,3
4,5
88,7
10,3
99,2
1,1
1,2
Singapore
116,8
6,4
4,4
26836,1
130,2
229,6
45,1
429,7
89,1
367,9
20,1
17,2
Thailand
176,6
4,5
64,2
2749,4
549,3
110,1
20,5
228,3
48,0
129,3
3,7
2,1
Vietnam
52,4
8,4
83,0
631,3
254,0
31,6
3,9
68,1
8,6
130,0
2,0
3,8
ASEAN-6
861,4
5,9
480,6
1792,3
2464,3
639,7
98,1
1226,1
218,8
142,3
36,2
4,2
India
785,5
8,5
1094,6
717,6
3815,5
95,1
56,1
229,9
108,3
29,3
6,6
0,8
Japan
4505,9
2,7
128,0
35214,5
3943,7
595,0
107,9
1109,8
240,5
24,6
2,8
>0.1
Korea
787,6
4,0
48,3
16309,0
1056,1
284,4
43,9
545,7
101,7
69,3
7,2
0,9
Taipei
346,4
4,1
22,7
15291,8
-
197,8
25,6
380,3
57,1
109,8
1.6*
0,5
HongKong
177,7
7,3
6,9
25593,6
214,5
292,1
62,2
592,3
94,6
333,3
35,9
20,2
34954,1
-
34954,1
34954,1
34954,1
34954,1
34954,1
34954,1
34954,1
-
34954,1
-
China
TOTAL
Source: World Bank, WTO Statistical Database, UNCTAD WIR 2006 and ADB
* Whole of Taiwan
** Numbers for GDP and PPP GDP only given for 2004 at WTO
*** Data from Eurostat as World Bank does not show data for EU 25. For comparison: Eurostat gives 3.1 GDP Growth Rate in US for 2005
(http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,39140985&_dad=portal&_schema=PORTAL&screen=detailref&language=en&product=STRIND_ECOBAC&root=STRIND_ECOBAC/
ecobac/eb012)
Figure 9: Share of Exports of World Trade in Goods & Services (excl. Intra-EU(25) trade, 2005
Share of Exports of Word Trade in Goods and Services (exc. Intra-EU (25) trade,
2005
European Union
19%
United States
13%
Rest of the World
39%
Japan
7%
ASEAN*
8%
China
9%
India
2%
Korea, Republic of
3%
Figure 10: Share of Imports of World Trade in Goods & Services (excl. Intra-EU(25) trade, 2005
Share of Imports of Word Trade in Goods and Services (exc. Intra-EU (25) trade,
2005
European Union
19%
Rest of the World
34%
United States
20%
ASEAN*
7%
Japan
7%
India
2%
Korea, Republic of
3%
China
8%
Figure 5: Share of Exports of World Merchandise Trade (excl. Intra-EU(25) trade, 2005
Share of Exports of Word Merchandise Trade (exc. Intra-EU (25) trade, 2005
European Union
17%
United States
12%
Rest of the World
40%
Japan
8%
China
10%
ASEAN*
8%
India
1%
Korea, Republic of
4%
Figure 6: Share of Imports of World Merchandise Trade (excl. Intra-EU(25) trade, 2005
Share of Imports of Word Merchandise Trade (exc. Intra-EU (25) trade, 2005
European Union
18%
Rest of the World
35%
United States
21%
ASEAN*
7%
Japan
6%
India
2%
Korea, Republic of
3%
China
8%
Figure 7: Share of Exports of World Services Trade (excl. Intra-EU(25) trade, 2005
Share of Exports of Word Trade in Commercial Services (exc. Intra-EU (25) trade,
2005
European Union
30%
Rest of the World
35%
United States
16%
ASEAN*
6%
Japan
5%
India
3%
Korea, Republic of
2%
China
3%
Figure 8: Share of Imports of World Services Trade (excl. Intra-EU(25) trade, 2005
Share of Imports of Word Trade in Commercial Services (exc. Intra-EU (25) trade,
2005
European Union
27%
Rest of the World
37%
United States
13%
Japan
6%
ASEAN*
8%
India
2%
Korea, Republic of
3%
China
4%
Figure 1: OFDI Stock Accumulated 1980-2005 (percentage of Global OFDI Stock)
OFDI Stock Accumulated 1980-2005 (percentage of Global OFDI Stock)
Rest of the World
23%
ASEAN*
1%
European Union
48%
India
0%
Korea, Republic of
0%
China
0%
Japan
6%
United States
22%
Figure 2: IFDI Stock Accumulated 1980-2005 (percentage of Global IFDI Stock)
IFDI Stock Accumulated 1980-2005 (percentage of Global IFDI Stock)
European Union
40%
Rest of the World
31%
ASEAN*
4%
United States
13%
Japan
1%
India
1%
Korea, Republic of
1%
China
9%
Figure 3: OFDI Flows Accumulated 2003-2005 (percentage of Global OFDI Flows)
OFDI Flows Accumulated 03-05 (percentage of Global OFDI Flows)
Rest of the World
22%
ASEAN*
1%
India
0%
European Union
54%
Korea, Republic of
1%
China
1%
Japan
5%
United States
16%
Figure 4: IFDI Flows Accumulated 2003-2005 (percentage of Global IFDI Flows)
IFDI Flows Accumulated 03-05 (percentage of Global IFDI Flows)
European Union
41%
Rest of the World
31%
ASEAN*
4%
India
0%
Korea, Republic of
1%
Japan
1%
China
3%
United States
19%
Table 7: EU 25 Bilateral Export and Imports Goods Trade with Other
Main Partners in the World (2005)
In million Euros and Shares
2005
Counry/ economy
Imports
Share of
total EU
imports
Exports
Share of
total EU
imports
Total =
Imports &
Exports
162.545
13,75
251.699
23,69
414.244
Japan
73.417
6,21
43.631
4,11
117.048
China
158.481
13,40
51.646
4,86
210.127
Korea, Republic of
33.879
2,87
20.156
1,90
54.035
India
18.915
1,60
21.092
1,98
40.007
ASEAN
71.137
6,02
45.012
4,24
116.149
US
Source: DG Trade Statistics, European Commission
(http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) / Eurostat
Table 8: EU 25 Bilateral Import and Exports Services Trade with Other
Main Partners in the World (2005)
In billion Euros
2005
Counry/ economy
Imports
Exports
Total = Imports &
Exports
114.060
119.830
233.890
Japan
11.790
19.907
31.697
China
8.778
10.952
19.729
Korea, Republic of
3.402
5.698
9.100
India
4.643
5.085
9.728
13.475
14.687
28.162
US
ASEAN
Source: DG Trade Statistics, European Commission
(http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) / Eurostat
Table 9: EU 25 Bilateral Total Trade for Goods and Services with Other
Main Partners in the World (2003-2005)
In billion Euros
2003
2004
2005
Total = Imports &
Exports
Total = Imports &
Exports
Total = Imports &
Exports
Counry/ economy
US
593.305
616.074
648.134
Japan
139.746
146.749
148.745
China
158.195
191.722
229.857
Korea, Republic of
48.860
56.924
63.135
India
34.213
40.765
49.734
129.421
138.327
144.310
ASEAN
Source: DG Trade Statistics, European Commission (http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) /
Eurostat
Figure 16: EU 25 OFDI and IFDI Stocks with Partners (2005)
EU25 OFDI and IFDI Stocks w ith Partners (2005)
900.000
800.000
700.000
Value
600.000
500.000
400.000
300.000
200.000
100.000
US
Japan
IFDI
China
Korea, Republic of
OFDI
India
ASEAN
Figure 13: EU 25 OFDI and IFDI Flows with Partners (2005)
EU25 OFDI and IFDI Flow s w ith Partners (2005)
35.000
30.000
25.000
Value
20.000
15.000
10.000
5.000
Balance
OFDI
IFDI
-5.000
US
Japan
China
Korea, Republic of
India
ASEAN
Table 13: Bound and Applied MFN Tariffs
Country/ economy
Binding
Coverage
(All Gods)
Bound
Tariff Rate
(All Goods)
Applied
Tariff Rate
(Manufactur
es)
Applied
Tariff Rate
(Agriculture
)
Overall
Applied
Tariff
(All Goods)
EU
100,0
4,1
3,6
9,5
4,5
US
100,0
3,6
3,7
8,2
4,3
Japan
99,6
5,0
3,3
10,4
4,7
Korea
94,4
16,1
6,6
42,5
11,9
China
100,0
10,0
9,5
15,0
10,3
Hong Kong
45,7
0,0
0,0
0,0
0,0
Malaysia
83,7
14,5
8,1
2,1
7,3
Thailand
74,7
25,7
14,6
16,2
14,7
Indonesia
96,6
37,1
6,1
8,0
6,4
Philippines
66,8
25,6
6,9
11,8
7,5
-
-
12,9
18,1
13,7
100,0
6,1
5,5
16,3
6,9
Singapore
69,2
6,9
0,0
0,0
0,0
India
73,8
49,8
25,3
30,0
28,3
Pakistan
44,3
52,4
16,1
13,9
15,9
Bangladesh
15,8
163,8
19,2
21,7
19,5
Sri Lanka
37,8
29,8
9,6
15,4
10,2
Vietnam
Taiwan
Source: World Bank: http://siteresources.worldbank.org/INTRES/Resources/4692321107449512766/tar2005a.xls
The figures are simple unweighted averages of the tariff rates in percent from the year of 2003 and
2004.
Applied Rates for EU, US and Asia
Country/ economy
1995
2005
EU
4.3
2.5
US
4.3
3.0
Japan
3.1
2.7
Korea
8.3
8.6
Taiwan
11.2
5.3
Hong Kong
0.0
0.0
Singapore
0.4
0.0
Malaysia
*8.4
7.5
Indonesia
14.0
6.5
Philippines
19.8
5.4
Thailand
21.0
9.9
Vietnam
**13
13.1
China
22.4
9.0
India
41.0
16.0
Source: World Bank
http://siteresources.worldbank.org/INTRES/Resources/tar2005.xls
* Malaysia 1996 ** Vietnam 1997
Note: All tariffs rates are based on unweighted averages for all goods in
ad valorem rates, or applied rates, or MFN rates whichever data is
available in a longer period.
EU AND THE WORLD TRADING SYSTEM
• The WTO
-- Structural shifts from GATT to WTO
-- Doha round: evolution; state of play; prospects
-- What future for the WTO?
EU AND THE WORLD TRADING SYSTEM
• EU and the WTO
-- Challenges of co-leadership in a multipolar system
-- EU negotiating positions: too defensive on agriculture;
too offensive on other issues
-- EU needs to have more pragmatic positions; be more
effective in coalition building
-- But constraints of internal EU politics
EU AND THE WORLD TRADING SYSTEM
• FTAs
-- Huge proliferation of FTAs
-- Building blocs or stumbling blocs?
-- Strong FTAs the exception; most are “trade light”
-- Consequences: rampant discrimination; the spaghetti
bowl
EU AND THE WORLD TRADING SYSTEM
•
The new EU FTA policy
-- Global Europe: economic/commercial rationale; WTO plus; but also non-trade motives;
differences with EPAs/MENA
-- Benchmarks for (relatively) strong, clean FTAs
-- How serious is the economic/commercial logic?
-- Exporting EU regulation and non-trade motives: labour/environmental standards;
“sustainable development”; climate change etc.
-- Comparisons with US FTAs on WTO plus issues
-- Arguments from the sceptics: Why no FTAs with Japan and China? Narrow
mercantilism; trade diversion; spaghetti/noodle bowls
-- Very difficult to do serious FTAs with Asian and other partners
Table 14: European Union Free Trade and Association Agreements
Trading partner
Type of agreement Status
Status
Effective application of EU acquis
communautaire
In force since 1996
Sector Free Trade Agreements Various dates
Various dates
Turkey
Customs Union
31-12-1995
Croatia
Stabilisation and Association Agreement (SAA)
Entered into force 01/01/05
Macedonia
SAA
Entered into force 01/05/05
Bosnia and Herzegovina
SAA
Negotiations ongoing
Albania
SAA
Enters into force in early 2007
Montenegro
SAA
Negotiations ongoing
Serbia
SAA
Negotiations on hold
Russia
Enhanced (cooperation) Agreement
Negotiations ongoingCouncil
Negotiating Mandate of 13/11/06
Ukraine
Enhanced (co-operation) Agreement
Council still to agree to open
negotiations
Moldova
Partnership and Cooperation Agreement
jul-98
Algeria
Euro-Med Agreement
1-9-2005
Egypt
Euro-Med Agreement
31-12-2003
Israel
Euro-Med Agreement
1-6-2000
Jordan
Euro-Med Agreement
1-5-2002
Lebanon
Interim Euro-Med Agreement
1-3-2002
Morocco
Euro-Med Agreement
1-3-2000
Interim Euro-Med Agreement
1-7-1997
Europe
EEA
Switzerland
North Africa and Middle
East
Palestinian Authority
Syria
Euro-Med Agreement
Negotiations concluded in 2004
but not signed
Tunisia
Euro-Med Agreement
01/03/1998
Gulf Cooperation Council
Free Trade Agreement
Negotiations ongoing
Iran
Cooperation Agreement
Negotiations ongoing since 2002
Iraq
Cooperation Agreement
Negotiations ongoing since
November 2006
Africa
ACP regions
Economic Partnership Agreements
Second phase of negotiations
began in October 2003 scheduled
for completion in 2008
South Africa
Trade Development and Co-operation Agreement
1-1-2000
Economic Partnership Agreement
1-2-2000
Chile
Association Agreement
1-2-2003
Mercosur
Association Agreement
Negotiations ongoing since 1999
CAN (Andean Community)
Free Trade Agreement
Negotiations complicated by
Venezuela’s position in CAN
CAFTA (Central America)
Free Trade Agreement
EU preparing negotiating mandate
Trade and Investment Enhancement Agreement
Proposal under discussion in the
Council
Free Trade Agreement to enhance existing
cooperation
Proposed
South Korea
Free Trade Agreement
Proposed
India
Free Trade Agreement
Proposed
India
Free Trade Agreement
Proposed
The Americas
Mexico
Canada
Asian
ASEAN
Source: Woolcock, S. (2007) European Union Policy Towards Free Trade Agreements, ECIPE Working Paper No. 3/ 2007,
pp. 12
Table 10a: The Bilaterals Targeted by the EC
Market Size
[a]
at
Current
USD
Av. Industrial Tariff
[b]
at
PPP
USD
Applied
Regulatory Ranking
[c]
Bound
Ease of
Doing
Business
Trading
Across
Borders
Dealing
with
Licences
Registerin
g Property
Protecting
Investors
ASEAN
1,9
4,5
-
-
-
-
-
-
-
Indonesia
0,6
1,6
35
8,3
135
60
131
120
60
Malasysia
0,3
0,5
11,2
8,6
25
46
137
66
4
Singapore
0,3
0,2
4,1
0
1
4
8
12
2
Thailand
0,4
0,9
20,2
13,4
18
103
3
18
33
Korea
1,6
1,6
10,2
6,7
23
28
28
67
60
Mercosur
1,9
3,6
-
-
-
-
-
-
-
Brazil
1,5
2,6
29,4
15,1
121
53
139
124
60
Argentina
0,4
0,8
-
-
101
71
125
74
99
India
1,6
5,8
37
~12.0
134
139
155
110
33
Russia
1,4
2,6
-
-
96
143
163
44
60
Gulf CC
1,2
1,0
-
-
-
-
-
-
-
UAE
0,3
0,2
-
~5.1
77
10
79
8
60
Soudi Arabia
0,6
0,6
-
-
38
33
44
4
99
China
4,7
14,6
9,2
9,1
93
38
153
21
83
14,3
33,6
-
-
-
-
-
-
-
All Countries
Source: P. Messerlin (2006) EC Trade Policy: At the Cross Roads, November 2006, ECIPE Launch Conference, Brussels and Groupe
d'Economie Mondiale, Paris
[a] GDP (in USD, 2004) as share of world
GDP
[b] Australian Productivity Commission
[c] Doing Business 2007
Table 10b: The Bilaterals Ignored and Done
Market Size
[a]
at
Current
USD
Av. Industrial Tariff
[b]
at
PPP
USD
Applied
Regulatory Ranking
[c]
Bound
Ease of
Doing
Business
Trading
Across
Borders
Dealing
with
Licences
Registerin
g Property
Protecting
Investors
Australia
1,5
1,1
11,0
3,5
8
23
23
27
46
Canada
2,4
1,8
5,3
3,3
4
8
32
22
5
Hong Kong
0,7
0,4
-
0,0
5
1
64
60
3
Japan
11,1
6,6
2,3
1,6
11
19
2
39
12
Taiwan
0,8
1,0
4,7
4,5
47
42
148
24
60
USA
28,4
20,3
3,4
2,6
3
11
22
10
5
All Countries
45,0
31,1
-
-
-
-
-
-
-
Chile
0,2
0,3
~25.0
~6.0
28
44
40
30
19
Mexico
1,7
1,8
34,8
17,2
43
86
30
79
33
South Africa
0,5
0,9
11,0
8,3
29
67
45
69
9
Turkey
0,7
0,6
-
11,8
91
79
148
54
60
All Countries
3,1
3,6
-
-
-
-
-
-
-
Source: P. Messerlin (2006) EC Trade Policy: At the Cross Roads, November 2006, ECIPE Launch Conference, Brussels and Groupe
d'Economie Mondiale, Paris
[a] GDP (in USD, 2004) as share of world
GDP
[b] Australian Productivity Commission
[c] Doing Business 2007
The map shows FTAs signed or under negotiation in January 2006.
East Asia is defined here as the 10 ASEANs, China, Japan and Korea. Source Richard Baldwin 2006
Noodle bowl syndrome in Africa
Source: World Bank
Noodle bowl syndrome in America
Source: Inter-American Development Bank.
EU AND THE WORLD TRADING SYSTEM
• Unilateral liberalisation
-- Diminishing returns to trade negotiations; importance of
unilateral measures; Asia and China
-- EU trade policy as foreign policy and internal-market
policy; link between internal and external liberalisation
-- Internal-market reforms key; trade-policy reinforcement
EU AND THE WORLD TRADING SYSTEM
• New members: trade-policy reforms pre-accession
-- Post-socialist transition: radical reformers (new EU members);
gradual reformers (China/Vietnam); erratic reformers (CIS)
-- New EU members: general liberalising trend in ’90s, but variation
among them
-- Convergence of EU-10/12 with EU-15 trade policy, esp. from late
1990s
-- Net liberalisation in trade in industrial goods and services, but not
agriculture; the Estonian exception
-- Major reorientation of trade; FDI effects; trade creation/diversion
EU AND THE WORLD TRADING SYSTEM
• New members in EU trade policy: state of play and
prospects
-- Expectations: somewhere between more liberal orientation and no
change
-- Reality: virtually no change so far; EU 10/12 passive, reactive; mixed
positions; danger of “Our Market is Big Enough”, “restaurant bill”
syndromes
-- EU-Russia; Russian accession to WTO
-- Variable internal implementation of common commercial policy
EU AND THE WORLD TRADING SYSTEM
• Conclusion
-- EU: challenge of constructive engagement while
containing domestic protectionism
-- Multi-track trade policy and internal-market reforms
-- What role for the new members?