IR 313 EU AS A GLOBAL
ACTOR
EU TRADE POLICY
EU POSITION IN WORLD TRADE
• The EU is in prime position when it comes to global trade.
• The openness of its trade regime has meant that the EU is the biggest player
on the global trading scene and remains a good region to do business with.
• The EU has achieved a strong position by acting together with one voice on
the global stage, rather than with 28 separate trade strategies.
• Europe is the world's largest exporter of manufactured goods and services,
and is itself the biggest export market for around 80 countries.
• Together, the European Union's 28 members account for 16% of world
imports and exports.
TRADE IN GOODS AND COMMERCIAL
SERVICES 2013
Trade in goods and commercial services 2013, € billions
Country or region
Imports
Exports
EU
2188
2415
United States
2079
1688
China
1716
1817
Japan
750
648
South Korea
468
506
EU POSITION IN GLOBAL MARKET
• The EU is the largest economy in the world.
• Although growth is projected to be slow, the EU remains the largest
economy in the world with a GDP per head of €25 000 for its 500 million
consumers.
• The EU is also the world's largest trading block. The EU is the world’s largest
trader of manufactured goods and services.
• The EU ranks first in both inbound and outbound international investments
GOODS AND SERVICES
• Goods and services are increasingly linked together. Having access to
services is a prerequisite for economic performance of many manufactured
products.
• For example, producers and exporters of textiles, cars or computers cannot
be competitive without access to efficient banking, insurance,
accountancy, telecom or transport system. And the purchase of many
products nowadays often comes with a service component.
• The rise of cloud computing means that technical infrastructure, platforms
and software are increasingly provided as services on a global basis. What
used to be hardware installed at the premises of a company is becoming a
service provided cross-border, demonstrating how services can substitute
goods in certain cases.
EU TRADE POLICY
• Trade policy is an exclusive power of the EU – so only the EU, and not individual
member states, can legislate on trade matters and conclude international trade
agreements.
• The EU manages trade and investment relations with non-EU countries through the
EU's trade and investment policy.
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The scope of EU's exclusive powers covers not just trade in goods, but also:
services
commercial aspects of intellectual property
foreign direct investment
HOW EU TRADE POLICY IS MADE
• The European Parliament decides jointly with the Council on the framework
of EU trade policy
• While the Commission maintains the right of initiative, for its proposals to be
formally adopted, agreement has to be reached between the colegislators.
• International agreements are adopted by the Council, after the Parliament
has given its consent.
HOW TRADE AGREEMENTS ARE
NEGOTIATED
• The Commission negotiates with the trading partner on behalf of the EU. It
does this, working closely with the Member States in the Council and keeping
the European Parliament fully informed.
• The Commission must request an authorisation to negotiate a trade
agreement with a trading partner from the Council, which sets out the
general objectives to be achieved. While the negotiations are going on the
Commission reports regularly to Council and the European Parliament.
HOW TRADE AGREEMENTS
• The trade agreement enters into force once it is fully ratified but parts of the
agreement can be provisionally applied if the Member States agree to do
so.
• Once the Commission has completed the negotiations, it presents the deal
to the Council and the European Parliament. They are the ones to formally
agree the outcome and prepare the way for signature and ratification of
the deal with the trading partner.
EU AND WTO
• The WTO is a member-driven organization composed of governments and
customs territories (such as the EU). It sets the framework for trade between
its members with decisions taken on a consensus basis. Its core activities are:
Forum for multilateral trade negotiation
Resolving trade disputes between states
Setting the legal ground rules for trade in the form of Agreements
Monitoring member trade policy
• Becoming a WTO member requires compliance with the WTO rules in force
and negotiations with the existing members on the acceding country’s
commitments. These negotiations are concluded when there is a decision
taken by the WTO Ministerial Conference.
WHY THE WTO MATTERS TO THE EU
• The EU is committed to multilateralism and has acknowledged the
fundamental importance of WTO in the international trade system.
• Being the world's major global player in the international trade, the EU
supports the work of the WTO on multilateral rule-making, trade liberalisation
and sustainable development.
• Sustainable development - The EU wants its trade policy to support
economic growth, social development, and environmental protection.
Coherence and mutual supportiveness among these three elements are the
basis for achieving sustainable development.
EU TRADE POLICY AND THE WTO
• The EU's active involvement in multilateral trade means more products on
sale at competitive prices, more growth and more jobs …
• By actively promoting a fairer and a more stable international trade system,
the EU strives to:
• Ensure new markets for European companies
• Observe the rules and make sure others also play by the rules
• Create tangible benefits in the everyday life of EU citizens
ACCESSING MARKETS
• Accessing markets outside the EU is crucial for jobs and growth within the EU.
The EU works to keep markets open and to keep trade flowing through a
variety of specific trade policies.
• An open and fair international trading system is one of the foundations of
Europe's competitiveness.
• Addressing barriers to EU exports in other countries accounts for the bulk of
the potential to improve the competitive position of the EU industry.
• Its leading trading partners are less open than the EU; sometimes significantly
so.
ACCESSING MARKETS
• The EU stands to gain from the further opening of markets worldwide.
• When tariff or non-tariff barriers block the flow of primary goods into Europe or
the access of European companies to markets outside Europe, Europe's
competitiveness suffers.
• When anti-competitive practices distort or undermine resulting trade, Europe's
competitiveness suffers.
ACCESSING MARKETS
• Europe's market must be open to supplies of intermediary goods and raw
materials for European producers of value-added products.
• Restricting this flow of goods raises costs for European companies, making
them less competitive: the EU needs to import to export.
• The EU has consistently removed these barriers to its own economy and now
has one of the most open markets in the world.
INVESTMENTS
• Foreign direct investment (FDI) consists in making capital available from one
country for carrying out an economic activity in another country, with a view
to exercising a form of control, such as the ability to influence business
decisions.
• The most common form of FDI is the creation or acquisition of a company,
like a plant to produce cars.
• Other forms of investment are portfolio investment, through which the
investor does not seek control, or any other assets including for example
intellectual property rights.
INVESTMENTS
• FDI plays a crucial role in establishing businesses, creating jobs at home and
abroad, as well as in setting up global supply chains.
• Investment and trade are inter-dependent and complementary. Around half
of world trade takes place between affiliates of multinational enterprises that
exchange intermediate goods and services.
• The investor is the key decision maker over where production of goods and
services takes place and their decisions have a direct impact on trade, jobs
and capital movements.
TRADE DEFENCE
• The EU stands firm against unfair trade practices through anti-dumping and
anti-subsidy measures. This is necessary to uphold the EU’s commitment to
open markets. The EU is one of the main users of trade defence instruments
globally. It ensures that procedures are followed rigorously and takes all the
Union’s interests into account.
• Dumping - A company is dumping if it is exporting a product to the EU at
prices lower than the normal value of the product (the domestic prices of
the product or the cost of production) on its own domestic market.
• Subsidy is a financial contribution from a government or public body which,
in the case of trade, affects the pricing of goods imported into the EU. The
EU may impose duties to neutralise the benefit of such a subsidy on imported
goods when the subsidy is limited to a specific industry or group of industries.
TRADE DEFENCE
• Safeguards are intended for situations in which an EU industry is affected by
an unforeseen, sharp and sudden increase of imports. The objective is to
give the industry a temporary breathing space to make necessary
adjustments – safeguards always come with an obligation to restructure.
THE ROLE OF TRADE DEFENCE
• Open trade is a recognised engine for growth and job-creation but it
requires that fair competition, without distortions, is maintained between
domestic and foreign producers.
• The use of trade defence is based on rules set out by the World Trade
Organisation. The EU is an efficient user of these instruments and applies a
number of conditions additional to the WTO rules to ensure their use is
measured.
• There has been a constant decrease in the percentage of EU imports
affected by EU anti-dumping and anti-subsidy measures. Less than 0.5% of
total EU imports are currently affected by such measures.
EU TRADE DEFENCE POLICY
• The EU applies trade defence instruments in accordance with EU and WTO
law. The European Commission monitors the application of these instruments,
follows up the enforcement of measures and negotiates future rules with
international partners.
• The EU also monitors trade defence investigations in other countries around
the world and guides EU producers affected by such investigations.
• The European Commission is responsible for investigating allegations of
dumping by exporting producers in non-EU countries. It usually opens an
investigation after receiving a complaint from the EU producers concerned,
but it can also do so on its own initiative.
DISPUTE SETTLEMENT
• International trade rules are effective when they are properly applied.
Therefore, dispute settlement mechanisms are set up in most trade
agreements to ensure the agreements can be enforced and that disputes
can be settled.
DISPUTE SETTLEMENT
• Provides a rapid and effective means of settling disagreements on whether
a country has acted in conformity with its international obligations;
• Applies the agreements, and develops the interpretative understanding of
the agreements
• By preventing retaliation before a dispute settlement procedure has been
completed, trade damaging unilateral action is avoided
• The system of dispute settlement at the WTO has worked very well.
• The European Union has included dispute settlement mechanism based on
the WTO dispute settlement mechanism in all of its Free Trade Agreements
since 2000
• Since 2009 the European Union also includes investor-to-state dispute
settlement mechanisms in trade and investment agreements
EU TRADE POLICY AND DISPUTE
SETTLEMENT
Dispute settlement at the World Trade Organisation
• The Understanding on Dispute Settlement at the WTO provides WTO Members with a
set legal framework for resolving disputes that arise in implementing WTO
agreements.
• Ideally disputes are resolved through negotiations. If this is not possible, WTO
Members can request a Panel to settle the dispute. The Panel’s report can also be
appealed before the WTO Appellate Body on questions of law. If a Member does
not comply with the recommendations from dispute settlement, than trade
compensation or sanctions, for example in the form of increases in customs duties,
may follow.
• Many WTO members, including the EU, make active use of this system so that
violations of trade rules are corrected. However, the EU only initiates a dispute
settlement case where other ways of finding a solution have not been productive.
EU TRADE POLICY AND DISPUTE
SETTLEMENT
• Resolving differences between States under international trade agreements
• Often known as bilateral dispute settlement, the EU includes a mechanism in
all its trade agreements concluded after 2000 so that the countries
concerned can resolve their differences on the basis of this mechanism. This
mechanism allows these countries to use a dispute settlement mechanism
specifically designed to deal with disputes arising under the agreement. The
system allows for the rapid settlement of disputes and is modelled on the
WTO dispute settlement system.
EU TRADE POLICY AND DISPUTE
SETTLEMENT
• Investor-to-State dispute settlement within international trade agreements
• The Treaty of Lisbon included foreign direct investment as part of the EU
common commercial policy. As a consequence, the European Commission
now negotiates on behalf of the EU on both the liberalisation and protection
of investment. The EU is gradually negotiating investment provisions in certain
Free Trade Agreements or in self-standing investment agreements.
• These new provisions on investment will set up a legally binding level of
protection for investment. They will be accompanied by investor-to-state
dispute settlement mechanisms, which permit investors to bring claims
alleging that one of the investment protection obligations has been
breached. These provisions create a specific procedure for an investor to
bring a case before an international tribunal.
GROUP PROJECTS
• List the parties involved in the case studies
• Describe the trade disputes in each of the cases. What are the disputes
about?
• What are the mechanisms used to settle the disputes?
• What are the actions taken by the parties involved?