As the world’s largest trading bloc, the EU is scrambling to maintain its position on international markets and increase its competitiveness. The rise of the BRICS, the re-direction of US attention towards the Pacific and the protracted Eurozone crisis have substantially weakened the European Union’s international profile. By 2015, shifts in trade flows will mean that 90% of global trade will be generated outside of the EU, mainly in Asia.
Against this background, the European University Institute (EUI) and the Centre for the Law of EU External Relations (CLEER) recently organized an expert meeting which brought together members of the EU institutions (European Parliament’s INTA Committee; Cabinet of Trade Commissioner De Gucht), think tanks and academia to explore the challenges which the EU is facing in the areas of trade liberalisation and standardisation.
One general lesson drawn from the discussions was that the European Union’s ‘low politics’ of trade and investment negotiations and its export of standards continue to play an important role in shaping the role of the EU at the international stage. Whereas the EU – a member of the World Trade Organization and an actor that (allegedly) speaks with one voice in all of its trade and investment relations – professes multilateralism, it has in reality consistently pursued a policy of entering into preferential trade agreements at bilateral and interregional levels. In fact, this trend follows general international trade practice. Global economic instability and a stagnant multilateral system (cf. the deadlocked Doha Round) have strengthened the pursuit for bilateral trade relations as governments realise that the future growth and stability of their economies rests on the unimpeded trade in goods and services. For the same reason, both eurosceptics and eurofederalists can agree to the EU pursuing an open market agenda through enhanced bilaterism. Globalization’s profound impact on the EU’s internal market has resulted in a growing ‘spaghetti bowl’ of trade arrangements and a continued drive towards the harmonisation of laws, so as to secure EU market access in third countries and create regulatory convergence and interoperability. To boost global competitiveness of European industries, regulatory convergence has been revived and revamped as a policy objective in EU-led trade talks by aiming for increased standardisation and mutual recognition.
In an effort to capitalize on the opportunities that ‘the rise of the rest’ has to offer, the EU negotiated the first of a new generation of Free Trade Agreements (FTAs) with the Republic of Korea. South Korea is the EU’s eight largest trade partner and the EU has become South Korea’s second largest export destination. The implementation of the FTA is expected to double trade between the two partners in the next 20 years. The agreement has been hailed by policy-makers as the most comprehensive of trade deals ever concluded by the EU. Besides progressively eliminating duties on nearly all trade in goods, the agreement addresses non-tariff barriers to trade, many of which were identified as particular obstacles. It also includes provisions on issues ranging from services (including financial services and telecoms) and investment protection, competition (both anti-trust and state aids), public procurement, intellectual property rights (including patents and geographical indications), transparency in regulation, to sustainable development. To ensure enforceability of commitments, the FTA includes strong clauses setting up mediation and dispute settlement mechanisms. Over time, this will lead to a new branch of FTA jurisprudence. The agreement also established various institutional bodies to monitor the implementation, such as the EU-Korea FTA Trade Committee, a Customs Committee and several working groups. As such, the FTA does indeed represent an ambitious approach to trade.
To be sure, the progressive lowering of tariffs will only be felt after a longer time period, and as most of the regulatory changes have yet to be implemented, the trade benefits of the agreement can only be assessed with certainty after five or ten years. Yet, evidence gathered from its first in operation shows that the FTA is indeed proving its worth.
The conclusion of this new generation FTA is a key part of the EU’s growth strategy and will be replicated for other trade partners: negotiations are on-going with Canada, India, Singapore and Mercosur. Also, the EU has initialled a so-called ‘Deep and Comprehensive Trade Agreement’ with Ukraine and it foresees to conclude similar agreements with other neighbouring countries in the east (Armenia, Georgia and Moldova) and to the south of the Mediterranean (Egypt, Jordan, Morocco and Tunisia). In parallel, an Economic Partnership Agreement has been concluded with Cariforum, the first of a kind aimed at going beyond the classic FTAs with (regional groupings of) African, Caribbean and Pacific countries by also focussing on sustainable growth and poverty reduction. Less forthcoming is the strengthening of trade relations with the EU’s two biggest trading partners: the US and China. With the EU being the top export destination for Chinese goods, China Europe’s second, and the EU’s desire to reduce Chinese trade irritants like a lack of enforcement of intellectual property rights, inconsistencies in regulatory practices and the maintenance of non-tariff barriers, there is a mutual interest in deepening the EU-China trade relationship. Yet, high-level discussions aimed at concluding a comprehensive Partnership and Cooperation Agreement have gone on for more than five years and still expose a hiatus in positions on many important chapters.
Further trade liberalisation with the US has also been difficult for years. Whereas mutual agreements based on transatlantic regulatory convergence in hitherto unregulated markets (e.g. nanotechnology, electronic vehicles, e-health) are setting global thresholds in standardisation, diverging regulatory philosophies, different risk assessment systems and differences in the implementation of international standards, to name just a few, are holding back a boost in trade between the partners. Yet, the most exciting trade prospects are still to be found across the Atlantic. After all, no other trade relationship in the world is as integrated as that between the EU and the US.
In sum, the deadlock in the Doha Round is providing the EU with cover to enhance its bilateral and interregional deals with trade partners. The EU has made use of this by actively pursuing a more tailor-made approach in its trade policy so as to prevent a further slump in European growth. The first signs of this trade policy show that the EU is getting returns on its investment. Perhaps it is time for the EU to also stop paying lip-service to reviving the Doha Round and find alternative ways to live up to its constitutional obligation to promote multilateral solutions to global challenges in trade and development.
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