Europe in the World economy

Europe in the world economy The EU is the world’s largest trading block in 2014 for both goods and services. BUT European exports are strong in countries where demand is static or slow growing but they are less well placed than Japan and the US in rapidly growing markets, particularly in Asia.

World’s major exporters of goods, 2004–13 EU still the leader but China rapidly catching up Source: European Commission, DG Trade, September 2014

World’s major exporters of services, 2004–13 Source: European Commission, DG Trade, September 2014 Developed countries more dominant in services trade

EU trading partners (share in extra–EU trade in goods) Source: Eurostat) China gaining share at expense of US

Extra-EU trade by product groups, 2014 Source: Eurostat

EU trade in services by partner, 2014 Source: Eurostat €bn

EU–27 inward and outward FDI flows by region, 2012

Outward stocks of FDI by region, EU-27, end 2012 Source: Eurostat, Foreign Direct Investment Statistics, August 2014

Evolution of EU external economic policy

EU commercial policy Roots in Treaty of Rome – establishes principles of free trade o the progressive abolition of restrictions on international trade and the lowering of customs and other barriers.” (Article 110) o As a result of above, talks of ‘an increase in the competitive strength of member states’

ToR also establishes uniformity of approach o i.e. European Commission takes responsibility for trade policy and negotiates on behalf of members at GATT, then WTO o As international trade agenda expands so does Commission responsibilities but not without a struggle  Airlines  Lisbon Treaty grants Commission full negotiating rights over services and intellectual property – reality recognised in law  Lisbon grants EU exclusive competence over FDI

Evolution of EU external trade and investment strategy Current strategy – roots in Global Europe framework advanced by former Trade Commissioner, Peter Mandelson in Key themes: o ‘rejection of protectionism at home: activism in opening markets abroad’ o Response to deeper integration of world economy o Boost performance in emerging markets

Main elements of Global Europe Revitalised Market Access Strategy – begun 1990s Strong commitment to WTO’s liberalisation agenda New generation of bilaterals in markets with greatest potential – to extend way beyond trade Wide-ranging agreement with US – the TTIP A stronger relationship with China

Main elements of Global Europe Focus on intellectual property Initiatives to open 3rd country procurement markets Review of use of trade defence instruments such as anti-dumping duties Ensure Global Europe and internal EU policies are consistent and reinforce competitiveness and reform agenda

Market Access Strategy (MAS) Good fit with Global Europe Aims to reduce obstacles faced by EU exporters of goods and services to non-EU markets. Free Market Access Database – information on market access conditions in non-members. EU to ensure that its trading partners abide by their international commitments Provides helpful information for trade negotiations.

Trade Barriers Regulation Introduced in 1995 – key component of MAS Gives EU business the opportunity to lodge a complaint with the Commission about trade barriers that restrict their access to 3rd country markets A complaint – by either a company or member state – must demonstrate existence of a barrier, that is contrary to international commitments, and that it has adverse trade effects. The Commission then investigates the complaint

Trade Barriers Regulation (2) Problem identified o Step 1 – Commission opens talks with country concerned o Step 2 – WTO complaint if above fails TBR – helped by strengthened WTO disputes settlement Onus on EU to respect its international obligations

Multilateral activity

WTO WTO has 161 members (April 2015) and establishes rules for international trading system Philosophy of free trade and liberalisation Latest round of multilateral talks (Doha round) underway since 2001 with limited progress EU committed to further progress at WTO but … Like others, frustrated by failure to agree and seeking extended bilateral agreements to achieve its aims – WTO plus

Bilateral activity

Free trade agreements “We’ve made it clear to our partners that the EU is only interested in deep Free Trade Agreements across the full range of sectors – like the agreement we signed with Chile in Not just goods, but services, non-tariff barriers and rules on … investment, competition and public procurement as well.” Peter Mandelson, 2006

New generation of bilaterals EU seeks to improve the terms on which EU companies compete aboard – WTO plus Focus on major emerging markets such as ASEAN, India, South Korea and Russia as well as China. So far only Korean agreement in force – agreement with Singapore but not yet ratified Also a way of fostering development/ regional development

Importance of New FTAS While less than a quarter of EU Trade was covered by FTAs before 2006, concluding on- going negotiations would bring this figure up to half of our trade Similar negotiations with Japan and the USA could lead to FTAs covering two-thirds of EU external Trade Trade, Growth and Jobs. Commission contribution to the February 2013 European Council

Other bilaterals/regional agreements Economic Partnership Agreements in negotiation with ACP countries (Replacing Cotonou) FTAs with EFTA, Euromed, Mercosur (in negotiation), Mexico, Chile, South Africa … Customs Unions with Turkey, Andorra and San Marino Partnership and co-operation agreements with Russia and Ukraine

Unilateral activity

Unilateral: EU General System of Preferences (GSP) – fosters development in least developed countries by granting tariff preferences with no quantitative limits 2006 – new scheme in force 176 beneficiary countries and territories, including India, China and Brazil ‘Everything but arms’ gives worlds 49 poorest nations duty free access to the EU for all products, except arms and ammunition