EU Trade Policy

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EU Trade Policy

• EU Commercial Policy (CCP)
• Katerina Soukupová

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Common commercial policy

• an area of exclusive Community responsibility
• the legal basis for the EU's trade policy Article
  133 of the European Community (EC) Treaty
• covers
• trade in goods
• trade in services
• company law, indirect taxation, standards and
  other technical regulations, and commercial
  aspects of intellectual property rights

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How it works now?

• The EC Treaty establishes the overall aims and
  objectives of EU trade policy

Article 2 sets the general aims including to
promote the development of economic activities,
high employment and competitiveness, and
environmental protection.
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Reasons for CCP

• negative externalities
• An externality occurs when a decision causes
  costs or benefits to third parties, often, though
  not necessarily, from the use of a public
  good(for example, production which causes
  pollution may impose costs on others, making use
  of the public good air). In other words, the
  participants do not bear all of the costs or reap
  all of the gains from the transaction.
• As a result, in a competitive market too much
  or too little of the good may be produced and
  consumed from the point of view of society.
• bargaining power and legal uniformity throughout
  the Union ? lower uncertainty and transaction
  costs

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Customs union

• essential element of the internal market
• includes
• the elimination of all customs duties and
  restrictions among the Member States
• the introduction of a common customs tariff (CET)
  
• the common commercial policy as an external
  dimension of the customs union
• three stages of four years each
• a three-year delay foreseen
• Introduction in july 1968, 18 months ahead of
  proposal

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The negotiating process
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• The 133 Committee
• a permanent dialogue and sounding board between
  the Commission and Member States on trade policy
  (consultative role)

• Civil Society dialogue
• regular consultation with business, trades
  unions and civil society

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• originally, the Commission empowered to negotiate
  just in the area of trade in goods with qualified
  majority voting
• the Treaty of Nice extended the authority of
  Commission trade in service, intellectual
  property rights
• principle of parallelism
• some of trade agreements in services can
  require unanimity, if unanimity would by required
  for the adoption of rules on the same subjects in
  the context of the single market. (ex.
  immigration)

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Instruments of EU trade policy

• Tariffs
• Non-tariff barriers
• Regulatory barriers

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Common External Tariff

• a customs duty a tariff or tax on the import of
  or export of goods
• involves applying uniform customs duties to
  products imported from third countries,
  irrespective of the member state of destination
• originally, the CET was the arithmetic means of
  the tariffs applied in 1957 by member states,
  amended several times
• for about ten thousand products

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Ad-valorem duties

• the duty is calculated as a percentage of the
  value of the product
• Custom value transaction value
• transaction value the price actually paid or
  payable for the goods when sold for export to the
  customs territory of the Community

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EU open economy?

• the average CET rate - 6,5
• 1/4 of the rates on all products - at 0
• the simple average tariff of the CET on
  industrial goods - 4,1
• the simple average tariff for agricultural
  products - 16,5 (just for MFN)
• rates on some manufactured goods still high,
  average rate on manufactures is alway below 5
• Agro-food tariffs can be extremely high, e.
  tariff for diary up to 209 , cereals up to 101
  , food items made from vegetables or fruits up
  to 150 , as well as garlic.

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Non-tariff barriers

• their importance has diminished considerably
  since the late 1980s
• Examples
• import quotas
• anti-dumping duties
• voluntary export restraints a restriction set
  by a government on the quantity of goods that can
  be exported out of a country during a specified
  period of time. Often the word voluntary is
  placed in quotes because these restraints are
  typically implemented upon the insistence of the
  importing nations.
• Typically VERs arise when the
  import-competing industries seek protection from
  a surge of imports from particular exporting
  countries .

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Quantitative restrictions

• generally not permitted
• Multifibre Agreements (MFAs) regulated by the WTO
  Agreement on Textiles and Clothing by 2005
• quotas on banana imports removed in 2006
• quotas remain in place for imports from non-WTO
  countries

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Anti-dumping measures

• dumping the selling in export markets below
  the sales price in their domestic market or below
  the cost of production
• permitted, if dumping causes or threatens to
  cause material injury to an established industry
  or materially retards the establishment of a
  domestic industry
• Anti-dumping actions take one of two forms
• a) antidumping duties equivalent to the
  dumping margin
• b) undertakings by exporting countries not to
  sell to the EU below an agreed price
• EU - one of the worlds leading users of such
  measures

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Anti-subsidy measures

• Subsidy a direct transfer of funds by the
  government but also indirect transfers such as
  loan guarantees and tax credits
• countervailing duties for the purpose of
  equilibrating the effect of the subsidy

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(No Transcript)
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Regulatory barriers

• technical regulation obligatory rules created
  by the EU or the member states
• product characteristics, related process and
  production methods, the terminology, symbols,
  packaging and labelling requirements applying to
  a product or production method
• ex. emission limits for machinery, health
  warnings on tobacco products
• standard non-mandatory rules approved by a
  recognised body
• WTO Agreement on Technical Barriers to Trade (TBT
  Agreement)
• Agreement on the Application of Sanitary and
  Phytosanitary Measures (SPS Agreement)
• 76 and 437 new regulations annually under the TBT
  Agreement (ban on the import of hormone-treated
  beef, dried fruit and nuts)

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Types of EU trade policy

• The EU utilises trade policy as a tool for seven
  different types of common policy
• commercial diplomacy
• agricultural policy
• economic integration with non-members
• development policy
• competition policy
• industrial policy
• foreign policy

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Commercial Diplomacy

• influence foreign government policy and
  regulatory decisions that affect global trade and
  investment
• In the past concerned over tariffs and quotas on
  imports
• Today, wider range of government regulations and
  actions including standards in areas such as
  health, safety, environment, and consumer
  protection regulations in banking,
  telecommunications and accounting competition
  policy and laws concerning bribery and
  corruption, agricultural support programs and
  industrial subsidies

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The Common Agricultural Policy

• is a system of EU agricultural subsidies and
  programmes
• guarantees a minimum trade to producers
• guarantees direct payment of a subsidy for
  planted crops
• Import tariffs set at a level to raise the
  World market price up to the EU target price. The
  target price is chosen as the maximum desirable
  price for those goods within the EU
• TRQs - for some products, a certain quantity can
  be imported with a low duty, but the much higher
  bound tariff applies to quantities above this
  amount.
• technical, sanitary, phytosanitary restrictions
  are now major obstacles to developing countries
  exports to the EU

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Competition policy

• stop practices which remove competition from the
  market such as monopoly, cartel, state aid, abuse
  of dominant position
• Monopoly is defined as a persistent market
  situation where there is only one provider of a
  product or service. Monopolies are characterized
  by a lack of economic competition for the good or
  service that they provide and a lack of goods
• A cartel is a group of formally independent
  producers whose goal is to increase their
  collective profits by means of price fixing,
  limiting supply, or other restrictive practices.
• Abuse of dominant position occurs where a firm
  holds a position of such economic strenght that
  allows it to operate in a market without being
  significantly affected by competition and it
  engages in conduct that is likely to blockade the
  development or maintenance of effective
  competition. Some of the more common types of
  abuse by dominant firms include f. e. predatory
  pricing. It occurs whan a large firm sets its
  prices very low often below the costs of
  production, with the intention of forcing
  competitors ouf of market so that it can
  establish a monopoly and higher prices.

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Industrial policy

• any government regulation or law that encourages
  the operation a particular industry
• often related to investment policy for that
  industry
• Tax, tariff and trade rules of the GATT and
  various trade pacts
• anti-dumping duties, subsidies, some public
  procurement (only non-discriminatory under
  reciprocity)

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Foreign policy

• a set of political goals that outline/form how
  that particular country will interact with other
  countries of the world and, to a lesser extent,
  non-state actors
• The objectives of the EU foreign policy
• to safeguard the common values,
  fundamental interests, independence and integrity
  of the Union
• to preserve peace to promote
  international cooperation
• to develop and consolidate democracy and
  the rule of law, and respect for human rights and
  fundamental freedoms
• Instruments export and/or import bans (trade
  sanctions which may apply to specific products
  such as oil, timber or diamonds), flight bans,
  prohibitions on investment, payments and capital
  movements, or the withdrawal of tariff
  preferences, arms embargoes

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EU as a trade power

• key player in the WTO
• first exporter
• second largest importer
• 40 of world trade

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EU exports
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EU exports

• 2/3 of EU-25 exports to other EU25 nations
• all the other European nations ¾ of EU-25 exports
• North America, Asia less than one-tenth of EU
  exports each
• Africa, Latin America, the Middle East less than
  3 each

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EU imports
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• 3/4 of EU imports from Europe
• biggest difference
• Asia, CIR deficit
• North America surplus

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The EU top ten import and export partners
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Developed x Developing

• More than 4/5 of the Unions trade with countries
  of similar income levels
• developing countries rely far more on the EU
• ex. India

Trade patterns

• depends on geography or historical connection
• importance of various trade partners varies a lot
  across the EU25

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Composition of EU25 imports and exports
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EU trade by product

• manufactured goods - almost 90 of EU exports,
  2/3 of imports
• a big importer of fuel
• net-importer of food in the future?
• the commodity structure of EU trade varies by
  geographical area

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Leading exporters and importers in world
merchandise trade, 2005
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Leading exporters and importers in world trade in
commercial services, 2005
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Current accountEU25 trade (bn euro)
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EU Trade with developing countries
3 DIMENSIONS
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Unilateral dimension

• The EU implements unilateral measures as an
  additional trade policy instrument in the
  interests of development and/or political
  stability
• General System of Preferences (GSP)
• elimination or reduction of tariffs on a
  non-reciprocal basis for an unlimited period of
  time
• 178 developing countries (
• 2 basic EU GSP policies
• 1. general - available to all developing nations
• 2. super

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Super GSP

• Everything But Arms
• the best unilateral preferences for nations
  called least developed nations (except arms and
  munitions)
• for pushing the EUs idea of labour rights, of
  environmental protection, of combating illegal
  drugs
• for very poor countries
• Afghanistan, Angola, Bangladesh, Benin, Mali,
  Somalia

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Bilateral dimension
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.

• 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

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Economic Partnership Agreements with ACP
countries

• Congo, Gabon Ethiopia, Kenya, Tanzania etc. -
  former colonies
• 1974 the new agreement - the Lomé Convention
• dute-free status to all industrial exports and
  most agricultural exports of ACP nations
  (sensitive items - sugar)
• the EU did not require the same
• new version - 2000 Cotonou Agreement remove ACP
  tariffs against EU tariffs a good way of
  integrating
• EU is a major market for the ACP nations, but the
  ACP markets are marginal markets for EU exporters

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The Euro-Med Association Agreements

• with ten Mediterranean nation Morocco, Algeria,
  Tunisia, Egypt, Israel, The Palestinian
  Authority, Lebanon, Jordan, Syria and Turkey
• bilateral duty-free trade in industrial goods
• provisions for financial an technical
  assistance from the EU, trade in services and
  foreign direct investment
• asymmetric - the EU is faster
• these nations depends heavily on the EU market
• Morocco is a typical case. The EU market accounts
  for 71 of its exports whereas the Moroccan
  market accounts for less than 1 of EU external
  exports.

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Multirateral dimension
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.
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• Thank you for your attention!!!