European Trade Policy: What Next

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European Trade Policy What Next?

• Simon J. Evenett
• www.evenett.com

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October 2006 Communication

• Sets out the contribution that EU trade policy
  can play in stimulating growth and creating jobs.
• Affirms commitment to the WTO.
• Proposes a new generation of carefully selected
  and prioritised FTAs, joining the scramble for
  better market access in fast-growing Asia.
• Proposes a renewed and reinforced market access
  strategy.
• Develop tools to address selected non-tariff
  barriers and trade-related domestic policies.

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Commentary on Communications general approach

• Evolution, rather than revolution, in
  Commissions thinking. Many similarities, but
  some differences.
• Instructive to compare this Communication with
  its market access-centric 1996 predecessor and
  with Mr. Lamys stated rationales for EU trade
  policy.
• 2006 Communication is a shift towards its 1996
  predecessor.
• Turn now to assessing FTA and WTO aspects of
  Communication.

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Should the EU join the scramble for Asian market
access?

• Communication makes the case for possible FTAs
  with India, Korea, and ASEAN (among others).
• Effectively ends the moratorium on starting new
  FTA negotiations.
• My bottom line
• Progress here is likely to harder than some might
  expect.
• There is less here than meets the eye EC is not
  targeting the two largest economies in Asia.
• Is this a disaster? No. European firms can make
  much more of existing market access in Asia.

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Doubts about potential FTA partners in Asia

• India
• No evidence of political capital being put spent
  on an FTA negotiation with EU.
• Low levels of negotiating ambition.
• Korea
• Strong offensive interests.
• Difficult negotiating partner (ask the USA).
• ASEAN.
• Little prospect of ASEAN-wide disciplines.

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Just how big are the markets the Commission is
targeting?
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European business can make more of existing
market access in Asia
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Implications for EC FTA negotiating strategy

• New FTAs maybe nice, but not absolutely
  necessary.
• Walking away from a bad FTA negotiation isnt a
  disaster.
• Europe has other means of expanding its presence
  in Asian markets.
• Demand the most serious political commitment from
  partners before negotiations begin.
• Fixed term negotiating mandate from Council.
• Opportunity to innovate on non-tariff commitments
  in FTAs.

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Cursory treatment of WTO in 2006 Communication

• Europe remains committed to the WTO and is
  working hard to revive negotiations as soon as
  circumstances in other countries allow.
• Perhaps there are good reasons for this cursory
  treatment.
• Need to develop other options here, should the
  likely pause in multilateral negotiations during
  2007-2009 come to pass.
• See paper for some suggestions.

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Wrapping up

• At the end of the Barroso Commission what are
  commentators likely to say about EU trade policy
  over the preceding five years?
• Real risk of a negative assessment failed Doha
  round and limited FTA success in Asia.
• Is there an upbeat alternative? Yes
• if the FTA process in Asia is unsentimentally
  managed and
• if the multilateral process isnt looking as sick
  as is now.