Deep integration in EU FTAs. Why so difficult?

1
Deep integration in EU FTAs.Why so difficult?

• Peter Holmes with colleagues

2
Why Deep Integration?

• Market access vs upgrading across whole economy
• But losers as well as winners
• internal market was a public good for old
  new EU standards always have public element
• Services can only be liberalised by DI
• Leaving it to the market?
• Free trade ensures competition?
• Proprietary standardisation will be enough?
• Deep institutional integration may be stimulated
  by and further promote deep market integration

3
EU Aims

• Global Europe (2005) policy rejects use of FTAs
  as mainly diplomatic tool
• market access in large important markets India
  not Pakistan as main goal for FTA
• include behind the border deep integration issue,
  eg SPS/TBT, Competition GP etc based on EUs
  own internal market experience
• Harmonisation sought for close partners

4
Result very little binding DI

• Most agreements disappointing in this area (Sapir
  et al Bourgeois et al Houtman)
• EEA is exceptional case but required loss of
  sovereignty
• Candidates approximation driven mainly by
  accession process
• Even EU Chile just lays pathway to mutual
  recognition
• EU Competition cooperation provisions fall well
  short of US-Australia
• Only Cariforum accepted deep EPA.

5
Competition

• Candidates Euromed declare anti-competitive
  practices that distort trade as in Arts 81 82
  to be incompatible with the agreements did
  this create binding legal obligations to amend
  domestic law?
• EU rejects hard cooperation obligations even in
  EU-US, eg exchange of confidential info.
• Competition is trade related issue but
  cooperation can be done outside FTAs even in
  MLATs

6
SPS TBT Market access vs upgrading

• Distinguish Standards, regulations, conformity
  assessment (CA) and accreditation.
• Standards Regulations are not just NTBs they
  are reflect market demands, esp where private
• Mutual recognition esp of CA requires trust and
  is slow cf EU US (not FTA) and EU-Turkey
• Fundamental issue is EU rules, eg Food Feed
  directive requiring inspection and traceability
  etc. And private standards eg Eurepgap
• Partners must comply with EU rules if they wish
  to export.
• Egypt unwilling to force this on all domestic
  producers. Morocco thinking about it.
• Some agreements provide for consultation and
  approximation and a pathway to mutual recognition
  but no obligations, Eg Morocco Chile - and EU
  India modelled on Chile

7
IPRs, Animal welfare labour standards etc

• EU less eager to press for stronger IPRs than the
  US but India seems keen to have provisions here,
  eg on GIs
• EU Chile and possibly EU India include provisions
  for consultation on Animal welfare pressure
  from Greens in EP on this
• Cariforum EPA forbids lowering of labour (or
  environmental) standards as investment
  incentives

8
Binding character?

• Sapir et al find few provisions that are subject
  to binding wording eg shall and create
  meaningful obligations (e g not just shall
  consider.
• What is the point of detailed but non-binding or
  binding but ill-defined or non-constraining
  provisions?
• NB Garcia Bercero argues EU is gradually
  extending binding DS in its FTAs, even tho new
  areas exlcuded and little use made.
• Association Agreements provide for binding
  decisions by councils
• US has less inflation but NB controversies over
  investor-state provisions

9
Regions

• EEA required adoption of acquis and binding
  acceptance, but tolerated by close small partners
  who had to comply with norms of their biggest
  market anyway. And EU rules are not NTBs top be
  negotiated away
• Latin Americans etc pointless to demand
  harmonisation to EU rules but EU seeks to be
  model. NB S.Africa chose EU water quality rules
• Cariforum is special case where EPA seen by
  partner as a way to create intra-regional interal
  market
• Neighbours torn. Shd Egypt pay costs? How can
  Ukraine totally pre-commit to EU norms so as to
  ensure unconditional market access?

10
EU norms as condition of free access to Internal
market

• Once satisfactory implementation of competition
  and state aids policies (by the associated
  countries) has been achieved, together with the
  application of other parts of Community law
  linked to the wider market, the Union could
  decide to reduce progressively the application of
  commercial defence instruments for industrial
  products form the countries concerned, since it
  would have a level of guarantee against unfair
  competition comparable to that existing inside
  the internal market. Commission, 1994 and 1995

11
What are the motives?

• EU is engaging in empty diplomacy because it can
  do nothing else?
• It is seeking to use soft law to build up its
  influence and support for its views at WTO.
• It is seeking to use soft law to build up hard
  law
• It is responding as in Cariforum to partners
  wishes to use trade agreements as instruments for
  reform as well as market opening

12
Conclusions what can EU do?

• There is a demand for DI India is spending time
  on this. Mutual recognition of CA is
  philosophers stone. Allows market access for
  those who do comply. Does not need harmonisation
  but needs accreditation of standards
  infrastructure
• Many developing countries want to use RTAs as
  instruments to upgrade quality and legal norms,
  but wholesale adoption of acquis unpalatable.
• Deep institutional integration can reflect and
  support but not create the deeper market
  integration
• EEA model unappealing even for most of EEA!
• But Catch 22 EU will not give unconditional
  market access without binding commitments and
  binding commitments onerous without prospect of
  quasi accession
• Pathway process has merits beyond initial
  content it may allow what it does not oblige