The external dimension of the Single Market of the European Union

1. The external dimension of the Single Market of the European Union EU Centre-RSIS Summer Programme “The European Union in Asia – Reflections on European Integration, Institutions and Influence” 4 – 30 June 2012 Anne Pollet-Fort EU Centre Associate Fellow

2. Introduction • Originally, internal dimension of single market dominated over external dimension (inward-looking attitude) • External partners placed the external dimension of Single Market on political agenda • Concerns over impact of SM and formation of “Fortress Europe” • Europe response • SM should be open to 3rd countries • EU will seek greater liberalisation of international trade

3. The EU, a major trading partner • 16.8% of world trade in 2010 • First exporter (16.2% in 2010) • Largest importer (17.3% in 2010) • Leader in Foreign Direct Investment • EU-27 receives € 218.7 bn in 2010 • Main trading partners • USA, China, Russia, Switzerland • Canada (11th), Singapore (12th), Indonesia (33rd), Bangladesh (48th)

4. The EU Trade Policy Competence, decision-making and instruments

5. Competence • External trade policy is an exclusive European competence • MS are precluded to conclude individual trade policies • EU institutions competent to adopt EU trade legislation and enter into bilateral or multilateral trade agreements • However, European competence depends on definition of scope of EU external trade policy • Since 1958, scope of EU competence has changed several times and was subject of debates between EU and MS • Lisbon Treaty clarifies the EU competence. All key aspects of trade, goods & services, trade related aspects of intellectual property & FDI fall under exclusive competence of the EU.

6. Bilateral/ Regional Multilateral Unilateral EU trade policy - dimensions 3 DIMENSIONS

7. Unilateral dimension

8. Unilateral instruments • Common external tariff • EU’s average tariff on industrial imports is now 4% • Higher import tariffs on agricultural products, food, textiles & clothing • Common rules for imports • Imports into EU are free & not subject to QR • Stricter surveillance for products from certain countries • Since 2005 no more quota on textile & clothing • Trade Defense instruments • Anti-dumping • Anti-subsidy • Safeguard measure • Market Access Instruments • GSP, GSP + and Everything But Arms

9. Decision makingUnilateral instruments • Community method applies: • Commission proposes • Council and EP co-decides following the Ordinary Legislative Procedure • Qualified Majority Voting • Subject to judicial review by ECJ • EU trade policy is a real common policy where Commission plays central role • Increased role of EP may lead to a more politicized EU Trade policy

10. Anti-dumping policy • EU had frequent resort to anti-dumping measures, esp. in the 90s. • 2001: EU had the 2nd largest number of product categories with ADD in force after the USA. • Most affected products: iron and steel products, consumers electronics and chemicals • In last years, fewer cases in EU & elsewhere • Use of ADD often criticised by EU’s trading partners as protectionist measures • Revision of the system announced but difficult to find consensus among MS

11. Market Access Strategy • Trade Barriers Regulation • tool for tackling trade barriers in export market • Market Access Strategy • Creating new opportunities for EU exporters • Market Access Partnership - cooperation between the Commission, Member States and businesses – local expertise make trade barriers easier to identify and address • Market Access teams created • Market Access Database (MADB) as an important tool to record barriers under examination in EU trading partners • Export Helpdesk

12. Generalised Systems of Preferences • Generalised System of Preferences (GSP) • provides autonomous preferences to 176 Developing Countries on over 6300 tariff lines; • GSP+ • offers additional preferences to support vulnerable developing countries in their ratification and implementation of international conventions on good governance, human rights, labour standards, environmental standards • the Everything But Arms arrangement, • provides Duty-Free, Quota-Free access for the 50 Least-Developed Countries (LDCs). • GSP system under review

13. Multilateral dimension

14. Multilateral dimension • The EU has been one of the key players in the negotiation and establishment of multilateral global trade regime (including in DDA) • The EU acted with a single voice in each of the GATT rounds of negotiations • The EU saw multilateralism & WTO as a mechanism for managing globalisation • use SM as a model for a global trade liberalisation. • Widen definition of trade issues & include services, investment, IPRs, competition policy • Put itself as leading champion of multilateral trade syst. • Position of EU is however more difficult in area of agriculture than in area of industrial goods • Multilateral trade liberalisation remains EU top priority!

15. Bilateral dimension

16. Bilateral dimension • Historically EU was an early, major promoter of preferential FTAs • 60s: Yaounde Agreements & 75 Lome Treaties • 70s: agreements with Mediterranean countries and 6 EFTA countries & EC generalised system of preferences • Late 80s: another wave of regionalism with conclusion of Association Agreements (CEECs) & cooperation agreements with CIS countries. • In the mid-90s, EU began to give priority to multilateralism of WTO over bilateral FTAs • Doha suspension => EU announced its intention to enter into more FTAs (Global Europe)

17. Decision-makingTrade agreements • The Commission negotiates • On behalf of the 27 Member States • Regular reporting to the Council and the EP • The Council • Decides on directives for negotiations • Follows negotiation process (Special committee made up by MS civil servants assists Commission) • Council approve the results of the negotiation (generally by qualified majority) – sometimes MS ratify as well • The EP • Gives consent on trade agreements since Lisbon Treaty • Impact on trade policy since greater role given to issues such as human rights and social standards

18. The New EU Trade Agenda

19. Global Europe: Competing in the World • October 2006: Commission announced a new trade policy • Reasons behind the shift in EU trade policy: • Difficulties of WTO negotiations • Development in other countries trade relations (ex: US FTAs) • Burgeoning economic growth in Asia and related conclusion of a range of FTAs • Strategy is part of the Lisbon Strategy & links both internal and external aspects of the SEM • To support efforts to foster economic growth and create jobs. • EU needs to adapt its policies if wants to reap benefits of globalisation and needs to take into account the changes of the world economy • Process of production is fragmented • Emergence of major new economies creates huge opportunities for growth & development BUT also creating new pressures on traditional industries and natural resources

20. New policy on FTAsPartners • Core of strategy: comprehensive FTAs should be negotiated with EU’s most important trading partners in the world • Partners identified • according to economic criteria: • Market potential (economic size & growth) • Level of protection against EU exports • First tier: South Korea, India & ASEAN • Combine high levels of protection with largest market potential • Are active in concluding FTAs with EU competitors • Second tier: Mercosur, Russia, and the Gulf Cooperation Council • China also meets criteria but requires special attention • Canada was added as priority partner

21. New policy on FTAsCoverage • Comprehensive & ambitious coverage • aiming at highest possible degree of trade liberalisation • Need to include issue areas such as • IPR since insufficient IPR protection reduces value of market access • Services as cornerstone of EU economy • Investment as investment conditions must be improved • Public procurement as it is an area of untapped potential • Competition provisions including provisions on state aid control • Must provide for regulatory convergence to combat NTBs • State of play http://trade.ec.europa.eu/doclib/docs/2006/december/tradoc_118238.pdf

22. Global Europe after 5 years • A successful conclusion of DDA out of reach • Progress in new FTAs, but hard on issues going beyond tariffs • Progress in EU/US dialogue on regulatory issues • With China, main challenge remains creation of level-playing field (public procurements, IPR, subsidies) • IPRs enforcement largely addressed • New Market Access Strategy led to concrete results • Public Procurement remains sensitive issue for partners • No progress on review of trade defense instruments due to lack of consensus between MS

23. Future trade policy

24. Future trade policy • Two factors for a redefinition of EU trade policy • Entry into force of Lisbon treaty • that considers trade policy as integral part of Union’s overall external action • Trade policy must therefore address development, environmental and social objectives • Europe 2020 strategy • How can EU trade policy further help achieving EU 2020 objectives ie achieving smart, sustainable and inclusive growth • Process • After a public consultation, Commission published a Communication in Nov. 2010 on a revived trade strategy • Accompanied by 2 more documents • Progress achieved on Global Europe 2006-2010 • A working paper "Trade as a driver of prosperity’

25. Today’s context • Globalisation • has put trade issues at the centre of citizens’ concerns • Emergence of new economic powerhouses • Economic downturn • Trade is part of the solution to exit crisis • Also impacts the way trade policy is perceived in the EU

26. Trade, Growth & World Affairs • Pursue active negotiating agenda • Multilateral Trade Agreements (Doha) • Bilateral Trade Agreements (Korea, ASEAN, India, Canada, Central America, Andean Community, Ukraine, Euromed, Mercusor, Gulf States, Libya, China) • Deepen relations with strategic partners • USA, China, Russia, Japan, India, Brazil • Enforce EU rights, tackling barriers

27. Fighting protectionism abroad • “We should be open, but not naïve” • EU announced that it would fight protectionism, which is on the rise as a consequence of the global economic downturn • In particular, EU will demand more “reciprocical commitments” from trade partners • EU Trade Commissioner and EU Commissioner for the Internal market have proposed new instrument in the area of public procurement

28. Protectionist pressures at home • Economic slowdown lead to rising anxiety among European population • Benefits of open trade policy questioned by European population • European support for open markets can only be guaranteed if accepted by public at large • Member States in the Council and the European Parliament will need to take account of public concern

29. Eurobarometer on trade An opinion survey on international trade found that: Europeans think trade is good for Europe and Europe is good at trade … 65% of Europeans think EU has benefited a lot from international trade 64% of Europeans think that European goods and products are competitive … but they are less confident about the future 71% of Europeans think that in the coming years, trade will benefit more and more emerging economies like Brazil, China and India 45% of Europeans think that the EU will be secondary economic power …and they want trade to deliver jobs and consumer benefits 61% of Europeans believe that the priority for future EU trade policy should be to create employment

30. Conclusion • New strategy key message: more assertiveness, enforcement, reciprocity and mutual benefits • EU remains the world’s major trading block • Difficulties of the eurozone • Have consequences on economies of EU partners • Have affected the EU’s reputation as a major power • A major difficulty for the EU will be to find back some leverage in trade negotiations with its trade partners when it will address its priority issues