Blog- 6:International Trade Agreement - European Union (EU)

European Union (EU) was created in the aftermath of the Second World War and it is a unique economic and political partnership between 27 European countries. The EU has delivered half a century of peace, stability, and prosperity and has helped raise living standards, launched a single European currency the euro, and is progressively building a single Europe-wide market in which people, goods, services, and capital move among Member States as freely as within one country. The European Union has enhanced political, economic, social co-operation and actively promotes human rights and democracy.

According to the OECD, Regional trade agreements (RTAs) cover more than half of international trade and operate alongside global multilateral agreements under the World Trade Organization (WTO). The first eleven years (1995-2005) of the WTO were paralleled by a tripling of RTAs officially notified to the WTO and in force, from 58 to 188.

Regional trade agreements however can have both positive and negative effects on trade depending on how they were designed and implemented. Hence, a policy question should be what determines RTAs success. For instance, it may be easier and attractive for a small group of neighboring countries with similar concerns and cultures to agree on market opening in a particular area than to reach agreement in a wider forum such as the WTO. These countries can also offer new approaches to rule-making and therefore using this as their stepping stones on the way to a multilateral trade agreement. However, this regional agreement also risk making it harder for countries outside the region to trade with those inside and leaves the potential to discourage further markets to open up. Ultimately, this limits the growth prospects for all and also broad-based multilateral negotiations with more players and more sectors that offer greater potential for mutual gain than limited bilateral or regional deals.

The agreements that have been designed to complement a general program of economic reform have been most effective in raising trade. The most important component for success is low trade barriers with all global partners. This is followed by nonrestrictive rules of origin were local firms must be able to effectively source materials at the lowest cost. These rules of origin are necessary and also important elements of agreement that expands both regional exports and exports to the rest of the world. Regional trade agreements help countries to integrate with global markets but do not provide a guarantee and therefore again, these agreements are crucial on how they are designed and implemented.

The EU has evolved during the process of globalization by aiming for the harmonious development of world trade and fostering fairness and sustainability. It actively encourages the opening of the markets and the development of trade in the multilateral framework of the World Trade Organization (WTO). At the same time, it supports developing countries and regions through bilateral relations with a view to involving them in world trade using preferential measures. European trade policy aims to increase the EU’s competitiveness. It offers a framework to deepen strategic economic relations and defend European interests worldwide. Its objectives must be adapted to the new global challenges and to the new strategy for the sustainable growth of the EU by 2020.

These objectives can be met by strengthening trade relations between the EU and its strategic partners.

In this context, it is particularly important to:

·         Complete the Doha Round of negotiations launched by the World Trade Organization (WTO). It is essential to improve access by developing countries to international trade, particularly in the areas of services and agriculture, but also to improve WTO surveillance capacity and strengthen its dispute settlement system.

·         Conclude the negotiation of free trade agreements between the EU and its trade partners, and strengthen relations with its strategic partners, particularly taking into account intellectual property rights and the protection of innovation, public procurement, competition rules and consumer protection; Develop a new European investment policy, create a favorable climate for enterprise, facilitate business access all over the Europe.

The Commission presents new guidelines for European trade policy. The policy must contribute to the objectives of the Europe 2020 strategy, in view of the impact of international trade on the sustainable growth of the European Union (EU).

The EU’s trade policy achievements in the last decade

Over the last decade the EU has put in place the Everything but Arms (EBA) initiative (duty free quota free access for LDCs), a new Generalized System of Preference (GSP) and reformed its rules of origin, as well as stepping up Aid for Trade (Aft). It was much less successful in its approach to Economic Partnership Agreements, other free trade agreements (FTAs) and the World Trade Organization (WTO), where progress has been slow or deadlocked.

The European Union’s communication on trade, growth and development, launched, sets the framework for its actions on trade and development in the coming decade.

Now is the right time to be launching this communication, with development taking place in a rapidly changing world. There has been rapid growth in several emerging powers and much of Africa is also continuing to grow, with openness to trade and investment playing a supporting role. But some countries have been left behind: the majority of least developed countries (LDCs) have not been able to transform their economies structurally. In addition, there are new challenges to be faced, such as threats to the climate and natural resource base.

The development of an open trade policy and international investment flows should thus:

1.       Contribute to the intelligent growth of the EU and the spread of innovation by removing barriers to international trade in goods and services and to investment. Stronger trade relations should, in particular, give European enterprises access to government procurement and research programs in third countries;

2.       Accompanied by social policies in the EU and worldwide. Open markets can lead to job losses in under-performing sectors. The Member States and the EU must therefore take the appropriate support measures, namely by extending the European Globalization Adjustment Fund (EGF). In addition, the EU is to pursue its cooperation with developing countries as regards combating poverty, defending human rights, compliance with international labor standards and good governance.

3.       Contribute to green growth in the EU and worldwide. Trade agreements should provide for the efficient use of natural resources and the protection of the environment.   

 

It then argues that domestic actions and good governance are key to trade and growth, and that trade  agreements can lock in domestic reforms. On the multilateral front, the EU proposes to support the  development dimension at the Doha round of WTO negotiations (the  LDC package), address emerging  issues (e.g. trade and food security, achieving reliable energy supply, threats to natural resource base),  and calls for emerging powers to provide more concessions to LDCs.