eu and the world trading system razeen sally european centre for international political economy/...

EU AND THE WORLD TRADING SYSTEM

Razeen Sally

European Centre for International Political Economy/

London School of Economics

www.ecipe.org

http://www.ecipe.org/


• How EU trade policy works

-- Highly centralised: at heart of EU economic and foreign policy

-- Customs union; old issues; new issues

-- Commission; Council of Ministers; member-states; Article 133 Committee


• EU in global trade and investment

• EU and WTO

• EU and FTAs

• EU internal market and external trade

• The new members in EU trade policy


• EU in global trade and investment

-- Market size; shares of trade and FDI

-- EU trade and FDI relations with key partners

-- Comparative trade barriers

-- Pockets of EU protection: agriculture; industrial goods; services; trade remedies; standards

Table 11: Economic and Trade Indicators 2005: Main Countries

Countries/ economy

GDP (US $ bn)

GDP Growth (%)

Population (mn)

Per Capita GDP (US$)

PPP GDP (US$

bn)

Merchandise Exports

(US$ bn)

Service Exports (US$

bn)

Total Merch

Trade (US$ bn)

Service

Trade

(US$ bn)

Trade/

GDP (%)

FDI Inflow

(US$ bn)

FDI/ GDP

(%)

World 44384,8 3,6 6400,0 6835,1 61027,5 10431,0 2415,0 21214,0 4760,0 47,8 916,3 2,1

EU** 12815,6 ***1.8 459,3 27902,5 12097,3 1333,7 494,1 2806,4 919,0 21,9 421,9 3,3

US 12445,1 3,2 296,5 41973,4 12409,5 906,0 354,0 2641,0 635,2 21,2 99,4 0,8

China 2228,9 9,9 1304,5 1708,6 8572,7 761,9 73,9 1422,0 157,1 63,8 72,4 3,2

Indonesia 287,2 5,6 220,6 1302,2 847,4 86,2 5,1 155,7 22,3 54,2 5,3 1,8

Malaysia 130,1 5,3 25,3 5134,4 274,8 140,9 19,0 255,6 40,5 196,5 4,0 3,1

Philippines 98,3 5,1 83,1 1182,9 408,6 41,3 4,5 88,7 10,3 99,2 1,1 1,2

Singapore 116,8 6,4 4,4 26836,1 130,2 229,6 45,1 429,7 89,1 367,9 20,1 17,2

Thailand 176,6 4,5 64,2 2749,4 549,3 110,1 20,5 228,3 48,0 129,3 3,7 2,1

Vietnam 52,4 8,4 83,0 631,3 254,0 31,6 3,9 68,1 8,6 130,0 2,0 3,8

ASEAN-6 861,4 5,9 480,6 1792,3 2464,3 639,7 98,1 1226,1 218,8 142,3 36,2 4,2

India 785,5 8,5 1094,6 717,6 3815,5 95,1 56,1 229,9 108,3 29,3 6,6 0,8

Japan 4505,9 2,7 128,0 35214,5 3943,7 595,0 107,9 1109,8 240,5 24,6 2,8 >0.1

Korea 787,6 4,0 48,3 16309,0 1056,1 284,4 43,9 545,7 101,7 69,3 7,2 0,9

Taipei 346,4 4,1 22,7 15291,8 - 197,8 25,6 380,3 57,1 109,8 1.6* 0,5

HongKong 177,7 7,3 6,9 25593,6 214,5 292,1 62,2 592,3 94,6 333,3 35,9 20,2

TOTAL 34954,1 - 34954,1 34954,1 34954,1 34954,1 34954,1 34954,1 34954,1 - 34954,1 -

Source: World Bank, WTO Statistical Database, UNCTAD WIR 2006 and ADB

* Whole of Taiwan

** Numbers for GDP and PPP GDP only given for 2004 at WTO

*** Data from Eurostat as World Bank does not show data for EU 25. For comparison: Eurostat gives 3.1 GDP Growth Rate in US for 2005 (http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,39140985&_dad=portal&_schema=PORTAL&screen=detailref&language=en&product=STRIND_ECOBAC&root=STRIND_ECOBAC/ecobac/eb012)

Share of Exports of Word Trade in Goods and Services (exc. Intra-EU (25) trade, 2005

India2%

China9%

Korea, Republic of3%

Japan7%

United States13%

ASEAN*8%

Rest of the World39%

European Union19%

Figure 9: Share of Exports of World Trade in Goods & Services (excl. Intra-EU(25) trade, 2005

Share of Imports of Word Trade in Goods and Services (exc. Intra-EU (25) trade, 2005

European Union19%


ASEAN*7%

United States20%

Japan7%


China8%

India2%

Figure 10: Share of Imports of World Trade in Goods & Services (excl. Intra-EU(25) trade, 2005

Share of Exports of Word Merchandise Trade (exc. Intra-EU (25) trade, 2005

India1%

China10%


Japan8%

United States12%

ASEAN*8%


European Union17%

Figure 5: Share of Exports of World Merchandise Trade (excl. Intra-EU(25) trade, 2005

Figure 6: Share of Imports of World Merchandise Trade (excl. Intra-EU(25) trade, 2005

Share of Imports of Word Merchandise Trade (exc. Intra-EU (25) trade, 2005

European Union18%


ASEAN*7%

United States21%

Japan6%


China8%

India2%

Share of Exports of Word Trade in Commercial Services (exc. Intra-EU (25) trade, 2005

European Union30%


ASEAN*6%

United States16%

Japan5%

Korea, Republic of2% China

3%

India3%

Figure 7: Share of Exports of World Services Trade (excl. Intra-EU(25) trade, 2005

Share of Imports of Word Trade in Commercial Services (exc. Intra-EU (25) trade, 2005

India2%

China4%Korea, Republic of

3%

Japan6%

United States13%

ASEAN*8%


European Union27%

Figure 8: Share of Imports of World Services Trade (excl. Intra-EU(25) trade, 2005

Figure 1: OFDI Stock Accumulated 1980-2005 (percentage of Global OFDI Stock)

OFDI Stock Accumulated 1980-2005 (percentage of Global OFDI Stock)

European Union48%


ASEAN*1%

United States22%

Japan6%


China0%

India0%

IFDI Stock Accumulated 1980-2005 (percentage of Global IFDI Stock)

India1%

China9%


Japan1%

United States13%

ASEAN*4%


European Union40%

Figure 2: IFDI Stock Accumulated 1980-2005 (percentage of Global IFDI Stock)

OFDI Flows Accumulated 03-05 (percentage of Global OFDI Flows)

India0%

China1%


Japan5%

United States16%

ASEAN*1%


European Union54%

Figure 3: OFDI Flows Accumulated 2003-2005 (percentage of Global OFDI Flows)

IFDI Flows Accumulated 03-05 (percentage of Global IFDI Flows)

European Union41%


ASEAN*4%

United States19%Japan

1%Korea, Republic of1% China

3%

India0%

Figure 4: IFDI Flows Accumulated 2003-2005 (percentage of Global IFDI Flows)

Table 7: EU 25 Bilateral Export and Imports Goods Trade with Other Main Partners in the World (2005)

In million Euros and Shares

Counry/ economy

2005

ImportsShare of total EU imports

ExportsShare of total EU imports

Total = Imports & Exports

US162.54

5 13,75 251.69

9 23,69 414.244

Japan 73.417 6,21 43.631 4,11 117.048

China158.48

1 13,40 51.646 4,86 210.127

Korea, Republic of 33.879 2,87 20.156 1,90 54.035

India 18.915 1,60 21.092 1,98 40.007

ASEAN 71.137 6,02 45.012 4,24 116.149

Source: DG Trade Statistics, European Commission (http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) / Eurostat

Table 8: EU 25 Bilateral Import and Exports Services Trade with Other Main Partners in the World (2005)

In billion Euros

Counry/ economy

2005

Imports ExportsTotal = Imports

& Exports

US 114.060 119.830 233.890

Japan 11.790 19.907 31.697

China 8.778 10.952 19.729

Korea, Republic of 3.402 5.698 9.100

India 4.643 5.085 9.728

ASEAN 13.475 14.687 28.162


Table 9: EU 25 Bilateral Total Trade for Goods and Services with Other Main Partners in the World (2003-2005)

In billion Euros

Counry/ economy

2003 2004 2005




US 593.305 616.074 648.134

Japan 139.746 146.749 148.745

China 158.195 191.722 229.857

Korea, Republic of 48.860 56.924 63.135

India 34.213 40.765 49.734

ASEAN 129.421 138.327 144.310


EU25 OFDI and IFDI Stocks with Partners (2005)

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

IFDI OFDI

Val

ue

US Japan China Korea, Republic of India ASEAN

Figure 16: EU 25 OFDI and IFDI Stocks with Partners (2005)

EU25 OFDI and IFDI Flows with Partners (2005)

-5.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

IFDI OFDI Balance

Val

ue

US Japan China Korea, Republic of India ASEAN

Figure 13: EU 25 OFDI and IFDI Flows with Partners (2005)

Table 13: Bound and Applied MFN Tariffs

Country/ economy

Binding Coverage (All Gods)

Bound Tariff Rate (All

Goods)

Applied Tariff Rate

(Manufactures)

Applied Tariff Rate (Agriculture

)

Overall Applied

Tariff (All Goods)

EU 100,0 4,1 3,6 9,5 4,5

US 100,0 3,6 3,7 8,2 4,3

Japan 99,6 5,0 3,3 10,4 4,7

Korea 94,4 16,1 6,6 42,5 11,9

China 100,0 10,0 9,5 15,0 10,3

Hong Kong 45,7 0,0 0,0 0,0 0,0

Malaysia 83,7 14,5 8,1 2,1 7,3

Thailand 74,7 25,7 14,6 16,2 14,7

Indonesia 96,6 37,1 6,1 8,0 6,4

Philippines 66,8 25,6 6,9 11,8 7,5

Vietnam - - 12,9 18,1 13,7

Taiwan 100,0 6,1 5,5 16,3 6,9

Singapore 69,2 6,9 0,0 0,0 0,0

India 73,8 49,8 25,3 30,0 28,3

Pakistan 44,3 52,4 16,1 13,9 15,9

Bangladesh 15,8 163,8 19,2 21,7 19,5

Sri Lanka 37,8 29,8 9,6 15,4 10,2

Source: World Bank: http://siteresources.worldbank.org/INTRES/Resources/469232-1107449512766/tar2005a.xls

The figures are simple unweighted averages of the tariff rates in percent from the year of 2003 and 2004.

Applied Rates for EU, US and Asia

Country/ economy 1995 2005

EU 4.3 2.5

US 4.3 3.0

Japan 3.1 2.7

Korea 8.3 8.6

Taiwan 11.2 5.3

Hong Kong 0.0 0.0

Singapore 0.4 0.0

Malaysia *8.4 7.5

Indonesia 14.0 6.5

Philippines 19.8 5.4

Thailand 21.0 9.9

Vietnam **13 13.1

China 22.4 9.0

India 41.0 16.0

Source: World Bank http://siteresources.worldbank.org/INTRES/Resources/tar2005.xls

* Malaysia 1996 ** Vietnam 1997

Note: All tariffs rates are based on unweighted averages for all goods in ad valorem rates, or applied rates, or MFN rates whichever data is available in a longer period.


• The WTO

-- Structural shifts from GATT to WTO

-- Doha round: evolution; state of play; prospects

-- What future for the WTO?


• EU and the WTO

-- Challenges of co-leadership in a multipolar system

-- EU negotiating positions: too defensive on agriculture; too offensive on other issues

-- EU needs to have more pragmatic positions; be more effective in coalition building

-- But constraints of internal EU politics


• FTAs

-- Huge proliferation of FTAs

-- Building blocs or stumbling blocs?

-- Strong FTAs the exception; most are “trade light”

-- Consequences: rampant discrimination; the spaghetti bowl


• The new EU FTA policy

-- Global Europe: economic/commercial rationale; WTO plus; but also non-trade motives; differences with EPAs/MENA

-- Benchmarks for (relatively) strong, clean FTAs

-- How serious is the economic/commercial logic?

-- Exporting EU regulation and non-trade motives: labour/environmental standards; “sustainable development”; climate change etc.

-- Comparisons with US FTAs on WTO plus issues

-- Arguments from the sceptics: Why no FTAs with Japan and China? Narrow mercantilism; trade diversion; spaghetti/noodle bowls

-- Very difficult to do serious FTAs with Asian and other partners

Table 14: European Union Free Trade and Association Agreements

Trading partner Type of agreement Status Status

Europe

EEA Effective application of EU acquis

communautaire In force since 1996

Switzerland Sector Free Trade Agreements Various dates Various dates

Turkey Customs Union 31-12-1995

Croatia Stabilisation and Association Agreement (SAA) Entered into force 01/01/05

Macedonia SAA Entered into force 01/05/05

Bosnia and Herzegovina SAA Negotiations ongoing

Albania SAA Enters into force in early 2007

Montenegro SAA Negotiations ongoing

Serbia SAA Negotiations on hold

Russia Enhanced (cooperation) Agreement Negotiations ongoingCouncil Negotiating Mandate of 13/11/06

Ukraine Enhanced (co-operation) Agreement Council still to agree to open

negotiations

Moldova Partnership and Cooperation Agreement jul-98

North Africa and Middle East

Algeria Euro-Med Agreement 1-9-2005

Egypt Euro-Med Agreement 31-12-2003

Israel Euro-Med Agreement 1-6-2000

Jordan Euro-Med Agreement 1-5-2002

Lebanon Interim Euro-Med Agreement 1-3-2002

Morocco Euro-Med Agreement 1-3-2000

Palestinian Authority Interim Euro-Med Agreement 1-7-1997

Syria Euro-Med Agreement Negotiations concluded in 2004 but not signed

Tunisia Euro-Med Agreement 01/03/1998

Gulf Cooperation Council Free Trade Agreement Negotiations ongoing

Iran Cooperation Agreement Negotiations ongoing since 2002

Iraq Cooperation Agreement Negotiations ongoing since

November 2006

Africa

ACP regions Economic Partnership Agreements Second phase of negotiations began in October 2003 scheduled

for completion in 2008

South Africa Trade Development and Co-operation Agreement 1-1-2000

The Americas

Mexico Economic Partnership Agreement 1-2-2000

Chile Association Agreement 1-2-2003

Mercosur Association Agreement Negotiations ongoing since 1999

CAN (Andean Community) Free Trade Agreement Negotiations complicated by Venezuela’s position in CAN

CAFTA (Central America) Free Trade Agreement EU preparing negotiating

mandate

Canada Trade and Investment Enhancement Agreement Proposal under discussion in the

Council

Asian

ASEAN Free Trade Agreement to enhance existing

cooperation Proposed

South Korea Free Trade Agreement Proposed

India Free Trade Agreement Proposed

India Free Trade Agreement Proposed

Source: Woolcock, S. (2007) European Union Policy Towards Free Trade Agreements, ECIPE Working Paper No. 3/ 2007, pp. 12

Table 10a: The Bilaterals Targeted by the EC

Market Size

[a]Av. Industrial Tariff

[b]Regulatory Ranking

[c]

at Current

USD

at PPP

USD

Applied Bound Ease of Doing

Business

Trading Across Borders

Dealing with

Licences

Registering Property

Protecting Investors

ASEAN 1,9 4,5 - - - - - - -

Indonesia 0,6 1,6 35 8,3 135 60 131 120 60

Malasysia 0,3 0,5 11,2 8,6 25 46 137 66 4

Singapore 0,3 0,2 4,1 0 1 4 8 12 2

Thailand 0,4 0,9 20,2 13,4 18 103 3 18 33

Korea 1,6 1,6 10,2 6,7 23 28 28 67 60

Mercosur 1,9 3,6 - - - - - - -

Brazil 1,5 2,6 29,4 15,1 121 53 139 124 60

Argentina 0,4 0,8 - - 101 71 125 74 99

India 1,6 5,8 37 ~12.0 134 139 155 110 33

Russia 1,4 2,6 - - 96 143 163 44 60

Gulf CC 1,2 1,0 - - - - - - -

UAE 0,3 0,2 - ~5.1 77 10 79 8 60

Soudi Arabia 0,6 0,6 - - 38 33 44 4 99

China 4,7 14,6 9,2 9,1 93 38 153 21 83

All Countries 14,3 33,6 - - - - - - -

Source: P. Messerlin (2006) EC Trade Policy: At the Cross Roads, November 2006, ECIPE Launch Conference, Brussels and Groupe d'Economie Mondiale, Paris

[a] GDP (in USD, 2004) as share of world GDP

[b] Australian Productivity Commission

[c] Doing Business 2007

Table 10b: The Bilaterals Ignored and Done

Market Size

[a]Av. Industrial Tariff

[b]Regulatory Ranking

[c]

at Current

USD

at PPP

USD

Applied Bound Ease of Doing

Business

Trading Across Borders

Dealing with

Licences

Registering Property

Protecting Investors

Australia 1,5 1,1 11,0 3,5 8 23 23 27 46

Canada 2,4 1,8 5,3 3,3 4 8 32 22 5

Hong Kong 0,7 0,4 - 0,0 5 1 64 60 3

Japan 11,1 6,6 2,3 1,6 11 19 2 39 12

Taiwan 0,8 1,0 4,7 4,5 47 42 148 24 60

USA 28,4 20,3 3,4 2,6 3 11 22 10 5

All Countries 45,0 31,1 - - - - - - -

Chile 0,2 0,3 ~25.0 ~6.0 28 44 40 30 19

Mexico 1,7 1,8 34,8 17,2 43 86 30 79 33

South Africa 0,5 0,9 11,0 8,3 29 67 45 69 9

Turkey 0,7 0,6 - 11,8 91 79 148 54 60

All Countries 3,1 3,6 - - - - - - -

Source: P. Messerlin (2006) EC Trade Policy: At the Cross Roads, November 2006, ECIPE Launch Conference, Brussels and Groupe d'Economie Mondiale, Paris

[a] GDP (in USD, 2004) as share of world GDP

[b] Australian Productivity Commission

[c] Doing Business 2007

The map shows FTAs signed or under negotiation in January 2006. East Asia is defined here as the 10 ASEANs, China, Japan and Korea. Source Richard Baldwin 2006

Noodle bowl syndrome in Africa

Source: World Bank

Noodle bowl syndrome in America

Source: Inter-American Development Bank.


• Unilateral liberalisation

-- Diminishing returns to trade negotiations; importance of unilateral measures; Asia and China

-- EU trade policy as foreign policy and internal-market policy; link between internal and external liberalisation

-- Internal-market reforms key; trade-policy reinforcement


• New members: trade-policy reforms pre-accession

-- Post-socialist transition: radical reformers (new EU members); gradual reformers (China/Vietnam); erratic reformers (CIS)

-- New EU members: general liberalising trend in ’90s, but variation among them

-- Convergence of EU-10/12 with EU-15 trade policy, esp. from late 1990s

-- Net liberalisation in trade in industrial goods and services, but not agriculture; the Estonian exception

-- Major reorientation of trade; FDI effects; trade creation/diversion


• New members in EU trade policy: state of play and prospects

-- Expectations: somewhere between more liberal orientation and no change

-- Reality: virtually no change so far; EU 10/12 passive, reactive; mixed positions; danger of “Our Market is Big Enough”, “restaurant bill” syndromes

-- EU-Russia; Russian accession to WTO

-- Variable internal implementation of common commercial policy


• Conclusion

-- EU: challenge of constructive engagement while containing domestic protectionism

-- Multi-track trade policy and internal-market reforms

-- What role for the new members?

eu and the world trading system razeen sally european centre for international political economy/...

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