What is the EU’s trade policy? Why is it important in a globalised economy and how does it work? Find out more about one of the EU’s most intricate policies.
Why is EU trade policy important in a globalised economy?
Economic globalisation is characterised by an increase in international trade and a growing interdependence of economies at a global level. The EU’s trade policy is a central tool to respond to the challenges posed by globalisation and to turn its potential into real benefits.
Having a trade policy at EU level rather than at a national level allows for more weight in bilateral negotiations and in multinational bodies such as the World Trade Organisation (WTO). The main goal of the EU’s trade policy is to increase trading opportunities for European companies by removing trade barriers such as tariffs and quotas and by guaranteeing fair competition.
It is essential for the European economy as it affects growth and employment. More than 36 million jobs in the EU depend on exports outside the European Union. On average, every €1 billion worth of exports to non-EU countries supports more than 13,000 EU jobs.
The EU’s trade policy protects Europeans by ensuring imports respect consumer protection rules.
The EU also uses its trade policy to promote human rights, social and safety standards, respect for the environment and sustainable development.
How does the trade policy work?
The EU’s trade policy covers the trade in goods and services, foreign
direct investment, commercial aspects of intellectual property, such as
patents, and public procurement.
It is composed of three main elements:
- Trade agreements with non EU-counties to open new markets and increase trade opportunities for EU companies
- Trade regulation to protect EU producers from unfair competition
- EU membership of the World Trade Organisation, which sets international trade rules. EU countries are also members, but the European Commission negotiates on their behalf.
Trade agreements are negotiated with non-EU countries to ensure better trading opportunities. There are different types:
- Economic partnership agreements, with developing countries from the Caribbean, Pacific and Africa
- Free trade agreements with developed countries
- Association agreements that strengthen larger political agreements such as the Union for the Mediterranean with Tunisia
The focus of all the agreements is to reduce trade barriers and ensure investment.
EU trade regulation
The EU also has rules to protect European companies from unfair trade practices. Such practices can include dumping or subsidies in order to make prices artificially low compared to European products. European products could also face customs barriers or quotas. If trade disagreements cannot be resolved, they can lead to a trade war.
Foreign direct investment in the EU is also regulated. In February 2019, MEPs approved a new screening mechanism to ensure that foreign investment in strategic sectors do not harm Europe’s interests and security.
The EU and the WTO
The World Trade Organisation (WTO) is made up of more than 160 members representing 98% of world trade. It aims to keep the world’s trading system predictable and fair by agreeing and monitoring common rules for trade between nations
The EU is a strong supporter of the WTO and has played a central role in developing the international trading system.
It is closely involved in WTO multilateral trade talks. The European Parliament closely follows such negotiations and adopts reports assessing their state. The current round of WTO negotiations – the Doha cycle (2001) – has stalled due to a lack of agreement on key policies such as agriculture.
The EU also uses the WTO’s ruling and enforcement powers when there is a trade dispute and it is one of the biggest users of the dispute settlement system.
How is the EU’s trade policy decided?
Trade policy is an exclusive EU competence, meaning the EU as a whole, rather than individual member states, has the power to legislate on trade matters and conclude international trade agreements (article 207 of the Treaty on the Functioning of the European Union – TFEU).
The Treaty of Lisbon (2007) made the European Parliament a co-legislator on trade and investment with the Council, representing the member states. International trade agreements can only enter into force if the Parliament votes in favour of them. The Parliament can influence negotiations by adopting resolutions.
European Agenda on Migration four years on
Ahead of the October European Council, the Commission is today reporting on key progress under the European Agenda on Migration since 2015, with focus on steps taken by the EU since the last progress report in March 2019. The Commission also set out those areas where work must continue to address current and future migration challenges.
High Representative and Vice President Federica Mogherini said: “Over the past years we have built an EU external migration policy when there was none. We have developed new partnerships and strengthened the old ones, starting with the African Union and the United Nations. Together we are saving lives and protecting those in need by enabling legal migration channels, addressing the drivers of migration, and fighting against smuggling of migrants and trafficking in human beings. The past years have confirmed that no country can address this complexity alone. It is only by working together, by joining forces that we can tackle these global challenges in an effective, human and sustainable way.”
Commissioner for Migration, Home Affairs and Citizenship Dimitris Avramopoulos said: “These past years have shown that only together as a Union we are capable of responding to extreme circumstances. Collectively, we have laid down the structural and operational foundations for a comprehensive European migration system that not only responds effectively and delivers results, but also promotes solidarity and responsibility. While there is still more work to do and the situation remains fragile, we are much better prepared than we were in 2015.”
When the migration crisis broke out in 2015, the EU took swift and determined action to face exceptional challenges through common European solutions. Over the past 4 years, the basis for a strong collective EU migration policy and new tools and procedures for efficient coordination and cooperation are now in place. The EU is better equipped than ever before to provide operational and financial support to Member States under pressure, manage the external borders and work in partnership with countries outside the EU. However, more efforts are needed to complete this work and make the EU’s migration policy truly future-proof, effective and resilient.
Important progress made towards a strong and effective EU migration management policy
Over the past 5 years, the Commission has worked tirelessly to build a stronger EU policy on migration. By focusing on priority areas we have managed to move from crisis mode to creating structural solutions to ensure Europe is better prepared for any future migratory challenges – in the medium and long term.
Solidarity and support to Member States: The EU is now working more closely with Member States than ever before through the hotspot approach and EU Agencies with over 2,300 staff deployed on the ground – to better manage migration, strengthen the external borders, save lives, reduce the number of irregular arrivals and ensure effective returns. The coordination processes and operational structures developed and established on the ground are key achievements that will remain in place.
Stronger cooperation with partner countries is achieving results: The EU has stepped up the work with partners outside of Europe to tackle the root causes of irregular migration, protect refugees and migrants and support host communities. Unprecedented funding, worth €9.7 billion, has been mobilised to this effect, notably through the EU Trust Fund for Africa, the Syria Trust Fund or the Facility for Refugees in Turkey, under which 97% of €6 billion has already been allocated. EU support is also focusing on resilience, stability, economic and employment opportunities. Cooperation with partner countries on return has also improved, with return and readmission agreements and arrangements now in place with 23 partner countries.
Groundwork laid for future strong and fair asylum rules:The need for a reformed Common European Asylum System was one of the clearest lessons of the 2015 crisis. The Commission put all the necessary proposals on the table for a complete and sustainable EU framework for migration and asylum. Whilst progress was made on five out of seven proposals, the reform is still pending and a common approach to securing a fair, more efficient and sustainable asylum system is still needed.
Important progress on safe and legal pathways: Over the past 5 years, Member States have made the largest collective efforts ever on resettlement, with almost 63,000 persons resettled. Confirming their commitment and determination to ensure the continuity of EU resettlement efforts in the future, Member States have responded to the Commission’s call to continue resettling in 2020 by already pledging around 30,000 resettlement places.
More work and immediate steps required in key areas
Whilst the overall migratory situation across all routes has returned to pre-crisis levels with arrivals in September 2019 being around 90% lower than in September 2015, the situation remains volatile and geopolitical developments have created new challenges for the EU. Further work is needed to address immediate key challenges and to progress on on-going work, in particular:
Urgent action to improve the conditions in the Eastern Mediterranean: Whilst the Greek authorities have undertaken steps over the past months to alleviate the pressure on the islands, including notably a new reception strategy and new asylum measures, the increase in arrivals has put strain on an already fraught system. While the EU-Turkey Statement continues to deliver concrete results, renewed migratory pressure in Turkey and instability in the wider region continues to cause concern. In view of this, urgent action must be taken to improve reception conditions, increase transfers to mainland Greece from the islands and increase returns under the Statement. The Commission is also stepping up its support to Cyprus, which is currently facing an increase in arrivals.
More solidarity on search and rescue: Despite search and rescue efforts, lives continue to be lost at sea and the ad hoc relocation solutions coordinated by the Commission are clearly not long-term remedies. The Commission remains committed to working with and supporting Member States in agreeing temporary arrangements to facilitate disembarkation following search and rescue in the Mediterranean, and encourages more Member States to participate in solidarity efforts. Such arrangements could serve as inspiration for addressing flows in other parts of the Mediterranean.
Accelerate evacuations from Libya: The situation in Libya remains a major concern. After violent conflict erupted in and around Tripoli in April 2019, intensified efforts through the trilateral AU-EU-UN taskforce must continue to help free migrants from detention, facilitate voluntary return (49,000 returns so far) and evacuate the most vulnerable persons (over 4,000 evacuated). Member States urgently need to increase and accelerate the pace of resettlements under the Emergency Transit Mechanism (ETM) in Niger run with the UNHCR and support the newly established ETM in Rwanda.
EU trade agreements: Delivering new opportunities in time of global economic uncertainties
Despite the difficult global economic climate, European companies have continued to make good use of the opportunities created by the European Union’s trade network – the largest in the world. In 2018 this network covered 31% of Europe’s trade exchanges, a figure that is set to rise significantly (to almost 40%) as more trade agreements enter into force, according to the European Commission’s annual report on the implementation of trade agreements released today. Overall, trade accounts for 35% of the EU’s gross domestic product (GDP).
In 2018 EU exports to and imports from trade agreement partners showed positive developments, with a continued growth of 2% and 4.6% respectively, with a strong performance of EU agri-food exports. The EU’s growing network of trade agreements is creating economic opportunities for workers across Europe, with over 36 million jobs being supported by exports to outside of the EU. The EU recorded a surplus of €84.6 billion in trade in goods with its trade agreement partners, compared to its overall trade deficit with the rest of the world of about €24.6 billion.
Commenting on the report, Commissioner for Trade Cecilia Malmström said “Trade agreements create opportunities for European businesses to grow and hire more people. Today’s report shows that overall trade is up, and more of our global trade is covered by preferential deals than ever before. Our food and drink exports in particular are flourishing thanks to lower tariffs and legal protection abroad for artisanal EU products like Champagne and Feta. The report also provides evidence of how our focus on trade and sustainable development is bearing fruit. Furthermore, we have taken a number of unprecedented steps to enforce the commitments made by our trade partners in the last year, including notably on workers’ rights. There is still work to be done, of course. But by opening up this data to the wider public we hope to launch a wider discussion about how to make sure trade agreements benefit as many citizens as possible.”
Looking at specific sectors across agreements, the 2018 report shows:
- EU agri-food exports to trade partners continued to grow with an overall increase of 2.2% compared to the previous year. Exports of agri-food products to South Korea also gained 4.8 %. Also noteworthy are agri-food exports to Georgia, Moldova and Ukraine, which grew by 11% compared to 2017;
- EU industrial goods exports also increased overall by 2%, with stronger growth among others for chemicals (2.5 %), mineral products (6 %) and base metals (4.4 %).
Looking for instance at one of the recent trade agreements, the report shows that in the first full calendar year (2018) of the EU-Canada trade agreement implementation:
- bilateral trade in goods grew by 10.3% and the EU’s trade surplus with Canada increased by 60%;
- EU goods exports to Canada rose by 15% (or €36 billion in extra export revenue), especially for sectors where import duties were previously high such as pharmaceuticals (up 29%), machinery (up 16%) or organic chemicals (up 77 %);
- EU Agri-food exports to Canada (accounting for 9% of total EU exports) rose by 7%.
Moreover, following intensive discussions in the joint committees created under the different trade agreements, several partner countries lifted barriers to trade, thus allowing more EU companies to benefit fully from the opportunities these agreements offer. Danish and Dutch farmers, for example, will be able to export beef to South Korea, while Poland and Spain will be able to export poultry meat to South Africa.
The report investigates also the impact of the provisions included in the dedicated ‘Trade and Sustainable Development’ (TSD) chapters, which are part of all modern EU trade agreements. These chapters aim at engaging with trade partners to implement international rules on labour and the environment, as incorporated in multilateral environmental agreements or International Labour Organisation (ILO) conventions. Recent achievements ahead of the entry into force of the respective agreements include the ratification by Mexico and Vietnam of ILO Convention 98 on the rights to organise and collective bargaining. Additionally, the agreements with Vietnam, Japan, Singapore, Mercosur and Mexico include reinforced commitments to effectively implement the Paris Agreement on Climate Change.
In 2018 and 2019, the EU also took several enforcement actions under its trade agreements, including in relation to labour standards. Among other examples, the EU requested a panel following South Korea’s failure to ratify ILO Conventions on workers’ rights, notably freedom of association and collective bargaining.
However, the report also highlights the need to increase efforts – together with Member States and stakeholders – to raise awareness of the opportunities trade agreements offer, as well as stepping up enforcement action so the agreements deliver the intended results.
The report will now be subject to discussion with the European Parliament and Member States’ representatives in the Council.
How to increase green investment in the EU
A shift to a less-polluting economy requires significant investment. The EU wants to attract more private money as public funds are insufficient.
The EU needs about €180 billion a year of additional investment in energy efficiency and renewable energy to cut carbon emissions 40% by 2030. Even more is needed to achieve carbon neutrality by 2050.
Some investment in climate and environment projects comes from the EU budget. For example, about 20% of the 2019 budget of €165.8 billion is related to tackling climate change. The European Parliament wants to increase this share of the budget to 30%.
How does the EU attract private green investment?
Public money is not enough for the amount of green investment that is needed, which is why the EU is working to attract private investment. Billions have already been mobilised through the European Fund for Strategic Investments and European Investment Bank (EIB) loans, and the share of money earmarked for climate projects is set to increase.
The EIB’s role in financing climate-friendly projects has increased. In her speech in Parliament in July, Ursula von der Leyen, the future president of the European Commission, said she would propose increasing it further by turning parts of the EIB into Europe’s climate bank. How to get the EIB more involved in green projects was discussed by MEPs on Wednesday 9 October.
The Parliament and the Council are also discussing new rules on sustainable investment that would act as a guide to investors, businesses and policy makers on what economic activities and investments should be considered as green.
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