eu and the world trading system razeen sally european centre for international political economy/...
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EU AND THE WORLD TRADING SYSTEM
Razeen Sally
European Centre for International Political Economy/
London School of Economics
www.ecipe.org
EU AND THE WORLD TRADING SYSTEM
• 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 AND THE WORLD TRADING SYSTEM
• 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 AND THE WORLD TRADING SYSTEM
• 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%
Rest of the World34%
ASEAN*7%
United States20%
Japan7%
Korea, Republic of3%
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%
Korea, Republic of4%
Japan8%
United States12%
ASEAN*8%
Rest of the World40%
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%
Rest of the World35%
ASEAN*7%
United States21%
Japan6%
Korea, Republic of3%
China8%
India2%
Share of Exports of Word Trade in Commercial Services (exc. Intra-EU (25) trade, 2005
European Union30%
Rest of the World35%
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%
Rest of the World37%
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%
Rest of the World23%
ASEAN*1%
United States22%
Japan6%
Korea, Republic of0%
China0%
India0%
IFDI Stock Accumulated 1980-2005 (percentage of Global IFDI Stock)
India1%
China9%
Korea, Republic of1%
Japan1%
United States13%
ASEAN*4%
Rest of the World31%
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%
Korea, Republic of1%
Japan5%
United States16%
ASEAN*1%
Rest of the World22%
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%
Rest of the World31%
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
Source: DG Trade Statistics, European Commission (http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) / Eurostat
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
Total = Imports & Exports
Total = Imports & Exports
Total = Imports & Exports
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
Source: DG Trade Statistics, European Commission (http://ec.europa.eu/trade/issues/bilateral/dataxls.htm) / Eurostat
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.
EU AND THE WORLD TRADING SYSTEM
• The WTO
-- Structural shifts from GATT to WTO
-- Doha round: evolution; state of play; prospects
-- What future for the WTO?
EU AND THE WORLD TRADING SYSTEM
• 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
EU AND THE WORLD TRADING SYSTEM
• FTAs
-- Huge proliferation of FTAs
-- Building blocs or stumbling blocs?
-- Strong FTAs the exception; most are “trade light”
-- Consequences: rampant discrimination; the spaghetti bowl
EU AND THE WORLD TRADING SYSTEM
• 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.
EU AND THE WORLD TRADING SYSTEM
• 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
EU AND THE WORLD TRADING SYSTEM
• 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
EU AND THE WORLD TRADING SYSTEM
• 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
EU AND THE WORLD TRADING SYSTEM
• Conclusion
-- EU: challenge of constructive engagement while containing domestic protectionism
-- Multi-track trade policy and internal-market reforms
-- What role for the new members?