eu trade policy in a changing world: the context

The Context

Isabelle Ramdoo, ECDPM

Mexa Worskshop, 27 July 2012Labourdonnais Waterfront, Port Louis

EU Trade Policy in a changing world

Overview of Presentation

1. Introduction

1. EU FTAs: Where?

1. EU new trade policy: Why?

1. EU Trade Policy: With whom?•Autonomous Scheme – Generalised System of Preferences•Economic Partnership Agreements•Bilateral FTAs•FTAs under negotiations•Trade relations with other countries

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• After imposing a moratorium on negotiating new PTAs from 1999-2006, the EU in 2007 began negotiating a new generation of more ambitious or comprehensive FTAs.

• 2006 Global Europe strategy: the EU targeted a number of larger countries and regions for negotiations, including South Korea, India, Canada, and the Association of South East Asian Nations (ASEAN).

• Whether the EU will be successful with a more ambitious and comprehensive agenda of FTAs remains to be seen.

Introduction

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1. EU FTAs – Where?

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EU’s trade agreements can be grouped into four categories :

1.Agreements for geographically close neighbours for which the EU is prepared to offer accession or some slightly looser relationship. These include EFTA, Turkey, Central and Western European countries and West Balkans (Association Agreements for potential future EU countries

2. Agreements designed primarily to foster stability around the EU borders – Mediterranean countries, Gulf States, Ukraine

3.Agreements with a historical and development focus – this is the case of EPAs

EU Trade Policy in a changing world

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4. FTAs with strategic partners: countries and regions where EU’s objective is to neutralise potential

discrimination against EU exports and investments resulting from FTAs between third countries or to secure commercial benefits via increased market access –e.g Korea, Chile, South Africa, Singapore etc.

In addition, EU provides autonomous preferences to developing countries and LDCs under its Generalised System of Preferences (GSP). The current GSP covers 176 countries.

Reform ongoing – number of countries will be reduced to about 80. All high income and upper middle income countries (eg. China, Brazil, Malaysia, Gulf states) will be removed. New GSP will start in 2014.

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Expansion of Trade flows• Global exports of goods and services grew at a real average rate of

6.3% in the period 1980 to 2008, while GDP growth averaged 2.9% during the same period. Trade in services rose from $0.5 billion in the 1980s to an average of $2.5 billion in the 2000s.

• Developing countries are now new drivers of global trade: between 2000 and 2009 their exports rose by 80%, compared to 40% for the world as a whole

Fragmentation of global value chain production in goods and services

• Production increasingly taking place through global value chains dominated by multinationals.

• Two thirds of world imports concern intermediate inputs.• Expansion of world trade mainly in international outsourcing and off-

shoring of services.

2. EU new trade policy: Why?

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• Participation of developing countries in global services trade rose from 19 to 24% during the same period.

• Trade patterns moved from a country specialisation based on goods (primary commodities for the South and manufactures for the North) to intra-firm/network specialisation in terms of tasks, giving the South considerable advantage in the production of manufactures

• The rise of the emerging economies: Brazil, Russia, India, China, and South Africa– now economic and political actors (members of G20). Together, they account for more than 40% of the world population (market) and approximately 17% of the value of world GDP (purchasing power).

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Improved market access for key products for negotiating country BUT erosion of preferences for others:

In 2010: some 400 PTAs in 2011, covering 50% of world trade (65% for manufactures). All WTO members (except Mongolia) belong to at least one PTA. South-South agreements represent 66% of all PTAs in force and North-South about 25%.

Tariff preferences are a minor motivation for entering into PTAs: increasingly used to promote services, investment, trade facilitation, competition policy and government procurement etc.

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Implications of FTAs

1. Autonomous Schemes

• The Generalised system of Preferences• EU was the first to implement a GSP Scheme in 1971• The current GSP has 3 schemes:

1. A standard GSP, available to all developing countries, providing preferences;

2. A GSP Plus Scheme, available to countries meeting some “vulnerability criteria” and implementing 27 conventions on sustainable development and good governance, providing more preferences than under the standard GSP Scheme to eligible countries;

3. An Everything but Arms Scheme, giving duty free and quota free market access to all LDCs

3 EU Trade policy : With whom?

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EU is currently reviewing the GSP. Will kick in in 2014. The new GSP will be available to:

- A smaller number of developing countries (80 countries compared to 176 countries at present)

- Provides a 3.5% point reduction from normal (MFN) rate for all beneficiary countries (e.x if the tariff is 24%, the GSP is (24 – 3.5 = 20.5%)

- For textiles – a 20% reduction of tariff (if tariff is 20%, GSP rate is (.8 x 20 = 16%)

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But new RoO since 1st January 2011. Key elements• Differentiated rules for LDCs and non-LDCs;

For LDCs• For most industrial products, the threshold of valued added

requested in the LDCs is only 30% (as against 50% for non-LDC).

• For textile and clothing, single transformation has been granted to LDCs without quotas.

Cumulation• new opportunities of cumulation. • Regional cumulation is maintained and enhanced.

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Derogation• the system of derogations from the rules of origin has been made

easier to apply for. • a procedure is introduced allowing the EU to rapidly grant

derogationvs on its own initiative, in order to be able to respond more quickly to any special situation which may occur, such as natural disasters

Simplified rules for exporters as from 2017

• From 2017, exporters will no longer have to go to the authorities for a certificate of origin 'Form A' for each consignment. Instead, they would register with authorities (who would remain responsible for controls) and once registered, issue statements of origin themselves directly to their customers in the EU.

This set of rules is – or will be – used as a point of reference during ongoing and future FTA negotiations

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2. Economic Partnership Agreements:

Today, 36 ACP countries have an EPA. They are:16 Caribbean countries (Haiti did not sign);2 Pacific countries (Fiji and Papua New Guinea)2 West African countries (Ivory Coast and Ghana)1 Central African country (Cameroun)5 Eastern and Southern African countries (Mauritius, Seychelles, Madagascar, Zambia, Zimbabwe)5 SADC countries (Mozambique, Botswana, Lesotho, Swaziland, Namibia)5 East African countries (Kenya, Burundi, Rwanda, Uganda, Tanzania)

All of them have duty free and quota free market access to EU

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• Formerly under unilateral preferences (Lome/ Cotonou) until 31 December 2007

• Since 1st January 2008, Mauritius has an EPA with the EUMauritius exports of main products to key markets

Trade relations between Mauritius and EU

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T Shirts Cotton

Shirts Cotton

TrousersT Shirts

Man made

Pull Cotton

YarnDenim Fabric

Cotton Fabric

Pull Wool

Total Exports to world (€

'000)285,393 142,831 93,948 77,571 25,393 14,442 14,332 6,922 6,023

EU 82.0% 6.3% 46.9% 85.5% 78.7% 33.9% 41.7% 8.8% 75.5%

US 1.5% 82.1% 10.5% 2.9% 10.5%

Madagascar 60.0% 10.2% 56.7%

South Africa 15.1% 5.0% 37.4% 9.8% 10.2% 19.9% 19.0% 24.2%

Bangladesh 3.2%

Turkey 15.9%

Tuna, skip jackfish prepared and

preservedFish fillets, fresh,

frozen, chilled

Total Exports to world (€ '000) 264,350 9,683 4,732EU 97.5% 100.0% 40.0%US 2.5% 3.5%

Japan 50.4%South Korea 3.1%

Rules of origin for fish and fish products and textiles

Fish and fish products:• Value tolerance: 15% ex-works price• Vessels: • Registration and flag requirements;• Ownership: either 50% owned by nationals or companies

headquatered in ESA or EC and 50% owned by EC or ESA• No crew requirements• Automatic derogation: 10,000 MT (8,000 for canned tuna and

2,000 for loins) for Mauritius, Seychelles and Madagascar • Specific rules: for fresh products – wholly obtained; for canned

and loins: materials from chapter 3 (fresh produce)

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Textile products• Yarn: manufacture from raw silk, natural fibres, chemical

materials, textile pulp• Fabric: Single stage transformation• Garment: Single stage transformationValue tolerance: 10% of weight of basic material used

Cumulation:- Bilateral cumulation with EU- Cumulation in ESA states, OCT and ACP states (excluding South

Africa) having an EPA- Cumulation with neighbouring countries (Algeria, Egypt, Libya,

Morocco, Tunisia, Maldives), provided the provisions of the EPA protocol apply and countries have concluded an customs administration cooperation agreement

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• To date, EU has signed the following agreements:• 1. A customs union with Turkey• A European Free Trade Agreement (EFTA) with neighbouring European

countries, which are not part of the EU (Switzerland, Liechtenstein, Iceland, Norway).

• Stabilisation and Association Agreements with former Eastern European countries (Macedonia, Croatia, Albania, Montenegro, Bosnia, Serbia)

• Association agreements with Mediterranean countries (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestine, Syria, Tunisia)

• Free Trade Agreements with Mexico (1999), Chile (2002), Korea (2012)• EPAs with ESA, Cariforum, PNG (2008)• Trade and Development Cooperation Agreement, South Africa (1999)• Preferential agreements with Peru – Columbia (2012); Central America

with Panama, Guatemala, Costa Rica, El Salvador, Honduras, Nicaragua (2012) ; These 2 agreements are not yet into force

3. Bilateral FTAs – Agreements signed

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• These FTAs represent a total of 26.4% of EU imports, of which 14 % come from EFTA and Turkey.

• EU trades duty free with EFTA and Turkey in industrial products, but not in agriculture For fish products, duties are as follows:

• In Latin America, Agreements provide preferential treatment to fish products, but not duty free treatment.

• Before their FTAs, Columbia and El Salvador already had duty free because they had a special scheme with the EU, GSP +

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Fish fillets, fresh,

frozen, chilledTuna, skip jack

fish prepared and preserved

EEA 5.4% 7.2% 7.2%Turkey 0.0% 0.0% 0.0%

MFN 18.0% 24.0% 24.0%EPA Mauritius 0.0% 0.0% 0.0%




Mexico 0.0% 6.8% 6.8%Chile 3.4% 8.0% 8.0%

Colombia* 0.0% 0.0% 0.0%El Salvador* 0.0% 0.0% 0.0%

• South Korea benefits from duty free for textiles. Fish products are covered but do not benefit from duty free

• South Africa: textiles are covered by the TDCA but not fish products. Therefore SA exports under GSP preferences

• Euromed countries have duty free access to EU for textiles and for fish products

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South Korea 13.5% 16.0% 16.0%




South Africa 14.5% 20.5% 20.5%

EU is currently negotiating a number of FTAs with key developing countries, where it has market access interests (20.2% of EU imports):

•India – a high potential economy, with rising middle class (markets) and rising GDP (purchasing power). Negotiations are quite slow.

•ASEAN (Indonesia, Malaysia, Philippines, Singapore, Philippines, Thailand, Vietnam, Cambodia, Laos, Myanmar): Third largest trading partner of EU. Negotiations for FTA have started with Singapore and Malaysia in 2010. Vietnam started negotiations in 2012

•Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE). Negotiations were re-launched in 2002

•MERCOSUR - Argentina, Brazil, Paraguay and Uruguay – first EU’s market for agriculture (19.8% of total EU imports). Negotiations difficult (8 rounds)

•Canada: Quite advanced, expected to be concluded in 2012.

FTAs under negotiations

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• EU’s trade policy aims at key markets. So far, almost 50% of EU’s trade remain outside FTAs (China, Russia, USA, Japan)

• Possible FTAs – Japan, US, Thailand, Philippines – discussions have started, but no fixed date yet for start of negotiations (will cover 18% of EU’s imports)

• No planned FTAs – China, Russia (covers 30% of EU’s imports)

Trade relations with other countries

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eu trade policy in a changing world: the context

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