EU TRADE POLICY AND DEVELOPING COUNTRIES Overview -- Global trade-and-development scenarios; general priorities for EU trade policy -- EU in the WTO --

EU TRADE POLICY AND DEVELOPING COUNTRIES

• Overview

-- Global trade-and-development scenarios; general priorities for EU trade policy

-- EU in the WTO

-- EU and bilaterals

-- EU and low-income/least-developed countries

-- Managing EU trade policy


• Global trade-and-development scenarios

-- Crisis aftermath: anaemic West; bullish emerging markets; shift to the East

GDP Growth and Growth Estimates

2008 2009 2010

Advanced economies

0.556 -3.432 1.323

Africa 5.183 1.694 4.028

Developing Asia

7.585 6.205 7.347

Western Hemisphere

4.172 -2.534 2.901

International Monetary Fund, World Economic Outlook Database, October 2009

World Trade Goods and Services

Trade Volumes

2008 2009 2010

Import Export Import Export Import Export

Advanced economies

0.5 1.9 -13.7 -13.6 1.2 2.0

Africa 11.2 -0.5 -1.7 -4.9 5.0 4.2

Developing Asia

6.9 6.5 -7.0 -8.1 5.3 3.3

Western Hemisphere

7.4 3.1 -11.2 -6.7 3.6 2.7

International Monetary Fund, World Economic Outlook Database, October 2009

Growth in Industrial Production (2005-2009)

Growth in Merchandise Exports (2005-2009)

FDI inflows, global and by groups of economies, 1980-2008 (billions of dollars)


• Three scenarios for the world economy

-- Reglobalisation

-- Deglobalisation

-- Anaemic recovery


• Reglobalisation

Strong and adaptive economic systems – and efficient stimulus packages – shortened the crisis and speeded up recovery

-- Recovery cycle; then strong globalisation-- Similarities with the late 1990s rather than the noughties-- Geographical equalisation of trade and growth-- Horizontal and vertical integration-- Trade and FDI expansion drivers of growth-- Technological development and policy liberalisation


• Deglobalisation

Cyclical deglobalisation succeeded by structural deglobalisation through policy interventions.

-- Stimulus activities not effective; inflation; end to deflationary effect of globalisation

-- Creeping protectionism enforced by new wave of factor market interventions at home; 1930s style fragmentation

-- Short recovery cycle that ends when stimulus packages are phased out; new dip in 2012-2014

-- Trade and FDI never rebound fully; supply-chain collapse-- Spiralling protectionism-- Positive growth in China; Eursclerosis; US inflation cycle;

negative growth in commodity countries


• Anaemic recovery

-- A lost decade for trade and growth; creeping protectionism and structural problems keep the world economy at low growth rates

-- Similarities with the 1970s and early 1980s-- Creeping protectionism and domestic market interventions-- Slow trade and FDI growth-- Globalisation angst-- The return of industrial policy-- China’s and India’s growth slows down (6%), OECD and ACP

very low growth (+/- 1%)

Annual average growth of trade as part of GDP

Annual average growth of trade as part of GDP

Source: UNCTAD Statistical Handbook


• Anaemic recovery (cont.)

-- Domestic crisis interventions (bailouts, fiscal stimulus): macroeconomic consequences cloud horizon for developing countries

-- Return to Big Government: new interventions in product and factor markets distort competition

-- Spillover to regulatory protectionism

Scenarios for the global economy and trade policy

Reglobalisation Economy. Buoyant global economy driven by globalisation. Strong horizontal

integration, especially through emerging markets. Strong cross-border vertical

integration through supply-chain production networks. New wave of policy

liberalisation drives globalisation and growth.

Trade policy. Benign conditions for trade liberalisation. The Doha Round finishes

soon in the new decade, followed by an ambitious post-Doha agenda of liberalisation

and rule-strengthening. Regionalisation and plurilateralisation of PTAs.

Harmonisation and simplification of ROOs. Revived unilateral liberalisation of trade

and investments, freeing up trade in services in particular. Trade-related structural

reforms in OECD and emerging markets.

Deglobalisation Economy. Global economic contraction. Short periods of small growth.

Regionalisation and relocalisation of production as global supply chains unravel.

Trade policy. Malign conditions for trade policy. Doha Round dead and buried and

no post-Doha agenda. Huge strains on WTO dispute settlement. Marginalisation of

WTO. Big-power driven PTAs. PTAs are inward-looking and trade-restrictive.

Formation of clashing regional blocs. Escalating unilateral protectionism.

Scenarios for the global economy and trade policy (cont.)

Anaemic

Recovery

Economy. Economic growth patchy and uneven. A decade of volatility, also for

trade and FDI. Expansion initially in Asia, but at a slower pace. Eurosclerosis.

American and UK quagmire. Japanese malaise..

Trade policy. Trade policy generally defensive and closely related to the business

cycle and overall macro conditions. Continued drift and decline of the WTO.

Proliferation of weak, trade-light PTAs. More trade/investment diversion and

spaghetti/noodle bowls. More domestic interventions in capital, labour and

product markets. Creeping regulatory protectionism increases, e.g. green

protectionism.


Emerging protectionism: v. little up-front protectionism; rather creeping regulatory protectionism - Tariffs- Import licensing- Financial mercantilism- Subsidies- “Buy national” measures- Foreign-investment restrictions- Migrant labour- Anti-dumping duties- Standards protectionism, including climate change- China-bashing

• Domestic economic policy and trade policy are linked: lessons from previous eras


• EU trade policy

-- Link between Single Market and external trade policy

-- Crisis aftermath: Single Market under stress; defensiveness abroad


• EU trade-policy priorities

-- Must prioritise

-- First priority: EU commercial interests

-- Equal priority: Single Market – contain internal protectionism and further liberalisation/structural reforms


• EU in the WTO

-- EU should lead initiative to conclude a v. modest Doha Round

-- EU should lead strategic thinking on post-Doha priorities (market access, rules, flexible decision-making)

-- Emphasise market access, rules and plurilateral agreements where economic gains are largest

-- Development dimension is market access and rules, not exemptions, old-style S&D and aid (as in DDA)


• EU and bilaterals

-- Prioritise key commercial partners

-- Rhetoric but only half-reality of Global Europe

-- USA, Japan and China

-- Deep-integration FTAs; liberalisation and structural reform at both ends; open regionalism

EU (27) Trade Partners Goods, Excluding the EU

Exports Imports

Destination Value ShareAnnual percentage

change Origin Value Share

Annual percentage change

2008 2008 2007 2008 2008 2008 2007 2008

World 1924.9 100.0 16 10 World 2282.2 100.0 16 12

1. US 362.7 18.8 6 2 1. China 363.7 15.9 30 15

2. Russia 153.2 8.0 34 27 2. US 268.3 11.8 13 8

3. Switzerland 143.7 7.5 15 13 3. Russia 254.0 11.1 11 28

4. China 113.7 5.9 23 17 4. Norway 135.3 5.9 6 29

5. Turkey 79.8 4.1 15 11 5. Switzerland 117.8 5.2 17 12

6. Norway 64.3 3.3 24 8 6. Japan 109.9 4.8 11 2

7. Japan 60.4 3.1 6 3 7. Turkey 67.5 3.0 23 5

8. UAE 46.6 2.4 16 27 8. Korea 57.9 2.5 11 2

9. India 45.6 2.4 32 15 9. Brazil 52.1 2.3 31 16

10. Canada 38.4 2.0 6 8 10. Libya 50.3 2.2 15 34

Source: World Trade Organization, International Trade Statistics, 2009.

EU (27) Trade Partners Services, Excluding the EU

Exports Imports

Value Share Annual percentage change Value Share Annual percentage change

Destination 2007 2007 2004-07 2006 2007 Origin 2007 2007 2004-07 2006 2007

World 668280 100.0 14 13 21 World 548024 100.0 12 10 19

1. US 186557 27.9 10 11 14 1. US 168917 30.8 9 5 14

2. Switzerland 83728 12.5 14 8 26 2. Switzerland 58615 10.7 13 4 26

3. Japan 26376 3.9 5 -4 14 3. Japan 18427 3.4 13 11 14

4. Russia 25930 3.9 32 20 43 4. China 18386 3.4 27 28 26

5. Norway 25875 3.9 16 13 27 5. Russia 16020 2.9 18 11 19

6. China 24001 3.6 30 9 45 6. Norway 15977 2.9 11 11 22

7. Canada 15768 2.4 16 18 23 7. Turkey 15897 2.9 9 -4 21

8. Singapore 15491 2.3 19 24 19 8. Canada 12762 2.3 15 16 24

9. Australia 14617 2.2 19 10 28 9. Hong Kong 10919 2.0 20 18 34

10. India 12754 1.9 42 38 45 10. Singapore 9548 1.7 16 10 29

Source: World Trade Organization, International Trade Statistics, 2009.

Stocks of foreign direct investment abroad, EU-27, 2006

Source: Eurostat Handbook, 2009

Stocks of foreign direct investment in the EU-27, 2006

Source: Eurostat Handbook, 2009


• EU and China

-- Trade and investment patterns

-- Tension and conflict; more so since the crisis

-- EU priorities: contain China bashing (exchange rate and trade deficit); “micro” market-access priorities; more effective prioritising of the latter; limit zero-sum competition among member-states; limit intrusion of non-trade standards; strengthen dialogue (esp. HLD)


• EU and FTAs

-- Deep-integration FTAs beyond ROK, Canada and Singapore??

-- Drop negotiations if only prospect is shallow, trade-light FTAs (e.g. India, ASEAN countries)

-- Pursue non-FTA frameworks on selected issues, e.g. with Russia


• EU and low-income/least-developed countries

-- Trade and investment patterns (e.g. EU-ACP): marginal for EU; very important for others

-- Preferences (GSP, GSP+, EBA) and trade-related aid: limited tools for development; long record of mixed results and failure

-- Limit linkage of non-trade conditions in trade agreements (including climate change)

-- EPAs: cannot achieve regional-integration objectives; nor deep-integration FTAs; focus on border barriers; limit non-trade conditions


• Conclusion

-- EU trade-and-development priorities: summary

-- EU trade policy and the Lisbon Treaty: Commission and EP

-- Challenge: prevent populist, protectionist slide in EU trade-policy making; prevent using trade as foreign-policy tool to export EU “values”

Documents

EU TRADE POLICY AND DEVELOPING COUNTRIES Overview -- Global trade-and-development scenarios; general priorities for EU trade policy -- EU in the WTO --