Main EU policy objectives in

international trade negotiations

by Pierre DEFRAIGNE Director of eur-IFRI

EU as a civilian/soft power

• EU relies on trade and aid to contribute to objectives which go beyond tradeGeopolitical (neighbourhood stabilisation and

African desintegration, wage on terrorism and non proliferation, illegal migrations, international crime)

Cultural and political affinities with some groups of countries (francophonie, Commonwealth, Latin America, Israël)

Issues such as democracy, human rights, rule of law and good governance;

Climate change and biodiversity

EU singularity as a trade power(I)• Key to EU prosperity is the unique balance

between regional integration on the one hand, combining liberalization with rules and norms harmonization, and external liberalization on the other

• Hence its preference for multilateralism for which regionalism is both a laboratory and a pillar since multipolarity goes hand in hand with multilateralism

• Hence the parallelism in the course of EU construction between progress of internal integration and progress of multilateral liberalisation: the Single Market never was a ‘fortress Europe’;

• Gatt and WTO might never have come into existence without EU integration and EU-US trade relationship would have been very difficult without WTO DSM

EU singularity as a trade power (II)• Concern for trade-ands issues: collective

preferences favour social justice, environmental responsibility, precaution principle, balance between State and market in some key areas (education , health, culture, utilities, security) and cultural diversity

• Hence the strong interest for social, environment and health standards, public services and culture (audiovisual) and for linking those concerns with trade liberalization

EU singularity as a trade power (III)

• Support for regional integration worldwide in particular for developing countries , but within the multilateral framework of WTO.

Questioning multilateralism

• But EU like other trade powers goes increasingly frustrated with the difficulty to achieve their goals (market access and rules) through a multilateral setting: EU takes the bilateral/regional route as a way to move quicker , but always with a vision to pave the way for further multilateral streamlining ;

• USA and some key East ASIA actors might be tempted by continental trade blocks as alternatives to WTO; USA sees itself as the ‘intersection set’ between Asia, the Western Hemisphere ..and a very elusive EU-USA FTA.

Questioning non commercial FTAs effectiveness

• On the one hand, with regard to development , the emphasis goes more on good governance and domestic policies than on aid and trade only, but it proves difficult to achieve;

• o,n the other, so far no RTA has delivered much in terms of ‘trade and’ issues

Emphasis goes on competitiveness and market access• Need to rekindle the Strategy of

Lisbon presently stuck in most MS• Boosting it through a more

aggressive trade policy sounds a good idea

• The starting point is the need to contain protectionism in the face of China’s massive imports in any market segment

The new trade paradigm and the Chinese factor• Trade and capital liberalisation , logistics and IT revolution,

decisive role of global firms and global financial markets have eased the emergence of a ‘global output/value added chain’ :from final products to inputs trade; growing importance of intra-firm trade; outsourcing and relocations (mobility of manufacturing facilities as a substitute for the mobility of goods and/or of workers );

• The Chinese factor : the 1978 ‘cat deal’ has given rise to an unprecedented combination of cheap labour and imported technology and generates super margins of competitiveness;

• Hence the growing importance for the global firms of the nexus: services, investment, intellectual property rights effective protection

Some drawbacks of the new paradigm

• Vulnerability of leaner and overstretched global output lines

• Environmental costs of excessive mobility

• Growing inequalities among countries and within countries with the risk of ‘winner takes all’ scenarios

EU faces a two-pronged dilemna• Outside : between protectionism and

competitiveness• Inside : between competitiveness

and solidarity

Central America is confronted to the challenge of climbing up the value added chain• In the global output chain , the two ends

(innovation and design and marketing/distribution) are the most profitable whereas labour costs of the manufacturing phase in the developing countries are squeezed by competition among them around FDI attraction;

• It is therefore of utmost importance that developing countries undertake policies in order to increase their labour productivity –particularly through education – so as to reap a larger chunk of the value added.

• Central America must therefore conduct a three-pronged policy - integration , FTAs , and structtural policies- in order to upgrade its rank in the world competitiveness scale .