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EU trade policy: Frequently asked questions

15-10-2019

This paper seeks to serve as a key resource for policy-makers who need to understand complex issues related to international trade quickly. It also outlines the key academic debates and issues, and provides references to further resources that could offer useful support to the work of policy-makers in the European Parliament. It seeks to provide immediate answers to the most commonly asked questions related to EU trade policy: from the evolution and scope of EU common commercial policy to the role ...

This paper seeks to serve as a key resource for policy-makers who need to understand complex issues related to international trade quickly. It also outlines the key academic debates and issues, and provides references to further resources that could offer useful support to the work of policy-makers in the European Parliament. It seeks to provide immediate answers to the most commonly asked questions related to EU trade policy: from the evolution and scope of EU common commercial policy to the role of different EU institutions and the economics of trade. It includes explanations of key trade concepts. In addition, the paper covers the procedures for the conclusion of international trade agreements, types of trade relationship, and the specific characteristics of EU legal instruments in the area of trade. Lastly, it addresses the issues of trade and sustainable development, which have grown into a key area of concern for Parliament.

US: Economic indicators and trade with EU

14-10-2019

The USA remains the EU's top trading partner and export market. The EU and US economies account for about half the entire world's GDP, and for nearly a third of world trade flows. The European Commission reported in 2016 that over 10 million European jobs depend on exports to the USA. This Infographic provides you with essential data on trade between the EU and US. This is an updated edition of an ‘at a glance’ note from July 2018.

The USA remains the EU's top trading partner and export market. The EU and US economies account for about half the entire world's GDP, and for nearly a third of world trade flows. The European Commission reported in 2016 that over 10 million European jobs depend on exports to the USA. This Infographic provides you with essential data on trade between the EU and US. This is an updated edition of an ‘at a glance’ note from July 2018.

International trade [What Think Tanks are thinking]

13-09-2019

The escalating trade conflict between the United States (US) and China has dampened economic growth in the European Union and other regions of the world, analysts say, and poses a further question mark over the continuity of the post-Cold War rules-based order. The EU is seeking to position itself as a defender of the multilateral rules-based system in the context of growing economic nationalism. The EU will need to coordinate closely its trade and climate policies, and think clearly about how best ...

The escalating trade conflict between the United States (US) and China has dampened economic growth in the European Union and other regions of the world, analysts say, and poses a further question mark over the continuity of the post-Cold War rules-based order. The EU is seeking to position itself as a defender of the multilateral rules-based system in the context of growing economic nationalism. The EU will need to coordinate closely its trade and climate policies, and think clearly about how best to defend its economic interests in the challenging new geopolitical environment facing the incoming European Commission. This note offers links to a series of recent commentaries and reports from major international think tanks and research institutes on international trade policy. More reports on trade can be found in a previous edition of 'What Think Tanks are thinking' published in June 2018.

EU policies – Delivering for citizens: International trade and globalisation

28-06-2019

The European Community was founded on the belief that economic integration leads to peace and economic prosperity. Trade is therefore a fundamental part of the identity of the European Union (EU) today. Given the success of the internal market in fostering the longest period of European peace in modern history, the EU considers itself an example of the benefits of trade, globalisation and economic openness. International trade policy is an exclusive competence of the EU, and with the combined economic ...

The European Community was founded on the belief that economic integration leads to peace and economic prosperity. Trade is therefore a fundamental part of the identity of the European Union (EU) today. Given the success of the internal market in fostering the longest period of European peace in modern history, the EU considers itself an example of the benefits of trade, globalisation and economic openness. International trade policy is an exclusive competence of the EU, and with the combined economic weight of its Member States behind it, the EU is one of the key players in global trade. Yet trade policy is about more than stability and growth for the EU, as it is also used to encourage poor countries to develop, foster international alliances and support fundamental values in the world. A strong partner in the World Trade Organization (WTO), the EU backs an international trading system based on rules rather than might. The benefits of globalisation and international trade have nevertheless been questioned in recent years, including within the EU. This has led it to reinvigorate its trade policy, in particular by presenting a new trade strategy and a reflection paper on harnessing globalisation. The EU's new 'trade for all' strategy addresses criticisms and focuses on making its trade policy more effective, transparent and value-based. In line with this strategy, the EU has pursued ongoing trade negotiations with renewed vigour and launched new trade and investment talks, resulting in state-of-the-art agreements with countries such as Canada and Japan. The EU faces uncertain times due to major shifts in international trade, coming from both the West and the East. In response, it seeks to promote economic openness, standing up for its values and protecting its interests. For example, the EU has retaliated against United States (US) steel tariffs and continues to defend the rules-based international trading order. Contentious trading practices on the part of third countries, including China, have led the EU to modernise its trade defence instruments, prepare a new foreign investment screening mechanism and seek a reform of the WTO. The EU is likely to continue this approach in the coming term, pursuing international cooperation and new agreements, possibly also at a continental level with Africa, and striving to protect its citizens and businesses from economic harm. This is an update of an earlier briefing issued in advance of the 2019 European elections.

Trade negotiations with Australia and New Zealand

03-05-2019

This study explores the context and potential of the FTA negotiations between the EU and Australia and New Zealand. Through an analysis of the status quo, as well as several academic and policy analyses, it highlights the main opportunities for the EU from the negotiations, as well as potential threats and obstacles to agreement. The study explores in detail the likely impacts of market opening on trade in goods and services, as well as the potential in other key areas, including public procurement ...

This study explores the context and potential of the FTA negotiations between the EU and Australia and New Zealand. Through an analysis of the status quo, as well as several academic and policy analyses, it highlights the main opportunities for the EU from the negotiations, as well as potential threats and obstacles to agreement. The study explores in detail the likely impacts of market opening on trade in goods and services, as well as the potential in other key areas, including public procurement and investment. It also highlights the current architecture of FTAs which Australia and New Zealand have established, especially the very recent Comprehensive and Progressive Trans Pacific Partnership (CPTPP), to which both are party. It explores how these agreements impact on the EU’s competitiveness in the Australian and New Zealand markets and how FTAs could be leveraged to improve EU integration with these partners and their broader region. The study also considers how trade and sustainable development (TSD) can be effectively integrated into the agreements, in line with the objectives of the EU’s ‘Trade for All’ strategy. Finally, several potential wider, more political impacts of the FTAs are underlined.

External author

Louise CURRAN

Understanding trade balances

08-02-2019

Trade policy discourse on both sides of the Atlantic has recently focused on trade deficits and surpluses. In the United States (US), President Donald Trump has routinely referred to the US trade deficit as a central indicator of the country's economic woes and made its reduction a key objective of US trade policy. In Europe, the world's largest trade surplus, run by Germany, has come under scrutiny. However, focusing on trade balances of exports and imports can be misleading in the trade policy ...

Trade policy discourse on both sides of the Atlantic has recently focused on trade deficits and surpluses. In the United States (US), President Donald Trump has routinely referred to the US trade deficit as a central indicator of the country's economic woes and made its reduction a key objective of US trade policy. In Europe, the world's largest trade surplus, run by Germany, has come under scrutiny. However, focusing on trade balances of exports and imports can be misleading in the trade policy context. Trade balances need to be considered as an integral part of a larger whole, the balance of payments of an economy. The imposition of specific trade policy measures, such as unilateral tariffs, cannot be expected to improve a trade balance significantly.

Consequences of US trade policy on EU-US trade relations and the global trading system

17-10-2018

The Trump Administration’s trade policy is driven by the belief that previous Administrations have let other countries take advantage of the United States for foreign policy reasons, as demonstrated by America’s more open trade regime and its trade deficits. It is determined to end this perceived imbalance by demanding reciprocity instead, and is willing to use tough tactics to achieve this through strict enforcement of its procurement and trade defense law; expansive tax provisions; bringing the ...

The Trump Administration’s trade policy is driven by the belief that previous Administrations have let other countries take advantage of the United States for foreign policy reasons, as demonstrated by America’s more open trade regime and its trade deficits. It is determined to end this perceived imbalance by demanding reciprocity instead, and is willing to use tough tactics to achieve this through strict enforcement of its procurement and trade defense law; expansive tax provisions; bringing the WTO dispute settlement to a halt; withdrawing from and forcing others to renegotiate existing bilateral and multilateral agreements; adopting a novel “national security” argument to justify breaking WTO tariff commitments for steel, aluminum and possibly autos; and enacting punitive tariffs on billions of dollars of imports from China, possibly threatening a trade war. The scenarios for U.S.-EU trade relations as well as the global trading system are anything but rosy. The EU can stand up to the Administration’s “bullying,” or it can take advantage of America’s need for a “re-balancing” to build its own stature by taking simple steps to improve EU-U.S. trade, forging a way forward in the WTO, and providing necessary leadership to address the dangers China’s economic system poses to the global trading order.

External author

Peter CHASE, Peter SPARDING, Yuki MUKAI

A new era in EU-China relations: more wide-ranging strategic cooperation?

19-07-2018

China is an important strategic partner for the EU, despite fundamental divergences in some areas, mostly related to state intervention and fundamental human rights. The partnership offers mutually beneficial cooperation and dialogue in areas ranging from investment and transport to human rights and cybersecurity. China is navigating in new directions, guided by Xi Jinping's 'Thought on Socialism with Chinese Characteristics for a New Era’. Despite President Xi’s repeated avowals that 'the market ...

China is an important strategic partner for the EU, despite fundamental divergences in some areas, mostly related to state intervention and fundamental human rights. The partnership offers mutually beneficial cooperation and dialogue in areas ranging from investment and transport to human rights and cybersecurity. China is navigating in new directions, guided by Xi Jinping's 'Thought on Socialism with Chinese Characteristics for a New Era’. Despite President Xi’s repeated avowals that 'the market will have a decisive role', public ownership remains the mainstay of the Chinese economy, whereas profound reforms would be needed to tackle the root causes of overcapacity in various industrial sectors. Xi's ‘Belt and Road Initiative’, now also included in the Constitution, is the flagship international connectivity and infrastructure programme dominated by Chinese state-owned companies. Overall, China’s crucial, but complex transition towards more sustainable growth would eventually benefit both, China and the world as a whole. Global economic interdependence, however, makes certain spill-over effects of China’s rebalancing unavoidable. China plays a pivotal role in global governance and the rules-based international order, and this comes with responsibilities. Beijing has begun to shift away from the narrow pursuit of national aims towards a more assertive foreign and security policy, and increased financial, economic and security cooperation with a global outreach. China is also facing domestic concerns, such as lifting millions of people out of poverty and reducing ever-growing income inequalities, deterioration in the situation of human rights and freedoms as well as endemic corruption.

Protectionism and international diplomacy

25-06-2018

Just three decades after the fall of the Berlin Wall signifying the end of Cold War aggression and the ascendancy of international liberalism, the world faces even greater uncertainty. In every region of the world, geopolitical shifts are taking place that have brought offensive trade agendas to the fore. The US has withdrawn from underwriting the post-World War Two international economic and foreign policy architecture, instead proposing to build a wall between itself and neighbouring Mexico, imposing ...

Just three decades after the fall of the Berlin Wall signifying the end of Cold War aggression and the ascendancy of international liberalism, the world faces even greater uncertainty. In every region of the world, geopolitical shifts are taking place that have brought offensive trade agendas to the fore. The US has withdrawn from underwriting the post-World War Two international economic and foreign policy architecture, instead proposing to build a wall between itself and neighbouring Mexico, imposing unilateral tariff increases while refusing to negotiate new international agreements. In Europe, the project of ever greater integration has been attacked by Brexit, as well as other populist sentiment against the perceived power of EU institutions and the forces of globalisation. The breakdown of the western coalition advocating global governance has left a power vacuum that other key players such as China are forced to respond to. These current tectonic shifts in power and foreign policy positions impact on every country and every individual in the early 21st century. While many governments strive to maintain international cooperation and further integration, it is an unpredictable era. For trade policy has established itself firmly within the arena of high foreign diplomacy and as a result, traditional assumptions and adherence to international norms can no longer be assumed in such a state of political and economic flux. Yet when trade policy becomes a tool of diplomacy and foreign policy, sound economic reasoning can be lost to political decision making. This report shines a spotlight on the rise of protectionism in the 21st century. It examines the diplomatic dynamics behind economic nationalism and its attack on the established liberal international institutions that were created after the second World War to settle disputes without recourse to war. Before focusing on the US, UK, EU and China, the first chapter centers on the threat to economic integration and cooperation in promoting sustainable development through the multilateral rules-based system established under the World Trade Organization.

External author

Ms Kamala DAWAR

Human rights in EU trade policy: Unilateral measures applied by the EU

30-05-2018

Protection of human rights is one of the EU's overarching objectives in its external action, in line with the Treaty on European Union. One of the EU's main tools to promote human rights in third countries is the generalised system of preferences (GSP), granting certain developing countries preferential trade access to the EU market. Covering 90 third countries, the scheme includes explicit human rights conditionality, providing that preferences can be withdrawn in case of massive and systematic ...

Protection of human rights is one of the EU's overarching objectives in its external action, in line with the Treaty on European Union. One of the EU's main tools to promote human rights in third countries is the generalised system of preferences (GSP), granting certain developing countries preferential trade access to the EU market. Covering 90 third countries, the scheme includes explicit human rights conditionality, providing that preferences can be withdrawn in case of massive and systematic violations of core human rights or labour rights norms. A special incentive arrangement under the GSP grants further tariff concessions to countries that ratify and implement a series of international conventions. Based on systematic monitoring by the European Commission, this special scheme is the most comprehensive and detailed human rights mechanism established in the framework of the common commercial policy. While the scheme has been particularly effective in encouraging beneficiary countries to make the necessary legislative and institutional changes, such progress has not been matched at the level of implementation. Suspension of preferences under GSP has been applied in only a few cases and, when it was, did not have an immediate and clear impact on the human rights situation. In practice, the EU has privileged a strategy of incentivising gradual progress through dialogue and monitoring, rather than withdrawing preferences. The EU's unilateral trade measures to protect human rights are not limited to the GSP. The EU has taken steps to prohibit or limit trade in items that could cause human rights violations, such as torture and execution equipment, and dual use goods. New legislation has recently been adopted on conflict minerals, and the European Parliament has called for a proposal for legislation to ban the import of goods produced using child labour. This is an updated edition of a briefing published in January 2017: PE 595.878.

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