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Topic - Trade Policy

Strengthening international trade and reducing barriers

Introduction

For many years, Germany has been one of the leading nations in the international trade of goods and services. Free global trade and fair competition help boost economic growth and create jobs in our country. The Federal Ministry for Economic Affairs and Energy therefore advocates open markets that are guided by clear rules.

Trade is important, especially for a country like Germany that accounts for 7.2 per cent of global trade. Many sectors of the German economy are heavily dependent on exports. This also has an impact on employment, with every fourth job in Germany directly or indirectly connected to exports. The export ratio – the share of exports of goods and services in our GDP – increased in 2015, reaching 46.9 per cent.

Open markets and fair rules

Countries that actively trade with others also prosper domestically. Free global trade generates a great deal of employment and economic growth in our country. This is why Germany has long been an advocate of open markets, fair international competition and trade liberalisation based on a clear set of predictable, multilateral rules. Further trade liberalisation is of essence to securing Germany’s future as an industrial hub.

However, opening markets further is not the only issue. In order to keep markets open, trade practices and subsidies which distort competition need to be combatted as well. This is done by utilising and moderately enhancing the WTO’s and EU’s trade-defence instruments (such as anti-dumping procedures).

Important events in the history of trade policy

1

30/10/1947

The GATT agreement is signed

2

01/10/1951

Germany joins the GATT

3

01/01/1995

The World Trade Organization (WTO) is launched

4

09/11/2001

Beginning of the Doha Round

5

18/04/2007

The European Commission’s Market Access Strategy

6

17/06/2013

The EU and the US announce the beginning of negotiations on a Transatlantic Trade and Investment Partnership (TTIP)

7

25/10/2015

The EU presents its new strategy on trade

8

25/10/2015

EU and Canada have signed the CETA free-trade agreement

The General Agreement on Tariffs and Trade (GATT) is an international treaty concluded in 1947 by its 23 founding members, including the US, the United Kingdom and Chile.

Four years later, the Federal Republic of Germany joins the GATT – the predecessor organisation of the WTO.

The World Trade Organization (WTO) is established in 1995 and replaces the GATT Secretariat.

The members of the WTO meet in Qatar to create a new multilateral group that has the aim to liberalise global trade. The negotiations started in 2001 are still ongoing.

The European Commission aims to open up global markets even further and therefore strengthen the competitiveness of European companies. To this end, the European Commission released a new communication on its Market Access Strategy in April 2007.

TTIP aims to make rules and regulations for business in Europe and the US more compatible in the long term. The latest round of negotiations ended in Brussels on 15 June 2016.

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The European Commission presents a new strategy on trade, placing a particular focus on transparency, sustainability and global responsibility.

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The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada will open up new opportunities for businesses and is the first FTA concluded by the EU to contain an ambitious chapter on sustainability as well as a modern investment protection mechanism whose design is based upon proposals made by Germany. Find out more.

European trade policy

Working together to improve opportunities for trade

Responsibility for trade policy rests with the EU, not with the Member States. One of the EU’s most important tasks is to conclude international trade and partnership agreements – with individual countries and entire regions.

The EU has exclusive power in the area of trade in goods. When it comes to services and intellectual property, power is shared between the Commission and the Member States. Case law from the EU Court of Justice dictates that the European Commission and the European Member States work closely together in order to ensure that Europe speaks with one voice, particularly at the WTO. So the European Commission organises trade policy in close coordination with the Member States. This coordination takes place on a weekly basis, at the meeting of the European Council’s trade policy committee.

The Federal Ministry for Economic Affairs and Energy is responsible for setting out Germany’s position on a number of trade policy issues and for representing the German government at European and international level.

“Trade for all” – the European Commission’s new strategy on trade

On 25 October 2015, the European Commission presented its new strategy on trade entitled “Trade for all”. With this strategy, the Commission revises and updates its “Global Europe” trade strategy from 2006 (which implemented the EU’s Market Access Strategy) and the trade policy elements included in its general economic policy strategy entitled “Europe 2020” from 2010.

The strategy focuses on 5 points:

  • Trade and investment as driving forces for growth and employment.
    The Commission notes that in the next 10 to 15 years, 90 per cent of global growth will take place outside Europe. In order to benefit from this growth, the EU needs open markets.
  • New trade policy issues: A stronger focus on services, digital trade, raw materials, innovation and small and medium-sized enterprises (SMEs).
  • Greater transparency in trade and investment policy
    This includes making TTIP negotiations more transparent to the public and working more closely with other EU institutions, the Member States and civil society. The European Commission also proposes regularly publishing the Council’s negotiating mandates.
  • A trade and investment policy that is based on values
    The European Commission has presented its plans for reforming and redesigning the investment protection chapters in free trade agreements. A particular focus will be placed on whether trade policy upholds high sustainability, human rights and democracy standards.
  • Trade policy as a tool to shape globalisation
    The European Commission stresses the importance it attaches to the WTO and to taking a multilateral approach to trade policy. At the same time, it develops proposals for reviving multilateral negotiations.

Germany welcomes the fact that the European trade strategy is being revised. The latest communication identifies the opportunities and challenges that currently exist in trade policy, including growth, employment, transparency, investment protection reform and sustainability. The objectives set out in the strategy – particularly those of opening up markets and implementing a set of dependable, global rules on trade – must now be consistently pursued. This is the only way in which German and European businesses can improve their competitive edge on growth markets outside the EU.

Market Access Strategy

The European Commission aims to open up global markets even further and thus strengthen the competitiveness of European companies. It wants to eliminate barriers to market access, particularly non-tariff barriers, and assist European companies as they enter certain markets and industries around the world.

To this end, the European Commission released a new communication on its Market Access Strategy on 18 April 2007 entitled "Global Europe: A stronger Partnership to deliver Market Access for European Exporters". The main focus is on better dovetailing the work undertaken by the European Commission, the European Member States and the European business community.

The Trade Barriers Regulation

The Trade Barriers Regulation gives companies the right to submit a request to the Commission to ask for the investigation of a barrier to trade, and to do so without asking for permission from their association or a ministry. It the request is accepted, an investigation is started. During this investigation the Commission tries to find out whether the barrier that the company complained about actually exists and whether it negatively affects or impairs a particular industry in the EU. If the complaint is confirmed and no amicable settlement can be reached, the EU can decide to start a formal procedure for settling the dispute as part of an international agreement that exists with the trading partner.

Facts and figures on foreign trade

7,2
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percent is Germany’s share
of global trade. China accounts for 12.0 per cent, the US for 11.6 per cent (2015)

1,4
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trillion euros
in goods and services were exported by Germany in 2015 alone. Imports reached 1.2 trillion euros.

67
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percent of German exports
were sold to other European countries – 69 per cent of German imports come from Europe

25
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percent of jobs
depended directly or indirectly on exports in 2014

Agreements and partnerships

Tools that promote open markets and free trade

European trade policy is based upon a wide range of different measures. Bilateral international agreements play a crucial role. But there are also unilateral measures that each country can take individually.

First of all, there are multilateral agreements (between all members of the WTO), plurilateral agreements (between some WTO members), bilateral and regional trade agreements, and unilateral trade policy measures.

Multilateral agreements

As a member of the WTO, the EU tries to reduce barriers to trade and encourage free and fair global trade through multilateral negotiations and create a stable and transparent set of rules. The EU advocates the conclusion of a compressive and balanced agreement as part of the WTO’s Doha Round.

Plurilateral agreements

Plurilateral trade agreements are concluded by several members of the WTO, without all WTO members having to join the agreement. The conclusion of such agreements makes particular sense when a large number of the WTO members want to lay down rules in a certain field, while others do not want to adopt these rules (yet).

Plurilateral agreements have been around for quite some time. With the conclusion of the Uruguay Round in 1995, members of the WTO adopted a Government Procurement Agreement (GPA), In 1997, the Information Technology Agreement (ITA) – another plurliateral agreement within the WTO – entered into force. The EU has signed both of these agreements. The WTO is currently negotiating a plurilateral agreement on services (Trade in Services Agreement or TiSA), which the EU will also be part of. And negotiations on a plurilateral initiative to reduce barriers to trade for environmental goodshas also been started.

Bilateral and regional trade agreements

The EU has a large number of free trade agreements with a host of different countries (in Eastern and Central Europe, the Mediterranean region, Turkey, Mexico). It also has Economic Partnership Agreements (EPAs) with a wide range of countries in Africa, the Caribbean and the Pacific region (ACP countries) that are geared towards sustainable development and regional integration. These agreements are in line with WTO rules and designed in an asymmetric manner. The agreement that has been concluded with the Caribbean countries is the only one that is currently being applied. The negotiations on EPAs with West Africa, East Africa and Southern Africa have been concluded, but these agreements have not yet been signed or ratified.

These agreements make it easier for companies to trade with third countries and can also help pave the way for liberalising trade as part of a multilateral agreement. In addition to this, the EU has a wide range of cooperation agreements and consultation mechanisms in place, including with many Asian countries, the US, Canada and Latin America. In addition to this, the EU has launched negotiations on a bilateral free trade agreement with several Asian and Latin American countries. The EU also plans to conclude agreements with India and the ASEAN countries. These are to improve market access for European companies in these fast-growing regions.

Unilateral policy measures

In the event that, contrary to WTO rules, third countries dump prices or use illegal subsidies, the EU can employ unilateral measures and introduce antidumping tariffs or countervailing duties in order to guard against distortions of competition on the international market and ensure that the European economy is not negatively affected.

In order to make a contribution to development, the EU has introduced its Generalised System of Preferences (GSP). Under this system, it grants reduced tariffs to developing countries or asks for no tariffs at all when it comes to importing various finished or semi-finished industrial products or processed agricultural products. This is to give developing countries preferential access to the European market.

Economic Partnership Agreements

In 2014, the EU concluded a number of regional agreements with West Africa, East Africa and Southern Africa. Back in 2007, the EU concluded a regional Economic Partnership Agreement or EPA with the Caribbean region represented by CARIFORUM (Caribbean Forum of ACP States).

As the original preferences granted by the EU to the African, Caribbean and Pacific Group of States were only permissible under a temporary exemption granted by the WTO until 2007, the EU concluded bilateral interim trade agreements with these countries. The goal is to transform these interim agreements into more comprehensive regional agreements that cover all countries of a particular region if possible. Following the conclusion of the agreement with CARIFORUM, negotiations with West Africa, East Africa and Southern Africa were concluded.

The Cotonou agreement signed on 23 June 2000 serves as the basis for this. In this agreement, the EU and the ACP countries (African, Caribbean and Pacific Group of States) agreed to conclude Economic Partnership Agreements that are in line with WTO rules. The agreements are to help gradually reduce barriers to trade that exist between the parties, improve cooperation in all areas that are relevant for trade and promote sustainable development, and promote regional integration.

Spotlight on: Free trade agreements

Strengthening competitiveness and growth in Europe

The European Commission aims to negotiate balanced and modern free trade agreements with important international markets and high-growth regions. This is to strengthen the competitiveness of the European economy and boost growth and employment in Europe.

The development of multilateral trading relations and a successful conclusion of the Doha Round are a priority for both Germany and the European Union. In light of the bilateral FTAs that are being concluded by some of Europe’s important trading partners (incl. the US and Japan) and which could jeopardise the competitiveness of European companies on the global markets, the EU’s position on bilateral free trade agreements (FTAs) has evolved.

The new generation of free trade agreements that the EU aims to conclude with other countries is broad-based and covers a wide range of different aspects. These agreements not only touch upon the issue of tariffs (e.g. customs duties, export subsidies) but also set out rules for services, the elimination of non-tariff barriers to trade and other trade-related aspects such as investment and competition. As the scope of these agreement is wider than the WTO agenda, they are often referred to as ‘WTO+ agreements’.

World Trade Organization

A central framework for world trade

Established in Geneva in 1995, the World Trade Organization (WTO) succeeded the General Agreement on Tariffs and Trade (GATT).

The GATT – which was introduced in 1947 – was the key element for the regulation of world trade for 48 years. The GATT aimed to substantially reduce tariffs and other barriers to trade, and protect and ensure free and unrestricted trade between countries.

The conclusion of the ‘Uruguay Round’ (1986 to 1994) and the establishment of the WTO helped extend international cooperation on trade policy to new areas. The WTO not only lays down rules for trade in goods (GATT), but also for trade in services (GATS), individual property rights (TRIPS) – to some extent at least –, state aid and, as part of a pluritaleral agreement, procurement (GPA).

Who is part of the WTO?

The WTO currently has 162 members, with its newest member – Kazakhstan – joining on 30 November 2015. At the 10th WTO Ministerial Conference, which was held in Nairobi from 15 to 19 December 2015, WTO members officially approved Afghanistan’s and Liberia’s accession to the organisation. The two countries now have 6 months to ratify the Protocol of Accession. They will become WTO members 30 days after they have formally notified the WTO of their acceptance. Negotiations with 20 other countries – including Serbia and Bosnia Herzegovina – are currently ongoing. Germany was a founding member of the WTO in 1995.

The WTO’s key decision-making bodies are the Ministerial Conference, the General Council, a number of additional councils and committees, and the WTO Secretariat.

The WTO agreement

The members of the WTO have concluded a large number of important agreements in order to set down rules for global trade. These cover, for example, trade in services, agriculture and anti-dumping provisions.

The Doha Round

In November 2001, the members of the WTO met in Qatar to establish a new multilateral group that aims to liberalise world trade. The negotiations launched back then are still ongoing and are called the “Doha Round” or Doha Development Agenda (DDA). The goal is to facilitate trade across the board, particularly in the areas of industry, agricultural products and services (GATS).

Other important negotiations include the introduction of rules on dumping and subsidies, on reducing tariffs on environmental goods and streamlining customs procedures. The current Doha Round focuses on better integrating developing countries into the global economy by granting special or preferential treatment to these countries.

Bali Ministerial conference in 2013

At the WTO’s 9th Ministerial Conference, which was held in Bali in December 2013, the then 160 members adopted the Trade Facilitation Agreement (which streamlines customs procedures). It enters into force once three quarters of the signatories have ratified the agreement. Any new member automatically joins this agreement through accession to the WTO. The agreement has led to some first successes. For example, two decisions on public stockholding for ensuring food security for the poorest parts of the population were made, some of the least developed countries (LDS) were given preferential or easier access to the services market, and guidelines for streamlining rules of origin for preferential access to the markets were adopted, as were guidelines for further reducing tariffs and providing support for cotton.

Nairobi Ministerial Conference in 2015

At the 10th WTO Ministerial Conference, which was held in Nairobi in December 2015, the countries agreed to reduce export subsidies in the agricultural sector and to tighten rules for export credits, state trading companies and food aid. In addition, another ‘development package’ focusing on the least developed countries (LDCs) was adopted. This package includes agreements on preferential rules of origin as well as preferences for LDCs in the services sector (LDC waiver). These agreements are to help improve and streamline the integration of these countries into the multilateral trading system. One of the main results of the Nairobi Conference was that the countries agreed to reform the agreement on exempting IT technology and medical technology products from tariffs including the schedule of concessions. 53 WTO members are part of this plurilateral agreement. It is the WTO’s first agreement for 18 years that sets out specific tariff reduction commitments for state-of-the-art products.

Dispute settlement

The Dispute Settlement Understanding (DSU) that sets out rules and procedures for the settlement of disputes was agreed on in the Uruguay Round and is seen as the key element of the multilateral trading system. The DSU aims to make the multilateral trading system more secure and predictable.

Monitoring of national trade policies

The Trade Policy Review Mechanism (TPRM) was enshrined in the rulebook for international trade in 1994. The TPRM is another key element of the WTO and aims to make national trade policies more transparent and understandable and ensure that our complex trading system runs smoothly.

Customs procedures

Tariff suspension as a trade policy tool

In order to make European companies more competitive and boost economic activity within the Union, the EU can, under certain conditions, suspend or reduce the tariffs these companies have to pay.

In order to make European companies more competitive and boost economic activity within the Union, the EU can, under certain conditions, suspend or reduce the tariffs these companies have to pay.
For example, companies that produce within the EU can buy raw materials, semi-finished products or components that are not available in the EU from other countries without having to pay the amount of tariffs that would usually apply for this. The European Member States and the European Commission have adopted guidelines setting out how these tariff suspensions (autonomous tariff suspensions or tariff quotas) will be applied.

Press releases

  • 17/10/2017 - Press release - International Cooperation

    Press release: State Secretary Beckmeyer: “Closer cooperation with Latin America generates jobs and prosperity”

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  • 27/06/2017 - Press release - International Cooperation

    Press release: Minister Zypries on the occasion of her meeting with Iran's Foreign Minister in Berlin

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  • 22/06/2017 - Press release - Trade Policy

    Press release: Federal Minister Zypries meets with EU Trade Commissioner Malmström

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  • 21/06/2017 - Press release - International Cooperation

    Press release: Parliamentary State Secretary Dirk Wiese: economic-policy relations with India are in Germany's strategic interest

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  • 12/06/2017 - Press release - International Cooperation

    Press release: Federal Minister Zypries meets with Egypt's President Al-Sisi

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