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In focus - Trade Policy

European Trade Policy

Introduction

The objectives of the EU's Common Commercial Policy are set out in Article 206 of the Treaty on the Functioning of the European Union (PDF: 2 MB) (formerly Article 131 of the EC Treaty). Pursuant to Article 206 of the TFEU, "[...] the Union shall contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and on foreign direct investment, and the lowering of customs and other barriers." The EU has successfully used its Common Commercial Policy, a policy area which is the exclusive responsibility of the EU, to considerably reduce and eliminate the tariffs and non-tariff barriers to trade cited in Art. 206 of the TFEU. Germany holds that bringing down tariffs and non-tariff barriers to trade and improving market access should continue to be given priority in the EU's Common Commercial Policy.

Tariffs, which have been cut dramatically across a wide range of sectors internationally, are now impeding trade to a much lesser extent than they used to. For this reason, the focus of the EU's Common Commercial Policy has shifted towards reducing non-tariff barriers to trade, which include import quotas, requirements for import and export licences, and discriminatory requirements regarding health and safety. Academic studies have found that these restrictions are likely to cost an average of 5 to 10% of the worth of goods that are traded internationally.

German interests regarding the EU's Common Commercial Policy

The German Government endorses the renewed efforts made by the European Commission to remove non-tariff barriers to trade. It is the view of the German Government that creating a clear set of rules governing global trade and widening their scope is of essence. Among these prospective rules are agreements to take action on price-dumping and on export subsidies which distort competition on the international markets. Clear multilateral trade rules give investors, exporters and importers the transparency and predictability they need, thus improving legal certainty for companies that do business abroad and allowing them to plan. This is why the German Government is campaigning within the WTO to also get agreements on investment and competition law and on transparent public procurement rules underway. In the same vein, the German Government is committed to simplifying customs procedures (trade facilitation) and would like to see trade policy issues being dealt with in a more comprehensive way. The German Government holds that public trade policy, including at international level, should increasingly be aligned with social policy objectives such as environmental protection, public health, and consumer protection and therefore considers the fact that, for the first time, the interplay between trade and the environment has now become subject to multilateral negotiations within the Doha round to be a success.

Trade, Growth, and World Affairs - trade policy as a core component of the EU's 2020 Strategy

On 9 November 2010, the European Commission tabled its strategy on trade entitled Trade, Growth and World Affairs - trade policy as a core component of the EU's 2020 strategy (PDF: 738 KB). The strategy lays out a host of measures and initiatives designed to bring down barriers to trade and to further improve European companies' access to markets outside the EU.

The European Commission's Communication is consistent with the EU's earlier policy and is reflective of a clear commitment to opening up markets. The priorities set out in the "Global Europe" Strategy of 2006 have largely remained the same, with particular focus being given to the Doha round and its conclusion, as well as the EU's bilateral free trade initiatives, which are to complement the multilateral system.

In its Communication, the European Commission points out once again that the trade strategy will be part of the overall Europe 2020 Strategy. It also underlines the fact that the framework has changed as a result of the entry into force of the Lisbon Treaty.

Germany welcomes the European Union's new trade strategy, which largely follows in the footsteps of the "Global Europe" Strategy. The objectives set out in this document - 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.

"Global Europe - Competing in the world"

In autumn 2006, the European Commission tabled a Communication entitled "Global Europe - Competing in the world", which set out the main objectives for the EU's future commercial policy. Most of this document was dedicated to a description of political measures that would improve European businesses' competitive edge on the international markets. Key aspects of this trade strategy were then successfully put into practice under the 2007 German EU presidency.

One of the main objectives of the Global Europe strategy is to secure better terms of access to non-EU markets. In order to achieve this, the EU must create a framework that allows European businesses to become more competitive internationally; if necessary by balancing out some of the competitive disadvantages that exist vis-à-vis other countries. This means having a clear focus on the conclusion of the Doha round as well as pressing ahead with the implementation of the EU's bilateral free trade initiatives, which are to complement the multilateral trading system. Another important building block of the Global Europe strategy has already been put in place: the new EU Market Access Strategy has laid the basis for more efficient action to eliminate trade barriers that hamper trade with non-EU countries.

Yet another crucial aspect in the debate on how to strengthen Europe's competitiveness is the question of how to guarantee a secure supply of raw materials. In recent years, we have seen some third countries distorting trade and competition and thereby aggravating the situation on the global commodities markets. There is full agreement among EU member states that this is an issue of particular importance for Europe's competitiveness. They now want to work with the European Commission and the private sector to create instruments (to be used in our multilateral and bilateral trading relations) that will safeguard a secure supply of raw materials for Europe.

Implementation of these instruments and the issue at large will continue to feature high up on Europe's commercial policy agenda.

In principle, it is true to say that both Germany and the EU are giving greater priority to the development of multilateral trading relations and a successful conclusion of the Doha round than to the forging of bilateral trade agreements. In the light of 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. Since 2007, the European Commission has been championing a "new generation of FTAs" to be concluded first and foremost with the world's largest growth regions. The idea is to boost growth and employment levels in Europe by improving European companies' global competitiveness. The new FTAs should be wide in scope and go beyond cutting tariffs. They should set out rules for the services sector, eliminate non-tariff barriers to trade and look at the overall trade environment, including investment, competition law, etc. As the scope of these agreement is wider than the WTO agenda, they are often referred to as "WTO+ agreements".

TiSA - Trade in Services Agreement

TiSA (= Trade in Services Agreement) is currently being drafted as a plurilateral agreement on the trade in services. Above all else, it is to improve access to foreign services markets and to create fresh momentum for the Doha negotiations, which are largely stalled. In the long run, the EU and the German Government would like to see the new rules designed to facilitate the trade in services be approved and implemented at multilateral level. The EU is negotiating TiSA with 21 WTO member states which account for approx. 70% of the global trade in services.

Click here for more detailed information on TiSA.

TTIP - Transatlantic Trade and Investment Partnership (USA)

The EU continues to be the number-one trading partner for the US. Similarly, the US is Germany's first export market outside Europe and also the market where German companies invest the most. The Transatlantic Trade and Investment Partnership between the EU and the US is an extraordinary joint effort by the EU and the US to generate considerable growth and employment. A transatlantic agreement will boost growth and employment both in the EU and in the US. German SMEs, which do a great deal of business in the US, stand to be among the biggest winners of comprehensive trade liberalisation which would see tariffs and other barriers to trade eliminated.

Click here for more information about the envisaged free trade agreement between the US and EU. The Federal Minister for Economic Affairs has established a TTIP Advisory Group to closely follow the ongoing negotiations for TTIP and provide input that can be used in the process of forming a German position.

CETA - Comprehensive Economic and Trade Agreement (Canada)

In 2009, the EU and Canada entered into negotiations for a Comprehensive Economic and Trade Agreement (CETA). Both sides are aiming for an ambitious agreement that should eliminate most existing tariff barriers and provide for much better mutual access to the goods and services markets. The negotiations on CETA were completed in mid-2014.

Click here and/or visit the website of the European Commission for detailed information on the negotiations on CETA and the next steps to be taken.

EGA - Environmental Goods Agreement

The Environmental Goods Agreement (EGA), which is currently being negotiated, is to deregulate the environmental goods market. Whilst EGA is being negotiated as a plurilateral agreement (i. e. by only a few WTO member states), it is hoped that it will later evolve into a multilateral agreement adopted by all WTO members. The initiative builds upon what is called the APEC List of Environmental Goods - a document that was approved in Vladivostok in September 2012 and which sets out the goal of limiting tariffs on a total of 54 environmental goods to a maximum of 5 per cent of the value of these goods by 2015.

The first round of negotiations on the EGA was held in Geneva on 9 and 10 July 2014. The EU is joined at the table by representatives from 13 non-EU countries. The next round of negotiations is scheduled for September. For further information on the envisaged agreement, please visit the website of the European Commission.

Asia

In mid-2007, during the German EU presidency, the European Union entered into negotiations on FTAs with India and South Korea, as well as beginning preliminary talks with the ASEAN countries.

Germany has a strong economic interest in an EU-India free trade agreement and the negotiations. Compromise has been reached on some key points, but others have yet to be resolved.

At the end of 2009, the EU changed strategy in its negotiations with the ASEAN area, which is a highly dynamic growth region. As it had turned out that the original approach of negotiating with the region as a whole was not resulting in any specific outcomes, the EU members agreed to start by entering into bilateral negotiations with individual ASEAN countries before possibly combining the outcomes into a regional agreement.

EUSFTA - EU-Singapore Free Trade Agreement
Negotiations with Singapore started in March 2010 and were brought to a successful conclusion in October 2014, when the EUSFTA - EU-Singapore Free Trade Agreement was concluded. Germany welcomes this agreement: despite its small size, Singapore is one of Germany's most important trading partners in the ASEAN area. Free trade agreements with high-growth countries in Asia are of essence for our export-driven economy. The text of the EUSFTA was negotiated by the European Commission and is currently being scrutinised by the German Government. Similarly, the European Commission was also in charge of concluding the EU-Singapore negotiations on investment protection. The German Government will take a very close look at this part of the agreement as well.

Other ongoing negotiations: Talks for an EU-Malaysia free trade agreement began in October 2010. Since then, other ASEAN countries have indicated that they would also like to enter into negotiations for bilateral trade agreements with the EU. The EU-South Korea Agreement has been in force since 1 July 2011, albeit provisionally.

In addition to these new initiatives, the EU has also long been negotiating for a bilateral free trade agreement with the Gulf Cooperation Council. These talks, however, have yet to produce a positive outcome.

Latin America

The first EU FTAs to be concluded with Latin American countries were the EU-Mexico FTA of 2000 and the Association Agreement with Chile of 2002. Going far beyond the scope of a mere free trade agreement, the Association Agreement with Chile provides a broad contractual basis for political dialogue, economic relations, and economic cooperation. It is soon to be modernised to allow for better access to the goods markets, more intensive dialogue both at political and scientific/academic level, stronger involvement of civil society, and the launch of expert forums on issues including energy, the environment, consumer protection, research, IT, culture, and education.

The trade section of the EU's Association Agreement with Central America entered into force provisionally at the end of 2013, marking the first time that the EU concluded an agreement with a region rather than individual states. Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama are all involved in the agreement.

The EU's plurilateral agreement with Columbia and Peru entered into force provisionally in 2013, with Ecuador having now also joined after the negotiations were successfully concluded in July 2014.

2010 saw the resumption of talks with the Mercosur group (formed by Argentina, Brazil, Paraguay, and Uruguay), which had been abandoned in 2004. However, the two new members of Mercosur, Bolivia and Venezuela, have so far chosen not to become part of the negotiations, which have recently shown signs of stalling again.

Ukraine

The EU-Ukraine Association Agreement, for which negotiations began in 2008, has now been ratified by both sides. The general political part of the agreement entered into force provisionally on 1 November 2014 whilst the provisional application of the part on free trade has been postponed to 31 December 2015.