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A trade strategy fit for the 21st century

09.07.2019

A trade strategy fit for the 21st century

On July 8, the EOS Secretariat participated in the event organized by BusinessEurope (the organization representing European companies across the continent through national business federations) titled “A trade strategy fit for the 21st century”.

BusinessEurope Director General Markus Beyer emphasized that: "Agreements with key trading partners like Canada, Japan and Mercosur have been concluded and important legislation has been adopted. We congratulate the outgoing Commission for the impressive progress achieved". A significant number of market access cases was successfully solved

Cecilia Malmstroem, the EU Commissioner for Trade, was also present, delivering a keynote speech and participating in a panel debate.

Ms Malmstroem stressed that "The new Commission will have to operate in a complex and challenging environment in global trade. Businesses and other civil society stakeholders have an important task to help identify priorities for an effective EU trade policy and we stand ready to contribute". The three main issues will be: tackling the relation with a more inward-looking United Stated; finding a way to balance relationship with China; making sure the World Trade Organization (WTO) doesn’t collapse.

Overall Ms Malmstroem said that the EU needs to pursue sustainability more and more in its trade policy. But the short-term aim has to be saving the WTO. Many member countries are frustrated with the increasing inability of the WTO to be functional. The following information taken from the Centre for Strategic and International Studies summarize the present problems with the WTO. First, two-thirds of the WTO’s 164 member states continue to claim “developing country” status, a designation that allows them to take advantage of certain benefits and exemptions to obligations not granted to advanced economies. However, economic realities suggest that many of these countries have the capacity to take on fuller obligations. For example, 10 Group of Twenty (G20) members claim developing country status at the WTO. Since the WTO allows for self-classification, there is no universal definition for developed or developing status. Second, the WTO’s negotiating arm is atrophying. At the root of the degrading negotiating function is the difficulty for WTO members to reach a full consensus, which is required to agree to new agreements, obligations, and rule changes. The failure of many countries, including major economies like China, to comply with notification and transparency obligations has made negotiating new rules and agreements even more difficult. The United States, the European Union, and others have called for rules that would punish members for not complying with their transparency obligations. The consensus requirement, however, will likely present a formidable roadblock to such rules being agreed to. Certain members, including China, have taken advantage of the overall impasse at the WTO and continue to maintain discriminatory barriers against imports, intervene in markets to support state-owned enterprises, and fail to report subsidies to the WTO accurately. Third, some countries (but primarily the United States) have concerns with the WTO dispute settlement system, the main process to resolve trade conflicts between members. Specifically, the United States is concerned the Appellate Body, which permits countries to appeal against adverse rulings, has exercised decision-making and arbitration power beyond its original mandate. Successive U.S. administrations have claimed that the Appellate Body, through its rulings, adds or diminishes to the rights of WTO members by reinterpreting WTO agreements, despite WTO members having never agreed to those interpretations. While desire for reform is broadly shared across the WTO community, member states’ opinions and proposals on how to proceed vary significantly.

During the event the mood about China was quite downbeat. It seems that based on the last few years China cannot be incentivized to reform, so a new, more assertive European policy vis-à-vis China is needed. On the other hand, the heavy-handed US approach in trade has been criticized. First of all, the US have slapped some sanctions on the European industry on preposterous grounds, the panellists said. Secondly, the trade tensions that are characterizing the last few months (high US tariffs) are damaging global trade without so far solving the situation with China. If sanctions continue, global supply chains could really suffer.

The panellists also noted a positive development in the EU trade policy: DG Trade is more and more integrated with other DGs, which is good for the coherence of trade policy. It was also emphasized that the EU trade policy will become even stronger if we reinforce our own internal market and make sure imports are properly vetted: EU companies often have to comply with strict regulations unlike many non-EU countries, so they are potentially in a competitive disadvantage with non-EU exporters which do not have strict regulations and export to Europe.