THE EXTERNAL POLICIES OF THE EUROPEAN UNION

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• THE EXTERNAL POLICIES OF THE EUROPEAN UNION
• Prof. D-r Jovan Pejkovski

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Trade and development

• The importance of trade as a factor for
  development and growth is becoming more and more
  evident.
• If accompanied by the proper flanking policies
  and if used correctly, trade policies can provide
  opportunities for promoting economic development
  and tackling poverty reduction.
• Development is a fundamental tenet of the EU
  trade strategy which aims to support the gradual
  integration of developing countries in the world
  economy and the multilateral trading system.

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• EU trade policy aims to contribute to a more
  equitable integration of developing countries
  into the international trading system through
  coherent action on three levels
• the multilateral (which remains the key area of
  EU trade policy),
• the bilateral and
• through autonomous measures.

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The multilateral level

• Ongoing WTO trade talks, the Doha Development
  Agenda. Trade can contribute positively to the
  Millennium Development Goals1 through its impact
  on economic growth.
• The World Bank estimated that a pro-poor outcome
  of the current Doha Development Agenda (DDA)
  could increase global income by up to 300 bn,
  with half accruing to developing countries.

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• However, the world's poorest countries have not
  always been able to fully benefit from the trade
  opportunities offered by the multilateral trading
  system.
• WTO Members have therefore agreed to put the
  issue of development at the heart of the next WTO
  negotiations, by launching the Doha Development
  Agenda.

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• The DDA aims at improving market access and
  establishing rules that help foster development
  and increase developing countries' opportunities
  to take advantage from further trade
  liberalisation.
• For this reason development is the one single
  theme that runs through all elements of the DDA
  Work Programme.
• With this aims in mind the EU has tabled
  important pro-development proposals in Geneva,
  including

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a. Market access for industrial products

• The EU proposes advancing meaningful
  liberalisation across all non-agricultural
  products, which represent over 70 of developing
  country exports, by eliminating
• tariff peaks and high tariffs, and
• significantly reducing tariff escalation.

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• The EU intends to fulfil the promise of the Doha
  Mandate in this negotiating area to the following
  ways
• real new market access for all, with the largest
  opportunities for Least Developed Countries
  (LDCs) through tariff and quota-free access
  offered by both developed and if possible most
  advanced developing countries
• developing countries should contribute on the
  basis of their capacity and should benefit from
  flexibilities in the application of reduction
  modalities.

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• This translates into a higher effort for
  developed Members than developing ones
• LDCs and other weak and vulnerable Members in a
  similar situation, should not have to reduce
  their tariff, but just bind them

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• developing countries who have made efforts to
  open their markets should get recognition for
  this.
• On this basis the EU has proposed to apply a
  non-linear Swiss formula, achieving deeper cuts
  on higher tariffs, as well as sectoral
  initiatives on labour-intensive products of
  export interest to developing countries, such as
  textiles, clothing and footwear, to bring tariffs
  on these products as close to zero as possible.

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• Reduction of tariff barriers between Developing
  Countries (DCs) is of the utmost importance since
  today 70 of tariffs paid by developing countries
  are paid to other developing countries.
• Furthermore, South-South trade has the highest
  potential to bring major benefits to developing
  countries today trade between DCs is growing
  twice as fast as global trade and already
  represents 40 of their exports.

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• This latter figure corresponds to 10 in Sub
  Saharan Africa, where the huge challenge concerns
  the development of regional markets, hence the
  important role of EPAs to support regional
  integration.
• It is also crucial that the more advanced
  developing countries, e.g. members of the G20,
  open their market more significantly and provide
  increased opportunities for the weakest Members
  as this could help to compensate for preference
  erosion in their traditional markets, i.e. the
  developed countries.

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• Non Tariff Barriers (NTBs) are of extreme
  importance to developing countries, and this is
  why the EU is fully committed to negotiating
  their elimination and exploring the scope for
  more horizontal mechanisms to deal with
  trade-restrictive barriers.
• However, several "NTBs" of concern to developing
  countries exporters are legitimate requirements
  (such as health and safety standards for food) so
  there is no scope to negotiate these away.

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• The EU is aware of the difficulties that export
  duties imposed by some Members have created for
  some developing countries and the strengthening
  of their industrial base.
• This is why the EU advocates to eliminate export
  duties.

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b. Agriculture

• The EU firmly believes that further opening and
  expansion of trade for agricultural products is
  an important contribution to sustained and
  continued economic growth for all countries.
• These objectives are perfectly in line with the
  Doha Declaration on agriculture which matches the
  need to establish a fair and market-oriented
  system with the recognition of Special and
  Differential Treatment for developing countries
  as well as of non-trade concerns.

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• Agriculture liberalisation will however not have
  the same impact on all developing countries
• the most competitive exporting developing
  countries are likely to increase their market
  share, while
• less competitive developing countries exporters
  will face new more aggressive competition from
  those countries.

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• The EU is fully aware of the importance of the
  agricultural sector in the developing countries.
• They can therefore count in the DDA on
  substantial reduction of trade distorting
  domestic support in developed countries, improved
  market access and on the elimination of export
  subsidies.
• In July 2004, the EU made a substantial step
  forward in the framework of the WTO talks by
  committing to phase out its export subsidies as
  long as all forms of export subsidisation are
  eliminated.

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• DCs defensive interests are also satisfied all
  developing countries will benefit from a special
  and differential treatment (SDT) across the board
  (longer implementation periods for all
  commitments, lower tariff and subsidy cuts).
• Although these provisions will hamper the
  liberalisation process and limit south-south
  trade, the EU has always been in favour of these
  provisions, with criteria to be negotiated in
  order to avoid an "open ended" approach.

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c. Services

• In the trade in Services negotiations the EU has
  taken account of the interests of developing
  countries in its requests and offers, by
  modulating its requests according to the level of
  development of individual countries.
• For LDCs in particular, it has made requests in a
  small number of sectors focussing on key
  infrastructure services, such as financial
  services, telecommunications and transport.

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• In its offers, the EU has put a strong focus on
  business services and on the temporary movement
  of people who provide particular services on a
  contractual basis in the EU.
• The EU is keen to strengthen the domestic
  services capacity of developing countries and
  respects their right to determine their own
  domestic regulation and safeguard public services.

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d. Trade Facilitation

• WTO rules protect developing countries against
  discriminatory practices and ensure that
  beneficial reforms and policies are kept in place
  and not reversed.
• Developing countries' interests should be even
  better reflected, not only in the current WTO
  rule-book but also in the rules established in
  the new areas.

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• In July 2004 WTO members have agreed to launch
  negotiation on Trade Facilitation in order to
  improve WTO rules and technical assistance in
  this area.
• Time and money are wasted because of outdated
  customs and border procedures and practices.
• The cost of such procedures can reach 4-5 of the
  overall cost of trade transactions, which is
  about the same as the current developed
  countries average tariff on trade in industrial
  goods. Halving the costs could mean considerable
  saving.

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• Trade Facilitation could bring substantial
  development benefits for business, the benefits
  are widely accepted. It promotes transparency,
  cuts red tape and stops a proliferation of
  incompatible requirements in export markets.
• For government, Trade Facilitation strengthens
  security through more effective controls,
  improves the investment climate and promotes
  higher customs revenues.
• On this latter point, revenue loss from
  inefficient border procedures in some developing
  countries may exceed 5 of GDP.

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• In particular, landlocked developing countries
  are likely to gain from improved transit
  practices which will reduce their costs to access
  foreign markets.
• The negotiations will also aim at enhancing
  technical assistance and support for capacity
  building in this area, a field in which the EU is
  a leading donor.

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e. Special and differential treatment

• The WTO Agreements contain provisions, which give
  developing countries special rights as well as
  exemptions to WTO obligations.
• The "special and differential treatment"
  principle states that any new rule must take
  account of the prevailing circumstances of
  developing countries.

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• The EU approach is to increase flexibility
  vis-à-vis the developing countries, without
  creating a two-tier WTO.
• EU should ensure that developing countries are
  better able to apply any new rule that is
  negotiate in the Round, and integrate better into
  the global economy as a result.

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f. Capacity building

• Improved market access and rules are not in
  themselves sufficient.
• Many developing countries also need assistance to
  improve their capacity to use the trading
  opportunities offered by the multilateral trading
  system.
• An crucial element of capacity building for
  developing countries is to make trade an integral
  part of their national development policies,
  programmes, and poverty reduction strategies.

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• The European Union identified the integration of
  trade in development as one of the priorities of
  its development policy.
• It now includes trade in its Country and Regional
  Strategies.
• Developing country members of the WTO should also
  have the capacity to fully participate in and
  benefit from the ongoing negotiations.

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• The EU is the main provider of Trade Related
  Assistance worldwide.
• This includes strengthening basic infrastructure
  to trade and addressing supply side constraints.
• The WTO membership set up a "Global Trust Fund"
  to deliver technical assistance and training.
• The EU has demonstrated its commitment to
  enhancing the negotiating capacity of developing
  countries by providing over 60 of the total
  funds.

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• The EU is committed in supporting the Integrated
  Framework (IF) for the Least Developed Countries,
  a multi-agency, multi-donor program that assists
  the least developed countries to expand their
  participation in the global economy.
• The IF program was first mandated by WTO
  Singapore Ministerial Conference in December 1996
  and was inaugurated in October 1997. In 2003,
  2004 and 2005 the European Commission funded a
  four week training programme for some 40
  negotiators and administrators from developing
  countries

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Bilateral Level

• The Development dimension is reflected in
  bilateral trade relations of the EU with
  developing countries.
• The most significant example is the Economic
  Partnership Agreements (EPA) which are being
  negotiated between the EU and African, Caribbean
  and Pacific (ACP) countries.

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• EPAs are an instrument for development by
  strengthening regional integration and improving
  the business environment in a credible and
  sustainable way.
• These agreements are being negotiated since 2002
  and will enter into force in 2008.
• These are not classical free trade negotiations.
  The objective of EPAs is not to open markets but
  rather build markets.

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Autonomous measures

• In addition to the multilateral and bilateral
  level, the EU has, for many years, operated
  unilateral preferential market access schemes
  under the Generalised System of Preferences (GSP)
  to provide developing countries with an added
  advantage on its market.

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• The EU GSP is the largest of all
  developed-country GSP systems. In 2003 EU imports
  under GSP totalled 52 billion.
• Under the EU GSP between 1999-2003 developing
  countries share in total EU imports grew from 33
  to 40.
• The current GSP, in place since 1995, applies to
  imports from developing countries that pay duty
  on entering the EU market and that are not
  already duty-free under Most Favoured Nation
  agreements.

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• The reform approved in June 2005 simplifies the
  EU GSP scheme by reducing the number of GSP
  arrangements from five to three.
• The coverage of the general GSP scheme will be
  extended to 300 additional products mostly in the
  agriculture and fishery sectors.
• A new "GSP Plus" incentive scheme will be
  targeted at especially vulnerable countries
  (selected before the begining of 2006) that have
  ratified and effectively implemented key
  international conventions on sustainable
  development, labour rights and good governance.

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• It will cover around 7200 products which will
  enter the EU duty free.
• Finally the EU has led the way by eliminating all
  duties and quotas for all products originating
  from Least Developed Countries (LDCs), under the
  Everything But Arms (EBA) initiative.
• Developed countries had in fact committed to this
  objective already back in 2001 (3rd UN Conference
  on LDCs).

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• Regrettably, other developed partners are still
  to follow the EUs example to implement the
  commitment taken in 2001. 

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• Trade makes a vital contribution to poverty
  reduction.
• The UN Summit of September 2005 re-affirmed the
  importance of trade for achieving the Millennium
  Development Goals, to which the European
  Commission is fully committed.

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• At the Gleneagles G8 Summit in July 2005
  Commission President Barroso announced that the
  EC will contribute 1 billion per year to aid for
  trade over the coming years.
• This includes strengthening basic infrastructure
  to trade and addressing supply side constraints.
• The European Commission is workinghard to help
  build a successful agreement that fully delivers
  on its development goals.

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• A successful development round will guarantee
  enhanced market access and development-friendly
  trade rules. But these elements alone will not
  automaticallylead to more sustainable growth.
  Improved access is indeed necessary, but not
  sufficient for the poor to benefit more from
  trade.
• The opportunities that are created call for new
  investment and economic restructuring. In this
  context the Least Developed Countries (LDCs) as
  well as many other small and vulnerable economies
  will face the most difficulties to transform the
  opportunities into development realities.

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• This is why over the past few years the EU has
  significantly stepped up its programmesto help
  developing countries benefit more from trade. The
  European Commission put a total of around 900
  million into Trade-Related Assistance in2004,
  making it the largest single donor of this kind
  of assistance. In addition there are further
  sizeable contributions in this area provided by
  the EUs Member States.

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• The European Unions Trade-Related Assistance is
  flexible, focused and carefully adapted to the
  individual countries and needs. For maximum
  effectiveness this cooperation is integrated into
  wider poverty reduction strategies.
• The EU is committed to helping developing
  countries build the capacities, step by step, to
  participate more effectively in the global
  trading system.

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• Translating theoretical market access into more
  trade
• But to help exporters in developing countries to
  make the most of EU trade preferences, and to
  make sure that this theoretical market access
  translates into more trade in practice, the
  European Commission set up the online Export
  Helpdesk for developing countries (EH) in
  February 2004.

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• This innovation aims to boost developing
  countries exports by ensuring that exporters in
  these countries get the maximum information and
  assistance necessary to tackle the EU market.
• This service for exporters, importers, trade
  associations and governments provides the
  following information online- EU and Member
  States import requirements as well as any
  internal taxes applicable to products.- EU
  preferential import regimes benefiting developing
  countries (customs duties and documentation,
  rules of origin, etc.).

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• - Trade data for the EU and its individual Member
  States (imports and exports).- A market place
  where exporters in developing countries can
  establish contacts with importers from the EU.-
  Links to other authorities and international
  organisations involved in trade operations and
  trade promotion.- Trade preferencesThe EU is
  the worlds main provider of trade preferences
  for developing countries.

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• Preferences simply mean that the goods imported
  into the EU from developingcountries are given a
  special low rate of customs duty, sometimes zero.
  
• This provides an incentive to traders to import
  products from developing countries and helps
  these countries to compete on international
  markets.

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• The EU currently has preferences for 178
  developing countries under theGeneralised System
  of Preferences (GSP) scheme, as well as quota and
  duty freeaccess for all products from the 50
  poorest countries under the Everything ButArms
  (EBA) initiative.
• Geographically, preferences extend to 77
  countries in Africa, the Caribbean and the
  Pacific, and bilateral and regional preferential
  agreements exist with Chile, Mexico,
  Mediterranean countries, South Africa and
  countries in the Balkans region.

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• Information and assistance been a key aim. To
  this end, a comprehensive user guide is being
  developed by the EH team which should be
  available by the end of 2005.
• Real-life solutionsAs well as providing specific
  information on European rules and regulations,
  there is also the possibility to lodge detailed
  information requests in four languages (EN, FR,
  ES and PT) about real-life situations encountered
  by exporters.

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How much use of this service?

• Confirmation of the importance of this service
  for developing country exporters is provided by
  the impressive statistics of its use
• from its launch to December 2004 it received an
  average of nearly 1500 hits per day,
• which has surged to an average of well over 3000
  hits per day so far this year.

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• Added to this are the 140-160 questions that are
  received per month by the contact section and the
  average of 100-120 offers and demands published
  per month in the market place section

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• Because the trade makes a vital contribution to
  poverty reduction.
• The UN Summit of September 2005 re-affirmed the
  importance of trade for achieving the Millennium
  Development Goals, to which the European
  Commission is fully committed.

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EU- USA - JAPAN

• Focus on Trade and Investment
• Policy Dialogue
• Need for Political impetus
• Japan-US Security Treaty
• Close Alliance Relations (Iraq, North
  Korea)Military cooperation through NATO
  Management of Trans-Atlantic Relations
  (Multi-polar / Uni-polar)
• TRILATERAL RELATIONS

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• ECONOMY Larger single market with common rules
  (new business opportunities)
• Lower tariffs on many products (some increase in
  new member state products)
• Reduction of investment incentive measures in new
  member states

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• ii. POLITICS Need for greater policy
  coordination and cooperation between more
  influential EU and more assertive Japan
  Complication of Trans-Atlantic relations and the
  impact on EU-Japan relations More energy and
  resources concentrated on EU integration with a
  relative decrease of interest in external issues

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• EU INTEGRATIONand its impact on EU-Japan
  relationsChina and North Korea East Asia
  Community building Strengthening of US-Asia
  relations (realignment of US bases in Japan)

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• iii. DIVERGING PRIORITY AGENDA EU expansion and
  integration Poverty alleviation in Africa
  Iraq, Middle East Immigration Management of
  tension prone Trans- Atlantic relations

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• iv. EMERGENCE OF CHINA AND ITS IMPACT
• China largest trading partner for Japan
• More important trading partner for EU than Japan
• Need for policy dialogue on Chinas political,
  military and economic impact in the region (ie.
  arms embargo)

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• FUTURE ORIENTATION1. Need for cooperation of two
  global players (Japan with more global political
  role and enlarged, more influential EU).2.
  Proliferation of Common Values (Democracy, Human
  Rights, Free Market, Poverty Eradication).3.
  Strengthening of international and regional
  institutions.

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• 4. Enhancement of Political Attention for both
  sides.5. Steady implementation of Action Plan by
  making full use of existing cooperation
  mechanisms (UN reform, Iraq, Middle East, Iran,
  Africa, Climate Change, WMD, North Korea).

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About EU external relations

• The external relations policy of the Barroso
  Commission is based on three key basic
  propositions on the EUs role in the emerging
  world order.
• The EU is a global player it pursues a specific
  foreign policy philosophy which one could term
  effective multilateralism and, thanks to its
  specific nature, the Union disposes of a wide
  range of foreign policy instruments which are
  particularly suited to respond to today's
  challenges.

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• The President has established a Group of 4
  Commissioners, chaired by him, and in charge of
  six external relations services.Benita
  Ferrero-Waldner is deputy chair of the Group of
  External Relations' Commissioners, and
  responsible for External Relations and European
  Neighbourhood Policy. She is responsible for two
  Commission departments

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• External Relations and the EuropeAid
  Co-operation Office Peter Mandelson is
  responsible for External Trade. The Directorate
  General for Trade of the European Commission is
  in charge of implementing the external trade
  policy of the European Union. International trade
  will be at the forefront of international
  relations over the coming years.

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• Louis Michel is responsible for Humanitarian Aid
  and Development Policy. A closely related goal is
  enhancing the effectiveness of the Union's 
  development assistance. He is reponsible for two
  services   the European Commission Humanitarian
  Aid Office (ECHO) and Development.

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• Olli Rehn is responsible for Enlargement. This
  has been the key tool in enhancing the European
  model and meeting the objectives of our foreign
  and security policy. The Enlargement Directorate
  General manages the process under his
  responsiblity.