13 Trade policy and the EU's 2020 strategy
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16183/10
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COM(10) 612
| Commission Communication: Trade Growth and World Affairs — Trade policy as a core component of the EU's 2020 strategy
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| Legal base | —
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| Document originated | 9 November 2010
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| Deposited in Parliament | 16 November 2010
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 29 November 2010
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | 13 December 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
13.1 The Commission says that faster growth is the over-riding
aim of European economic policy, and that, in setting out how
trade and investment policy contribute to this objective, this
Communication is a crucial element in the external dimension of
the Europe 2020 strategy.
The current document
BASIC ORIENTATIONS
13.2 The Commission says that open economies grower faster than
those which are closed, by fostering efficiency and innovation,
providing domestic consumers with a wider variety of goods at
competitive prices, and boosting foreign demand for goods and
services. However, it observes that, if an open trade policy in
Europe is to succeed politically, there must be a spirit of reciprocity
and mutual benefit between the EU and its international partners,
involving fair access to raw materials and economic opportunities.
13.3 At the same time, it observes that the world
economy, and trading patterns, have undergone profound changes
in recent years, with different parts of the globe being involved
in the supply chain, and that this has required European companies
to rely on imports, services and highly qualified people from
abroad, and on the robust protection of their investments and
intellectual property if they are to stay ahead. It therefore
believes that, as set out in the 2020 Strategy, the EU's agenda
must evolve accordingly, and that, although cutting tariffs on
industrial and agricultural products is still important, market
access for services and investment, opening public procurement,
better protection of intellectual property rights, unrestricted
supply of raw materials, and overcoming regulatory barriers will
make a bigger difference, adding that this also underlines the
need for greater coherence between the EU's internal and external
policies.
13.4 The Commission says that it will act both multilaterally
through the World Trade Organisation (WTO), and bilaterally through
the completion of balanced free trade agreements with its major
partners. It adds that, once those agreements currently under
negotiation have been completed, they will account for about half
of the EU's trade, but that it is equally important to deepen
trade and investment links with the other big economies, such
as the United States, China, Japan and Russia. At the same time,
the Commission points out that trade also provides major benefits
for developing countries, and that the EU is contributing to this
through generous unilateral trade preferences, involving a carefully
differentiated approach which depends upon levels of development.
A POLICY FOR TOMORROW'S CHALLENGES
Smart growth: forwarding to the future
13.5 The Commission says that the EU's economic future
lies in maintaining a competitive edge in innovative high-value
products, and that its trade policy must take on board the following
elements:
— Services
The Commission notes the reliance of an effective
global manufacturing supply chain on transport, telecommunications,
and financial, business and professional services, but points
out that, although these represent about 70% of world output,
they account for only about 20% of trade. It recognises that some
services are non-tradable, but says that trade barriers also play
a major role, and are in general much higher than those for manufactured
products. It says that it will therefore seek greater openness
for EU service providers, in line with the opportunities which
the EU itself gives to providers from third countries, and that
it will continue to offer integration with the internal market
to some neighbouring countries[61]
in sectors such as financial, postal and telecommunications services.
In addition, it says that the EU should seek to ensure that the
regulation of services in all third countries is open, non-discriminatory
and transparent, and to prevent the erection of barriers in areas
where technological change has led to the creation of new services.
— Foreign direct investment
The Commission notes the enormous increase in capital
movements and foreign direct investment, saying that around half
of world trade now takes place between affiliates of multinational
enterprises trading intermediate goods and services. It recalls
that it has proposed a comprehensive European investment policy,[62]
and it says that it will seek in ongoing trade negotiations with
Canada, Singapore and India to integrate investment protection
with liberalisation, and consider whether stand-alone investment
agreements should be pursued with other countries, such as China.
— Public procurement
The Commission says that public procurement is an
area where foreign markets are particularly closed, not least
in sectors such as transport, medical devices, pharmaceuticals
and green technology where EU industry is highly competitive,
and that it will both press for more opening and fight against
discriminatory practices. It notes that the EU market is much
more open than those of its trading partners, particularly at
regional and local level, and it says that it will present in
2011 a legislative proposal to increase the EU's leverage to secure
improved symmetry of access to public procurement markets in developed
and large emerging countries. Likewise, it observes a similar
need for symmetry regarding access to research and development
programmes.
— Innovation and new technologies
The Commission suggests that trade and investment
flows are a key factor for both new and more traditional sectors.
It notes that the EU is advocating an extension of a moratorium
on tariffs for electronic commerce, and will pursue its efforts
to update the 1996 WTO Information Technology Agreement.
— Regulatory barriers
The Commission says that these are especially harmful,
particularly in the EU's main trading partners, with the lack
of acceptance (or use) of international standards and burdensome
certification or inspection requirements being major concerns.
It acknowledges that countries have a right to establish their
own levels of protection in areas such as health and safety and
environmental protection, and that this provides reassurance for
consumers, but it suggests that it often imposes an important
cost on EU companies abroad, and that non-tariff barriers are
a significant cause of trade disputes. It therefore believes that
enhanced regulatory cooperation is an important aspect of trade
relationships, and it says that it will urge its major trading
partners to join existing initiatives, such as the UN-Economic
Commission for Europe (UNECE) regulations on automobiles, and
to participate actively in the development of international standards
or common regulatory approaches in a broad range of sectors, noting
that it is easier to tackle potential barriers before they become
entrenched.
The Commission also acknowledges the need for the
EU's own system of regulation to be increasingly sensitive to
the international context, and the relationship between the opening
of external trade and internal market reforms; and it suggests
that more needs to be done to leverage the effectiveness of those
policies, thereby enhancing the EU's competitiveness in the global
market. It says that it will explore how to improve coordination
between regulatory actions in the two areas, and it notes that
these issues are discussed in its recent Communication "Towards
a Single Market Act".[63]
— Movement of people
The Commission comments on the need to ensure that
the temporary movement of people to provide services contributes
to making service providers more competitive, and it says that
bringing in the most highly qualified people from abroad is essential
to enable its companies and research centres to maintain their
record of innovation (and that there is a need for their European
experts to be able to move to their establishments abroad). In
so far as it considers there is a need to offer the same treatment
to foreign firms, it believes that the proposed Directive on conditions
of admission of third country nationals in the framework of intra-corporate
transfer should help to create a stable and open environment.
Inclusive growth in the EU and abroad
13.6 The Commission observes that, despite the benefits
from globalisation, there are concerns within the EU about the
potential consequences in areas such as employment. It points
out that trade openness creates more jobs overall, but recognises
that the shift towards the best performing sectors may cause losses
in other sectors, and the consequent need to equip people to adapt
to these changes. It adds that, whilst it is the responsibility
of Member States to put in place the right social, educational
and labour market policies, the EU contributes additional support,
with one such instrument being the European Globalisation Adjustment
Fund, which it suggests could be extended and simplified. The
Commission notes the importance of inclusiveness outside the EU's
borders, and its commitment to promoting sustainable development
and international labour standards; and in this regard it draws
attention to its Economic Partnership Agreements with African,
Caribbean and Pacific countries. It says that it will propose
in 2011 a reform of the EU's General System of Preferences in
order to focus on those countries most in need and which effectively
implement international labour standards, human rights, environmental
protection and good governance. Finally, it says that it will
adopt in 2011 a Communication on trade and development, which
in addition to considering in broad terms how trade policy can
best serve development, will see how it can help countries hit
by natural disasters, such as Haiti and Pakistan.
Sustainable growth in the EU and abroad
13.7 The Commission states that trade policy should
continue to support green growth and climate change objectives,
particularly the reduction in carbon emissions, and that the EU
needs to ensure that its industry can compete in the sustainable
economy of the future, including the fisheries and agriculture
sectors (which it notes will see further reform). It says:
- that its policy on climate
change remains a global agreement, with emission reduction
goals set for all countries, and that trade policy can contribute
to this by eliminating barriers to the movement of environmental
goods and services;
- that trade policy should continue more broadly
to support and promote green growth in other areas, such
as energy, resource efficiency and the protection of biodiversity,
with particular attention being paid to the implementation of
the sustainable development chapters of the EU's trade agreements;
- that the sustainable and undistorted supply
of raw materials and energy is of strategic importance for
the competitiveness of the EU economy, and that a number of other
countries are developing industrial policies which create supply
bottlenecks and other distortions: that it is preparing a new
Communication by the end of 2010 on the implementation of the
raw materials strategy paper[64]
it put forward in 2008, and the way forward; and that it will
use current trade rules to the maximum, pursuing the monitoring
of export restrictions, and exploring approaches based on best
practices, whilst continuing to observe its development objectives
of poverty eradication and good governance;
- that on energy the EU will use both bilateral
and multilateral negotiations to include trade provisions which
will help it to diversify its energy supplies (and hence energy
security as well), and promote free transit and trade in sustainable
energy, particularly as regards the development of its renewable
energy industry.
UPDATING THE NEGOTIATING AGENDA TO BOOST GROWTH
Concluding Doha and building on the multilateral
rules-based system
13.8 The Commission confirms that, despite the slow
progress, completing the Doha Round remains the top priority,
with the potential benefits — which could include annual
increases of €300 billion in world trade, and €135 billion
in world income — being too important to ignore. It says
that 2011 represents the next best opportunity to conclude an
agreement to which all involved both make a significant contribution
and stand to benefit. It suggests that a successful outcome would
confirm the central role of multilateral trade liberalisation
and rule-making, and the WTO's role against protectionism, but
that better use could be made of the organisation's surveillance
and monitoring capacity. It adds that the EU should continue to
give priority to further accession, and will seek to strengthen
the dispute settlement mechanism: and, given the long-term benefit
from strengthening the WTO's role in addressing the challenges
of global economic governance alongside other institutions such
as the G20, the Commission proposes to set up an eminent group
with representatives from developed and developing countries to
help shape views on its functioning after Doha.
Completing the on-going negotiating of Free Trade
Agreements
13.9 The Commission says that the Global Europe agenda
of an ambitious new generation of bilateral trade agreements with
important trading partners is challenging, not least because these
go beyond import tariffs, addressing regulatory barriers, intellectual
property rights, government procurement, the protection of innovation,
sustainable development and other important issues. However, it
suggests that the benefits should be substantial, since these
agreements will cover about half of the EU's external trade, are
likely to reduce by one half the average tariff on EU exports
and the average EU import tariff by one fifth, and add up to 0.5%
to EU GDP in the longer run. It notes that agreements have been
completed successfully with Korea, as well as Peru, Colombia and
Central America, whilst talks with India, Canada and Singapore
are at an advanced stage, and negotiations with the MERCOSUR region[65]
have been reopened. It also suggest that the EU should make use
of fast-growing regional trade in East Africa, and seek to conclude
bilateral negotiations with ASEAN[66]
countries such Malaysia and Vietnam: and it says that, in order
to help establish an area of shared prosperity with Europe's neighbourhood,
it will continue to pursue Deep and Comprehensive Free Trade Agreements
within the Eastern and Euro-Mediterranean Partnerships.
Engaging strategic partners on trade, investment
and regulatory convergence
13.10 The Commission says that, because of their
economic size and potential, and their influence on the global
economy, EU trade policy needs to pay particular attention to
the US, China, Russia, Japan, India and Brazil, and that these
must now become an even greater priority. It notes that intense
negotiations with India are continuing, and believes that the
relationship with Brazil will be transformed when an EU-Mercosur
Association Agreement is concluded: and it summarises the issues
currently arising with regard to the other four countries.
ENFORCEMENT AND IMPLEMENTATION AGENDA
13.11 The Commission says that the EU must step up
its efforts to enforce its rights under agreements, with proper
enforcement of trade rules being an indispensable pillar of trade
policy, particularly for SMEs. It says that at a global level
it will continue to pay particular attention to actions taken
in the recovery from the economic crisis, and notes the extent
to which a G20 commitment in 2008 not to introduce protectionist
measures has played an important political role, a commitment
it says it will continue to monitor closely. At the same time,
the Commission calls upon the EU's G20 partners to take action
to reverse the trade restrictions introduced during the financial
crisis, and says that it will act vigorously against any protectionist
tendencies which may harm EU interests. Beyond this, it says that
the EU must push hard for systematic implementation of all free
trade agreements.
13.12 The Commission says that the Market Access
Strategy will remain a key element of its enforcement activities,
its market access teams in third countries having produced very
good concrete results in removing trade barriers in countries
with a significant export potential. Other action proposed includes
working with major partners to strengthen consumer safety by market
surveillance authorities, the adoption of proposed origin marking
for imported end products, international customs cooperation,
strengthening measures relating to intellectual property rights,
including a harmonisation of rules within the EU, and pressing
for the implementation of the Anti-Counterfeiting Trade Agreement,
applying trade defence mechanisms to address trade distortions,
developing international rules regarding state aid rules, and
enhancing the role of EU delegations as contact points for EU
business abroad.
PUBLIC CONSULTATIONS AND IMPACT ASSESSMENTS
13.13 The Commission says that its public consultations
have provided useful inputs to the preparation of this Communication,
and that it remains committed to this practice when drafting policy
and proposing action. It also says that it will step up a gear
in embedding impact assessments and evaluations in trade policy
making, including the carrying out of such assessments on all
new trade initiatives with a potentially important impact, and
that it will also carry out ex-post evaluation on a more systematic
basis.
TRADE AND EXTERNAL RELATIONS
13.14 The Commission says that the EU should aim
to play a role in foreign affairs and global management commensurate
with its economic weight, and that trade policy has its own distinctive
contribution. It goes on to suggest that the EU's trade and foreign
policies should be mutually reinforcing in areas such as development
policy and the application of UN sanctions, in encouraging its
partners to respect human rights, labour standards, the environment
and good governance, and in its export control system for dual-use
goods. More generally, it comments on the economic significance
of export controls, and it says that it will bring forward a Green
Paper to consult on the functioning of the current system and
possible areas of reform.
The Government's view
13.15 In his Explanatory Memorandum of 29 November
2010, the Minister for Employment Relations, Consumer and Postal
Affairs at the Department for Business, Innovation and Skills
(Mr Edward Davey) says the Government strongly supports the Commission's
focus on trade and investment as a means of securing growth within
the EU, and welcomes its prioritisation of a successful conclusion
to the Doha Development Round and a strengthening of the WTO.
In particular, it supports the proposal to set up a group of eminent
persons from developed and developing countries to obtain independent
recommendations to help shape a view on the future agenda and
functioning of the WTO post-Doha. It also agrees that these
multilateral negotiations and agreements to secure greater liberalisation
can be supported by bilateral Free Trade Agreements.
13.16 He says that the Government would have liked
the Commission to focus further on what actions can be taken to
ensure that poor countries can secure the benefits of trade, though
it welcomes the proposed reform of the EU's General System of
Preferences and the continuing use of Economic Partnership Agreements
with developing countries. It also welcomes a number of proposals
to make best use of existing levers to improve trade, including
a better alignment of Single Market policies with those relating
to external trade, the continuation of the activities of Market
Access Strategy teams, and the enforcement of already completed
bilateral and multilateral trade agreements. It notes that the
Commission also proposes to review the EU's 2004 strategy on the
enforcement of intellectual property rights in third countries,
a course of action it supports.
13.17 The Minister says that the area of most concern
to the Government is the proposed introduction in 2011 of legislation
to promote greater symmetry in the level of openness in public
procurement contracts to suppliers from third countries. Whilst
he notes that the details are not yet known, he is concerned that
the procurement instrument could be used to reduce access for
third countries to the EU and in particular to the UK, increasing
protectionism and undermining value for public money.
13.18 Finally, the Minister also notes two additional
areas where it is not yet clear what the final proposal will entail
— one being the a Green Paper on a potential Trade Defence
Instrument, and the other the strengthening and simplification
of the European Globalisation Adjustment Fund. Although the Government
supports both trade defence and the need for adjustment policies,
it is keen that any proposals should not constitute greater protectionism
and are in keeping with WTO commitments: and it says that in all
instances it will watch emerging policies and legislation closely.
13.19 The Minister says that the Government plans
to respond to the Communication within the planned Trade White
Paper due in early 2011, and that, in preparation for this, his
Department will put forward a comprehensive UK trade and investment
strategy and policies, on which it is consulting across Whitehall
and the Devolved Administrations.
Conclusion
13.20 This document forms part of the Europe 2020
strategy, and deals with its external dimension by setting out
how trade and investment policy can contribute to achieving faster
growth within the EU. As such, it is wide-ranging and contains
a number of suggestions for further action, and, although these
are in the main supported by the Government, it is clearly right
to draw it to the attention of the House. However, as with a number
of other comparable Commission Communications which we have considered
recently, its very breadth makes it difficult to have a focussed
debate on the document itself, and it seems to us that any consideration
of the issues raised would best be carried out as and when further
specific proposals are brought forward. On that basis, we are
clearing the document.
61 Such as Ukraine, Moldova, the Caucasus countries,
Egypt, Jordan, Morocco and Tunisia. Back
62
(31783) 11952/10: see HC 428-ii (2010-11), chapter 3 (15 September
2010). Back
63
(32132) 13977/10: see chapter 11 of this Report. Back
64
(30202) 16053/08: see HC 19-ii (2008-09), chapter 14 (17 December
2008). Back
65
Comprising Argentina, Brazil, Paraguay and Uruguay. Back
66
Association of South East Asian Nations. Back
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