Making policies work

Talking Points

The new EU trade and investment strategy: The proof of the pudding is in the eating

16-10-2015

Bilal, San; Clara Brandi; Max Mendez-Parra, 2015, Die aktuelle Kolumne.

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Maastricht, Bonn, London, 16 October 2015.

On 14 October 2015 the European Commission released the new EU trade and investment strategy. Its catchy title – Trade for All – is very auspicious as well as ambitious, and the strategy contains promising elements for global development. But the proof of the pudding is in the eating: how will the strategy be put into practice?

The new trade strategy is built around three core principles:

  • Effectiveness: assuring that trade delivers new economic opportunities for European workers and firms (particularly SMEs).
  • Transparency: Securing the public access and scrutiny of negotiation texts and documents.
  • Values: Aligning trade objectives with European values associated with sustainable development, human rights, responsible business practices, fair and ethical trade and the fight against corruption.

Many elements of interest for developing countries

Based on these principles, the strategy outlines a series of specific policies to deliver its objectives. But is this truly a strategy “for all”. Is it in line with the recently adopted global goals of the 2030 Agenda? From a development perspective, the following issues are particularly important:

The multilateral system

The Commission supports the role of the World Trade Organization (WTO) as the prime driver of global trade liberalisation. This is welcomed as there is a clear commitment to not empty of value the current negotiations with the bilateral strategy followed so far. The strategy also rightly underlines that the current parameters defining the negotiation are outdated and need to be revised. The WTO system needs urgent reforms. The Commission identifies “…a growing imbalance between the contribution large emerging countries make to the multilateral system and the benefits they derive from it” and calls for an update in the WTO system to reflect these changes. The Commission correctly highlights the effectiveness of plurilaterals (in contrast to the single undertaking principle) to deliver outcomes from the negotiation. Plurilateral treaties are not an ideal solution, but they might open up new prospects for progress under the aegis of the WTO.

With a view to the ongoing Doha Round, the Commission reinforces its commitment to support a package for Least Developed Countries (LDCs) in the context of the current negotiations as well as “push in the G20, the WTO and other multilateral for close monitoring of the effect of third countries’ protectionist measures on LDCs…” These elements indicate an invitation to other countries like the rising powers to provide trade solutions for LDCs – which is highly welcome from a development perspective.

Trade preferences and sustainability

The Commission highlights the link between trade policy instruments and the European and other universal values. For instance, it underlines the role of the GSP+ regime in providing incentives and support for human rights, sustainable development and good governance. The EU seeks to make sure that the provisions on trade and sustainable development are implemented effectively in the Free Trade Agreements (FTAs) entering into force as well as promote other core principles in all trade and investment agreements. While including such provisions has promising potential to foster sustainable development, there is also the risk that developing countries feel that they are abused for protectionist purposes. Moreover, developing countries might need support in implementing the required provisions.

The future of preferences for less developed countries is also essential. Following the recent waiver for LDCs on services agreed at the WTO, the Commission strives to evaluate a preference system for services for these countries. The Commission should assure that its preference is in line with the real capabilities of LDCs, their strengths as well as their needs in the provision of services. In this sense, a full and broad access in every of the modes of provision would be ideal.

With respect to Africa, the Commission emphasises the importance of the Economic Partnership Agreements (EPAs) and considers its extension to other areas such as services and investment, with those willing to do so. The Commission should be careful in recognising the national interests of the African countries as well as their capabilities. It should also pay attention to the regional integration dynamics, if it does not want to repeat the tense EPA process of the last decade. The strategy puts a major emphasis on working with African partners to ensure the effective implementation of the EPAs. This suggests a more realistic assessment of the difficulties of the implementation of the EPAs, which should be undertaken together with the implementation of regional integration agendas and a better integration into regional and global value chains.

Regarding Asia and the Pacific, the strategy indicates renewed interest in resuming the negotiations for an ambitious FTA with India and with ASEAN. Trade in this region has been particularly instrumental in their development process. An interesting element for developing countries is the proposed (resistance from some member states is expected) FTA with Australia and New Zealand. This could translate to similar flexibility with respect to market access in agricultural products in favour of many developing countries, at least in the bilateral negotiations.

TTIP

The mushrooming of mega regional trade negotiations like TTIP, TPP and RCEP are transforming the trade rules of the future. It is highly welcome that the Commission addresses, at least to some extent, the perspective of third countries. For example, the Commission shows readiness to open its FTAs to non-members, including TTIP. Moreover, it seeks to make sure that its trade and investment initiatives minimize any negative impact on countries in need. And it seeks to propose regulatory approaches in the scope of the TTIP negotiations that have positive spillovers on third countries, including developing countries.

In the context of the TTIP negotiations, the EU has another opportunity to signal that it takes seriously the 2030 Agenda for Sustainable Development. These new global goals require among other things anopen and non-discriminatory trade system. To be concrete, for instance, the EU should go a step further and strive for simple and consistent Rules of Origin and coherence preferences for less developed countries (EBA and AGOA) and include explicit provisions for third party in its rules on standards equivalence and mutual recognition.

Some key issues, however, remain unresolved. For example, the current rise of mega regional trade deals generates a fragmented global trade system. How does the Commission position itself on how we will get out of this jigsaw mess? How does the EU view the option of multilateralizing TTIP preferences in the future?

The challenge is to put them into practice

While the new EU trade strategy does not address all trade challenges Europe is currently facing, the elements presented in the new trade strategy are very welcome. Many of them are in line with  developing countries’ concerns. However, there are risks associated with their implementation. The Commission needs to demonstrate that these elements are not just empty words but that there is not only a real interest in making them work to deliver outcomes that benefit developing countries, but that the EU has the capacity to do so.

The main task is to define the details of each of these policies. To be successful, the Commission will need to adopt a strong cooperation approach from other players in different international fora (UN, G20, etc). It will also need to more actively engage in multi-stakeholders processes, including to promote responsible trade and investment, with private sector, civil society actors and citizens.  But other policies can be implemented immediately (e.g. full and wide preferences on services can be delivered now). Besides, the EU also need to review its Aid for Trade strategy (foreseen for 2016), linking it more explicitly to its approach to private sector support, and better integrating sustainability and responsible trade dimensions in its support strategy.

A quick and decisive action from the EU in the implementation of these policies is at the heart of principles of this new strategy.


Photo courtesy of Guitarfish (Flickr/CC).

The views expressed here are those of the authors, and not necessarily those of ECDPM.


A shorter version of this article was originally posted by Euractiv.  Clara Brandi works at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) and Max Mendez-Parra at the Overseas Development Institute (ODI).

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Comments

San Bilal

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2015-10-22 13:35:09

The overall approach of the EU is sound, and covers many dimensions we have stressed as important. But it is not perfect, and will require careful scrutiny, including in its implementation, by far the biggest challenge. The focus on services and movement of professionals is to be welcomed, but indeed it should include the movement of ALL service providers, not only higher skilled workers. As for addressing unfair trade practices, we all know this is highly political tool and often captured by vested interests. But a useful reminder indeed.

Sheila Page

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2015-10-19 20:03:48

This is slightly uncritical. You might want to note that it proposes discrimination in migration policy in favour of 'professionals'. This is not only unpleasant in itself, but likely to make any opening on services to LDCs difficult and limited. It also expresses concern about 'circumvention' of trade defence measures, suggesting that there is a risk that EU trade defence rules will be made even tighter.

Economic Transformation and TradeTrade Policy and Economic Partnership AgreementsEconomic Partnership Agreements (EPAs)European Think Tanks Group (ETTG)Least Developed Countries (LDCs)TradeAfrica