Trade Policy and the European Union - Term Paper Example

Trade Policy and the European Union Introduction The European Union has been an active participant in world trade agreements that opens its market to developing countries. EU believes that liberalization of trade policy will benefit hundreds of millions of people of poor countries to get out of poverty. EU is presently doing this to many developing countries and EU thinks it could do more by extending their openness to other countries as well. As a manifestation of their commitment, they take into consideration the developments of these countries in every bilateral agreement EU enters into. This study aims to look into the preferential arrangements done by the European Union with United States and with other developing countries. First, let us examine what the European Union Trade policy is, then the preferential arrangements made by EU 1. European Union’s trade policy. European Union has an established coherent policy decided upon by the Community’s Commercial policy and implemented by the twenty five EU member’s states. The EU trade policy covers changes in tariff rates, conclusion of tariff and trade agreements with non-member countries, uniformity in liberalization measures, export policy and instruments to protect trade such as anti-dumping measures and subsidies. Uniformity has to be carried on and any product entering any ports in Italy, UK or Portugal.. (Meredith, Tom) 2. Preferential arrangements. EU has contracted bilateral trade agreements with many developing countries and hopes to reach all of the 171 developing countries. As one of strategies in implementing this trade policy, EU has been a member of several trade agreements and partnerships. First, it is a member country of the World Trade Agreement and a promoter of pro-development measures (EU Commission) 2.1. The Doha Round. As member of WTO, the EU helps in working out appropriate solution to the particular needs of the developing countries being discussed in the WTO “Doha Round”. The Doha round is trade negotiations started in Doha, Qatar in 1999 participated in by developing countries. These negotiations hope to reach an agreement that will see many of the WTO’s 152 countries cut subsidies to their producers and stop protecting home markets by lowering tariffs to let their products in. It is also a deal to increase trade in these countries. Negotiations on this still continue as some developing countries did not participate because of dissatisfaction on previous talks. Trade disputes are also discussed and resolved in this forum, as in the recent trade dispute of US and EU. (Angela Balakrishnan, 2009) 2.2 Regional and bilateral trade relations and negotiations. EU is working on bilateral arrangements with Latin America, India, ASEAN, the States of the Gulf Cooperation Council and Euro med Countries towards trade relations. In these negotiations, EU takes into account the needs of these developing countries and works to ensure that they will derive benefits in their access to the European market. (EU Commission) 2.3. Economic Partnership Agreements The EPAs are agreements intended to help regional markets to strengthen and diversify their economies to widen their exports to EU. As a policy, EU will welcome the exports of these countries without exception. Current partnership agreements are with the Caribbean countries which were signed in 2008 and negotiations with the African and Pacific regions. Diversification of economy is the development of other products that is intended for export. (EU Commission) 2.4. Preferential Access to the EU market for developing countries. The preferential access is an arrangement of EU’s generalized system of preferences which is extended to 176 developing countries and territories. GSP reduces tariffs of goods coming from these countries upon entering EU market. GSP has enabled the EU to become one of the world’s biggest importers of agricultural products and other produce from these developing countries. (EU Commission) 2.5 Aid for Trade. EU has committed a wider support for Aid for Trade for developing countries to develop the capacity to become a trading partner. This fund will be invested in infrastructure, meeting health and safety standards and developing facilities. EU has promised €1bn aid in 2007 to increase by another €1bn annually until 2010. This support has made EU as the biggest donor of trade-related financial assistance globally. 3. Identify and evaluate any policy debates Recent issues of debates concerns trade disputes between the United States and the EU. Partnership between these two economic giant nations has been strained by commercial interactions, trade disputes and tensions. It is important that trade relations of these two nations be preserved as it will bring problems in trade with the other countries as well. (Ronald Alhem) In the analysis done by Alhem, relations of EU and US has experienced ups and downs, and had periodic tensions, and even threats of trade war, but disputes were eventually ironed out. Today’s round of dispute has been difficult to resolve. Reasons Alheam provided are due to the equal economic ability of EU and US to impose concessions on the other. Alheam said that another factor of dispute may be because bilateral differences now “involve clashes in domestic values, priorities and regulatory systems wherein international rues are inadequate to provide a sound basis for effective and timely dispute resolution.” Attempts to settle these disputes were done in the DOHA talks which began in 1999 and still persist because of continuing changes in the policies of both countries. Ahem grouped these disputes into five trade categories. 1. avoiding a ‘big ticket’ trade dispute associated with steel or the tax breaks for U.S. exporters; 2. resolving long standing trade disputes involving aerospace production subsidies and beef hormones; 3. dealing with different public concerns over new technologies and new industries, 4. fostering a receptive climate for merger; and 5. strengthening the multilateral trading system. Finally in the DOHA conference, US AND EU had produced an agreement to work closely on concessions to move forward trading system of developing countries. Both countries have also agreed to settle their trade disputes without going into reprisal measures. At this talks, US agreed “to allow negotiations on its trade remedy laws an on patent protection, while the EU agreed to a greater liberalization of he agricultural building. Both countries agreed to support capacity building initiatives to help developing countries better take advantage of world trade opportunities.” (Raymond Alheam) 4. Identify the participants in policy-making and comment on their role in delivering policy objectives. In a new concept of policy making in EU, the citizens were made participants in forming future decisions for trade policy negotiations. The EU’s trade policy was put on trial by the people. They were divided in their support to acquit or condemn EU trade policy on charges that it fails to alleviate poverty in the third world, and has contributed to the destruction of the environment. On a trial of opinion done with a 300 member jury in November, 2006, decision was split over the matter. This new kind of debate is a series of campaign to let the citizen know the challenges of the country. The campaign of dialogue and debate has been organized by several organizations to support the European Commission in its plans. This campaign is an aftermath of the “No” votes on the draft Constitution of two EU founding member states’ and was lodged by the EU It is also an effort of the Commission to renew the confidence of the citizen to the European policy. The EU Commission believes that the citizen will have a fair idea of the issues when they are involved in the formulation of policies 5. Identify main economic concepts/issues/reasoning relevant to the policy under discussion and explain why they are relevant. Main concern of antagonism to trade liberalization is that poverty in the third world countries still persist in spite of economic trade, and concerns on environment protection. Environment issue is relevant to any country in order to protect the safety, health of the citizen and its environment. We see every day damages done by climate change, destructions in forests, disease related incidences and many more. There are certain products that contain prohibitive chemicals and unsafe for human use. People are interested to know what measures are done by the government on these issues. To allay the fears of environmentalists, the EU and member states said that regulations have been put in place that would safeguard products including disposal of wastes. These new regulations will be followed by partner countries in sending their products to EU. Criticisms on free trade are growing, such that it is good in theory, but it does not guarantee to work. It does not guarantee the most efficient allocation of resources and the cheapest prices for consumers, and does not provide the least developed country opportunity to provide themselves with a better quality of life. Joe Devanny debates on the issue as he said Westerners believe it can be done. He points to WTO and World Bank who promotes and lends credit for development projects and free trade. Joe believes otherwise because of protectionism of EU on agriculture and the US on its steel industries, which places the trade policy in an arguable position. (Devanny Joe. 2005) June 21, 2005. Another study done by Enrique Valerdi Rodriguez of EU Commission points to the implications of the EU Trade Agreements in a developing country. He said that the idea that free trade always benefits parties involved must be carefully studied, much more in the cases of bilateral agreement wherein two countries have different levels of development. He cited the 19th-century German economist Fredrich List, father of the infant industry who argued that, “free competition between two nations…can only be mutually beneficial in case both of them are in a nearly equal position of industrial development, and that an nation which owing to misfortunes is behind others in industry, commerce, and navigation.. must first of all strengthen her own individual powers, in order to fit herself to enter into free competition with more advanced nations”. (List, 1841, cited in Enrique V. Rodriguez). This means that a developing country must first strengthen its capabilities before going into international agreements. Rodriguez points out the examples of Taiwan, South Korea, Hong Kong, Singapore and China who developed first their domestic trade and infant industry before going to the international market. These countries are now known as Asian Tigers as they were alleviated from poverty by trade policies. To make it work for a poor country, Rodriguez contends that EU should play a significant role of giving special and differential treatment to developing countries so these countries can protect their infant industries. These are economic considerations that require state interventions such as fewer tariffs, subsidies, until they will be able to stand the market competition in EU. Comments. There are valid points on the criticisms on bilateral agreement, particularly on the levels of development of the countries. US and EU are two economic giants whose competency are almost equal, such that each one can afford to declare a trade war and be able to impose their own conditions of trade. I cannot dismiss the point that EU trade policy has failed to some point to help the poor countries. I see the efforts done by the EU through the preferential treatments in tariffs, aids and support to developing countries. But a lot more remains to be done as the work is magnanimous. Developing countries are weak and cannot protect their young industry; cannot compete with the efficiencies of developed ones; and in such a case, the economy of the developing country remains low. The developing country must look at the experience of the “Asian Tigers” in the area of domestic and export trade. End. W.c. 2025 References Aheam, Raymond J.(09 June, 2003). European Union Trade Relations: Issues and Policy Challenges. Foreign Affairs, Defense and Trade Division, CRS Issue Brief for Congress U.S. digital.library.unt.edu/govdocs/crs/permalink/meta-crs-2004:1 - 160k Balakrishnan, Angela. The Doha Round of WTO Talks) guardian.co.uk. 23 April 2009 http://www.guardian.co.uk/business/2008/jul/21/globaleconomy.wto Devanny Joe. (21 July 2008) European Commission. External Trade Issues. Trade and Development http://ec.europa.eu/trade/issues/global/development/index_ Meredith, Tom. The European Union Trade Policy. http://www.berr.gov.uk/whatwedo/europeandtrade/trade-policy/trade-policy-eu/page27588.html Rodriguez, Enrique V. (11 Feb. 2009) The European Union Free Trade Agreements – Implications for Developing Countries. European Commission. 21 April 2009 Read More