EU Trade Policy

EU Trade Policy

The EU is the world’s largest market and has become the world’s largest trading player. Trade policy is entirely common and is managed by the European Commission.

The EU is a customs union, which means that the countries have common customs duties against the rest of the world and that it is impossible for an EU country to conclude its own agreements with countries outside the EU.

The customs duties that the countries’ customs offices collect at the border go to 80 percent into the EU budget. The rest is left to the member states for their own administration.

The EU wants to see a globally regulated trade with common dispute resolution as in the WTO. But the WTO has long had difficulty advancing in trade deregulation due to disagreements between the countries of the world. The dispute resolution panels have not been able to be staffed properly because the United States has vetoed new appointments.
In 2017, US President Donald Trump began talking about abandoning rule-based solutions, tearing up trade agreements and putting the US first – to let the strongest party win. He imposed punitive tariffs on steel and aluminum imports and opened more trade disputes with China.
Faced with both the WTO’s difficulties and the unexpected challenge from the United States, the EU has put even more effort into negotiating its own, very broad trade agreements with the rest of the world, including the United States.

The European Commission is the party that negotiates trade agreements with the outside world on behalf of EU countries. There are few white spots on the EU trade map; the union has trade or cooperation agreements with trade as an element, with almost all countries in the world. So far, only a few countries in Africa are missing, as well as a group of countries bordering Russia (for example, Kazakhstan and Turkmenistan).

According to COUNTRYAAH, the EU’s strength as a trading bloc has made Europeans dare to challenge the world’s former largest trading bloc, the United States. One of the first disputes was about Europe’s right to refuse to import meat from hormone-treated American animals. Recent conflicts have involved banana imports, genetically modified goods, Hollywood’s film dominance, steel imports and imports of chlorine – treated chicken. In 2018, President Trump imposed punitive tariffs on imports of steel and aluminum, which also affected the EU. The EU responded with tariffs on US imports of orange juice and motorcycles, among other things, and reported the US to the WTO for violations of international trade rules.

Despite the disputes, the United States is the Union’s largest trading partner, just as the EU is the United States’. The EU and the US have been negotiating for the removal of trade barriers since the 1990’s – not always successfully. Between 2013 and 2016 negotiated the EU and the US to establish a free trade area, known as transatlantic trade and investment partnership (Transatlantic Trade and Investment Partnership, TTIP).

As there were hardly any tariffs left in transatlantic trade, the negotiation was mainly about adapting and recognizing each other’s rules of goods and services. This met with strong criticism in Europe. Likewise, many disapproved of the ISDS dispute resolution, which allows investors to sue states if political decisions harm their investments.
In the winter of 2016, negotiations were postponed, shortly after Donald Trump took office as the new US president. In the autumn of 2018, negotiations resumed, however with lower expectations and without a clearly stated goal.

Norway, Iceland and Liechtenstein have concluded the most comprehensive agreement with the Union, the EEA Agreement. It basically gives countries free access to the EU’s internal market in exchange for accepting both existing and future rules, paying a fee and accepting the European Court of Justice as the highest dispute resolution body. Switzerland has similar access through a large number of separate agreements.

The EU has had a trade and cooperation agreement with Russia since 1997. Attempts to update the agreement have fallen into political disagreement, first due to disputes that Poland and Latvia have had with their Russian neighbor, then due to Russia’s annexation of the Ukrainian peninsula Crimea in 2014 and Russian involvement in fighting in eastern Ukraine. The economic sanctions imposed on Russia by the EU after the annexation of Crimea have made relations more difficult. Russia has responded with a ban on imports of goods from the EU.

Since 2009, the EU has been operating eastwards in the framework of the so-called ” Eastern Partnership ” with neighboring countries Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The co-operation covers political dialogue, trade and financial support for development.

The EU has brought together relations with other neighboring countries in a ” European neighborhood “. These are 16 neighboring countries to the east and south, but for political reasons some countries sometimes drop out (2017, for example, Syria, Libya and Belarus). Other countries included are Algeria, Armenia, Azerbaijan, Egypt, Georgia, Israel, Jordan, Lebanon, Moldova, Morocco, Palestine, Tunisia and Ukraine. This includes trade, democracy support and political dialogue as well as financial support (EUR 15.7 billion between 2014 and 2020).

Since 1995, the EU has similarly pursued a Mediterranean union with trade, social reforms, student exchange, etc. Despite several start-ups, that union has not really got its own life.

Between the EU and China, the world’s second largest trade exchange takes place at a value of approximately EUR 1 billion per day. There is a large trade surplus in China’s favor. EU-China trade is based on technical agreements, while a broader investment agreement has been negotiated for a long time without reaching targets.

Contacts with China are close but periodically strained. China is the exporting country whose goods usually have to be recalled. China is also the country that is most often affected by so-called anti-dumping duties because export goods are judged to be sold below the production price. China has also been criticized for looking between the fingers when companies copy well-known European branded goods.

In some European countries, Chinese investment has caused concern. In 2018, an EU regulation was adopted that is considered to be aimed at China. The regulation states that foreign investments in strategically important businesses (such as ports or advanced electronics) must be examined in advance, especially when the investor is state-owned or closely linked to a foreign state.

Japan is the EU’s second largest partner in Asia. In December 2017, the parties agreed on a new and broader trade agreement in which Japan promises to remove several trade barriers. The parties are also discussing strategic cooperation.
During the summer of 2018, negotiations were also initiated on broad trade agreements with Australia and New Zealand.

The EU has long had close relations with ASEAN(ten South Asian countries) which together constitute the EU’s third largest trading partner. The EU signed a free trade agreement with Vietnam and Singapore in 2018, negotiates with Indonesia and already in 2011 concluded a broad trade agreement with South Korea, one of the first of the “new generation” agreements. By “new generation” is meant that since customs rarely constitute a barrier to trade nowadays, trade agreements must include harmonization of rules or recognition of each other’s rules in order to make a difference.

The EU holds annual summits with the African Union, with which it has a ten-year partnership agreement.

The EU is Africa’s largest investor, far larger than both the US and China, and has pledged new investment worth € 54 billion by 2020. This promise is linked to efforts to persuade African states to prevent emigration and repatriate migrants. Investment support, aid, education and democracy building in new collaborations being tested with, for example, Mali, Nigeria, Ethiopia and Sudan.

Since the 1970’s, the EU has had partnership agreements (aid, trade and cooperation) with 40 sub-Saharan African countries and in recent years has supplemented them through regional agreements with East Africa (five countries) and West Africa (16 countries).

The EU has free trade agreements with all countries in Latin America except Venezuela. In addition, negotiations on closer cooperation with the group of countries in the Andes (Ecuador, Peru and Colombia) were recently concluded, while negotiations are under way to strengthen a looser regional agreement with Mercosur (Argentina, Brazil, Paraguay and Venezuela).

In 2018, a new agreement with Mexico was basically completed.

Requirements for trade

All EU trade agreements now contain a human rights clause that allows the EU to freeze contacts with the other country in the event of serious infringements. This has happened several times. The EU has also begun to introduce a clause with requirements for climate-friendly policies, for example in the Canada agreement from 2017 and in the EU’s Japan agreement from 2018.

EU Trade Policy