European Union as a

Trading Block

Group 6
 Introduction
• The European Union (EU) is a political and economic
union of 27 member states, located primarily in
Europe. It was established by the Treaty of Maastricht
in 1993 upon the foundations of the pre-existing
European Economic Community
• With almost 500 million citizens, the EU generates an
estimated 30% share of the world's nominal gross
domestic product (US$ 16.8 trillion in 2007)
• The EU has developed a single market through a
standardised system of laws which apply in all
member states, guaranteeing the freedom of
movement of people, goods, services and capital .It
maintains a common trade policy, agricultural and
fisheries policies, and a regional development policy.
EU population in the world
Population in millions, 2007

1
322

49
7
30
1
12 14
8 2

E Chin Japa Russi United

U a n a States
 The area of the EU
compared to the rest of the
Surface area, 1 000 km²

16
889

9 9
327 159

4
234

36
5
E Chin Japa Russi United
U a n a States
 How rich is the EU
compared to the rest of the
37
300

27
800
24
700

10
10 10
793
035 000
6
400
3
676
1
46
326
8
E Chin Japa Russi United E Chin Japan Russia United
U a n a States U a States

Size of economy: Gross Domestic Wealth per person: Gross Domestic

Product in Product
billion of euros, 2006 per person in Purchasing Power
 Decision- making Institutes:
European Parliament (EP), which represents the EU’s
•

citizens and is directly elected by them

•

•Council of the European Union, which represents the

individual member states
•

European Commission, which represents the interests of

•

the Union as a whole.

•

• This ‘institutional triangle’ produces the policies and

laws that apply throughout the EU.
• In principle, it is the Commission that proposes new
laws, but it is the Parliament and Council that adopt
them.
•
 Economy & Budget
• it the largest economy in the world by nominal GDP
and the second largest trade bloc economy in the
world by PPP valuation of GDP.
• It is also the largest exporter of goods, the second
largest importer, and the biggest trading partner to
several large countries such as India, and China.
• 170 of the top 500 largest corporations measured by
revenue (Fortune Global 500) have their headquarters
in the EU
• A total outlay of of €120.7 billion for the year 2007
and €864.3 billion for the period 2007-2013 has
been planned
 Single Market
• Two Core Objectives:
single market
customs union
• The single market involves the free circulation of
goods, capital, people and services within the EU
• Free movement of capital is intended to permit
movement of investments such as property purchases
and buying of shares between countries
• The free movement of persons means citizens can
move freely between member states to live, work,
study or retire in another country
• The free movement of services and of establishment
allows self-employed persons to move between
 Monetary union – Introduction
of Euro
• 1999 - Introduction of Euro as an Accounting Currency.
Formation of Eurozone
• 2002 – Adoption of Euro as the official Currency by 11
Countries
• 2009 – 16 Countries have joined Eurozone
• All other countries are legally bound to join EU

• Purpose:
Easing Travel
Price Transparency and low interest Rates
Protection against International shocks
The EU in World Trade
The EU in World Trade

A
MAJOR
TRADIN
G
POWER
The EU in World Trade
The EU in World Trade
 EU Trade Policy – Basic
Features
• Objective : A competitive European economy in an
open world trade system organized by multilateral
rules
 EU Trade Policy – Basic
Features
• Multilateral:Mostly implemented in the framework of
the WTO aiming at promoting market access with
rules, in the context of effective global governance.

• Bilateral: The EU has concluded bilateral agreements

with third countries and regional areas. 121 countries
potentially linked to the EU by regional trade
agreements, many negotiated in the 1990s.Example –
Ø Economic Partnership Agreements in negotiation with
ACP countries (Cotonou)
Ø Free Trade Agreements with EFTA, EEA, Euromed,
Mercosur (in negotiation), Mexico, South Africa
Ø Customs Unions with Turkey, Andorra and San Marino
Ø Partnership and Cooperation Agreements with Russia
and Ukraine
 EU Trade Policy – Basic
Features
• Unilateral measures are adopted in the interest of
development and political stability
• Key Initiatives:
General System of Preferences (GSP): Duty free
Access/tariff Reduction
“Everything But Arms” initiative (EBA):Duty free
Access to imports from LDC’s
Asymmetrical preferences : For economic or political
stability of a particular region
 Example : EU – China
Relationship
• China’s Economic Revival

• China’s Economic Return

• A new Trading Power
• A Major recipient of foreign investment
• A stable growing china is in Euerope’s interest.
• Challenges of Sustainable growth
EU – China Trade and Economic
Relationship
• Benefits Of openness
• Mutual Benefits
• EU exports
• EU investment in China
• Chinese investment in Europe
• The Price Effect
• Impact Of Competition
• Adjustment in Europe
• Technological Change
• Investment Restriction
• Trade Deficit
• Problems Faced by EU
• Intellectual property and legal rights, forced
technology transfers.
• Subsidies
• Excessive saving depresses demand for imports
• Environmental, social and safety conditions
• Distorting the market for global trade in natural
resources
 EU’s Response and Priorities
for Action
• Insisting On openness
• Enforcing China’s WTO Obligation
• Liberalizing beyond WTO Obligations

• Leveling the Playing Field

• Combating forced technology transfers, piracy
and counterfeiting
• Subsidies, banking reform and trade restrictions
on raw material and energy foods.
• Supporting European Companies
• Protecting European IPR
• Supporting European Business in China
• Language Training
• Strengthening the commission on the ground

• Defending EU’s Interest

• WTO dispute settlement
• Using anti-dumping and anti-subsidy instruments
 EU’s Other Trade Preferences
• The EU is the world’s main provider of trade
preferences for developing countries.

• ‘Preferences’simply mean that the goods imported

into the EU from developing countries are given a
special low or zero rate of customs duty. This provides
an incentive to traders to import products from
developing countries and helps these countries to
compete on international markets.

• EU currently has preferences for 178 developing

countries under the Generalised System of
Preferences (GSP) scheme, quota and duty free access
for all products from the 50 poorest countries under
Cont..
• Also Bilateral and preferential agreements exist with Chile,
Mexico, Mediterranean countries, South Africa and countries
in balkan regions, while full or interim Economic Partnership
Agreements will be effective as from January 2008, granting
duty and quota free access to many countries in Africa, the
Caribbean and the Pacific, in place of the unilateral trade
regime under Cotonou that expired on 31 December 2007.

• EU has focussed on Making Trade and Developmentof

various countries an important feature: Kenyan horticulture
is set to go from bloom to boom following the EU’s decision
to allow the import of Kenyan-certified horticultural
products.

• Bangladesh depends on the textile sector for most of its

export earnings. An EU program is helping the country to
Cont..
• EU-backed programmes have helped Dominican
bakers to enter new markets, boost productivity and
enhance their competitiveness.

• Since 1998, the European Commission has been

supporting the development and structuring of the
Madagascan lychee trade which has captured 70% of
the lucrative Christmas market in Europe – a market
worth some €12 million.

• Ukrainian consumers are increasingly demanding

high-quality food products, even when they are out of
season. The country also has the potential to become
Cont..
• The countries of West Africa generally lack a common
quality system necessary to develop a fully functioning
regional market and promote integration.An EU-funded
project is helping to lay these foundations.

• The island nation Mauritius is dependent on fi shing for

much of its livelihood. That is why the EU has been
supporting its plans to become a fishing hub.

• An EU programme helps the Southern African Development

Community (SADC) to build intra-regional business bridges,
as well as links with European enterprises.
Cont…
• An EU-funded programme sought to boost the
competitiveness of the Ugandan private sector by
supporting enterprise-level activities centred on the use or
acquisition of know-how.

• An EU-backed project is working to combat rural poverty in

Paraguay by creating synergies between the different links
in the organic cotton production chain.

• The ex-Soviet republics in Central Asia are facing

challenges in managing their borders, particularly the illicit
movements across them. An EU-funded project seeks to
enhance border management and boost trade along these
frontiers.
EU Trade Policy – How it Works

• The Trade Defense Instruments: instruments to ensure

fair trade and defend the interests of European
companies.
• have been designed in line with specific WTO
agreements recognizing the right of members to
counter unfair practices
Anti-dumping: measures created to counter
dumping practices
Anti-subsidy : measures designed to combat
subsidies
Safeguards: A WTO member may restrict imports of
a product temporarily if its domestic industry is
seriously injured or threatened with injury
 Offensive trade policy
instruments
• The Trade Barriers Regulation (TBR) gives EU industry
the opportunity to lodge a complaint with the
Commission when encountering trade barriers that
restrict their access to third country markets
• Market Access Strategy of which the EU’s Market
Access Database provides: information about market
access conditions in non-EU countries;
• Monitoring of third country trade defence measures
 Trade Barrier Regulation
•

Came into effect on 1 January 1995,

•

It is a legal instrument that gives the right to EU

•

enterprises, industries or their Associations as well as

the EU Member States
•Applies not only to goods but also to services and
intellectual property rights
Conditions for lodging a complaint:
•

a non-EU country enforces a trade barrier which

•

adversely affects exports from EU Member States; or

a non-EU country enforces a trade barrier which
•

adversely affects the EU market

•

•
The Whole Process
 Barriers or Obstacles to Trade

• An obstacles to trade is defined in the Regulation as

“any trade practice adopted or maintained by a third
country in respect of which international trade rules
establish a right of action”.
•

• International trade rules are primarily those

established under the World Trade Organization (WTO)
or, since February 2008, those contained in bilateral
Free Trade Agreements.
•
The TBR is, therefore, an instrument which effectively
•

provides industry with an indirect access to the rights

deriving from the WTO Agreements.
•

• Since 1996, 25 TBR examination procedures have

been initiated.
•

How is TBR different than other instruments?

•

• The TBR is the only trade policy instrument which

gives the right to an individual company to present a
complaint to the European Commission.
•

•
 EU Trade Policy -
Competitiveness
The Lisbon Agenda
• A more focused objective to achieve more and better
jobs in a more innovative, dynamic and attractive
Europe
• to concentrate efforts on a limited number of
essential core tasks
• to set up a new system of clear and direct
governance
• Maintain the WTO at the centre of the international
trading system
• Propose a new generation of free Trade agreements
• Strengthen intellectuels property enforcement
• Open up public procurement abroad
 EU Trade Policy -
Competitiveness 59,8
Manufacturing 148,9

-22,2
Machinery 29,4

46,4
Transport equipment 69,0

49,0
Chemicals 77,4

-31,1
Textiles and clothing -43,1

4,8
Iron and steel 2,8

8,4
Paper and articles of papers 7,4

5,9
Non-metal. Mineral 7,2

-13,0 2000
Other products 1,0 2006

Trade Balance (Billions

 Trade Balance
Comparative trade balance trends
20 (bn euros)
0
10
0
0 E
U25
- US
10
A
- Japo
20
-
n
30
Chin
- e
40
-
50
-
60
19 19 19 19 19 19 19 19 20 20 20 20 20
92 93 94 95 96 97 98 99 00 01 02 03 04
EU Trade Policy- WTO
Context
 WTO Context
The EU is one of the key players in the WTO
 WTO Context
• The overall effect of EU enlargement for trade in
(nonagricultural and agricultural) goods will be
beneficial for third countries.
•Nevertheless, for some tariff lines, the acceding
countries may have had lower tariffs prior to adopting
the Common External Tariff of the EC, possibly
triggering compensation claims.
•The scale of compensation on particularly sensitive
lines could be significant.
•To minimize the possibilities for compensation claims,
acceding countries are advised not to autonomously
lower any duties in the pre-accession period.
•Lowering of bound duties can trigger claims. Reductions
in applied rates can create difficulties in negotiations
and, more importantly, increase trade flows on which
compensation is calculated.
 Strengths

• No tariffs or trade barriers

• Guaranteed trade within the EU trading bloc
• Creates sustainable economic growth
• Common Values
• Recognition & credibility
• Influence
• Independence
• Cost reduction
• Expertise
 Weaknesses
• Institutions – no clear division
• No constitutional treaty
• No geographical delimitation (borders)
• Democratic deficit
• Financial limitations
• Diversity of interests which might sometimes compete
• Lowest common denominator
• Communication problems
• Poor quality of outcomes
• Possibility of one organisation dominating the others
 Opportunities
• Enlargement process
• Dialogue / cooperation with ENP countries
• Counter-balancing the US
• Mutual learning
• Creation of consensus
• Learn how to negotiate
 Threats
• Increased EU-US dichotomy
• China, India competitors
• Passive participation of some members
• Poor communication
• Bureaucracy
• Lack of transparency
Thank You