EU commercial policy in a multipolar trading system

Intereconomics

Volumn 42, Issue 3, 2007, Pages 143-155

  Evenett, Simon J ^a  

^a UNIVERSITY OF ST GALLEN   (Switzerland)

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EID: 34347390726     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/s10272-007-0217-8     Document Type: Article

References (51)

1. As it was to become.
2. Wolfe takes a different perspective examining, amongst others, what subset of the WTO membership effectively constitute "critical mass" in so far as the decision-making of that international organisation is concerned. See Robert Wolfe: Can the trading system be governed? Institutional implications of the WTO's suspended animation. To be published in Alan Alexandro ff (ed.): Can the world be governed?, forthcoming 2007. Section 1 of Wolfe's paper contains a particularly interesting discussion of the notions of power, negotiations, learning, and agency in the context of the WTO.
3. An analogous question could be asked of the political economy of trade reform in each of the existing and emerging trading powers.
4. I documented those intra-EU differences on agricultural trade reform in Simon J. Evenett: The WTO Ministerial Conference in Hong Kong: What Next?, in: Journal of World Trade, Vol. 40, No. 2, April 2006.
5. Edwin Vermulst and I have documented the differences in view between member states concerning the efficacy of antidumping measures, see Simon J. Evenett, Edwin Vermulst: The Politicisation of EC Anti-dumping Policy: Member States, Their Votes, and the European Commission, in: The World Economy,Vol. 28, No. 5, 2005.
6. Recently I have evaluated both the near-term trajectory and the longer-term strategy of EU commercial policy, see Simon J. Evenett: "Global Europe": An Initial Assessment of the European Commission's New Trade Policy, in: Aussenwirtschaft, December 2006.
7. Simon J. Evenett: The Trade Strategy of the European Union: Time for a Rethink? Paper prepared for Breugel, April 2007.
8. I admit that much has been written on these matters, too much in fact to summarise here. One contribution in this respect is the Sutherland Report. See Peter Sutherland , Jagdish Bhagwati, Kwesi Botchwey, Niall Fitzgerald , Koichi Hamada, John H. Jackson, Celso Lafer, Thierry de Montbrial: The Future Of The WTO. Addressing institutional challenges in the new millennium. Report by the Consultative Board to the Director-General Supachai Panitchpakdi, World Trade Organization; Geneva 2004.
9. See also Robert Wolfe, op. cit., for a recent insightful analysis of such matters.
10. Pascal Lamy: Leadership, the EU and the WTO, speech given at the Evian Group, Montreux, Switzerland, 13 April 2002. Ostry characterises the bipolar dominance slightly differently and arguably more completely than Lamy: "The GATT worked very well, effectively managed from the 1960s by the European Community (now European Union or EU) and the US with a club of friends. No headlines for the General Agreement to Talk and Talk. The club model was based on a post-war consensus termed embedded liberalism': Rules and other arrangements to buffer or interface between the international objective of sustained liberalisation through the reduction or elimination of border barriers and the objectives of domestic policy, sovereignty and stability. This largely transatlantic consensus was greatly aided by the use of reciprocity in negotiations (denounced as mercantilist by purists) and by the virtual exclusion of agriculture (via an American waiver and the near-sacrosanct European CAP or Common Agricultural Policy). Developing countries were largely ignored, although that began to change in the 1970s as a consequence of the OPEC oil shock".
11. Sylvia Ostry: After Doha: Fearful New World?, in: Bridges, Year 10, No 5, August 2006, page 3 (italics in the original).
12. Sylvia Ostry, op. cit., offered the following colourful evaluation of what developing countries actually obtained from the Uruguay Round of multilateral trade negotiations "The Grand Bargain turned out to be a Bum Deal" (page 3).
13. The Doha Ministerial Declaration mentions the word "development" 39 times, the phrase "technical assistance" 21 times, the phrase "capacity building" 13 times, and the expression "Special and Differential Treatment" 8 times.
14. It seems to me that many Least Developed Countries' approach to the various forms of Special and Differential Treatment could well be examples of these last two possibilities.
15. For example, the Doha Development Agenda is almost always referred to as the Doha Round in Washington, DC trade circles.
16. Another factor limiting corporate support is the lack of transparency and specificity concerning the exceptions that each WTO member can take with respect to liberalisation in each major area of trade. Unless and until these exceptions are speci. ed openly, a major exporter is likely to discount any potential exports gains from completing the Doha Round by the likelihood that the product or products it ships are listed as an exception. Arguably, the difficulties with bindings described in the main text and the uncertainty generated by lack of specificity on exceptions combine to limit the willingness of major exporters to support the current round of multilateral trade negotiations. In general, more thought needs to be given to the effect of what might appear to be tedious technical negotiating modalities on the incentives of major corporate groups to support multilateral trade liberalisation.
17. Using current exchange rates the relative size of China's economy looks slightly less large. China's economy recently overtook the United Kingdom's in size, the latter being the fourth largest economy in the world. China is expected to overtake Germany, the third largest economy, soon.
18. Please note that the data reported in Table 1 for the European Union excludes intra-EU trade.
19. Using current exchange rates the relative size of China's economy looks slightly less large. China's economy recently overtook the United Kingdom's in size, the latter being the fourth largest economy in the world. China is expected to overtake Germany, the third largest economy, soon.
20. Please note that the data reported in Table 1 for the European Union excludes intra-EU trade.
21. The original study by Goldman Sachs (Dominic Wilson, Roopa Purushothaman: Dreaming With BRICs: The Path to 2050, Goldman Sachs, Global Economics Paper No. 99, 2003) included economic growth predictions for Russia as well and introduced the moniker for these four emerging markets of "BRICs".
22. This particular Goldman Sachs study does not present growth predictions for the entire European Union, just these four countries.
23. The China-Chile FTA is a good example. This FTA contains no provisions on service sector liberalisation or on national intellectual property rights law. In fairness provisions on sanitary and phytosanitary measures are included in this FTA and appear to go beyond existing multilateral disciplines. With respect to the liberalisation of trade in goods in this FTA, China ensured that 211 tariff lines were excluded outright from liberalisation. In addition a total of 1610 product lines were given 10 year phase-in times for tariff elimination.
24. India sought to put 840 items on a sensitive list (down from an initial demand of 1400 items) in its FTA negotiations with ASEAN, and rejected an ASEAN demand that India remove import duties on 90 per cent of its product lines by 2011. The ASEAN-Indian FTA negotiations were suspended soon after on 25 July 2006. Thailand faced similar challenges in its negotiations with India, with the latter seeking to impose very restrictive rules of origin that would have reduced the amount of goods able to enter India on a preferential tariff basis.
25. Defenders of India's FTA strategy point to its FTA with Singapore, which includes measures to modestly liberalise India's service sector. (Even here certain restrictions on the establishment of commercial presence through foreign direct investment have been retained by India.) It should be noted that this agreement also contains numerous exceptions to liberalising goods trade between the parties. A total of 6551 tariff lines were excluded outright from tariff liberalisation. A further 2407 tariff lines will only see a phased reduction of 50 per cent in the applied tariff rates. Together these exclusions and phased reductions account for approximately 76 per cent of India's tariff line commitments in its FTA with Singapore. In my view the latter indicates a distinct reluctance by India to commit to across-the-board goods trade liberalisation in the context of a reciprocal trade agreement with a nation whose economy is less than five per cent of the size of the Indian economy (when these economies are measured in purchasing power parity terms.)
26. Both of these nations have called for certain Uruguay Round trade agreements to be renegotiated.
27. According to WTO statistics Brazil, India, and China each saw their combined exports of goods and services grow on average (in nominal terms) by at least 20 per cent per annum since 2000.
28. The reader should not interpret the following emphasis on China and India's industrial policies and the extensive nature of their business-government linkages as suggesting that these countries' circumstances are particularly egregious or unique. The resurgence in recent years of policies towards national champions from certain European governments, including for example its manifestation as "economic patriotism" in France, demonstrate that the new trading powers are not alone in their pursuit of industrial policies and the like.
29. For details see Peter Nolan : China and the global business revolution, Palgrave 2001.
30. Dylan Sutherland : China's Large Enterprises and the Challenge of Late Industrialisation, Routledge 2003.
31. Peter Nolan , op. cit., p. 71.
32. Peter Nolan , op. cit., p. 81.
33. For a recent analysis of the corporate performance of the Chinese National Team see Paul Guest, Dylan Sutherland: How Has China's 'National Team' Of Enterprise Groups Performed? An Evaluation Using Aggregate and Firm Level Data, Centre for Business Research, University of Cambridge, Working Paper, 2006.
34. Atul Kohli: Politics of Economic Growth in India, 1980-2005. Part I: The 1980s, in: Economic and Political Weekly, 1 April 2006.
35. Atul Kohli: Politics of Economic Growth in India, 1980-2005. Part II: The 1990s and Beyond, in: Economic and Political Weekly, 8 April 2006.
36. Atul Kohli: Politics of Economic Growth in India, 1980-2005. Part II: The 1990s and Beyond, op. cit., p. 1368.
37. Ibid., p. 1362.
38. See "India asks Chirac to be fair to Mittal," in: Financial Times, 21 February 2006.
39. "Racism alleged over Mittal's Arcelor bid - New Delhi criticises European governments opposed to Euros 18.6bn move for Luxembourg-based group," in: Financial Times, 11 February 2006.
40. For an account of this dispute and the associated government policies see Andrea E. Goldstein, Steven M. McGuire: The Political Economy of Strategic Trade Policy and the Brazil-Canada Export Subsidies Saga, in: The World Economy, Vol. 27, No. 4, April 2004.
41. This count is likely to be an underestimate as it refers to the number of parent companies that are based in a given economy and so excludes multinational companies perceived to be "ours" even though they are based abroad. Therefore, India's count would not include the Mittal Steel Company, whose headquarters is based in Europe.
42. This statistic does not include the 948 multinationals based in Hong Kong, China. Whether the Chinese government feels the same degree of affinity for Hong Kong-based multinationals as it probably does for mainland Chinese counterparts is another matter and worth considering further.
43. See German Marshall Fund: Perspectives on Trade and Poverty Reduction. A Survey of Public Opinion, Key Findings Report 2006, Washington, DC 2006, for a recent survey of European and US public opinion on globalisation, economic reform, and related matters.
44. For example, have EU officials made the case for allowing more temporary workers into Europe, which is almost certain to be a key demand of the Indian government?
45. Another reason for doubting a market access agenda will gain broad-based support is that the OECD nations' merchandise trade is almost open and that the remaining market access interests of the new trading powers (including agriculture and national labour markets, the latter through the movement of national persons) remain politically sensitive matters in the USA and the EU.
46. A contrary argument is that in recent years China and India have increasingly sought recourse to antidumping investigations to protect their domestic firms. During the period 2000-June 2006 China and India initiated 125 and 316 antidumping investigations respectively. The comparable numbers for the EU and the US were 159 and 232 respectively. (Some have argued, however, that with all concerned targeting each others' exports then the case for stronger multilateral disciplines on antidumping measures may become more attractive. There may be something to this argument, however, on the basis of prior experience it seems to me to be yet another triumph of hope over experience.)
47. Bernard Hoekman reminded me that international cooperation on such matters need not take place within the confines of binding multilateral agreements and that alternatives, including soft-law alternatives, could be considered. Pointing to the latter logical possibility is perfectly proper and, in turn, raises the question of the relative effectiveness of potential future binding and non-binding initiatives.
48. Richard E. Baldwin: Multilaterising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade, in: The World Economy, Vol. 29, No. 11, November 2006.
49. See, for example, the op-ed piece by Lawrence Summers titled "Only fairness will assuage the anxious middle," published in The Financial Times on 11 December 2006. Arguably concerns about the wellbeing of the middle classes played a role in the mid-term Congressional elections in November 2006, which saw a large number of trade sceptics elected (see Simon J. Evenett , Michael Meier: The U.S. Congressional Elections in 2006: What Implications for U.S. Trade Policy?, 14 November 2006, mimeo).
50. Finally, see press reports of, and recent testimony given at, a Hearing on Trade and Globalization held by the U.S. House Ways and Means Committee on 30 January 2007.
51. In an email to me Robert Wolfe took this point and developed it in a different way. The challenge as Wolfe sees it is to understand how reciprocal trade liberalisation could be internalised in the policy making processes of the new trading powers so as to give fresh impetus to the liberalisation function of the WTO. My emphasis, of course, has been on the potential for rule development - in particular, strengthening and widening disciplines on national treatment. Rule development can complement liberalisation, but I would argue that the former could go forward on its own (just, as in principle, the latter can).