This article is part of our special report Free Trade for Growth.
With the growing interdependence of global economies, the EU’s trading partners cannot let Europe down and have every reason to help lift the continent out of the crisis, because by helping us, “they help themselves,” EU Trade Commissioner Karel De Gucht tells EurActiv in an interview.
Karel De Gucht, a former deputy prime minister of Belgium, is the European Commissioner in charge of trade. He spoke to EurActiv Editor-in-Chief Daniela Vincenti.
The WTO last month cut its trade growth forecast for this year to 2.5% as the euro-region debt crisis drags down the global economy. Even if Europe is eyeing at an export-led growth to lift us out of the crisis, some maintain a pessimistic view on the future. Are we doomed?
We are never doomed. When we got into this crisis, in 2008-2009, there was a sudden fall of trade. The level of trade went down by 18% or so. That’s not the case now, which means that there is expectancy in the market that it will get better.
When you have this sharp fall in trade, which is considered a multiplier of the recession figures in an economy, there’s no trust in the markets anymore. It’s a multiplier of the overall economic downturn because of worldwide supply chains whereby you sell and buy a lot of parts and components before you get to the actual product.
At the moment, we are not yet seeing that, which means there is still trust in the markets that it will get better. Companies’ stock is growing and that means managers expect to sell within a normal economic cycle. There’s still trust in the market. We should not be too pessimistic.
Second remark. Economies are very much interdependent. China cannot do well when Europe is doing badly. The same goes for the United States. On the other hand, we cannot do well if China does not do well.
The big economies have become so interdependent in the worldwide supply chains. Europe is about 20% of trade volume in the world. It is the biggest in the world. If there is a problem in this big economy everybody feels the consequences. We are interdependent, so they have every reason they can imagine to help us come out of this crisis. The reason is that they help themselves.
However, it is no secret that trade barriers and protectionism are creeping up. Anti-dumping and anti-subsidy cases are increasing. The EU has launched an investigation into China’s solar panels flooding the EU market and on Gazprom. The US lodged a complaint with the WTO alleging that China unfairly subsidised car-part exports. If the fight does not deliver, is there a risk we will not be able to avoid mistakes of the 1930s?
It’s not a fight at all. The solar panel case is a complaint, by an important part of the photovoltaic sector, that China is dumping products on the European market. The Chinese sold €21 billion worth of photovoltaic-related products in the European market in 2011.
When there is such a complaint by a representative part of the sector, we have to look into it. Prima facie this is a complaint that is well documented and if we get such a serious complaint, we need to launch an investigation: It’s about having an aggressive mode or even an assertive mode. That’s not what it’s about.
I like to stress … a lot was written about the launch of the investigation after Chancellor Merkel went to China and said that we should try to resolve the case through dialogue and negotiations.
It’s by accident that two days later I had to declare that we launched the investigation, as we normally have 45 days to take such a decision and we took it on the 45th, and it was a couple of days after that.
There was no formal link between our decision and Merkel’s statements. That’s the normal procedure. It’s not just because it’s China, we should follow another procedure. We would not do that and with good reason because we would be liable for that.
To go back to your question. There is more incremental protectionism, for example requirements for joint ventures, forced transfer of research, non-trade barriers of all kinds. We should prevent that.
The EU is trying to boost the number of regional free trade deals, as the Doha round seems irreversibly wounded, if not dead. Korea, Colombia and Peru, we are looking at Canada, Japan and the United States for other comprehensive trade and economic agreements. The proliferation of these regional trade agreement are they really a good thing? What is the impact on global trade rules?
I believe that sooner or later we should go back to the negotiating table of Doha. In a certain sense we are, because we discuss trade facilitation, which is one of the major building blocks of Doha.
I have stated in the past, when I was still minister for trade in my own country, that one of the big gains was what is called in technical terms the low-hanging fruits of trade deals – you are able to fix the existing tariffs.
You have the tariffs that are bound and those that are set and in between you have what they call “water”, which means that a number of countries can go up to a certain level of tariffs and for some countries you still have quite a lot of water.
That’s one of the big risks – that countries would start extracting that water or drinking it to stabilise the present picture. That was one of the important features of the Doha round, and as long as we don’t have Doha, we don’t have that and it becomes more and more difficult to get it.
I’m personally convinced that sooner or later the big trading blocks should get their act together and get back to the negotiating table on Doha, but I have to agree with you that at this moment in time it is moribund.
Would you be in favour of a Global recovery round that would focus on manufacturing and services, leaving out agriculture which has wrecked Doha. First is it feasible and would it work?
I’m intimately convinced that a multilateral agreement has big advantages. What we are doing with our trade negotiations does not go against Doha. We are only negotiating deep and comprehensive FTAs that go much further than anything you could imagine under Doha and the WTO rules.
Why do we need a Doha round?
We need it because it puts a floor in the system. What we are doing in trade is very much compatible with Doha. I would argue that what we are doing is complementary.
Do you think the Trans-Pacific Partnership Economic Agreement [the multilateral free trade agreement now being negotiated between Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam] is complementary too?
Legally it will be compatible. Whether it is complementary it is still something else. I would argue that we are doing is complementary. It also depends on what exactly they are doing within the TPP. Whether it will be deep and comprehensive or a recollection of existing obligations, we will have to see.
I prefer to talk of what we are doing, which is compatible and complementary.