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09/12/2016

North-South divide in new EU trade strategy, says rapporteur

Trade & Society

North-South divide in new EU trade strategy, says rapporteur

MEP Tiziana Beghin, rapporteur on the Trade for All strategy. [European Parliament]

The EU’s new Trade for All strategy, presented last month by Commissioner Cecilia Malmström, seems to favour northern countries too much, MEP Tiziana Beghin told EurActiv ahead of a hearing in Parliament on Thursday (12 November).

“My first impression is that the strategy lacks balance between member states and focuses too much on trade in services, and not enough on the manufacturing trade,” argued the Italian MEP from Movimento Cinque Stelle, who is in charge of drafting the report.

Services account for some 70% of EU GDP and employment. In the past, most services could not be delivered locally, but technology has changed that, and now EU exports of services have doubled in ten years, rising to €728 billion in 2014.

According to the Commission, the EU must respond to the rise of global value chains. Manufacturing companies today buy, produce and sell services that allow them to sell their products. But for Beghin, the strategy needs rebalancing between North and South.

Luisa Santos, Director of International Relations at BussinessEurope, said that the strategy is not about prioritising services over manufacturing, but signalling that services and manufacturing should go hand in hand.

“This is a revolution that differentiates us from our competitors,” she said, stressing the competitive advantage of European companies.  “Today we are selling goods with services. Of course we are still selling services and goods separately, but these are increasingly limited cases.”

The departure from a narrow, mercantilist approach was also welcomed by Belgian economist André Sapir. “This is music to my ears,” he said, noting that the EU is finally developing the correct approach, as services and goods are intertwined.

DG Trade’s challenge

Reacting ‘à chaud’ on the new strategy, Santos told EurActiv that the Commission had done a good job in the drafting of the new strategy, both in terms of substance, including ongoing negotiations, and spelling out its intention to open new ones, but also in terms of procedures, by increasing transparency.

However, all this needs resources. “If the Commission wants to fulfill its goals in trade and investment policies, it needs to give itself the means,” insisted Santos, adding that DG Trade is already struggling with a lack of resources.

“Bear in mind that we have a number of negotiations that are more or less silent for the moment. But if one of them is revived, take Mercosur, you are going to have a real problem,” she argued.

Indeed, the executive is currently negotiating a massive agreement with the United States (TTIP), and one with Japan, as well as an investment treaty with China. Add Indonesia and the Philippines or Myanmar, which are not small partners, and you are in trouble, said Santos.

Because today’s EU trade agreements are going beyond plain tariffs, and more emphasis is put on promoting EU values and standards, negotiations are becoming more complex.

Transparency über alles

On top of new resources, the complexity calls for greater transparency. The opposition faced by TTIP exemplifies why negotiators cannot hide behind closed doors, and must engage with the wider public.

The European Commission has promised to step up efforts to promote an informed debate in member states and deepen dialogue with civil society at large.

But Sapir questions whether that is enough. “The nature of trade policy has changed a lot. When trade negotiators discussed tariffs, their legitimacy went unchallenged, but when they started to touch regulations their legitimacy was questioned,” he said.

It is inevitable that the Parliament will ask for more transparency. Tiziana Beghin has made it a point of it. “With TTIP we got transparency because we asked for it. It sounded more like a concession,” she said, calling for a paradigm change.

“We need to step towards a new cultural model,” she said.

Speaking to EurActiv, Beghin proposed avoiding tensions with NGOs and civil society in the future. “Why not ask the Council to wait for the opinion of the European Parliament about potential trade agreements before writing a negotiating mandate?”

The Parliament is expected to vote on its report on the Trade for All strategy in June 2016. MEPs and stakeholders have promised a lively and constructive debate until then. 

Background

According to IMF estimates, 90% of world demand will be generated outside the European Union. That is why the EU has made it a top priority to open up more market opportunities for European business, by negotiating new Free Trade Agreements with key countries.

If the EU were to complete all our current free trade talks tomorrow, we could add 2.2% to the EU's GDP or €275 billion, the European Commission said. This is the equivalent of adding a country as big as Austria or Denmark to the EU economy.

In terms of employment, these agreements could generate 2.2 million new jobs, or an additional 1% of the EU total workforce.

Timeline

  • 15-16 February 2016: Consideration of working document
  • 14-15 March 2016: Consideration of draft report
  • 20-21 April 2016: Consideration of amendments
  • 23-24 May 2016: Adoption of the draft report in INTA committee
  • June 2016: Adoption in plenary

Further Reading