EU Trade and Investment: A bumpy road

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An anti-TTIP demonstration. London, 2015. [Global Justice Now/Flickr]

San Bilal, Clara Brandi and Max Mendez-Parra question whether the Commission’s new trade strategy truly is “for all”, and if it is in line with the global goals of the 2030 Agenda.

San Bilal is the head of the Economic Transformation and Trade Programme at the European Centre for Development Policy Management (ECPDM). Clara Brandi is an economist and political scientist at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE). Max Mendez-Parra is a trade economist at the Overseas Development Institute (ODI).

The catchy title of the European Commission’s new EU Trade and Investment Strategy – ‘Trade for All’ – is both auspicious and ambitious. It has promising elements for global development, but the proof of the pudding is in the eating.

We welcome the fact that the Commission supports the role of the World Trade Organisation (WTO) as the prime driver of trade liberalisation. It also rightly underlines the need to update the WTO system urgently and highlights the effectiveness of plurilateral agreements in specific sectors. This is in contrast to the single undertaking principle that requires agreement to one big package. Plurilateral agreements are not an ideal solution, but they might open up new prospects for progress with the support of the WTO.

Looking towards the ongoing Doha Round, the Commission has reinforced its commitment to support a package for the Least Developed Countries (LDCs) in the current negotiations, as well as to “push in the G20, the WTO and other multilateral organisations for close monitoring of the effect of third countries’ protectionist measures on LDCs…” This means other countries, especially the rising powers, could provide trade solutions for LDCs – which is highly welcome from a development perspective.

The Commission provides incentives and support for human rights, sustainable development and good governance, underlining the role of the Generalised Scheme of Preferences (GSP+) regime. This means the EU seeks to make sure provisions on trade and sustainable development are implemented effectively in its free trade agreements (FTAs). This has promising potential to foster sustainable development, but there is the risk that developing countries will feel that they are abused for protectionist purposes. Moreover, developing countries might need support in implementing the required provisions.

Following the recent services waiver agreed at the WTO for the LDCs, the Commission is trying to create an adequate preference system for services for these countries. The Commission should assure that its preferences are in line with the real capabilities of the LDCs; their strengths as well as their needs in the provision of services. In this sense, full and broad access in all modes of service provision would be ideal.

With respect to Africa, the Commission emphasises the importance of the Economic Partnership Agreements (EPAs). The Commission should be careful in recognising the national interests of the African countries as well as their capabilities. It should also pay attention to the regional integration dynamics, if it does not want to repeat the tense EPA process of the last decade.

Mega-regional trade negotiations like TTIP, TPP and RCEP are transforming the trade rules of the future. The Commission addresses, at least to some extent, the perspective of third countries. For example, it shows readiness to open its FTAs to non-members, including TTIP. Moreover, it seeks to make sure that its trade and investment initiatives minimise any negative impact on countries in need. And it seeks to propose regulatory approaches in the scope of the TTIP negotiations that have positive spill-overs on third countries, including developing countries.

In the context of the TTIP negotiations, the EU has another opportunity to signal that it takes seriously the 2030 Agenda for Sustainable Development. These new global goals require, among other things, an open and non-discriminatory trade system. To be concrete, for instance, the EU should go a step further and strive for simple and consistent Rules of Origin and coherence preferences for less developed countries (EBA and AGOA) and include explicit provisions for third parties in its rules on standards equivalence and mutual recognition.

Some key issues, however, remain unresolved. For example, the current rise of mega-regional trade deals generates a fragmented global trade system. How does the Commission position itself on how we will get out of this jigsaw mess? How does the EU view the option of making TTIP preferences multilateral in the future?

While the new EU trade strategy does not address all the trade challenges Europe is currently facing, the elements presented in the new trade strategy are a good start. Many of them are in line with developing countries’ concerns. But there are risks associated with their implementation.

The Commission needs to demonstrate that these elements are not just empty words but that there is a real interest in making them work to deliver outcomes that benefit developing countries, and that the EU has the capacity to do so.

To be successful, the Commission will need to adopt a strong cooperation approach from other players in different international fora (UN, G20, etc.). It will also need to more actively engage in multi-stakeholder processes, including promoting responsible trade and investment with the private sector, civil society actors and citizens. 

But other policies can be implemented immediately (e.g. full and wide preferences on services can be delivered now). Besides, the EU also needs to review its Aid for Trade strategy (foreseen for 2016), linking it more explicitly to its approach to private sector support, and better integrating sustainability and responsible trade dimensions in its support strategy.

Quick and decisive action from the EU in implementing these policies is a central principle of this new strategy.