Commission plays ‘pivot to Asia’ trade card

2008 Summer Olympics, Beijing. [US Army/Flickr]

European Commissioner Cecilia Malmström will today (14 October) present the new forward-looking trade and investment strategy – turning its focus to Asia, EURACTIV has learned.

This new approach which responds in part to the growing number of global trade deals, such as the Trans-Pacific Partnership (TPP), includes opening negotiations with Australia and New Zealand, but also upgrading deals with TPP countries with which the EU has already signed FTAs (free trade agreements), such as Mexico and Chile.

>> Read: EU urged to launch trade talks with TPP countries, starting with New Zealand

“We need to take advantage of the areas that are growing,” said Luisa Santos, head of international trade at BusinessEurope. “It’s not a case of ‘going after’ TTP countries. It’s the fact that aside from these countries, there aren’t many other options. “

Trade analysts realise that there is not much that can be done with emerging markets, like Brazil, Russia, India and China (BRICs). Brazil’s plunging economy, combined with a massive corruption scandal at oil giant Petrobras and other state-run companies, have paralysed the country, while EU talks with MERCOSUR are not moving forward.

Meanwhile, negotiations with India are blocked by a trade row over an EU ban of 700 Indian pharmaceutical products. Talks continue with China on an investment treaty, but an FTA is far from being on the horizon.

>> Read: EU, India working to resolve trade row over generic drugs

“These are the natural consequences of not having any other options. If we want to promote a forward-looking trade agenda, then we need to go to countries with which we are not currently discussing or negotiating,” added Santos.

These include other ASEAN countries (Association of Southeast Asian Nations), which seems a definite priority when it comes to Asia. The EU has over the summer concluded talks with Vietnam, and it is also in discussions with Malaysia. Myanmar is no longer a stumbling block, experts say. “There is no reason why we can’t pursue negotiations with all the islands,” Santos added, including Indonesia.

Taiwan and Hong Kong will also feature in the strategy, a source said, as Brussels is expected to propose launching negotiation for a bilateral investment treaty.

“We don’t need an investment treaty with Hong Kong. It is a way to push the Chinese into a corner,” explained one leading expert.

The Commission’s strategy will also call for an upgrade of its current FTAs with Mexico and Chile in order to include also a regulatory chapter and transform agreements into fully-fledged new generation trade deals.

With TPP, the United States is clearly securing preferential market access in a region that the Asian Development Bank thinks will produce more than half of the world’s output by 2050. China responded with its own regional trade integration initiative, RCEP (Regional Comprehensive Economic Partnership), covering East and South East Asia, and potentially India. Beyond TTIP, the EU is well aware that it needs to secure its place in Asia, in order to be part of these new trade clubs.

The EU executive, however, is also conscious that it needs to regain the trust of the people. To do so it will try to provide a broader narrative for the future trade and investment policy, putting social development and environmental protection at the centre of any deal.

New narrative: Trade for all

Burned by TTIP critics and protests across Europe, the last one attracting 150,000-250,000 people at the weekend in Berlin, Malmström will insist on the ‘trade for all’ aspects of the new strategy.

As she said in September, speaking at Columbia University in New York, trade like any other international policy should put principles into practice.

“Trade will always be fundamentally an economic policy. But it is not an island. The choices we make about trade must reflect our values. This is not just an abstract wish. Over the last two years the public debate around trade policy has intensified – and not just in Europe. Much of the concern is essentially a call to greater responsibility,” she said in New York.

The focus on responsibility means effective, transparent and based on EU values, said an official who preferred not to be named.

People are concerned about the potential impact of trade policy on their daily lives. They want reassurance about the preservation of their standard of life as well as that of people abroad and the environment. They want to see trade benefit every constituency, the source insisted.

Geopolitical game

“Policy-makers in democratic systems have to listen to that debate, understand it and respond to it,” Malmström said in September.

It seems she has listened and now is pushing forward an agenda that will maintain a close link with civil society, but at the same time take into account geopolitical realities, as well as economic ones.

>> Read: Commission to reframe ‘geopolitical’ trade strategy

Mexican government sources told EURACTIV: "It is time to “update” the FTA between Mexico and the European Union in order to deepen the trade and economic relationship, due to the changes in the international fora and trade environment and rules. In 1999 when the FTA was negotiated some issues were left to the multilateral organization WTO. Now both sides are ready to have market access in the agricultural sector taking into account the sensitivity on both sides and open the services market that it is more important now."

New areas would be included like e-commerce, improve trade facilitation beyond WTO, harmonization of rules and procedure, others like energy, competition and trade, investment and trade, sustainable development and dispute settlement among others chapters, the source added.

Commenting on the EU’s proposed trade strategy, Mark van der Horst, Chair of AmCham EU’s Trade Committee said, ‘The Commission’s strategy recognises that trade is one of the biggest contributors to economic growth and high standards of living. Given that an estimated 31 million jobs in the EU depend on trade, it is important that our trade policies not only remove barriers such as tariffs, but identify other opportunities such as regulatory cooperation and the development of synergies with our trading partners that can benefit consumers and businesses alike.’ He went on to say, ‘This strategy brings EU trade policy in line with the reality of how trade is conducted in the 21st century.’ 

In the coming ten years, more than ninety per cent of world growth will happen outside the EU. That means European businesses will be more dependent on foreign markets to be able to sell their goods and services. ALDE MEP Marietje Schaake said: "The European Commission needs to use trade agreements to make sure that European businesses can easily operate abroad. Especially small companies need help, because they often do not have the resources to make that step. That is why it is essential that ongoing negotiations are completed and new markets are opened where possible. I am happy to see that the Commission will take the initiative to start negotiations with Australia and New Zealand."

Schaake added: "The European economy is heavily dependent on exports and rules-based trade. It is crucial that the EU has an ambitious trade policy to open the doors to new markets for European businesses. At the same time, trade policy must form an integral part of the European foreign policy so that we use our economic position to strengthen our values abroad, such as respect for human rights and the environment and high consumer protection. The Commissioner has indicated that these are her priorities, I hope she moves quickly to put them into action."

Bernd Lange, S&D MEP and chair of the international trade committee added: "The European Commission draws many correct conclusions. European trade policy must be based on our common values ??and work for the common good, not individual interests. We will make sure that these plans do not turn out to merely be a castle in the air, but indeed become real," he said.

"The EU's trade policy must meet the challenges of our globalised world. Based on pure commercialism it will neither promote sustainable development nor fight the root causes of migration effectively. This strategy must play its part in restoring the people's confidence in our trade policy. Anything less would be a lost opportunity," he addded.

EPP MEP Daniel Caspary, calls for tangible progress in the ongoing trade negotiations. "We see initiatives taken by our trading partners, not least the Trans-Pacific Partnership, and believe that the EU should raise the bar in its commitments in negotiating a Comprehensive Free Trade Agreement in order to enhance free trade, but also to maintain the EU’s constructive influence in the region", he said.

“The EU’s trade policies can be an important tool to combat the scourge of bribery, secret dealings and abuse of power around the globe,” said Carl Dolan, Director of the Transparency International EU Office. “Strong anti-corruption provisions in these agreements will focus the minds of governments on enforcing their existing anti-corruption obligations”.

“Trade is important for global prosperity. In a globalised economy, open markets and a predictable trade policy are pivotal in furthering Europe’s competitiveness and job creation”, said EuroCommerce Director-General Christian Verschueren. “Europe needs to invest renewed energy into breaking down market access barriers, freeing up the trade in goods and services, in the interest of consumers and to boost growth and jobs in Europe and our trading partners.”

"We have come a long way in tailoring our Trade policy more to the needs and priorities of SMEs. With the new trade strategy, Commisisioner Malmstroem has shown that she is serious in further developing the SME angle in future trade agreements, and ensuring they are much better implemented”, said Arnaldo Abruzzini, Secretary General of EUROCHAMBRES

According to spiritsEUROPE the strategy raises questions about the limited resources in the Commission devoted to trade.  "How many people does the Commission have to negotiate new agreements?  How many to enforce them?  How many people in EU Delegations around the world help our SMEs to make the most of those opened markets?," questioned Paul Skehan, Director General of spiritsEUROPE, calling on the EU executive to reallocate and train more trade-related staff today to undertake future negotiations, to enforce the existing trading rules and to man EU Delegations abroad.”

Director General Monique Goyens on the publication of the EU Trade Policy Strategy: “The strategy’s focus to make trade policy more open and transparent is a very positive step. We welcome that the Commission intends to apply the level of transparency in TTIP – albeit incomplete – to all free trade agreements. What stands out is the goal of EU’s future trade policy to take consumer choice into account, enhance their confidence in trade and to make trade more sustainable and responsible. But we regret that the precautionary principle is not explicitly enshrined in the Commission’s new approach on trade policy.”

The EU is currently working on more than 20 agreements with more than 60 countries across the Americas, Asia and Africa.

On 14 October, the European Commission will adopt the communication on new Trade Policy Strategy, which will include some indication of which countries it would like to open up FTAs, or Bilateral Investment Agreements.

  • 14 October: European Commission's new Trade Policy Strategy

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