The European Union and the Regulation of World Trade: Crisis and Protectionism

Faculty of Economic SciencesNational University of Córdoba

2010, March 18th

Pr. Jean-Marc SiroënUniversité Paris-Dauphine, LEDa

IRD, UMR 225 DIALwww;dauphine.fr/siroen

Plan IntroductionI. The European Union in World Trade ; crisis and tradeII. The European Trade policyIII. European Union and Trade AgreementsIV. Why the crisis was not accompanied by protectionism?

The European Union (27) in World Trade

Crisis and tradeAustria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, The Netherlands, United Kingdom

0

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1000

1500

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4000

4500

5000

Bill

ions

US

$

Crisis and Trade - Quarterly World Exports

OMC

-39%

An unprecedented decline of international tradeSource : WTO

Crisis and Trade.Monthly EU’s and Argentina’s Exports (billions US $)

-42%

-50%

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100000

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2006

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EU (27)

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m11

Argentina

Source : WTO

Leading exporters and importers in world merchandise trade (excluding intra-EU (27) trade), 2008

6Source : WTO

16

12 11

6 4 4 3 3 3 3

18

9

17

6

2 3 3 3 3 1

UE

China

USA

Japan

Russia

Canada

Korea

H. K

.

Singapore

S. Arabia

Exporters Importers

EU : the first trade power in goods …

EU : the first trade power in goods …

Leading exporters and importers in world trade trade in commercial services (excluding intra-EU (27) trade), 2008

7 Source : WTO

…and services…and services27

19

5 5 43 3 3 3 2

24

14

6 6

3 23

14 3

EU USA

China

Japan

India

Hong Kong

Singapore

Switzerland

Korea

Canada

Exporters Importers

Intra-Export trade of regional trade arrangements,(2008 ; % of total exports)

WTO

UE is the most

integratedTrade zone

UE is the most

integratedTrade zone67

50

25

15

7

EU

NAFTA

ASEAN

Mercosur

Andean Community

AFTA ASEAN Free Trade Area Brunei Darussalam Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

CAN : Andean Community Bolivia Colombia Ecuador PeruVenezuela

9

The EU in world trade –10 major EU export partners (2008)

1. USA2. Russia3. Switzerland4. China5. Turkey6. Norway7. Japan8. United Arab Emirates9. India10. Brazil

19%8%8%6%4%3%3%2%2%2%

EU, DG Trade34. Argentina34. Argentina 0,5%0,5%

10

The EU in world trade –10 major EU import partners (2008)

1. China2. USA3. Russia4. Norway5. Switzerland6. Japan7. Turkey8. Korea9. Brazil10. Libya

16%12%11%6%5%5%3%3%2%2%

EU, DG Trade33. Argentina33. Argentina 0,7%0,7%

The EU Trade policy

A Common Trade Policy

A Common Trade Policy

• EU : Custom Union• Common trade policy for the 27 members : trade policy,

multilateral and bilateral negotiations, anti-dumping,…• Negotiations are driven by the EU Trade Commissioner

(Karel De Gucht, Belgium)• Each member countries + EU are WTO members

Tariffs in EU and elsewhere…. (2008)

TariffsImport duties /total imports (%)

Source : WTO

49

106 5 4

32 3125

13 106 5 4

12 136

32

16 1624

510

146

Average Final Bound

Average Applied tariffs

Average Applied tariffs in Agriculture

10,9

5,8

3,8 3,8

1,9 1,91,4 1,3 1,2

0In

dia

Ru

ssia

Arg

en

tina

Ch

ile

Ch

ina

Ko

rea

Jap

an

USA

EU

Sing

apo

re

Anti-dumping measures: by reporting (importing) Member (1995- 2008)

Source : WTO

386

268258

167124124108

90 86 81 75 66 51 45 34 28 25 25 22 21 19 17

Indi

a

US

EU

Arg

entin

a

S. A

fric

a

Turk

ey

Chin

a, P

.R.

Cana

da

Braz

il

Mex

ico

Aus

tral

ia

Kore

a

Egyp

t

Peru

Indo

nesi

a

Thai

land

Mal

aysi

a

Vene

zuel

a

New

Zea

l.

Colo

mbi

a

Isra

el

Paki

stan

Anti-dumping measures: EU & Latin America (1995- 2008)EU vs Latin America(total 258)

Latin America vs EU(total : 440)

Argentina :0 Brazil :4 Mexico : 3

Brazil : 3 (/86) Mexico 1 (/81)

Latin America vs EU Countries(total : 440)

Argentina :23 (/167) Brazil :16 (/86) Mexico : 6 (/81)

Colombia :1 (/21) Peru :1 (/45) Venezuela : 1 (/25)

Source : WTO

Does Economic crisis imply more antidumping ?

AD Measures per year (1995 to 2008)

0

50

100

150

200

250

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Source : WTO

Other MeasuresCountervailing duties(30/06/2009)

Safeguard Initiations (31/12/2009)

2

2

1

1

1

1

1

1

Argentina

Brazil

Bulgaria

Chile

China

Croatia

Czech Republic

Ecuador

7

3

1

United States

Canada

Brazil

Source : WTO

Disputes at WTORespondent

Complainant USA EU MercosurOther Latin

AmericaOther Total

Argentina 3 4 1 7 15Brazil 10 6 2 2 4 24Chile 2 2 2 4 0 10Colombia 1 1 3 0 5Costa Rica 1 3 4Ecuador 1 1 1 3Guatemala 3 3 1 7Honduras 3 3 6Mexico 9 3 6 3 21Nicaragua 3 2 5Panama 3 2 5Peru 2 2Uruguay 1 1Venezuela 1 1EU 31 11 6 33 81

European Union and Trade Agreements

What about EU-Mercosur ?

European Trade AgreementsConcluded Ongoing FTAs

Custom Unions : Andorra, Turkey, San Marino

FTA : Mediterranean, other European (Norway, Switzerland,

Iceland, ex-Yugoslavia), South Africa FTA : African Carribean,

Pacific (CARIFORUM, Ivory Coast,

Cameroon) + Economic Partnership Agreements (EPAs) under negotiation

FTA : Latin America (Mexico, Chile)

Asia (India, Korea, Singapore, ASEAN)

Ukraine America (Canada, Colombia &

Peru, Central America, Mercosur)

Candidate countries

Turkey, Croatia, Macedonia

+ GSP (Generalized System of Preferences)

EU-Mercosur negotiations The negotiation stalled in September 2004. No negotiation round

is scheduled for the moment The Mercosur-EU FTA should cover, trade in goods and services,

investment, intellectual property rights (IPR) aspects including protection of geographical indications, government procurement, technical barriers to trade and sanitary and phytosanitary issues.

EU-Mercosur negotiations are linked to the WTO Doha world trade talks and in particular to the question of market access for agriculture and industrial goods and services.

Both the EU and Mercosur recognise that greater clarity on the outcome of the Doha talks is necessary before an EU-Mercosur agreement can proceed to a conclusion.

Disputes Latin America-EURespondent

Complainant USA EU MercosurOther Latin

AmericaOther Total

Argentina 3 4 1 7 15Brazil 10 6 2 2 4 24Chile 2 2 2 4 0 10Colombia 1 1 3 0 5Costa Rica 1 3 4Ecuador 1 1 1 3Guatemala 3 3 1 7Honduras 3 3 6Mexico 9 3 6 3 21Nicaragua 3 2 5Panama 3 2 5Peru 2 2Uruguay 1 1Venezuela 1 1EU 31 11 6 33 81

European imports from Argentina & Brazil

Argentina Brazil

SITC Codes SITC Sections Share of

Total (%)

Share of total EU Imports

Share of Total (%)

Share of total EU Imports

Total

SITC 0 Food and live animals 66,4% 9,6% 23,8% 11,7% 21,3%

SITC 2 Crude materials, inedible, exceptfuels 9,2% 1,4% 32,8% 17,3% 18,7%

SITC 4 Animal and vegetable oils, fats and waxes 7,2% 9,6% 1,4% 6,2% 15,8%

SITC 1 Beverages and tobacco 1,9% 3,1% 1,4% 7,7% 10,8%

SITC 6 Manufactured goods classified chiefly by material 4,5% 0,3% 12,6% 2,5% 2,8%

SITC 5 Chemicals and related prod, n.e.s. 3,0% 0,3% 5,4% 1,6% 1,8%

SITC 9 Commodities and transactions n.c.e. 0,2% 0,1% 1,4% 1,4% 1,4%

SITC 7 Machinery and transport equipment 5,2% 0,1% 10,5% 0,9% 1,0%

SITC 8 Miscellaneous manufacturedarticles 0,6% 0,0% 3,0% 0,6% 0,6%

SITC 3 Mineral fuels, lubricants and related materials 0,6% 0,0% 6,0% 0,5% 0,5%

European Commission, DG Trade

European exports to Argentina & Brazil

Argentina Brazil

SITC Codes SITC Sections Share of Total (%)

Share of total EU Exports

Share of Total (%)

Share of total EU Exports

Total

SITC 4 Animal and vegetable oils, fats and waxes 0,1% 0,2% 0,6% 4,8% 5,0%

SITC 5 Chemicals and related prod, n.e.s. 20,1% 0,6% 19,4% 2,5% 3,1%

SITC 7 Machinery and transport equipment 48,6% 0,5% 51,6% 2,4% 2,9%

SITC 6 Manufactured goods classified chiefly by material 12,9% 0,4% 12,7% 1,9% 2,3%

SITC 8 Miscellaneous manufacturedarticles 7,1% 0,3% 5,9% 1,1% 1,5%

SITC 9 Commodities and transactions n.c.e. 3,8% 0,6% 0,9% 0,7% 1,3%

SITC 2 Crude materials, inedible, exceptfuels 1,1% 0,2% 1,1% 1,0% 1,2%

SITC 1 Beverages and tobacco 0,4% 0,1% 0,7% 1,0% 1,1%

SITC 0 Food and live animals 1,0% 0,1% 1,6% 0,9% 1,0%

SITC 3 Mineral fuels, lubricants and related materials 2,5% 0,2% 2,1% 0,7% 0,9%

European Commission, DG Trade

The European « Common Agricultural Policy » (CAP) and Doha Round

market access —

domestic support —(subsidies and other instruments, including those that raise or guarantee prices and farmers’ incomes)

export subsidies

market access —

domestic support —(subsidies and other instruments, including those that raise or guarantee prices and farmers’ incomes)

export subsidies

High tariffs and other barriers

Partial withdrawal of trade-distorting supports thanks to successive CAP reforms (move from “amber” or “blue” box to “green” box)

Full elimination in 2013

High tariffs and other barriers

Partial withdrawal of trade-distorting supports thanks to successive CAP reforms (move from “amber” or “blue” box to “green” box)

Full elimination in 2013

Why the crisis was not accompanied by protectionism?

Why the crisis was not accompanied by protectionism?

Global Governance more cooperative? WTO, G20 (London Summit)

Flexibility of central banks and massive recovery plans “Leadership” (Kindleberger) from United States and China

playing a function of “locomotive” Other kinds of adjustment : competitive devaluations

Cyclical explanations

27

Evolution of exchange ratesin regard with euro

Maximum variation between 2008, July 1 and 2009; March, 30From European Central Bank28

33,022,1

-9,5-16,9 -17,9

-24,9 -26,8 -28,8 -33,6 -37,0 -38,7 -43,9-52,2

Japan

USA

Switzerland

China

Canada

Rom

ania

UK

Australia

Turkey

Russia

Hungary

Brazil

Poland

Why the crisis was not accompanied by protectionism?

Passage from a “ final” product specialization (cars, wheat,…) to "vertical" specialization in term of step in the production process.

For firms located downstream protectionism implies a higher price for semi-processed goods and a loss of competitiveness for exports

Structural explanations

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Conclusion The common trade policy is a novel and specific experience at this

scale The objective of the protectionist CAP being to guarantee a minimum

level of income, higher world prices should help to open the EU agricultural market.

The crisis had a severe effect on international trade. It is not due to protectionism, but to the downturn of world prices, a lack of export credits, destocking and the higher multiplier effect of income on trade due to the international fragmentation of production processes.

This moderation might change in case of extended crisis, global imbalances and misalignment of currencies (Yuan ?)

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Thank you,…

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