Working Group on International Trade

The Trade Policy Agenda of the German EU Presidency


Working group on International Trade (BDI/Konrad-Adenauer-Stiftung)

with Dr. Karl-Ernst Brauner, Director General of external Economic Affairs at the German Ministry of Economics

“The Trade Policy Agenda of the German EU Presidency”

Tuesday, 25 January 2007

at the European Office Konrad-Adenauer-Stiftung

In his presentation, Dr. Brauner outlined the key issues of European Trade Policy and offered an assessment from the point of view of the German government.

1. Doha Development Round (DDA)

Germany and the EU are pronounced adherents of multilateral trade liberalisation and therefore prefer a rules-guided globalisation. This has to include the whole world, implying small and developing countries as well as large and industrialised countries. An important feature of multilateralism is that it promotes south-south trade which is underdeveloped in many parts of the world.

The multilateral way of lowering custom duties increases the pressure on national states to finish their national domestic reforms. If DDA fails, the losses will be tremendous: Not only for industry and agriculture but also a loss for the achievements of civilisation, e.g. dispute settlement in international trade.

But even in case DDA negotiations will be accomplished successfully, people will evaluate the outcome of this trade round differently from the previous ones: Due to the close failure, the WTO’s capacity to act will be regarded more critically.

At this point of time an outcome seems possible. President Bush has signalised a readiness to move and positions are talked over at the World Economic Forum in Davos.

2. Bilateral and regional free trade areas (FTAs)

While favouring the multilateral approach, the EU has to react to recent developments in world economic relations. The EU’s competitors are heavily engaged in bilateral and regional free trade areas. If we do not want to fall behind, we have to react to this situation and take action in bilateral negotiations with those countries bearing high market potential and where custom barriers are still high. We are especially talking about Asian countries like South Korea and India.

Bilateral agreements offer possibilities for further going negotiations: The EU is thinking about including competition rules and investment rules, as well as trade facilitation and the fighting of corruption.

The question we still have to answer is how to link the economic necessities of trade liberalisation with other political issues such as human rights. FTAs should not fail due to non-economic issues.

Concerning the fear of creating a “spaghetti bowl” by establishing further bilateral trade agreements, Mr. Brauner reassured that only “a few spaghettis will be added to an already existing huge bowl”. The bilateral agreements the EU bears in mind will not make a real difference in this regard.

Still, solutions for third countries have to be found: FTAs discriminate those countries that do not take part in it – this is especially true for neighbouring countries engaged in trade with the potential EU partner. Pakistan has already written to Chancellor Merkel asking to be included into the agreement with India.

3.Developing Countries

So far, the EU offered special market access conditions to developing countries. This was possible due a waiver from existing GATT rules. This waiver expires and therefore the EU is negotiating Economic Partnership Agreements (EPAs) with developing countries. These FTAs include provisions for capacity building and further support in economic development. Germany will push this process forward during its EU Presidency.

4.Transatlantic Free Trade Area (TAFTA):

The transatlantic initiative is rather based on regulatory problems than on customs. Earlier initiatives have not been successful; the recent debate is a try to give a new impulse into this issue. In any case, transatlantic free trade is not a measure that is to be taken against anyone; its aim is to deepen the existing and historically grown relations.

5.TDI – Trade Defence Instruments (TDI):

The EU Commission has launched a green book on TDI. This reflective process intends to give more certainty to industries on the use of instruments for trade defence. Dr. Brauner said, so far the EU Commission follows a rather consumer-oriented approach. The German Ministry German of Economics is reviewing existing measures with support form the European University Institute. By doing so Germany bears in mind its industries that suffer from unfair competition.

Short outline of the discussion

- A representative from the EU-Commission emphasised that the reflection on TDI is necessary because it strikes the fundamental question whether we still want to have a producing industry or whether we want to end up “producing nowhere and distributing everywhere”. A cheap production at any cost might not be the right way to secure our social security systems.

- China's activities in Africa: Has the EU given up on Africa? Dr. Brauner underlined the importance of the EPA process to EU-Africa relations. EPAs are more than FTAs, they aim at fostering regional cooperation in Africa and offer a coherent strategy for economic development.

- Concerning China, Dr. Brauner stated the EU follows an inclusive approach. An important step is to get China conform to WTO law. This also concerns international property rights. There is recently no interest in a FTA with China.

- Negotiations on the TAFTA are complicated by the fact that agreements on standards will make up a key point.

- FTAs: where are the priorities? Dr. Brauner agreed with the country choice of the EU-Commission. Asian countries as South Korea and India are more important for FTA negotiations than Latin American countries.