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The EU Commercial Policy: Doubts and Options

Speakers
Professor Patrick Messerlin, Professor of Economics, Sciences Po Director, Groupe d’Economie Mondiale at Sciences Po (GEM)

 Date
16 Jun 2011

 Venue
Level 13, ESSEC Amphitheatre, 100 Victoria Street, National Library Building, Singapore 188064

 Time
4.30-6.00pm

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Since European Commisioner Karel De Gucht’s assumption of the trade portfolio in 2010, the EU’s approach to commercial policy has been more pro-growth. The EU’s Commercial Policy has three intertwined components –  a World Trade Organization track (the Doha Round), preferential trade agreements (PTAs) with its neighbours (the ‘enlargement’ policy) and PTAs with countries in the rest of the world (as in the 2006 document on the ‘Global Europe’ trade strategy). Prof Messerlin’s presentation focused on the last of these components, which includes Singapore and the ASEAN countries.

The EU’s ‘Global Europe’ strategy of concluding FTAs and PTAs with many countries around the world may be very ambitious, and rightly so for the EU to grow out of its current economic predicament. But compared to the trade agreements concluded by the United States, the EU’s are less systematically ‘legally enforceable’, according to Prof Messerlin. The European Commission also might need more domestic and foreign political support to pursue its trade strategy successfully. This is crucial in areas the ‘Global Europe’ policy borders on the confrontational, such as in the Commission’s fights with trading partners on the issue of intellectual property rights, or in the fights between foreign governments and EU member states on the issue of public procurements.   

One of the gems of the EU’s functioning, Prof Messerlin noted,  has been the internal mutual recognition principle in its regulatory  system.    Here, Messerlin commented on the 1979 “Cassis de Dijon” case, in which the European Court of Justice ruled that the famous French blackcurrant liqueur could be exported in Germany over that country’s objections that its alcohol content was too low for it to be classed as a spirit (Branntwein).  In general, however, the problem, though, is in its effective enforcement.

The EU’s inability to properly enforce the principle of mutual recognition within its borders has been the source of its reputation as a difficult partner in terms of technical norms, such as those on technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS). Here Prof Messerlin posits a better alternative to the EU’s enforcement of the mutual recognition principle, as suggested by the case of Australia.  It relies heavily on trust – all goods are said to be non-harmonised, but exceptions and exemptions are well-defined.

 The ‘Global Europe’ strategy also fails to take in account the EU’s fragility in the context of a tougher world economic outlook. The difference between EU member states in GDP per capita has naturally widened since the 2004 round of enlargement to include ten new countries that year, followed closely by two more countries in 2007. As a result, Messerlin argued, the EU as a bloc is now more heterogenous economically than the United States. And compared to China, Brussels has less political clout over its member states than Beijing has over the Chinese provinces. Diversity in any economy is surely a strength, but in the case of a currency bloc like the eurozone of 17 countries, this for Messerlin spells fragility. 

Economic differences between the EU member states can also be discerned in the level of sophistication of its exports. Germany fares very highly in this measure, whereas Greece appears at the other end of the spectrum – even China’s placement in this regard is closer to Germany than Greece. These observations led Prof Messerlin to offer a ‘tip’ to FTA negotiators for Singapore or indeed any country – while trade issues are an exclusive competence of the European Commission, external trade negotiators should be mindful that they are ultimately dealing with 27 different situations in as many countries that are in the EU.

A corollary to this ‘tip’, Prof Messerlin said, is that external FTA negotiators actually have potential leverage to push the EU Single Market towards stronger consolidation, for the benefit of these external countries. In doing so, he recommended that external FTA negotiators focus on services.