External Trade in the European Union
25 August 2006by eub2 -- last modified 25 August 2006
The European Union is the world’s biggest trader, accounting for 20 per cent of global imports and exports. Free trade among its members underpinned the successful launch nearly 50 years ago of the EU. The Union is therefore a leading player in efforts to liberalise world trade for the mutual benefit of rich and poor countries alike.
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Increased trade boosts world growth to everybody’s advantage. It brings consumers a wider range of products to choose from. Competition between imports and local products lowers prices and raises quality. Liberalised trade enables the most efficient producers to compete fairly with rivals in other countries, whose governments have to cut import duties used to protect national firms.
A global player
The
EU’s basic philosophy is that it will open its market to imports from
outside provided its trading partners do likewise. It is also keen to
liberalise trade in services. But it is ready to make allowances for
developing countries by allowing them to open their markets more slowly
than industrialised countries and is helping them integrate into the
world trading system.
The removal of barriers to free trade within the EU has made
a significant contribution to its prosperity and this has
reinforced its commitment to global liberalisation. As the
EU member states removed tariffs on trade between them, they
also unified their tariffs on goods imported from outside.
This meant that products paid the same tariff whether they
entered the EU via the ports of Genoa or Hamburg. As a
result, a car from Japan which pays import duty on arrival
in Germany can be shipped to Belgium or Poland and sold
there in the same way as a German car. No further duty is
charged.
The harmonisation of its common external tariff (CET), as it was known,
meant that EU countries had to participate as a single group in
international trade negotiations. External trade thus became one of the
first instruments of European integration requiring member states to
pool their sovereignty.
A firm commitment
As
a result, the EU has been a key player along with its trading partners
in the successive international rounds of trade liberalisation
negotiations. The latest of these is the ongoing Doha Development Round
which began in 2001. The aim of these rounds, which are now held in the
framework of the World Trade Organisation, is to reduce tariffs and
remove other barriers to world trade. Following earlier rounds, the
EU’s average tariff on industrial imports has now fallen to 4%, one of
the lowest in the world.
Progress in the Doha Round
has proved difficult to achieve. Wide and persistent differences have
opened up between the rich and poor countries on several issues
concerning access to each other’s markets and the long-running question
of agricultural subsidies. Negotiations collapsed in 2003 and efforts
to get the talks back on track in Hong Kong in December 2005 were only
partly successful.
The rules-based system
The European Union has invested heavily in trying to make a success of the Doha Round. It is also a firm believer in the rules-based system of the WTO which provides a degree of legal certainty and transparency in the conduct of international trade. The WTO sets conditions under which its members can defend themselves against unfair practices like dumping – selling at below cost – by which exporters compete against local rivals. It provides a dispute settlements procedure when direct disputes arise between two or more trading partners.
A network of agreements
Goods are traded between exporters and importers.
It has trade agreements with its neighbours in the Mediterranean basin and with Russia and the other republics of the former Soviet Union. When it expanded from 15 to 25 members, the EU declared its intention to develop closer trade and partnership agreements with these neighbours.
The wider world
The
EU’s trade policy is closely linked to its development policy. The
Union has granted duty-free or cut-rate preferential access to its
market for most of the imports from developing countries and economies
in transition under its general system of preferences (GSP). It goes
even further for the 49 poorest countries in the world, all of whose
exports – with the sole exception of arms – are to enjoy duty free
entry to the EU market under a programme launched in 2001.
The EU has developed a new trade and development strategy with its 78
partners in the Africa-Pacific-Caribbean (ACP) group of countries aimed
at integrating them into the world economy. It also has a trade
agreement with South Africa that will lead to free trade between the
two sides, and it is negotiating a free trade deal with the six members
of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia and the United Arab Emirates.
The EU has trade and association agreements with Mexico and Chile in
Latin America and has been negotiating a deal to liberalise trade with
the Mercosur group – Argentina, Brazil, Paraguay and Uruguay.
It does not, however, have specific trade agreements with its major
trading partners among the developed countries like the United States
and Japan. Trade is handled through the WTO mechanisms, although the EU
has many agreements in individual sectors with both countries.
Given the size of their bilateral trade (the US takes 24% of EU exports
and supplies 18% of its imports), it is not surprising that disputes
break out between the two from time to time. While a number of these
are settled bilaterally, others end up before the WTO
dispute-settlement body. Although these disputes make the headlines,
they represent less than 2% of total transatlantic trade.
The WTO framework also applies to the EU’s trade with China, a country which greatly benefited from the WTO decision to remove restrictions on textile trade from January 2005. Special arrangements were negotiated between the two sides during the year to prevent the continuation of a surge in Chinese exports to the EU which affected the European garment industry.
EU External Trade policy web links
European Commission External Trade policy DG
The European Union in the World
EU Trade and Development
EU External Trade Grants and Loans
EU Legislation in Force: External Trade Policy
Recent case-law of the Court of Justice and the Court of First Instance : EU Commercial policy policy
Further information on EU External Trade Policy on Europa
Source: European Commission
Last updated: March 2006