Fair access to all areas?

The EU has to find a balance between getting access to other markets and building up its own.

The European Commission’s new trade strategy, adopted last November, takes less than three paragraphs to get to the point. After referring to the role of trade policy in making the EU more competitive and the potential benefits of trade in general,  the strategy turns to the notion of ‘reciprocity’. 

“Trade policy will not gain public support in Europe if we do not have fair access to raw materials, or if access to public procurement abroad is blocked,” the paper says. “The EU will remain an open economy but we will not be naive,” it says. “In particular, the Commission will remain vigilant in defence of European interests and European jobs.”

Ensuring reciprocity is at the core of the trade agenda, following the recognition advertised nowhere, but plain for all to see, that the Doha round of world trade talks is unlikely to be concluded in the foreseeable future. But not everyone believes that this is a good idea.

Fredrik Erixon, the director of the European Centre for International Political Economy (ECIPE), a think-tank based in Brussels, says that the new agenda looks more like a strategy devoted to market access than to trade. “This is primarily about getting access to other markets without opening our own,” he says. The problem, in his view, is that the main driver of growth is not exports, but imports – because they increase competition, which forces domestic firms to adapt and innovate.

While advocating the enforcement of existing trade rules, Erixon is also sceptical about the trade defence instruments – including retaliation – that are a central ingredient of this new agenda. The EU is currently contemplating ramping up anti-subsidy actions against China (see panel, bottom) – but this approach is not, he suggests, the best way of handling commercial relations with China, because the EU has too much at stake there. Many of the goods imported to the EU from China are actually made by European firms in China, and around two-thirds of imports are of intermediary goods which are then used in EU-made products. In 2009, the EU exported goods worth €82 billion to China, and EU exports to China have more than doubled over the past five years.

“Escalating tit-for-tat strategies is not really in our interests,” Erixon says. “A strategy based on diplomatic negotiations would be far better.”

Under pressure

This analysis is confirmed by a leading European company that is considering legal action against China for what it sees as unfair practices. “We’re seeing prices well below the level that would allow them to make money without illegal subsidies,” a company representative said on condition of anonymity. But, he added, the company felt constrained in pressing its case because of its extensive operations in China. That, he suggested, was frustrating for the Commission, which wants to see someone file a case.

Laurent Ruessmann, who heads the European trade practice of Crowell & Moring, a law firm, agrees that there has been a “noticeable shift in emphasis” in the EU’s trade strategy away from dialogue toward enforcement. Ruessmann attributes this shift partly to the personality of Karel De Gucht, the European commissioner for trade since February 2010.

“De Gucht has taken a stricter approach to market access reciprocity,” he says. But that, he stresses, is the beginning, not the end, of a diplomatic process. “You take some steps to signal firmness,” he said, “and then you see what the other side does.”

Several ongoing cases could soon prove whether that is the strategy behind the Commission’s new agenda.