Sixth Enlargement Trade Ministerial Meeting,

Sixth Enlargement Trade Ministerial Meeting,
Bucharest, 9-I0 May 2003

Main Developments of EU Trade Policy
EU Trade Commissioner Pascal Lamy

1. A trade policy for 25

Let me introduce our debate by expanding a little on the immediate implications of the Ten's accession and the EU approach to trade policy. The current wave of enlargement is both a quantitative and qualitative leap. A European trade policy with 25 will make us stronger - indeed the largest commercial power in the world. With a population of almost 455 million and a GDP of around €9400 billion, the enlarged EU will account for some I9% of world trade, be the source of 46% of world outward FDI and host to 24% of inward. We shall have more clout in defending our position in multilateral fora, as well as an increased responsibility towards our third country trade partners. The current System, featuring a single trade regime for the EU will be extended, letting thereby our economies as well as third countries benefit from an increased single market with an increased coverage of the EU's open standard of treatment of third countries.

2. The challenge of the Convention

On the institutional side, our trade policy is one of those which work best: In trade matters, Europe is a major actor, who plays on equal footing with other powers, in particular the United States. This
success appears due to (i) a balanced decision-making procedure with clear allocation of tasks between the Commission and Member states, (ii) a shared policy concept - support to market opening, provided it is harnessed by rules.

This mechanism is confronted with a double challenge, of legitimacy and of effectiveness and needs to adapt to a much greater number of members. This is the challenge of the Convention.

- A legitimacy challenge: trade policy is the only common policy in which the European Parliament has no formal role in the treaties. As trade policy is increasingly related to major social issues, in economic terms but also in terms of social values, there must be a place for debate on these questions between elected representatives, in addition to the debates within the national parliaments. I would like to add that an explicit parliamentary support can but increase the legitimacy of the negotiator in international fora.

- An efficiency challenge: The reunification of Europe, the extension of the Union to 25 or 30 members will weaken the decision-making procedure: even after the Nice reforms, there remain still too many cases, where unanimity decision is the rule. Maintaining 25 rights of veto cannot enable us to act effectively to harness globalisation, as the veto right enables in particular certain non-member countries to exert blackmail on the most fragile Member States.

I greet the recommendation put to the Convention to improve consistency between all the instruments of external action of the Union. However this should not undermine what we have achieved in commercial policy. If we want to work jointly, we have to apply the only formula that proved its worth, both in terms of effectiveness and in terms of legitimacy: the Community method. This method rests on the presence of an impartial actor – the Commission -, advocate of the general interest, and confidence - catalyst among the Member States, whatever their size. Confidence is not spontaneous, especially to 25 or to 30! It has to be created and needs an institutional source in the service of all.

This is also valid beyond trade policy: if we want Europe to play its political role in the world, one will have to resort - be it progressively - to the Community method.

3. The EU approach to trade policy

On substance, as you are aware the EU trade policy works on two complementary levels: the bilateral/regional level and the multilateral level, through the WTO. The basic assumption of our trade policy is that: i) unilateralism is not an option for us, ii) we have two options in order to integrate successfully into the world economy: regionalism and multilateralism. When I say "we", I mean of course all of us here, as your presence clearly indicates that you share this approach. Indeed regionalism and multilateralism are not mutually exclusive but complementary: one is subordinate to the other. Regionalism is governed by the multilateral rules and disciplines of the WTO.

The principles of regionalism as developed and experienced by the European Union over half a century of integration are simple: a single market, harmonization of standards and regulations affecting the free movement of goods, services, people and capital; solidarity through financial mechanisms; and where necessary common policies, among them trade and competition policies. When I say the principles are simple, we ail realise through our common experience in the accession process that implementation requires a high level of commitment. The benefits of regional integration are considerable: a single market attractive to foreign investors, increased but fair competition, and far greater clout in international negotiations.

However regionalism does not offer an alternative to strengthening the multilateral trading system. Global markets need global institutions to sustain and regulate them. As the world economy globalises, we consider that the WTO is the most legitimate forum for removing obstacles to trade, creating and enforcing global rules and making them compatible with rules drawn up by other multilateral bodies. We need to progress on the multilateral route in order to give a sense of direction and equity to globalisation. Indeed the Doha Development Agenda reflects in very concrete terms the aims of the EU. And I am glad that collectively, we were able to move beyond a simple market access round: without the further development of rules and a major rebalancing of the system in favour of developing countries, we would not be able to tackle the challenge of globalisation.

According priority to the multilateral trading system of course also includes its extension. The more countries join, the greater the welfare gains for ail existing members through facilitated trade relations. From the point of view of candidates for accession to the WTO, early accession is also desirable with a view to participation in the Doha Development Agenda (DDA) negotiations. This is why EC takes an active role in all WTO accession processes. At the moment, we are, for example, intensely pursuing the accession processes of Russia, Ukraine, Saudi Arabia, Vietnam and several Least Developed Countries (LDCs). We will seek as much progress as possible on all fronts.

This is not to say that we do not make sure that the rules of the game are respected - accession to the WTO can only take place by assuring the respect of WTO rules and on the basis of market access commitments that are mutually acceptable and are considered «commercially viable». Following the agreement of WTO members at the end of last year to facilitate the accession processes for LDCs, we are actively pursuing our negotiations with LDCs on this basis, showing flexibility wherever possible. In this context, we are happy that negotiations with Cambodia are advancing at a rapid pace and could result in this country acceding by the Cancun Ministerial.

In our bilateral relations, we also provide technical assistance that is of relevance for WTO accession (for example, under TACIS or our budget lines for Asia). WTO accessions are also on the agenda of session four this afternoon - this will give us an opportunity to go into more detail on the accessions that you are most interested in (Russia, Ukraine)."

4. How do we strike a balance between the bilateral/regional and the multilateral levels ?

The multilateral level, through the WTO provides the set of rules that international trade needs and a level playing field. The EU is a natural stakeholder and a provider of global governance. It plays a key role in the WTO, because the current Round offers our countries the best chance to negotiate balanced arrangements.

The basis of the EU approach is that the multilateral route and therefore the DDA negotiations are the over-riding priority for EU trade policy in the immediate future. We have therefore postponed any decision of new FTA initiatives until after the DDA. Moreover new initiatives should stand up on their own merits and achieve additional benefits and policy objectives, beyond what is feasible in DDA: The EU encourages and practises regional integration on three conditions: i) first it has to be WTO compatible; ii) second it has to be WTO and DDA +, i.e. to genuinely enhance our multilateral ambitions in the WTO, which are already high; iii) thirdly, any such initiative must not detract from the pursuit of the Doha development Agenda in which we agreed to deepen our integration at the global level.

This does not mean we are against FTAs. On the contrary, we have been a heavy user of regional integration and are seriously pursuing those negotiations already underway (e.g. Mercosur, GCC). I should highlight two developments on FTAs concluded or under negotiations. Firstly, the FTAs concluded by the EU in the last years have shown a steady evolution in terms of their scope and level of ambition for both trade and services liberalisation and rude making. This reflects the view that an FTA must go beyond the WTO in order to make sense: the WTO sets the ground, an FTA builds on it, both in terms of goods and services liberalisation and rule-making and regulatory harmonisation or co-operation. Secondly, the EU is increasingly looking for relations on a "region-to-region" basis, be it in ongoing FTA negotiations (Mercosur, GCC, EPAs) or other forms of relations (Andean, Central America, Asia). We consider that such an approach has the potential to generate more economically viable and interesting results, since regional integration on the partners' side increases the market potential and makes regulatory efforts more "cost-effective".

Given this framework, trade policy is managed as a pillar of the European Union's relations with the rest of the world. Therefore we pursue regional integration according to our interests to foster stability in a regional context or to support common values.

A good example is the case of Latin American countries, where relations are traditionally based on a series of bilateral and regional agreements that we are currently expanding. In particular our association agreement with Chile - signed since we met last year in Malta - is the most ambitions and innovative ever for a bilateral agreement with the EU, (with a very wide coverage for goods, and including services and government procurement in a free trade area). It will serve as a benchmark for future agreements of this type.
Negotiations are currently underway to liberalise trade with Mercosur, the South American Common Market consisting of Argentina, Brazil, Paraguay and Uruguay. The EU is already the most important trading partner of the Mercosur countries and the biggest foreign investor in the region. The negotiations cover not only the liberalisation of trade in goods and services, but also public procurement, intellectual property rights, competition policy and foreign investments.

Regarding Mediterranean countries, we are on track with the Euromed objective of Free Trade Area with the region, as the Interim Agreement with Lebanon just went into force and we only have negotiations with Syria left to complete.

5. A new relationship with developing countries

Trade is also one of the tools of development, it is one of the weapons of peace and this relates to the EU's priority given to effective assistance for the integration of developing countries in world trade. Trade has to be a major element of the agenda for development. Access to the markets of developed countries together with capacity building through trade related technical assistance could foster the development of trade, and be a source of economic growth for developing countries. This is the approach of the Doha Development Agenda and this is the approach of the EU in the WTO and in its relations with the Africa, Caribbean and Pacific states "ACP".

Access to markets is one of the subjects, to which we attach great importance. The EU has already made great strides at opening its markets to developing countries. This is being done not only through the WTO but also through its bilateral and regional preferential agreements, as well as other initiatives (Generalised System of Preferences for developing countries, and the duty and quota free market access for the 49 least developed countries through the «Everything But Arms» initiative adopted in February 2001). The EU is, for example, the world’s biggest importer of agricultural products from developing countries.

TRTA: But improved access to the market is only a part of the story. What seems to be more significant is the increase in the commercial capacity of developing countries, which brings me to the integration of trade in development policies. As a result of the re-orientation of the European Union's development policy towards trade, substantial amounts of development assistance will be devoted to the integration of developing countries in the multilateral trading System. Already over the period 1996 - 2000, the European Commission spent about €700 million on trade related assistance. Early 2003 the portfolio of trade related projects funded by the Commission covered more than 200 projects for a total amount of more than €1.5 billion. As for the next 3 to 5 years around €2 billion has been allocated to new trade related projects. We shall pursue this effort.

Our relations with the Africa, Caribbean and Pacific states "ACP" are a case in point. Our special relations date back to the Treaty of Rome. The preferences granted under the successive
Conventions with the ACP countries contributed to the growth of the exports of these countries to the EU. But experience of preferences under the Lomé Convention showed clearly that preferential access
to the market is not enough. This is the reason why we developed the idea of the economic Partnership Agreements - entailing a symmetrical trade relation plus technical assistance for capacity building - as an instrument where development is closely connected with our commercial policy. With the ACP states we concluded, by mutual agreement, that these partnership agreements gave the best possibility to promote the progressive and harmonious integration of the ACP countries in the world economy, to promote their sustainable development and to contribute to the eradication of poverty in these countries.

Under the Cotonou Agreement concluded in February 2000, the European Union adopted an integrated trade and development strategy aimed at integrating these countries smoothly into the world economy. In September 2002 we have started negotiations of a series of preferential trade agreements, which should be in place by 2007 and that will phase out trade barriers between ACP countries themselves on a regional basis and strengthen co-operation among them in ail trade-related areas. The underlying aim of the new system is to prepare ACP countries for integration into the global marketplace through the creation of regional free-trade agreements among themselves, while encouraging sound internal policies. Wide- ranging EU support for those, especially the least developed countries, which risk being left behind by globalisation will be pursued.

6. Bilateral trade relations with the USA : business as usual

Of course, when reviewing bilateral trade relations, we cannot but think about the United States. The US is our first trading partner, with bilateral trade flows that amount to 20% of global exchanges on both sides. This relationship remains unaffected by the Iraqi war in contrast to the "collateral damages" that affected the foreign policy. This may be partly ascribed to the earlier mentioned Community method, which enables
us to defend our interest jointly, whereas playing by the multilateral rules defuses escalation and contains the damage. Such a volume of trade inevitably entails commercial disputes with the United States. Those are spectacular and largely publicised, but they have to be considered in relation to the volume of our bilateral trade. We endeavoured to treat these disagreements within the framework of the multilateral rules and mechanisms, by defending our interests while avoiding any escalation. This is not a bad policy, as we have prevailed in a number of cases where the WTO DS arbitrated.

7. "Wider Europe", the EU's post-enlargement neighbourhood policy

Enlargement in 2004 gives new impetus to the effort of drawing closer to the 385 million inhabitants of the countries which will find themselves on the new external land and sea border, namely Russia, Ukraine, the Western NIS and the Southern Mediterranean, but do not have a vocation for joining the EU. Over the coming decade and beyond, the Union's capacity to provide security, stability and sustainable development to its citizens will no longer be distinguishable from its interest in close co-operation with the
neighbours. The EU's so-called Wider Europe communication launched in April, addresses concerns expressed by rnany of you relating to relations with our neighbours. It proposes to examine ways and means of achieving a more coherent regional policy. For trade and economic integration, this means to work towards the establishment, at the pan-European level, of a much more open and integrated market functioning on the basis of similar or harmonised rules.

Such integration can bring significant economic and other benefits to countries in our neighbourhood zone, but we have to recognise that the starting points of individual countries (the Mediterranean, Ukraine, Moldova. Russia) are different. Concrete proposals will therefore have to take account of this individuality.

This Strategy is of course distinct from that pursued with other neighbours, that have a European perspective like the Western Balkans. Following the asymmetrical trade liberalisation granted to
these countries, we pursue our strategy of Stabilisation and Association agreements including the prospects of FTAs with the EU.

8. The way ahead

We are in agreement on the objectives of the current Round and co-ordination between us has proceeded well so far. Today, we need to focus on how to best put forward our joint ambitions in the WTO. I am looking forward to an interesting discussion — both on our general DDA strategy and our interests in the different topics on the negotiation table. The first wave of EU enlargement will have become a reality before the scheduled completion of the DDA negotiations (end December 2004).