Interview with EU Trade Commissioner Karel De Gucht

TNI In the new EU trade strategy, what are your main priorities?

In November, I presented a Communication on the future of EU Trade Policy. Our priorities include: completing a series of ambitious trade agreements, both at the multilateral level through the WTO and bilaterally with a number of key trading partners; deepening our trade and investment links with our major trading partners – such as the US, China, Japan and Russia; ensuring better access to energy and raw materials from industrialised and emerging economies – but I do not specifically target ACP countries in this respect as we are not driven by offensive trade interests – and proposing an amendment to the EU Generalised System of Preferences for developing countries. We shall also publish a broader policy paper on our Trade & Development agenda at the end of next year. Our starting point in formulating policy approaches for developing countries is that no country has experienced long-term growth without opening its markets to international trade.

Europe is pursuing Free Trade deals with many of its economic partners. What are the key economic interests at stake for Europe?

For us, free trade has a triple beneficial effect: economic growth, consumer benefits and positive labour effects. We are already one of the most open economies in the world (73 percent of our imports enter the EU market at zero percent tariff) and it is clear that the EU has a stake in a number of sectors. Industrialised or emerging economies still erect barriers of various nature for European companies, be it in public procurement, services or investment. Regulatory barriers also represent a problem. And of course the sustainable and unrestricted supply of raw materials and energy is of strategic importance for the competitiveness of the EU economy. But as I said, this essentially applies to our relations with industrialised or emerging countries. For other developing countries we carefully calibrate our demands to their development needs.

In the context of a Post-Lisbon Europe and the Europe 2020 Strategy, what are the key priorities in investment and services at both the multilateral and bilateral levels?

An effective global manufacturing supply chain cannot exist without the vital support of transport, telecom, financial, business and professional services. Services represent 70 percent of world output but only about one fifth of world trade. We will seek from our main developed and emerging trade partners greater openness for our service providers, in line with what the EU internal market offers to service providers from third countries. We should also seek to ensure that regulation of services in all third countries is open, non-discriminatory, transparent and in the public interest, so that also our providers can better do business there.

In terms of investment, there has been an enormous increase in capital movements and Foreign Direct Investments worldwide. The Commission has proposed a comprehensive European investment policy. It will seek to include investment protection and investment liberalisation in on-going trade negotiations, starting with trade negotiations with Canada, Singapore, and India. The Commission is also considering whether stand-alone investment agreements with other countries, such as China, could be considered.

With the current context of economic and currency crises, combined with aggressive competition from emerging economies, should Europe resist protectionist measures? How can trade policy best respond to these challenges?

Trade was not a cause of the crisis but from the outset there were concerns that the heavy social burden of the crisis could trigger a wave of protectionist measures, as in the 1930s and 1970s, which would have deepened and prolonged the crisis. However, the WTO legal framework and trade disciplines proved their worth by substantially reducing the scope for the introduction of protectionist measures, especially with regard to tariff increases beyond “bound” levels agreed at the WTO. Furthermore, the awareness of the lack of binding WTO disciplines on non-tariff barriers led to a preventive and internationally coordinated pledge to keep markets open. Protectionism has not been fully contained, but international trade rules worked.

It is true that, by contrast with previous global downturns, the current recovery is being led by the emerging economies. The question arises as to whether the dynamism of emerging economies alone will be sufficient to sustain global demand growth in the coming years. This is an open question and Europe can only respond to that by increasing its competitiveness on global markets.

Continued failure to complete the WTO’s Doha Round trade talks could have strong negative impacts on the multilateral trading system. What are the concessions the EU could be ready to make to avoid such a scenario and under what conditions?

Despite the slow progress, completing the Doha Development Round (DDA) remains our top priority. World trade could increase by over €300 billion a year and world income by more than €135 billion. As recognised in Seoul at the G20 Summit this November, 2011 represents a crucial opportunity to conclude the negotiations, and the EU is prepared to work very hard in the months ahead to reach an ambitious, balanced and comprehensive agreement to which all major players make significant contributions and from which all players, developed and developing, will benefit. The successful conclusion of the Doha negotiations will confirm the central role of multilateral trade liberalisation and trade rules at international level. It will also confirm the WTO as a powerful shield against protectionist backsliding. I do not wish to go into the details of the negotiations.  It is clear however that the EU aims at balanced market opening covering industrial goods, services and agriculture, where the contribution of each Member corresponds to its role in the world trade system. In agriculture, the EU is committed to an agreement that reforms farm subsidy programmes throughout the developed world in line with the EU’s wide-ranging reform of the Common Agricultural Policy. And of course the EU supports the development dimension of the DDA which runs through every negotiating chapter.

With little or no progress on EPA negotiations, why does it take so long for the EU to instil the necessary momentum to move the EPA process forward?

It takes two to tango. I think there is a consensus on the founding principles of the EPAs as outlined in Cotonou: a shared trade and development partnership to contribute to ACP development, growth and job creation. EPAs are the best available tool we have jointly designed with our ACP partners. However, it cannot be denied that seven years after their launch EPA negotiations, particularly in Africa, are not progressing as we would wish. It is clear that the current uncertainty cannot prevail indefinitely. We very much need to achieve a common understanding about the very tangible benefits that trade can bring to development.  Under the new College, we have continued negotiations with those EPA partners still committed to the process and hope to conclude in the short-term.

On 22 October I discussed with ACP and EU Ministers ways of instilling fresh momentum towards timely, development-friendly results. I am personally committed to making this happen, and I stand ready to travel to Africa in the next few months, for instance to support ACP and EU Parliamentarians meeting in the Democratic Republic of Congo and to help steer negotiations in Southern Africa.

What is expected from African and Pacific countries to help the process move forward? Beyond the development rhetoric, what are the specific flexibilities the EU would be willing to provide to make the negotiations move forward (notably on market access, MFN, export taxes, etc)?

We have made great efforts to show flexibility both on the trade side and in development co-operation. In terms of the scope of the negotiations, the EU has accepted that some pressing issues be frontloaded and others postponed. This has allowed progress on trade in goods and development cooperation while leaving non-goods issues until later. During negotiations, various issues have cropped up, some of which are difficult and remain on the table. In this regard, we respond to ACP regions’ development needs and propose appropriate solutions to accommodate such concerns. In the end both sides need to contribute to a package that makes sense in terms of the joint objective, development, which is sustainable. But this is a decision we cannot take for ACP countries and regions: in the end, it is their choice. Only a clear, forward-looking political engagement can help unblock the situation.

The EU is granting free market access to countries that have not yet signed or implemented an EPA, how fair is this and what do you intend to do about it?

It is not only a matter of fairness but also of legal certainty. Latin scholars would say “pacta sunt servanda.” We have obligations in terms of both EU and WTO rules. We have more than respected our end of the deal by granting duty free and quota free access to EU markets since 1st January 2008. However, access to the EU was predicated upon agreements being signed and applied within a “reasonable period of time.” Nearly three years on economic operators are lacking the legal certainty provided by an EPA that is not only signed but also implemented.

How would imposing new fixed deadlines affect the negotiations? Is there a risk of antagonising parties and splitting regions like at the end of 2007?

There are no “fixed deadlines” apart from those we set directly with our negotiating partners. It is true that an ACP region, the SADC EPA Group, has proposed the end of 2010 as a deadline for concluding a regional agreement and we are prepared to work with them to try to meet that deadline. However, it is clear that if the commitment to a successful conclusion is palpable, we can buy some extra time in the interest of the overall deal. We hope to be making progress with all regions in the next few months, and we are open to concluding agreements wherever possible, depending on the level of ambition of our partners.

How is the power game in EPA negotiations affecting the broader EU-Africa relations? How to avoid Africa turning its back on Europe because of EPAs?

EPAs are only a small portion of the broader EU-Africa partnership, and we look forward to discussing the way ahead at the third EU-African Union Summit in Libya on 29-30 November 2010. The EU and African heads of state and government will discuss issues such as peace and security, climate change, regional integration and private sector development, infrastructure and energy, agriculture and food security, migration. The results of the Summit will be enshrined in an Action Plan covering the 2011-13 period. The first Action Plan (2008-2010) was adopted at the Lisbon Summit in 2007 and launched the Joint Africa-EU Strategy. In the area of “Trade, Regional Integration and Infrastructure,” the Action Plan delivered on several fronts, including with harmonisation programmes in the sanitary and phytosanitary (SPS) field, backed up by the “Better Training for Safer Food Africa” initiative; and with the “EPA Development Programme (PAPED)” for West Africa (a facility of €6.5 billion over the next five years).

EU-African relations are therefore strong and becoming even stronger. The EU is still the main export market for most sub-Saharan African countries. It is therefore our shared interest to push forward this shared agenda, including with a mutually satisfactory conclusion of the EPA process.

This interview was conducted before the summit took place.

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