With just 7% of the world’s population, the EU accounts for 25.8% of world GDP, and its trade with the rest of the world accounts for around 20% of global exports and imports (excluding intra EU trade). This gives the EU the titles of biggest trade player in the world, the biggest importer and exporter, the biggest investor, biggest economy in terms of GDP and the number one recipient of foreign direct investment – for trade today covers more than goods.
Growth and jobs
The EU’s trade policy is in place for Europe. Trade with other countries creates growth and jobs at home. But the transactions are of course mutually beneficial – no country can develop behind closed borders. Today, around 60% of any final European product – whether raw materials, components or other – comes directly or indirectly from other countries or regions of the world. This alone is reason to reject protectionism: Europe is dependent on the import of key commodities and raw materials and needs to access markets worldwide.
The EU is working to have barriers to trade lifted. Open and fair trade boosts competition while benefiting consumers. The EU is a believer in a rules-based system, centred around the World Trade Organisation (WTO) and its multilateral mechanisms. It would welcome progress in multilateral trade negotiations, known as the Doha Round. But in the meantime, the EU is also pushing ahead with bilateral trade negotiations.
Talks are underway with ASEAN countries and India, neighbours to the EU’s south and east and Canada, and are beginning with Japan. The EU is looking into deepening relations with the US, as well as improved investment arrangements with China. An ambitious agreement is now in place with South Korea. In Latin America, agreements are in place with Colombia and Peru. An agreement has also been signed with the region of Central America. Agreements are also being negotiated with countries of the southern Mediterranean and Eastern Europe, such as Georgia, Moldova and Armenia.
Ensuring existing agreements are implemented is a priority. Globally the EU has more than 200 Free Trade Agreements in place, covering more than 35% of global trade.
In addition to duties, bilateral agreements may also address government procurement, intellectual property rights, transparent regulation, sustainable development, services and investments. Together, these measures make trade cheaper, faster and more predictable.
Development through trade
Trade is one of the most effective ways in which to boost development. Through trade with the EU, poorer countries are able to generate income from exports, advance industrialisation and diversify their economies. The EU imports more agricultural products from developing countries than Australia, Canada, Japan, New Zealand and the US together.
The ‘Generalised System of Preferences’ (GSP) initiative encourages sustainable development and good governance. The system offers additional tariff reductions to particularly vulnerable developing countries (Least Developed Countries – LDCs can export Everything but Arms – EBA – to the EU without paying duties). Non-LDCs can access additional trade preferences (GSP+ scheme) when they ratify and implement international conventions in areas such as human rights and labour standards, sustainable development and good governance.
Such initiatives aim to discourage a ‘race to the bottom’ in trade and investment, and the EU continues to stand firm in the fight against child labour while promoting human and labour rights, climate action and good governance.