EU Trade Policy:
Drive Forward EU Trade Agreements
Arguments and Positions
Conditions for international trade are getting more difficult. For some years now, the number of protectionist measures has been rising worldwide.
China is becoming ever more important in world trade – while intervening in the Chinese economy by way of planning, also causing distortions of competition. The USA is more and more putting into question the US commitment to international agreements, has launched tariff increases and is threatening further steps.
In the EU, too, a discussion about the protection of domestic production has started.
The German chemical industry – a global player
As part of international value networks, the German chemical industry depends on open markets. With imports and exports and many production sites worldwide, it is fully integrated in the global economy.
In 2018, the German chemical industry exported goods worth nearly 200 billion euros. Out of this, just under 45 percent went to countries outside the EU. During the same period of time, Germany imported chemical-pharmaceutical goods to the value of more than 142 billion euros. The German chemical industry itself imported raw materials and other inputs (ca. 46 billion euros) and technology. This safeguards the competitiveness of domestic production.
Many companies of the chemical-pharma-ceutical industry have production sites world-wide. They benefit from the proximity to customers or use specific location advantages, and they are major nodal points of global value networks. Conversely, foreign companies invest and produce in Germany.
With its international integration, the chemical industry is exemplary of the export nation Germany which has made good use of the rules of the World Trade Organization (WTO) for a successful orientation to global markets and for becoming part of the international division of labour.
Negotiating free trade and investment
In 1995, a world trade order was created with the WTO which has contributed to growth and prosperity. This world trade order is currently in danger due to pressure from the USA. The EU has presented reform proposals.
The EU Member States have transferred the competence in matters of trade and inter-national investments to the European Union. In an international comparison, the EU is a large, strong and attractive trading partner.
In view of the threat of additional US tariffs, the EU is planning lean trade negotiations with the USA. The mandates for this were adopted in April.
The EU is negotiating an investment agreement with China. A timely conclusion was decided at the April 2019 summit.
Furthermore, the EU is pursuing to conclude bilateral free trade agreements with many other countries.
- For open markets and modern trade rules - against protectionism
Germany and the EU should work for open markets and fair competition – and against protectionist measures. Protectionist measures, like those taken by the United States, should be countered flexibly under WTO rules: with both retaliation and offers for negotiations. Moreover, the EU should reform the WTO together with the USA, Japan and China.
- Defuse the trade conflict with the USA through pragmatic trade negotiations
The US has increased tariffs vis-à-vis the EU and is threatening further increases. The EU should defuse the conflict through trade negotiations – all EU and US industrial tariffs should be abolished. Also, regulatory cooperation should be negotiated at a later stage.
- Establish fair competition in and with China
China is pursuing an ambitious industrialisation strategy, using state interventions for this purpose. In response, the EU needs to develop its own suitable strategy for bringing about fair competition with Chinese companies and coordinate these efforts with like-minded partners.
- Conclude trade agreements and ratify them at EU level
The EU should conclude WTO-conforming, bilateral trade agreements with important partners and establish new rules therein. These agreements should be shaped in such a way that approval is required only from the EU Council and the European Parliament.