EU Trade Policy
Arguments and Positions
Conditions for international trade are getting more difficult. For years, the number of protectionist measures has been rising. 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. Brexit burdens the European Union’s trading with the UK. In the EU, too, a discussion about protecting domestic production has started.
The German chemical industry – a global player
With its products, the German chemical industry contributes globally to the UN sustainable development goals. As part of international value networks, the industry depends on open markets. 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 (for ca. 46 billion euros) and technology. This safeguards the competitiveness of domestic production.
Many companies of the industry have production sites worldwide. They benefit from the proximity to customers or use specific location advantages, and they are nodal points of global value networks. Protecting investments and intellectual property is important for the international commitment. Also, foreign companies invest and produce in Germany.
Focus on free trade and investment
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.
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.
Inside the EU, the Member States have transferred the competence in matters of trade and international 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 EU is negotiating an investment agreement with China and pursuing to conclude compre¬hensive free trade agreements with further countries – most recently, with Canada, Japan, Singapore, Vietnam and the South American trade bloc Mercosur; after Brexit also with the UK.
- 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. Especially global challenges such as climate protection, food and healthcare can only be tackled successfully with free, rules-based trade. Therefore, the EU should reform the WTO together with the USA, Japan, China and others.
- 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 take a strong stance, however, while defusing the conflict through trade negotiations - all 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. The European Union needs to respond with its own suitable strategy to bring about fair competition with Chinese companies. The EU should coordinate these efforts with like-minded partners.
- Conclude trade agreements and ratify them at EU level
The EU should continue to open up markets through bilateral trade agreements with important partners and ratify such agreements fast. These should be shaped in a way that approval from the EU Council and the European Parliament is sufficient for the trade rules.