trade

The EU is pushing to begin negotiations on a Free Trade Agreement (FTA) with Japan as a way to kick-start the flagging European economy. The prospective EU-Japan FTA would be the largest such agreement in the world, with the two trade partners together representing roughly one third of all global economic output. However, certain sectors of the economy (particularly in the automobile industry) are alarmed at the prospect of such a wide-ranging FTA, arguing that it will not represent a fair deal.

Last year we spoke to Ivan Hodac, Secretary General of the European Automobile Manufacturers’ Association (ACEA), and asked him what he thought about an FTA with Japan:

[European automobile manufacturers] don’t see any benefit from an FTA with Japan because that market is also closed for us. The Japanese will get a dismantling of the 10% which they have to pay to trade in Europe. What the EU negotiators are doing is opening the market to the Japanese, Malaysisans, etc. but not insisting on reciprocity. We agree with your commenters that the FTAs should be opened – but they should be REAL free trade agreements.

According to ACEA, more than 2.3 million people are employed directly in the manufacture of motor vehicles in the EU, which represents almost 7% of all EU manufacturing employment. However, if you include services in this equation then the share held by automobile manufacturing looks less impressive: accounting for only 1% of total employment in the EU. Are Europe’s trade partners competing unfairly, or is the struggling European automobile industry simply seen as worth sacrificing in order to gain benefits in other sectors?

We recently had a comment sent in from Vicente, who put it more bluntly:

All European countries have a deficit! Why? Because [the EU] has opened its borders to [developing] countries like China, India and Brazil with very low custom tariffs while they charge very high tariffs… It is an unfair trade where only the big corporations profit.

Last month, the European Commission produced a report identifying a “staggering increase in protectionism around the world”, with a 25% rise in the number of trade restrictions introduced over the last 8 months by G20 countries, along with a slowdown in the dismantling of existing barriers. This figure does not just refer to trade tariffs between countries, but also to so-called “non-tariff barriers” (e.g. technical regulations, government subsidies, etc) that disadvantage foreign trade even in the absence of significant formal tariffs. In stagnating global economy, such a trend conjures up uncomfortable memories of the 1930s Great Depression and the “beggar-thy-neighbour” policies that lead to mass unemployment and social unrest.

Trade Commissioner Karel de Gucht recently identified Latin America as a “worrying” source of increasing protectionism. At a recent event on EU-Latin America relations (held by our partner think-tank, Friends of Europe) we met up with José Ignacio Salafranca Sánchez-Neyra, a Spanish centre-right MEP, and had the chance to put Vicente’s comment to him for a reaction. He admitted that he was “worried about the EU having on-average lower custom tariffs than the MERCOSUR countries [of Latin America]” and that this was “precisely the reason why we still haven’t reached an agreement” on trade talks.

We also spoke to João Aguiar Machado, EU Commission Deputy Director General of Trade, and put the same question to him. He responded that “Brazil has higher tariffs than the EU does, but you cannot say that in itself this is protectionism.”

Finally, it might also be worth reversing the question: is the European Union competing fairly in global trade? Earlier this year, we interviewed Olivier de Schutter, the UN Special Rapporteur on the Right to Food, who told us that developing countries continue to “struggle to remain competitive against heavily-subsidised food products being dumped on their markets” by the EU’s Common Agricultural Policy (CAP). In addition, at the same time that the EU Commission’s report was published on rising protectionism in the G20, another report (PDF) was published by the World Trade Organization (WTO), the UN and the Organisation for Economic Co-operation and Development (OECD). This report found that, of the six Specific Trade Concerns (STCs) that have attracted the most complaints from other countries, three of them are EU rules (on waste electronics, the authorisation of chemicals, and wine).

What do YOU think? Should negotiations towards an EU-Japan Free Trade Agreement (FTA) be seen as a positive step? Or is Europe opening up its markets to competition from countries that don’t play fair? Are we witnessing a worrying rise in protectionism and a return to the “beggar-thy-neighbour” policies of the 1930s? Or could bilateral FTAs be a solution? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions.

Image Credits: CC / Flickr – staxnet

10 comments Post a commentComment


  1. Magda Magdalena

    No.Europe is acting like a colonialist power even inside, trying to eliminate small competition from less powerful countries.

  2. catherine benning

    Do any trade partners act fairly? I don’t think so.

    • Christos Mouzeviris

      I agree…. Do we…?? Does anybody? With some of our leaders believing that even competition among EU members is good and it creates growth, why are you surprised that our partners do not? This is the system we have created, so no point in blaming the others… Change the system if you want “fairness”, by all means…

  3. Nikolai Holmov

    The entire single European market (sEm) is designed to be protectionist to external actors. It is necessary only to look at how it is constructed.

    The sEm is further complicated by governments owning stakes in certain sectors, such as France and the governmental stake in energy, which in effect all but effectively takes energy out of the sEm as far as internal members are concerned – let alone external actors.

    Anybody entering into a FTA with the EU has to make major concessions to do so, to the point it may not even be worth it in legislative time, reform time, tariff losses et al.

    Those complaining about external actors entering the EU are simply complaining that the EU’s protectionist market place is being breached without having the good grace to at least acknowledge it is protectionist in the first place – the benefits of which they enjoy!

  4. Marilina Asero

    Countries like China use cheap labour costs with no rights and no welfare in manufacturing sectors. Difficult to compete on that. In several tech sectors or even in EU FP Research programme Europe gives access to participants from third countries but there is no reciprocity. Countries as US and Japan have lot of restrictions for EU components. China does not offer reciprocity on participation of EU entities in its research programme. Certain restrictions of US banning some countries from using their technologies can hinder EU collaborative initiatives. EG. HPC resources embedding US technologies and chips, even when purchased and used in Europe by EU research centres, can impede access to computation requests from certain countries, also when they are involved in collaborative projects with Europe, via IP tracking.

  5. Zoétán Jenei

    sajnos országunkban a kormány a protekcionizzmus utjára lépett és én nem kivánom támogatni ebben Hungary kormányát mert ez nekem is hátrányos mert növeli az árakat mert csökken a verseny

  6. Samo Košmrlj

    eu should think of some way to reduce the import of especially the low quality goods, a good excuse would be for example to tax the products, made with low environment protection standards. and definitely stop the import of low quality stuff which breaks after a week of use

  7. Ozcan

    we have to destroy all markets that oppose us. burn them down and confiscate them. devour them entirely.

  8. MandyandPj Leneghan

    The EU is a trading bloc in its own right, with 27? nations involved. Surely that should be enough of the planet to provide the necessary competition/cooperation that, for some reason is deemed an essential. Globalization does not and will not work…for the people, that is but globalization is a bonanza for the privileged few monopolists. Logically, the EU would trade only within its own borders (comprising of 27 nations), that way, fair trade is guaranteed. All most people require is housing, furniture, food and some services, all of these can be provided by Europeans and for Europeans, which would provide sufficient modern employment for all. Why is there this fundamentalist obsession thing about globalisation, IMF, world trade organizations and the like? Are they really necessary? Those that believe that adherence to such globalist doctrine is essential, then what is the point of an EU?…pj

  9. Alice

    I’m not very hopeful. Freshmen Republicans in Congress are tied to the Tea Party matdane of no new taxes. It would be political suicide for them to backtrack on that issue. They aren’t going to budge, even if it means that the government might not be able to pay its bills in two weeks, thereby threatening the nation’s credit rating and the possibility that my parents and yours may not get their social security checks next month.As you’ve noted, the national and global stakes are a lot higher the lack of trade agreements than just no new taxes. Thanks for reminding me to look beyond the trees to the forest.

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