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.