EU Commission failing to properly enforce trade agreements
18 March 2016
The EU will not reap the full benefits of foreign trade unless the Commission improves its handling of trade complaints, warns Ian Duncan.
We operate within a common market of nearly 500 million customers. The 28 member states of the EU can trade beyond their own borders without tariff or hindrance. The next step forward for the European Union is the brokering of similar trade arrangements beyond our shores.
With the implementation of the Lisbon treaty in 2009, such foreign trade became the exclusive responsibility of the EU, with the European Commission responsible for leading negotiations on behalf of the 28 member states. Whether negotiated multilaterally (through the World Trade Organisation) or bilaterally (under the direction of the EU) free trade deals are the heart of any growth and jobs strategy.
However, the benefits that flow from such agreements are realised only if the terms agreed are fully implemented and enforced by all concerned. Although the EU has concluded 30 free trade agreements, the enforcement of these agreements by the European Commission is patchy at best.
When this fact was first drawn to my attention I was slightly dubious. How bad could the enforcement really be, I thought? Well, rather than speculate, as Secretary General of New Direction - the Foundation for European reform, I decided to commission a report into the EU's enforcement of its trade agreements
The report, 'Paper Tiger? Free trade agreements as if binding pacts mattered,' authored by Simon Evenett of the University of St. Gallen in Switzerland, made for troubling reading. Evenett discovered that for the last three years for which data is available, the European Commission has resolved only 10 per cent of the trade complaints per year. By any standard, this is poor. So is the Commission's ambition of raising this to 20 per cent per year.
This unambitious target is compounded by the Commission's approach, which is to target the smallest of trade complaints. Over half of trade complaints resolved to date involve EU exports of no more than €63m. This might seem like a high figure but it must be remembered that EU trade is valued at €1 trillion each year.
Alongside the Commission's unambitious target and focus on the small cases, the failure to resolve long standing cases - some dating from 20 years ago - remains a problem that must be addressed. Further, since the year 2000, the Commission has been less and less likely to seek the involvement of the World Trade Organisation (WTO) in dispute settlement. Last year the Commission brought no cases to the WTO at all.
A particularly damning finding of the report is the fact that the EU is no more successful in tackling protectionism by nations with which it has a free trade deal, than with nations with which it does not, somewhat undermining the value of these agreements in the first place.
The conclusions of the report could not be clearer. The Commission must hold trade partners to account. Without this the EU as a whole will be seen as a paper tiger on the global economic stage. Free trade agreements are the bedrock of growth, but they are not worth the paper they are written on if they are not enforced. I hope that this report encourages the Commission to be more ambitious and to aim high. Getting trade conditions right can make all the difference.
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