Trading standards

By 2015, nearly 90 per cent of world growth will be generated outside of Europe. This is a staggering statistic and could have huge implications for the future economic health of the EU.

If the EU’s new trade initiatives, under the auspices of its ‘global Europe’ strategy, are to be successful, then it must act now. Trade officials from the world’s largest economies have been on the prowl looking to extend their markets and secure trade deals across the globe. It is imperative that the EU does not miss the boat, as there is a real threat the EU will be pushed out from emergent economies completely. So far, the EU has seized the initiative and we are seeing ‘global Europe’ coming to fruition. As I write, EU negotiators are rigorously hammering out the details of comprehensive trade agreements with Indian and South American officials, covering a vast array of products and services from the automobile industry to the food and spirits sector.

Although both agreements are in their early stages, fiscal indicators from the European commission show immense potential. An EU-India FTA is expected to boost bilateral trade by €160bn by 2015, with key sectors seeing as much as 30 per cent increases in bilateral foreign direct investment. Last year alone, trade exchange between the two strategic trade partners was worth €69bn in goods and services.

The statistics available on Mercosur are equally as promising. A region-to-region trade agreement would encompass a free-trade zone representing around 750 million people with annual commerce worth nearly €100bn. This would lead to an increase in EU exports to the bloc which are already on a par with India, and ahead of both Canada and South Korea. Undoubtedly the prospect of trade agreements with two of the world’s most dynamic regions seems too good to miss, but is a deal worth pursuing at any cost?

Although the commission will have us believe that the negotiations with India have been progressing rather well, we should not take this at face value. India is a vast country with a population of more than twice that of Europe and a diverse socioeconomic demographic. Furthermore, India’s market is traditionally protectionist. For any agreement with India to be truly commercially advantageous, deep liberalisation, beyond standard tariff dismantling must be realised. It is imperative that Europe demands strong, comprehensive chapters concerning NTBs and safeguards for the EU to fully capitalise on any agreement.

Mercosur may prove a bridge too far. This has nothing to do with the potential benefits from an EU-Mercosur trade deal, but rather that the road to El Dorado is strewn with obstacles. There has been substantial resistance from the EU agricultural sector, as Europe’s famers, already struggling to compete with cheaper alternatives from the continent, have argued that an EU-Mercosur agreement would tip them over the edge. Mercosur is already a major exporter of agricultural and food products to the EU, with 86 per cent of EU beef imports and 70 per cent of EU poultry imports coming from these countries, further liberalisation has cost EU agriculture €13bn.

Another problem is that the levels of protectionism of the South American partners are troubling, and Argentina’s recent ban on all EU food and drinks products in favour of local alternatives has done little to alleviate the concerns of many in the EU. Unless these grievances can be resolved, the EU should not pursue a deal at any cost.

As rapporteur on the EU-Korea FTA, I can only emphasise the importance of the EU engaging with the global centres of economic growth. However, it is important for the EU not to be fooled by the success of Korea. Trade negotiations are not always plain sailing, nor, as the WTO Doha round has shown, is success preordained.