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The European Union is the world’s biggest trader, accounting for nearly 20 % of global exports and imports. The United States is the EU’s largest trading partner, followed by China and Russia. Two-way trade flows across the Atlantic are worth close to €400 billion a year Open trade among members of the EU has led to the single European market with freedom of movement for people, goods, services and capital. The Union therefore takes a lead in pushing for further trade liberalisation at world level for the benefit of rich and poor countries alike. Trade sanctions - e.g. removing trade preferences or limiting or freezing trade with a partner in breach of human rights or other international standards of behaviour - are also a tool of European foreign policy.
The rules of the game To benefit all players, trade has to be free and fair, with the same transparent and mutually-agreed rules applied to everyone. The EU firmly supports the World Trade Organisation which lays down a set of rules to help open up global trade and ensure fair treatment for all participants. The system, although imperfect, offers a degree of transparency and legal certainty in the conduct of international trade.
Free and fair The most visible way to make trade free is to reduce, or remove altogether, import duties or quotas which countries apply to products. Suppliers, whether domestic or foreign, can then compete openly on price and quality. But there are also hidden or ‘technical’ barriers to trade whereby governments and companies try to gain an unfair advantage over others. These unfair trade practices include the following: - selling goods on foreign markets below cost or domestic price in order, for example, to force producers in these countries out of their home market — so called ‘dumping’,
- paying subsidies from the state budget to companies, including to ‘national champions’, to give them an unfair advantage in export or domestic markets,
- reserving public contracts for local firms, even though foreign bidders submit better offers,
- disregarding intellectual property rights (trade marks and copyrights) by producing pirated or counterfeit goods which are sold cheaply to undercut the original manufacturer.
| The WTO also provides a dispute settlement procedure when direct disputes arise between two or more trading partners. While the EU sometimes takes action in the WTO against its trade partners, the EU has also been on the receiving end of WTO disputes in cases involving notably its agricultural sector.
In parallel with its WTO membership, the EU has developed a network of bilateral trade agreements with individual countries and regions across the world. These agreements complement moves at the WTO to remove barriers to trade internationally and help us move more quickly to secure mutual advantage with key commercial partners. There are clear WTO rules establishing conditions for these agreements to prevent them being used to discriminate against other trade partners, and all EU agreements are compatible with these rules.
Spreading the benefits But trade agreements are not just based around commercial interests. The EU is particularly sensitive to the interests of developing countries and has long recognised that trade can boost their economic growth and their productive capacity.
Developing countries enjoy duty-free access or cut-rate tariffs on exports to the EU market for the 7 200 products covered by the EU's generalised system of preferences (GSP). Vulnerable countries with special development needs enjoy duty free treatment for all products covered by the GSP. This is a one-way concession which does not require reciprocal action on the part of beneficiaries. The world’s 50 least developed countries have totally free access to the EU market for all their products, except exports of arms and ammunition.
The special trade and aid relationship between the EU and the 79 countries of the African-Caribbean-Pacific (ACP) group dates from the Lome Agreements of 1975. This relationship is being further developed through so-called 'economic partnership agreements' (EPA). These agreements will combine EU trade and aid in a new way. The ACP countries are encouraged to foster economic integration with regional neighbours as a step towards their global integration, while more aid is focused on institution-building and good governance. Under the EPA the development dimension becomes the cornerstone of the EU-ACP relationship.
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