International Trade [Topical Digest]

Trade policy has continued to occupy international headlines since President Trump imposed US tariffs leading to ‘trade wars’; the pandemic has meanwhile highlighted the need to ensure supply chain resilience. In this context, the EU is working to secure the survival of the multilateral trading system, embodied in the WTO, while also seeking bilateral and regional trade agreements with partner countries from Asia to Latin America. The European Parliament promotes values-based trade and the importance of a level playing field, not least when it comes to human rights and social, labour and environmental standards. This topical digest summarises the most recent research written for European Parliament policymakers to help understand this complex and dynamic field, including: horizontal international trade overviews; publications on thematic areas such as the economics of trade, the WTO, investment, trade and sustainable development, digital trade and export control; and overviews of legislation. For an outline of analyses on the EU’s bilateral trade negotiations and relations, see the topical digest on trade and investment agreements.

Legislative trains on trade
The Legislative Train Schedule – resembling the arrivals-departures board in a railway station – provides a summary of the state of play of trade legislation and international trade agreements all in one place.

Horizontal overviews

EU trade policy: Frequently asked questions
In-depth analysis by Jana Titievskaia, October 2019
Offering explanations of key trade concepts, this paper seeks to provide immediate answers to the most commonly asked questions relating to EU trade policy: from the evolution and scope of EU common commercial policy to the role of different EU institutions and the economics of trade. In addition, the paper covers the procedures for the conclusion of international trade agreements, types of trade relationship, and the specific characteristics of EU legal instruments in the area of trade. Lastly, it addresses the issues of trade and sustainable development, which have grown into a key area of concern for Parliament.

Review of EU Enforcement Regulation for trade disputes
Briefing by Gisela Grieger, March 2021
The Enforcement Regulation enables the EU to suspend or withdraw concessions or other obligations under international trade agreements in order to respond to third country breaches of international trade rules that affect the EU’s commercial interests. The proposed amendments were aimed at empowering the EU to impose counter-measures in situations where EU trade partners violate international trade rules and block the dispute settlement procedures included in multilateral, regional and bilateral trade agreements thus preventing the EU from obtaining final binding rulings in its favour.

EU trade policy review
‘At a glance’ note by Krisztina Binder, December 2020
In June 2020, the European Commission launched an EU trade policy review that will lead to a revised strategy to be adopted early in 2021. The aim is to set a new course for trade policy in a changing global context, aligned with EU priorities and supporting recovery from the coronavirus crisis. Parliament contributed to the process with a resolution on 26 November 2020, and will continue monitoring implementation of the new policy in 2021.

Key issues in the European Council: State of play in December 2020
In this quarterly updated publication, the European Council’s commitments are scrutinised and assessed for accountability purposes. The trade chapter (from page 74) provides a useful angle on the European Council’s position with regard to international trade.

Slowing down or changing track?: Understanding the dynamics of ‘Slowbalisation’
Section on ‘Slowing international trade’ by Jana Titievskaia (pp. 5-7), EPRS in-depth analysis, December 2020 Since the aftermath of the global financial crisis, year-on-year annual growth in international trade has been falling. This trend was exacerbated by the onset of US-China trade tensions in 2019. This is striking, given that trade has consistently outpaced GDP since the mid-1800s, with the exception of the interwar years. In nominal terms, trade appears even weaker, failing to keep up with GDP growth owing to the fall in the relative prices of traded goods and services, particularly commodities.

International trade policy
Briefing by Jana Titievskaia, July 2020
In recent years, the multilateral liberal trading order has already facing unprecedented turbulence with the rise of protectionism and zero-sum thinking, trade wars and the blockage within the WTO.

EU international procurement instrument
Briefing by Jana Titievskaia, March 2020
The EU has opened up its public procurement markets to third countries to a large degree, yet many of these countries have not granted the EU comparable access. In 2012, the European Commission tabled a proposal for an international procurement instrument (IPI). It then revised the proposal in 2015, taking on board some recommendations from Council and Parliament.

Trade and competitiveness policies in the European Council: background, current developments and way forward
In-depth analysis by Izabela Bacian and Marko Vukovic, March 2020
In recent years, international trade has gained increasing visibility on the European Council agenda. Profound changes have occurred in the global trading landscape, with common rules and standards questioned and new actors entering the world stage. A high level of economic interconnectedness and the ineluctable rise of emerging economies on the world stage, notably China, have highlighted differences across economic systems and divergences over the impact of certain policies and practices in the global economy.

Delivering for citizens: International trade and globalisation
Briefing by Jana Titievskaia and Roderick Harte, February 2019 Offering a comprehensive summary of the last five years of EU trade policy and detailing what the EU has been doing for citizens on trade and globalisation during the 2014-2019 parliamentary term, this briefing sets out the legal basis for EU trade policy, and the underlying strategies and discourses that drive the EU’s trade policy. It also outlines the state of play in trade negotiations, trade agreements concluded, and the key trade-related legislative developments of the last term.

The power of the European Parliament: Examples of EP impact during the 2014-2019 legislative term,
Chapter on Trade (CETA), pp. 8-9; by Jana Titievskaia, EPRS, April 2019
A good example of the Parliament’s role in trade from the last term is the shift from the controversial investor-state dispute settlement mechanism to a more institutionalised international court system under the Comprehensive Economic and Trade Agreement (CETA) between EU and Canada

Economics of trade

Distortive foreign subsidies regulation: A level playing field for the single market
Briefing by Marcin Szczepański, June 2021
In May 2021, the European Commission published a draft regulation designed to tackle those foreign subsidies that have a distortive effect on the single market. The plan is to give the Commission powers to investigate subsidies granted by non-EU public authorities to companies operating on the internal market. If these are found to be distortive, the Commission would be able to apply redressive measures.

Critical raw materials in EU external policies: Improving access and raising global standard
Briefing by Marcin Szczepański, May 2021
lobal demand for critical raw materials (CRMs) is rising, but export restrictions imposed by resource-rich countries are intensifying the competition for these materials. To boost its access to CRMs, the EU has a dedicated strategy based on three pillars: two internal ones (increasing domestic sourcing and circularity) and an external one, focused mainly on securing supply from third countries.

Understanding trade balances
‘At a glance’ note by Jana Titievskaia, February 2019
A focus on export-import trade balances can be misleading in the trade policy context. Trade balances need to be considered as an integral part of a larger whole, the balance of payments of an economy.

Global and regional value chains: Opportunities for European SMEs’ internationalisation and growth
Briefing by Ioannis Zachariadis, February 2019
International value chains have emerged as the new paradigm for the organisation of production globally. Today, most production processes across the world are vertically fragmented as a result of the increased unbundling of tasks and functions and their sourcing from different geographical locations. This briefing analyses how this situation affects small and medium-sized enterprises in particular.

The added value of international trade and impact of trade barriers: Cost of non-Europe report
Study by Risto Nieminen and Laura Puccio, October 2017
This cost of non-Europe report analyses the economic framework of international trade. The first part contains an overall presentation of international trade and a brief description of the significance of global value chains. The second part analyses the benefits of international trade and the consequences of protectionism.

World Trade Organization

World Trade Organization TRIPS waiver to tackle coronavirus
‘At a glance’ note by Jana Titievskaia, June 2021
Despite embedded flexibilities in the World Trade Organization (WTO) Agreement on Trade-related Intellectual Property Rights (TRIPS), India and South Africa, co-sponsored by a large number of developing countries, submitted an initial proposal for a temporary waiver in response to Covid-19 in October 2020 that met with divided opinions.

International trade dispute settlement: WTO Appellate Body crisis and the multiparty interim appeal arrangement
Briefing by Jana Titievskaia, April 2021
To find a temporary solution to the United States’ blockage of appointments to the WTO Appellate Body, the EU and a number of trade partners set up a multiparty interim appeal arbitration arrangement (MPIA). The parties are continuing to seek resolution of the Appellate Body crisis, and have agreed to use the MPIA as a second instance until the situation is resolved.

WTO e-commerce negotiations
‘At a glance’ note by Jana Titievskaia, October 2020
Members are seeking a high-standard outcome building on WTO agreements, but the legal form of the deal is not yet clear. Participants wish to modernise trade rules to fit the digital age and show that the WTO’s negotiating function can deliver. Key issues in the negotiations include e-contracts and e-signatures, data flows, data localisation requirements, disclosure of source code, and customs duties on electronic transmissions.

US duties on imports of Spanish ripe olives
‘At a glance’ note by Jana Titievskaia, March 2019
In January 2019, the EU launched a case before the WTO against the US challenging duties on imports of Spanish ripe olives. Given the importance of such support for EU farmers, the US measures could have far-reaching consequences for the EU’s agricultural model and set precedents in the WTO.

Multilateralism in international trade: Reforming the WTO
Briefing by Roderick Harte, October 2018
Despite having achieved various successes since its creation, the WTO is currently facing major challenges that undermine its status as the world’s primary forum for negotiating trade rules, settling trade disputes and addressing trade issues. The EU is a strong supporter of the rules-based trade system and therefore has a strong interest in preserving the WTO.

Investment

Multilateral investment court: Framework options
Briefing by Issam Hallak, June 2021
The intergovernmental talks at United Nations Commission on International Trade Law (UNCITRAL) are aimed at reforming the system with a view to establishing a fully-fledged permanent multilateral investment court with an appellate mechanism and tenured judges. Also see

Multilateral Investment Court: Overview of the reform proposals and prospects,
briefing by Issam Hallak, January 2020

CETA: Investment and the right to regulate
‘At a glance’ note by Laura Puccio, February 2017
Under international public law, states can be asked to compensate investors whenever regulatory measures become expropriation measures or violate standards of treatment, such as the ‘fair and equitable treatment of investors’ obligation. The EU-Canada Comprehensive Economic and Trade Agreement (CETA) takes a relatively restrictive approach to these investor rights.

Trade and sustainable development

Trade policy for the biodiversity strategy 2030
‘At a glance’ note by Jana Titievskaia, June 2021
The EU’s biodiversity strategy for 2030 commits to doing more to assess trade agreements’ potential impact on biodiversity and to enforce biodiversity-related provisions. Parliament’s Trade Committee has adopted an opinion on the trade aspects of the new strategy.

Using trade policy to tackle climate change
‘At a glance’ note by Jana Titievskaia, October 2019
European leaders have called for urgent action against climate change. Since the Paris Agreement is binding only in part and aspirational concerning national emissions targets, there are calls to use trade policy instead

Human rights in EU trade agreements: The human rights clause
Briefing by Ionel Zamfir, July 2019
The clause, which also covers democratic principles and often the rule of law, is more than just a legal mechanism enabling the unilateral suspension of trade commitments in times of crisis.

Human rights in EU trade policy: Unilateral measures applied by the EU
Briefing by Ionel Zamfir, May 2018
The generalised system of preferences, which grants certain developing countries preferential trade access to the EU market, covers 90 third countries. The scheme includes explicit human rights conditionality, providing that preferences can be withdrawn in cases of systematic violations of core human or labour rights norms.

Gender equality and trade
‘At a glance’ note by Ionel Zamfir, January 2019
The EU has established specific mechanisms in its trade policy to enforce women’s labour and human rights, and monitor the gender impact of its trade preferences

The Generalised Scheme of Preferences Regulation (No 978/2012): European implementation assessment
Study by Isabelle Ioannides, December 2018
This evaluation is organised in two parts. The first part, which has been prepared internally, focuses on the incentives in the GSP provisions that aim to push beneficiaries to comply with human rights and the extent to which these have been implemented and have had an impact on poverty reduction and good governance

EU aid for trade: Taking stock and looking forward
Briefing by Marta Latek, April 2018
Most commentators agree that aid for trade investments have helped developing countries to improve and diversify their export and trade performance. Its impact on poverty reduction has been much less clear

Trade and sustainable development chapters in CETA
The inclusion by the EU of sustainable development chapters in the free trade agreements concluded with its partners plays a role in ensuring that trade and investment liberalisation does not lead to a deterioration in environmental and labour conditions 

Digital trade

WTO e-commerce negotiations
‘At a glance’ note by Jana Titievskaia, October 2020
Members seek a high-standard outcome building on WTO agreements, but the legal form of the deal is not yet clear. Participants wish to modernise trade rules to fit the digital age and show that the WTO’s negotiating function can deliver. Key issues in the negotiations include e-contracts and e-signatures, data flows, data localisation requirements, disclosure of source code, and customs duties on electronic transmissions

Blockchain for supply chains and international trade
Study for the Scientific Foresight Unit (STOA), May 2020
This study provides an analysis of blockchain technology in the context of international trade. It analyses the potential impacts of blockchain development and applications in eight use cases for supply chains and international trade. It also provides an analysis of the current legislative framework and existing initiatives. Based on this analysis, and following a broad consultation of relevant organisations, the study identifies several challenges in international trade documentation and processes, and presents a range of policy options for the European Parliament

The advent of blockchain in trade
‘At a glance’ note by Krisztina Binder and Angelos Delivorias, July 2018
The use of blockchain in supply chains and trade-related business processes has gained ground in recent years. Start-ups and large companies exploit a wide range of blockchain-based applications in these areas

Export control

Review of dual-use export control
Briefing by Beatrix Immenkamp, January 2021
The proposed regulation will recast the regulation in force since 2009. Among other elements, the proposal explicitly defines cyber-surveillance technology as dual-use technology and introduces human rights violations as an explicit justification for export control. It also includes provisions to control emerging technologies. The proposed regulation introduces greater transparency into dual-use export control by increasing the level of detail Member States will have to provide on exports, licences, licence denials and prohibitions

EU imports and exports of medical equipment
Briefing by Issam Hallak, October 2020
A mapping of EU trade in four categories of product – pharmaceuticals, medical equipment, personal protection and medical supplies – shows that, in all four categories, as few as five trade partners provide about 75 % of EU imports. Exports are more diffuse, with five partners receiving approximately half of EU exports. In 2019, the EU was a net exporter of medical products in all four categories, with pharmaceutical products representing most of its trade surplus of medical products

EU export authorisation scheme for personal protection equipment
Briefing by Issam Hallak, May 2020
A mapping of exports and imports of PPE subject to authorisation shows that, even though the EU runs a large trade surplus for medical products in general, it had been running trade deficits on these specific products for the last decade. The scale of trade in these products is also very small since imports represented as little as 0.05 % of EU gross domestic product (GDP) in 2019. This all goes to show how what amounts to a tiny portion of international trade can have dramatic consequences

Food trade and food security in the coronavirus pandemic
‘At a glance’ note by Krisztina Binder, May 2020
Not only has the pandemic created a global public health crisis, it has also had a significant impact on the global economy and international trade. Measures to deal with the consequences of the pandemic, while affecting food trade have also impacted on the world’s food systems and raised concerns for global food security. The EU is committed to keeping trade flowing and supply chains functioning, and supports international cooperation to promote food security.