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Disputes between the European Union and the Rest of the world Essay

Disputes between the European Union and the Rest of the world

Introduction

            The sheer size of the EU sheer markets as well as its vast experience of more than forty years in negotiating international trade agreements has made it become the most powerful trading bloc in the world. Moreover, it has become a formidable power through trade, hence creating more problems with the rest of the world. The EU has increasingly used its market access as a bargaining chip to obtain changes within the domestic arena of its trading partners, starting with labor standards to development policies, and internationally, ranging from global governance to foreign policy. Therefore, this paper mainly analyses EU’s power in trade a factor that has made it create tension with the rest of the world. The analysis includes major dilemmas that are associated with how it exercises its trade power and point out why these strategies create tension with other international states. The argument also includes the need for the EU to refine it initial strategies of accommodation for it to successfully transform its structural power to be more effective and hence have a more legitimate influence.

            Among the first goals of the EU as a trade power is using its power to secure concessions from others on market access. This makes it function as an economic globalization determinant or shaper. Basically, the EU is using its trade power to achieve non-trade objectives that range from the export-specific rules flanking market integration such as social, environment and safety standards to a more political or strategic linkage (Haughton, 2007).The rest of the world is therefore left to wonder if such use of trade power ultimately matters in geopolitical terms.

Power in trade

            When we compare the EU and the US, there is no significant difference in the way the two exercise their power in trade at the bilateral levels mostly through agreements that they often have over their access to the market for their goods, capital and services in other regions. Agreements with EU have usually been involved more on reciprocal concessions over tariffs, quotas, and technical barriers to trade. However, concessions can sometimes be asymmetrical, either due to the fact that the EU could be making steeper cuts, or due to the fact that the value of the EU cuts could be greater following the size of the market. Failure to withstand such asymmetries means that the EU, similar to the US, uses preferential bilateral agreements to pry open the available markets that are found in the South as an exchange for accessing its own markets. Regionally, EU power has taken the form of less specific reciprocal concessions. As more nations across the world join regional trading blocs, the aim of the EU is to realize economies of scale through bloc-to-bloc deals. Such first bi-regional trade agreement is still being negotiated since 2000 mainly involving the EU and Mercosur, which is a customs union between Brazil, Argentina, Uruguay, and Paraguay created in 1991. It is to be followed by ASEAN (the Association of South East Asian Nations) as new economic partnership agreements (EPAs) with, among others, the Caribbean countries and the Gulf Cooperation Council. It cannot be denied that in Latin America especially, have taken such moves partly in consideration to reaction by USA’s own drive towards regionalism.

            EU’s involvement in multilateral bargaining at the global level has been shaped by its relationship to the US. These two great trade powers have for so long been engaged in what is seen by the rest of the world as a battle of the titans, as each side has been trying to ensure that each of them has a continued access balance towards the market through trade and regulatory deals, if not, to resort to dispute settlement (Grabbe, 2006). As that continues, they have also tried using their trade power to exert their rule of ‘western hegemony’ over the developing world, especially towards the so-called ‘new issues’ that pertain to services as well as intellectual property that were initially introduced during the Uruguay Round. Of late little co-operation has existed between the EU–US regulatory and these two powers have kind of began pursuing sharply diverging tactics, that came up with opposing alliances during the Hong Kong meeting of the Doha Round in December 2005.

Power through trade

            The EU tends to be more attached to not only multilateral forms of trade relations but also to the premises of embedded liberalism. Contrary to the US case; the EU’s use of trade in order to achieve non-trade objectives has some pride as a potential instrument of Europe’s geopolitical power. Whilst little doubt exists in regards to the EU being considered as one of the top players in world trade, there has been a lot of keen interest while assessing EU’s identity as a ‘power’ in general. They have however put across various qualifiers in characterizing a mode of influence that can enable them to manipulate others and make them perform according to the interest of the EU.

            Existence of the shift from a post-war to a post-Cold War paradigm of economic hegemony does not seem to be towards only increasing interventionism inside the affairs of trading partners, that even other nations apart from EU promotes. It has also taken other forms absent in the subservience of trade to security imperatives, the power to be yielded from asymmetries in such interdependence, and the ends of increased interdependence, as scrutinized under a mode demanding criteria of legitimacy. Even as the US tries to promote some specific features of an open trading system that tend to serve its domestic interests, the EU instead has been increasingly engaged in a more clever game where values, interests, and model are blurred. It does not just try to promote openness, but are more concern with openness ‘the EU way’. Considering the fact that the EU itself is a system of market liberalization, external efforts that it encourages are regarding replication more than domination

            Most groupings that have come up in the last decade seem to have done so majorly to increase their bargaining power within the trade negotiations against the EU and the US. They forget that having a closer relation to other regions around the world tend to be a means of enhancing the normative power of the EU and a reflection of this power. This is because such EU outstanding context and unique character as an integrative policy among other states is shown to be important. It is not US as a federal state which is relevant to integration among countries, but the EU as a federal union. Therefore, it seems the EU’s support for regional organizations like the Pacific Islands Forum and the African Union is linked to a particular expectation of contribution not only to the economic integration but also to the prevention, management and resolution of inter-state conflicts.

            However, while the EU has considered itself to be the judge of what is right or wrong as a trade power, there is some evidence showing that as a union it is indeed a conflicted trade power. This is a fact since within its different guiding principles; there are various policies which directly contradict each other (Teorell, 2010).

Regionalism vs. Multilateralism

            A lot of debate has been going on, whether regional trade agreements have been indeed building blocks or they are just stumbling blocks for multilateralism. The claim by the EU has always been that they are indeed building blocks. This was demonstrated when it defended the relevance of its own approach to the Uruguay Round agenda; as both the EU as well as the GATT at the same time tried to explore the fresh basis of trade in services, of course, with diverse ambitions as to the extent of liberalization. While it was a key player in the launching of the Doha Round, it is also becoming an active promoter of regionalism.

            The question then left to ask is whether these two factions are compatible. Following the sudden jump in terms of free trade agreements to more than 300 like in 2001, the shocking thing is that the WTO has not been able to reach agreement even on a single case report towards any regional agreement in spite of them vowing to participate in the role of regional trade committees. This is in contrast to the Appellate Body which has taken on the issue, for example, they suggested on the need to apply some kind of ‘necessity test’, towards a recent ground-breaking case, where by Turkey and EU were condemned after they increased unnecessary barriers to Indian textiles when Turkey decided to enter its customs union with Europe. Following the move the EU is still drawing lessons. Of course, such judgment may act as an inspiration to the EU policy-makers in their endeavor devise strategies of accommodation trying to tame the trade-diverting effects on regionalism. As an alternative, on the region-to-region front, there could be a possible insertion of clauses that link the implementation of market access deals with progress on the multilateral front, just like it was done with ASEAN. EU’s regionalism can also come under conflict with bilateral agendas of their own partners. Trials by the EU’s strategy of encouraging regional co-operation in the Balkans have come into conflict following its use of trade linkages for domestic change.

            Also, as was realized in the Euro-Med context when the EU sought to draw lessons from past relations with the Mediterranean after its multi-lateralized its relations and encouraged trade among the southern partners by changing its rules of origins and allowance of accumulation, for example, aggregation between the value added to the southern nations. However, following lack of consensus between these economies, such approach has not yet been judged to bear fruit, (Knodt & Jünemann, 2007). There could be a need for more drastic incentives. Continued systematic promotion of regionalism could be of harm indeed to the EU’s proclaimed development goals. Like, when some analysts argue that being engaged in urging of rapid regional integration in Francophone West Africa was seen as a great contributing factor towards the subsequent instability in the region. The EU sought free movement of goods in this case, but not people, but failing to provide a redistributive wealth mechanism that was to deal with adjustment costs and at the same time undermined government social programs.

            Moreover, most of the deals negotiated throughout the 1990s under the watch of the New Transatlantic Agenda between the EU and the US tended to be vulnerable to similar criticism. In a way they have had a trial to the feasibility of exporting the approach by the EU of market integration through regulatory mutual recognition by the US. However, still it is important for the EU and the US to design such agreements as well as their supporting mechanisms better and make them be open to those who are new who might take the approach of respecting the standards adopted trans-atlantically.

Non-discrimination vs. Bilateral preferential relations

            What can be seen as a major variant on the multilateralism –regionalism dilemmas tend to be increasing tension between the vowed commitment of the EU to international trade law, more specifically the highly favored-nation (MFN) principle, as well as the desire of the EU to be able to maintain preferential trading relations with specific countries. The agreement by the EU to the concept of ‘trade distorting’ regimes that stems from some of its members’ colonial pasts, exceeding the entire preferential market access granted to ACP countries, may of course sound as an objective even more commendable as compared to the MFN pursuit of global justice. However, it is important for EU to be clear on the price it has to pay for this moral luxury. Therefore, establishing such tension between international law and special relations tend to be acting geopolitically pitting two sets of developing countries against one another.

            Likewise, the 2001 Everything But Arms initiative (EBA) involvement in granting duty and quota-free access to the entire exports but not where arms and munitions are involved from the least countries that are less developed has faced criticism for excluding the key crops such as sugar, rice and bananas until 2009, as well as for leading in discriminatory practices among developing countries. Vulnerable and small economies that have been included tend to be bound to displace the exports of the same but some countries were excluded. Some States like the Caribbean or the Bangladesh members of the ACP group got a chance to benefit from this preferential trading arrangement with the EU. The WTO has many times condemned such policies. However, most of the member states, like UK, France, or Portugal who are former colonial powers, would not be keen on abandoning a system that is designed to eradicate poverty for the poorest farmers around the world who have become dependent on inflated EU prices. In this instance, the EU has chosen a classic strategy of accommodation: progressive graduation as well as the negotiation of transition systems. Based on the multilateral constraint, EU’s only remaining power tend to lie with determining the speed of transfer of adjustment costs with its trading partners and its import intermediaries.

            This kind of negative power is doomed to unpopularity. Therefore, by EU presenting a new deal like in 2005 of cutting guaranteed sugar prices by 36 per cent over four years, it was predictably criticized on all sides, attacked based on the fact that it was reforming the detriment of poor sugar exporting countries and it was failing to move much further. Somehow, the EU seems to have taken firm grounds stand, ironically, even playing around with the non-discriminatory obligations that are contained within the GSP, at least as under the rule of the WTO 2004 appellate body ruling on EU vs. India. In this case, India was challenging the EU’s modified GSP which tend to provide an additional margin of preference on the part of recipients with drugs enforcement policies where the Commission was involved in inventing the entire list of beneficiaries of the programme without considering any objective criteria. Seen as a brilliant compromise given to the EU given by the AB, the benefit of the doubt based on the fact that indeed the right to modify preferential treatment was not subject to a simplistic constraint of identical treatment among beneficiaries, (Tocci, N., 2007). The AB argued that different developing countries were not situated on the same way when it comes to their different needs and hence could possibly be subject to ‘performance requirements’ as long as the approach were objective, transparent, as well as non-discriminatory in the broad sense. What question perhaps remains to be tested is what are acceptable conditionalities more generally? In a sense, it was important for the EU to develop a more universal approach as to where to draw the line.

Western Hegemony Vs. Mediating Power

            An area which has also brought tension is in the EU’s alliance strategy as well as the light it portrays on what kind of actor it really wants to become. As a matter of fact, is it possible for the EU to play the part of the nervous protectionist North (agriculture), the rich liberal North (services), as well as the mediator between the South and the North? Taking the ‘rich North,’ is it necessary for it to generally to always take the US side for it to protect their shared commercial interests? Or it should go for emphasizing its vocation as a mediating power on the global scene, especially between the developing world and the US but at the same time, increasingly, between different interests in the developing world itself? Just as was recently demonstrated by controversies in the Doha Round, not only do multilateral trade negotiations are asking how much liberalization, but they are also asking what kind of liberalization as well as for whose benefit The Uruguay Round basically represent the culmination of an assertive US–EU alliance bent towards a commercially driven line in addition to a grand bargain between their reluctant acceptance of (partial) opening on some tropical/agricultural products and a (delayed) opening on textile, as an exchange for introducing fresh issues within the newly created WTO. In particular, intellectual property issues have exposed the EU to a lot of criticism that comes from the developing world due to the fact it sided with the interest of US multinationals.

            This tension between the North – including the EU – and the developing world started way back. However, a lot of attempt has been made by the EU to establish a reputation as a champion of development including through its 2001 role, when it launched the ‘Doha development agenda. Some other promoted path-breaking declaration on trade and public health has been going on. Like it has opened the way for legalizing broad exemptions from intellectual property constraints during any imports on generic drugs to treat diseases such as AIDS. There are also other initiatives, for example the databank which was set up by the Commission’s Directorate General for Trade in order to assist developing countries in their market access strategies, and have enabled the EU begin to change the image it has in the WTO.

            Following what recently came up in the Doha Round is an indication again to the lack of commitment that the EU has in seeking to marry its natural alliance in most of the domains (not all) with the US and its development advocacy. For example, when a World Bank Study questioned the EU’s ‘demonstration strategy’ through EBA stating that once requirements such as standards as well as rules of origin were taken into account, it was realized that the US was actually more open to LDC exports as compared to the EU. On the other hand, there is failure by the EU to promote multilateral solutions that is capable of addressing perhaps the single most important factor that links trade and poverty such as the massive volatility as well as decline in the price of primary commodities. As a result if the EU is indeed committed to uphold an image as a ‘mediating power’ within the global political economy, it will have no option but to actively promote changes in the WTO which the US is likely to actively resist, (Marshall, M., & Jaggers, K.,2010). However, a lot of failure has been manifested by the EU in exploiting a potentially promising strategy of accommodation like putting transatlantic economic as well as regulatory co operation at the service of multilateralism.

Internal vs. external objectives

            Somehow, the manner in which the EU is exercising power through trade should be held up to special standards. Claiming consistency between its internal and external actions tend to be at the heart of its legitimate exercise of power. The EU has indeed faced difficulties in an attempt to lead by example in the area of trade. Like, in case where the single market has been premised based on the assumption that free movement of people is a key dimension of market integration, as a matter of fact, what will this one mean for the position taken by the EU on the freedom of movement of people in order to deliver services? In order for EU to be consistent, it will need to invest political capital and more creativity in ‘globalization with human faces’ as well as the manner in which there could be encouragement of back-and-forth movement of people as an alternative to permanent migration.

            The existing tension between the internal and external is well evidenced over agriculture, and came up in the Doha Round. A lot of questions have been raised over the conflicted position taken by the EU regarding agricultural tariffs and subsidies in its commitment to putting multilateralism at the service of development. As a matter of fact, there is no need for denying European citizens their landscape, food security, and way of life. However, it is important to tell them the much it costs, like the number of people who are now living under $1 a day. Also the question can be whether region-to-region agreements tend to be more about promoting regional integration outside the EU ‘per se’ but not taking the form of a worldwide strategy pushing for convergence with European standards as well as mutual opening of markets, thereby supporting EU incumbents. Time and again representatives of Mercosur have stated that they are aiming to follow the EU’s example, which according to them has made Europe ‘less dependent on the outside world, (the EU has stressed market opening). What is interesting is that the current political leadership in Mercosur, particularly President Lula in Brazil, have kind of supported the EU project over the US-led Free Trade of the Americas Agreement, indicating that the EU’s leverage through trade does not show some indications of legitimacy as compared to that of that of the US, (Stephanie Hanson, and Brianna Lee, 2012).

            Moreover, it seems that EU assumes that the liberal recipe of ‘peace through commerce’ which has indeed seems to have worked so well with them applies uniformly anywhere else. Generally, trade is capable of fueling conflict especially when carried out within a context of corrupt governance, deep social inequalities, and unfair rules, as well as without enough attention being paid to its destructive byproducts like export dependence, adjustment costs, price volatility or illegal trafficking. For EU to bring its external action to be in line with its internal philosophy, it needs to establish trade policies that are also sensitive to these potential conflicts. The current certifications efforts for diamonds or timber constitute tend to be a promising starting point.

Equal Partnership vs. Conditional Opening

            There is a fundamental contradiction that exists as well within the very idea of ‘normative’ or ‘soft’ power. The language the EU is speaking is of shared norms which are developed through consensus and co-operation. But on the other hand, trade power tends to be the use of ‘carrots and sticks’ in enforcing such norms on trading partners. We are not even surprised that the incorporation of non-trade conditions in trade deals faces great resistance from developing countries, as they just see this to be a blunt coercion. A growing debate is now going on regarding the effectiveness of conditionality, which is now kind of spilling over from the field of aid to that of trade. Regardless of any instrumental argument, what is still being asked is whether a post-colonial power is not suppose to rely on voluntary change as well as the provision of public goods like its markets in bolstering the likelihood of such change. Do we miss to see a contradiction as the EU tries to export norms of its making, which is predicated based on voluntary co-operation between states using its quasi-coercive leverage through trade? Some of the policies such as the EBA undoubtedly tend to lie at the other end of the spectrum; unconditional opening to be a tool for development; having trust that new export opportunities in themselves is likely to encourage desired changes in the beneficiaries. Nevertheless, is it true that this policy is genuinely taking the interests of developing countries to heart, or it is just a public relations coup on the part of the EU?

This is a signal to the rest of the world that the EU was eventually acting upon its pro-developing world rhetoric, the EU managed to find their way out in Hong Kong in generalizing the principle under WTO. So far giving way duty/quota-free access to 97 per cent of the products that originates in least developed countries is not welcomed by majority.

Trade Liberalization vs. Domestic Preferences

            There is great tension for the EU as a trade power based on the embedded liberalism compromise. The conflict is in the manner of combining a trade liberalization credo with a primary concern for the social effects of market integration. Often, the EU has been facing social demands for protection that somehow may be going beyond the spirit of embedded liberalism. In response to such demands, the Commission’s trade policy-makers under the leadership of Pascal Lamy have developed a fresh conceptual apparatus based on the fact of collective preferences setting up institutions that are capable of forging collective preferences. The end result is diversification of social choices over health care, inter alia food safety, precaution in the field of biotechnology or welfare rights, cultural diversity, public provision of education and health care. However, it is argued that if these concerns justify protection then the EU has the obligation of providing compensation to its trading partners.

Conclusion

            Indeed, it seems like EU exploits its formidable trade power for pursuing non-trade objectives through conditionality or through fostering regional trade blocs in its own image. This highlights the way the divergences between member states objectives makes it hard for the EU to signal its resolve to the outside world more clearly. Nonetheless, such divergences are themselves a byproduct or an expression of existing tensions between various alternative priorities or even norms that must simultaneously be committed to by the EU machinery, such as nondiscrimination and bilateral preferential relations, regionalism and multilateralism, western hegemony and mediating power, trade liberalization and domestic preferences, internal and external objectives, equal partnership and conditional opening. Due to the fact that legitimacy tends to be the main currency for an aspiring normative power, it will be difficult for the EU to effectively become a power through trade without addressing what majority of the world considers being unsustainable contradictions.

References

Haughton, T. (2007). When does the EU make a difference? Conditionality and the accession process in Central and Eastern Europe. Political Studies Review, 5(2), 233–246.

Knodt, M., & Jünemann, A. (2007). Introduction: Conceptionalizing the EU’s promotion of democracy. In A. Jünemann & M. Knodt (Eds.), Externe Demokratieförderung durch die Europäische Union-European external democracy promotion (pp. 9–32). Baden-Baden: Nomos.

Marshall, M., & Jaggers, K. (2010). Polity IV project: Political regime characteristics and transitions, 1800–2009. Fairfax: Center for Systemic Peace, George Mason University.

Stephanie Hanson, and Brianna Lee (2012) Mercosur: South America’s Fractious Trade Bloc. Retrieved 3rd 10, 2014. http://www.cfr.org/trade/mercosur-south-americas-fractious-trade-bloc/p12762

Teorell, J. (2010). Determinants of democratization: Explaining regime change in the world. Cambridge: Cambridge University Press

Tocci, N. (2007). The EU and conflict resolution. Promoting peace in the backyard. London: Routledge.

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