Trade Deals Key to Boosting Europe's Economy, EC Says
Europe's GDP will be 250 billion euros ($305 billion) better off if the EU signs trade pacts with its key trading partners, the European Commission said July 20. By 2015, 90 percent of economic growth will be generated outside Europe, one third in China alone, it said. Tapping into the markets of important trade partners will be increasingly significant for European growth, it said. More than two-thirds of those gains would come from agreements with the U.S. and Japan, it said. The EC has requested authority to negotiate a trade agreement with Japan, and in June, an interim report of the EU-U.S. High Level Working group on growth and jobs stressed the benefits of a comprehensive trade agreement with the U.S., it said. A recommendation should follow later this year on prospects for such talks, it said.
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For 2012, free trade agreements (FTAs) are “within reach” with Canada and Singapore, and there are ongoing FTA negotiations with India and Mercosur (South American) countries, the EC said. But those talks are very challenging and it's unclear whether the pacts can be concluded “within a realistic timetable and at an acceptable level of ambition,” it said. Stepping up the pace of FTA negotiation and ratification will be essential to reap the benefits of external trade, it said. The EU is still the world's largest exporter, importer, source and recipient of foreign direct investment, the EC said. It has managed to hold onto its 20-percent share of total world exports despite China's rise where Japan and the U.S. have seen their shares decline significantly, it said. The EU has a “massive” manufacturing trade surplus of 281 billion euros, a number that has grown five times since 2000, it said. The trade surplus in services now stands at 86 billion euros, and in agricultural products the balance shifted from a deficit in 2000 to a surplus of 7 billion euros last year, it said.
Robust external demand is what's helping Europe grow now, as public and private domestic demand is weak, it said. More trade growth also helps growth via the supply side, it said. Trade liberalization creates new opportunities for innovation and stronger productivity growth, it said. By operating on supply and demand at the same time, the leveraging of trade policy is a condition for the success and sustainability of any recovery strategy, it said. Fundamental changes in global supply chains mean that Europe must look more closely at where value is added to products and less at where exports are booked, it said.
The main objective of EU trade policy then becomes to maintain and, where necessary, reinvent Europe's place in the global supply chains, it said. But while trade negotiations are essential for the future, the best way to boost the contribution of trade to growth now is to ensure enforcement of EU rights under existing rules, the EC said. Analysis shows that overall, the EU has been as successful as the U.S. over the last five years in defending its interests at the WTO, with a slightly lower number of cases filed but a higher rate of success, it said. The EU launched the same number of offensive cases as the U.S. in the last 10 years, but is now “changing gear in the implementations of FTAs to make sure that the benefits materialise,” it said.