Trade Policy

Question 1

Composition of EU’s external trade

Answer 1

• manufactured goods account for almost 90% of EU exports
• on import side, 2/3 of spending on manufactured goods
• EU27 is a big importer of fuel (about 1/5 of total)

Question 2

Three dimensions in the EU’s trade policy

Answer 2

• Multilateral
• Bilateral
• Unilateral

Question 3

Modern trade policy

Answer 3

Trade is no longer just about tariffs, but also about

• Technical Standards
• Licensing practices
• Different praxes in domestic taxes (esp. corporate)
• Treatment of investment

Trade is not just about trade, but also about

• Environment
• Human Rights
• Labour Rights

Question 4

EU’s role in the WTO

Answer 4

• EU was a subscriber to the GATT, later WTO
• EU negotiates on behalf of the MS
• Trade policy one of the main supranational policies in the EU
• Commission responsible for goods trade negotiations
• > Council of Ministers sets ‘Directives for Negotiation’
• > Council accepts/rejects final deal by QMV
• > Commission also in charge of surveillance and enforcement of 3rd nation commitments to EU

Question 5

Newer trade issues

Answer 5

Since the 1980s, GATT negotiations have also included…
… Trade in services (GATS)
… Intellectual property rights (TRIPs)
… Trade-related investment measures (TRIMs)

Question 6

Effects of Preferential-Trade-Agreement on EU MS (various options)

Answer 6

• Vinerian analysis focusing on welfare effects of a PTA (trade creation and diversion)
• Rules of origin
• “Natural trading partners”
• Differences in transport costs across countries

Question 7

Unilateral Measures - General System of Preferences

Answer 7

• GSP granted to poor countries by EU
• GSP+ (even more generous access, but conditions)
• Everything-but-Arms (EBA) -> no tariffs but on arms

Question 8

Unilateral Measures - Anti-dumping duties & anti-subsidy measures

Answer 8

WTO allows temporary exceptions (‘safeguards’) for:

• avoiding ‘unfair competition’ (dumping) through anti-dumping duties
• offsetting foreign trade-distorting subsidies through countervailing duties (CVDs) (rarely used)

Question 9

Anti-dumping duties

Answer 9

Tariff levied on imports when foreign firms sell goods at a price below fair value:
Fair value is a price that covers the costs of production and a normal return on capital -> difficult to determine

Question 10

Countervailing Duties and Escape clause

Answer 10

Countervailing duties (CVD):
Tariff levied to countervail a subsidy given by a foreign government to a foreign firm.  

Escape clause relief:
Temporary tariff to relieve a sudden import surge that threatens to destroy a domestic industry.