The EU has exclusive power in the area of trade in goods. When it comes to services and intellectual property, power is shared between the Commission and the Member States. Case law from the EU Court of Justice dictates that the European Commission and the European Member States work closely together in order to ensure that Europe speaks with one voice, particularly at the WTO. So the European Commission organises trade policy in close coordination with the Member States. This coordination takes place on a weekly basis, at the meeting of the European Council’s trade policy committee.

The Federal Ministry for Economic Affairs and Climate Action is responsible for setting out Germany’s position on a number of trade policy issues and for representing the German government at European and international level.

“Trade for all” – the European Commission’s new strategy on trade

On 25 October 2015, the European Commission presented its new strategy on trade entitled “Trade for all”. With this strategy, the Commission revises and updates its “Global Europe” trade strategy from 2006 (which implemented the EU’s Market Access Strategy) and the trade policy elements included in its general economic policy strategy entitled “Europe 2020” from 2010.

The strategy focuses on 5 points:

• Trade and investment as driving forces for growth and employment:
  The Commission notes that in the next 10 to 15 years, 90% of global growth will take place outside Europe. In order to benefit from this growth, the EU needs open markets.
• New trade policy issues: A stronger focus on services, digital trade, raw materials, innovation and small and medium-sized enterprises (SMEs).
• Greater transparency in trade and investment policy:
  This includes making TTIP negotiations more transparent to the public and working more closely with other EU institutions, the Member States and civil society. The European Commission also proposes regularly publishing the Council’s negotiating mandates.
• A trade and investment policy that is based on values:
  The European Commission has presented its plans for reforming and redesigning the investment protection chapters in free trade agreements. A particular focus will be placed on whether trade policy upholds high sustainability, human rights and democracy standards.
• Trade policy as a tool to shape globalisation:
  The European Commission stresses the importance it attaches to the WTO and to taking a multilateral approach to trade policy. At the same time, it develops proposals for reviving multilateral negotiations.

Germany welcomes the fact that the European trade strategy is being revised. The latest communication identifies the opportunities and challenges that currently exist in trade policy, including growth, employment, transparency, investment protection reform and sustainability. The objectives set out in the strategy – particularly those of opening up markets and implementing a set of dependable, global rules on trade – must now be consistently pursued. This is the only way in which German and European businesses can improve their competitive edge on growth markets outside the EU.

Market Access Strategy

The European Commission aims to open up global markets even further and thus strengthen the competitiveness of European companies. It wants to eliminate barriers to market access, particularly non-tariff barriers, and assist European companies as they enter certain markets and industries around the world.

To this end, the European Commission released a new communication on its Market Access Strategy on 18 April 2007 entitled "Global Europe: A stronger Partnership to deliver Market Access for European Exporters". The main focus is on better dovetailing the work undertaken by the European Commission, the European Member States and the European business community.

Modernising trade-defence instruments

The EU is currently working on a modernisation of its trade-defence instruments in order to afford more effective protection to Europe’s companies and industrial centres against distortions of competition in international trade and against unfair trading practices and subsidies in other countries. A trilogue agreement was reached in December 2017 between the European Commission, the European Council and the European Parliament.

Further to this, the EU’s Council of Ministers approved a new methodology to calculate dumping in EU anti-dumping procedures, sending out an important signal in particular for the manufacturing sectors in Germany and the EU, such as the steel industry. The new rules ensure that the EU will continue to be able to deploy an effective set of trade-defence instruments to counter unfair trading practices in future – particularly in the case of dumping by non-market economies.

The Trade Barriers Regulation

The Trade Barriers Regulation gives companies the right to submit a request to the Commission to ask for the investigation of a barrier to trade, and to do so without asking for permission from their association or a ministry. It the request is accepted, an investigation is started. During this investigation the Commission tries to find out whether the barrier that the company complained about actually exists and whether it negatively affects or impairs a particular industry in the EU. If the complaint is confirmed and no amicable settlement can be reached, the EU can decide to start a formal procedure for settling the dispute as part of an international agreement that exists with the trading partner.

First of all, there are multilateral agreements (between all members of the WTO), plurilateral agreements (between some WTO members), bilateral and regional trade agreements, and unilateral trade policy measures.

Multilateral agreements

As a member of the WTO, the EU tries to reduce barriers to trade and encourage free and fair global trade through multilateral negotiations and create a stable and transparent set of rules. The EU advocates the modernisation of the WTO.

Plurilateral agreements

Plurilateral trade agreements are concluded by several members of the WTO, without all WTO members having to join the agreement. The conclusion of such agreements makes particular sense when a large number of the WTO members want to lay down rules in a certain field, while others do not want to adopt these rules (yet).

Plurilateral agreements have been around for quite some time. With the conclusion of the Uruguay Round in 1995, members of the WTO adopted a Government Procurement Agreement (GPA), In 1997, the Information Technology Agreement (ITA) – another plurilateral agreement within the WTO – entered into force. The EU has signed both of these agreements.

Bilateral and regional trade agreements

The EU has a large number of free trade agreements with a host of different countries (in Eastern and Central Europe, the Mediterranean region, Turkey, Mexico). It also has Economic Partnership Agreements (EPAs) with a wide range of countries in Africa, the Caribbean and the Pacific region (ACP countries) that are geared towards sustainable development and regional integration. These agreements are in line with WTO rules and designed in an asymmetric manner. The agreement that has been concluded with the Caribbean countries is the only one that is currently being applied. The negotiations on EPAs with West Africa, East Africa and Southern Africa have been concluded, but these agreements have not yet been signed or ratified. These agreements make it easier for companies to trade with third countries and can also help pave the way for liberalising trade as part of a multilateral agreement.

In addition to this, the EU has a wide range of cooperation agreements and consultation mechanisms in place, including with many Asian countries, the US, Canada and Latin America. The EU has also launched negotiations on bilateral free trade agreements with several Asian and Latin American countries. The EU-Japan free trade agreement entered into force on 1 February 2019 and aims to strengthen economic and political relations between these two important trading areas and to give the EU a stronger role in the wider Asian region. To this end, the EU is seeking to conclude further agreements with Australia, India, New Zealand, Latin America and ASEAN countries.

Unilateral policy measures

In the event of dumping or of subsidies which contravene WTO rules by third countries, the EU can employ unilateral measures and introduce antidumping tariffs or countervailing duties in order to guard against distortions of competition on the international market and ensure that the European economy is not negatively affected.

In order to make a contribution to development, the EU has introduced its Generalised System of Preferences (GSP). Under this system, it grants reduced tariffs to developing countries or asks for no tariffs at all when it comes to importing various finished or semi-finished industrial products or processed agricultural products. This is to give developing countries preferential access to the European market.

Economic Partnership Agreements

In 2014, the EU concluded a number of regional agreements with West Africa, East Africa and Southern Africa. Back in 2007, the EU concluded a regional Economic Partnership Agreement or EPA with the Caribbean region represented by CARIFORUM (Caribbean Forum of ACP States).

As the original preferences granted by the EU to the African, Caribbean and Pacific Group of States (ACP states) were only permissible under a temporary exemption granted by the WTO until 2007, the EU concluded bilateral interim trade agreements with these countries. The goal is to transform these interim agreements into more comprehensive regional agreements that cover all countries of a particular region if possible. Following the conclusion of the agreement with CARIFORUM, negotiations with West Africa, East Africa and Southern Africa were concluded.

The Cotonou agreement signed on 23 June 2000 serves as the basis for this. In this agreement, the EU and the ACP countries agreed to conclude an Economic Partnership Agreement in line with WTO rules. The agreements are to help gradually reduce barriers to trade that exist between the parties, improve cooperation in all areas that are relevant for trade and promote sustainable development, and promote regional integration.

The development of multilateral trading relations and a successful conclusion of the Doha Round are a priority for both Germany and the European Union. In light of the bilateral FTAs that are being concluded by some of Europe’s important trading partners, such as the US and Japan, and which could jeopardise the competitiveness of European companies on the global markets, the EU’s position on bilateral free trade agreements (FTAs) has evolved since 2007.

The new generation of free trade agreements that the EU aims to conclude with other countries is broad-based and covers a wide range of different aspects. These agreements not only touch upon the issue of tariffs (e.g. customs duties, export subsidies) but also set out rules for services, the elimination of non-tariff barriers to trade and other trade-related aspects such as investment and competition. As the scope of these agreement is wider than the WTO agenda, they are often referred to as ‘WTO+ agreements’.

To find out more about the status of the EU’s ongoing negotiations click here.

The GATT – which was introduced in 1947 – was the key element for the regulation of world trade for close to half a century. The GATT aimed to substantially reduce tariffs and other barriers to trade, and protect and ensure free and unrestricted trade between countries.

The conclusion of the ‘Uruguay Round’ (1986 to 1994) and the establishment of the WTO helped extend international cooperation on trade policy to new areas. The WTO not only lays down rules for trade in goods (GATT), but also for trade in services (GATS), individual property rights (TRIPS) – to some extent at least –, state aid and, as part of a plurilateral agreement, procurement (GPA).

Members and agreement

The WTO currently has 164 members. Its newest member, Afghanistan, joined the Organization on 29 July 2016. Negotiations with 21 other countries – including Somalia, Serbia, and Bosnia and Herzegovina – are currently ongoing. Germany was a founding member of the WTO in 1995.

The members of the WTO have concluded a large number of important agreements in order to set down rules for global trade. These cover, for example, trade in services, agriculture and anti-dumping provisions.

WTO milestones

In November 2001, the members of the WTO met in Qatar to establish a new multilateral group that aims to liberalise world trade. The negotiations launched back then are still ongoing and are called the “Doha Round” or Doha Development Agenda (DDA). The goal is to facilitate trade across the board, particularly in the areas of industry, agricultural products and services (GATS).

Another important milestone was the 9th WTO Ministerial Conference in Bali in December 2013, at which the then 160 WTO members adopted the Agreement on Trade Facilitation. The agreement entered into force on 22 February 2017. Some of the goals of the agreement have already been achieved: The participating countries agreed on measures to improve food security for the poorest parts of the population in the least developed countries (LDCs). These countries will also be granted easier access to the services market. Furthermore, guidelines will be implemented that simplify the rules of origin for preferential market access and for further reducing tariffs and the domestic support measures for cotton.

At the 10th WTO Ministerial Conference, which was held in Nairobi in December 2015, the participating countries agreed to reduce export subsidies in the agricultural sector and to tighten rules for export credits, state trading companies and food aid. In addition, another “development package” focusing on the least developed countries was adopted. Furthermore, the participating countries agreed on preferential rules of origin and preferences for LDCs in the services sector (LDC waiver). These agreements seek to facilitate and improve the integration of these countries into the multilateral trading system.

One major success of the Nairobi Conference was that the countries agreed to reform the agreement on exempting IT technology and medical technology products (ITA II) from tariffs and set draft schedules which 53 WTO members adhere to. It is the WTO’s first agreement for 18 years that sets out specific tariff reduction commitments for state-of-the-art products.

Dispute settlement

The Dispute Settlement Understanding (DSU) that sets out rules and procedures for the settlement of disputes was agreed on in the Uruguay Round and is seen as the key element of the multilateral trading system. The DSU aims to make the multilateral trading system more secure and predictable.

Monitoring of national trade policies

The Trade Policy Review Mechanism (TPRM) was enshrined in the rulebook for international trade in 1994 and is one of the main instruments of the WTO. It aims to make national trade policies more transparent and understandable and ensure that our complex trading system runs smoothly.

Modernisation of the World Trade Organization

More than 20 years have passed since the founding of the WTO in 1995. In order to equip the WTO for the challenges of the 21st century, the European Commission presented a concept paper in September 2018 with corresponding proposals. These cover all three pillars of the WTO: rulemaking, monitoring and dispute settlement. The Federal Government fully supports the Commission’s initiative.

For example, companies that produce within the EU can buy raw materials, semi-finished products or components that are not available in the EU from other countries without having to pay the amount of tariffs that would usually apply for this. The European Member States and the European Commission have adopted guidelines setting out how these tariff suspensions (autonomous tariff suspensions or tariff quotas) will be applied.