Amid economic and financial crises, free trade and globalisation are dirty words to many Europeans. Some of those same countries where globalisation-bashing is popular are benefiting from world markets.
The EU, the world’s biggest trading block, says exports made up one third of its 1.8 percent GDP-growth in 2010.
Despite the benefits, free trade is in trouble. Economic nationalism has some people believing that the Doha round of trade talks is dead.
Not waiting for Doha, the EU and other economic powers are negotiating bi-lateral free trade agreements (FTAs). But some sectors are nervous about FTAs fearing that Europe will be overrun by cheaper goods. Workers fear for their jobs. The jobless fear they will never find a job and yet slow-growing Europe desperately needs world markets to pull it out of crisis.
This week’s guests are Karel De Gucht, the EU’s frank-talking Trade Commissioner who formerly held the EU’s Development and Humanitarian Aid portfolio; Bernadette Ségol, the general secretary of the European Trade Union Confederation, who said that Europe should act to prevent workers and jobs from becoming what she calls the “gambling chip of casino capitalism”; and Reinhard Quick, chairman of the Business Europe’s Free Trade Negotiations Working Group, who said that Europe needs more structural reform to better compete in the global economy and trade with fast growing emerging markets which Europe needs.
Chris Burns: “There’s a new trade agreement with South Korea since 1st July. How is that affecting Europe? Is it creating jobs or killing them?”
Commissioner Karel De Gucht: “It is creating jobs because we expect the exports to increase by about 20 billion euros. As from the first day, European exporters will pay 850 million euros less in import duties and that’s moving up to 1.6 billion.”
Chris Burns: “Madame Ségol, your reaction?”
Bernadette Ségol: “While we are in favour of trade and the recent Korean agreement, we are waiting to see how it is implemented. I mean we know that things were not implemented very nicely in the OECD and we fear it’s true for the car industry in Europe and we hope that the safeguard clause will function.”
Chris Burns: “Mr Quick, are you hoping to see, or are you seeing, quick results?”
Reinhard Quick: “Well we see results in the fact that I hear from our sectors that they were able to export more in July to Korea and I think that’s a basic demonstration that the agreement works.“
Chris Burns: “Commissioner, you mentioned that the luxury goods sector is doing great. But what about cars? There is a fear that Hyundai cars will flood the European market, especially hurting companies like Fiat. What do you say?”
Commissioner Karel De Gucht: “Well, first let’s talk about our own exports; they will certainly go up, our exports to Korea. It is true that we are going to face competition from Korean cars but we were already facing that competition because those companies also assemble cars in Europe itself. And as the representative from the trade unions just said, there is a safeguard clause in the treaty so that if the situation gets bad in Europe, then we can intervene and we will.”
Chris Burns: “Madame Ségol, is this going to kill jobs in the auto industry?”
Bernadette Ségol: “We hope it won’t but we are worried about that because we know that the influx of small cars could be really dangerous for jobs in Europe and we hope that this safeguard clause is going to function but we are not quite sure yet. So let’s see. The proof of the pudding is in the eating.”
Chris Burns: “Mr Quick, we hear that the auto industry is nervous about this. Can you confirm this?”
Reinhard Quick: “The auto industry is nervous about it but I think we should also recognise where we are as far as tariff protection is concerned. The Commissioner said that the Korean car industry constructs and also builds cars in Europe. I think you have to take that into account, as well as the investment coming into Europe. We will have more exports and then it’s quite normal that you also have more imports and I think it will be beneficial to the European industry.”
Chris Burns: “OK. Commissioner, what about Doha? Are the Doha talks dead? And some say that’s really being held up by farm subsidies both by the US and by the Europeans. Isn’t it time to dismantle those subsidies?”
Commissioner Karel De Gucht: “We have been doing everything to make the Doha round work and it’s a real pity that it didn’t do so, that we didn’t manage to close the deal because recently several countries have taken protectionist measures and that’s my big fear – that if we were to go into a downturn on the economy that a lot of them will go down that route. If we had concluded the Doha deal it would no longer have been possible. So that’s a big mistake, by the way.
Chris Burns: “Madame Ségol, one aspect is a December package perhaps, for Doha that would strip various tariff barriers from developing countries. Do you favour that or are you afraid of being flooded by cheap goods?”
Bernadette Ségol: “Well certainly we would be afraid to be overloaded by cheap goods but the main thing is what is implemented in those countries. Do we have labour rights? Do we have freedom of association? Do we have trade union rights? As long as we don’t have that, we can’t agree to certain deals.”
Chris Burns: “OK that takes me to non-tariff barriers as well: labour protection, environmental protection, consumer protection. Doha is trying to strip down those barriers. Mr Quick, how much do you favour tearing down some of those non-tariff barriers?“
Reinhard Quick: “I very much favour stripping down non-tariff barriers because they are an obstacle to trade. But that doesn’t mean for example that environmental barriers should be stripped down. Imports still have to comply with our environmental regulations, so I think there is a mistake in thinking that you strip down environmental barriers when you conclude multilateral trade negotiations where you liberalise trade — but on the same time the goods which come into the EU have to comply with our laws.”
Chris Burns: “Commissioner, it seems that the name of the game is not so much tariffs but non-tariff barriers. How much is that holding up some of these free trade agreements and how much is Europe willing to cut some of those non-tariff barriers on our side?”
Commissioner Karel De Gucht: “We are continuously working on them but it is very difficult because every country has its own way of putting into place non-tariff barriers. They are painstaking, so they are costly. But what we for example have been doing in the Korea deal is have a dispute settlement mechanism – a very quick one – so that if ever that kind of thing appears then we can act immediately and make a deal with them at very short notice.”
Chris Burns: “Let’s try to wrap this up with a question about hope for the Arab Spring. How much could new or changed free trade agreements with some of these countries in the Arabian world help some of these governments that are now struggling to put themselves back together. Madame Ségol?”
Bernadette Ségol: “Yes, it can help. We believe that these economies are in great trouble and that trade could help them to find solutions, but trade is not going to build democracy in these countries. You need a lot more than trade to build these democracies. So trade, yes, for building these economies, but it is not the final word to have sustainable development there.”
Chris Burns: “Mr Quick, what’s your reaction?”
Reinhard Quick: “While I think trade can help, trade is not the only solution. And I think we should look at our already existing agreements with these countries and if I’m not mistaken they already have quite a lot of duty-free access to the European market.”
Chris Burns: “And Commissioner – could you wrap that up? Is there anything that works on that line?”
Commissioner Karel De Gucht: “Yes, what Mr Quick was saying is correct. We have deals with most of these countries – especially on goods – so we should develop this into the services sector and also complete some agricultural deals. But we already have the framework, we have recently have seen that there’s an alleviating of the Rules of Origin which makes it easier for those countries to import and if you allow me to react to what Madame Ségol has been saying, it is true that trade is not going to make democracy work but you will never have democracy without economic development and economic development without trade is completely impossible. So there’s a clear link you know.”
Are FTAs killing jobs?