CHANGES IN TRADE: SPEECH BY COMMISSION MALMSTRÖM – 28 MAY

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CHANGES IN TRADE: SPEECH BY COMMISSION MALMSTRÖM - 28 MAY
28 May 2018

CHANGES IN TRADE: SPEECH BY COMMISSION MALMSTRÖM – 28 MAY

Brussels, Brussels Daily

Speech by European Commissioner for Trade Cecilia Malmström European Round Table of Industrialists

 

Ladies and gentlemen,

Thank you for inviting me here today. Today I want to talk to you about change – Trade is always changing, but every once in a while there are  shifts that redefine how we do business.

As you are well aware, the world is interconnected in an unprecedented way – and Europe in particular. We want to shape globalisation, not to be shaped by it. It’s not only goods and services that we export through open global trade.  It is our values and standards – sharing and enforcing them is a critical part of our response to globalisation.

As the EU we have particular power to do this.  We are deeply embedded in global value chains – everyone does business with us, many want to do business with us. We are a market of 500 million consumers. And we have significant political weight to throw around.

90% of global growth in the next 10 to 15 years will take place outside the EU. If we want to shape globalisation, we will need to face it head on. One of the ways we do this is through an ambitious negotiating agenda.

 

Benefits of Japan agreement

We have finalised negotiations with Japan and now preparing to sign it. In this room we have the top business leaders in Europe. I do not have to tell most of you what an economic achievement this agreement is. Japan is the EU’s second largest trading partner in Asia, after China. In 2015 alone, the EU exported 58 billion EUR in goods and 28 billion EUR in services to Japan. The agreement is projected to increase this significantly.

At the moment Japan has custom taxes of:  nearly 40% on beef  up to 30% on chocolate  15% on wine  up to 40% on cheese

Our agreement will break down these barriers and many others. All industrial products will be fully liberalised. We have strong commitments on services and investment.   All these measures will stimulate business while passing on savings to consumers.

It will tackle other barriers for EU products too, like the lengthy procedures surrounding fruit exports. It will open up Japan’s services market to EU firms, and allow them to bid for more public contracts in Japan, like in the railway sector.

 

Our Japan agreement is the first we have negotiated with a chapter specifically on SMEs. We need to make sure that smaller firms have the information they need to take advantage of trade agreements.

SMEs are the backbone of the European economy.  They represent 99% of all businesses in the EU. They have created around 85% of new jobs in the past 5 years. And this is not the only new development in our Japan agreement.   Our chapter on Corporate Governance is another first. The EU and Japan are countries that share high standards in this area. The chapter commits us to:  Transparency in publicly listed companies  Accountability of management towards shareholders  Fair exercise of shareholder rights  And fairness in takeover transactions.

These measures will ensure a fair environment for EU and Japanese businesses to operate in, as well as building trust.

The EU-Japan agreement is the biggest bilateral trade agreement ever negotiated. It covers an area of over 630 million people, or a fourth of world GDP. When signed, approved and implemented,  it will account for more than one quarter of the world’s GDP. It’s the most recent of our achievements. We hope that the agreement can be signed in July at an EUJapan Summit.

All of this, in the end, means jobs. For every additional 1 billion EUR in trade, that’s 14 000 extra jobs in the EU. As for the rest of our trade agenda, the provisional application of our deal with Canada is now in force. Mexico is another important trading partner of ours. The EU was Mexico’s third largest source of imports last year, after the US and China. We have had a long partnership with Mexico.

The agreement we negotiated with them in 2000 was a good one, but it needed an update. We have now updated it to the point where it’s basically a new agreement. An agreement for the 21st century, that includes topics like intellectual property and services, And it reflects our values with our first ever chapter on anti-corruption.

Elsewhere in Latin America we are negotiating with Mercosur. A large and highly protected market where EU business will be the first to get liberal access. We are making good progress in these negotiations, but we still need time. We do not want a fast deal at the expense of a good deal.

Our list of agreements now includes Singapore and Vietnam too. And soon we will have a deal with Chile. If sealed, it will be the first trade agreement we have with a chapter specifically addressing gender, as a pilot project. Chile has already done a lot in this field. Our policies are gender neutral, but they are not always gender sensitive. Trade and society at large are changing. Not so long ago the idea of women occupying positions among 50 of the largest companies in Europe would have been unthinkable.

Looking to the future, we just received a mandate to open negotiations with Australia and New Zealand.

Every negotiation concluded sends a message to the world. The EU and its partners are coming together to:  shape globalisation,  stand up for open trade,  and to agree on a rule book that’s fair and works for everyone.

We stand against both uncontrolled liberalisation, unilateralism and the temptation of protectionism. And we need many allies these days.

Multilateralism

Despite our busy negotiation agenda, we still believe that the WTO is the fairest and best system for trade. A strong, rules-based approach to global trade:  stands against protectionism,  ensures a fair environment for all businesses to operate in,  and creates prosperity by opening up markets worldwide.

But the system is currently threatened – and we need to stand up for it. We must reform the system and address the longstanding transparency problems.   We need to make sure that one or two countries cannot block initiatives in the WTO. The EU has already taken up the role of lead reformer in some areas.

The Multilateral Investment Court initiative is moving forward, more and more countries are interested in it. We want to create a fairer and more transparent dispute settlement system for foreign direct investment. And in the field of e-commerce, we have 80 countries that want to cooperate further. Many in the international community are looking to the EU these days.

We are building consensus to move forward with these reforms. However, the challenges in the WTO are compounded by recent US actions. For instance, the US is now blocking nominations to the Appellate Body. We need for the WTO dispute settlement system to work.

 

US, China and steel

The US is an important, longstanding partner of ours’. It simply doesn’t make sense that our steel exports are a threat to US national security. President Trump has now also asked for an investigation on cars on the same basis, article 232. Overcapacity in steel and aluminium sectors is not a problem the EU is responsible for.  It is an issue we are also deeply impacted by.

And we realise that the present uncertainty is bad for business. The EU has been working with partners around the world, including the US, to address this issue. Overcapacity in steel, for instance in China, is at the root of this issue and the EU is eager to address it. We have reformed our Trade Defence Instruments, we are working in the G7 and G20 settings and we have a Global Steel Forum underway.

So, the EU should be fully and permanently exempted from these US measures. We have offered a positive agenda as an alternative.

 

FDI screening

Tariffs on steel are not the only threat to EU trade at the moment. The EU has the most open investment environment in the world. We consider investment, like open trade, an essential economic freedom. But in certain circumstances this can make us vulnerable.

In the past two years, there has been a rise in the purchasing of strategic EU assets by nonEU investors. A significant number are state-owned enterprises. Others are subsidised and backed by foreign governments. Often these countries have major investment barriers in place:  Forced joint venture  Forced technology transfers  Foreign ownership caps

These countries are not open like we are, and they do not play by the same rules as we do.

We cannot let this threaten our security or public order in Europe. We must understand what is going on. This is why the Commission has made a proposal on investment screening.  We need to protect our strategic, critical assets while preserving our openness. Negotiations on a bilateral investment agreement with China are underway. And China is overall supportive of the WTO and the multilateral trading system as a whole.

 

Conclusion

Global trade is one of our fundamental economic freedoms.  And it is also a formidable tool for growth.  Millions of people have been lifted out of poverty through trade.  If used correctly, it can help the world develop sustainably and inclusively, and help us shape globalisation.

I am a believer in open and free markets, but I am also a pragmatist. If we are to continue to enjoy free and open global trade, everyone in society must enjoy the benefits of it. Otherwise, we will continue to see backlashes and trade made a scapegoat. If the benefits are not spread, then for the sake of open trade governance and regulation will have to correct that.

As leaders of European business you are in a position to spread those benefits. So I call on you to ensure that the positive impact of global trade is not just felt, but understood by everyone.

Thank you for listening.

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