Abstract
Global trade collapsed in dramatic fashion in 2009, after growing exponentially in the two decades prior to the crisis. In recent years it has failed to regain its pre-crisis dynamism. At a time when the G20 is trying to provide new momentum to global growth, a critical issue is whether trade can become, once again, one of its engines. While the conditions to conclude ambitious multilateral trade negotiations are not in place, there is room and political capital to finalise ‘super’ Free Trade Agreements (FTA) (like TTIP) that can unlock the trade potential and support GDP growth in the future. Should this happen, trade can become again one of the major engines of growth of the global economy. The main challenge ahead will be to ensure that, as they come close to conclusion, super-FTA negotiations are not watered down and keep an adequate level of ambition. Once this has happened, it will then be important to find ways to effectively and comprehensively multilateralise the progress FTAs will have made on regulatory convergence and other non-tariff related issues. In this respect the EU can play a critical role, given its weight in the global trade system, the FTA negotiations it is carrying out with key partners, and its commitment to the development of a multilateral trade system. The EU has a strong incentive to move in this direction. With the European recovery stalling, the EU has a lot to gain from successful FTA agreements and further positive developments at multilateral level (and a lot to lose from the current lacklustre global trade performance).
The authors are grateful to Peter Bekx, Malgorzata Galar, Sandra Gallina, Istvan Jakab, Norbert Wunner and Przemyslaw Wozniak for their valuable comments. The views expressed here are those of the authors and they should not be attributed to the European Commission.
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Notes
- 1.
In the Sydney G20 Communique, Ministers of Finance and Central Bank Governors committed to the development of “ambitious but realistic policies with the aim to lift our collective GDP by more than 2 % above the trajectory implied by current policies over the coming 5 years. To achieve this we will take concrete actions across the G20, including to (…) enhance trade”. Trade is in fact one of the four priority areas to in the Comprehensive Growth Strategies that will form the basis of the G20 Brisbane Action Plan.
- 2.
It is important to note that the significant contribution to growth by trade in the EU/EA was also due to cyclical factors, notably depressed economic demand triggered by the recession, and efforts to regain competitiveness in the vulnerable economies, which moved from large deficit positions to surplus positions. Therefore, the EU/EA is not a special case and would probably have benefitted more from the external sector had trade elasticities remained at their pre-crisis levels. In addition, EU growth can be boosted also by a further increase of the intra-EU trade through the completion of the Single Market. This issue is not developed further in this article, which treats the EU as a single entity in the global economy and therefore looks exclusively at the extra-EU trade.
- 3.
The EU has a 20 % share of world exports not far from 20 % and retains close to 28 % of global income generated by the production of manufactured goods (European Commission 2013).
- 4.
A trade elasticity value of less than one indicates that GDP growth outstripped international trade growth. Here, trade elasticity, or intensity, is taken as trade growth over GDP growth.
- 5.
Average tariff level in the US is about 2 and 3 % in the EU.
- 6.
These developments call for a rethinking of the multilateral trade system, which should evolve towards a WTO 2.0 (Baldwin 2012) more able to take into account the supply dimension of international trade and be more focus on regulatory and non-tariff barriers.
- 7.
At the London Summit in London in April 2009, G20 Leaders stated: “We remain committed to reaching an ambitious and balanced conclusion of the Doha Development Round, which is urgently needed. This could boost the global economy by at least $150 billion per annum. To achieve this we are committed to building on the progress already made, including with regard to modalities”. The importance of concluding the Doha Round was restated in the Pittsburgh G20 Leaders’ Communique of September 2009: “We are committed to bringing the Doha Round to a successful conclusion in 2010” and in the Toronto Communique of June 2010: “We are committed to bringing the Doha Round to a successful conclusion in 2010. We therefore reiterate our support for bringing the WTO Doha Development Round to a balanced and ambitious conclusion as soon as possible, consistent with its mandate and based on the progress already made”. Finally, in Seoul in November 2010 G20 Leaders used an even stronger language: “Our strong commitment to direct our negotiations to engage in across-the-board negotiations to promptly bring the Doha Development Round to a successful, ambitious, comprehensive and balanced conclusion consistent with the mandate of the Doha Development Round and built on the progress already achieved. We recognise that 2011 is a critical window of opportunity, albeit narrow, and that engagement among our representatives must intensify and expand. We now need to complete the end game”, to no avail.
- 8.
This role cannot be filled at the moment by the WTO. As noted by Baldwin (2012), “Without a conclusion to the Round, it seems politically impossible for the WTO to move on to new issues, i.e., to address the deeper disciplines needed to underpin supply-chain trade. The reason is that few WTO members have a significant stake in supply-chain trade and many have a stake in setting market access and agriculture issues. The latter fear that talk of ‘new issues’ is another way for rich nations to (once again) avoid opening their markets to the goods in which developing nations have their comparative advantage” (p. 10).
- 9.
An excellent review of the criticism addressed to TTIP and its cost and benefits of TTIP is included in the UK House of Lords Report “The Transatlantic Trade and Investment Partnership” published on 13 May 2014. A critical assessment of the challenges that the new type of negotiations implied by the TTIP specific nature can be found in Fabry et al. (2014), “TTIP: Une negociation a la Pirandello”, Notre Europe and in Defraigne (2014), “Departing from TTIP and going plurilateral”, Madariaga-College of Europe Foundation, October.
- 10.
These considerations also apply to other trade and investment agreement under negotiations, e.g., the EU-Japan Free Trade Agreement or the EU-China Investment Agreement.
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Bertoldi, M., Mc Innes, C. (2015). Can Trade Become Again an Engine of Growth for Europe and the World?. In: Paganetto, L. (eds) Achieving Dynamism in an Anaemic Europe. Springer, Cham. https://doi.org/10.1007/978-3-319-14099-5_2
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