The EU’s use of soft power:

trade and development

Manfred Elsig

World Trade Institute, BernGraduate Institute, Geneva

HEID, 3 July 2008

The EU in action?

Outline

• The EU: what type of power?

• The EU in trade politics

• The EU in (trade-related) development policy

• Venues to negotiate and regulate trade

• Bringing Brussels back in: who are the actors and what are the preferences? A case-study on the venue-mix

• What future role for the EU in a multi-polar trade world?

The EU: what type of power?

• The EU as a civilian power (Duchene)

• Military power Europe (Bull)

• Normative power Europe (Manning)

• Joseph Nye’s concept of soft and hard power

• go-it-alone power (Gruber)

The EU: what type of power?

• The EU’s foreign policy (CFSP)

• Little hard power, lots of soft power?

• Influence through enlargement and ENP

• The soft power of EU trade and EU development policies at work!

The EU: what type of power?

• The EU as conflicted trade power?

….the EU’s own experience as “a system of market liberalization”. This has made its foreign trade policy resemble “replication” more than “domination” (Meunier and Nicolaïdis 2006:912).

Power: a relational concept

• Power: difficult to measure!

• Most work relates to the Kantian /Dahlian tradition

• Dahl: A has power over B to the extent he can can get B to do something that B would not otherwise do

Power in (trade) negotiations

• Market access, asymmetry of power, hard power (realist concept)

• Saliency, BATNA, (liberal concept)• Ideas, discourse (constructivist concept)• Negotiation process (negotiators‘ strategies,

expertise, coalition-building etc..) (procedural power)

• Schelling‘s Paradox!

Source: Eurostat

EU major trading power

A A MAJORMAJOR

TRADING TRADING POWERPOWER

Others49,4%

China8,9%

Japan7,0%

United States17,2%

EU2517,5%

SHARE IN WORLD TRADE IN GOODS (2005)

EU2526,0%

United States18,4%

Japan6,9%

China3,8%

Others44,9%

SHARE IN WORLD TRADE IN SERVICES (2005)

Source: Eurostat, IMF, all products in value, excluding intra-EU trade

0

2

4

6

8

10

12

14

16

18

20

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

EU25

USA

Japan

China

Market shares trends trends in world trade (%)

The EU in international trade

Source: EU Commission

Source: EU Commission

Source: EU Commission

The EU in trade politics

• 1957 Rome Treaty (Art. 113/new 133):• …1. The CCP shall be based on uniform principles, particularly in

regard to changes in tariff rates, the conclusion of tariff and trade agreements, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade such as those to be taken in the event of dumping or subsidies.

• 2. The Commission shall submit proposals to the Council for implementing the common commercial policy.

• 3. (…) The Commission shall conduct these negotiations in consultation with a special committee appointed by the Council (…)

• 4. In exercising the powers conferred upon it by this Article, the Council shall act by a qualified majority.

The EU in trade politics

• Customs Union: Common Commercial Policy• Representation, Delegation and Control (Art.113/133)• From 6 to 27 members• EC vs. EFTA (Economic Union vs. FTA)• 4 key enlargements:

– UK joins (bandwagoning starts)

– Democratization processes (Southern Europe)

– Semi-EFTA enlargement

– Eastern Enlargement

The last wave of enlargement: Balance of interests affected?

• The liberal north (Sweden, UK, Netherlands, Denmark, Germany)

• The club med (France, Spain, Italy, Greece)

• New members: • liberal: Czech Republic, Estonia, Latvia,

(Slovenia)• protectionist: Poland, Hungary, Slovak

Republic, Lithuania

The EU in (trade-related) development policy

• Treaty of Rome: – Coordination function / most aid still bilateral– Trade-related aid focus– 6 members and their relations to the colonies /

relationship with few countries in Africa – Debates between regionalists (Fra, Be, Ita) and

globalists (NL, Ger)

• UK: Commonwealth• Spain/Portugal: Mediterranean/ Latin America

The EU in (trade-related) development policy

• Yaoundé Conventions (1963-1975)– Trade privileges for West African Countries

• Lomé Conventions (1975-2000)– Accommodate British Colonies (ACP)– Non-reciprocal trade agreements– Contractual right to aid– Stabilization programmes for exports

The EU in (trade-related) development policy

• Mid 1980s-1990s: – PHARE: Poland-Hungary Aid for Restructuring of the

Economies Programme– TACIS: Technical Assistance for the Commonwealth of

Independent States (1991)– Association agreements (including trade)

• Cotonou Agreement (2000-)– Aid performance (less needs-based)– Stabilization programmes eliminated– Economic Partnership Agreements (EPAs)– New issues: security, arm trade, migration (new security)

The EU in (trade-related) development policy

• DDA (2001)– Implementation-related issues– New rules (S&DT)– Market Access– Trade Facilitation– Aid 4 Trade (Financing for Development)

Other development-related trade instruments

• EU Generalized System of Preferences (GSP)• GSP+ (more tariff lines)

– sustainable development, good governance, more vulnerable countries

• Integrated Framework for trade-related technical assistance to LDCs– coordinated by IMF, ITC, UNCTAD, UNDP, WB,

WTO.

• Everything but arms initiative (EBA) for LDCs

Source: EU Commission

Source: EU Commission

Source: EU Commission

Source: EU Commission

Source: EU Commission

The venues to negotiate and regulate trade

1) DDA: still alive and kicking?

• The prospects for the DDA: a European view

• The EU in a dilemma: The in-build agenda

• Leon Brittan pro-actively engages (the Millennium Round)

• The important role of the Singapore Issues– TF, Competition, Public Procurement, Investment

How did we get here?

• The Seattle Debacle• 9/11 and the Doha Ministerial• The Agenda is set (Christmas Tree Effects)• The DDA in crises: Cancun, Hong Kong,

suspension…• G2 leadership rarely visible and not sufficient• Another mini-ministerial is approaching• The crises over agriculture and the French Presidency

State of Play

Why the EU can’t act as a leader?

• The political-economy of trade liberalization

• The single package approach

• Concessions by negotiation partners (NAMA, services, etc.)

• Export business support?

• Transatlantic leadership?

• A multipolar trade world (G4+Japan+China)

2) New preferential trade agreements:short term relief?

• The new wave of EU PTAs?

• Global Europe Communication 2006

• End of Lamy moratorium

• A market-access based approach and protection of exporter interests

Source: WTO, Crawford and Fiorentino, 2005

Political and Economic Motivations for New Regionalism

Old and New Security Agenda (e.g. EuroMed)

Bargaining tool (vis-a-vis trading partners)→ Constant struggle for having a strong BATNA (EU-US)

Satisfy export industries (export discrimination argument) → India, Korea, China, Mexico, Chile

Bandwagoning (not to be left out by the demandeurs) → Signalling and FDI (Domino-effect)

Elitist idea (exporting the EU model, geostrategic reasons)→ Mercosur, EPAs, GCC, etc

Ease of negotiating and implementing agreements Fewer actors decrease transaction costs (negotiations and compliance) /

asymmetry of power / bureaucratic capacities

3. Autonomous Trade Policy

• Offensive: Unilateral Trade Liberalization (in respect to some DCs); Trade Barrier Regulation

• Defensive: Trade defensive instruments: the other face of Europe?– Level-field or protectionist?

TDI

• Anti-dumping

• Anti-subsidy

• Safeguards

Bringing Brussels back in: Actor Constellation

• The power of the member states

• The role of pressure groups

• The role of the EP, ECJ

• The role of the European Commission?

• Collusion hypothesis (powerful agent) vs. Rent-seeking (pressure group) hypothesis

Who governs?

• The strong role of the Commission (agenda-setting, negotiating on behalf of the EU, signing)

• Member States control through a specialized advisory Committee (Com Art. 133): – Interests: long-time liberal north vs. Club-med (now new members)

• EP: still marginal (but see new Constitution!)• ECJ: has been supportive of the Commission until ruling

1/1994 on competency (exclusive vs. shared)• Various intergovernmental conferences that led to increase

exclusive competence of the Community (Amsterdam, Nice, Constitution)

Who governs?

• The multi-level system (various access points)• Institutional access for private actors• Different logics of lobbying

– At the national level– At the European level

• Commission engages in “coalition-building”• The growing role of consultancy and lobbying firms in

Brussels

PA: Bringing Brussels back in

• Principals and Agents– Member States and EU Commission

• Delegation– Agenda setting, Commission is negotiator

• Control– Ex ante, on-site, ex post – Mandate, Art. 133 Committee, Ratification

• Autonomy– The Commission is powerful when setting the agenda– Institutional rules help from easy sanctioning– The multi-level system allows for strategic partnerships

Institutional set-up

Principals Delegation Agent 27 EU Member States Art. 133

Germany Committee

France

UK Coreper …. Club Med

Liberal North GAERC New Members?

European Commission

EU Parliament

ECJ

The EU in trade negotiations

4

Art. 133 ComArt. 133 Com

CommissionCommission

GAERCGAERC

CommissionCommissionArt. 133 ComArt. 133 Com

CommissionCommissionGAERCGAERC

EPEP

EPEP

COREPERCOREPER

EPEP

MSMS

GAERCGAERC

11b

2

3

3a

9

5

8a/8b

8c

6 7

Council &Member States

Commission European Parliament

t

Ratification

Ratification

Negotiation

Negotiation

InitiationInitiation

Decision-making process

Adapted from Elsig 2002

Explaining the old approach (1997-2005)

• Pascal Lamy’s Moratorium (starting 1999)

• Hierarchy in using regulatory venues

– Multilateralism (first): Commission-driven Enthusiasm

– Inter-regionalism (second best)

– Bilateralism (on hold)

• Pressure from principals increases, yet policy remains

• Autonomy by design (agenda setting, multi-level system (access), interest divergence among principals), active use of autonomy by DG Trade

Explaining the new approach

• European Commission Communication “Global Europe” (2006)

• New Commission shifts position (a new market access approach):

– Not principals sanctioning

– Adaptation

– the discovery of Asian markets

– the competitiveness paradigm (Lisbon Agenda)

Quo vadis? EU trade policy in a multipolar trade world

• Perceptions of the European Union in the world?

• What future role of the EU?

• Constitutional issues (the role of the EP)

• The New Trade Policies (behind the border)