Bringing Politics Back In: Economic Interests
and the Shift Toward Bilateralism in EU Trade Policy 1
Gabriel Siles Brügge
Department of Politics
University of Sheffield
Elmfield, Northumberland Road
Sheffield, S10 2TU
UK
[email protected]
Work in progress. Please do not cite without permission.
Comments are welcome!
Paper presented at the ECPR
‘Fifth Pan-European Conference on EU Politics’,
Porto, 24-26 June, 2010.
Abstract
Rational-choice institutionalist literature in European Studies contends that the supranational
design of EU trade governance insulates policy-makers from societal interests and systemic
pressures. This is often used to explain why EU decision-makers were able to pursue, free
from protectionist pressures, a multilateral trade strategy from the mid-1990s to mid-2000s.
The state autonomy thesis, however, has difficulty in explaining why the EU moved towards
bilateralism with the announcement of the 2006 ‘Global Europe’ Strategy. Drawing on
insights from International Political Economy, this paper considers whether economic
interests and external events influenced policy-makers drafting this important policy
document. Finding evidence that pressure groups did play an important role – with services
lobbyists being particularly vocal – it argues that their involvement was driven by the fear of
systemic competition from rivals’ Free Trade Agreements (FTAs). Illustrating that the EU’s
trade strategy has been shaped over the years by a lively politics of interest, this paper is a
first step in bringing the study of EU trade policy – for long the preserve of scholars stressing
its ‘exceptionalism’ – into the political economy mainstream.
1
This research has been possible due to the generous financial assistance provided by the Economic and Social
Research Council (ESRC) through a 1+3 PhD studentship. I also wish to thank my supervisor Tony Heron for
his helpful comments throughout my research. Any opinions expressed by interviewees are their own and
should not be construed as the official position of the organization they are working for. Moreover, any errors
remain my own.
I – Introduction
In October 2009, after a series of controversial negotiations, the European Union (EU) and
South Korea finally initialed the Free Trade Agreement (FTA) that they had been negotiating
for over two years. This agreement is the most visible expression so far of the new ‘Global
Europe Strategy’ (henceforth ‘Global Europe’), which was announced in October 2006 by the
European Commission’s Directorate-General (DG) for Trade (European Commission, 2006f).
This strategy spelled the end of the ‘moratorium’ on new FTAs that had been at the heart of
EU trade policy since 1999, with a new emphasis on negotiating bilateral trade agreements
with emerging (and largely Asian) economies taking the place of the EU’s previous
‘multilateralism-only’ approach. This paper asks what led the European Commission to
change its trade strategy, focusing in particular on the key role played by economic interest
groups and systemic pressures.
Existing institutionalist explanations in the field of European Studies are unable to account
for the EU’s policy shift because they have argued that functional integration has insulated
European trade policy-makers from interest groups and systemic pressures. This supposed
depoliticization may, up to a point, explain the stability demonstrated by EU trade policy
during the 1990s and early 2000s, but is unable to account for the strategic shift of 2006. This
paper therefore argues that more can be garnered from the International Political Economy
(IPE) literature on regionalism, which emphasizes ‘domestic-societal’ and ‘systemic’ drivers
of preferential liberalization. In this vein, the paper finds evidence to suggest that pressure
groups did play an important role in shaping the EU’s new trade strategy – with services
lobbyists being particularly vocal – as such groups feared systemic competition from rivals’
Free Trade Agreements (FTAs). Illustrating that the EU’s trade strategy has been shaped over
the years by a lively politics of interest, this paper is a first step in bringing the study of EU
trade policy – for long the preserve of scholars stressing its ‘exceptionalism’ – into the
political economy mainstream.
The paper is structured as follows. Section II highlights the limitations of institutionalist
approaches to studying EU trade policy and maps out an alternative IPE explanation of the
emergence of ‘Global Europe’ that emphasizes the role of economic interests and their
sensitivity to external pressures. Section III applies this framework to study the evolution of
the EU’s previous multilateral trade strategy, while sections IV and V considers in more
detail the development of the ‘Global Europe’ strategy. Finally, section VI concludes by
offering an overview of the arguments presented in the paper and proposing avenues for
further research once we have ‘brought politics back in’ to the study of EU trade policy.
II – Explanations of EU Trade Strategy
The theoretical starting point for much of the existing literature on EU trade policy is the socalled ‘collusive delegation’ argument (see Meunier and Nicolaïdis, 1999; Nicolaïdis and
Meunier, 2002; Meunier, 2005; Woolcock, 2005; Zimmerman, 2007). Its proponents start
from the position that the delegation of trade policy-making authority from national
governments to the supranational Commission in the Treaty of Rome was intended to
‘insulate the process from protectionist pressures and, as a result, promote trade
liberalization’ (Meunier, 2005, p. 8). Crucially, this view has found its way into a historical
narrative in European Studies concerning the ‘exceptional’ nature of EU external trade
policy-making.
2
The underlying assumption of this narrative is that institutional developments over the past
twenty years have underscored the depoliticization of EU trade governance. In an influential
piece, Brian Hanson (1998) argues along these lines that one of the unintended consequences
of the Single Market Program was to further shield policy-makers from protectionist interests
by introducing qualified majority voting into new arenas of economic policy-making in the
EU Council of Ministers. This change in institutional set-up – so the conventional wisdom
goes – was reflected in a shift in EU trade policy during the Uruguay Round; after decades of
defensiveness over agriculture, the EU became increasingly supportive of the multilateral
trading system (Woolcock and Hodges, 1996). Supporters of this argument contrast the EU’s
policy shift to that of the United States (US), which it is alleged turned increasingly away
from multilateralism in the late 1980s and early 1990s due to the increased politicization of
its trade policy (Woolcock and Hodges, 1996; Woolcock, 2000; on the shift in US policy, see
Destler, 2005). The EU – now relatively unencumbered from protectionist and other special
interest group interference in trade policy-making – was thus able to assume the hegemonic
responsibility for the multilateral system that was in the past bestowed upon the US.
Up to a point, it can be argued that this depoliticized view of trade policy is consistent with
the stability demonstrated by EU trade policy during the 1990s and early 2000s. The new
multilateralist attitude it had adopted during the Uruguay Round was to become a cornerstone
of the EU’s approach in the subsequent Doha Round of the World Trade Organization
(WTO), launched in the Qatari capital in 2001. The EU even went as far as announcing a
‘moratorium’ on new Free Trade Agreements (FTAs) in 1999. The EU maintained this
position even after the debacle at the Cancún Ministerial in September 2003 – where most of
the Singapore issues were dropped from the Doha agenda – when other competitors
(particularly Asian nations and the US) were stepping up their efforts in seeking bilateral
trade deals (on on Asian FTAs, see Dent, 2006; Ravenhill, 2003, 2008; on US ‘competitive
liberalization’, see Destler, 2005). It was not until October 2006 – following a prolonged lull
in the Doha Round – that the European Commission announced a new trade strategy by
launching its ‘Global Europe’ communication (European Commission, 2006f). Couched in
the terms of the Lisbon Agenda – which aimed to promote internal competitiveness and job
creation through further liberalization and marketization – ‘Global Europe’ announced a
more offensive external trade strategy built on a new generation of bilateral trade deals with
emerging markets, trade-defense instruments, vigilant protection of intellectual property
rights and so forth (see Hay 2007). Negotiating mandates for FTAs with India, Korea, and the
Association of Southeast Asian Nations (ASEAN) were consequently sought from the
Council in April 2007, with the first agreement – the EU-Korea FTA – being initialed in
October 2009.
Institutionalist Explanations of the EU’s New Trade Strategy
Given its emphasis on institutional and policy stability, how can the EU Studies literature
explain this shift towards bilateralism? Explanations have principally been concerned with
studying the effects of institutional conflict resulting from the delegation of policy-making
authority. Most have adopted a Rational Choice Institutionalist approach known as PrincipalAgent theory (PA) (for advocates of using PA in studying EU trade policy, see Elsig, 2002;
Kerremans, 2004; Pollack, 1997; for applications, see also Nicolaïdis, 1999; Meunier, 2000,
2007; van den Hoven, 2002; Elsig, 2007). The underlying assumption has been that there is a
divergence of interests between principal and agent, with most scholars simply attributing
pro-integrationist and liberal trade preference to the Commission. Member States, in contrast,
are usually painted as being mainly concerned with preserving national sovereignty (e.g.
3
Meunier and Nicolaïdis, 1999; Nicolaïdis and Meunier, 2002; Pollack, 2003; Meunier,
2005). 2 The preferences of the Commission and Member States are seen to derive from their
functions as, respectively, agents of European integration and guardians of the national
interest. Some of this literature has also focused on the battle over new trade policy
competences between the Member States and the Commission which followed the expansion
of the international trade agenda into ‘new’ issue areas – including services and investment –
not originally foreseen in the Treaties (e.g. Meunier and Nicolaïdis, 1999, 2000; Young,
2002).
This leads the institutionalist literature to argue that the EU’s trade strategy has been a
product of the Commission’s – more specifically, of DG Trade’s – efforts at exercising
leadership in trade policy, especially vis-à-vis the Council of Ministers. This argument has
been made for the EU’s policy during Uruguay Round (Vahl, 1997) and its multilateral
approach during the Doha Round (van den Hoven, 2004; Billiet, 2006). In a similar vein,
‘Global Europe’ is seen as an effort to continue exercising leadership in trade policy – to
varying degrees – in the face of the stagnation of the multilateral trade strategy. As such, it is
either seen as evidence of DG Trade’s ‘entrepreneurial ability to repackage Member State
preferences into a consensual doctrine’ (Meunier, 2007, p. 905) or of the Commission’s
power to reset the trade policy agenda according to its ideological preferences (Elsig, 2007).
The emphasis on institutional and political stability has meant that the institutionalist view
has difficulty in explaining the greater contingency displaced by EU trade policy-making in
recent years. The notion that the Commission – or DG Trade more specifically – has been
driven by a bureau-maximizing logic may suggest why there was an institutional imperative
to change course when the multilateral trade strategy was seen to be failing. However, it is
difficult for explanations stressing the importance of institutions to account for the strategic
shift in the absence of significant institutional change to the EU’s trade policy-making
machinery in the intervening period. 3 Moreover, the underlying depoliticized view of EU
trade policy-making is problematic. Although working with the assumption that functional
integration has served to insulate policy-makers, little empirical evidence has been invoked to
support the argument that interest groups play a negligible role in European trade policymaking (Dür, 2008). Another related problem is the tendency of institutionalist accounts to
overlook the wider international systemic context within which trade diplomacy is rooted.
The problem is that the EU is being treated as an ‘exceptionally’ depoliticized entity,
divorced from its context within the international political economy, when it is not the only
trading entity to be signing bilateral trade agreements with emerging markets. This paper
therefore attempts to situate the EU’s foreign economic policy-making within the wider IPE
literature on trade policy, which offers a more compelling and dynamic understanding of the
‘politics’ of trade. 4
2
Although some allowances are made for assumed national trade preferences (e.g. Meunier and Nicolaïdis,
1999), these are usually simply given exogenously. This appears justified because Member States’ trade
preferences are considered to be relatively stable (Johnson 1998). As almost to confirm this widespread
assumption, there is a dearth of works on the formation of member state trade policies (for an exception to this
see Falke, 2005).
3
The Treaty of Lisbon, which only involved a few minor changes to the EU trade policy-making machinery
(most notably a role for the European Parliament in ratifying all subsequent international trade agreements),
only came into force in late 2009.
4
There exists in the field of European Studies an incipient literature which also seeks to problematize the
narrative of depoliticization, pointing to the role that interest groups play within EU trade governance (see,
amongst others, De Bièvre, 2002; Dür and De Bièvre, 2005; Dür, 2007, 2008; Woll, 2006). However, it
essentially borrows arguments from the wider IPE literature on trade policy.
4
Bringing Politics Back In
Within mainstream IPE accounts of trade policy we can differentiate between two – albeit
sometimes overlapping – schools of thought. The first emphasizes ‘domestic-societal’
sources of trade policy. This school is largely based on the US experience, wherein trade
policy is determined by the outcome interest group competition (for a review, see Hillman
1989). Some within the school deploy a pure rationalist-pluralist model of political action in
which the state is conceived as an ‘empty vessel’, serving simply to aggregate the preferences
of domestic interest groups (Grossman and Helpman, 1994; Hiscox, 2002). Other, more
nuanced accounts place more emphasis on the mediating role of political institutions and
independent interests of policy-makers (e.g. Haggard, 1995; Woll, 2008). The crucial point,
however, is that trade policy is seen as contingent on social and political factors, rather than
being institutionally determined.
The second school of thought within IPE puts emphasis on the ‘systemic’ determinants of
trade policy. It is embedded within the so-called ‘neo-neo’ debate which dominated
mainstream IPE scholarship in the 1990s (for a review, see Katzenstein, et al., 1998). As is
commonly known, the theoretical foundations for this debate were taken from Kenneth
Waltz’s Theory of International Politics (1979), the main point of contention being the extent
to which the ‘self-help’ system generated by the anarchical international environment could,
or could not be, mitigated by international institutions. The insights gleaned from the ‘neoneo’ debate have been particularly relevant in studying the phenomenon of economic
regionalism – common IPE shorthand for the signing of preferential trade agreements – in the
wake of US hegemonic decline. In the absence of hegemonic leadership it is argued that
states are more likely to defect from the multilateral system to sign preferential trade deals in
order to counteract protectionist swings in the trade policies of key trading partners
(Mansfield, 1998). Alternatively, such action may be in seen in terms of welfare-maximizing
logic as states respond to the behavior of commercial rivals. In other words, states may be
motivated on defensive grounds to protect export interests, but they might likewise be
prompted to proactively form or join such an economic grouping to benefit from ‘trade
creation’ effects (Pomfret, 1988; Yarbrough and Yarbrough, 1992). Finally, the pursuit of
preferential trade deals can also serve to enhance market power and hence, commercial
bargaining power vis-à-vis one another (Oye, 1992). Ultimately, the commonality of such
approaches is that they stress the ‘contagion effect’ (Mansfield, 1998) of different strategies,
that is, the strategic interaction between different trade agreements.
It would be wrong, however, to overstate divisions between both schools of thought.
Although both ‘domestic-societal’ and ‘systemic’ explanations have their own distinct logics
of explanation, several works in IPE have invoked both. Perhaps the most prominent of these
is Richard Baldwin’s (1993; 1997) ‘domino theory of regionalism’. Baldwin argues that the
fear of trade diversion from a preferential trade agreement will prompt interest groups to
lobby their governments to seek to join this agreement to offset any potential loss of
competitiveness. This sets a chain of ‘dominoes’ in motion, as more and more states are
lobbied by their exporters to join existing preferential trading arrangements. Others have
pointed to the important role that market structures – in the form of imperfect competition
and increasing returns to scale – in shaping firms’ preferences for regionalism (see Casella,
1996; Milner, 1997; Chase, 2003, 2005). These make firms in such industries particularly
sensitive to external commercial pressures as they are seen derive significant economic rents
from engaging in production-sharing – i.e. ‘the subdivision of different stages of
manufacturing in different countries’ (Chase, 2003, p. 145). PTAs can help protect the added
5
competitiveness that firms may gain from off-shoring labor-intensive production to
developing countries, by restricting ‘access to this benefit of location’ (Manger, 2005, p. 810)
through restrictive rules of origin and a ban on MFN tariff rebates (see also Manger, 2009).
Facing such ‘proactively’ strategic agreements, firms with investment in a third country may
lobby their respective governments to seek PTAs that offset the advantages gained by their
competitors. The emphasis on the sensitivity of societal interests to external, systemic
pressures is thus quite apparent in this scholarship, which stresses the importance of FDI as a
driver of competitive North-South regionalism.
At first hand, this would appear to be quite relevant in the case of ‘Global Europe’ and its
emphasis on emerging markets. However, in the EU case investment liberalization can
largely be seen as an adjunct to market-opening in services, as FDI in services comprises the
lion’s share of EU27 outward FDI stocks – 68% of the total in 2005, compared to only 21%
in manufacturing (Eurostat, 2008, p. 17). Mark Manger’s (2009) emphasis on services
liberalization for those firms having established or seeking a commercial presence in a host
country through investment (‘mode 3’ in GATS parlance) therefore seems more pertinent
than appealing to explanations stressing production-sharing, although he still owes an
intellectual debt to the literature on regionalism and ‘imperfect competition’.
Manger contends that in emerging economies mode 3 services markets – which include
telecommunications, professional services, retail banking and other financial services, and
utilities – are often marked by large economies of scale, requiring significant ‘sunk’
investments (see also, Manger, 2008, pp. 2459-60). Services firms may lobby their
governments for preferential access to such markets for two reasons. Firstly, incumbent
service operators with significant sunk investment may favor preferential liberalization of
investment because it – even if applied non-discriminatorily – allows them to take advantage
of their ‘first-mover’ advantage to improve on their dominant position. Secondly, and perhaps
more importantly, where regulation is very important for a given sector preferential
liberalization itself creates ‘first-mover’ advantages for potential entrants. This is because the
elimination of regulatory restrictions previously blocking or hampering the operation of
foreign service suppliers is usually carried out on a discriminatory basis. The exclusion of
outsiders from an FTA ensures that firms benefitting from its provisions may be able to
establish a dominant position through ‘first-entry’. In the extreme cases of limited licensing –
often found in telecommunications – and standard-setting latecomers may be, respectively,
completely prevented from entry or severely disadvantaged by the adoption of different
regulations to that of their home market (Manger, 2009, pp. 44-8).
Although Manger does not explicitly pursue this line of reasoning, it is useful for our
purposes to consider the argument that where FTAs serve as vehicles for discriminatory
liberalization in services systemic pressures are amplified. There is a heightened ‘domino
logic’ to such agreements when compared to preferential liberalization in the goods trade,
particularly when they concern the liberalization of highly-regulated service sectors. Service
suppliers are vying here for access to oligopolistic markets that were previously closed or
severely restricted to foreign suppliers. There is therefore an added urgency for them to
pressure their governments into seeking bilateral agreements in order to capitalize on ‘firstmover’ advantages, or to prevent their competitors from doing the same. Furthermore, the
discriminatory nature of regulatory liberalization is likely to lead firms and policy-makers to
seek to not only match rivals’ gains – as in Baldwin’s (1993; 1997) framework – but to
exceed them in order to win the race for ‘first-entry’. This links the insights of ‘domesticsocietal’ accounts stressing the role of interest groups to the wider systemic pressures that
6
lead states to pursue preferential trade policies. All told, this added competitive edge to
(mode 3) services liberalization in emerging economies may offer an explanation of interest
group activism on ‘Global Europe’ and the sensitivity of policy-makers to certain systemic
pressures.
The aim of this section has not been to specify a testable model of interest group activism in
the EU, but to situate the study of EU trade policy within a wider literature in IPE which
emphasizes ‘domestic’ and ‘systemic’ drivers of regionalism that have generally been
neglected in the theoretical literature on EU trade policy. The argument presented above is
that these offer a more compelling insight into the workings of EU trade governance because
they allow for a greater contingency of outcome than rational-choice institutionalist accounts
within EU Studies. This paper, however, is only a first step on a long road to bringing
‘politics back in’. With this in mind, the aim of the next section is to apply the insights of IPE
to consider the evolution of the EU’s trade strategy from multilateralism to ‘Global Europe’.
III – Tracing the Evolution of EU Trade Strategy
EU trade policy was marked from inception by two potentially incommensurate trade regimes
(and sets of political economic interests) which constrained the ability of European
negotiators to negotiate multilateral trade agreements. While under the Common Agricultural
Policy (CAP) the EU sought to provide support payments and tariff protection for its
agricultural producers, the stated objective of the customs union – in Article 110 of the Treaty
of Rome – was to achieve the progressive liberalization of industrial tariffs through
multilateral liberalization. Facing US attempts to pry open EU agricultural markets in both
the Kennedy Round (1964-1967) and the Tokyo Round (1973-1979), European negotiators
adopted a defensive attitude towards the multilateral trading system (Preeg, 1970; Winham,
1986). Apart from resulting in a general reticence to initiate and partake in new trade rounds,
this defensiveness on agriculture notably translated into European opposition to strengthening
the General Agreement on Tariffs and Trade (GATT) through the establishment of open and
judicialized proceedings, as these had the potential to undo the EU’s agricultural support
system. This is perhaps best illustrated by its opposition during the Tokyo Round to the
establishment of a multilateral surveillance mechanism to monitor the selective application of
the safeguard clause (see Winham, 1986, pp. 243-7).
The EU as a Trade Multilateralist
Although it initially treated the Uruguay Round (1986-1994) with similar circumspection and
maintained a largely defensive position on agriculture throughout (Paemen and Bensch,
1995), the EU’s attitude to the multilateral trading system was about to change. During the
Uruguay Round’s Mid-Term Review in Montreal in 1988 the EU proposed – jointly with
Canada – the creation of a new Multilateral Trade Organization. This was followed in March
by a proposal on improving multilateral dispute-settlement procedures (Woolcock and
Hodges, 1996). This move towards supporting the judicialization of the international trading
system marked the beginning of a decisive shift in EU trade strategy. This was consolidated
in the 1996 ‘Market Access Strategy’, which underscored the EU’s multilateral orientation in
trade (European Commission, 1996). The content of the Market Access Strategy – an
ambitious liberalization agenda focused on a number of so-called ‘WTO plus’ issues, such as
services liberalization, trade and investment, and government procurement – was to prefigure
the EU’s official Millennium (later Doha) Round objectives (European Commission, 1999).
A ‘moratorium’ on new FTAs followed in the run-up to the Seattle Ministerial of 1999,
7
which was expected to launch a new Round of trade talks. The EU approach on WTO plus
issues was thus distinct from the start to that of the US, which over time increasingly favored
addressing WTO plus issues through bilateral negotiations as came to be explicitly expressed
in its policy of ‘competitive liberalization’.
However, rather than seeing the EU’s multilateral trade strategy as the embodiment of the
‘exceptionally’ depoliticized nature of EU trade governance, as is the case in the
institutionalist accounts reviewed earlier, the approach taken here is to assess it in light of the
systemic and domestic-societal sources of trade policy identified by the IPE literature. For
one, there were clear systemic pressures on EU trade policy. In a report justifying why the
EU was committing its policies to multilateral disciplines by supporting a strengthening of
dispute-settlement in the GATT (later WTO), the Commission explicitly stated that this was
prompted by a desire to restrain growing US unilateralism (European Commission, 1990). 5
Developments at the domestic (EU) level were of even greater importance. The forces of
agricultural protectionism – which had in the past been so dominant in trade policy – were
increasingly subordinated by European trade policy-makers to economic interests seeking
improved access to overseas markets. This was perhaps most clearly reflected in the 1996
Market Access Strategy’s two principal objectives, which were
-
a more systematic, more coherent, and more pro-active approach to both
negotiation and enforcement of trade deals and rules on the part of the
Community [EU], and
-
greater emphasis on the objective of third country market opening in the
Community’s commercial policy (European Commission, 1996, p. 4,
emphasis in the original).
One of cornerstones of this new strategy was a concerted effort on behalf of the Commission
to involve business interests in policy-making. The objective was to have them ‘provide the
Commission with adequate information […] to eliminate barriers [to trade] (European
Commission, 1996, p. 12, emphasis in the original). As a result, following the
implementation of the Market Access Strategy, pro-liberalization European business interests
– which had played a relatively negligible role in EU trade policy-making during the Uruguay
Round negotiations (Cowles, 1997) – were increasingly involved in various consultations
with the Commission. This went from feeding the Commission information to pursue cases in
the context of WTO dispute settlement (see De Bièvre, 2002; Shaffer, 2006) to lobbying it on
the position to take in the upcoming round of multilateral trade negotiations (see below).
Thus, and contrary to the expectations of the state autonomy thesis, (pro-liberalization)
interest groups became increasingly involved in European trade policy-making following the
turn to multilateralism. What is more, the turn itself represented an effort to develop a more
proactive European trade strategy to serve these economic interests. As noted in the Market
Access Strategy (European Commission, 1996, p. 19, emphasis in the original) ‘[i]n shaping
the negotiating agenda of the WTO, [the EU] will give priority to those issues which will
create new opportunities for European business’.
The importance attached to addressing the so-called ‘new issues’ within the multilateral
context – in contrast to the US’s preference for bilateral or unilateral action – spoke volumes
5
This unilateralism is perhaps most strongly embodied in the so-called ‘Super 301’ provision of the 1988
Omnibus Trade and Competitiveness Act – which mandated retaliatory action against the actions of countries
found to implement trade barriers particularly egregious to US exporters.
8
as to the nature of the markets that the EU was interested in targeting through its multilateral
strategy. Already during the Uruguay Round negotiations, US negotiators in both the services
and intellectual property rights talks – which aimed to establish structures within the
multilateral trading system to address both of these issues 6 – had openly professed a
preference for frameworks that would be more demanding of participants. Their membership
was thus potentially more limited, in light especially of the objections raised by developing
countries. In contrast, the EU favored a more ‘inclusive’ GATS and TRIPS, willing to
countenance more modest agreements to ensure the participation of emerging economies.
This seemed to be motivated by commercial considerations, particularly when it came to
services, where EU firms had a stake in developing and emerging markets unlike their
American counterparts (Paemen and Bensch, 1995).
The EU’s ambitious Market Access Strategy and Doha Round agenda similarly indicated that
the EU hoped to reap the benefits of an ‘inclusive’ multilateral Round. On services, the EU
hoped to obtain ‘more and better commitments from all WTO members on market access and
national treatment’ (European Commission, 1999, p. 8). Accordingly, the EU’s GATS
requests going into the Doha Round were not only addressed to a large number of emerging
economies, but also featured demands for improved commitments on market access and
national treatment in a large number of service sectors (for a copy of all leaked EU GATS
requests, see Corporate Europe Observatory and Transnational Institute, 2003). Such an
ambitious multilateral agenda was not unexpected given that EU countries accounted for just
over a third of total commercial services exports in 1999 (author’s calculation using data in
WTO, 1999). There was also still much potential for liberalization in services, in contrast to
manufacturing where average levels of protection were already comparatively low from
decades of tariff-based multilateral trade rounds.
This allowed, in light of the Market Access Strategy’s emphasis on engagement with proliberalization business groups, the services lobby to emerge as a key player in trade policymaking, which came to be closely allied to policy-makers in the Commission. Having noted
how effectively US service industries had ‘cooperated’ with American negotiators during the
Uruguay Round, Trade Commissioner Leon Brittan actively encouraged the CEOs of major
European services firms to reorganize themselves into a more cohesive and inclusive
organization. Before 1999, European firms had been represented in Brussels by the European
Tradable Services Network (ETSN), an organization generally considered to lack proactive
leadership or political clout given its limited membership (Arkell, 2001). The European
Services Forum (ESF) thus came into being in early 1999 and originally served as a vehicle
to aggregate the preferences of the European service interests and feed these into the EU
position during the Doha Round services talks. 7
At the level of the Commission, this emphasis on multilateralism was rationalized by the new
Trade Commissioner Pascal Lamy in terms of the doctrine of ‘managed globalization’
(Abdelal and Meunier, 2006; Jacoby and Meunier, 2007). Deliberately vague in order to
strike a consensual tone, it betrayed a certain dirigiste apprehension concerning the
consequences of globalization for state intervention in the economy. In this vein, the implicit
view was that ‘[i]nternational institutions with muscle can work in managing globalization
only if their constraining rules apply to the largest possible number of countries’ (Meunier,
2007, p. 912). It is therefore unsurprising that Lamy’s tenure saw the EU as one of principal
6
These came to be the GATS and the Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS).
7
Interview with an interest group representative, Brussels, 14 September, 2009.
9
champions of WTO accessions (see European Commission, 2004). More importantly, it also
saw the EU adopt a moratorium on new FTAs in order to send the signal to others that the EU
was prioritizing the Doha Round and – by extension – was seeking to bolster the rules-based
system of Most-Favored-Nation (MFN) multilateral trade liberalization. Business support for
this approach was, at first, forthcoming. In the first couple of years of the Doha Round, the
ESF and the Union of Union of Industrial and Employers’ Confederations of Europe (known
by its French acronym, UNICE) 8 both supported the Commission’s multilateral trade
strategy, largely because of the expectation of significant market access gains. At this stage,
the few ongoing bilateral/regional trade agreements that the EU was pursuing were largely
perceived as a side-show by the ESF and UNICE, both of whom were focused on securing
gains at the multilateral level. 9
IV – Business Pressure after Cancún and the ‘Issues Paper’
However, the undoing of the EU’s ambitious WTO agenda at the Cancún Ministerial in
September 2003 – which resulted in the dropping of the Singapore issues from the Doha
Round agenda and led to a prolonged lull in the Round – meant that expectations amongst
European policy-makers and business leaders were considerably dampened (Young, 2007).
Although it would take another three years before the announcement of ‘Global Europe’, the
Cancún Ministerial was the key turning point in the Round for the EU and the beginning of
the end of its multilateral trade strategy, as interest groups grew increasingly impatient with
the lack of tangible new liberalization gains. Prior to Cancún, European business groups were
relatively unequivocal in their support for the EU’s ‘multilateralism-only’ approach. Days
before the summit, in a position paper co-authored with other international business groups,
UNICE and the ESF stressed that
while regionalism/bilateralism can be a useful means for liberalization,
multilateral liberalization is our end goal. Therefore, we call on WTO
members to allocate all the priority and necessary resources to the ongoing
DDA negotiations (ESF et al., 2003, p. 2).
Following the Cancún debacle, however, the ESF was quick to change its position and began
lobbying the Commission to lift its ‘moratorium’ on new FTAs. As early as November 2003
it stated that
the European services industry cannot ignore situations where its major
competitors are gaining new markets via bilateral free trade agreements. The
EU should therefore, as an additional policy tool, conclude the ongoing
bilateral and bi-regional free trade agreements and be ready to open new ones
when appropriate (ESF, 2003, emphasis added).
Following the Cancún deadlock in September 2003, European trade policy entered what
could best be described as a lull. In his subsequent public interventions as Trade
Commissioner, Pascal Lamy stressed the continuing commitment of the EU to
multilateralism, even in the face of USTR Robert Zoellick’s threat of intensifying US
‘competitive liberalization’, while underlining the need for a ‘period of reflection’ in EU
8
UNICE is the largest cross-sectoral business pressure group in the EU, representing national business
federations from a number European states (Greenwood, 2003). It changed its name to BUSINESSEUROPE in
2007.
9
Interview with an interest group representative, Brussels, 14 September, 2009.
10
trade policy (Lamy, 2003; Lamy, 2004). Ultimately, the EU ended up sticking to its selfimposed moratorium by not initiating any new PTA negotiations between September 2003
and the end of Lamy’s tenure as Commissioner in November 2004. Although Lamy was open
to new preferential trade initiatives in principle (see in particular, Lamy, 2002) the evidence
suggests that Lamy was not amenable to a more aggressive FTA-based strategy, particularly
as it did not fit within his view of ‘managed globalization’.
Mandelson and the Mantra of Competitiveness
The arrival of a new Commissioner in Peter Mandelson in November 2004 was therefore also
a crucial watershed in EU trade strategy. A new emphasis on ‘competitiveness-driven’ trade
policy – which would ultimately culminate in the ‘Global Europe’ Strategy – became
apparent from the start of his tenure. As part of this, Mandelson participated in two ad hoc
groupings that had been formed by the incoming Commission President Jose Manuel Barroso
to underscore his commitment to the Lisbon Agenda 10 and its aim of tackling the EU’s
perceived competitiveness problems: the Lisbon Strategy Commissioner’s Group under the
chairmanship of Barroso himself and the Competitiveness Council Commissioners Group
under the leadership of Vice-President and Commissioner for Enterprise and Industry Günter
Verheugen. Although these meetings institutionalized links between EU trade officials and
competitiveness/industry policy-makers 11 working on the Lisbon Strategy, these groupings
were largely perceived as ineffectual, producing little in the manner of concrete proposals. 12
There is, however, some value in highlighting Mandelson’s involvement in these two
initiatives, as they suggest that the process of re-orienting EU trade strategy began quite early
into his time at DG Trade, where he was already seeking to position trade policy within the
context of the Lisbon Strategy.
Business was to play a key role in this process. Although Mandelson – who as an important
architect of the New Labour project expounded the view that the logic of ‘globalization’
could not be resisted (see Watson and Hay, 2003) in contrast to Lamy’s notion of ‘managing’
it and mitigating its effects – was an important architect of the ideational/discursive shift in
DG Trade, it was clear that in terms of the concrete instruments of policy, decision-makers
were often responding to interest group pressure. UNICE for its part was content to see that
something was finally in the pipeline after Lamy’s long ‘period of reflection’ (UNICE,
2005). 13 It came out to welcome Mandelson’s involvement in the two Commissioners
Groups, stressing that
it would like the Commission to address all internal and external factors
affecting the global competitiveness of European business in a coordinated
and coherent manner and to systemically take competitiveness into account
when making legislative proposals or when negotiating trade and investment
issues with third countries (UNICE, 2005, p. 1).
10
The aim of the Lisbon Agenda (or Strategy), launched at the Lisbon Summit in 2000, was to turn the EU into
‘the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic
growth with more and better jobs’ by 2010 (Presidency Conclusions, 2000).
11
DG Enterprise and Industry led discussions on the Lisbon Strategy, while in the Council it was the Working
Group on Competitiveness. Both of these groupings were traditionally quite separate from the trade policymaking sphere of DG Trade and the Council Article 133 Committee.
12
Interview with an interest group representative, Brussels, 21 September, 2009.
13
Interview with an interest group representative, Brussels, 14 September, 2009.
11
UNICE’s statement clearly suggested a growing weariness with the perceived lack of
direction in EU trade policy. 14 Dissatisfaction with the EU’s ‘multilateralism-only’ strategy
following Cancún – with no progress from September 2003 onwards, given a significantly
reduced negotiating agenda and no agreement on modalities – was clearly implicit. Thus, in
the same statement, UNICE was to also state that ‘the EU should sharpen its multilateral and
bilateral strategies to [...] [achieve] substantially increased market access […] in the large
emerging economies (China, India, Brazil and Russia)’ (UNICE, 2005, pp. 3-4) In this vein it
called for ‘new EU trade and investment agreements [to] address trade in the broadest sense’
(UNICE, 2005, p. 4, emphasis in the original) by focusing on a number of WTO plus issues,
among them services and investment. Underpinning all of this was a view that ‘EU
companies [needed] to reverse the loss of market share in major export markets’ (UNICE,
2005, p. 3), in particular in services, where it was felt that the EU was likely to lose its
competitive advantage in the face of increasing competition. Thus, it is not surprising to find
that the services lobby was one of the earliest, and most forceful, advocates of a shift towards
bilateralism (see above), given the ‘first-mover’ advantages found in certain services markets
(see Section II above). It was perhaps also the product of a general feeling among services
lobbyists and negotiators that the Doha Round – by focusing on trade-offs between industrial
and agricultural market access – was sidelining the issue of services. 15
The ‘Issues Paper’
Business’s increasingly restlessness first came to be reflected in Commission strategic
thinking in September 2005. At its Fifth Market Access Symposium – a regular gathering of
policy-makers and industry representatives organized by the Commission – DG Trade first
presented its so-called ‘Trade and Competitiveness Issues Paper’. This document aimed ‘to
show how trade policy can […] contribute to competitiveness and which policy levers should
be used to maximize its contribution’ (European Commission, 2005a, p. 3, emphasis added).
Considered to be the precursor to the ‘Global Europe’ communication by policy-makers 16 the Symposium itself was also intended to feed into a communication on the ‘External
Aspects of Competitiveness’ scheduled for release in autumn of 2006 – a cursory reading of
the strategy suggested that its sole contribution was to reiterate the previous Market Access
Strategy’s emphasis on providing European exporters with ‘adequate access to third markets’
(European Commission, 2005a, p. 3).
Thus, although it acknowledged the fears increasingly expressed by European business
leaders – noting that EU producers did not have adequate access to the growing markets in
East Asia and were losing market share to key competitors – there was widespread
disappointment within the European business community at the time. The principal complaint
voiced at the Market Access Symposium and during private consultations was that this was a
largely ‘academic’ paper (see European Commission, 2005b). In the face of a flagging Round
and the increasing turn to bilateralism of the EU’s competitors, it seemed to offer little in the
way of market access in order to address European industry’s lagging competitiveness in East
Asian emerging markets. 17 European business’s impatience with the lack of specific ‘policy
levers’ – such as bilateral trade agreements – in the Issues Paper was symptomatic of its
general state of anxiety. In the Far East the key competitors that business was worried about –
14
Interview with an interest group representative, Brussels, 14 September, 2009.
Interview with an interest group representative, Brussels, 14 September, 2009. Telephone interview with a
European Commission official, 11 March, 2010.
16
Telephone interview with a European Commission official, 5 May, 2010.
17
Interview with an interest group representative, Brussels, 14 September, 2009.
15
12
and which were explicitly mentioned in the Issues Paper – were naturally not the emerging
economies themselves – as Asian ‘noodle-bowl’ FTAs typically included only modest
provisions on investment and services liberalization (Ravenhill, 2008). Rather, the two
countries singled out by the Issues Paper had been the US and Japan. After four decades of
multilateralist trade policy, the latter had signed its first FTA with Singapore in 2003 and a
‘basic accord’ with the Philippines in 2004, with negotiations underway with South Korea,
Malaysia, and Thailand by 2006 (see Manger, 2005). The US, in turn, had by 2006 signed an
FTA with Singapore and was also negotiating with Korea, Malaysia, and Thailand as part of
its policy of ‘competitive liberalization’ (see Bergsten, 2002; Schott, 2004).
That being said, and despite the complaints of business, the Issues Paper did provide some –
albeit tentative – suggestions to address these issues. Its starting point was the economic
analysis that the EU’s largely open trade and investment regime – with the exception of
agriculture and a limited number of manufacturing tariff peaks – had helped the EU’s
competitiveness. 18 The logical corollary, it was argued, was that access to third party markets
represented the greatest potential for boosting EU external competitiveness. Crucially, this
line of argument was not simply a repetition of the Market Access Strategy’s emphasis on
market-opening. Rather, it was suggested that the EU ‘[u]rge trade partners to open their
markets, using our possibilities for movement on our trade protection as negotiating
leverage’ (European Commission, 2005a, p. 6, emphasis in the original). These were the
beginnings of a re-orientation of policy towards aggressively serving export interests,
potentially even at the expense of import-competing sectors (in manufacturing) that had
traditionally enjoyed protection. To an extent this responded to Mandelson’s New Labourite
discourse on globalization that saw it not as a process to be ‘managed’ but rather as one to
which there was no alternative (see above; for more on the consequences of this for EU trade
policy, see Siles Brügge, 2010b). For the purposes of this paper, suffice to say that this made
Mandelson particularly amenable to the interests of those who were clamoring for more
market access abroad, the most vocal of which were the services lobby.
V – From ‘Issues Paper’ to ‘Global Europe’
The period between the release of the Issues Paper and the announcement of ‘Global Europe’
– September 2005 to October 2006, the dates of DG Trade’s ‘broad consultation exercise’
(European Commission, 2006b, p. 1) – provides strong evidence of the involvement of
business groups in trade policy-making. Given that the practical implications of the Issues
Paper – that opening third party markets ‘should be primarily pursued through an ambitious
strategy in the Doha Round […] [and] complemented by bilateral or regional initiatives’
(European Commission, 2005a, p. 6) – were still rather modest, it is unsurprising to find that
business’s requests were growing increasingly insistent. By January 2006, a Commission
report on a meeting held with European business federations noted that ‘[r]egarding market
access, the [business] federations are clearly disappointed so far and not optimistic for the
future about the outcome of multilateral negotiations’ (European Commission, 2006a, p. 1).
In this vein, for example, the UNICE representative noted that although he ‘recognizes that
the Paper raises the [sic] good points for business […] [t]he EU has not been able to
assertively defend and promote its offensive positions in the negotiation processes [sic]’
(European Commission, 2006a, p. 4). Such views were echoed by numerous other influential
interest groups (see European Commission, 2006a). In sum, the report underscored how
18
Telephone interview with a European Commission official, 5 May, 2010.
13
[b]usiness requests more action at bilateral level […] notably towards
emerging countries where both current barriers and future markets are located.
Attention to be given to countries which have already or are negotiating
FTAs/RTAs [Regional Trade Agreements] with our competitors and where we
are losing market share (European Commission, 2006a, p. 1, emphasis in the
original).
It was particularly the ESF that was worried about competitive pressures from East Asia, as
can be noted from its November 2003 position quoted at length above (ESF, 2003). Reacting
to the Issues Paper at the January 2006 meeting, the ESF noted that it felt that it neglected the
issue of services liberalization. It also called on the Commission to target ‘key emerging
countries’, among them India, Brazil, China, and several ASEAN members (European
Commission, 2006a). It stressed not only that the Commission avoid interregional
negotiations with ASEAN because they would become interminable, but also emphasized
that for ‘each FTA concluded by our competitors, we lose 2 or 3% of the markets’ (European
Commission, 2006a, p. 6). Perhaps most illustratively, it underscored that ‘[w]hatever the
outcome of the DDA [Doha Development Round] […] the Commission should focus on
bilateral negotiations with [the aforementioned] key emerging countries’ (European
Commission, 2006a, p. 6, emphasis added).
Whereas before Cancún the EU’s bilateral trade negotiations had largely been perceived as a
sideshow by the ESF, the competitive pressure exerted by the EU’s competitors in East Asia
was making FTAs seem increasingly necessary. In the case of the US’s FTAs this was doubly
relevant for services because of the strong emphasis they placed on regulatory provisions (see
Wunsch-Vincent, 2003). European service providers were competing with a very assertive
US bilateral WTO-plus strategy for ‘first-entry’ into Asia’s highly-regulated services
markets. In addition, the ESF was to also express concern for the position of incumbent
European operators. It was to note that
European companies are gradually losing current market share and potential
future access to these markets and regularly have to wait longer to obtain
licenses required for market entry as competitors often obtain privileged
access to these as an informal but nonetheless integral part of bilateral deals
(ESF, 2007, p. 2). 19
As noted in Table 1 below – which provides a timeline of the ‘Global Europe’ strategy – the
January 2006 meeting with business came at a time when DG Trade was starting a more
formal process of consultation with UNICE on the content of a new communication, taking
the Issues Paper as a point of departure (this is described in European Commission, 2006g).
This should not surprise one as UNICE – known as BUSINESSEUROPE since 2007 – has,
as the most influential representative of overarching business interest in the EU (Greenwood,
2003) long enjoyed a privileged relationship with DG Trade. It has been involved in regular
consultations with the Commission in general matters of trade as the primary representative
of business, much as the ESF was originally conceived of as (and became) the main port of
call for all matters relating to trade in services.
19
Although this is a reference derived from document that came after the release of the ‘Global Europe’
communication, it still voices concerns that were consistent with the ESF’s statements at the time.
14
November 2004
September 2005
September 2005 – April 2006
January 2006
January 2006 – April 2006
March 2006
June 2006
July – August 2006
October 2006
Mandelson
becomes
new
Trade
Commissioner
and
joins
the
Competitiveness Council Commissioners
Group
and
the
Lisbon
Strategy
Commissioners Group.
DG Trade presents its ‘Trade and
Competitiveness Issues Paper’ at the 5th
Market Access Symposium.
Discussions based on the ‘Issues Paper’ with
Member States in the Article 133 Committee
and in the Competitiveness Working Group.
Meeting held with EU business federations
on ‘External Aspects of Competitiveness’.
‘Issues Paper’ used as the basis for
discussion.
Consultations held with UNICE on the
basis of the basis of the ‘Issues Paper’.
The only Civil Society Dialogue meeting
held based on a discussion of the ‘Issues
Paper’.
Commission begins drafting the new
communication around this time.
Draft communication on ‘External Aspects
of Competitiveness’ is released to the
Member States and UNICE.
Member States and UNICE react to the draft
communication.
‘Global Europe: Competing in the World’
communication officially released.
Source: author’s data
Table 1 – A Timeline of the ‘Global Europe’ Strategy
Consultations with Member States
The timeline also highlights the consultations held by DG Trade with the Member States in
both the Article 133 Committee – the Council committee tasked by the Treaties to oversee
trade negotiations – and the Competitiveness Working Group. The latter series of discussions
derived from the explicit attempt to link trade policy to the wider Lisbon Agenda of
promoting European competitiveness and job creation. These deliberations, however, did not
appear to play a major role in the shaping of the ‘Global Europe’ strategy for two reasons.
First of all, the Competitiveness Working Group – and associated Enterprise and Industry DG
– were largely marginalized in the consultation process. Although there was great enthusiasm
at first within the so-called ‘industrial policy’ hierarchy at being involved in trade policymaking – this was particularly the case for the Competitiveness Working Group, given the
prestige of the Article 133 Committee within the EU’s comitology – in the end there was
little meaningful dialogue. 20
20
It is one of the only Working Group level bodies to be explicitly mentioned in the Treaties.
15
Secondly, within the Article 133 Committee, the pressure from Member States on the whole
was rather moderate (for this argument, see also Elsig, 2007, pp. 938-9). For one, there is
evidence to suggest that the Article 133 Committee has grown less influential in recent years
for a variety of reasons, from an increased diversity of interest as a result of enlargement
(Elsig, 2009) to a decision to ‘reallocate resources away from trade policy, given that it is the
Commission which has the responsibility to negotiate on their behalf’ (Baldwin, 2006, p.
930). More specific to this case was the fact that although Member States were growing
impatient with the lack of progress in Doha, there were internally divided as to whether it
would be wise for the EU to abandon the multilateral track. 21 Such dissension was partly
echoed in internal UNICE discussions held at around this time, where some national
federation representatives were unsure of whether to push for a change of trade strategy, as
they felt it might undermine efforts to seek market access at the multilateral level. But on the
whole, within UNICE there was a general consensus on the need to adopt a bilateral tack,22
which was then fed into discussions held with the Commission between January and April
2006. The same could be said of the ESF, whose members shared a common interest in
addressing the competitive threat of rivals’ trade activism in East Asia. 23
Tracing Business Input into the ‘Global Europe’ Strategy
The Commission had already begun drafting the strategy around March of that year (see
European Commission, 2006b), releasing a draft for comment to the Member States and
UNICE in June and the final communication in October (see Table 1 above). What is
interesting at this stage is to consider the evolution in Commission thinking following the
reactions of business to its proposals. Table 2 below provides an overview of the texts of the
three ‘versions’ of the ‘Global Europe’ communication produced by DG Trade. It covers the
Issues Paper – which served as an intellectual springboard for the strategic re-orientation of
policy and formed the basis of most subsequent consultations with business and other
stakeholders – the June 2006 draft communication, and the final text of the ‘Global Europe’
communication, while focusing on three sets of business’s demands.
The first set of demands concerned the EU’s strategic orientation. DG Trade had alluded to
bilateral and regional trade agreements vaguely in the Issues Paper, with business reacting
strongly to what was perceived as an insufficiently practical paper. DG Trade was to later
explicitly state in the ‘Impact Assessment Report’ that accompanied the ‘Global Europe’
strategy that in drafting ‘Global Europe’ it was heeding the calls of business for action
following the publication of the Issues Paper. Above all, ‘[r]egarding market access, business
representatives requested more action at bilateral level […] [with] [a]ttention to be given to
countries which have or are negotiating free trade agreements (FTAs) with EU competitors
and where we are losing market share’ (European Commission, 2006g, p. 5). This is an
21
Interview with a Member State official, Brussels, 20 May, 2010.
Interview with an interest group representative, Brussels, 14 September, 2010.
23
The ESF operates on an ‘opt-out’ principle for its position papers. In other words, once the paper has been
drafted and circulated by the Secretariat, members have to choose to ‘opt-out’ to not appear on a list annexed to
the communiqué listing those members supporting the given position. Interview with an interest group
representative, Brusses, 14 September, 2009. Unfortunately, no such list was attached to ESF (2003) – which
called for a lifting of the moratorium immediately After Cancún – or to ESF (2006), where the ‘Global Europe’
strategy was welcomed. However, in a later statement supporting the strategy and setting out the specific
provisions sought in ‘Global Europe’ FTAs (ESF, 2007) the ESF did include such a list. The number of
supporting organizations numbered 66, which if we consider that ESF membership numbered only 56 by
September 2009 (ESF, 2010), gives a picture of the level of consensus among service suppliers regarding EU
trade strategy.
22
16
On EU
Trade
Strategy
On
Economic
Criteria
for FTAs
On
Services
Trade
Issues Paper
(September 2005)
Business Demands
(September 2005July 2006)
Opening third party markets
‘should be primarily pursued
through an ambitious strategy in the
Doha Round […] complemented
by bilateral or regional
initiatives, such as Regional Trade
Agreements (RTAs) with Mercosur
and the Gulf Cooperation Council’
(European Commission, 2005a, p.
6, emphasis added)
None.
‘Business requests more action at
bilateral level’ (European
Commission, 2006a, p. 1, emphasis
in the original)
‘A new generation of FTAs: market
access oriented; carefully selected; with
enriched content and strengthened
enforcement.’
(European Commission, 2006c, p. 22,
emphasis in the original)
‘In terms of content new
competitiveness-driven FTAs would
need to be comprehensive
and ambitious in coverage, aiming at
the highest possible degree of trade
liberalization’ (European Commission,
2006f, p. 11, emphasis added)
Business requests EU FTAs focus
on ‘emerging countries where
both current barriers and future
markets are located. Attention to
be given to countries which have
already or are negotiating
FTAs/RTAs with our competitors
and where we are losing market
share.’ (European Commission,
2006a, p. 1, emphasis added)
Economic criteria for FTAs: market
potential and protection of EU
exporter interests (including ‘the
difference in protection facing the EU
and its main competitors’) (European
Commission, 2006c, p. 12, emphasis
added). Reference to ‘our potential
partners such as India, Korea, and
ASEAN’ (European Commission, 2006c,
p. 13)
The ‘ESF does not welcome the
content of [the Issues Paper]
because the services sector has not
been included at a sufficient level.
[…] The services sector is the core
of the European economy […]
and should be at the very heart of
EU trade policy to maintain EU’s
[sic] comparative advantage’
(European Commission, 2006a, p.
6, emphasis added)
‘EU service producers are strongly
competitive on world markets and
therefore stand to gain from
international market opening. [...]
They are prevented from providing their
services in many parts of the world. [...]
The services sector should be at the
very heart of EU trade policy to
maintain EU’s [sic] comparative
advantage.’ (European Commission,
2006c, p. 7, emphasis added)
‘The key economic criteria for new
FTA partners should be market
potential (economic size and growth)
and the level of protection against EU
export interests (tariffs and nontariff
barriers). We should also take account
of our potential partners’
negotiations with EU competitors
[…] Based on these criteria, ASEAN,
Korea and Mercosur […] emerge as
priorities.’ (European Commission,
2006f, p. 11, emphasis added)
In addition to ‘far-reaching
liberalization of services and
investment’ a ‘new, ambitious model
EU investment agreement should be
developed in cooperation with the
Member States’ (European
Commission, 2006f, p. 11, emphasis
added). This is known as the
‘Minimum Platform’.
There is ‘some room for more open
markets remains in certain
professional services, such as
accounting and legal services. [...]
Substantial gains may be expected
from further integration of the
EU’s internal market, intuitively
more likely than with regard to
external liberalisation.’ (European
Commission, 2005a, p. 24,
emphasis added)
Global Europe Draft
(June 2006)
Final ‘Global Europe’
Communication
(October 2006)
Sources: author’s compilation of data from European Commission (2005a, 2006a,b,f and UNICE, 2006)
Table 2: Business Demands and the Evolution in DG Trade’s Strategic Thinking
almost verbatim repetition of the summary findings of its January 2006 consultation of
business federations, quoted from at length above (see p. 14).
This points to a second set of demands from business – which were voiced particularly
strongly by the services lobby – that could broadly be classed as requests for so-called
‘economic criteria’ in EU FTAs. There were two such criteria that were routinely requested
following the publication of the Issues Paper. The first was what could be called the ‘market
potential’ criterion, namely ‘the size of the market and its growth prospects [which] are
proxies for [EU] current and long-term commercial interests in a country, including
investment opportunities’ (European Commission, 2006c, p. 12). The second, and perhaps
most significant, was the ‘protection of EU export interests’ criterion, which stated that
markets should not only be targeted on the basis of existing levels of protection, but also that
the EU should take competitors’ FTAs into account. The ESF was particularly sensitive to
such developments, which is not entirely surprising if we consider the highly competitive
nature of preferential (and discriminatory) liberalization in services markets. However, it was
not the only group that was concerned with this turn of events. It is not difficult to see in this
second economic criterion a general reflection of business demands (see the reference in the
previous paragraph) for a more assertive trade policy in the face of trade activism from
competitors in East Asia. The economic criteria themselves were one of the elements most
strongly welcomed by UNICE in its discussion of the ‘Global Europe’ draft (UNICE, 2006),
particularly as it was felt that in the past the EU’s preferential trade policies had been driven
by geopolitical interests (for a scholarly account of this argument, see Messerlin, 2001) that
did little to serve the interests of industry.
European business’s requests for more assertive action following the publication of the Issues
Paper would ultimately find themselves reflected in the ‘Global Europe’ strategy document,
which was both specific in terms of the policy tools it foresaw – a new emphasis on FTAs –
and the markets to be targeted on the basis of ‘economic criteria’ – emerging economies in
East Asia and (to a lesser extent) Latin America. Business (especially the ESF, but also
UNICE) also repeatedly requested that services be explicitly addressed in the communication.
On services trade, the Issues Paper had stated that more gains could be expected from internal
EU liberalization than from further market access abroad, a position that was reversed in
subsequent drafts of ‘Global Europe’ following intense pressure from concerned interest
groups (see Table 2). In the ‘Global Europe’ draft from June 2006, policy-makers were to
almost cite word for word a previous ESF statement on the issue stating that ‘[t]he services
sector should be at the very heart of EU trade policy to maintain EU’s [sic] comparative
advantage’ (European Commission, 2006b, p. 7, see Table 2). Policy-makers drafting the
strategy themselves admitted that they were paying particular attention to include references
to services and investment liberalization in light of the ESF’s previous complaints that the
Issues Paper had overlooked these areas of trade policy-making. 24
The insights provided by Manger’s (2009) combination of ‘systemic’ and ‘domestic-societal’
IPE explanations of trade policy seem particularly pertinent in this regard. The ESF was
particularly worried about ‘missing the boat’ of preferential liberalization in the face of
increasing activism from competitors in the region, which was also reflected in its strong
advocacy of the ‘economic criteria’. The ESF was, however, more concerned than most other
European business groups about being at a competitive disadvantage in services in East Asia
– particularly in terms of new entry to highly-regulated markets – lending credence to the
24
Telephone interview with a European Commission official, 5 May, 2010.
notion of a heightened ‘domino logic’ in preferential services liberalization. The fact that this
was particularly relevant for mode 3 suppliers is underscored by the EU’s adoption of the socalled ‘Minimum Platform on investment for EU FTAs’. It represented a desire for a
consistent approach in services and investment that has so far been absent from the mandates
used across different FTAs in other issue areas – such as government procurement and
intellectual property rights. 25 This template for ‘a Title on “Establishment, trade in services
and e-commerce”’ in subsequent FTA mandates was formulated in anticipation of the ‘Global
Europe’ strategy – a draft was circulated to the Members States in July 2006 – and approved
by the Council of Ministers in November 2006 (European Commission, 2006d,e). The aim
here was to have a template that could be adapted in each FTA negotiating mandate to the
particular circumstances of a trading partner, particularly with a view to match any market
access gains acquired by a competitor through an FTA or otherwise (see European
Commission, 2006e, p. 2). This desire for competitiveness-driven adaptability was also
reflected in a novel ‘review clause’ for investment, which, in the words of its drafters, was
included ‘with a view to allow in the future a possible upgrading of establishment provisions’
(European Commission, 2006e, p. 2; for a more extensive discussion of the ‘Minimum
Platform’ and the EU’s bilateral services and investment agenda, see Siles Brügge, 2010a).
To reiterate, what was particularly noteworthy about the Minimum Platform was the
emphasis placed on services and investment liberalization within the context of the ‘Global
Europe’ strategy. Crucially, the fact that it was referred to as a Minimum Platform was not
only a reference to its nature as an institutional compromise between the Council and
Commission. Rather, it corresponded to the ‘minimum’ being sought from all future FTAs. 26
In this respect it represented a desire for a consistent approach in services and investment that
has so far been absent from the mandates used across different FTAs in other issue areas –
such as government procurement and intellectual property rights. 27 That being said, the
intention was still – albeit on the basis of the Minimum Platform – to adapt the FTA
negotiating mandate to the particular circumstances of a trading partner, particularly with a
view to match any market access gains acquired by a competitor through an FTA or
otherwise (see European Commission, 2006b, p. 2). This desire for competitiveness-driven
adaptability was also reflected in a novel ‘review clause’ for investment, which, in the words
of its drafters, was included ‘with a view to allow in the future a possible upgrading of
establishment provisions’ (European Commission, 2006c, p. 2).
The strong pressure from business groups – and in particular the services lobby – in the face
of increasing competition from rival economies in East Asia seems to have played an
important role in prompting the Commission to change tack in 2006 and abandon its
multilateral strategic orientation. Table 2 – where the Commission’s initial position in the
Issues Paper has been juxtaposed to its subsequent statements of policy following intense
interest group lobbying – has provided evidence of this. Both the timing and content of the
EU’s trade strategic pronouncements fit the theory that interest groups and systemic events
are important factors in the determination of trade policy. What is more, the evidence has
25
Interview with a European Commission official, Brussels, 29 April, 2010. Interview with a European
Commission official, 6 May, 2010.
26
In denying a researcher’s request for access to the final text of the Minimum Platform, the Council’s Working
Party on Information argued that the ‘release [of the Minimum Platform] to the public would enable negotiating
partners of the EU to assess the measure of its willingness to compromise’ (Council of the EU, 2009, p. 5). This
confirms the view that the Minimum Platform was not only a very important benchmark for future agreements,
but more importantly, suggests that it also represented the EU’s ‘red line’ on services and investment.
27
Interview with a European Commission official, Brussels, 29 April, 2010. Interview with a European
Commission official, 6 May, 2010.
19
suggested that business was not hampered by a lack of ‘sufficient interest convergence’
(Elsig, 2007, p. 940). The most influential business groups lobbying on the ‘Global Europe’
strategy – namely UNICE and the ESF – both embodied the strong and cohesive views held
by their membership.
VI – Conclusion
The aim of this paper has been, first and foremost, to challenge the widespread institutionalist
myth that EU trade policy is uniquely depoliticized. To do so, it has deployed arguments
from IPE that stress the importance of pressure from interest groups in pushing for NorthSouth preferential liberalization, particularly in the area of services and investment. In this
respect, the paper has been able to show that the ‘Global Europe’ strategy emerged – at least
in part – in response to interest group pressure and their responsiveness to systemic
competitive pressures in East Asia. That is not to say that the IPE arguments considered here
are without their own limitations. The Manger (2009) and Baldwin (1993, 1997) frameworks,
in particular, do not take into account the effect of a stagnating multilateral trade round in
terms of shaping competitive pressures for regionalism. In the case of the EU’s trade strategy,
the ESF and other business groups only became concerned about the systemic pressures
exerted by competitors’ FTAs after the Cancún debacle and the subsequent dampening of
business expectations. These issues, however, do not detract from the elements of most
relevance to this paper from such theoretical approaches. It is clear that both interest groups
and systemic pressures were key factors in shaping EU trade strategy, even in the pre-Cancún
period, as the Commission’s 1996 Market Access Strategy suggests policy-makers were
responsive to business interests.
Rather, such theoretical limitations tell a cautionary tale of the problem of overdetermination
in social science. We should be careful not to fall into this common pitfall and attribute the
emergence of the ‘Global Europe’ strategy exclusively to this one set of factors. As was been
hinted at above, an important explanatory role still needs to be accorded to the ideas held and
wielded by Commission policy-makers in the context of trade policy-making, for which there
was unfortunately little space in this paper (this is explored in more depth in Siles Brügge,
2010b). Mandelson’s more explicitly neoliberal discourse in trade was inherently more
amenable only to embracing an FTA-based trade strategy than Lamy’s doctrine of ‘managed
globalization’, but it also shaped the parameters of subsequent trade policy-making. This
change of discursive climate might provide a clue as to why it was only after Cancun and the
departure of Lamy that interest groups became more active in pushing for a bilateral
approach.
The potential problems with a purely rationalist approach to trade policy become more
apparent when we turn to the FTA negotiations spawned by the ‘Global Europe’ strategy, of
which so far only an agreement with Korea has been initialled in October 2009. There the
implicit emphasis placed in the ‘Issues Paper’ on ‘trading away’ the EU’s ‘pockets of
protection’ was embodied in a substantial trade-off: in exchange for agreeing to a substantial
liberalization of the automobile as well as other sectors, the EU would receive substantial
concessions in terms of market access, with the most important concessions going to the
services industry (see Siles Brügge, 2010b). This sits oddly with the underlying Olsonian
assumption of much of rationalist IPE scholarship; the notion that the ‘losers’ from a
particular economic policy are more likely to exercise effective political pressure (see Olson,
1965) is problematic given the inability of the (import-competing) European automobile
industry to successfully counter the substantial liberalization of trade in cars with Korea (see
20
Siles Brügge, 2010b). This paper is thus only the first step on a long road to bringing the
study of EU trade policy – for long the preserve of scholars stressing its ‘exceptionalism’ –
into the political economy mainstream. It illustrates that, rather than being the product of a
uniquely depoliticized policy-making machinery, the EU’s trade strategy has been shaped
over the years by a lively politics of interest – not unlike that found in other major trading
nations.
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