Global trade

Fair global trade through development-focused EU trade policy

Market in Beira, Mozambique

Trade can be a key driver of development. Many developing countries are increasingly integrated into global supply chains. And, for many trading partners, the European Union is a significant export market.

If trading with these countries is to actually help them achieve sustainable development, it is vital that EU trade agreements incorporate social, environmental and human rights standards and that they take account of the current level of development of the trading partner concerned. A development-friendly EU trade policy is therefore a valuable tool in making world trade more just and more sustainable.

Since the entry into force of the Treaty of Lisbon in 2009, the European Union has sole responsibility for trade policy. EU Member States mandate the European Commission to negotiate trade deals with third countries. Once negotiations have been concluded, the Council, the European Parliament and the EU Member States decide whether to approve these deals.

EU trade policy instruments

The European Union has various trade policy instruments at its disposal:

  • bilateral free trade agreements with developing countries (for example Economic Partnership Agreements with ACP countries, see below for details) and bilateral free trade agreements with industrialised countries (for example the European-Canadian free trade agreement, CETA), which can also impact on developing countries
  • unilateral preferences accorded by the EU, for example through the Generalised Scheme of Preferences (GSP, see below)
  • aid for trade from the EU and its Member States and development assistance for partner countries to help them implement free trade agreements (see below for details)
  • strategy papers, action plans and general political texts and documents (for example the European Commission's trade and investment strategy "Trade for All").

Economic Partnership Agreements

Since 2002, the European Commission has been negotiating Economic Partnership Agreements (EPAs) with regional groups representing the countries of Africa, the Caribbean and the Pacific area (ACP countries). The aim is to promote sustainable development and regional integration in the ACP countries and bring trade relations between the EU and ACP countries into conformity with World Trade Organization (WTO) principles.

As part of this, the EU grants the ACP countries duty-free and quota-free access to the European market. The ACP countries can choose not to open their markets in certain particularly sensitive sectors. Liberalisation of all other sectors takes place over a long transition phase. Even in those sectors where liberalisation has taken place, the ACP countries can take measures to protect them if EU imports are posing a serious threat to their economy.

The EU has already completed negotiations on agreements with the Caribbean countries (CARIFORUM-EPA), southern Africa (SADC-EPA), east Africa (EAC-EPA) and west Africa (ECOWAS-EPA). The agreements with the Caribbean countries and with southern Africa are already being provisionally applied (as at March 2018). A number of interim EPAs with individual African countries are also currently in operation.

Generalised Scheme of Preferences

Under the Generalised Scheme of Preferences (GSP), the EU unilaterally grants developing countries reduced tariffs on a wide range of industrial and agricultural products. By easing access to the EU market, the aim is to enable partner countries to increase their exports, helping to boost their economies and reduce poverty. Currently, 76 countries benefit from these reduced tariffs. If countries are found to have committed serious and systematic abuses of human rights agreements or ILO core labour standards, this reduction in tariffs may be temporarily suspended.

Two special initiatives are included within the GSP: the Everything But Arms Initiative (EBA) and GSP+. Under the EBA initiative, the Least Developed Countries (LDCs) are granted unconditional duty-free and quota-free market access for all products except arms. Currently 49 countries are benefiting from the initiative.

The GSP+ initiative allows countries that qualify for the GSP but not for the EBA initiative (in other words non-LDCs) to be granted greater reductions in tariffs than are available under the GSP. In order to qualify, these countries must have ratified 27 international agreements (for example the various treaties on human rights, labour rights and environmental standards and good governance) and be able to prove that these treaties are indeed being applied.

The BMZ's goals

The Federal Ministry for Economic Cooperation and Development (BMZ) champions efforts to bring greater justice to the world trade system. Operating within the framework of EU trade policy, it is pursuing the following goals:

  • moves towards liberalisation appropriate to each developing country’s level of development, for example transition periods and safeguards for sensitive areas of the economy, such as the agricultural sector
  • across-the-board inclusion of human rights and environmental and social standards in bilateral trade agreements
  • the linking of tariff reductions to sustainability criteria (for example palm oil from Indonesia)
  • efficient monitoring mechanisms to regularly check what impact trade instruments are having on human rights and sustainable development in the partner countries
  • a strong role for civil society in negotiations and in implementation of the trade agreements
  • simple and flexible rules of origin that help incorporate developing countries into global value chains and, in particular, foster South-South trade
  • consideration of what impact free trade agreements between the EU and other industrialised countries have on developing countries, so that these agreements also benefit the developing countries (for example the inclusion of a wide range of environmental and social standards in the European-Canadian free trade agreement, CETA).

Aid for trade

The BMZ offers its partner countries considerable support through its aid for trade. It funds bilateral and multilateral projects and programmes (for example through the GIZ, the EU, United Nations organisations such as UNCTAD and the ITC (International Trade Centre), through other multilateral partnerships such as the Enhanced Integrated Framework (EIF) and through international non-governmental organisations such as the International Centre for Trade and Sustainable Development (ICTSD). These measures help partner countries to diversify their economies and their exports. This makes them better able to participate in the global economy and in regional economic communities. The aim is to help partner countries to have a say in trade agreements and to implement them in such a way that trade boosts sustainable development and poverty reduction efforts, and vice versa.

The BMZ is particularly keen to support regional groupings, which can play a key role in market integration. The partner countries are helped to create an environment that is favourable to trade and to establish systems to monitor and assess the impact of trade agreements.

More information about Germany's commitment to a fair world trade system can be found here.


BMZ glossary

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