EU Will Pursue Bilateral Agreements, May Launch Trade Disputes in 2013

BRUSSELS—Finalizing or furthering ongoing bilateral free trade negotiations with more than four countries or regional associations, including Canada, India, Japan, and the Mercosur nations, as well as grappling with controversial trade disputes with China and Russia will be key features of the European Union trade agenda in 2013.

Assisted by Ireland, which takes over the six-month rotating European Union presidency and has made free trade a key plank in its policy agenda, the European Commission also hopes to get a green light to begin free trade talks with the United States.

Following up on a year when the EU ratified free trade agreements with Colombia, Peru, and Central American countries; inked a tentative deal with Singapore; and took a controversial step to launch an ambitious free trade agreement with Japan, the European Commission is hoping to cross a final but stubborn hurdle with Canada.

In what could presage talks between the EU and the United States, the EU-Canada negotiations, which were supposed to finish in 2012 after more than 10 rounds, are stuck over disputes about agriculture and intellectual property rights issues.

While a breakthrough on the free trade talks with Canada would be a bonus for the European Commission, it would be a minor accomplishment compared with the breakthrough that would occur if the EU executive body, which negotiates all trade issues on behalf of the 27 EU member states, can resuscitate talks with India, make progress with Mercosur, and complete the terms of a deal with Japan. In the waning months of 2012, the EU member states and the European Parliament approved a negotiating mandate for EU-Japan free trade talks.

EU Pins Hopes on Japan.

“Realistically speaking, our highest hopes are with Japan,” a European Commission official told BNA on the condition of anonymity. “We have done a substantial amount of leg work in the scoping process that preceded the agreement to begin the talks with Japan. We know where the key differences are, and we know what each expects of the other, so there is reason to be optimistic that we could clinch a deal by the end of 2013.”

If the EU were to finalize a free trade deal with Japan, it would be despite intense opposition from European automobile manufacturers, which oppose a deal with Japan—and any country with an automobile manufacturing industry—until EU overcapacity problems are resolved.

Speaking in November after an attempt to get the EU to impose a safeguard clause in the EU-South Korea free trade agreement to stop Korean car imports, European Association of Automobile Manufacturers President Sergio Marchionne accused the European Commission of allowing unequal market access in the free trade talks.

“It makes zero sense for Europe to use the auto industry as a bargaining chip to give away in return for doubtful benefits for other sectors,” Marchionne said in a speech in 2012. “Potential free trade agreement partners regard the EU as a big fish to catch. Entry is easy and the market is made up of 500 million affluent people … a guarantee of equal conditions for all is the one fundamental principle that must apply.”

European Trade Commissioner Karel De Gucht has rejected accusations by the European car makers that he has been sacrificing the EU auto industry to gain better market access for other European industries. However, with the European medium-priced car sector crisis growing by the month, the EU automakers have support from France and Italy, where the growing ranks of unemployed industry workers is a significant political problem.

Stalled India, Mercosur Talks Could Revive.

In the case of the EU-India free trade talks, which began in 2007, market access for EU car makers has been an issue, as have been disputes related to intellectual property rights, especially those concerning pharmaceuticals. Because India produces 60 percent of the generic drugs sold in the developing world, the country has resisted EU patent-protection efforts. The latest issues to stall the talks concern India’s demands for the EU to approve the country as a nation with a suitable data protection legal framework, as well as the relaxation of work visas for Indian professionals.

Concerning the EU-Mercosur free trade talks, which resumed in 2010 after a decade-long hiatus, the current divisions are a microcosm of the stalemated World Trade Organization Doha Trade round. The EU wants lower industrial tariffs, including those for cars, while the Mercosur nations want better terms to sell agricultural products in the 27 member states. France and Italy, reluctant to sign off on renewing the EU-Mercosur talks, are intent on protecting struggling EU farmers.

Despite the divisions, the EU and the Mercosur nations have agreed to resume talks on Jan. 24, 2013.

Other ongoing bilateral free trade talks in which the EU will try to make progress concern Malaysia and Vietnam. In addition, the European Commission is expected to launch free trade talks with Thailand and other Association of Southeast Asian Nations (ASEAN) countries following its successful negotiations with Singapore. That tentative accord, signed Dec. 16 between the European Commission and the Singapore government, must be ratified by EU member states and the European Parliament in 2013, a process not expected to encounter significant political difficulty.

Long-standing free trade negotiations with the Gulf Cooperation Council, which includes Bahrain, Kuwait, Omar, Qatar, Saudi Arabia, and the United Arab Emirates, will continue.

The EU-Ukraine talks are on hold because of human rights abuse concerns.

Disputes Loom With Russia, China.

On the EU trade dispute front, a trade complaint is expected to be filed soon in the World Trade Organization by the EU against Russia over Russian recycling fees imposed on car imports. The EU says the fees violate WTO rules because they are not applied to Russian-made cars. According to European Commission officials, little progress was made on the dispute at an EU-Russia summit held on Dec. 21, 2012, and a request for a WTO trade dispute panel is anticipated.

When it comes to China, there are a host of trade disputes, many involving trade defense mechanisms such as antidumping or anti-subsidy duties. One of the most prominent cases for 2013 involves telecommunications hardware made by Chinese companies. In 2012, De Gucht was set to launch the first-ever European Commission-instigated antidumping probe by calling for an investigation into Chinese telecom hardware producers.

Convinced that European telecom companies, such as Ericsson and Siemens, have refrained from filing a complaint for fear of Chinese government retribution, the European Commission backed off on launching the probe in 2012 at the last minute because of political pressure from German Chancellor Angela Merkel.

Political pressure from Germany regarding EU trade defense issues also will be an important factor in a dispute over Chinese photovoltaic solar panels, which European manufacturers insist are illegally subsidized, driving numerous domestic EU makers into bankruptcy. In 2012, the European Commission launched antidumping and anti-subsidy probes into Chinese solar imports, and must decide by the middle of 2013 whether to impose temporary duties.

However, with German manufacturing industry exports to China, especially luxury cars such as BMW and Mercedes, helping to propel the nation’s economy in the face of slumping markets in the EU, Merkel has been insisting that the European Commission ease off on Chinese trade defense mechanisms.