University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Disputes between the European Union and the rest of the World
Disputes between the European Union and the rest of the World
The EU (European Union) has become a formidable power through trade, hence creating more problems with the rest of the world. Occasionally its dominance has helped it manipulate its trading partners. Starting with regional labor standards to development policies and internationally, ranging from global governance to foreign policy (Marshall & Jaggers, 2010).This paper will mainly focus on the EU as a dominant trade block. A factor that has undoubtedly contributed to the many conflicts it has internationally. The analysis includes different, but recent trade related conflicts the EU is involved in and points out the factors that led to the misunderstanding, and in some cases if there was a third party involved in the issue. The analysis also shows if a form of solution was reached or if the dispute was left unresolved, and the possible outcomes it had during the time of the confrontation. Lastly, it summarizes the main ideas of the paper and gives a comprehensive overview of the analysis.
Russia – EU car tax disagreement
Among the first goals of the EU as a trade, hegemony is using its supremacy to secure concessions from others on market participation. This makes it function as an economic globalization determinant. The EU is using its trade dominance to achieve non-trade objectives therefore openly flanking market integration such as social, environment and safety standards to be more political or strategic in nature (Haughton, 2007). A bold move that has often left the rest of the world wonder if such use of trade power by the EU ultimately matter in geopolitical terms.
In 2013, a disagreement arose between the EU and Russia, which mainly centered on the newly imposed car levies. Russia had been a member of the WTO (World trade Organization) for barely a year before the trade dispute began. The EU accused Russia of using a recycling charge levied on imported cars to cover its automobile manufacturers illegally. The EU affirmed that for a whole year it had tried all possible diplomatic channels to amicably resolve the problem but with no success, Moscow declined to review its policies. According to the EU trade commissioners the implementation was not in line with the stated WTO laws that forbid biases against imports (Diakun, 2012).
Allegations arose on what was seen as Moscow’s non-compliance as the WTO sought to find out the facts. Initially, Moscow had some misconceptions about the benefits they would gain by joining the WTO. For Russia joining the union came at a cost of signing up to firm standards, which it understood well, equalized by the benefits of gaining access to a populous and larger markets with guarantee against protectionism. Most critics have accused Russia of failing to keep its commitments and the levy on cars put in place some days after it joined the WTO (Osipov, 2013).
Russia placed an increase in the duties paid on German and Italian vehicles imports, making them more expensive for the customers and affecting their market. The European Union is of the opinion that Russia is doing this on purpose to protect its manufacturers. Critics from Russia say the country is known for never keeping its WTO obligations and that the car levies disputes are part of a long chain of non-compliance laws on goods that range from harvesting machines to alcoholic drinks. Russia, conversely has protested against the EU initiatives to open up the bloc’s electricity and gas market, which it claims affects the regions business structure.
The proposed recycling levy bill failed to be amended by the Russian national assembly before it went into recess, and the EU warned the then Russian Economy Minister to expect a reaction from the union. Under the WTO regulations, Russia has exceeded its 60-day grace period to try and change or explain its laws (Marshall & Jaggers, 2010).
Comparisons between the 2001 China entry and that of Russia were unavoidable as the potential benefits of incorporating a big economy like Russia were very promising. In the case of China the first dispute arose two years after having enjoyed an enormous trade boost immediately after joining: for Russia it took less than 11 months. Russia still has other issues with the EU policies mainly its laws on the control of the European gas pipeline assets by Gazprom. The EU set up a committee to look into the issue. The Russian parliament, on the other hand, passed a ruling that changed the levy on recycling and confirmed the changes sort out the requests pointed out by the committee of the EU panel (Stephanie and Brianna, 2012).
EU- Russia- Ukraine- gas dispute
The presidents of the EU, Russia and Ukraine, have agreed to meet and talk in relation to the dispute they have had over the Ukraine-EU free trade and gas agreements. Concurrently, with the efforts to stabilize the Ukraine security situation, the heads of state Vladimir Putin, of Russia, Petro Poroshenko, of Ukraine and Jose Manuel Barroso president of the European Commission are anticipated to hold one-one-one talks, but the venue and dates are not specified. Raising the discussions to the level of the heads of state seems to give hope to possible ease of tension over the Ukraine issue, a crisis that has for long plagued the relations between the West and Russia (Andres & Kofman, 2011).
The EU and Russian president spoke over the phone on possible ways that they could ease the current tension in the Ukraine. In June this year an approved series of three-way talks over gas disputes that brought together the energy ministers of the EU, Ukraine and Russia broke down provoking the Ukraine gas supplies to be cut off by Russia. Since then the EU energy minister has scheduled various meetings with both the Russian and Ukraine energy ministers to restart the initial discussions on resolving the Ukraine-Russian row over gas prices (Diakun, 2012).
The EU consumers have not been affected by the disruption of the Ukraine gas supplies, the Ukraine, however is a major route supply for approximate half of Russia’s gas shipments to the EU. This means that the EU depends on Moscow for a third of its energy. Russia has also recently held talks with the EU to try to calm the Kremlin fears over a wide-ranging free trade agreement that the Ukraine had signed with other 28 EU nations. A move that Moscow believes will be counterproductive to its economy (Osipov, 2013). The competition between Russia and EU over Ukraine gas has led to a problem that escalated when Russia seized the former Soviet Union Crimea region. EU sanctioned Russia for illegally occupying Crimea and on the other hand Moscow retaliated by banning imports from Europe. Which leaves both the opposing at a trade standoff since the dispute is still not resolved.
China-EU solar panel dispute
The EU-China solar panel dispute in recent months has taken center stage on most newspaper headlines. This is hardly a new thing since the two are both seen as dominant international trading blocs. Most analysts, however often ignore the fact that trade disputes between economic titans like in the case of the EU and China is not a new thing. Rather they represent a continuous confrontation of the so-called China-EU strategic trade alliance.
The basis that a large volume of the EU-China policy is centered on the concept of normative power makes it one of the primary contributing factors for the long conflict. The EU policies towards China under this principle have developed in four main aspects namely: investments and trade, global governance, technical skills, and social and political changes. EU-China collaborations on renewable energy and climate change are mainly structured on the concept of encouraging sustainable growth.
In regards to the EU-Sino disagreement, the trading commissioner for the commission failed in his role of convincing other state members who already have well-developed solar energy technology to support their proposed sanctions on China. Germany, for example, a renowned leader in solar energy was particularly vocal with its disagreement on the placed investigations and sanction tariffs on China (Stephanie and Brianna, 2012).
In relation to the Sino-EU disagreement, the Commissioner for the EU failed in his initial role of convincing a majority of the members who have advanced and mature solar energy technologies to place retributive measures in China. For example, Germany, which is known internationally as a solar energy giant, is against the said investigations and restrictions placed on China.
The commission’s status from these investigations has been greatly undermined by the EU-China strategy. Such inquiry failures have further prompted China to sideline the commission, if not the entire EU affiliates. Aside from the dispute over the solar panels, the EU reluctance to allow China’s Market Economy Status (MES) is another one of the constant challenges that has not been resolved by the two factions for over a decade. EU has refused this initiative on the grounds that China lacks significant government interventions and transparency in its trade and economic policies (Marshall & Jaggers, 2010).
This drawback according to the Chinese was seen as a possible defeat. They reasoned that being granted the status of a market economy would be a major advantage in their EU-China alliance, both politically and economically. They stated that the principal reason for the EU refusal was due to the vast trade difference between China and the EU, and that the EU has tried to use the market economy status problem to gain more negotiating power and attempt to solve trade market entry and trade barrier issues that cripple their firms. The EU however continues to stress that the decline is a pure technical issue within the blueprints of its anti-dumping laws.
With this perspective of the EU, China has changed its stand from that of a new entrant to a competitor. The EU gets itself in a bind where its economic interests are threatened by its normative power strategy. Such inconsistencies that are allied with EU counterparts have further confused both renewable manufacturers and the Chinese government. The EU has eventually found its drive to promote sustainable development and pursue a value based foreign policy in China that is beyond its levels. The current standoff between EU and China, mainly originated from a mix-up and lack of recognition as to what each side’s law priorities state (Teorell, 2010). The issue has however not been resolved.
EU-US Dispute on Trade Alliance
In 2011 the sheer size and importance of the United States-European Union mutual trade alliance, with trades mainly on goods roughly total up to €450 billion making the two trading partners the major trade players internationally. Recently, discussions started on a possible trade alliance aimed at mitigating or eliminating non-tariff and tariff trade hindrances in products and services.
The EU parliament in 2012 demanded the start of talks so as to get a more efficient EU-US trade pact. Among the most highly traded items within the two factions include automobiles and medical products, machines and high tech gadgets, as well as pharmaceutical, optic and photographic appliances among others (Cooper, 2014).
Therefore, their agreements mainly focus on labor and capital intensive industries, as recognized by the economies of scale and intra-industry trade policies. Debates on agricultural products have caused some disagreements in such discussion and with various public opinions; the greatest differences still remain in areas of food safety and consumers, subsidies and environment protection.
One such recent dispute has been on the Boeing and Airbus grants awarded to the concerned companies. A bilateral agreement between the US and EU that was concluded in 1992 centered on the trade of large civil aircrafts, and the parties who controlled the funding of the subsidies in this large sector. The US withdrew from the initial 1992 agreement in October 2004 disputing the public funding allocated to the Airbus. The EU also responded by challenging the public endorsement granted to Boeing. According to the (WTO) World Trade Organization both parties had breached the initial subsidy policies, and therefore were allowed to place counter measures (Tugores-García, 2012). While there is a possibility that such initiatives would clearly provoke a trade war involving other sectors, it is expected that the problem will eventually be solved. The dispute hearing on possible counter-measures started on the 16th of April 2013, and the outcome will definitely have dire consequences on how new entrants of large civil aircrafts from other countries can progress while joining the market (Cooper, 2014).
Eu-China wines dispute
A recent EU-China dispute on anti-dumping laws centered on wine exports was resolved amicably earlier this year through negotiation and consultation. China had begun an investigation last year to establish whether European wines were sold at the standard price in the country. The initiative was seen as being an EU countermeasure for enforcing disciplinary policies on China’s solar panels. A dispute that had almost driven the two trade giants to the edge of a trade war, was sorted out through mediation by the then China Premier when agreed on price undertakings. In May 2014, the EU warned China that it would commence anti-dumping and anti-subsidy inquiries on its imports of network telecommunication equipment. The solar panel dispute is a case reference that highlights how under the WTO consultation and dialogue rule are the best ways to solve disputes, and that the EU and China had the capability and intelligence to choose this option (Huang, 2010).
In 2012, the export of wine from the EU reached 257 million liters which are approximated at $1 billion, more than that originating from France. In July 2014, the two factions settled a disagreement on poly-silicon products by using consultation and negotiations. It agreed that in the European markets the said products will not be sold below a certain price set by china. On the other hand, China agreed to stop its anti-dumping and anti-subsidy trends initially placed on its imports. Analysts have foreseen this unlikely alliance between the two factions as one that is likely to create a more beneficial atmosphere in the future.
This is because both sides take pride in their bilateral economies. If not properly settled trade disputes often have much bigger negative impact on both economies than can possibly be mitigated. As the EU and China industries are now closely interlinked industrial connections should be incorporated into the frameworks of resolving trade disputes, since it will help improve future relations and avoid further conflicts (Cooper, 2014).
China-EU Misunderstandings over Trade Defense Mechanisms
The EU has on several occasions been charged by China for inappropriate use of placed trade defense mechanisms. China particularly charges the EU for using double standards against their imports and products. In 2003 when Chinese companies sold coke in European regions at cheaper rates, they were accused of offloading their products and fined based on the EU antidumping policies. Much later the EU again threatened to file a case against China at the WTO for restricting coke exports, which China clearly explained it had done mainly due to environmental reasons. These are all clear indications of how the EU often used unfair standards against China products which eventually raised disputes between the two parties.
More surprising is the EU refusal to apply several trade methods concurrently. It is a known fact that both European and (EC) European Commission affiliate companies placed (IPR) Intellectual Property rights protection and anti-dumping measures on most of their Chinese imports. For example, on the importations of China electronics, the China-based manufacturers were first charged with IPR infringement. Then the EU in 2005 also simultaneously filed anti-dumping case against the Chinese electronics (Huang, 2010). All of which have helped fuel the long trade disputes between China and the EU.
The anti-dumping policies of the EU have always been characterized by bias trends towards the affected domestic producers. This is most certainly the case being investigated against the so-called (NME) non-market economy countries like China. For a long time, exporting producers from China have been far worse treated as compared to other countries. They had to show that they qualified for their market status, by undergoing very strict regulations that were not required from other foreign exporters belonging to the WTO.
In addition, China enjoyed fewer regulation privileges as compared to other foreign exporters due to the limited access given to the information utilized for the vetting of the injury margin or dumping regulations. A similar EU bias of its producers could be found in the way it proves the existence of hazardous material within the EU industries. In such cases instead of analyzing a substantial size of the industry as a whole, the EU on focused on a small portion of the total industry strictly comprising of companies that support the imposing of anti-dumping measures.
Eu – Brazil protectionism dispute
The EU filled at the WTO a trade case against Brazil that seems potentially explosive. The Latin America trade giant received for the first time after almost ten years a case over what it claims are protectionist charges levied on automobiles and other imports. The case is being filled amidst worry that Brazil has over the recent years become more protectionists in nature. The initiative to seek a hearing at the WTO comes as both sides seek to rejuvenate the initial long-standing trade agreement between the Mercosur and the European Union. Officials from the EU recently affirmed that the rising number of tax measures recently introduced by Brazil were not in line with the WTO policies and therefore, provided the domestic industries with undue advantage, while safeguarding them from external opposition.
Initially, Brazil’s move was thought to be aimed at Chinese automobile importers, who in 2011 controlled most of the local Brazilian market due to the aid of ingenious marketing strategies applied by the Brazilian media. Recently the EU openly declared that it was disturbed by the wrong path taken by Brazil on its policies and taxes affirming that such broad tax initiatives also affected smart phones, computers and semiconductors. Such moves negatively affect the EU exporters whose products were levied more than their local counterparts. The EU complained that the implementation also affects the Brazilian citizens since they would now be left with little choice, higher prices and lower access to original products.
The protectionism claims were strongly rejected by the Brazilian side, and they maintain that the Latin America trade bloc had solid counter arguments to show they fully adhered with the WTO trade regulations. Analysts reviewing the continuing dispute have claimed that the EU-Brazil case opens the doorway for more trade cases against Brazil. This implies that there are more cases against Brazil by other WTO members and companies, many of them have endured the injustice since the Brazil market is very lucrative. But now with the slowed economy, it is evident that the WTO members and involved companies are now less lenient towards the Latin America trade bloc (Grina, 2014).
The officials at the EU have said they had brought up the Brazil tax complaints in other former bilateral talks but had made no developments in sorting the problem. The move by the EU to ask for an official hearing of the issue in the WTO gives both parties a 60-day grace period to come up with an amicable solution. If no solution is reached within that timeframe, the EU will be permitted to ask for a formal committee to hear the case, which could impose against Brazil punitive trade restrictions.
India-eu trade disputes
The EU and India in 2007 began talks on a wider investment and trade agreement BTIA (Broad based Trade and Investment Agreement) with the intent of opening up trade in services, goods and investment. However even after several negotiation sessions, there has been very little development due to several unresolved issues. Until such issues can be solved a trade agreement between the two nations will never come to pass, and the WTO policies will continue regulating the trades between the two members (Wouters, Goddeeris, Natens, & Ciortuz, 2013).
The EU on automobiles would like to see the eventual elimination of the duty import, whereas India wants to maintain it at 10 %. Talks on opening up regulations on the public procurement as well as the insurance sector have been particularly hard. Though, India is still in the path of changing its laws on foreign investments. The EU wants India to verify its commitment by passing a public procurement bill, which has not yet been submitted to the Indian parliament for approval. The gross domestic product markets in India, according to public procurement, accounts for 15- 20 percent. This is due to the needs of the infrastructure in a wide variety of areas that include energy, telecom, roads, railway and healthcare; these areas are of apparent concern for the development of the EU commerce (Wouters, Goddeeris, Natens, & Ciortuz, 2013).
Simultaneously, India aims to benefit its IT sector with the trade agreements. It mandates the EU to upgrade its status to that of a secure data state. Such recognitions are viewed as important for the Indian based IT company’s expansion. In addition, India is negotiating for its professionals to be given more open Visa to the EU. India had complained over the EU seizing generic medicine that had been in transit through the region. Even though the two parties later solved the problem there are still some significant aspects of the dispute that still emerge.
The EU in 2003 asked for talks with India in relation to 27 anti-dumping allegations in regards to several EU export products that, included chemicals, pharmaceuticals, steel, textile and paper. The EU was of the opinion that there was no proof of the alleged dumping accusations and that there was sufficient analysis of the casualties and injury. Since then India has terminated progress on most of the disputed issues; these include those on pharmaceutical and steel products, the problem remains un-resolved and under consultation (Khorana, & Garcia, 2013).
India in 2010 also asked for talks with the Netherlands and EU in relation to the reported genetic medicines seized on the grounds of patent breach. The taken drugs had been produced in India and were being transported through airports and ports in the Netherlands to Brazil, which was the primary destination. India claims that the alleged Dutch and EU measures were against their agreements under the (GATT) General Agreement on Tariffs and Trade and the agreement under the (TRIPs) Trade-Related Aspects of Intellectual Property Rights regulations. It was not until 2011 that the dispute was sorted through mutual consensus.
According to the consensus, the fact that medicines are passing through the EU territory and that there is a patent title warranted by such products in the EU area. In itself does not give much basis for EU customs authority to suspect the patent rights violation. Proof can provide such basis that the medicine might be re-routed onto EU markets. The Indian medicine conflict perhaps might arise, on the basis of the extent of (IPR) intellectual property rights on third world economies (Wouters, Goddeeris, Natens, & Ciortuz, 2013).
US and EU Power Struggle
In comparison, these two powerful trade blocks have no difference in the ways they show their dominance in different regions. Mostly they achieve this through agreements that they often have over their access to the market for their goods, capital and services in other areas. Agreements with EU have often been more involved on mutual concessions over levies, rations, and technical obstacles. Nonetheless, they can sometimes be asymmetrical. Either because the EU could be making steeper reductions or the value of the EU reductions could be larger following the size of the regional bloc. Failure to withstand such asymmetries means that the EU, similar to the US, uses preferential bilateral agreements to pry open the available markets that are found in the area as an exchange for accessing its markets. Regionally, EU’s power has taken the form of less accurate mutual concessions (Cooper, 2014).
As more states join the EU, it wants to satisfy its members’ goals by realizing economies of scale via bloc-to-bloc pacts. Such first bi-regional trade agreement are still being negotiated since 2000 mainly involving the EU and Mercosur, which is a customs union created in 1991. It is to be followed by ASEAN (the Association of South East Asian Nations) as new economic partnership agreements (EPAs) with, among others, the Caribbean countries and the Gulf Cooperation Council. It cannot be denied that Latin America especially, has made such moves partly in consideration to reaction by USA’s drive towards regionalism.
The EU and the US have always been engaged in a battle of supremacy since their establishment as trade giants. Each side has been trying to guarantee their members and partners that they have an unrelenting access to markets and resilience in trade and regulatory deals. In addition, both have also tried using their power in trade to exert the type of ‘western dominion’. Mainly Over the developing countries, especially towards the so-called ‘new issues’ that pertain to services as well as intellectual property that were initially made In China and later introduced during the Uruguay Round. Currently, little co-operation exists between the EU–US regulatory bodies. These two powers have kind of began pursuing sharply diverging tactics, which often came up with opposing alliances like during the Hong Kong meeting of the Doha Round that happened in December 2005 (Teorell, 2010).
As shown by the paper, it is evident that the EU mostly uses its undisputed trade prowess to pursue objectives that are often non-trade related. Like in the case of China wines dispute and misuse of trade defense instruments. The EU therefore, attempts to forcibly fashion the trade blocs in its image either through conditionality or by force. This shows the way the various quarrels among of the different member states make it hard for the EU to project its dominance more evidently to the entire world (Teorell, 2010).
Nonetheless, such divergences are themselves a byproduct or an expression of existing tensions between various alternative priorities or even norms that must simultaneously be committed to by the EU machinery. They include nondiscrimination and bilateral preferential relations, regionalism and multilateralism, western hegemony and mediating power, trade liberalization and domestic preferences, internal and external goals, equal partnership and conditional opening. It will then be difficult for the EU to effectively become a power through trade without addressing what the majority of the world considers being unsustainable contradictions (Maggi & Staiger, 2012).
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