Disputes between the European Union and the rest of the World Essay

Disputes between the European Union and the rest of the World Essay
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    University of Arkansas System

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  • Pages: 21

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).


Andres, R. B., & Kofman, M. (2011). European energy security: reducing volatility of Ukraine-Russia natural gas pricing disputes. NATIONAL DEFENSE UNIV WASHINGTON DC INST FOR NATIONAL STRATEGIC STUDIES.Cooper, W. H. (2014). EU-US Economic Ties: Framework, Scope, and Magnitude.

Diakun, A. (2012). EU Foreign Policy in Ukraine: Policy Shortcomings and Russia’s Countervailing Force (Doctoral dissertation, Central European University).

Grina, J. J. (2014). Brazil’s rise to global power (Doctoral dissertation, Monterey, California: Naval Postgraduate School)

Huang, Z. (2010). EU-China Trade Disputes in the WTO: Looking Back to Look Forward. Yearbook of Polish European Studies, (13), 41-57.

Khorana, S., & Garcia, M. (2013). European Union–India Trade Negotiations: One Step Forward, One Back?. JCMS: Journal of Common Market Studies,51(4), 684-700.

Maggi, G., & Staiger, R. W. (2012). Trade Disputes and Settlement. mimeo.

Marshall, M., & Jaggers, K. (2010). Political regime characteristics and transitions, 1800–2009. Fairfax: Center for Systemic Peace, George Mason University.

Osipov, V. (2013). Ukraine: Implications of Future Cooperation with the EU and NATO. ARMY WAR COLLEGE CARLISLE BARRACKS PA.

Stephanie Hanson, and Brianna Lee (2012) Mercosur: South America’s Fractious Trade Bloc. Retrieved 3rd 10, 2014. http://www.cfr.org/trade/mercosur-south-americas-fractious-trade-bloc/p12762

Teorell, J. (2010). Determinants of democratization: Explaining regime change in the world. Cambridge: Cambridge University Press

Tugores-García, A. (2012). Analysis of global airline alliances as a strategy for international network development (Doctoral dissertation, Massachusetts Institute of Technology).Wouters, J., Goddeeris, I., Natens, B., & Ciortuz, F. (2013). Some critical issues in EU-India Free Trade Agreement Negotiations. Available at SSRN 2249788.

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Disputes between the European Union and the Rest of the world Essay

Disputes between the European Union and the Rest of the world Essay
Rate this post

  • University/College:
    University of California

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 4799

  • Pages: 19

Disputes between the European Union and the Rest of the world

Disputes between the European Union and the Rest of the world


            The sheer size of the EU sheer markets as well as its vast experience of more than forty years in negotiating international trade agreements has made it become the most powerful trading bloc in the world. Moreover, it has become a formidable power through trade, hence creating more problems with the rest of the world. The EU has increasingly used its market access as a bargaining chip to obtain changes within the domestic arena of its trading partners, starting with labor standards to development policies, and internationally, ranging from global governance to foreign policy. Therefore, this paper mainly analyses EU’s power in trade a factor that has made it create tension with the rest of the world. The analysis includes major dilemmas that are associated with how it exercises its trade power and point out why these strategies create tension with other international states. The argument also includes the need for the EU to refine it initial strategies of accommodation for it to successfully transform its structural power to be more effective and hence have a more legitimate influence.

            Among the first goals of the EU as a trade power is using its power to secure concessions from others on market access. This makes it function as an economic globalization determinant or shaper. Basically, the EU is using its trade power to achieve non-trade objectives that range from the export-specific rules flanking market integration such as social, environment and safety standards to a more political or strategic linkage (Haughton, 2007).The rest of the world is therefore left to wonder if such use of trade power ultimately matters in geopolitical terms.

Power in trade

            When we compare the EU and the US, there is no significant difference in the way the two exercise their power in trade at the bilateral levels mostly through agreements that they often have over their access to the market for their goods, capital and services in other regions. Agreements with EU have usually been involved more on reciprocal concessions over tariffs, quotas, and technical barriers to trade. However, concessions can sometimes be asymmetrical, either due to the fact that the EU could be making steeper cuts, or due to the fact that the value of the EU cuts could be greater following the size of the market. 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 South as an exchange for accessing its own markets. Regionally, EU power has taken the form of less specific reciprocal concessions. As more nations across the world join regional trading blocs, the aim of the EU is to realize economies of scale through bloc-to-bloc deals. Such first bi-regional trade agreement is still being negotiated since 2000 mainly involving the EU and Mercosur, which is a customs union between Brazil, Argentina, Uruguay, and Paraguay 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 in Latin America especially, have taken such moves partly in consideration to reaction by USA’s own drive towards regionalism.

            EU’s involvement in multilateral bargaining at the global level has been shaped by its relationship to the US. These two great trade powers have for so long been engaged in what is seen by the rest of the world as a battle of the titans, as each side has been trying to ensure that each of them has a continued access balance towards the market through trade and regulatory deals, if not, to resort to dispute settlement (Grabbe, 2006). As that continues, they have also tried using their trade power to exert their rule of ‘western hegemony’ over the developing world, especially towards the so-called ‘new issues’ that pertain to services as well as intellectual property that were initially introduced during the Uruguay Round. Of late little co-operation has existed between the EU–US regulatory and these two powers have kind of began pursuing sharply diverging tactics, that came up with opposing alliances during the Hong Kong meeting of the Doha Round in December 2005.

Power through trade

            The EU tends to be more attached to not only multilateral forms of trade relations but also to the premises of embedded liberalism. Contrary to the US case; the EU’s use of trade in order to achieve non-trade objectives has some pride as a potential instrument of Europe’s geopolitical power. Whilst little doubt exists in regards to the EU being considered as one of the top players in world trade, there has been a lot of keen interest while assessing EU’s identity as a ‘power’ in general. They have however put across various qualifiers in characterizing a mode of influence that can enable them to manipulate others and make them perform according to the interest of the EU.

            Existence of the shift from a post-war to a post-Cold War paradigm of economic hegemony does not seem to be towards only increasing interventionism inside the affairs of trading partners, that even other nations apart from EU promotes. It has also taken other forms absent in the subservience of trade to security imperatives, the power to be yielded from asymmetries in such interdependence, and the ends of increased interdependence, as scrutinized under a mode demanding criteria of legitimacy. Even as the US tries to promote some specific features of an open trading system that tend to serve its domestic interests, the EU instead has been increasingly engaged in a more clever game where values, interests, and model are blurred. It does not just try to promote openness, but are more concern with openness ‘the EU way’. Considering the fact that the EU itself is a system of market liberalization, external efforts that it encourages are regarding replication more than domination

            Most groupings that have come up in the last decade seem to have done so majorly to increase their bargaining power within the trade negotiations against the EU and the US. They forget that having a closer relation to other regions around the world tend to be a means of enhancing the normative power of the EU and a reflection of this power. This is because such EU outstanding context and unique character as an integrative policy among other states is shown to be important. It is not US as a federal state which is relevant to integration among countries, but the EU as a federal union. Therefore, it seems the EU’s support for regional organizations like the Pacific Islands Forum and the African Union is linked to a particular expectation of contribution not only to the economic integration but also to the prevention, management and resolution of inter-state conflicts.

            However, while the EU has considered itself to be the judge of what is right or wrong as a trade power, there is some evidence showing that as a union it is indeed a conflicted trade power. This is a fact since within its different guiding principles; there are various policies which directly contradict each other (Teorell, 2010).

Regionalism vs. Multilateralism

            A lot of debate has been going on, whether regional trade agreements have been indeed building blocks or they are just stumbling blocks for multilateralism. The claim by the EU has always been that they are indeed building blocks. This was demonstrated when it defended the relevance of its own approach to the Uruguay Round agenda; as both the EU as well as the GATT at the same time tried to explore the fresh basis of trade in services, of course, with diverse ambitions as to the extent of liberalization. While it was a key player in the launching of the Doha Round, it is also becoming an active promoter of regionalism.

            The question then left to ask is whether these two factions are compatible. Following the sudden jump in terms of free trade agreements to more than 300 like in 2001, the shocking thing is that the WTO has not been able to reach agreement even on a single case report towards any regional agreement in spite of them vowing to participate in the role of regional trade committees. This is in contrast to the Appellate Body which has taken on the issue, for example, they suggested on the need to apply some kind of ‘necessity test’, towards a recent ground-breaking case, where by Turkey and EU were condemned after they increased unnecessary barriers to Indian textiles when Turkey decided to enter its customs union with Europe. Following the move the EU is still drawing lessons. Of course, such judgment may act as an inspiration to the EU policy-makers in their endeavor devise strategies of accommodation trying to tame the trade-diverting effects on regionalism. As an alternative, on the region-to-region front, there could be a possible insertion of clauses that link the implementation of market access deals with progress on the multilateral front, just like it was done with ASEAN. EU’s regionalism can also come under conflict with bilateral agendas of their own partners. Trials by the EU’s strategy of encouraging regional co-operation in the Balkans have come into conflict following its use of trade linkages for domestic change.

            Also, as was realized in the Euro-Med context when the EU sought to draw lessons from past relations with the Mediterranean after its multi-lateralized its relations and encouraged trade among the southern partners by changing its rules of origins and allowance of accumulation, for example, aggregation between the value added to the southern nations. However, following lack of consensus between these economies, such approach has not yet been judged to bear fruit, (Knodt & Jünemann, 2007). There could be a need for more drastic incentives. Continued systematic promotion of regionalism could be of harm indeed to the EU’s proclaimed development goals. Like, when some analysts argue that being engaged in urging of rapid regional integration in Francophone West Africa was seen as a great contributing factor towards the subsequent instability in the region. The EU sought free movement of goods in this case, but not people, but failing to provide a redistributive wealth mechanism that was to deal with adjustment costs and at the same time undermined government social programs.

            Moreover, most of the deals negotiated throughout the 1990s under the watch of the New Transatlantic Agenda between the EU and the US tended to be vulnerable to similar criticism. In a way they have had a trial to the feasibility of exporting the approach by the EU of market integration through regulatory mutual recognition by the US. However, still it is important for the EU and the US to design such agreements as well as their supporting mechanisms better and make them be open to those who are new who might take the approach of respecting the standards adopted trans-atlantically.

Non-discrimination vs. Bilateral preferential relations

            What can be seen as a major variant on the multilateralism –regionalism dilemmas tend to be increasing tension between the vowed commitment of the EU to international trade law, more specifically the highly favored-nation (MFN) principle, as well as the desire of the EU to be able to maintain preferential trading relations with specific countries. The agreement by the EU to the concept of ‘trade distorting’ regimes that stems from some of its members’ colonial pasts, exceeding the entire preferential market access granted to ACP countries, may of course sound as an objective even more commendable as compared to the MFN pursuit of global justice. However, it is important for EU to be clear on the price it has to pay for this moral luxury. Therefore, establishing such tension between international law and special relations tend to be acting geopolitically pitting two sets of developing countries against one another.

            Likewise, the 2001 Everything But Arms initiative (EBA) involvement in granting duty and quota-free access to the entire exports but not where arms and munitions are involved from the least countries that are less developed has faced criticism for excluding the key crops such as sugar, rice and bananas until 2009, as well as for leading in discriminatory practices among developing countries. Vulnerable and small economies that have been included tend to be bound to displace the exports of the same but some countries were excluded. Some States like the Caribbean or the Bangladesh members of the ACP group got a chance to benefit from this preferential trading arrangement with the EU. The WTO has many times condemned such policies. However, most of the member states, like UK, France, or Portugal who are former colonial powers, would not be keen on abandoning a system that is designed to eradicate poverty for the poorest farmers around the world who have become dependent on inflated EU prices. In this instance, the EU has chosen a classic strategy of accommodation: progressive graduation as well as the negotiation of transition systems. Based on the multilateral constraint, EU’s only remaining power tend to lie with determining the speed of transfer of adjustment costs with its trading partners and its import intermediaries.

            This kind of negative power is doomed to unpopularity. Therefore, by EU presenting a new deal like in 2005 of cutting guaranteed sugar prices by 36 per cent over four years, it was predictably criticized on all sides, attacked based on the fact that it was reforming the detriment of poor sugar exporting countries and it was failing to move much further. Somehow, the EU seems to have taken firm grounds stand, ironically, even playing around with the non-discriminatory obligations that are contained within the GSP, at least as under the rule of the WTO 2004 appellate body ruling on EU vs. India. In this case, India was challenging the EU’s modified GSP which tend to provide an additional margin of preference on the part of recipients with drugs enforcement policies where the Commission was involved in inventing the entire list of beneficiaries of the programme without considering any objective criteria. Seen as a brilliant compromise given to the EU given by the AB, the benefit of the doubt based on the fact that indeed the right to modify preferential treatment was not subject to a simplistic constraint of identical treatment among beneficiaries, (Tocci, N., 2007). The AB argued that different developing countries were not situated on the same way when it comes to their different needs and hence could possibly be subject to ‘performance requirements’ as long as the approach were objective, transparent, as well as non-discriminatory in the broad sense. What question perhaps remains to be tested is what are acceptable conditionalities more generally? In a sense, it was important for the EU to develop a more universal approach as to where to draw the line.

Western Hegemony Vs. Mediating Power

            An area which has also brought tension is in the EU’s alliance strategy as well as the light it portrays on what kind of actor it really wants to become. As a matter of fact, is it possible for the EU to play the part of the nervous protectionist North (agriculture), the rich liberal North (services), as well as the mediator between the South and the North? Taking the ‘rich North,’ is it necessary for it to generally to always take the US side for it to protect their shared commercial interests? Or it should go for emphasizing its vocation as a mediating power on the global scene, especially between the developing world and the US but at the same time, increasingly, between different interests in the developing world itself? Just as was recently demonstrated by controversies in the Doha Round, not only do multilateral trade negotiations are asking how much liberalization, but they are also asking what kind of liberalization as well as for whose benefit The Uruguay Round basically represent the culmination of an assertive US–EU alliance bent towards a commercially driven line in addition to a grand bargain between their reluctant acceptance of (partial) opening on some tropical/agricultural products and a (delayed) opening on textile, as an exchange for introducing fresh issues within the newly created WTO. In particular, intellectual property issues have exposed the EU to a lot of criticism that comes from the developing world due to the fact it sided with the interest of US multinationals.

            This tension between the North – including the EU – and the developing world started way back. However, a lot of attempt has been made by the EU to establish a reputation as a champion of development including through its 2001 role, when it launched the ‘Doha development agenda. Some other promoted path-breaking declaration on trade and public health has been going on. Like it has opened the way for legalizing broad exemptions from intellectual property constraints during any imports on generic drugs to treat diseases such as AIDS. There are also other initiatives, for example the databank which was set up by the Commission’s Directorate General for Trade in order to assist developing countries in their market access strategies, and have enabled the EU begin to change the image it has in the WTO.

            Following what recently came up in the Doha Round is an indication again to the lack of commitment that the EU has in seeking to marry its natural alliance in most of the domains (not all) with the US and its development advocacy. For example, when a World Bank Study questioned the EU’s ‘demonstration strategy’ through EBA stating that once requirements such as standards as well as rules of origin were taken into account, it was realized that the US was actually more open to LDC exports as compared to the EU. On the other hand, there is failure by the EU to promote multilateral solutions that is capable of addressing perhaps the single most important factor that links trade and poverty such as the massive volatility as well as decline in the price of primary commodities. As a result if the EU is indeed committed to uphold an image as a ‘mediating power’ within the global political economy, it will have no option but to actively promote changes in the WTO which the US is likely to actively resist, (Marshall, M., & Jaggers, K.,2010). However, a lot of failure has been manifested by the EU in exploiting a potentially promising strategy of accommodation like putting transatlantic economic as well as regulatory co operation at the service of multilateralism.

Internal vs. external objectives

            Somehow, the manner in which the EU is exercising power through trade should be held up to special standards. Claiming consistency between its internal and external actions tend to be at the heart of its legitimate exercise of power. The EU has indeed faced difficulties in an attempt to lead by example in the area of trade. Like, in case where the single market has been premised based on the assumption that free movement of people is a key dimension of market integration, as a matter of fact, what will this one mean for the position taken by the EU on the freedom of movement of people in order to deliver services? In order for EU to be consistent, it will need to invest political capital and more creativity in ‘globalization with human faces’ as well as the manner in which there could be encouragement of back-and-forth movement of people as an alternative to permanent migration.

            The existing tension between the internal and external is well evidenced over agriculture, and came up in the Doha Round. A lot of questions have been raised over the conflicted position taken by the EU regarding agricultural tariffs and subsidies in its commitment to putting multilateralism at the service of development. As a matter of fact, there is no need for denying European citizens their landscape, food security, and way of life. However, it is important to tell them the much it costs, like the number of people who are now living under $1 a day. Also the question can be whether region-to-region agreements tend to be more about promoting regional integration outside the EU ‘per se’ but not taking the form of a worldwide strategy pushing for convergence with European standards as well as mutual opening of markets, thereby supporting EU incumbents. Time and again representatives of Mercosur have stated that they are aiming to follow the EU’s example, which according to them has made Europe ‘less dependent on the outside world, (the EU has stressed market opening). What is interesting is that the current political leadership in Mercosur, particularly President Lula in Brazil, have kind of supported the EU project over the US-led Free Trade of the Americas Agreement, indicating that the EU’s leverage through trade does not show some indications of legitimacy as compared to that of that of the US, (Stephanie Hanson, and Brianna Lee, 2012).

            Moreover, it seems that EU assumes that the liberal recipe of ‘peace through commerce’ which has indeed seems to have worked so well with them applies uniformly anywhere else. Generally, trade is capable of fueling conflict especially when carried out within a context of corrupt governance, deep social inequalities, and unfair rules, as well as without enough attention being paid to its destructive byproducts like export dependence, adjustment costs, price volatility or illegal trafficking. For EU to bring its external action to be in line with its internal philosophy, it needs to establish trade policies that are also sensitive to these potential conflicts. The current certifications efforts for diamonds or timber constitute tend to be a promising starting point.

Equal Partnership vs. Conditional Opening

            There is a fundamental contradiction that exists as well within the very idea of ‘normative’ or ‘soft’ power. The language the EU is speaking is of shared norms which are developed through consensus and co-operation. But on the other hand, trade power tends to be the use of ‘carrots and sticks’ in enforcing such norms on trading partners. We are not even surprised that the incorporation of non-trade conditions in trade deals faces great resistance from developing countries, as they just see this to be a blunt coercion. A growing debate is now going on regarding the effectiveness of conditionality, which is now kind of spilling over from the field of aid to that of trade. Regardless of any instrumental argument, what is still being asked is whether a post-colonial power is not suppose to rely on voluntary change as well as the provision of public goods like its markets in bolstering the likelihood of such change. Do we miss to see a contradiction as the EU tries to export norms of its making, which is predicated based on voluntary co-operation between states using its quasi-coercive leverage through trade? Some of the policies such as the EBA undoubtedly tend to lie at the other end of the spectrum; unconditional opening to be a tool for development; having trust that new export opportunities in themselves is likely to encourage desired changes in the beneficiaries. Nevertheless, is it true that this policy is genuinely taking the interests of developing countries to heart, or it is just a public relations coup on the part of the EU?

This is a signal to the rest of the world that the EU was eventually acting upon its pro-developing world rhetoric, the EU managed to find their way out in Hong Kong in generalizing the principle under WTO. So far giving way duty/quota-free access to 97 per cent of the products that originates in least developed countries is not welcomed by majority.

Trade Liberalization vs. Domestic Preferences

            There is great tension for the EU as a trade power based on the embedded liberalism compromise. The conflict is in the manner of combining a trade liberalization credo with a primary concern for the social effects of market integration. Often, the EU has been facing social demands for protection that somehow may be going beyond the spirit of embedded liberalism. In response to such demands, the Commission’s trade policy-makers under the leadership of Pascal Lamy have developed a fresh conceptual apparatus based on the fact of collective preferences setting up institutions that are capable of forging collective preferences. The end result is diversification of social choices over health care, inter alia food safety, precaution in the field of biotechnology or welfare rights, cultural diversity, public provision of education and health care. However, it is argued that if these concerns justify protection then the EU has the obligation of providing compensation to its trading partners.


            Indeed, it seems like EU exploits its formidable trade power for pursuing non-trade objectives through conditionality or through fostering regional trade blocs in its own image. This highlights the way the divergences between member states objectives makes it hard for the EU to signal its resolve to the outside world more clearly. 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, such as nondiscrimination and bilateral preferential relations, regionalism and multilateralism, western hegemony and mediating power, trade liberalization and domestic preferences, internal and external objectives, equal partnership and conditional opening. Due to the fact that legitimacy tends to be the main currency for an aspiring normative power, it will be difficult for the EU to effectively become a power through trade without addressing what majority of the world considers being unsustainable contradictions.


Haughton, T. (2007). When does the EU make a difference? Conditionality and the accession process in Central and Eastern Europe. Political Studies Review, 5(2), 233–246.

Knodt, M., & Jünemann, A. (2007). Introduction: Conceptionalizing the EU’s promotion of democracy. In A. Jünemann & M. Knodt (Eds.), Externe Demokratieförderung durch die Europäische Union-European external democracy promotion (pp. 9–32). Baden-Baden: Nomos.

Marshall, M., & Jaggers, K. (2010). Polity IV project: Political regime characteristics and transitions, 1800–2009. Fairfax: Center for Systemic Peace, George Mason University.

Stephanie Hanson, and Brianna Lee (2012) Mercosur: South America’s Fractious Trade Bloc. Retrieved 3rd 10, 2014. http://www.cfr.org/trade/mercosur-south-americas-fractious-trade-bloc/p12762

Teorell, J. (2010). Determinants of democratization: Explaining regime change in the world. Cambridge: Cambridge University Press

Tocci, N. (2007). The EU and conflict resolution. Promoting peace in the backyard. London: Routledge.

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