EU’s trade muscles need exercising to wield political clout

Date: 14/11/1996

THROUGH the creation of the single market and the presence of its trade negotiators at multilateral fora, the European Union has won the recognition it has long sought as a world commercial power.

But can the EU's trade clout win it the title of 'superpower', with the accompanying political leverage that the name implies?

When the Union threatened late last month to punish Burma for its human rights abuses through trade sanctions, Rangoon's counter threat of tit-for-tat measures against the EU raised questions about whether the Union's economic weight had translated into political influence.

Critics say individual member states are ruining the Union's chances of boosting its collective clout by putting their own economic interests before the bloc's reputation.

“The Union has potential muscle, but it has not been brought into proper effect because there is no unanimity within Europe,” says British Socialist MEP Clive Needle. “We could have real benefits if Europe were to exert its trade muscle effectively.”

The potential for punitive sanctions is implied in each of the EU's relationships with outside partners: the texts of all trade and cooperation agreements begin with a clause declaring that the pact can be revoked if either side abuses human rights.

Another Union tool is its Generalised System of Preferences (GSP), granting special treatment to the industrial or agricultural exports of GSP beneficiaries.

But the GSP list is hardly discriminating - there are 175 countries on it and they include Iran, Afghanistan, Nigeria and Indonesia - and the only thing which can get a country struck off is proof of forced labour.

But if a nation has not signed the International Labour Organisation (ILO) convention, as Iran has not, then a case of forced labour cannot be brought against it.

So far, the EU has never used GSP privileges for leverage against alleged wrongdoers.

Last year, the International Confederation of Free Trade Unions (ICFTU) was the first to push the Union to use the GSP as a means of enforcing 'correct' behaviour, lodging complaints about the use of child labour in Burma and forced labour in Pakistan.

The Commission has responded by holding hearings on Burmese labour conditions, but has not yet acted on the allegations against Pakistan.

A current review of the GSP may mean that, from 1998 onwards, countries which allow trade union rights will receive better privileges.

The problem is that GSP benefits are not as important as they used to be because the Uruguay Round of world trade talks cut tariffs for everyone. On the other hand, say some trade experts, because markets are now more competitive, “any margin of advantage is important”.

The ICFTU believes the current EU investigation into Burmese practices has had real impact on Burma's partners, if not in Rangoon.

“There is a growing climate of isolation,” claims an official. “The Commission hearings and European Parliament resolutions are clearly what have prompted other Asian nations to challenge Burma as well.”

When the Association of Southeast Asian Nations (ASEAN) deferred Burma's application to join the bloc last summer, says the IFCTU, “it was the first time ever that any linkage to human rights was made in an ASEAN summit”.

But Needle maintains that Burma's growing international isolation is due as much to US as to EU pressure, and what is more, the Burmese military junta is reacting positively to Washington's threats, not to Europe's.

Blame for the Union's limp-wristed attempts to punish Burma is often laid at the door of France's desire to protect its huge oil interests in the country. British and Dutch oil interests threw a similar spanner in the works when the Union wanted to punish Nigeria's military regime for executing democracy activists.

“We were not successful in getting effective sanctions there. Because of oil, the EU pulled back from what the Parliament saw as the right move,” says Needle.

He adds that even if the Commission is making the right moves and taking the Union's trade sanction policy seriously, there is no such effort at ministerial level. “There is too much timidity in the Council of Ministers. National interests too often take precedence,” he argues.

The Commission is fighting for the right to be the sole trade negotiator for the EU as trading relationships spread to new sectors and services.

Trade Commissioner Sir Leon Brittan says that because member states refuse to give him the power to negotiate investment and intellectual property deals, he cannot force other countries to reform.

And when Danish opposition nearly scuppered Brittan's plans to retaliate against Washington's Helms-Burton legislation, “it was a disaster narrowly avoided”, according to one aide.

Brittan and his colleagues made their fight against Helms-Burton an issue of EU credibility on the world stage. If the Union could not even defend its own companies from foreign sanctions, how could it claim to be a world power?

The determination of Asian nations to stand up to the EU has also highlighted the latter's weaknesses. Brittan and others claim the establishment of the World Trade Organisation as the Union's greatest trade policy success, but say that now that the WTO is working, members are not always using it adequately to force democratic reforms.

After nearly a year of tough talk about introducing new world rules making trade conditional on fair working conditions for employees, the Union backed down in the face of opposition from Asia.

EU member states themselves were divided over the subject, developing countries were vehemently opposed and, in the end, a compromise was reached to send the matter to the ILO. All over Europe, headlines screamed: 'EU ducks tough issue'.

More than its role in world politics and in setting moral standards, Brittan says the Union's “growing international identity” is “first and most obviously, because of its powerful economic weight”.

Tell that to industries suffering from the EU's inability to get countries to stop pirating European intellectual property. While Europe's music recording industry loses nearly 1 billion ecu per year to piracy, industry officials say they do not even file complaints because they do not believe the Commission has the tools to fight it.

The EU has signed up to the US-China intellectual property rights agreement, but both the Union and Washington are having a hard time making Beijing stick to the bargain.

There are, however, some success stories. “In Thailand, the Commission worked wonders,” says Stefan Kraczyk of the International Federation of the Phonographic Industry (IFPI), explaining that Commission talks in Bangkok in 1992 resulted in Thai record piracy being slashed by half within a year.

“The EU is always seen as a lame duck, but that is not true,” he says. “It does not have the tools the US has, but once it can take action, it does.” The tool in the case of Bangkok was the 'new commercial policy instrument' (now called the 'trade barrier regulation') which allows retaliatory trade action against a foreign country's barriers to imported goods.

MEPs want the EU to rethink its trade sanction policy and are pushing for an investigation into the trade interests of individual member states which block Union moves to impose sanctions.

“Pressure needs to be brought on the French government in particular,” says Needle.

He suggests that in addition to the classical procedure of agreeing and announcing sanctions, EU governments should put pressure on other trading blocs with which it works (such as the ASEAN group and Latin America's Mercosur bloc) to initiate or intensify their own commercial sanction policies towards non-democratic regimes in their regions.

Needle says it should also ask well-known African leaders such as South African President Nelson Mandela to support EU sanctions against nations such as Nigeria, Sudan or Zaïre.

Lastly, he argues, Brussels and Washington should align their policies to achieve maximum effect through combined EU and US sanctions.

The ICFTU also wants to see the Union join hands with the US and other economic heavyweights to make its trading policy more effective.

“We need concerted multilateral actions to bring pressure on big, powerful countries,” says an official.

During the Gulf War, some European governments argued against military involvement, maintaining that a trade embargo was sufficient.

But it will probably be some time before trade measures alone will be enough to force miscreants into line. As any athlete knows, it takes training and dedication to develop muscles. EU governments will need plenty of exercise if they want to convert their trade muscle into foreign policy strength.