Trade seen as key weapon in EU’s foreign policy arsenal

Date: 23/11/00

By Simon Taylor

Whenever the EU is accused of not having a foreign policy worthy of the name despite its huge economic and financial might, politicians respond by insisting that the Union's range of policy instruments gives it enormously powerful tools to deal with countries around the world.

Trade is always cited as one of the key weapons in the EU's arsenal.

This year has seen two bold initiatives from the European Commission to use trade concessions as the cornerstone of attempts to meet the Union's foreign policy objectives.

In the summer, External Relations Commissioner Chris Patten tabled an ambitious proposal to boost trade with the countries of the western Balkans by scrapping quotas and tariffs on 95% of all imports from the region. The package was designed to repair some of the economic damage suffered by Balkan states during ten years of civil war and diplomatic isolation, and formed a key part of the Union's strategy for restoring lasting peace and stability to the region.

In September, Trade Commissioner Pascal Lamy produced an even bolder scheme to open the EU's markets to all imports (except for arms) from 48 of the world's poorest countries. The package is central both to Lamy and member states' efforts to convince developing countries to support a new round of multilateral trade talks next year by offering them concessions.

Reactions to the two trade deals in member states have been decidedly different. Spain and Italy initially raised objections to the Balkans duty-free package, arguing that abandoning import protection could harm EU industries and farmers. But their reservations were swept aside because member states were desperate to show a united front and hold out hope to the Serbian opposition that the Union would be there to help if Yugoslav President Slobodan Milosevic was kicked out.

Patten's efforts to win the political argument were helped by the minimal economic effects of the deal. Commission experts pointed out that the Balkan states only accounted for 0.16% of the Union's total imports. They also stressed that, rather than leading to a flood of imports, the measures were intended to boost investment and employment in the Balkans.

It is hard to argue convincingly that the relatively modest deal, which excluded sensitive goods such as textiles, wine, fisheries products and beef, played a major role in the toppling of Milosevic by the supporters of new President Vojislav Kostunica.

Nevertheless, the concessions were welcomed by leaders in the region who recognised the significance of the Union's decision to put political priorities over economic interests. In Croatia, which recently re-embraced Union values after years as a pariah state under nationalist President Franjo Tudjman, new Economics Minister Goranko Fizulic praised the trade package as a sign of encouragement. "This is a political gesture which enables countries to jump as fast as possible on the train which is definitely and irreversibly heading for the EU," he said.

Unfortunately, the Union has so far proved unable to extend this enlightened political approach to the world's poorest countries. Hopes that Lamy's 'Everything But Arms' (EBA) package would sail through, given the desperate financial situation of the countries it will benefit, were over-optimistic.

The siren voices of the farming lobby have been heard again in the corridors of Brussels, claiming that the modest proposal to gradually allow least developed countries to export sugar and rice duty-free would destroy their livelihoods. Some member states have objected on the grounds that giving these countries privileged access might encourage entrepreneurs to set up factories in states which benefit from the trade concessions. Boosting investment in the world's poorest states to create new jobs and reduce their reliance on growing bulk agricultural commodities is precisely what the EBA deal is designed to do. Otherwise it is worthless.

If the fate of the package is determined by protectionism in some member states, the rest of the world will surely agree with the

EU that trade is a key tool in its foreign policy - but conclude that it is an instrument to pursue sordid self-interest over the Union's much-vaunted lofty values.

Article forms part of a survey on trade.