News
BackHow can the EU’s foreign trade and investment policy contribute to promote development? Are free trade and open markets really always beneficial to developing countries? These questions were debated by experts attending a workshop in the European Parliament, who also took a closer look at the Communication of the EU Commission on “Trade, growth and development”.
The Communication published by the EU Commission in January shows far-reaching changes in the global economy: emerging markets such as China, India and Brazil already belong to the largest economies. Moreover, developing countries account for more than half of the global trade. However, the least developed countries (LDCs) are in general still not seeing any major progress being made with regard to the reduction of poverty; many LDCs have to increasingly rely on a small number of export goods. From the point of view of the EU Commission, the term “developing countries” loses its significance, and the call now is for more differentiation among them. Hence, the efforts of the EU shall now be aimed at the poorest and most vulnerable countries, whilst emerging countries will be offered partnerships based on mutual interests.
Trade is not a miracle cure that can solve all problems
Open trade is a vital condition for successful development, commented Peter Thompson, Director for Trade and Development of the Directorate-General of the European Commission. Hence, the aim of the EU is to help developing countries to integrate into the multilateral trade system and to use trade to reduce poverty in developing countries. However, development would start locally and both national reforms and good governance would be necessary to make trade beneficiary to the poor. From the point of view of the Commission, a modern development-oriented trade policy must also focus on a wide range of issues, which go beyond tariff cuts, such as trade facilitation at local and regional level, technical, social and environmental-related rules and the protection of intellectual property rights.
Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), pointed out that international trade was a powerful tool for states, but not a miracle cure that could solve all problems. Some problems of the developing countries could be solved on the basis of trade, but there were also developing countries, where trading instruments could not be used for their benefit. Developing countries had been very good students, when they were told to open up their economy, to liberalise their trade and to cut tariffs. For example, between 2001 and 2008, the export share of the GDP of developing countries had increased from 35 to 45 percent. However, the UNCTAD Secretary-General doubted that it was sensible to pursue this path of trade liberalisation forever. Those Asian countries that had followed the so-called wise recommendation to keep on opening their economies had been hit hard because they were so closely linked to the global economy. It was important to strike the right balance between domestic and external demand.
Kenneth Heydon, former Deputy Director of the OECD Trade Directorate emphasised the importance of trade liberalisation for growth. He warned that relying on tariff preferences for certain countries might act as a brake for multilateral trade liberalisation.
Robert Wade of the Institute of Development of the London School of Economics took a critical stance towards the prevailing opinion that free trade is always beneficial. Referring to the question whether trade liberalisation was indeed acting as an engine of development, Wade said that the development of countries was generally accompanied by trade liberalisation. However, this would not necessarily mean that trade liberalisation would be the driving force of development. A causal relationship between trade openness and growth had not been clearly established. The rise of China as workbench of the world would be problematic. For example, even though cheap Chinese imports would benefit Latin American consumers, they were to the detriment of Latin American workers who would be pushed out of qualified jobs. From the perspective of a Latin American government, for example the Brazilian government, Wade thinks it is quite right to take measures which may include subtle forms of trade protection to prevent that cheap Chinese imports wipe away own industries.
Further information: Communication of the European Commission on “Trade, Growth and Development”
Trade is not a miracle cure that can solve all problems
Open trade is a vital condition for successful development, commented Peter Thompson, Director for Trade and Development of the Directorate-General of the European Commission. Hence, the aim of the EU is to help developing countries to integrate into the multilateral trade system and to use trade to reduce poverty in developing countries. However, development would start locally and both national reforms and good governance would be necessary to make trade beneficiary to the poor. From the point of view of the Commission, a modern development-oriented trade policy must also focus on a wide range of issues, which go beyond tariff cuts, such as trade facilitation at local and regional level, technical, social and environmental-related rules and the protection of intellectual property rights.
Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), pointed out that international trade was a powerful tool for states, but not a miracle cure that could solve all problems. Some problems of the developing countries could be solved on the basis of trade, but there were also developing countries, where trading instruments could not be used for their benefit. Developing countries had been very good students, when they were told to open up their economy, to liberalise their trade and to cut tariffs. For example, between 2001 and 2008, the export share of the GDP of developing countries had increased from 35 to 45 percent. However, the UNCTAD Secretary-General doubted that it was sensible to pursue this path of trade liberalisation forever. Those Asian countries that had followed the so-called wise recommendation to keep on opening their economies had been hit hard because they were so closely linked to the global economy. It was important to strike the right balance between domestic and external demand.
Kenneth Heydon, former Deputy Director of the OECD Trade Directorate emphasised the importance of trade liberalisation for growth. He warned that relying on tariff preferences for certain countries might act as a brake for multilateral trade liberalisation.
Robert Wade of the Institute of Development of the London School of Economics took a critical stance towards the prevailing opinion that free trade is always beneficial. Referring to the question whether trade liberalisation was indeed acting as an engine of development, Wade said that the development of countries was generally accompanied by trade liberalisation. However, this would not necessarily mean that trade liberalisation would be the driving force of development. A causal relationship between trade openness and growth had not been clearly established. The rise of China as workbench of the world would be problematic. For example, even though cheap Chinese imports would benefit Latin American consumers, they were to the detriment of Latin American workers who would be pushed out of qualified jobs. From the perspective of a Latin American government, for example the Brazilian government, Wade thinks it is quite right to take measures which may include subtle forms of trade protection to prevent that cheap Chinese imports wipe away own industries.
Further information: Communication of the European Commission on “Trade, Growth and Development”