Analysis: EU adjusts external trade ties

  • 2004-02-12
  • By Ahto Lobjakas
The European Union has launched moves to readjust its trading ties with the rest of the world to take into account its scheduled enlargement by 10 new member states in May. Acceding states will give up their bilateral trade deals and join EU-wide arrangements with third countries. While the EU views the adjustments as a routine exercise, officials are not ruling out persistent differences of opinion with some trading partners, among them Russia, Ukraine and Kazakhstan.

Customs tariffs, which are as a rule higher in the 10 acceding countries than the current EU, will on average fall by half. The EU will have a larger internal market, with common rules simplifying and enhancing access for outside partners. Russia, for example, is reckoned by the European Commission to stand to gain 300 million euros from enlargement. Russian officials, on the other hand, dispute this and say the country will lose money.
Arancha Gonzalez, spokeswoman for Pascal Lamy, the EU's commissioner for external trade, said that the adjustment of trade links is particularly important when it comes to the EU's "new neighbors." "What we're doing is discussing with all our trading partners - and this clearly includes our next-door neighbors Russia, Kazakhstan, and Ukraine - to make sure that on May 1... trade continues to take place between the enlarged EU and our next-door neighbors without any obstacles and without any problems," she said. "We are tackling these issues together with the respective authorities. We're going to do this in a very open, constructive and pragmatic manner."
The adjustments are easiest within the World Trade Organization, where other members such as the United States and China can already submit claims for compensation if they can prove that enlargement results in tariff hikes or quota restrictions. But Russia, Ukraine and Kazakhstan, which are the largest EU trading partners among the new neighbors, are not members of the WTO. Their trade links with the EU are bilateral, contained in their partnership and cooperation agreements. Officials indicate the EU, therefore, has wider latitude to bargain over terms than within the WTO. On the other hand, all three countries can impose whatever tariffs they like on imports from the EU or elsewhere. All three have made their concerns known to the EU, although only Russia has so far submitted a formal list of requests.
EU officials said talks with Russia, and contacts with Ukraine and Kazakhstan, had produced the most tangible progress in the field of steel quotas. All three nations want the EU to increase steel quotas in order to accommodate their present-day trade with the 10 accession states. Gonzalez confirmed that in the steel sector, the EU is prepared to compromise.
"On steel, the EU has agreements on steel products with Ukraine, Kazakhstan and Russia, with [import] quotas," she said. "These quotas would now be modified to take into account traditional trade flows between the candidate countries and these three countries. The quotas will be increased to accommodate the trade flows between these three countries and candidate countries, so again, that this trade flows and takes place without obstacles."
EU officials say there are other claims presented by the three countries that could be deemed "legitimate" - that is, genuinely related to enlargement - by the EU. However, they refuse to elaborate before further talks take place. At present, officials have already ruled out concessions on some demands - e.g., Russia's request that the EU lower its health-control standards for Russian exports into the new member states. One official said the EU was not willing to compromise its tough health standards.
Russia has earlier indicated it may withhold consent on extending the current PCA with the EU to the new member states if its concerns are ignored. Last week EU officials brushed off suggestions that a "legal vacuum" could ensue after enlargement if Moscow makes good on the threat, citing the "constructive attitude" displayed by the Russian delegation last week. However, one official said the PCA with Russia already contains dispute-settlement mechanisms, adding the EU would not hesitate to pursue them should it consider Russia to be in breach of the agreement. o

Ahto Lobjakas
wrote this for Radio
Free Europe/Radio Liberty.