WRITTEN QUESTION P-2621/02

by Maurizio Turco (NI) to the Commission

(12 September 2002)

Subject: Benefits of liberalisation and costs of protectionism

On 4 July this year the Commission submitted individual requests to 109 member countries of the WTO, asking them to reduce or eliminate barriers to the free movement of services and make access to those markets easier.

Can the Commission say:

- what the requests submitted contained and what requests have been received so far in response, specifying the sectors and countries to which they were submitted and from which they were received;

- whether it has assessed the scale of the benefits, in terms of export growth, the EU would enjoy if the requests are accepted; on the other hand what the benefits and hence the costs if the requests are not accepted would be for the third countries if their requests to the EU are granted;

- whether it has assessed the scale of the costs borne by the developing countries as a result of Community protectionism in the agricultural sector and the amount of EU development aid allocated to those same countries, as well as the increased costs to European consumers of a failure to liberalise the agricultural market?

Answer given by Mr Lamy on behalf of the Commission

(15 October 2002)

The Community and its Member States have essentially submitted their initial requests under the services negotiations to all World Trade Organisation (WTO) members with the exception of the countries that are parties to the European Economic Area (EEA) agreement, the candidate countries for accession to the Union, and countries in the Balkans that are WTO members.

The initial requests, as submitted, seek improved market access in the following sectors: Professional Services, Business Services, Telecommunications Services, Postal & Courier Services, Construction and related Engineering Services, Distribution Services, Financial Services, Transport Services, Energy Services, Environmental Services, Tourism and Travel Related Services, News Agency Services. More generally the requests do not seek to dismantle or undermine public services, nor to privatise state-owned companies. No requests are being made on health services or audio-visual services to any country, and only the United States will receive a very limited and targeted request vis-à-vis privately-funded higher education services.

It should be noted that there are certain adjustments in the requests submitted in an attempt to balance on the one hand the Community's offensive interests and on the other hand the level of development of the country concerned. For example, the Community is generally seeking commitments in fewer sectors and modes of supply for the least developed countries (LDCs), just as it is requesting market access commitments in a more limited number of sectors. Further details on the requests are available in the summary of the requests published on the Directorate General Trade web site(1).

In terms of initial requests to the Community from third countries, so far requests from the following 19 countries have been received: Argentina, Australia, Brazil, Canada, China, Egypt, Hong Kong, Japan, Korea, Mauritius, Mexico, New Zealand, Panama, Paraguay, Singapore, Switzerland, Taiwan, Uruguay, United States. The Commission is still in process of analysing these, but a first examination reveals that all services sectors covered by the General Agreement on Trade in Services (GATS) are targeted by the incoming requests, although they obviously vary in terms of scope and in terms of level of ambition from one country to the next.

Due to the difficulties related to measuring services trade flows, statistics on trade in services still lack the level of detail and sophistication of merchandise trade statistics. This makes it difficult to quantify the exact benefits or costs as the Honourable Member requests. However, most of the studies undertaken by organisations such as the Organisation for Economic Cooperation and Development (OECD), World Bank and the WTO tend to show that gains from liberalising services may be substantially greater than those from liberalising trade in goods. This is in part due to the fact that current levels of protection are higher in the former and because liberalisation of services would also create additional spill-over benefits from the required movement of capital and labour. For a good overview of empirical studies undertaken on the economic effects of services liberalisation the Commission would refer the Honourable Member to a background note from the WTO secretariat from 29 May 1998(2).

The Commission is aware of external studies and has carried out its own studies which examine both the costs and benefits to developing counties of its agricultural policy.

The Community is by far the largest market in the world for products originating in the developing countries in large part as a result of trade preferences granted to developing countries. In the period 1997-1999, the Community imported an average of USD 35,5 billion of agricultural products from developing countries. This is more than the United States, Japan, Canada, Australia and New Zealand did together. In 2000, 62,5 % of the agricultural imports of the Community came from developing countries. Moreover, recent research (2002) conducted for WTO shows that 70 % of the Community imports from developing countries, and almost all from least

developing countries, came in duty free. The Everything but Arms (EBA) initiative adopted by the Council in February 2001 and the ongoing work for rendering existing preferential schemes more stable and predictable (imminent negotiations of the Economic Partnership Agreements (EPAs) with the African, Caribbean and Pacific States (ACP) agreements and generalized system of preferences (GSP) scheme) provide evidence of the willingness to consolidate this position. In the multilateral arena, flexibility, preferences and technical assistance provide evidence of the commitment to special and differential treatment and the Community is engaged in negotiations that will enhance these provisions.

As regards development aid, the Community already accounts for some 55 % of total international Official Development Assistance and more than two thirds of grant aid. In 2000, the Commission has committed EUR 8,4 billions and spent EUR 4,9 billions in development aid.

A recent initiative also foresees to provide ad hoc technical assistance to favour real access to world trade.

The Commission is clearly committed to continuing the Common agricultural policy (CAP) reform process and negotiates further trade liberalisation in the WTO. The presentation of the CAP Mid-term review is a clear step towards reducing trade distortion and increasingly meet the expectations of European citizens in areas such as enhancement of the environment, food safety and animal welfare.

(1) http://europa.eu.int/comm/trade/.

(2) S/C/W/26/Add.1.