Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Global Europe - Competing in the world - A contribution to the EU's Growth and Jobs Strategy {SEC(2006) 1228} {SEC(2006) 1229} {SEC(2006) 1230}
Date: 2006-10-04
Institutions: European Commission
Subjects: European Employment Strategy, common commercial policy, competition policy, competitiveness, free-trade agreement, globalisation, international competition, market access

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.10.2006 
COM(2006) 567 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

GLOBAL EUROPE: COMPETING IN THE WORLD 

A Contribution to the EU's Growth and Jobs Strategy 

{SEC(2006) 1228} 
{SEC(2006) 1229} 
{SEC(2006) 1230} 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

GLOBAL EUROPE: COMPETING IN THE WORLD 

A Contribution to the EU's Growth and Jobs Strategy 

1. 

PURPOSE OF THE COMMUNICATION 

Growth  and  jobs,  and  the  opportunity  they  create,  are  at  the  heart  of  the  European 
Commission's  agenda  for  Europe.  They  are  essential  for  economic  prosperity,  social  justice 
and  sustainable  development  and  to  equip  Europeans  for  globalisation.  They  are  a  core 
criterion by which citizens will judge whether Europe is delivering results in their daily lives. 

In  2005,  the  renewed  Lisbon  strategy  set  out  the  steps  we  must  take  in  Europe  to  deliver 
growth and jobs. It underlined that an open market with high quality internal rules, effectively 
enforced,  in  areas  such  as  competition,  innovation,  education,  research  and  development, 
employment, social and cohesion policy is essential in helping European companies compete 
globally. And it highlighted the need to ensure open markets around the world. 

This internal agenda must be complemented with an external agenda for creating opportunity 
in  a  globalised  economy,  encompassing  our  trade  and  other  external  policies.  Our  external 
priority  in  this  area  in  recent  years  has  been  to  pursue  an  ambitious,  balanced  and  just 
multilateral  agreement  to  liberalise  international  trade  further,  opening  markets  in  which 
European  companies  can  compete  and  providing  new  opportunities  for  growth  and 
development. The WTO remains the most effective way of expanding and managing trade in 
a  rules-based  system,  and  a  cornerstone  of  the  multilateral  system.  The  Doha  Development 
Agenda  remains  our  first  priority  and  the  Commission  is  working  intensively  to  restart  the 
Doha negotiation after its suspension in July 2006. 

Through our trade policies, we also seek to contribute to a range of the Union's external goals, 
in particular development and neighbourhood objectives. These will remain core functions of 
EU trade policy. Coherence of the Union's external policies is vital to strengthening the EU's 
global role. 

The purpose of this Communication is to set out the contribution of trade policy to stimulating 
growth and creating jobs in Europe. It sets out how, in a rapidly changing global economy, we 
can  build  a  more  comprehensive,  integrated  and  forward-looking  external  trade  policy  that 
makes  a  stronger  contribution  to  Europe's  competitiveness.  It  stresses  the  need  to  adapt  the 
tools of EU trade policy to new challenges, to engage new partners, to ensure Europe remains 
open to the world and other markets open to us. 

This Communication also addresses some of the links between the policies we pursue at home 
and  abroad.  As  globalisation  collapses  distinctions  between  domestic  and  international 
policies,  our  domestic  policies  will  often  have  a  determining  influence  on  our  external 
competitiveness and vice versa. Recognising the need for an integrated, coherent approach to 

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domestic and to global challenges has been a hallmark of this Commission1. But there is more 
to do to reflect this in the ways we think and work2. 

2. 

A CHANGING WORLD  

Changes  in  the  global  economic  order  today  are  as  significant  for  the  world  economy  and 
international relations as the end of the Cold War. Global economic integration is quickening, 
driven by growing trade and capital flows, deepening financial markets, falling transportation 
costs,  and  the  revolution  in  information  and  communications  technology.  This  is  creating 
unprecedented opportunities for growth and development. But it is also putting new pressures 
on natural resources, in particular our climate, and on traditional industries and livelihoods. It 
has eroded old certainties and aroused new fears. 

Companies  are  responding  to  these  changes,  combining  advanced  technologies  and  foreign 
capital  with  large  pools  of  increasingly  educated  labour  in  the  developing  world.  Global 
supply chains are changing as companies outsource complex production and services to lower 
cost  economies.  Components  of  a  single  product  may  be  sourced  in  a  range  of  countries, 
replacing traditional trade in finished goods. 

More countries than ever before are seizing the opportunities of globalisation. In the second 
half of the twentieth century, the United States, Europe and Japan drove the global economy. 
Today  they  are  being  joined  by  increasingly  open  and  expanding  economies,  in  particular 
China and India, but also Brazil, Russia and others. China is already the third largest exporter 
and likely to become the second largest national economy a few years from now. Within the 
same timeframe, India may become the sixth largest. 

The  nature  of  global  trade  is  changing  as  a  result.  We  do  not  yet  live  in  a  world  without 
tariffs,  but  many  sectors  are  moving  in  that  direction.  For  Europe,  knowledge,  innovation, 
intellectual  property,  services  and  the  efficient  use  of  resources  are  now  the  keys  to 
competitiveness. Trade policy and our whole approach to international competitiveness need 
to adapt. 

3. 

ANALYSIS: THE FOUNDATIONS OF EU COMPETITIVENESS 

There  are  two  critical  and  linked  requirements  for  European  competitiveness.  First, 
having  the  right  internal  policies,  which  reflect  the  external  competitive  challenge  and 
maintain our openness to trade and investment. Second, ensuring greater openness and 
fair rules in other markets, in particular our future major trading partners. Both must 
be underpinned by transparent and effective rules – domestic, bilateral and multilateral. 

3.1. 

The Right Policies at Home 

i)  Competitive  markets:  the  single  market  is  vital  to  creating  globally  competitive 
companies  in  the  EU.  Its  disciplines  promote  predictability  and  transparency  and  allow 

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See  "A  Citizen's  Agenda  for  Europe",  adopted  by  the  Commission  in  May  2006,  the  "EU's  renewed 
Strategy  for  Sustainable  Development",  adopted  by  the  Council  in  June  2006,  and  "Europe  in  the 
World", adopted by the Commission in June 2006. 
The  accompanying  staff  working  paper  contains  a  more  detailed  analysis  underpinning  this 
Communication. 

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business to exploit market size and economies of scale, encourage the efficient allocation of 
resources  and  innovation,  and  prevent  state  aids  being  used  as  an  anti-competitive, 
protectionist tool. It has fostered the development of high-quality rules and standards which 
help shape global norms. 

Competitive markets have helped European manufacturing industry broadly maintain its share 
of GDP in the face of globalisation, while the US and Japan have lost ground. The output of 
EU industry has increased by 40% over the last two decades3 and the EU’s position on world 
markets remains almost unchanged. Our service industries are world leaders in a wide range 
of fields. 

This  is  largely  because  EU  companies  sell  products  and  services  with  a  design  and  quality 
premium4.  Upmarket  products  account  for  a  third  of  world  demand  and  half  of  European 
exports. In these higher-value products, the EU ranks second just behind Japan but ahead of 
the US, whilst countries like China lag far behind. 

But the EU is losing ground in the highest technology areas. Improving our performance in 
innovation, education, research and development, both for products – including quality, high 
value-added agricultural products – and services is critical to maintaining the EU’s ability to 
sell  top-of-the-range  products.  We  must  also  consider  our  external  focus.  European  exports 
are strong in countries where demand is static but they are less well placed than Japan and the 
US in rapidly growing markets, particularly in Asia. 

ii)  Openness:  European  economic  openness  is  vital  for  creating  jobs  and  growth  in 
Europe  and  for  our  international  competitiveness.  Openness  to  global  trade  and 
investment  increases  our  ability  to  exploit  the  benefits  of  an  effective  single  market.  It 
exposes  the  domestic  economy  to  creative  competitive  pressures,  spurring  and  rewarding 
innovation, providing access to new technologies and increasing incentives for investment. 

Europe must reject protectionism. Protectionism raises prices for consumers and business, and 
limits  choice.  In  the  medium  term,  protecting  import-competing  sectors  from  fair  external 
competition  diverts  resources  away  from  more  productive  sectors  of  the  economy.  As  our 
prosperity depends on trade, others' reciprocal obstacles would damage our economy. 

Imposing  temporary  and  targeted  restrictions  on  anti-competitive  imports  into  Europe  can 
play  a  role  in  defending  European  interests  against  unfair  trade.  We  must  maintain  these 
necessary  trade  defence  instruments  while  making  sure  that  they  are  adapted  to  changing 
global trading conditions. 

iii)  Social  justice:  We  must  also  recognise  the  potentially  disruptive  impacts  of  market 
opening for some regions and workers, particularly the less qualified. Structural change is 
not  new,  but  it  is  accelerated  by  globalisation.  Removing  obstacles  to  adjustment  in  the 
internal  market  and  moving  resources  to  sectors where  they  can  be  used  most  effectively  is 
essential  to  realising  the  benefits  of  trade  and  to  creating  jobs  in  Europe.  But  the  negative 
effects  of  trade  opening  can  be  sharply  felt  in  particular  sectors  or  regions  and  can  feed 
political  opposition  to  open  trade.  We  need  to  do  better  in  anticipating  the  effects  of  trade 

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See  Commission's  Communication  on  "A  new  industrial  policy:  creating  the  conditions  for 
manufacturing to thrive" (October 2005). 
CEPII  (2004),  European  industry's  place  in  the  International  Division  of  Labour:  situation  and 
prospects. 

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opening;  in  helping  sectors,  regions  and  the  workforce  adapt;  and  in  ensuring  benefits  are 
passed on to citizens. As we pursue social justice and cohesion at home, we should also seek 
to  promote  our  values,  including  social  and  environmental  standards  and  cultural  diversity, 
around the world5. 

3.2. 

Opening Markets Abroad 

Progressive trade opening is an important source of productivity gains, growth and job 
creation.  It  is  an  essential  factor  in  reducing  poverty  and  promoting  development,  with  the 
potential  in  the  longer  term  to  help  address  many  of  the  underlying  factors  which  drive  the 
global challenges we face, from security to migration to climate change. 

Our core argument is that rejection of protectionism at home must be accompanied by 
activism  in  creating  open  markets  and  fair  conditions  for  trade  abroad.  This  improves 
the  global  business  environment  and  helps  spur  economic  reform  in  other  countries.  It 
reinforces the competitive position of EU industry in a globalised economy and is necessary 
to  sustain  domestic  political  support  for  our  own  openness.  There  are  two  core  elements  in 
pursuing this agenda: stronger engagement with major emerging economies and regions; and 
a sharper focus on barriers to trade behind the border. 

Major  emerging  economies,  especially  China,  India  and  Brazil,  are  rightly  reaping  the 
benefits of their growing role in world trade. Together they now represent 15% of global trade 
flows.  This  growth,  based  on  progressive  liberalisation,  has  been  essential  to  their  historic 
achievement in lifting millions out of poverty.  

The EU is already very open to exports from these emerging and other developing countries 
and  is  ready  to  go  further.  But  most  emerging  countries  combine  high  growth  with 
unnecessarily high barriers to EU exports. As their role and the benefits they draw from the 
global trading system grow, so too do their responsibilities to play a full part in maintaining a 
global regime that favours openness. 

This  openness  is  no  longer  simply  about  tariffs.  Securing  real  market  access  in  the  21st 
century will mean focusing on new issues and developing the tools of trade policy to achieve 
the types of opening that make a real difference: 

i)  Non-tariff  barriers:  Reducing  tariffs  remains  important  to  opening  markets  to  Europe's 
industrial and agricultural exports. But as tariffs fall, non-tariff barriers, such as unnecessarily 
trade-restricting regulations and procedures become the main obstacles. These are often less 
visible,  more  complex  and  can  be  more  sensitive  because  they  touch  directly  on  domestic 
regulation.  Regulating  trade  is  necessary,  but  it  must  be  done  in  a  transparent  and  non 
discriminatory  manner,  with  the  least  restriction  on  trade  consistent  with  achieving  other 
legitimate policy objectives. 

Addressing  non-tariff  barriers  is  complicated,  resource-intensive  and  is  not  fully  covered  in 
the  WTO  system.  Instruments  such  as  mutual  recognition  agreements,  international 
standardisation  and  regulatory  dialogues,  as  well  as  technical  assistance  to  third  countries, 
will play an increasingly important role in promoting trade and preventing distorting rules and 

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See "Promoting decent work for all", adopted by the Commission in May 2006. 

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standards.  This  will  require  new  ways  of  working  within  the  Commission  and  with  others, 
including Member States and industry in order to identify and tackle barriers. 

ii)  Access  to  resources:  More  than  ever,  Europe  needs  to  import  to  export.  Tackling 
restrictions  on  access  to  resources  such  as  energy,  metals  and  scrap,  primary  raw  materials 
including  certain  agricultural  materials,  hides  and  skins  must  be  a  high  priority.  Measures 
taken by some of our biggest trading partners to restrict access to their supplies of these inputs 
are  causing  some  EU  industries  major  problems.  Unless  justified  for  security  or 
environmental reasons, restrictions on access to resources should be removed. 

Energy will be particularly important. As global demand increases and Europe becomes more 
dependent  on  external  energy  sources,  the  EU  needs  to  go  further  in  developing  a  coherent 
policy  for  competitive,  secure  and  sustainable  energy.  Internally,  this  means  completing  a 
competitive,  EU-wide  energy  market  and  promoting  a  sustainable,  efficient  and  diverse 
energy mix. Externally, we should seek to improve transparency, governance and trade in the 
energy  sector  in  third  countries  through  non-discriminatory  conditions  of  transit  and  third 
party  access  to  export  pipeline  infrastructure;  and  by  helping  to  improve  production  and 
export capacities and develop energy transportation infrastructure. Diversity of source, supply 
and transit is essential to our internal and external policies. 

The  pursuit  of  economic  growth  through  trade  can  have  environmental  implications, 
particularly for biodiversity and our climate. Our external competitiveness policies will need 
to  encourage  energy  efficiency,  the  use  of  renewable  energies  including  bio  fuels,  low 
emission technology and the rational use of energy in Europe and globally, both to reduce the 
growth in global energy demand and strengthen security of supply. The links between trade 
policy and climate change in particular will require further examination.  

iii) New areas of growth: We will require a sharper focus on market opening and stronger 
rules in new trade areas of economic importance to us, notably intellectual property (IPR), 
services, investment, public procurement and competition. 

The value of new market access for EU businesses is seriously reduced without sufficient IPR 
protection  provided  by  the  countries  concerned.  IPR  violations  deprive  right-holders  of  the 
revenue from their investment and ultimately put at risk the viability of the most innovative 
and  creative  companies.  The  biggest  challenge  at  present  is  the  enforcement  of  existing 
commitments, particularly in emerging economies. The Commission has devoted considerable 
resource to fighting counterfeiting and improving IPR enforcement in key third countries such 
as China. We have stepped up co-operation with partners like the US and with Japan on IPR 
and we have worked to protect EU geographical indications. But there is much more to do. 

Services  are  the  cornerstone  of  the  EU  economy.  They  represent  77%  of  GDP  and 
employment,  an  area  of  European  comparative  advantage  with  the  greatest  potential  for 
growth in EU exports. Gradually liberalising global trade in services is an important factor in 
future economic growth including in the developing world. The EU will need to negotiate to 
liberalise trade in services with key trading partners, especially where market access is poor or 
our partners have made few WTO commitments. 

Improving investment conditions in third countries for services and other sectors can make an 
important  contribution  to  growth,  both  in  the  EU  and  in  the  receiving  countries.  As  supply 
chains  are  globalised,  the  ability  to  invest  freely  in  third  markets  becomes  more  important. 
Geography and proximity still matter. Establishing a “physical” presence in a foreign country 

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helps EU companies realise business opportunities, makes the flow of trade more predictable, 
and consolidates the image and reputation of the firm and of the country of origin.  

Public  procurement  is  an  area  of  significant  untapped  potential  for  EU  exporters.  EU 
companies are world leaders in areas such as transport equipment, public works and utilities. 
But  they  face  discriminatory  practices  in  almost  all  our  trading  partners,  which  effectively 
close off exporting opportunities. This is probably the biggest trade sector remaining sheltered 
from multilateral disciplines. 

The  absence  of  competition  and  state  aid  rules  in  third  countries  limits  market  access  as  it 
raises  new  barriers  to  substitute  for  tariffs  or  traditional  non-tariff  barriers.  The  EU  has  a 
strategic interest in developing international rules and cooperation on competition policies to 
ensure  European  firms  do  not  suffer  in  third  countries  from  unreasonable  subsidisation  of 
local companies or anti-competitive practices. There is much to be done in this area. In most 
countries there is little transparency over the granting of aids. 

In  all  these  areas,  transparent,  effective  and  respected  rules  are  essential.  The  proper 
enforcement of such rules at home is the foundation of our competitiveness. But we also need 
to work with others to ensure their rules and standards are of similar quality. 

4. 

AGENDA:  AN ACTION PLAN FOR EU EXTERNAL COMPETITIVENESS 

Based on this analysis, we should build an agenda for action in the months and years ahead. 
Our  aims  should  be  to  influence  the  forces  driving  change,  to  seize  the  opportunities  of 
globalisation  and  to  manage  the  risks.  This  is  the  challenge  that  lies  at  the  heart  of  the 
Commission's  Communication  of  10  May  2006,  A  Citizen's  Agenda  for  Europe.  The 
Commission's role, in close co-operation with Member  States, the  Parliament  and others, in 
leading the EU's trade policy is a unique source of strength for Europe – a role not matched in 
any other area of policy. But we must ensure that our priorities and methods are adapted to the 
challenges of the future. 

4.1. 

Internal 

The renewed Lisbon strategy sets out a coherent agenda for adapting European economies to 
the  new  global  environment.  To  ensure  our  domestic  rules  respond  to  new  pressures  and 
opportunities, the Citizen’s Agenda proposed a fundamental review of the single market. This 
will examine how the internal market can further help European business make the changes 
necessary  to  compete  internationally  by  diversifying,  specialising  and  innovating.  But  there 
are other policy initiatives we should pursue now. 

Our  policy-making  process  should  factor  in  global  competitiveness  challenges.  The 
greater  the  consistency  in  rules  and  practices  with  our  main  partners,  the  better  for  EU 
business. We must play a leading role in sharing best practice and developing global rules and 
standards. To do so effectively we must also take account of the external dimension in making 
our regulatory and other standards. This is not about downgrading our rules. It is about taking 
an open and flexible approach in setting our rules and seeking to prevent future trade friction 
– and so support European business – where possible. This is already part of our agenda for 
better regulation in the EU, but there is more we can do. International and bilateral regulatory 
co-operation is a key tool to this end. 

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European  citizens  expect  to  see  positive  results  from  economic  and  structural  change. 
The  case  for  openness  is  undermined  if  its  benefits  do  not  reach  citizens.  The  Commission 
and  Member  States  have  important  roles  in  ensuring  that  the  benefits  of  trade  opening  and 
globalisation  reach  all  citizens  and  are  not  captured  by  specific  interests.  Following  the 
liberalisation  of  trade  in  textiles  at  the  end  of  2005,  these  benefits  have  not  been  passed  on 
consistently.  The  Commission  will  put  in  a  place  systematic  monitoring  of  import  and 
consumption prices before considering further action. 

Companies  and  people  need  time  and  predictability  to  adapt  to  change.  The  EU’s  new 
generation  of  cohesion  policy  programmes  provide  opportunities  to  anticipate,  prepare  and 
react  to  changes  linked  to  globalisation.  These  opportunities  must  be  seized.  The  European 
Globalisation  Adjustment  Fund  will  also  provide  a  swift  answer  to  one-off,  clearly  defined 
problems  resulting  from  restructuring.  The  aim  must  be  to  promote  adaptation,  sustainable 
growth and employment, not to shelter individual jobs or companies from inevitable change. 
We  will  also  make  trading  easier  for  companies  at  home,  modernising  EU  customs  by 
revising the Customs Code and introducing e-customs. 

4.2. 

External 

i) The WTO  

The  world  needs  a  strong  multilateral  trading  system.  It  is  the  most  effective  means  of 
expanding  and  managing  trade  for  the  benefit  of  all  and  provides  a  unique  framework  for 
dispute settlement. 

There  will  be  no  European  retreat  from  multilateralism.  We  stand  by  our  commitment  to 
multilateralism  and  are  prepared  to  pay,  reasonably,  to  keep  the  system  thriving.  The 
suspension  of  the  Doha  negotiations  is  a  missed  opportunity  for  global  growth  and 
development.  The  EU  has  made  significant  offers  of  liberalisation,  not  least  in  agriculture, 
and made clear its willingness to go further within the limits of its current mandate, as part of 
a  global  agreement.  Europe  remains  committed  to  the  WTO  and  is  working  hard  to 
resume negotiations as soon as circumstances in other countries allow. 

ii) Free Trade Agreements 

Free  Trade  Agreements  (FTAs),  if  approached  with  care,  can  build  on  WTO  and  other 
international  rules  by  going  further  and  faster  in  promoting  openness  and  integration,  by 
tackling issues which are not ready for multilateral discussion and by preparing the ground for 
the  next  level  of  multilateral  liberalisation.  Many  key  issues,  including  investment,  public 
procurement, competition, other regulatory issues and IPR enforcement, which remain outside 
the WTO at this time can be addressed through FTAs. 

But FTAs can also carry risks for the multilateral trading system. They can complicate trade, 
erode  the  principle  of  non-discrimination  and  exclude  the  weakest  economies.  To  have  a 
positive  impact  FTAs  must  be  comprehensive  in  scope,  provide  for  liberalisation  of 
substantially  all  trade  and  go  beyond  WTO  disciplines.  The  EU's  priority  will  be  to  ensure 
that any new FTAs, including our own, serve as a stepping stone, not a stumbling block for 
multilateral liberalisation. 

FTAs  are  by  no  means  new  for  Europe.  For  example,  they  play  an  important  role  in  the 
European neighbourhood by reinforcing economic and regulatory ties with the EU. They are 

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part  of  our  negotiations  for  Economic  Partnership  Agreements  with  the  African  Caribbean 
and  Pacific  countries  and  of  future  association  agreements  with  Central  America  and  the 
Andean  Community.  But  while  our  current  bilateral  agreements  support  our  neighbourhood 
and  development  objectives  well,  our  main  trade  interests,  including  in  Asia,  are  less  well 
served. The content of these agreements also remains  limited.  We  should  continue  to  factor 
other  issues  and  the  wider  role  of  trade  policy  in  EU  external  relations  into  bilateral  trade 
developments.  But  in  order  for  trade  policy  to help  create  jobs  and  drive  growth,  economic 
factors must play a primary role in the choice of future FTAs. 

The key economic criteria for new FTA partners should be market potential (economic size 
and  growth)  and  the  level  of  protection  against  EU  export  interests  (tariffs  and  non  tariff 
barriers).  We  should  also  take  account  of  our  potential  partners’  negotiations  with  EU 
competitors, the likely impact of this on EU markets and economies, as well as the risk that 
the preferential access to EU markets currently enjoyed by our neighbouring and developing 
country partners may be eroded. 

Based  on  these  criteria,  ASEAN,  Korea  and  Mercosur  (with  whom  negotiations  are  on-
going)  emerge  as  priorities.  They  combine  high  levels  of  protection  with  large  market 
potential and they are active in concluding FTAs with EU competitors. India, Russia and the 
Gulf  Co-operation  Council  (negotiations  also  currently  active)  also  have  combinations  of 
market potential and levels of protection which make them of direct interest to the EU. China 
also meets many of these criteria, but requires special attention because of the opportunities 
and risks it presents. 

In terms of content new competitiveness-driven FTAs would need to be comprehensive and 
ambitious in coverage, aiming at the highest possible degree of trade liberalisation including 
far-reaching liberalisation of services and investment. A new, ambitious model EU investment 
agreement should be developed in close coordination with Member States. Where our partners 
have  signed  FTAs  with  other  countries  that  are  competitors  to  the  EU,  we  should  seek  full 
parity  at  least.  Quantitative  import  restrictions  and  all  forms  of  duties,  taxes,  charges  and 
restrictions on exports should be eliminated.  

FTAs should also tackle non tariff barriers through regulatory convergence wherever possible 
and  contain  strong  trade  facilitation  provisions.  They  should  include  stronger  provisions  for 
IPR and competition, including for example provisions on enforcement of IP rights along the 
lines  of  the  EC  Enforcement  Directive.  We  will  seek  to  include  provisions  on  good 
governance  in  financial,  tax  and  judicial  areas  where  appropriate.  We  should  also  ensure 
Rules  of  Origin  in  FTAs  are  simpler  and  more  modern  and  reflect  the  realities  of 
globalisation.  We  will  put  in  place  internal  mechanisms  to  monitor  the  implementation  and 
the results of new FTAs. 

In  considering  new  FTAs,  we  will  need  to  work  to  strengthen  sustainable  development 
through  our  bilateral  trade  relations.  This  could  include  incorporating  new  co-operative 
provisions  in  areas  relating  to  labour  standards  and  environmental  protection.  We  will  also 
take  into  account  the  development  needs  of  our  partners  and  the  potential  impact  of  any 
agreement on other developing countries, in particular the potential effects on poor countries' 
preferential access to EU markets. The possible impact on development should be included as 
part of the overall impact assessment that will be conducted before deciding to launch FTA 
negotiations.  In  line  with  our  position  in  the  WTO,  we  will  encourage  our  FTA  partners  to 
facilitate access by least-developed countries to their market, if possible by granting duty and 
quota free access. 

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These  are  high  levels  of  ambition.  Negotiating  bilateral  agreements  can  be  complex  and 
demanding, but we need to create substantial starting points from which to begin negotiations. 
We will need to ensure that we share similar ambitions with our prospective partners at the 
outset in order to avoid negotiations later stalling because of a mismatch of expectations. The 
decision  to  launch  negotiations  should  be  taken  case-by-case,  based  on  these  economic 
criteria but also our partners' readiness and broader political considerations. FTA provisions 
should be an integral part of the overall relations with the country or region concerned. The 
best way to achieve this within the wider institutional architecture will need to be established 
on a case-by-case basis. 

iii) Transatlantic Trade and Competitiveness 

The  transatlantic  trading  relationship  is  by  far  the  largest  in  the  world  and  the  heart  of  the 
global  economy.  The  economic  gains  from  tackling  non-traditional,  behind-the-border 
barriers are potentially significant in the EU and US. We have been seeking to do so for some 
time,  most  recently  through  the  Transatlantic  Economic  Initiative,  launched  in  2005,  and  a 
range of regulatory dialogues. Despite some progress, this has proven to be difficult territory 
and a further injection of momentum is necessary. 

We  must  also  work  together  to  tackle  global  challenges.  Our  weight  in  the  world  economy 
means that co-operation between the EU and US in addressing areas such as IPR protection or 
trade security will be of great importance. 

iv) China 

China is the single greatest test of Europe's capacity to make globalisation an opportunity for 
jobs  and  growth.  China  faces  huge  challenges  in  addressing  pressing  social,  environmental 
and  economic  issues.  Europe  must  get  China  right,  as  an  opportunity,  a  challenge  and 
prospective partner. 

The  Commission  will  set  out  a  comprehensive  strategy  on  China  in  the  coming  weeks.  On 
trade  and  economic  issues,  the  strategy  will  identify  a  clear  set  of  priorities,  focus  on  key 
challenges such as enforcing intellectual property rights, market access issues and investment 
opportunities  and  highlight  the  need  for  stronger  co-operation  across  the  Commission,  with 
Member States and others in tackling these issues. 

v) IPR enforcement 

The  EU  should  seek  to  strengthen  IPR  provisions  in  future  bilateral  agreements  and  the 
enforcement  of  existing  commitments  in  order  to  reduce  IPR  violations  and  the  production 
and  export  of  fake  goods.  The  Commission  will  reinforce  its  enforcement  activity  and  co-
operation  with  a  number  of  priority  countries  in  particular  China,  Russia,  ASEAN,  Korea, 
Mercosur,  Chile  and  Ukraine;  and  we  will  work  to  improve  enforcement  in  Turkey  in  the 
context of accession negotiations. This will include reinforcing customs co-operation, creating 
and  strengthening  IPR  dialogues,  reinforcing  our  presence  on  the  ground,  allocating  more 
resources to support right-holders, in particular SMEs, and building awareness of IPR issues 
among EU companies, particularly those operating in China. 

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vi) Renewed market access strategy 

The  EU's  Market  Access  Strategy  was  launched  in  1996  to  help  enforce  multilateral  and 
bilateral trade deals and open third country markets. It aims to give exporters information on 
market  access  conditions  and  create  a  framework  to  tackle  barriers  to  trade.  The  Market 
Access  Database,  created  to  support  this  strategy,  has  helped  inform  business  and  policy 
makers about market conditions, but it has not achieved its full potential. 

The Commission will bring forward a Communication on a renewed Market Access Strategy 
in  early  2007.  This  is  likely  to  involve  setting  regular  priorities  in  terms  of  sectors  and 
markets where the removal of trade barriers would create the greatest gains for EU exporters.  

The  Commission  will  need  to  concentrate  resources  in  key  countries,  invest  in  technical 
expertise,  co-ordinate  policy  tools  and  work  more  closely  with  Member  States  and 
industry/exporters. We should also draw on the experience of existing negotiations to identify 
what works and what does not when seeking to remove more complex barriers. 

vii) Public procurement 

Almost  all  the  EU's  major  trading  partners  operate  restrictive  public  procurement  practices 
which  discriminate  against  EU  suppliers.  The  Commission  is  considering  presenting  a 
proposal to target these practices in order to ensure a level playing field for EU suppliers in 
tendering for public contracts abroad. 

The best way to address  these  issues is to encourage third countries  to negotiate substantial 
agreements with the EU. Because open EU procurement markets are important for our own 
prosperity,  the  challenge  is  to  find  new  ways  of  opening  up  major  foreign  procurement 
markets without closing our own. So where important trading partners have made clear that 
they  do  not  want  to  move  towards  reciprocity,  we  should  consider  introducing  carefully 
targeted  restrictions  on  access  to  parts  of  the  EU  procurement  market  to  encourage  our 
partners to offer reciprocal market opening. This approach would not be considered for poorer 
developing countries. 

viii) Review of Trade Defence Instruments 

Trade defence instruments are part of the multilateral system and help ensure that the benefits 
of openness are not undermined by unfair pricing, trading practices or subsidisation. We need 
to  make  sure  that  others  apply  high  standards  in  their  use  of  trade  defence  instruments  and 
international rules are fully respected. 

We  also  need  to  make  sure  our  instruments  are  effective  and  adapted  to  the  changes  in  the 
global economy. For example, manufacturers in the EU increasingly compete with European 
distributors  who  have  outsourced  production  overseas  -  often  the  only  way  to  respond  to 
international competition and so help secure jobs in Europe. Suppliers produce in more than 
one  country,  often  both  inside  and  outside  the  EU.  Goods  assembled  in  one  country  often 
contain parts produced in another. Consumers and other manufacturers expect the benefits of 
wider choice, lower prices and higher standards. We need to consider whether our instruments 
allow us to take account of this wide range of European interests. 

In  the  case  of  unfair  subsidisation,  we  need  to  strengthen  transparency  requirements  at  the 
international  level  and  reinforce  our  ability  to  monitor  practices  in  third  countries.  Where 

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justified,  we  will  use  WTO  dispute  settlement  mechanisms  or  our  own  anti-subsidy 
instruments to remove foreign practices which unduly distort competition. 

The  Commission  will  collect  views  from  experts  and  stakeholders  to  consider  how  to 
strengthen our use of trade defence instruments in the 21st century. This will lead to a Green 
Paper later this year. 

5. 

CONCLUSION 

Ensuring Europe’s competitiveness in the global economy by removing barriers to trade will 
require  new  priorities  and  new  approaches  in  trade  policy,  together  with  high-quality  EU 
rules,  and  stronger  links  between  the  two.  It  will  need  to  be  an  integral  part  of  the  wider 
Lisbon  strategy.  It  will  require  stronger  co-operation  within  the  Commission  and  with 
Member  States,  industry  and  others,  in  line  with  the  proposals  on  coherence  in  the 
Commission's Communication "Europe in the World". 

The  principal,  substantive  means  of  achieving  our  goals  remains  through  the  system  of 
multilateral  negotiation.  That  is  why  Europe  remains  strongly  committed  to  multilateralism. 
The world trading system based on the WTO is essential in providing predictability, stability 
and other essential conditions for global growth. We shall need to pursue new opportunities, 
sharpening  our  efforts  to  open  markets  and  tackle  trade  distortions  within  the  multilateral 
system and through bilateral initiatives. We will seek to create the conditions for open and fair 
global competition and to share our rules and standards with our partners. 

In the months ahead the Commission proposes:  

Internally we will: 

- Make sure that internal policy proposals, while furthering European standards, fit with 
global competitiveness challenges. 

-  Make  sure  the  benefits  of  trade  opening  are  passed  on  to  citizens  by  monitoring 
developments in import and consumer prices. 

- Equip people for change through the new generation of cohesion policy programmes and 
the European Globalisation Adjustment Fund. 

Externally we will: 

-  Maintain  our  commitment  to  the  Doha  Trade  Round  and  the  WTO  as  the  best  way  of 
opening and managing world trade. 

- Make proposals on priorities in trade and investment relations with China as part of a broad 
strategy to build a beneficial and equal partnership. 

- Launch a second phase of the EU IPR enforcement strategy. 

- Make proposals for a new generation of carefully selected and prioritised FTAs. 

- Make proposals for a renewed and reinforced market access strategy. 

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- Propose measures to open procurement markets abroad. 

- Conduct a review of the effectiveness of our trade-defence instruments. 

This  is  an  ambitious  agenda  designed  to  sharpen  the  contribution  of  trade  policy  to  growth 
and jobs in Europe, to contribute to the liberalisation of global trade and to complement other 
external  policy  objectives of  our trade  policy, in particular development  and  neighbourhood 
objectives. It will be a central element in judging the effectiveness of European trade policy in 
the months and years ahead. 

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Statistical Annex (intra-EU trade excluded) 

Table 1: Market potential and key economic indicators of main EU trade partners 

Market 
potential  
2005-25  
(€ bn)** 

449 

204 

74 

58 

57 

45 

35 

28 

27 

21 

18 

17 

12 

10 

5 

USA 

China 

Japan 

India 

ASEAN 

Korea 

Mercosur 

Canada 

GCC 

Russia 

Taiwan 

Australia 

HK 

Iran 

Ukraine 

GDP  
(2005, €Bn) 

Annual 
average 
growth rates 
2005-25 (%)* 

Trade with the 
EU (2005, €Bn) 

Share of EU 
trade (2005, %) 

10 144 

1 573 

3 920 

607 

714 

598 

677 

849 

412 

526 

268 

526 

149 

151 

61 

3.2 

6.6 

1.6 

5.5 

4.9 

4.7 

3.6 

2.6 

4.3 

3.0 

4.3 

2.5 

4.8 

4.3 

4.9 

412.7 

209.4 

116.4 

40.0 

115.1 

53.3 

51.0 

40.8 

87.6 

163.0 

36.5 

30.1 

31.1 

24.2 

20.7 

18.5 

9.4 

5.2 

1.8 

5.2 

2.4 

2.3 

1.8 

3.9 

7.3 

1.6 

1.4 

1.4 

1.1 

0.9 

Source: World Bank, Global Insights and own calculations. Note: * Growth figures from Global Insights 2007-15.  

** Indicates cumulative changes in market size: economic size x growth. 

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Table 2: World market shares in 2003 and change over the 1995-2003 period 

market 
share 2003 
(in %) 

change in market share 
between 1995 and 2003 
(in percentage points) 

EU 

Japan 

Korea 

Russia 

India 

Ukraine 

USA 

China 

Hong Kong 

Mediterranean 

GCC 

Mercosur 

Brazil 

ASEAN 

21.3 

10.5 

4.4 

1.4 

1.2 

0.3 

13.8 

1.2 

1.8 

1.7 

0.6 

2.2 

1.6 

8.3 

Rest of the world 

18.6 

-1.1 

-4.0 

0.3 

0.3 

0.2 

0.2 

-2.7 

5.1 

0.5 

0.3 

0.1 

-0.1 

0.0 

0.2 

0.6 

Note: The sum of figures in the first column equals 100, the sum of figures in the last column is 0. 

Source: UN Comtrade – Calculation by CEPII (2006) – report for DG Trade 

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Table 3: World market shares in low-, medium-, and high-quality products in 2003 and 
change over the 1995-2003 period 

(level in percent and variation in percentage points) 

down-market 

mid-market 

up-market 

2003 

Variation

2003 

Variation

2003 

Variation 

12.9 

-1.8 

20.0 

2.0 

32.3 

3.1 

6.7 

5.1 

-2.2 

11.7 

-4.4 

15.2 

-0.1 

4.4 

0.8 

3.1 

12.0 

-3.7 

13.6 

-4.1 

17.9 

20.4 

3.0 

7.4 

8.1 

0.1 

8.2 

4.2 

4.6 

0.6 

-2.8 

7.7 

-1.5 

3.7 

0.9 

5.3 

-6.9 

-0.6 

0.2 

1.5 

-0.1 

-0.3 

EU 

Japan 

Korea 

USA 

China 

Mercosur 

ASEAN 

Source: UN Comtrade – Calculation by CEPII (2006) – report for DG Trade 

Table 4: Contribution to the trade balance by quality of traded goods in 1995 and 2003 

EU 

USA 

Japan 

Korea 

India 

Russia 

China 

Low-market 

-56.6 

-47.1

-18.9

2003 

Mid-market 

-15.8 

5.2

20.2

21.7

30.1

-0.9

-10.3

75.8 

-3.4 

Up-market 

not classified 

Degree 
of 
specialisation 

74.8

-19.2

-55.4

-0.3

73.2

-43.8

-36.9

14.1 

182.7

39.3 

-57.0

-66.5 

-88.9

7.6

13.1 

-36.8

67.8 

35.3

24.8

67.2

65.6

55.2 

148.5

Low-market 

-36.5 

-36.4

-16.0

108.4

1995 

Mid-market 

-20.8 

25.1

10.1

1.3

23.9

-4.6

-3.3

61.0 

-3.7 

Up-market 

not classified 

Degree 
of 
specialisation 

49.9

-29.6

59.3 

109.7

42.6 

-41.3

-61.3

-112.5 

-63.4

-39.0

-68.5

-0.9

41.0

10.6 

-5.0

52.3 

32.1

20.5

94.8

57.3

94.7 

94.2

Note:  when  quantities  are  not  available 
Source: UN Comtrade – Calculation by CEPII (2006), report for DG Trade. 

the  breakdown  by  quality 

ranges 

is  not  possible.

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Table 5: Contribution to Trade Balance of high technology products by quality in 2003 

Quality 

EU25  

USA 

Japan   Korea  

Russia 

India  

China  

all 

-12.7 

28.9

not classified

-4.0 

High 
technology 

Low-market

-11.4 

Mid-market 

-2.0 

4.1

3.5

6.7

Up-market 

4.8 

14.6

all 

12.7 

-28.9

not classified

0.6 

17.7

3.7

-0.4

4.2

6.1

-6.1

-3.7

-9.9

29.5

-0.3

3.7

7.8

10.9 

-44.4 

-0.2 

-0.9 

-8.9

-3.5

6.2 

-17.8 

38.8

-2.0 

-7.1 

-15.4

18.4

6.8 

-18.6 

-28.7

-29.5

-10.9 

44.4 

8.9

0.0

13.4 

8.5 

-33.3

Others 

Low-market

-45.2 

-50.6

-23.1

71.2

7.8 

90.9 

144.0

Mid-market 

-13.8 

Up-market 

71.1 

-1.4

5.5

24.0

-26.9

41.3 

-36.7 

-41.6

5.2

-73.7

-73.3 

-18.3 

-60.2

Note:  when  quantities  are  not  available 
Source: UN Comtrade – Calculation by CEPII (2006), report for DG Trade. 

the  breakdown  by  quality 

ranges 

is  not  possible.

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Share in  World FDI Flows 2002-2004

Inflows

Outflows

Rest of the 
World
14%

USA
17%

Canada
3%

L.America
6%

EU25
27%

Candidates
1.8%

Efta
3%

Japan
2%

China
13%

Australia New 
Zealand
5%

Asean
4%

Hong kong
4%

USA
38%

Canada
7%

L.America
1%

Australia New 
Zealand
3%

Asean
2%

Source: UNCTAD, Eurostat

World is calculated excluding intra-EU Trade.

Commercial Services World Trade, 2004
(billions of euros)

EU25
33%

Candidates
0.2%

Efta
4%

Japan
7%

China
0%
Hong kong
5%

38

45

343

307

256

209

-7

Canada

26

16

40

32

-10

Russia

Korea

47

USA

11

15

Mexico

-4

36

33

17

16

50

58

EU25

Candidates

China

-8

52

38

34

23

14

10

32

33

Efta

Medit.Countries*

India

-1

31

27

3

Other L.America

14

19

-5

Mercosur

17

33

-15

Sub Saharan Africa

-8

76

108

Japan

-31

Japan

89

71

-18

Asean

26

26

Exports

Imports

Balance

Australia & New Zealand

EU excluding intra EU Trade   Candidates  Bulgaria, Croatia, Romania, Turkey
Efta Iceland, Norway, Switzerland  *Medit.Countries Algeria, Egypt, Israel, Jordan, Morocco, Syrian Arab Rep, Tunisia   Latin America including the Caribbean
Mercosur Argentina, Brazil, Paraguay, Uruguay   Asean Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam.

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