Report

Teaser, summary, work performed and final results

Periodic Reporting for period 1 - RESPECT (Realizing Europe’s Soft Power in External Cooperation and Trade)

Teaser

The effectiveness of the EU as a normative actor in international relations depends crucially on the EU’s common commercial policy – broadly defined to include regulatory standards that determine the conditions for trade in goods and services as well as investment flows...

Summary

The effectiveness of the EU as a normative actor in international relations depends crucially on the EU’s common commercial policy – broadly defined to include regulatory standards that determine the conditions for trade in goods and services as well as investment flows into and out of the European single market. The most recent EU trade strategy calls for trade and investment policy to take responsibility for supporting and promoting EU values and standards relating to human rights, labour rights, environmental, health and consumer protection, sustainable development, economic governance, as well as the EU’s broader objectives of protecting people and the planet.

In line with the EU´s stated strategic objectives, the overall objective of the project is to determine, through in-depth analysis of the EU’s common external commercial policies, instruments of economic diplomacy and development assistance implemented at both the EU and Member State levels, factors that support or inhibit the realisation of the EU’s non-trade policy objectives (NTPOs) established in the Treaty of Lisbon – such as sustainable development, human rights, labour standards and environmental protection – and to develop concrete proposals for action to realize better the EU’s NTPOs in the formulation of its external trade and investment policies.

Understanding how the EU’s trade policy can be made more effective in supporting external (foreign policy) objectives is important because if done correctly trade and investment can have significant positive effects on the livelihoods of people in partner countries and are associated with improvements in human development, maternal health and child mortality, and human/social rights. Moreover, increased policy coherence between the EU-level trade and external strategies and Member States\' policy action can strengthen cohesion within the EU by providing a more equitable distribution of the gains from trade across countries.

Work performed

During the period covered in this report four main publications have been registered. Three of them focus on services trade and investment policy. This topic is particularly relevant given the process of servicification of the global economy, the increased importance of services for value added and employment in EU Member States and partner countries as well as the prominent role that services might play in the agenda for sustainable development.

In the first publication Fiorini and Hoekman describe the structure of EU services trade and investment policy and analyze the motives for partial success of trade agreements in generating some of the economic benefits which can be expected from services trade liberalization. A dual focus on removing discriminatory barriers and on improving domestic governance institutions is identified as the solution for maximizing the gains from services trade liberalization and allowing for their equitable distribution across EU Member States.

The second publication explores in further details the relationship between these two dimensions of services trade policy across granular dimensions of economic governance institutions. A conceptual framework is proposed to identify cases of complementarity between market access and governance reforms and instances of substitutability, where the removal of discriminatory barriers can trigger positive economic effects in environments characterized by weak institutions. The conceptual predictions are tested with available policy data for EU countries.

The connection between services and dimensions of sustainability is investigated in the third publication. Fiorini and Hoekman conduct a text analysis of the 17 Sustainable Development Goals (SDGs) and show the high services content of the agenda for sustainable development. Moreover, the authors disclose a positive relationship between openness in services trade regimes and attainment of selected SDGs.

The fourth publication reflects on the endogenous formation and evolution of geographical indications (GIs). Meloni and Swinnen use the world\'s first GIs in the wine sector in Europe to identify the role trade for the creation of GIs and that of changes in political power, liberal principles taking over in Europe and infrastructural investments allowing for changes in the structure of trade as determinants of GIs\' expansion over time.

Final results

These three publications contribute to a better understanding of the anatomy and properties of important trade and trade related policy instruments: services trade policies and GIs.

In case of services trade policy, the first two RESPECT studies provide new knowledge of the relationship between the removal of discriminatory barriers to services trade and the policy effort to reform governance institutions. In particular they offer novel intuitions on how to use the two to maximize sectoral productivity gains due to a better access to higher quality-to-price ration services inputs. This type of outcome (economic growth driven by productivity gains) has immediate spillovers on those sustainability dimensions which have an income matrix (such as poverty reduction) and it is directly relevant for Sustainable Development Goal number 9, centered on industrialization and innovation targets. Moreover, these studies offer concrete suggestions for EU services trade policy design that account for the interplay between market access and domestic governance. Empirical evidence in those papers suggests that average productivity gains for EU manufacturing sectors due to services trade liberalization could increase substantially and the cross-country distribution of those economic benefits could become more equitable.

The third publication proposes novel descriptive empirical evidence on the relationship between services trade policy regimes and the attainment of NTPOs as measured by selected SDGs indicators. Recognizing the role of trade policy for achieving sustainable development is crucial for the design of services related EU trade policy and related negotiations with third countries. The reported study contributes to open a new research agenda aiming at a more precise causal assessment of the effect of services trade policy instruments on dimensions of sustainable development.

Understanding the determinants of GIs\' creation and evolution is crucial to assess their potential to contribute to non-trade policy objectives (NTPOs). The modes and extent to which GIs respond to economic, political, cultural and environmental tensions determines their effects across a wide range of outcomes, from the magnitude and distribution of economic gains to the potential impact on biodiversity conservation. A detailed and accurate forecast of these effects is at the core of a sound policy design regarding GIs. The last RESPECT study listed below contributes to such exercise.

Both for the case of services trade policy and GIs, many implications and results can be projected on EU partner countries and these intuitions can be used in the design of EU trade and external policy strategies to strengthen the attainment of non-trade policy objectives (NTPOs) in third countries.

Website & more info

More info: http://respect.eui.eu/publications/.