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European Commission Highlights Global Barriers Affecting EU Trade, the Impact of Which Could Have Unwanted Consequences for Businesses Exporting to the EU

On 20 June 2016, the European Commission released a report on trade and investment barriers, highlighting the global proliferation of protectionist trends over a period of eighteen months (1 July 2014 – 31 December 2015). Thirty one countries were monitored over this period, and the report reveals a strong tendency towards protectionism, evidenced from the introduction of 201 new protectionist measures, bringing the total to 1000 since the beginning of the economic crisis.

The report further revealed that the products that are most affected by these measures include raw materials and energy products (hit by export restrictions); and Information and Communication Technology (ICT) products (hit by local content requirements).

Four countries – mainland China, Russia, India and Indonesia – were identified as having introduced nearly half of all the new measures identified. In a different report, the Commission had also identified India and mainland China, along with the US and Brazil, to be the greatest users of trade defence measures against the European Union. Other countries identified in the 20 June Report include South Africa, Argentina, Turkey, Ecuador, Algeria, Brazil, Mexico, Thailand, the United States, Egypt, Nigeria and Malaysia. While the report identifies market access barriers for European products in these markets, Hong Kong traders should take note of the growing protectionist tendency in these markets as this potentially affects their interests as well.

Most measures take the form of border measures such as tariff increases, quantitative restrictions, import licensing and trade bans. The Commission has also witnessed an emerging trend, especially in Russia and the United States, of curbing access for European companies to bid for public contracts. On the other hand, many of the measures enacted by countries – the report particularly notes mainland China in this regard – are done so under the guise of national security, including cyber security. The Commission’s view is  that domestic legislation now often goes beyond the usual contours of national security and anti-terrorism through broad and vague definitions that not only create uncertainty but oblige firms to hand over sensitive data to authorities.

The EU wishes to remove these barriers to its products, and is committed to doing so both by developing rules at the WTO and by ensuring that its trading partners comply with all the provisions of bilateral treaties. The WTO itself has come to recognise this growing protectionist trend, particularly as regards G20 economies, which have bolstered efforts to shield domestic industries from foreign competition.

According to EU Trade Commissioner, Cecilia Malmström, this trend is on the rise despite the fact that “[o]pen markets are proven to bring more innovation, increased productivity, economic growth and prosperity. Despite this, few barriers to trade have been removed, while new ones have been introduced.” She also points to the EU’s efforts to promote open trade – specifically addressing restrictive measures on public procurement in the US and technical barriers to trade in Japan – through negotiations on free trade agreements.

Hong Kong traders may additionally like to know that the Trade Commissioner has also proposed new rules to hamper access to European public contracts for any countries that do not reciprocate entry into their own markets. This, the Commissioner hopes, would open up public markets across the globe.

In the event that countries do not reciprocate, the EU could potentially introduce protectionist measures of its own, both in the form of higher tariffs (within the bound levels) and import bans, to counterbalance the negative impact of market access restrictions for European goods.

In the alternative, the EU could also apply more trade defence measures, such as anti-dumping or countervailing duties, as a reactionary measure to bring other countries into line with open trade policies. In either case, this does not augur well for exporters wishing to gain access to European markets, including Hong Kong traders.

Please click on the following link to access the report: European Commission Report on Trade and Investment Barriers and Protectionist Trends 2016

Content provided by Picture: HKTDC Research
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