Article: EU fight against trade barriers gained firms €8 billion in extra exports

This article is taken from our policy coverage dated 22/06/20.

The European Union's fight against growing international trade barriers, generated €8 billion in additional exports for European companies in 2019, according to the latest annual report.

The report on Trade and Investment Barriers 2019 pinpoints that food and agricultural exports were particularly hard hit last year especially by new restrictions.

The total number of existing trade barriers around the word amounts to 438, out of which 43 were introduced in 2019 by 22 different countries.

The highest number of trade restrictions concern access to the Chinese and Russian markets (respectively 38 and 31 measures). China also imposed the highest number of new restrictions in 2019, followed by South Mediterranean and Middle East countries.

Trade barriers can take various forms - from fully-fledged import bans and unlawful border taxes to "disproportionally burdensome or discriminatory regulations going against international trade rules set in the World Trade Organization or in bilateral agreements," the report notes.

As to the types of barriers affecting EU companies, For the first time in 2019, border measures (229 or 52% of the total) were more numerous than behind-the-border measures (188 or 43%). "This is a sign that some partners use a wider panoply of barriers to achieve protectionist goals," the report says.

China remains the country with the highest number of recorded barriers, with 38 obstacles hindering EU export and investment opportunities. Russia comes second with 31 barriers currently in place, followed by Indonesia on 25 and the United States with 24. India and Turkey share the fifth place, with 23 reported measures. Other countries with ten or more trade barriers registered include: Brazil (19), Republic of Korea (19), Australia (14), Algeria (12), Thailand (12), Mexico (11), Egypt (10) and Malaysia (10).

The growth in new export barriers leads the report to one of its key conclusions, which a statement explains is that "protectionism has become deeply ingrained in global trade."

Yet the EU was able to fight off some of the barriers through coordinated efforts by the European Commission, member states and EU business organisations via the Market Access Partnership.

"Ensuring respect of the existing international trade rules is one of my top priorities. Our action to enforce trade rights and eliminate trade barriers brings tangible benefits for EU companies, including small ones. In 2019, our joint efforts regained for them €8 billion," EU Trade Commissioner Phil Hogan commented on the report.

But Hogan warned the fight was far from over noting that "we have also been facing a worrying sea change in world trade. Barriers affect EU export sectors of particular importance and obstacles spread across regions. While we focus all our efforts on the post-COVID economic recovery, this calls for new impetus to enforcement. It is essential to keep global trade flows open."

Given the need to step up efforts in this area, the Commission is soon to name a Chief Trade Enforcement Officer "to coordinate and steer all EU enforcement actions. This will include the establishment of a single entry point for trade enforcement issues to respond faster and more effectively to trade restrictive practices by EU trading partners."

Further changes could come following a major review of EU trade policy that the Commission launched with a public consultation June 16. The Commission is particularly interested in comments on suggestions on how to improve EU enforcement efforts to help small businesses facing unjustified export restrictions.

Agri-food trade barriers

"In 2019, significant progress was achieved in removing agri-food barriers," a factsheet on the report announces, citing for example a case involving Polish producers of baby milk powder which can now export again to Egypt.

Two of China's import barriers removed in 2019, namely new certification requirements for low risk food products and the mad cow (BSE) import ban on EU bovine and ovine products had hit European exports to the tune of €11.9 billion.

Another example of an issue resolved in 2019 included Saudi Arabia's traffic light labelling, ironic considering that the European Commission is considering a colour-coded front-of-pack label for the EU.

Other trade barrier cases in the agri-food area that opened and closed in 2019 involved Colombia's unlawful anti-dumping duties on frozen fries, Egypt's restrictions on Feta imports and Pakistan's "Non-Tariff Barriers to import food products."

Also resolved in 2019 were two disputes with Canada over phytosanitary import conditions for fresh tomatoes and what the report described as "Unjustified trade restrictions due to a non-recognition of country freedom and pest free areas of EU Member States for the Citrus and Asian longhorned beetle."

The report further shows that in 2019 not only did beef exporters from France, Ireland and The Netherlands regained access to China, but Irish and Croatian producers recovered access to Japan.

Dutch pork producers can now export to Mexico, while Belgian pear producers regained access to the country's market, the report reveals.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.