EU Trade Policy: Looking East Isabelle Ramdoo, ECDPM MEXA Workshop, 26th July 2012, Mauritius

1. EU Trade Policy
Looking EAST
Isabelle Ramdoo, ECDPM
MEXA Workshop, 26th July 2012, Mauritius

2. Structure of Presentation
1. A closer look at EU imports from main competitors
1. Countries having an FTA with the EU – The case of South
Korea
1. Countries having no FTAs: Which regimes apply?
1. Country cases – exports to EU, tariffs, rules of origin
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3. 1. A closer look at EU imports from main competitors
Cotton Denim T Shirts T Shirts Pull Shirts
Yarn Pull Wool Trousers
Fabric Fabric Cotton Man made Cotton Cotton
Total
imports 103,954 214,680 388,905 14,211,039 4,788,144 9,272,782 143,103 11,939,600 5,549,936
(€’000)
China 5.3% 10.0% 17.4% 29.2% 25.5% 18.2% 19.8%
Bangladesh 21.9% 14.9% 4.8% 12.9% 9.1%
Turkey 5.5% 13.9% 30.6% 13.4% 19.5% 7.3% 8.4% 8.5% 8.1%
Germany 6.6% 5.2% 3.1% 6.1% 6.9% 6.5% 5.6% 6.8% 6.3%
Netherlands 4.0% 4.9% 4.9% 3.7% 4.2%
Italy 29.6% 32.0% 16.7% 4.1% 3.6% 12.6% 5.5% 5.5%
Cambodia 3.3%
France 3.4% 2.9% 4.0% 3.9% 5.0% 2.7%
India 7.3% 2.6% 2.3% 10.5%
tunisia 2.8% 5.8% 2.2%
Pakistan 7.6% 5.4%
Morocco 8.7% 1.7% 2.4%
Vietnam 3.7%
UK 11.1%
Denmark 9.6%
Belgium 7.6% 6.5%
Mauritius 4.8% 1.8%
Spain 4.3% 9.4%
Austria 8.2%
Portugal 7.8% 4.1% 4.8%
Switzerland 6.2%
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4. Yarn and fabric
1. Yarn (HS 51.06.10)
• Top EU importers: Italy, UK, Denmark Belgium
• Top competitors: Turkey, China
2. Cotton Fabric (HS 52.08.49)
• Top EU importers: Italy, France, Spain, Portugal
• Top competitors: Turkey, China
3. Denim Fabric (HS 52.09.42)
• Top EU importers: France, Italy
• Top competitors: Turkey, Morocco, Pakistan. Tunisia
Garments
4. T-Shirts (cotton) (HS61.09.10)
• Top EU importers: Germany, France, UK, Belgium
• Top competitors: Bangladesh, Turkey, China, India
5. T-Shirts (man made) (HS 61.09.90)
• Top EU importers: France, Italy, Germany
• Top competitors: Turkey, China
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5. 6. Pullovers (wool) HS (61.10.19)
• Top EU importers: Italy, Germany, France
• Top competitors: China, Bangladesh, Turkey
7. Pullovers (cotton) (HS 61.10.20)
• Top EU importers: Germany, France, UK, Netherlands
• Top competitors: China, Turkey, Bangladesh
8. Trousers (HS 62.03.42)
• Top EU importers: Germany, UK, France, Italy
• Top competitors: China, Bangladesh, Turkey, Tunisia
9. Shirts (cotton) (HS 62.05.20)
• Top EU importers: Germany, France, UK, Italy
• Top competitors: China, India, Bangladesh, Turkey
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6. Fish and Fish products
Fish fillets, fresh, fish prepared and
Tuna, skip jack
frozen, chilled preserved
Total imports (€ ‘000) 6,847,220 3,148,904 922,443
China 27.0% 3.5%
Vietnam 21.7%
Norway 8.4%
Iceland 7.9%
Germany 6.6% 10.9%
Netherlands 5.7% 3.8%
USA 5.2%
Denmark 4.5% 3.0%
Russia 4.3%
Ecuador 16.6% 3.3%
Thailand 10.9% 8.9%
Mauritius 8.1% 1.5%
Seychelles 7.4%
Cote d'Ivoire 3.9%
Ghana 3.9%
Philippines 3.5%
PNG 2.7%
Spain 17.8% 10.2%
Morocco 9.4%
France 7.0%
Lithuania 6.5%
Belgium 6.0%
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7. Fish and fish products
1. Fish fillets, fresh, chilled or frozen (HS 03.04.29)
• Top EU importers: Spain, UK, France
• Top competitors: China, Vietnam, Russia
2. Prepared or preserved fish (HS 16.04.14)
• Top EU importers: Spain, UK, France
• Top competitors: Ecuador, Thailand, Seychelles
3. Other prepared or preserved fish (HS 16.04.20)
• Top EU importers: Spain, UK, France
• Top competitors: Morocco, Thailand, China, Ecuador
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8. 2. Countries having an FTA – South Korea
• South Korea signed an FTA with the EU in 2011. This FTA is
considered as the most advanced trade agreement the EU has signed
so far. S. Korea does not benefit from full duty free and quota free
market access to the EU.
• On average, S. Korea is not a large trading partner to the EU: EU’s
share of imports from S. Korea represents 2% of its total imports and
EU’s share of exports to Korea also represents 2% of total EU export.
• However, for specific sectors, such as automobile and machinery, S.
Korea is an important player
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9. Overview of preferences granted to S. Korea in
selected products
• Textile products: South Korea is not a major exporter of textiles to
the EU. Main markets are in Asia – Mainly Japan and China
• FTA will open up EU market. However, RoO are quite strict for textile
products
• Fish and fish products – S. Korea is a large consumer and a
producer of fish and fish products, in particular fresh fish (ch 03)
• FTA does not confer improved benefits – no derogation provision
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10. Key elements of the EU – Korea FTA for textile products
Korean exports of selected textile products by main markets (2011)
T-shirts - Man T Shirts - Pullover - Shirts -
made Cotton Cotton Cotton Yarn
Total Exports to
world (€ '000) 99,151 54,855 17,445 8,313 7,291
EU 1.9% 1.9% 2.0% 10.4% 0.2%
China 8.2% 17.6% 17.8% 28.2% 33.8%
Japan 71.2% 40.7% 27.4% 12.3% 23.9%
Pakistan 20.7%
US 3.6% 5.0% 45.0% 30.2%
Hongkong 13.4%
Rules of origin for t-shirts and pullovers:
Double stage transformation : (spinning of natural and/or man made staple
fibres, or extrusion of man made filament yarn accompanied by knitting (knitted to
shape products)
Value tolerance: 10% of the weight of basic material used
Double stage transformation: Knitting and making up including cutting
(assembling two or more pieces of knitted or crocheted fabric which have been
either cut to form or obtained directly to form
Value tolerance: 8% of the weight of basic material used
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11. Rules of origin for shirts
Double stage transformation: Weaving accompanied by making-up
including cutting; or
Value tolerance: 10% of the weight of basic material used
• Embroidering accompanied by making up including cutting, provided
that the value of the unembroided fabric used does not exceed 40% of
ex-works price of the product, or
• Coating accompanied by making up, including cutting, provided that the
value of the uncoated fabric used does not exceed 40% of ex-works
price of the product, or
• Making up preceded by printing accompanied by at least 2 preparatory
operations (such as scouring, bleaching, mercerising, heat setting,
raising, calendaring, shrink resistance processing, permanent finishing,
decatising, impregnating, mending and burling), provided that the value
of the unprinted fabric used does not exceed 47,5% of the ex-works
price of the product
• Value tolerance: 8% of the weight of basic material used
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12. Rules of origin for yarn
Manufacture from
• - raw silk or silk waste, carded or combed or otherwise prepared
for spinning;
• - other natural fibres, not carded or combed or otherwise
prepared for spinning;
• - chemical materials or textile pulp;
• - paper making materials
Value tolerance: 10% of the weight of basic material used
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13. Fish and fish products
Main exports of fish and fish products to main markets (2011)
Fish fillets, fresh, fish prepared
Tuna, skip jack
frozen, chilled and preserved
Total exports to world (€ '000) 221,167 14,127 34,846
EU 5.5% 0.9% 15.5%
US 7.1% 25.6% 20.3%
China 4.6% 52.2% 9.1%
Japan 82.6% 32.9%
Taipei 8.9%
Vessels registered in Korea or EU and sail under their flags; and
Crew requirements: At least 50 % owned by nationals of Korea or EU; or
Vessels owned by companies with head office in Korea or EU and which
are at least 50% owned by Korea or EU
Value tolerance: 10% of ex-works price of product
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14. Countries having no FTAs: What regimes apply?
Philippine
India Vietnam Thailand Pakistan Bangladesh China
s
GSP - but in
GSP - some Special
practice, most
products are regime for 75 GSP - Special
Regime GSP GSP GSP products are
excluded from products, GSP LDC Scheme
excluded from
preferences for the rest
preferences
State of play of EU trade policy:
-India and Vietnam: Currently negotiating FTAs
-Thailand and Philippines: Considering negotiating FTAs
- Pakistan: Special incentive
- Bangladesh and China: no plans of FTAs so far
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15. 4. What rules apply for those
countries?
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16. 1. India: currently negotiating an FTA
Why?
- An important partner for the EU, in both strategic and economic terms.
EU is also a major partner to India
- It is a high potential emerging economy
- Middle class is rising (currently 150 million, expected to reach 600
million in 2020) – HUGE market potential for EU products
Current state of play:
• India is a beneficiary of the EU's GSP scheme. In 2010, around 85%
of Indian exports to the EU entered under a zero or a preferential
tariff. But average tariffs is high in India for EU products (31.8 % for
agric and 10.1% for industrial products)
• FTA negotiations were launched in 2007 - expected to cover 25% of
world population and 30% of world GDP
• The negotiations have entered a crucial phase and intensive activity is
expected ahead of the EU-India Summit to be held on 10 February
2012.
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17. • EU will not provide DFQF – will liberalise 95% of its market (with an
exclusion list of 226 products, mostly chemicals, petrochemicals,
plastics, ceramics and glassware.
• India will liberalise 90%, with an exclusion list of about 150 agricultural
goods (including dairy products, sugar, fruits and vegetables, meat
products, fish and fish products) and 250 manufactured products such
as some textiles and clothing, textile machinery, cars, and wines and
spirits.
Key challenges:
• Tariffs: India is inflexible on tariffs on automobiles (peak of 60%) and
want to exclude products where EU has subsidies.
• Concerns regarding clauses on human rights, social and environmental
as well as labour standards.
• Strict requirements on Intellectual Property Rights issues, which may
curtail the production of cheap generic drugs, especially AIDS drugs
which India exports to Africa.
• Concerns in Services – movement of people, liberalisation of services
such as professional services
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18. Indian exports of selected textile products to main markets (2010)
T-Shirts
T-Shirt Shirts - Denim Pull Cotton Pull
Trousers man Yarn
Cotton Cotton fabric Cotton Fabric Wool
made
Total
Exports to
1,472,549 701,562 368,597 225,445 152,048 128,741 9,931 4,290 3,055
world (€
'000)
EU 47.1 53.7 46.7 24.7 4.9 61.8 14.1 13.6 65.0
US 30.8 28.0 29.3 20.0 31.5 54.1 15.3
Tunisia 10.4
Togo 39.2
Brazil 12.8
Bangladesh 33.2
Turkey 17.0
UAE 7.3 6.0 11.6 30.1
Afghanistan 6.8
India is a major global player in the apparel sector ( t-shirts – 1.4 billion exports
in 2011);
EU is a major market for Indian apparel products. Most products exported under
the GSP Scheme (see below).
Note: fabric (denim and cotton) go to countries that benefit from duty free access
to EU (and single transformation).
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19. Current duties applied to Indian textiles by EU
India exports under the Generalised system of preferences, a Scheme
providing trade preferences to all developing countries.
Rate of duty applied to Indian textile products
T-Shirt Shirts - T-Shirts Denim Pull Cotton Pull
Trousers Yarn
Cotton Cotton man made fabric Cotton Fabric Wool
Duty applied
to Indian 9.6% 9.6% 9.6% 9.6% 8.0% 9.6% 8.0% 3.8% 9.6%
products
Scheme GSP GSP GSP GSP MFN GSP MFN MFN GSP
For textile products, GSP tariffs are 20% lower than the normal tariff that EU applies,
without preferences (MFN rate). Although India is a large exporter, its volume of exports
are not large enough to suspend it from preferences.
GSP preferences are suspended for yarn and fabric because the value of EU imports
from India for 3 consecutive years exceeded 14.5% of total EU imports of yarn and fabric
from all GSP countries. Here India pays the normal tariff (non-preferential).
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20. Rules of origin applied to Indian textile products:
For yarn and fabric, since India does not benefit from preferences, there are
no specific rules of origin
For textiles, the rules are as follows:
Pulls and T – Shirts: Double stage transformation, i.e knitting and making
up.
Value tolerance: non-originating material should be classified under another
heading and their value should not exceed 8% of ex-works price of product
(e.x for trousers, it does not prevent the use of items such as buttons or
zip fasteners)
Shirts and trousers: Double stage transformation, i.e weaving accompanied
by making up, including cutting; or making up preceded by printing
accompanied by at least 2 preparatory finishing operations, provided
unprinted fabric does not exceed 47.7% of ex works price of product
Value tolerance: non-originating material should be classified under another
heading and their value should not exceed 8% of ex-works price of product
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21. Cumulation
1. Bilateral cumulation – applicable between EU and India
1. Cumulation with Norway, Switzerland and Turkey: If India is a
beneficiary of Norway, Switzerland and Turkey GSP Scheme, and that
the rules of origin are the same; there is sufficient processing; same
treatment apply to Europe. Cumulation does not apply for
agricultural products and fish and fish products.
2. Regional cumulation possible between Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan and Sri Lanka. Conditions countries should
apply the GSP RoO among themselves if their RoO are not the same.
Cumulation does not apply if tariffs are not the same for all
countries involved in cumulation (eg. Between India and an LDC; for for
fabric, where India does not benefit from preferences); Working and
processing in beneficiary country should be further processed –
otherwise the product will have the origin of the country with highest
value of materials used.
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22. 4. Possibility for ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia,
Philippines, Singapore, Thailand, Vietnam) to cumulate with SAARC
countries (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri
Lanka). This is also new and quite important.
5. Extended cumulation (NEW)
At the request of a country, extended cumulation is possible between the
country and another country with which the EU has signed an FTA, under
the following conditions:
- The request must contain a list of the materials concerned by
cumulation. Each time a new material is used, a new request must be
made. Each request will be examined by the Commission individually
- Agricultural and fish and fish products are excluded from extended
cumulation
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23. 2. Viet Nam
EU signed a Partnership and Cooperation Agreement with Vietnam in June
2012. This is a political agreement.
Negotiations have started on a FTA in June 2012. EU is not the major
market for Vietnamese products (US and Japan) but is quite significant.
Main Vietnamese textile products are cotton pullovers, t-shirts (cotton,
man made and trousers
Pull T Shirt T Shirts Shirts Cotton Denim
Trousers Pull Wool
Cotton Cotton man made Cotton Fabric Fabric
Total Exports
to world (€ 754,470 577,876 236,752 171,346 169,290 13,000 5,262 2,158
'000)
EU 4.7% 7.0% 11.4% 25.4% 37.6% n/a 35.3%
US 87.7% 67.9% 66.7% 41.9% 49.0% 57.1%
Korea 52.8%
UAE 10.9%
Lao 9.5%
Bangladesh 6.9%
Japan 2.1% 15.4% 14.4% 9.0% 6.4%
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24. Vietnam is not an LDC but benefits from GSP Scheme. The same rules of
origin and cumulation principles that apply to India also apply to Vietnam.
Tariffs applied are a bit different, because the share of Vietnamese imports
in the EU is lower than that of India
Tariffs applied to Vietnam on selected textile products
Pull T Shirt T Shirts Shirts Cotton Denim
Trousers Pull Wool
Cotton Cotton man made Cotton Fabric Fabric
Tariff applied
9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%
to Vietnam
Regime GSP GSP GSP GSP GSP GSP GSP GSP
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25. 3. Pakistan
• Pakistan is an important partner for the EU, although trade and
investment remain below its potential.
• In 2011, after a severe flood resulting in a serious impact on Pakistan's
economy, EC agreed on a package of measures to assist in the
recovery of Pakistan's economy.
• One element of this package is the granting of 2 years unilateral trade
preferences on a number of goods (75 products) imported into the EU
from Pakistan.
• Most products are textile products. These include yarns, fabric and
apparel – but most products on interest to Mauritius are NOT
INCLUDED. The normal GSP applies to these products and Pakistan
pays the same duties as Vietnam above.
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26. Pakistan’s exports to main markets in selected products
T Shirt T shirt man Shirts Pull Cotton
Trousers Denim Pull cotton
Cotton made Cotton Wool fabric
Total Exports
to world (€ 636,390 348,889 265,714 58,889 39,979 13,482 802 251
'000)
EU 65.5 7.9 24.7 20.0 18.5 40.1 59.2 22.3
USA 23.2 69.2 70.1 78.0 40.7 23.9
South Africa 23.1
Turkey 32.9
Bangladesh 28.6
Egypt 5.6
With the exception of wool pullovers, Pakistan’s main market for the above
selected products is in fact the US, with the EU representing less than 25% of
Pakistan’s exports
Note also that denim products are mainly exports to Turkey and Bangladesh
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27. Tariff applied to Pakistan
Pull T Shirt Trouser T Shirts Shirts Cotton Pull Denim
Cotton Cotton s man made Cotton Fabric Wool Fabric
Tariff applied
9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%
to Pakistan
Regime GSP GSP GSP GSP GSP GSP GSP GSP
For 75 products that benefit from special incentive package: duty free for 55
products; tariff rate quotas for 20 products
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28. 5. Bangladesh
T Shirts T Shirts man Denim Cotton
Cotton Trousers Pull Cotton made Pull wool fabric fabric
There are no figures for Bangladesh exports to Europe - latest figures date back to 2007
Total exports
to the world 3,831,138 3,293,836 1,954,133 161,288 7,626 1,293 251
EU's imports
from
Bangladesh 3,116,272 1,542,020 1,381,480 77,290 7,626 449 229
Data problems – no export figures before 2007 (no comparison with
other markets)
Key issues about Bangladesh – LDC Status and special preferences
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29. Tariff applied to all products from Bangladesh: 0% (duty free and quota on
every thing except arms
Rules of origin: More favourable than for other countries
Yarn
Weaving or printing accompanied by at least 2 preparatory or finishing
options
Value tolerance: 10% of total weight of basic material used
Fabric
Weaving or printing accompanied by at least 2 preparatory or finishing
options
Value tolerance: 10% of total weight of basic material used
Apparel
Single stage transformation – Manufacture from fabric applicable to t-
shirts, pullovers, shirts and trousers
Cumulation: Same rules as for India
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30. 6. Thailand and Philippines
Important producer of numerous textile products
EU is a main market
T Shirts Shirts T shirts Pull Denim Cotton Pull
man made cotton cotton Trousers cotton fabric fabric wool
Total Exports
to world (€
'000) 266,540 114,080 163,352 93,140 75,781 63,797 15,694 1,018
EU 52.8% 23.4% 17.1% 43.0% 37.2% 1.0% 58.0% 6.0%
US 11.7% 28.8% 31.4% 17.0% 46.5%
Japan 10.0% 6.2% 17.5% 43.1%
Bangladesh 60.1% 4.7%
Maldives 22.1%
HKG 8.7%
Vietnam 6.8%
T Shirt T Shirts Shirts Cotton Denim
Pull Cotton Trousers Pull Wool
Cotton man made Cotton Fabric Fabric
Tariff applied
9.6% 9.6% 9.6% 9.6% 9.6% 6.4% 9.6% 6.4%
to Thailand
Regime GSP GSP GSP GSP GSP GSP GSP GSP
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31. Fish and fish products
fish prepared and Fish fillets, fresh,
Thailand Tuna, skip jack
preserved frozen, chilled
Total Exports to world (€
2,297,696 228,203 174,055
'000)
EU 15.1% 17.6% 12.3%
Japan 7.5% 21.0% 64.0%
US 22.6% 11.7% 12.3%
Australia 8.8% 8.3% 3.2%
fish prepared and Fish fillets fresh, frozen
Philippines Tuna, skip jack
preserved and chilled
Total Exports to world (€
209,779 810 No exports
'000)
EU 46.5% 7.3%
US 36.2% 29.3%
Japan 3.3% 10.0%
South Korea 12.7%
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32. fish prepared and Fish fillets, fresh,
Tuna, skip jack preserved frozen, chilled
Tariff applied to Thailand and
Philippines 20.5% 20.5% 14.5%
Regime GSP GSP GSP
Rules of origin
1. Fish fillets: Wholly obtained
2. Tuna, skipjacks and prepared fish: all materials from fresh fish are wholly
obtained
Value tolerance: 15% ex-works price
Derogations: No derogations
Vessels:
Registration and flag requirements;
Either 50% owned by nationals or owned by company with head office in country or
EU + at least 50% ownership
Possibility to use Regional cumulation to vessels of different beneficiary countries
(product will have origin of country which flag the vessels)
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33. 7. China
• Since joining the WTO in 2001, China has emerged as the world's third
largest economy and the world's leading exporter, as well as
increasingly an important political power.
• EU-China trade has grown significantly. China is now the EU's second
trading partner after the USA and the EU's largest source of imports by
far. The EU is also China's main trading partner.
• In January 2007 the EU and China launched negotiations on a
comprehensive Partnership and Cooperation Agreement (PCA). The aim
is to further improve the framework for bilateral trade and investment
relations and also to upgrade the 1985 EC- China Trade and Economic
Cooperation Agreement.
• However, positions remain far apart on many important chapters, and
the EC has called upon China to demonstrate more ambition.
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34. Exports of selected textiles products from China to main markets
T shirts
Pull T shirts Shirts Denim Cotton Pull
Trousers man Yarn
cotton cotton cotton fabric fabric wool
made
Total
Exports to
8,172,821 4,821,539 4,788,144 4,616,777 2,920,506 827,901 151,326 109,043 94,683
world (€
'000)
EU 29.2 28.7 12.9 20.7 28.2 0.7 4.4 25.2 4.0
US 24.2 19.5 10.8 19.5 23.4 18.6
Japan 9.5 11.3 25.5 24.5 17.1 7.1 13.8
Hongkong 10.0 4.7 64.4 16.6 12.2 68.6
Macao 8.4
Bangladesh 15.9 22.3
Indonesia 14.7
Vietnam 8.8
T shirts
Pull T shirts Shirts Denim Cotton Pull
Trousers man Yarn
cotton cotton cotton fabric fabric wool
made
Tariff
applied to 12.0% 12.0% 12.0% 12.0% 12.0% 8.0% 8.0% 12.0% 3.8%
China
Regime MFN MFN MFN MFN MFN MFN MFN MFN MFN
Note: China does not benefit from GSP preferences for the above products because of size of exports to EU
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35. Fish and Fish products
Fish fillets, fresh, fish prepared and
China Tuna, skip jack
frozen, chilled preserved
Total Exports to world (€ '000) 4,157,982 241,130 417,453
EU 35.0% 15.8% 6.8%
Japan 16.4% 9.2% 22.2%
US 29.6% 22.3% 6.5%
Thailand 19.5%
Russia 8.7%
Korea 11.7%
Israel 9.9%
Brazil 4.3%
fish prepared and Fish fillets, fresh,
Tuna, skip jack
preserved frozen, chilled
Tariff applied to China 20.5% 20.5% 14.5%
Regime GSP GSP GSP
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36. Rules of origin
For textiles: Since China does not benefit from preferences for these
products, it does not have to meet RoO
For fish and fish products: China is beneficiary of GSP and subject to
GSP RoO (see above)
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37. Thank you
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www.slideshare.net/ecdpm
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