The European Union is a strong trading power, but what does this mean for us as individuals? Well, without international trade, prices would be higher and the range of goods on offer would be more limited. Consider, for instance, a normal pair of jeans: the cotton is grown in Mali, woven in Egypt, dyed with indigo from India and sewn together in Bangladesh, based on a pattern from a European designer. And that’s just one piece of clothing…
In 2011, the EU exported an astonishing €2,130 (£1,810) billion worth of goods and services which is only slightly surpassed by €2,182 (£1,854) billion worth of goods and services it imports. In fact, Europe is the world’s largest exporter of goods and services, with our main trading partners being the United States, China and Russia. To top it off, the EU is the biggest export market for more than a hundred countries.
Together, the 28 EU countries account for 18.6% of world imports and exports – but only 7% of the global population.
The benefits of trade
Trade is based on the simple premise that each country should do what it’s good at. A country doesn’t have to be the absolute best at producing something, but if it is relatively better than others, then it makes sense for the country to specialise in that area and meet its other needs through trade. This is called comparative advantage, and it creates benefits for all trading partners.
From this perspective, trade is rewarding for all countries that engage in it, while those that close themselves from the outside world tend to lose out. Through agreements to reduce tariffs and other barriers to trade, the EU seeks to open new markets for European companies and so create jobs and stimulate growth.
Beyond goods and services, trade is closely linked to international money flows, which also promote growth and development. In 2011 the EU invested over €360 billion around the world, while other countries invested over €225 billion in Europe.
Just as the 28 EU countries share a single market and a single external border, they also share a single trade policy. It is the European Trade Commissioner who sits at the negotiating table on their behalf at the World Trade Organisation (WTO) and visà- vis individual trading partners. By working together, EU countries are able to pack a big enough punch to shape an open international trading system based on fair rules – and to ensure that those rules are respected.
In addition to its important role at the WTO, the European Commission works directly with Europe’s trading partners to remove problems for exporters, open up new opportunities for investment, and reduce the counterfeiting and piracy of European goods. At the same time, the European Parliament is fully implicated in trade policy, which ensures that the concerns of ordinary citizens are taken into up in negotiations.
Because international trade is so important, 153 countries have joined the WTO. It sets out trading rules and acts as referee if one country believes another has not been playing fairly.
The EU’s trade policies not only focus on creating jobs and economic growth in Europe, but also aim to help people in poorer countries trade their way out of poverty. Europe has therefore opened its markets to imports from the poorest countries and is helping these countries to take greater advantage of the opportunities that trade offers. However, NGOs and others in Europe take issue with the current trade focus: you may wish to research this yourself and debate it with your friends and teachers. See the links at the end of this section.
While trading with our partners, the EU also reinforces international efforts to protect the environment and combat climate change, to improve working conditions and to ensure the highest standards of health and safety for the products we buy and sell.
Before concluding trade agreements, the EU conducts analyses to determine the potential economic, social and environmental impacts: how will increased trade and investment flows affect tax revenues? Employment? Land use? For example, the EU commissioned independent research into these issues as part of the negotiations with the Andean countries of Columbia and Peru.