Common Commercial Policy of the EU - Ministry for Foreign Affairs
Common Commercial Policy of the EU
The European Union' Common Commercial Policy means that trade relations with third countries are defined at the EU level. The direction of the common commercial policy is defined in cooperation between the European Commission, the EU Member States (Council), and the European Parliament. The Commission prepares and makes proposals, and negotiates trade agreements on behalf of the EU, under a negotiating mandate by the Member States. Trade agreements negotiated by the Commission are adopted following their approval by the Council and the European Parliament. Finland and the other Member States promote their trade policy interests through the EU. The Commission represents the EU also within the World Trade Organization (WTO). The Common Commercial Policy covers trade in goods and services, trade aspects of intellectual property rights (IPR), public procurement, and foreign direct investment (FDI).
Finland guards its interest in the EU
As an EU Member State, Finland represents its trade policy interests within the CCP. The Ministry for Foreign Affairs is responsible for preparing and coordinating CCP matters in Finland.
Trade policy differs critically from e.g. the EU’s Common Security and Defence Policy because the EU has nearly exclusive competence for trade policy issues. As a result, all CCP initiatives and proposals are made by the European Commission, who also negotiates trade agreements with third countries.
The Commission plays a visible role also in that it speaks on behalf of the EU within the World Trade Organization (WTO).
While the Commission enjoys a strong and visible role in trade policy, decisions are ultimately made in the European Council. The Council of the European Union, where national government ministers meet, decides on negotiating mandates, international agreements and various trade policy measures.
The European Commission is under an obligation to consult the Member States regularly. Thus Finland – like the other Member States – can have an active say in trade policy issues in the preparatory phases of policy-making.
The Treaty of Lisbon, which entered into force in December 2009, provides for a closer involvement of the European Parliament (EP) in the conduct of trade policy. Among other things, the EP’s consent is required for the ratification of free trade agreements and for CCP-related legislative measures.
EU decision-making in trade policy
CCP issues are centrally prepared in the Trade Policy Committee (TPC), a preparatory body of the Council of the European Union. All the Member States are represented in the TPC, which convenes in Brussels every week.
Despite its advisory role, the TPC plays a central role in EU decision-making in CCP, discussing all trade policy issues of key importance. Even though decisions can be made by qualified majority vote, a consensus is usually sought in trade policy matters.
In parallel with its full configuration, the TPC regularly convenes in various expert groups (e.g. “Services and investment”).
Legislative proposals that concern, for example, trade defence measures, are processed in the Council’s working group on trade questions. The application of trade defence instruments is moreover discussed in the Commission-led Anti-Dumping Committee.
The EU has a very extensive trade policy agenda in terms of substance and geographical coverage. The TPC’s agenda regularly includes negotiations carried out within the World Trade Organization (WTO). In parallel with multilateral negotiations, the EU maintains and develops a wide network of regional and bilateral trade arrangements.
Bilateral relations with important trading partners, such as the USA, Russia, China, India, Brazil and Japan, play a key role in the Common Commercial Policy of the EU.
Formulating Finnish positions
Finland’s national positions to be presented in the TPC are prepared in the “EU2 sub-committee” of the Committee for EU Affairs, which is composed of representatives from the different ministries. This sub-committee meets in the restricted format more frequently than in the extended composition. In addition to central government, various interest groups are also represented in the extended composition.
Finnish positions may also be discussed in the Committee for EU Affairs, composed of the permanent secretaries of all ministries or their deputies, and ultimately in the Cabinet Committee on European Union Affairs.
Multilateral trade negotiations carried out within the framework of the WTO have long been some of the basic elements of Finnish and EU commercial policy. In Finland, the principal responsibility for WTO negotiations lies with the Ministry for Foreign Affairs.
The WTO acts as a trade negotiation forum between member states. The current WTO agreements were mainly drawn up during the Uruguay Round. The WTO covers approximately 98% of the world’s trade. Despite their obvious strengths, the WTO and the multilateral trade system are facing huge challenges.
Started in 2001, the Doha Round, also known as the Doha Development Agenda (DDA), has still not been concluded. The aim of the negotiations is to agree on ways to facilitate products' market access by reducing customs duty rates or removing trade barriers in various economic sectors. An additional aim is to agree on the rules for reducing trade-distorting support. Special attention is paid to facilitating the trading prospects of developing countries.
The key sectors in the negotiations are agriculture, industrial products and the trade in services. The negotiations have also dealt with a wide range of other subjects, such as development issues, geographical indications and rules of origin. No actual breakthroughs have been achieved, with the exception of the Trade Facilitation Agreement (TFA), which simplifies trade procedures, and the agreement on export competition in agriculture. Also, the Information Technology Agreement negotiated in the 1990s has been updated (known as ITA II).
The nature of world trade has changed with the developments in value chains, trade in services and electronic trade. Alongside the “old” subjects in the Doha Round, new subjects have been included, such as electronic trade and facilitating investments. However, the member states do not see eye to eye on the future of the DDA and the status of the new subjects in the WTO negotiations.
The WTO's 11th Ministerial Conference was held in Buenos Aires in December 2017. No Ministerial Declaration or broad consensus of other kind was achieved during the conference. Negotiations will continue in Geneva and some of the new initiatives will be promoted, as far as possible, also through multilateral negotiations.
Finland supports maintaining and strengthening a multilateral, rule-based trade system, including dispute resolution. We are committed to achieving results on the outstanding issues of the Doha Round (DDA). At the same time, Finland considers it important to start negotiations also on new issues at the WTO. Furthermore, it is important to utilise the opportunity to engage in multilateral negotiations as far as possible while the opportunity is there.
WTO’s dispute settlement system
A member of the WTO may have to defend themselves in the WTO's Dispute Settlement Body if it violates or is suspected of violating a WTO agreement. The system is based on the procedures and provisions set out in the WTO’s Dispute Settlement Understanding and consists of three parts: if no mutually agreed solution is reached during consultations, the dispute can be brought to a panel and, if necessary, the panel’s ruling can be brought to the Appellate Body.
Violations of an agreement must be justifiable and proven with article-specific accuracy. Members with a significant interest in the end result can register as third parties to the dispute and they will be given an opportunity to be heard during the process. All EU member states are represented in disputes by the European Commission.
Historically, about 70% of all the disputes addressed by the panels have been appealed, but over the last few years this figure has reached almost 90%. It is the duty of the Appellate Body not only to interpret the provisions of WTO agreements, but to create case law.
The whole process from consultation to the appeal stage, if any, should take between 12 and 15 months. However, the high rate of the system’s utilisation and especially the recent congestion of the Appellate Body have led to prolonged handling times. The reports of the panels and Appellate Body are accepted by the Dispute Settlement Body. The rulings are binding. The unsuccessful party in the dispute must make their operations WTO-compatible within the agreed-upon time-frame (usually 10–15 months).
The Dispute Settlement Body monitors the implementation of rulings. The implementation measures taken can also be contested and, in the last resort, the system offers the possibility of counter-measures, although seeking a compromise that is favourable to both parties is encouraged in the settlement of disputes.