(c) Mediterranean countries
In November 1995, the "Euro-Mediterranean Partnership" was launched in Barcelona between the EU and Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, the Palestinian Authority, Syria, Tunisia, and Turkey. The partnership includes the establishment of a Euro- Mediterranean free-trade area by 2010, to foster the development of countries in the region. To this end, the EU concluded "Euro-Mediterranean" association agreements with Israel, Jordan, Morocco, the Palestine Liberation Organization (for the benefit of the Palestinian Authority of the West Bank and Gaza Strip), and Tunisia; an agreement at negotiator's level was reached with Egypt in 1999. Entry into force has taken place for the Agreements with Tunisia and Morocco and, on a provisional basis, for those with Israel and the Palestinian Authority.
The "Euro-Mediterranean" agreements are distinguished from predecessor agreements by the greater degree of reciprocity in market access commitments. Each provides for the establishment of a bilateral free-trade area, covering industrial products and including concessions on certain agricultural and fishery products. An asymmetric liberalization schedule applies, shorter for the EU, with a transitional period to full implementation of 12 years for the developing country partner, except for Israel, which has immediate effect.
(d) African, Caribbean and Pacific (ACP) States
Partnership Agreement of Suva
The Partnership Agreement between the African, Caribbean and Pacific (ACP) States and th EU entered into force on 1 March 2000, and is to be signed in Suva, Fiji. The Partnership Agreement of Suva replaces the Fourth Lomé Convention, which expired at the end of February 2000. Of the 71 ACP countries, 55 are WTO Members and 39 are least developed countries (LDC).
The trade provisions are one instrument of ACP-EU cooperation. The EU grants duty-free treatment on industrial and processed agricultural products originating in 70 ACP countries on a nonreciprocal basis (the Trade, Development and Cooperation Agreement applies to South Africa). The protocols on rum and bananas of the Fourth Lomé Convention are discontinued, but Protocols 3 and 4 on sugar, and beef and veal, respectively, are continued. The Parties have requested a waiver from obligations under Article I:1 of GATT 1994 (which concerns MFN treatment), for the period from 1 March 2000 to 31 December 2007, by which time new WTO-compatible trading arrangements are to be concluded.46 One option is a partnership agreement on a bilateral basis or between the EU and a regional grouping (Regional Economic Partnership Agreement (REPA), another is integration into GSP. Furthermore, the EU undertakes to grant duty-free treatment by 2005 at the latest to "essentially all products from all LDCs building on the level of existing trade
provisions of the fourth ACP-EC Convention". Trade, Development and Cooperation
Agreement (TDCA) with South Africa
The Community concluded a Trade, Development and Cooperation Agreement (TDCA) with South Africa in March 1999, which entered into force on a provisional basis on 1 January 2000.Under the TDCA, 95% of EU imports from South Africa will be fully liberalized at the end of ten years, and 86% of South Africa's imports from the EU will be fully liberalized at the end of 12 years, covering more than 90% of combined trade. Separate agreements are under negotiation for concessions on fishery products, wine, and spirits. The TDCA is likely to have important effects on the trade policies of South Africa's partners in the Southern African Customs Union (SACU) –Botswana, Lesotho, Namibia and Swaziland – since the members apply the duties set by South Africa.
(e) Interregional agreements leading to free-trade agreements
The EU's initiative to establish closer political and economic ties with Latin America and the Caribbean led to a 1998 Interim Agreement with the objective of reciprocal trade liberalization with Mexico, and an Interregional Framework Partnership Agreement with MERCOSUR50; which entered into force in 1999. The EU is the main trading partner of MERCOSUR, and the second most important trading partner of Mexico.
Negotiations were concluded on a free-trade agreement between the EU and Mexico in November 1999.51 The provisions on goods are to enter into force on 1 July 2000. On industrial goods, EU imports from Mexico are to enter duty-free in 2003, and Mexico's imports from the EU are to be granted tariff preferences in parallel to those granted to Canada and the United States under the North American Free-Trade Agreement (NAFTA) to ensure that trade diversion related to NAFTA is limited for European exporters to the Mexican market.
Partnership and cooperation agreements
70. The Community concluded a Partnership and Cooperation Agreement (PCA) with the Russian Federation in 1994, which entered into force in 1997, and has also concluded PCAs with Azerbaijan, Kazakhstan, Kyrgyzstan (which acceded to the WTO in 1999), Moldova, and Ukraine. The PCA provides for the parties to grant each other MFN and national treatment, subject to exceptions for regional trade agreements and preferences to developing countries. A party may not apply quantitative restrictions on imports from the other party, although provision is made for separate agreements on textiles and clothing, and iron and steel products. The Community concluded an agreement on trade, commercial, and economic cooperation with Mongolia, which provides for the parties to grant each other MFN treatment.
THE BIGGEST TWO PARTNERS: JAPAN AND U.S.A
Japan-EU Relations
The second largest national economy after the United States, accounting for two thirds of Asian GDP and 14 % of the global economy, Japan is one of the Union's major trading partners and its third largest foreign market. Friction during the 1980s over trade imbalances and the difficulties European firms encountered in exporting to Japan have given way to a far more constructive relationship, based on the 1991 political declaration governing relations between the two partners. This was consolidated by approval of an EU strategy in 1995 on Europe and Japan, and will be considerably extended by the action plan, which the two parties agreed to develop at their Tokyo Summit in July 2000. This will launch a 'decade of Japan-Europe cooperation' beginning in 2001 in four key areas: promoting peace and security, strengthening the economic and trade partnership, coping with global and societal challenges and bringing people and cultures together..
One of the Union's major concerns has been to ensure that European exporters and investors are not prevented from entering the Japanese market by unnecessarily restrictive red tape and bureaucratic regulations. Since 1995, this has been achieved through the regulatory reform dialogue aimed at removing structural and other obstacles facing exporters. The Commission's gateways to Japan export promotion campaigns have also helped many EU businesses, especially smaller ones, to break into the Japanese market. This is being accompanied by moves to negotiate a mutual recognition agreement on testing and certification, which would constitute the first treaty between the EU and Japan and by an accord on the application of each partner's competition legislation. There are also regular contacts between the respective consumer and business communities.
Often dialogue has been successful in overcoming obstacles but, when not, the EU has turned to the WTO to defend the interests of European businesses. The Union is also keen to see fewer obstacles to European investment in Japan. Japanese direct foreign investment is seven times greater in the EU than European investment in Japan.
U.S.-EU Relations
The Union is the United States' largest trading partner. Total U.S.-EU trade was $256 billion in 1995, up from $227 billion in 1994. In 1995, U.S. imports from the EU were $132 billion and represented 18% of total U.S. imports. U.S. exports that year to the EU were $124 billion, representing 21% of total U.S. exports.
The United States and the Union are each other's most significant source of direct investment. By the end of 1994, the Union had more than $274 billion invested in the United States, and the United States had more than $251 billion invested in the EU.
The United States continues to support the EU's implementation of the single market program. It is in the interest of both sides that this integration be implemented in an open fashion without creating new trade barriers. The United States holds regular meetings with the Union to discuss a range of economic and political issues and to resolve trade differences, many concerning agriculture. In its negotiations with the Union on trade and investment issues, the U.S. Government works to ensure that American interests are fully represented. The global reform of agricultural policies was an important U.S. objective and a major goal of the Uruguay Round of multilateral trade negotiations.
The United States long has discussed foreign and trade policy issues on an ad hoc basis with the Union. These arrangements were formalized by the Declaration on U.S.-EU Relations of November 23, 1990, which institutionalized regular consultation and cooperation on political, economic, scientific, educational, and cultural matters.
On December 3, 1995, the U.S. and the EU announced the New Transatlantic Agenda（NTA）, which encompasses key areas of cooperation in the political, diplomatic, economic, and cultural areas. The Agenda follows the framework for a stronger and deeper transatlantic relationship outlined by Secretary Christopher in his June 2 Madrid speech. It sets four broad goals for U.S.-EU cooperation: promoting peace around the world, democracy, and development; responding to global challenges; contributing to the expansion of world trade and bilateral economic ties; and "building bridges across the Atlantic" by promoting closer ties between our business people, scientists, educators, and others.
Investment between the European Union and other countries
During the last four years, the EU has consolidated its position as a net supplier of FDI. In 1999, the EU attracted 18 per cent of world FDI inflows (Euro 114 bn) and accounted for 52 per cent of outflows (Euro 298 bn).
FDI inflows and outflows in the EU
Main investors in the EU
The main investors remain concentrated to a few developed countries:
The United States:
The US is by far the largest investor in EU. In 1999, 65 per cent of total FDI inflows in the EU came from the US, which meant inflows for a value of Euro 75 bn. US FDI towards the EU has three folded since 1996.The value of the US’ stocks in the EU is Euro 399 bn, which represents 56 per cent of total EU liabilities. Since 1996, EU liabilities towards the US have increased by 90 per cent in the whole period.
EU FDI inflows by main country grouping
EFTA:
EFTA comes second as main investor in the EU, after the US. However, during 1999 FDI from EFTA has lost importance for the EU, not only in value (from 23 bn Euro in 1998 to 11 bn in 1999), but also in share (21 per cent of FDI flows into the EU came from EFTA in 1998, and only 10 per cent in 1999). It is still early to say if 1999 data are the result of a trend reversal or just a temporary reduction. The share of EFTA in EU liabilities has been slowly decreasing since 1996; it accounted for 19,7 per cent of EU liabilities in 1999, or Euro 140 bn.
Japan:
Japan is still one of the largest investors in the EU. 1999 has been a particularly important year, with investments from Japan in the EU accounting for 5 bn Euro; this meant that Japanese investments increased by 375 per cent over 1998. At present, Japan accounts for 6 per cent of total EU liabilities in 1999. EU companies have liabilities towards Japan amounting to Euro 43 bn.
Mediterranean countries:
In 1999, FDI inflows into the EU coming from Mediterranean countries increased by more than 1000 per cent over the previous year (from 0.8 bn Euro in 1998 to almost 10 bn Euro in 1999). As a result; EU liabilities towards these countries increased by 180 per cent between 1998 and 1999;
at present, Mediterranean countries assets in the EU amount 15 bn Euro.
EU liabilities towards the rest of the world
Main destinations of EU investment
EU investment is becoming more and more geographically diversified. While the US remains the first recipient of European direct investment, Latin America is the second largest recipient of EU FDI. Candidate countries and Japan have gained importance as destinations for European FDI, whereas EFTA countries lost most of their weight in 1999.
US:
In 1999 EU companies invested for a total value of nearly Euro 197 bn in the US, which represented 66 per cent of total EU outflows. The importance of the US in EU investments has not stopped increasing since 1996, both in share (US share in EU FDI outflows has almost two folded from 37 per cent in 1996 to 66 per cent in 1999) and in value (EU FDI outflows into the US has increased by more than 650 per cent in four years, raising from 26 bn Euro in 1996 to 197 bn in 1999). As a consequence, in 1999 the US represented 53 per cent of EU assets. The US share in European assets has been growing uninterruptedly since 1996 (that year US accounted for 43 per cent of EU assets). In 1999, European companies controlled assets worth Euro 596 bn.
Latin America
Latin America is the second recipient of FDI from the EU. More than half of these flows are destined to Mercosur. In 1999, outflows to Latin America amounted 39 bn Euro, more than four times their value in 1996 (9 bn Euro). EU assets in Latin America have increased from 48 bn Euro in 1996 to 121 bn Euro in 1999 (they account for 11 per cent of total EU assets in the world at present). A very important part of this increase is due to Mercosur. In fact, EU assets in Mercosur went from 28 bn Euro in 1996 to 80 bn Euro in 1999; they have therefore increased faster than EU assets in all Latin America.
EU FDI outflows by main country grouping
EFTA:
A remarkable lost of weight of EFTA countries in EU FDI outflows took place during 1999. European investment received by these countries reduced from 23 to 6 bn Euro between 1998 and 1999. During 1996, 1997 and 1998 the share of EU FDI outflows to EFTA oscillated around 10 per cent; in 1999, however, this share fell to only 2 per cent. As a consequence, the EFTA share in total EU assets has decreased from 10 per cent in 1998 to 8 per cent in 1999, with EFTA liabilities towards the EU accounting for 87 bn Euro.
Candidate countries:
EU investment in the candidate countries has gained importance during the last four years. It currently accounts for 13 bn Euro and it is the third destination for European FDI outflows, after the US and Latin America. Among candidate countries, Poland receives more than half of these flows (54 per cent), followed by the Czech Republic (20 per cent). Both countries have increased
their weight at the expense of Hungary, which in 1999 reduced its share in European FDI to candidate countries to 5 per cent from 21 per cent in the previous year. Turkey is also an important recipient, absorbing 8 per cent of European investment in 1999.
At the end of the decade, the EU controlled assets in candidate countries for a value of 50 bn Euro, or 4.5 per cent of total EU assets in the world. This share has remained more or less stable since 1997.
Asia:
Over the last decades, Asia has been a major recipient of EU FDI. Japan has gained increasing importance, particularly in 1999, with Japanese inflows from the EU increasing from less than 1 bn Euro in 1998 to 9 bn in 1999. European assets in Asia represented 11 per cent of EU total assets in 1997 (Euro 73 bn). Since then, however, the Asian share in EU assets has decreased in both 1998 (9 per cent) and 1999 (8.5 per cent), although the value of EU assets in Asia has
continued increasing, amounting 94 bn Euro in 1999.
EU assets in the rest of the world
Mediterranean Basin
EU investments in the Mediterranean Basin have grown during the second half of the decade, receiving an average of 2.5 bn Euro per year. EU assets in the Mediterranean Basin have almost doubled between 1996 and 1999; they currently amount 18 bn Euro, which represents 1.7 per cent of total EU assets in the world.
ACP
ACP countries have more than two folded their FDI inflows from the EU since 1996, growing from 2 bn Euro that year to 5 bn in 1999. However, their share in EU FDI has reduced and it currently accounts for 1.7 per cent of total EU investment in the world. Also the share of the ACP in total EU assets is slowly decreasing from 2.5 per cent in 1996 to 2.1 per cent in 1999. EU assets in ACP countries in 1999 accounted for 23 bn Euro.
CIS:
FDI outflows from the EU into CIS countries reached its maximum level in 1997, when the European Union invested in the former Soviet Union 2 bn Euro, which represented 2 per cent of total EU FDI in the world that year. Since then, however, European FDI flows to CIS have stagnated at around 0.9 bn Euro. Although EU assets in the former Soviet Union countries have globally grown from 1.7 bn Euro in 1996 to 4.5 bn Euro in 1999, their share in total EU assets has
stagnated, representing only 0.4 per cent of EU assets in the world.
Conclusion:
The European union’s external relations are global and diverse, encompassing both the Common Foreign and Security Policy and Community aspects such as competition the environment, justice and home affairs and consumer protection. The commission’s role is to promote an effective, consistent and coherent external relations policy for the European Union, so as to enable the EU to assert its identity on the international scene.
Bibliography
1 Mercado, S. et al. (2001) European Business, Harlow: Prentice Hall, chapters12
Wall, S., Rees, B(2001) Introduction to International Business, London: FT Prentice Hall
Daniels, J., Radebaugh, D.(2001) International Business, London: Prentice Hall, part 3
Eurostat(2001) Basic Statistics of the EU, Brussels: Eurostat (in the European Documentation Centre, Harrison Learning Centre)
Piggott, J., Cook, M(1999) International Business Economics, Harlow: Longman, pp 117-121
Dyker, D(1999) The European Economy, Harlow: Longman, Chapter 11
http://www.ecdel.org.au/en/eu_global_player/4.htm ( assess on 18th Dec. 2001)
( assess on 18th Dec. 2001)
( assess on 18th Dec. 2001)
( assess on 18th Dec. 2001)
( assess on 18th Dec. 2001)
