The EU’s common commercial policy is used as an instrument to realize its values in EU trading partners, reflected in the inclusion of sustainable trade and development chapters in EU preferential trade agreements (PTAs). This chapter asks if including non-trade provisions (NTPs) in EU PTAs has a systematic positive effect on non-trade outcomes in partner countries. It analyzes the relationship between bilateral trade flows, the coverage of NTPs in EU PTAs and the performance of EU partner countries on several non-trade outcome variables using synthetic control methods. It finds no robust evidence of a causal effect of including NTPs in EU PTAs on indicators of non-trade outcomes.

Even though there were linkages between European Union trade policy and “values” before 2009 (in particular with the institution of dialogues under the various association agreements concluded before 2009 or via the link between development policy and trade), linking non-trade policy objectives (NTPOs) and EU values to EU trade policy has become an increasingly prominent feature. The further politization of trade policy with greater power of the Parliament, which must give its consent to the conclusion of trade agreements since the Lisbon Treaty (Article 207 Treaty on the Functioning of the European Union, TFEU), and the rising citizen concerns on the impact of some trade agreements on NTPOs – as shown by the manifestations related to the Transatlantic Trade and Investment Partnership (TTIP) and EU–Canada Comprehensive Economic and Trade Agreement (CETA) – has created more political pressure to enhance these linkages. Finally, the realization that trade can be a useful tool for achieving NTPO objectives, for example in promoting policies in line with climate change objectives, has also called for the multiplication of these trade/NTPOs linkages in bilateral, regional and multilateral engagement with third countries (using soft power via dialogues and non-binding agreements) but also for the enhancement and proper enforcement of NTPO provisions in trade agreements (moving toward a stronger hard law approach in the future). The latter is notably the main objective of the most recent European Commission Communication published in June 2022 on the power of trade partnership as tools to foster green and just economic growth.

The European Union’s trade policy has seen a dramatic increase in attention over the past few years. In face of the challenges facing the global trade regime, ranging from trade conflicts between the EU and major world powers to the maintenance of a rules-based trade order under the auspices of the World Trade Organization (WTO), policymakers, experts, and the public have converged in highlighting the importance of trade policy making. The attention paid to trade policy has increased disproportionately in the wake of Covid-19, which led to political pressure to re-shore global value chains and enhance “strategic autonomy”, and reinforced the need to use trade as a tool to pursue non-trade policy objectives (NTPOs) – such as human rights, labour rights, and environmental commitments – in third countries.

Unlike trade in goods, market access commitments for services usually comprise regulatory measures as opposed to trade taxes. In other words, they are generally about non-tariff measures (NTMs). In some sectors foreign access may be limited or completely prohibited through quantitative restrictions, e.g. bans on foreign provision of broadcasting or transport services, or requirements that government officials fly on the national airline. More generally, services activities are often regulated. Differences in regulation may then result in additional costs for foreign providers when they contest a market. Because they involve sale of intangibles in the form of service flows rather than physical goods, there is usually some form of direct interaction between service producers and customers. This means that establishment is more likely to be important for service exports than goods exports, resulting in an effective mix of cross-border and FDI related regulatory measures when we discuss market access in services.

Introduction

The external trade policy of the European Union (EU) involves nearly one-fifth of world trade. Hence an understanding of the principles and practice of EU trade policy, the Common Commercial Policy (CCP), is of vital importance for understanding the EU’s role and impact on the global economy.

With growing trade, falling transaction costs, better information and communication technologies, global economic integration is increasing; ‘globalization’ is on the rise (if one wanted to be trendy). Global production chains are common in most industries and are essential for maintaining competitiveness. Thus the EU’s external trade policy has an increasing role to play in promoting the competitiveness of the European industries and ensuring EU economic growth.