There is no immediate prospect of a signifi cant embedding of Social Europe. Given the even greater diversity introduced by the new members of the EU in terms of social provision, national interests and fi scal and institutional capacities, it is diffi cult to see a coherent EU-level approach emerging. The recent development of employment policy through the Lisbon process is a case in point. Decentralized to the national level and concentrated around an enterprise, opportunity and activation agenda, the process operates through benchmarking, facilitating policy transfer across the Union (van Apeldoorn, 2002, pp. 175–80). It does not involve the mobilization of resources nor the creation of common labour standards, and despite its rhetorical commitment to avoiding the ‘race to the bottom’, does not integrate labour market issues of employment with the wider ‘de- commodifi cation’ agenda of social protection in concrete terms (European Commission, 2003, pp. 8–9). Its results so far have been modest. (European Commission, 2004, pp. 10–11).
Without integration in these areas, there will remain ‘imperfections’ in the single market as well as a ‘gap’ in the European project between the economic and the social. Accommodation to market forces will continue to take place largely at national level, with the possibility of an informal convergence taking place over time, driven by the market but mediated by national state structures and transnational social forces.
per cent. An additional 5 per cent of world trade was accounted for by the Central and Eastern European countries (CEECs), several of whom have since joined the EU. The Asian region followed in importance with around a quarter of world trade, leaving North America in third place with 15 per cent. The three regions as a whole concentrated 80 per cent of world trade, indicating their central place and the marginalization of the developing world (WTO, n.d.). However, much West European trade is intra-regional – largely due to the process of European market integration discussed above, with Western Europe absorbing 67 per cent of the EU’s exports and providing an almost identical proportion of its imports. Again, if we include the CEECs, the proportion rises to almost three-quarters (WTO, n.d.). Of the remainder, only North America, with 10 per cent of EU exports and 7 per cent of imports, and Asia, with the percentages reversed, constituted signifi cant proportions. In sum, the EU is indeed a major player in world trade but does trade largely with itself and its geographical hinterland.
These fi gures tend to underestimate the overall degree and pace of globalization. As Dicken (2004, p. 35) points out, world trade increased 20-fold between 1950 and 2000, four times faster than the growth of world output. And in more recent times, the acceleration in foreign investment fl ows has outstripped both trade and output, with fl ows of foreign direct investment (FDI) growing at four times the rate of output during the 1980s (ibid., p. 53). The author goes on to demonstrate that during the 1990s fl ows of FDI grew at three times the level of output in the fi rst half of the decade and then at an astonishing rate of 40 per cent per annum between 1996 and 1999. Unsurprisingly, this was accompanied by intense cross-border merger and acquisition activity, with EU economies well represented (ibid., pp. 53–4). Overall, then, these fi gures demonstrate the EU’s key role in world trade and investment fl ows, and an accelerating expansion in transnational economic linkages over recent decades. This process has been facilitated by the Bretton Woods settlement and accelerated by the manner of its breakdown, as discussed earlier.
Since the 1960s the EU has been a customs union, operating a single commercial policy featuring a common external tariff against non-members.
This policy has developed within the context of successive rounds of GATT trade negotiations and now within the ‘rules-based trading order’
of the WTO. Two highly signifi cant trends are visible within the GATT/
WTO system over time (Economist Survey, 1998, pp. 6–7). The number of participating countries in world trade accords has grown consistently since the 1940s to encompass 149 countries in the current WTO. With this growth of participating states, there has been a concomitant expansion in the number of trade barriers covered by GATT/WTO agreements. The initial emphasis was on the negotiation of tariff reductions essentially in the
industrial sector (with the exception of textiles). Over time and especially since the Uruguay Round, which led to the formation of the WTO, the scope of world trade agreements has grown to cover most non-tariff barriers such as quantitative restrictions and customs procedures, and traditionally
‘diffi cult’ sectors such as services, agriculture and textiles (Economist Survey, 1998). In addition, the WTO provided the impetus for agreements in trade- related investment measures (TRIMS) and intellectual property (TRIPS) which signifi cantly liberalize transnational investment.
The Uruguay Round established a signifi cant liberalization of world trade, with reductions in a wide range of barriers to trade and investment and the institution of permanent procedures of dispute settlement with the force of international law. In one sense, then, the global agenda has followed the European agenda, with an initial focus on tariff reductions leading to the removal of non-tariff barriers and the formation of a single market. The core principle of WTO agreements is (theoretically) that of multilateralism:
signatories to WTO agreements commit to treating all trading partners equally, i.e. offering all other member states the same access to their markets as those granted to the most favoured nation. Likewise, the principle of non-discrimination commits member states to equal treatment of domestic and foreign corporations within their borders. Taken together, these reforms in the world trade system constitute a highly signifi cant and controversial development in global economic governance, sparking resistance and protest within civil society and the development of the ‘anti-globalization movement’ (Economist Survey, 2001). It is therefore critical to understand that the opening of world trade could not have taken place without the EU’s explicit commitment: indeed, the Uruguay Round succeeded only after several years of tough negotiation between the EU, the USA, Japan and the Cairns Group, largely over agricultural issues, and that this extensive liberalization has dramatically opened up the European market, frustrating the interests for a Fortress Europe (Hanson, 1998).
The philosophy behind this substantial and rapid liberalization of world trade is clearly neoliberal, based on the notion that freer trade globally will advance the prosperity of all nations and ensure a more optimal allocation of resources (Economist Survey 1998, pp. 4–5; Krugman, 1996;
Smith, 2003). Beyond the rarifi ed atmosphere of broad sections of the economics profession, these liberal assertions are highly contestable. What for liberals constitute trade barriers are for many realists (mercantilists) and structuralists the necessary policy tools to promote domestic industrial development (Hamilton, 2003; Gerschenkron, 1962; Burchill, 2001a). A large literature exists positing the necessity of protectionist measures to promote the national economic cause. The evidence from the East Asian tiger economies heavily implies the importance of effective and interventionist
state strategies of industrial support, encompassing strategic management of trade for successful economic catch-up (Wade, 1990; Henderson, 1993;
Johnson, 1982; Dore, 2000; Krugman, 1986). Including within the EU itself, it is diffi cult to identify a single developed nation achieving its critical economic breakthrough without resort to protectionism. Nevertheless, the legacy of 1930s protectionism and its rhetorical value lie at the heart of transactional capital’s discourse over the desirability of free trade.
It is of no little relevance to note the conversion of the EU to a more open economic agenda more in keeping with that of the USA (Hanson, 1998). This does not mean that the EU does not wield important power in global trade negotiations, nor that the EU consistently operates an open policy. On the contrary, the exceptions to openness are instructive.
The EU – and the USA – have operated relatively protectionist policies in agriculture and in some specifi c industrial sectors such as textiles. Before the WTO, however, European protectionism extended to more industrial sectors such as services, electronics, steel, shipbuilding and cars (Hanson, 1998; van Apeldoorn, 2002, pp. 81–2, 130–32, 136–41). These industries were precisely those left most vulnerable to international competition and/
or seen as ‘strategic’ and hence the focus of national efforts of industrial promotion. Protection therefore refl ected successful lobbying and pressure from a set of specifi c industrial sectors at national and European level whose strategy was a defensive one of market protection. Hanson (1998) demonstrates the shifting of infl uence towards outward-looking export interests, coinciding with the single market project, and refl ected in the WTO agreement underscoring again the role of the more transnationally focused fractions of capital in the EU’s recent trajectory. In consequence, it comes as no surprise to see the decline in protectionism during the 1990s and the retreat from Fortress Europe.
Given this shift towards a more neoliberal approach to world trade, EU–US trade relations are substantially more stable and cooperative than is often presumed to be the case. Both parties have been responsible for the development of the WTO, with its wide-ranging impact in trade and investment liberalization, and both are committed to its core principles.
This does not preclude the possibility of specifi c trade disputes but we should remember that the WTO was established to formalize and legalize the handling of such disputes. For all of the furore created over specifi c disputes such as those over the EU banana regime, US steel and hormone- injected beef, both the USA and the EU have simply sought to maximize their bargaining positions and strategically delay the dispute settlement process before ultimately accepting the WTO’s jurisdiction. This suggests that both parties take full advantage of dispute settlement procedures in pursuit of their interests but are also committed to the WTO process.
Clearly there is scope for more trade rows and rivalry, especially if the USA adopts a more unilateral stance towards world trade, but given the scope of the WTO’s agreements, these are by no means as important as the general consensus over the WTO process. Indeed, the USA and the EU have in addition deepened their dialogue through the Transatlantic Economic Partnership, which has already launched further cooperation between regulatory agencies in several sectors (Europa, a). In sum, the economic ties between the two regions, their joint stake in globalization, and the role of transnational forces and networks in their policy-making processes all operate as important constraints on protectionist excess.
In addition to its general WTO commitments the EU operates additional bilateral agreements with a variety of regions around the globe. These additional relationships focus on the specifi c issues around interregional trade and include the Mediterranean region, the Andean and MERCOSUR economies, the African Caribbean and Pacifi c countries (ACP – see below the section on development), the Gulf States, China, Turkey, Russia and so on (Europa, b). Taken together, these relationships constitute an ongoing process of dialogue regarding further trade liberalization, going beyond the formal commitments made under the WTO but increasingly integrated within WTO rules and negotiating rounds. Short of a major global economic collapse, it is diffi cult to see how such a wide-ranging and deeply embedded agenda of trade liberalization could be overturned in the short term. The EU’s embrace of neoliberalism and the rules-based trading order of the WTO appear to constitute a defi nitive rejection of Fortress Europe in favour of a focus on the opening of markets to trade and investment, with all of the opportunities this brings to transnational capital.
In response to the assorted and sometimes contradictory concerns of the anti-globalization movement and developing countries over the excessive neoliberalism of the initial WTO agreements, the Doha Round of trade negotiations was launched in 2002 (Ainger, 2003). The Doha agenda refl ects disillusion with the uncompromising neoliberal premises of WTO agreements among developing countries and the anti-globalization movement.
Alongside the developing countries’ demands for reform, the deregulatory bias of WTO accords has raised signifi cant issues for countries operating high domestic environmental and labour standards. Non-discrimination principles extend to the WTO’s treatment of the way that products are produced, leading to the allegation that they disconnect the theoretical economic gains from trade and investment from their distributional and social consequences by transforming national environmental, health and safety and labour regulations into potentially unsustainable trade barriers (Burbach, 2004; Elwood, 2004). Equal access applies also to the treatment of foreign capital and inward investment, reducing, in practical terms,
control and sovereignty over key national assets, infrastructures and development strategies. This opens up the possibility of a democratic defi cit within the WTO, with nationally agreed and democratically determined systems of regulation laid open to challenge through their potential confl ict with principles of non-discrimination and equal access (Ledebur, 2004;
Ransom, 2000).
In response, the EU is currently taking forward initiatives in areas such as corporate social responsibility and labour standards (Europa, c and d).
The Doha Round has involved major clashes of interest between developed and developing nations, pushing back the timetable for agreement to the next Ministerial Conference of the WTO in December 2005. Despite the EU’s willingness to engage in this round and a bevy of proposals on many of the issues, the underlying neoliberal principles of the WTO remain intact (Ainger, 2003). These principles are perceived by many as advancing the
‘race to the bottom’ without genuinely tackling the intractable issues of international development, to which we now turn.