Resisting Protectionism after the Crisis: Strategic Economic Discourse and the EU–Korea Free Trade Agreement

Abstract

In 2006 the European Commission announced its Global Europe strategy, which proposed pursuing a series of ambitious Free Trade Agreements (FTAs) premised on exchanging the EU's remaining ‘pockets of protection’ for market access. The first of these agreements was signed with South Korea in October 2010. This article asks how the Commission's Directorate-General (DG) for Trade could successfully conclude this agreement in the aftermath of the Financial Crisis. Given a strong mobilisation of protectionists with access to policy-makers, this liberal policy outcome cannot be explained purely in terms of institutional insulation, as in much of the literature on EU trade policy, nor be simply ‘read off’ from the material interests of societal actors. This article, therefore, develops a constructivist framework which broadens our understanding of the power of strategically invoked economic discourses. By developing a novel analytical strategy to determine the intentional invocation of such discourses, it is able to show how DG Trade constructed an ideational imperative for liberalisation in Global Europe, enabling it to overcome opposition to the EU–Korea FTA. Beyond its contribution to constructivist scholarship, this article draws attention to the neglected dimension of ideas in trade policy and highlights the continued purchase of neoliberalism after the crisis.

Keywords:

• European Union
• trade
• strategic discourse
• constructivism
• protectionism
• neoliberalism

Notes

I am very grateful to Tony Heron, Colin Hay, Ben Richardson, Ben Jacoby, Alasdair Young, Fabienne Bossuyt, María García, Aukje van Loon, José María Siles and an anonymous reviewer for their helpful input, comments and/or suggestions on earlier drafts of this article. I would also like to thank: Ben Rosamond, Ben O'Loughlin and the other participants at a panel on ‘Strategic Narratives: Globalisation and Crisis' at the 7th Pan-European International Relations Conference, Stockholm, 9-11 September 2010; Bart Kerremans, Jan Orbie, Dirk De Bièvre, Manfred Elsig, Sieglinde Gstöhl, Arne Niemann, Ferdi De Ville and the others involved in a workshop organised by the Jean Monnet Centres of Excellence at the Catholic University of Leuven and the University of Ghent on ‘Diverging Paradigms on EU Trade Policy', Leuven, 16–17 December 2010 and, finally, those taking part in a panel on ‘EU Trade Policy' at the 12th Biennial EU Studies Association Conference, Boston, 3–5 March 2011. Any errors remain my own. The research for this article has been possible due to the generous assistance provided by the UK Economic and Social Research Council through a ‘1+3' Studentship. Any opinions expressed by interviewees are their own and should not be construed as the official position of the organisation they are working for.

This article draws extensively on interviews conducted with EU officials, government representatives and interest group activists in Brussels and Geneva in September–October 2009, December 2009, March 2010 and April–May 2010. At the request of interviewees themselves, most references to interviews are anonymous.

This literature distances itself from the term constructivism as it is generally used in International Relations to denote Wendt's (1999) particular brand of ideas-based explanation which is grounded in an acceptance of neorealist theoretical parameters and an emphasis on so-called constitutive (read, ‘structural’) logics of explanation (see Parsons 2007).

Although Hay and Rosamond (2002) also refer to European integration as a discursively constructed constraint and Rosamond (2002) explores the ‘construction of “Europe” as an economic space’ by focusing on the discourse of ‘competitiveness’, neither of these dimensions has been explored much in subsequent work.

Although Commissioner for Trade Leon Brittan (in office 1993–9) did invoke a more necessitarian discourse in a number of high-profile public interventions, this has been interpreted as evidence of an ‘argumentative strategy’ rather than necessarily as a reflection of his true beliefs (see Rosamond 1999, 2000); this is underscored by the fact that these pronouncements were inconsistent with the more contingent discourse of globalisation and trade liberalisation espoused in the 1996 Market Access Strategy that was written during his time as Commissioner (and which, given its more coordinative setting, is more likely to have corresponded to his true views). Moreover, this latter discourse persisted under the tenure of Brittan's successor; although Pascal Lamy (in office 1999–2004) did not engage in a rhetorical strategy of referring to globalisation as a non-negotiable external constraint, he did still emphasise the desirable (yet ultimately contingent) nature of both globalisation and trade liberalisation (see, for instance, Lamy 1999).

The Issues Paper referred to these as ‘pockets of distortion’ as they were the few remaining sectors still enjoying significant trade ‘protection’ in the EU, potentially at the expense, it argued, of both broader economic efficiency and/or the competitiveness of downstream industries (see European Commission 2005: 11–24).

Interview, interest group representative, Brussels, 21 September, 2009. Applied tariff rates in passenger automobiles were on average approximately 10 per cent in 2009 (ACEA 2009b), whereas the weighted average applied tariff for all manufactured products was only about 1.7 per cent for that same year (UNCTAD 2010).

Interview, interest group representative, Brussels, 8 October 2009.

Interview, interest group representative, Brussels, 21 September 2009.

Interview, European Commission official, Brussels, 16 December 2009.

Telephone interview, European Commission official, 5 May 2010. One of the charges often levied against it was that it was overly ‘dry’ and ‘academic’, hardly the stuff of persuasive rhetoric. The purpose of the Issues Paper is also discussed in European Commission (2006c: 4).

Interview, EU official, Brussels, 6 May 2010.

In fact, the Issues Paper was widely criticised by the business community at the Symposium because it was perceived to not offer sufficient prospects for liberalisation rather than because it might lead to the dismantling of protection for certain sectors. Interviews, interest group representatives, Brussels, 14 September 2009.

Interview, EU official, Brussels, 6 May 2010.

Interviews, European Commission officials, Brussels, September–October 2009 and December 2009.

In April 2007, the EU's Council of Ministers also approved negotiating mandates for FTAs with India and the Association of South East Asian Nations.

Interview, European Commission official, Brussels, 23 September 2009.

Interview, interest group representative, Brussels, 21 May 2010.

Interview, Mr Erik Bergelin, Director of the Trade and Economics Section at ACEA, Brussels, 24 September 2009.

Interview, European Commission official, Brussels, 23 September 2009.

Duties for motor vehicles with a displacement of over 1.5 l were to be eliminated within three years while those for all other vehicles were to be eliminated within five years.

Interview, European Commission official, Brussels, 17 December 2009.

That being said, the fact that the Koreans pushed the issue so strongly suggests that the concession will also have important implications for EU–Korea trade.

Interview, Mr Erik Bergelin. Duty drawback also raised the spectre of indirect imports of car parts from China. The industry was rather sensitive over the issue of rules of origin and its good access to policy-makers was illustrated by a dispute early in the negotiations between the EU and Korea over whether products produced in Kaesong industrial complex in North Korea by South Korean firms should be covered by the FTA's content requirements (Bounds and Fifield 2007).

The current EU trade policy process is that the Commission negotiates a trade agreement on behalf of the EU based on a mandate handed down by the Member States meeting in the Council of Ministers. These then have to approve the agreement before it must be ratified by the EP.

Interview, European Commission official, Brussels, 17 December 2009.

Interview, interest group representative, Brussels, 14 September 2009.

Interviews, European Commission officials, Brussels, September–October, December 2009.

This was particularly relevant in the key area of services and investment (see Siles-Brügge 2010).

Interview, official in the office of the US Trade Representative, Geneva, 15 March 2010. Only in December 2010 were KORUS's prospects revived when it was announced that the USA and Korea had renegotiated several key provisions that had been important stumbling blocks to ratification in Congress – including greater protection for the American automobile market (ICTSD 2010).

Interview, interest group representative, Brussels, 14 September 2009.

Interview, EU official, Brussels, 6 May 2010.

Under full liberalisation, the contraction in output was estimated at 1.78 per cent, while under two partial liberalisation scenarios it was estimated at only 1.08 per cent and 0.9 per cent (Copenhagen Economics and François 2006). Moreover, even under a partial liberalisation scenario the EU's increase in export value (760 million euro) was dwarfed by the market expansion of Korean auto manufacturers in the EU (5.2 billion euro) (author's calculation, using data from Copenhagen Economics and François 2006).

Interviews, interest group representatives, Brussels, September 2009.

Interview, Member State official, Brussels, 20 May 2010.

Interviews, European Commission officials, Brussels, September–October 2009 and April–May 2010.

This is underscored by the fact that as early as November 2010, the Korean government, anticipating the imminent entry into force of the agreement, offered its livestock farmers 2 trillion won in aid (approximately 1.7 billion US dollars at November 2010 exchange rates) to mitigate the effects of trade liberalisation with the EU (Cheong Wa Dae 2010).

Indeed, elsewhere we have deployed rationalist models to explain the nature of EU's trade agreements with the African, Caribbean and Pacific states (Siles-Brügge and Heron 2012).