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EU Commission: global protectionism becoming structurally ingrained

The European Commission’s 2020 edition of its annual report on trade and investment barriers faced by European firms in international markets is written in an unusually alarmist tone.

The report takes stock of barriers as reported by European companies. “At the end of 2019, 438 active trade and investment barriers in 58 countries were listed in the EU’s Market Access Database,” notes the report.

“This record figure, together with the increasing lifespan of a number of barriers, points not only to increasing protectionism but also to the fact that protectionism is becoming structurally ingrained in our relations with many partners,” Commission staff write.

China focus and Middle Eastern contagion

China remains the country where EU firms report most barriers to trade. Russia comes second, followed by Indonesia, the United States, India and Turkey.

In 2019, which is the year this report covers, barriers have risen fastest and most dramatically in the Middle East and in the wider Asian region. The Commission notes “a contagion effect” in the Mediterranean and Middle East region.

A notable 2019 trend is the return of old-fashioned tariffs, quotas and extra paperwork at customs. “A breakdown of 43 new barriers per type of measures shows a preponderance of new border measures (65%) over behind-the-border measures (28%),” notes the EU executive. The Commission notes “cruder, less sophisticated border measures to hamper trade”.

EU sectors most affected by these measures are agriculture and fisheries, ICT, automotive, pharmaceuticals and wood/paper/pulp.

Special chapter for United States

The report dedicates for the first time a special section to the United States and the EU’s well-known concerns over US tariffs and threats thereof, tax policies, national security investigations into imports, Section 301 investigations into European digital tax plans and trade deals with third countries (Japan, China). “After the large increase in market access barriers in 2018, the situation with the United States did not improve in 2019.”

“There seems to be a paradigm shift, with protectionism becoming ingrained in trade relations, barriers affecting sectors at the heart of the EU’s sovereignty, increasing challenges in addressing industrial and services barriers, and barriers spreading across specific regions in a sort of contagion effect,” concludes the Commission.

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