Journal Issue

Summary of WP/92/94

International Monetary Fund
Published Date:
January 1993
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Summary of WP/92/94

“The European Community’s Trade and Trade-Related Industrial Policies” by Miranda Xafa. Roger P. Kronenberg. and Joslin Landell-Mills

This paper examines the trade policy objectives and instruments of the European Community (EC) from 1987 to mid-1992. The internal market program, aimed at a single market in goods, services, and factors of production by the end of 1992, will give a further boost to intra-EC trade. The EC’s external trade regime after 1992 is still evolving, but efforts to replace national restrictions with EC-wide measures may in some instances lead to continued reliance on managed trade.

There is considerable scope for trade and domestic support policies in the EC to accelerate structural reform. The EC’s external trade regime is characterized by relatively low industrial tariffs, but also relies heavily on nontariff measures as instruments of protection in selected sectors (such as agriculture, textiles and clothing, and automobiles). The Common Agricultural Policy reforms agreed upon in May 1992 are a positive step toward reducing distortions in agriculture but will need to be strengthened over the longer term if such distortions are to be eliminated. EC competition policy has been more strictly enforced since 1985, and state aids are being subjected to greater scrutiny. The outcome of the Uruguay Round will also be instrumental in shaping the EC’s external regime after 1992.

An important aspect of the EC’s external regime is the extensive network of preferential and nonreciprocal trade arrangements. Such links are being strengthened further, particularly with regard to the European Free Trade Association and Eastern and Central Europe, as more countries seek to participate in the benefits to be derived from the single market program.

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