1 The European Union

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Latin America and Asia as Economic Partners of the European Union:

Trade and Foreign Direct Investment

M.Sc. Alina Wilke

Friday 14:00 to 16:00 (Germany) 07:00 to 09:00 (Colombia) Summer term 2021

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Contact

Alina Wilke

Tel.: 0049 202 439 3174

Mail: [email protected]

Office hours: Thursday, 10:00-12:00 (Germany) Arrangement of bilateral meetings

(phone, Zoom) on other dates on request (via e-mail)

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What will you know after this seminar?

• How the EU is structured and how decisions in the EU are made

• General understanding of trade and FDI

• The size and nature of the EU´s trade/FDI relationship with Asia and LAC

• Different kinds of trade associations

• Analytical insights on current determinants on trade and FDI

• How to write a seminar paper

• And…

how to collaborate in an international environment

15.04.2021 Alina Wilke 3

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Course requirements

• Visiting the lecture on Friday

• Writing a seminar paper (in a group or individually)

→Due date seminar paper: 27.08.2021 (PDF submission via email)

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Seminar paper

• Ideally done by an international group of 2-3 students (individual paper writing are also possible)

• 15 pages for individual papers / 20-25 pages for group papers (from introduction to conclusion)

• Further formal requirements will be handed out in a separate PDF

• Topics

• You can suggest individual topics until the 28^th of May, 2021 (stating if you would like to do it as a joint work or not)

• Suggested topics + pre-defined topics are put into a list

• Up to three students can assign to each topic (Google documents)

• Choose a topic until the 18^th of June, 2021

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Timeline

1 Introduction

1.1 The European Union 16.04.2021

Online Talks European Parliament and ECB 23.04.2021

1.2 Trade 30.04.2021

1.3 FDI

2 Latin America and the EU 07.05.2021

3 Guest lecture – Pacific Alliance (Jahir Lombana) 14.05.2021

3 Asia and the EU 21. & 28.05.2021

No class (exam period in Baranquilla) 04.06.2021 5 Guest Lecture – Trade with services (Andrés Vargas) 11.06.2021 6 Guest lecture – Innovation systems (Juan Perilla) 18.06.2021 7 How to write a seminar paper (Schmutzler, Wilke) 25.06.2021

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Abbreviations used in this lecture

European Union EU

European Central Bank ECB

European Economic Community EEC

Latin America and the Caribbean LAC

Foreign Direct Investment FDI

Comprehensive Agreement on Investment CIA (Agreement between EU and China)

Southern Common Market (Mercado Común del Sur) Mercosur (South American trade bloc)

EU-Vietnam Free Trade Agreement EVFTA Investment Protection for EU, Vietnam Businesses EVIPA

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Abbreviations used in this lecture

Multiannual Financial Framework MFF

Members of the European Parliament MEP

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1 The European Union

1.1 What it is and what it does

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The European Union What it is

• Political and economic union of 27 member states (as of Feb.

2021)

• Comprises an internal single market with an own system of laws

→The system of laws only applies to areas that the members agreed upon

→Guarantees free movement of people, goods, services and capital within this market

• Monetary Union since 1999, fully established in 2002, of 19 member states

• Of the EU member states, 22 join the Schengen Area, where passport and other forms of border controls are abolished

Source: European Union (2018)

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The European Union

What it is – Member States

Source: Maps of the World (2020)

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What it is – Benchmark Data

• EU covers over 4 million km²

• More than 446 million inhabitants

• The world’s third largest population after China and India

• GDP per capita varies across EU-countries (Luxembourg – Bulgaria), but is relatively high in global comparison

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Source: Own representation of data from The World Bank (2021)

0 10000 20000 30000 40000 50000 60000 70000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GDP per capita (PPP)

Bulgaria Colombia Germany United States

Euro area European Union East Asia & Pacific Latin America & Caribbean

South Asia World

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What it is – Historic Outline

• In 1951 six countries sign a treaty to run their heavy industries – coal and steel – under a common management (Germany, France, Italy, the Netherlands, Belgium and Luxembourg)

• The cooperation is expanded to other sectors, creating the

European Economic Community (EEC) in 1957 → Treaty of Rome

• Formation of a customs union in 1968 between the six → biggest trade union at the time

• Trade between the EEC and the rest of the world increases quickly

• First plans for a single currency from 1970

• Introduction of the Exchange Rate Mechanism (ERM) in 1972

Source: European Union (2020a)

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• Denmark, Ireland and the United Kingdom join the EEC in 1973

• In 1981 Greece joins the EEC, Spain and Portugal follow in 1986

• Different national regulation are still a barrier to trade among the member countries → The Single European Act of 1986 sorts this out

• 1992: Treaty of Maastricht is signed → The European Union (EU) is officially declared

• Establishment of a single market in 1993 (free movements of goods, services, people and money)

• In 1995 Austria, Finland and Sweden join the EU

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• The Euro is introduced in 11 EU countries in 1999 for commercial and financial transaction only (Greece joins in 2001)

• The EU and Mexico pass a trade agreement in 2000 (“Global agreement)

• In 2004 eight countries of central and eastern Europe — Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and

Slovenia— join the EU

• In 2007 two more countries from eastern Europe - Bulgaria and Romania - join the EU

• In 2013 Croatia joins the EU, becoming its 28th member

• In Dec. 2015 European Union–South Korea Free Trade Agreement enters into force

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• In March 2017, UK notifies the European Council of its intention to leave the EU

• In Feb. 2019: EU’s trade agreement with Japan

• In June 2019, the EU and Mercosur reach an agreement on trade

• Nov. 2019: Trade and investment agreement: EU and Singapore

• In Aug. 2020: EU-Vietnam Trade and Investment Agreements (EVFTA and EVIPA)

• Concluded but not ratified in Dec. 2020: EU and China Comprehensive Agreement on Investment (CAI)

• Since Jan. 2021, the UK is no longer a member of the EU

Sources: European Union (2020a), European Commission (2021b)

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What it does – MFF 2014-2020

1. Smart and inclusive growth

2. Sustainable growth:

natural resources 3. Security and citizenship

4. Global Europe

5. Administration 6. Compensations

Multiannual Financial Framework of the EU Total for 2014-2020

1. Smart and inclusive growth 2. Sustainable growth: natural resources 3. Security and citizenship 4. Global Europe

5. Administration 6. Compensations

Source: Own representation based on European Parliament (2021)

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What it does – MFF 2021-2027

Source: European Commission (2021a)

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What it does – MFF 2021-2027

1. Single Market, Innovation and Digital

2. Cohesion, Resilience and Values 3. Natural Resources and

Environment 4. Migration and Border

Management

5. Security and Defense 6. Neighbourhood and the

World

7. European Public Administration

Multiannual Financial Framework of the EU Total for 2021-2027

1. Single Market, Innovation and Digital 2. Cohesion, Resilience and Values 3. Natural Resources and Environment 4. Migration and Border Management

5. Security and Defense 6. Neighbourhood and the World

7. European Public Administration

Source: Own representation of data of the European Commission (2021a)

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What it does – MFF 2021-2027 – NextGeneration EU

NextGeneration EU Commitment Appropiations (in billion Euro, in 2018 prices)

2021-2027

1. Single Market, Innovation and Digital Horizon Europe 5

InvestEU 5.6

2. Cohesion, Resilience and Values

Recovery and Resilience Facility 672.5

REACT-EU 47.5

RescEU 1.9

3. Natural Resources and Environment Rural development 7.5

Just Transition Fund 10

Total NextGeneration EU 750

Source: Own representation of data of the European Commission (2021a)

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1 The European Union

1.2 EU Institutions and the

decisison making process

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The European Union European Institutions

• The EU has seven main institutions + the ECB. Some of them interact in the decision making process (in bold letters)

– European Commission – European Parliament – Council of the EU

– European Council

– European Court of Justice – Court of Auditors

– European Ombudsman

• European Central Bank (ECB) – independent status

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European Institutions – European Commission

• Executive of the EU

• Initiates and enforces laws, manages policies

• One commissioner from each member state

• Head of the European Commission is Ursula von der Leyen

Source Photo: https://ec.europa.eu/commission/commissioners/2019-2024_en Source: Citizens Information (2021)

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European Institutions – European Parliament

• Negotiates and adopts EU laws (together with the Council of the EU)

• It supervises EU institutions and budget

• It establishes an EU budget (together with the Council of the EU)

• Members of Parliament (MEP) are elected every five years by European citizens (currently 705 MEP)

• Only directly elected body in the EU

• President of the European Parliament is David Maria Sassoli

Source Photo: https://www.maz-online.de/Nachrichten/Politik/David-Sassoli-im-Portraet- Das-ist-der-neue-EU-Parlamentspraesident

Source: Citizens Information (2021)

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European Institutions – Council of the EU

• Consists of one government minister of every member state (no fixed members)

• Negotiates and adopts EU laws (together with the European Parliament)

• Annual drafting of policy guidelines for member countries

• Develops the EU´s foreign and security policies

• Negotiator role in international agreements

• It establishes an EU budget (together with the European Parliament)

• Note: Different from the European Council and the Council of Europe (which is not an EU-institution)

• The presidency of the Council of the EU rotates every six months

Source: Consilium (2021)

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The European Union European Institutions

Source: van Dijk (2018) on Wikipedia.com

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European Institutions – Decision making process

Ordinary legislative procedure

1. Five entities can make legislative proposals to the Commission – European Investment Bank

– European Central Bank – European Parliament

– European Parliament Citizens’ initiative – A quarter of the member states

2. The European Commission submits a legislative proposal to the European Parliament and the Council

3. Readings in Parliament and Council (approve, propose to amend it or reject it) – there might be second/third readings

Source: European Union (2020c)

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4. The Conciliation Committee, composed of an equal number of MEPs and Council representatives, tries to reach agreement on a joint text

5. Last reading in European Parliament and Council

6. Adoption or rejection of the legislative proposal → Trilogue

Source: European Union (2020c)

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Source: https://www.youtube.com/watch?v=hvT_dBGwMsU

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The European Union European Central Bank

• Main tasks:

– Sets interest rates and lends to commercial banks

– Management of eurozone's foreign currency reserves (balances exchange rates)

– Supervision financial and market institutions – Development and issuing of Euro notes

– Price stability / inflation control – Financial infrastructure

• President is Christine Lagarde

Sources: European Union (2020b),

European Central Bank Source Photo:

https://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html

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Outlook next lecture – 23^rd of April 2021

We will get to know the European Parliament and the European Central Bank in detail through an

Online Talk

• Listen and talk to a member of the European Parliament

• Listen and talk to an employee of the European Central Bank

• Please log in at 02:00pm (Germany) / 07:00am (Colombia) to the usual Zoom link (Moodle / Website)

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Sources

Citizens Information (2021): EU Institutions. Citizensinformation.ie. Online verfügbar unter

https://www.citizensinformation.ie/en/government_in_ireland/european_government/eu_institutions/, zuletzt aktualisiert am 23.02.2021, zuletzt geprüft am 23.02.2021.

Consilium (2021): The Council of the European Union. Online verfügbar unter

https://www.consilium.europa.eu/en/council-eu/, zuletzt aktualisiert am 23.02.2021.000Z, zuletzt geprüft am 23.02.2021.660Z.

European Commission (2021a): Headings: expenditure categories. Online verfügbar unter

https://ec.europa.eu/info/strategy/eu-budget/long-term-eu-budget/2021-2027/spending/headings_de, zuletzt aktualisiert am 02.02.2021+01:00, zuletzt geprüft am 22.02.2021.178Z.

European Commission (2021b): Negotiations and agreements - Trade. Online verfügbar unter

https://ec.europa.eu/trade/policy/countries-and-regions/negotiations-and-agreements/, zuletzt aktualisiert am 22.01.2021, zuletzt geprüft am 04.02.2021.

European Union (2018): The European Union. What it is and what it does. Luxembourg: Publications Office of the European Union.

European Union (2020a): About the EU. Online verfügbar unter https://europa.eu/european-union/about- eu_en, zuletzt aktualisiert am 14.08.2020+02:00, zuletzt geprüft am 18.02.2021.061Z.

.

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Sources

European Union (2020b): European Central Bank (ECB). Online verfügbar unter

https://europa.eu/european-union/about-eu/institutions-bodies/european-central-bank_en, zuletzt aktualisiert am 20.05.2020+02:00, zuletzt geprüft am 23.02.2021.425Z

European Union (2020c): Ordinary legislative procedure. Online verfügbar unter

https://www.europarl.europa.eu/infographic/legislative-procedure/index_en.html, zuletzt aktualisiert am 29.09.2020.000Z, zuletzt geprüft am 23.02.2021.522Z.

European Union (2021): Living in the EU. Online verfügbar unter https://europa.eu/european-union/about- eu/figures/living_en, zuletzt aktualisiert am 12.01.2021+01:00, zuletzt geprüft am 17.02.2021.473Z.

Maps of the World (2020): How Many Countries are Members of the European Union? Online verfügbar unter https://www.mapsofworld.com/answers/world/how-many-countries-are-members-of-the-european- union/, zuletzt aktualisiert am 15.01.2021+00:00, zuletzt geprüft am 17.02.2021.434Z.

The World Bank (2021): DataBank. Online verfügbar unter https://databank.worldbank.org/home, zuletzt geprüft am 26.02.2021.

van Dijk, Ziko (2018): Organs of the European Union - Picture file. Hg. v. Wikipedia. Online verfügbar unter https://commons.wikimedia.org/wiki/File:Organs_of_the_European_Union.svg, zuletzt geprüft am

23.02.2021.