Strengthening trade and investment relations...EU-Lebanon Trade Relations I. EU engagement with neighbouring countries in the region – Lebanon focus II. EU-Lebanon trade and investment

Strengthening EU-Lebanon

trade and investment relations

Monika HencseyEuropean Commission DG [email protected]

EU hosted Workshop with Lebanese private sectorBeirut, 26 October 2016:

How to Export Your Product to the European Union?

EU-Lebanon Trade Relations

I. EU engagement with neighbouring countries in the region – Lebanon focus

II. EU-Lebanon trade and investment relations

III. Access to the EU market: opportunities and challenges





Long standing relations between the EU and its neighbours

• Privileged relations with its Mediterranean partners based on preferential treatment

• Barcelona Process started in 1995

• European Neighbourhood Policy since 2004

Long standing relations between the EU and its neighbours

• Regional approach alongside bilateral to bring stability and growth: • Euromed process between the EU and the region:

• Union for Mediterranean Ministerial launched 2008• Technical working group on standards, anti-counterfeit• Pan-Euromed Rules of Origin

• Bilateral agreements and instruments

• Turkey Custom Union 1995• Association Agreements with Free Trade Area in force with most

Euromed countries: Palestinian Authority 1997, Tunisia 1998, Morocco 2000, Israel 2000, Jordan 2002, Egypt 2004, Algeria 2005, Lebanon 2006

• Syria initialled 2008, signature suspended; Libya negotiations suspended

• Renewed European Neighbourhood Policy in 2016• more targeted focus• co-ownership

• Partnership Priorities• Partners' commitments on regulatory reforms with a view to closer

integration into EU market (eg technical regulation, SPS etc.)• EU commitment to support the reform process • Lebanon: Four priorities incl. fostering growth and job opportunities

• Compacts – refugees• Jordan and Lebanon• More specific actions on both sides

• External Investment Fund

Renewed partnership

€ 129 bn8% 46% € 129 bn8% 46%

€ 180 bn10% 39% € 180 bn

10% 39%

2015: GoodsData source: ITC / Eurostat

Interpretative Note:8% of EU imports come from MED11. 46% of MED11 exports go to EU.(likewise for all other figures)

Interpretative Note:8% of EU imports come from MED11. 46% of MED11 exports go to EU.(likewise for all other figures)

EU-Euromed Goods Trade Statistics in 2015

Reporter PartnerTrade with Partner, € bn Trade with World (EU: Extra-EU), € bn EU market share in global trade

Exports Imports Trade Exports Imports Trade Exports Imports Trade

Morocco EU 12.6 17.8 30.4 19.9 33.8 53.7 63.5% 52.7% 56.7%

Algeria EU 20.8 23.0 43.8 31.3 46.7 78.0 66.3% 49.3% 56.1%

Tunisia EU 9.5 10.2 19.6 12.7 18.2 30.9 74.6% 55.8% 63.5%

Libya EU 7.5 4.3 11.9 9.2 10.4 19.7 81.4% 41.6% 60.3%

Egypt EU 5.4 21.7 27.1 19.8 67.0 86.8 27.3% 32.4% 31.2%

Jordan EU 0.2 4.0 4.2 6.0 18.4 24.4 3.4% 21.6% 17.2%

Israel EU 14.5 20.3 34.8 50.3 55.9 106.2 28.8% 36.4% 32.8%

Palestine EU 0.0 0.6 0.6 0.7 4.7 5.4 2.0% 11.7% 10.5%

Lebanon EU 0.5 6.8 7.3 2.3 15.3 17.6 21.3% 44.4% 41.4%

Syria EU 0.1 0.5 0.6 0.6 4.4 5.0 15.6% 11.7% 12.1%

Euromed10 EU 71.0 109.2 180.2 152.7 274.9 427.6 46.5% 39.7% 42.2%

Turkey EU 57.7 70.9 128.5 129.6 186.7 316.3 44.5% 38.0% 40.6%

Euromed11 EU 128.7 180.1 308.8 282.3 461.6 743.9 45.6% 39.0% 41.5%

EU28 EM10 109.2 71.0 180.2 1,791.0 1,726.7 3,517.7 6.1% 4.1% 5.1%

EU28 EM11 180.1 128.7 308.8 1,791.0 1,726.7 3,517.7 10.1% 7.5% 8.8%

Source: ITC. Notes: Red figures based on counterpart reporting; blue figures are those presented on the previous slide.

€ 37 bn6% 32% € 37 bn

6% 32%

€ 33 bn4% 38% € 33 bn

4% 38%

2014: ServicesData source: ITC / EurostatNo data for Syria

€ 5 bn4% 52%€ 5 bn

4% 52%

€ 9 bn9% 33%

€ 9 bn9% 33%

2014: FDI net flowsData source: WB / EurostatNo data for Syria

Market access

•Liberalisation of all industrial goods

•Degree of agricultural, processed agricultural and fishery products

varies by country:

• EU: around 80%• Large scope: Morocco, Egypt, Jordan, Palestine, Lebanon• More limited scope: Tunisia, Algeria

EU-Euromed Association Agreements

Market access (cont.)•Asymmetric in favour of Euromed partners:

• Immediate dismantling of tariffs by the EU vs. progressive dismantling of tariffs by Mediterranean countries

• Some preferences on agricultural produce from Mediterranean partners but not full reciprocity with EU

• Rendez-Vous clause for agriculture & services

Rules•Basic commitments on regulatory areas

EU-Euromed Association Agreements

South-South FTAs• Mediterranean countries offer one another similar concessions to

those granted to the EU in the Association Agreements (with exceptions on agriculture)

• Incomplete network

PanEuroMed Rules of Origin

Rules as important as market access• Enhancing economic integration beyond trade liberalisation, i.e.

creating a common regulatory platform amongst Euromed partners• Euromed / Union for Mediterranean• Agadir Process (Egypt, Jordan, Morocco, Tunisia + Palestine,

Lebanon)

Towards a full regional Free Trade Area

Network of FTAs in the Euromed region

Def.: Rules that determine the country of origin of a product for the purpose of trade relations and tariff treatment.

Protocols attached to each Free Trade Agreement• similar rules but not identical• EU-Lebanon 2002

PanEuromed Rules of Origin (RoO)

Regional convention on PanEuroMed preferential RoO• common rules within Euromed and beyond (e.g. Western Balkan)• enlarged sourcing possibilities: incentive for investment and

economic integration– diagonal cumulation (between countries in the region with FTAs – eg

with EFTA for Lebanon) – duty drawback in bilateral trade with the EU

• easier to modernise at once without disturbing trade • Lebanon signed in 2014 but not yet ratified by Lebanon

Modernization of PEM RoO on-going and almost finalised

PanEuromed Rules of Origin (RoO)

• Mediterranean exports are insufficiently diversified

• essentially energy (25%) and textile/clothing (30%)

• Some improvement since FTAs in Association Agreements: share of chemicals, machinery, processed agriculture increased

• South-south trade not yet liberalised: intra-med trade = 5-6% of total trade (among the lowest in the world, compared to for example above 30% in Asia)

• economic complementarity or competition?

• infrastructure bottlenecks and trade barriers

Challenges for EU-Euromed trade

• Lack of attractiveness to Foreign Direct Investment

• In 2014, EM11 held only 3% of EU's outward FDI stock*

• Size of the market: lack of a regional integrated market

• Transparency, business environment and investment climate

• Infrastructure (transport, electricity, telecom)

• Suppliers, services, logistics, customs

* Source: Eurostat

Challenges for EU-Euromed trade (cont.)

Source: World Bank, June 2016

Ease of doing business: region ranks low





Coverage: 98% of products entering EU, less for those entering Lebanon.•Both sides to liberalise industrial goods•EU to fully liberalise all but around 50 basic and processed agricultural product lines•Lebanon to only liberalise a limited list of agricultural products

Timeline: EU immediately open, Lebanon progressively

2003 EU fully opened its market upon entry into force of interim Association Agreement

2015 Lebanon opened its market after 12 years•5 year grace period•progressively reducing tariffs afterwards

EU-Lebanon FTA: asymmetry

Source: ITC (Reporter: EU)

Ø growth rate: 7.7% 6.6%

Source: Eurostat; Note: Non-energy = all goods excluding HS 27.

• The EU is the first trading partner for Lebanon, covering• 38% of Lebanese trade*• 43% of Lebanese imports*• 11% of Lebanese exports*

• Lebanon exports to the EU consisted mainly of base metals and articles thereof (20%), chemicals (13%), foodstuffs (12%) and plastics (11%).**

• EU exports to Lebanon consisted mainly of mineral products (32%), machinery and appliances (13%), chemicals (12%) and foodstuffs (7%).**

Sources: * ITC, ** Eurostat

EU-Lebanon trade relations (2014)

Top ten destinations for Lebanese exports in 2014

Export Partner Value of Exports (bn euros) % of Exports

1 Saudi Arabia 284 11.4%

2 EU-28 277 11.1%

3 United Arab Emirates 241 9.7%

4 South Africa 223 9.0%

5 Iraq 193 7.7%

6 Syrian Arab Republic 182 7.3%

7 Turkey 109 4.4%

8 Jordan 98 3.9%

9 Qatar 70 2.8%

10 Switzerland 65 2.6%

Source: ITC (Reporter: Lebanon)







• EU is an open market

• Rules of origin to ensure complementarity and that mainly Lebanese products benefit from the agreement

• Mechanisms to protect public interest in the EU

• SPS for agro-food• Technical regulations for industrial products• Animal welfare, environment protection

• Transparent conditions

• No discrimination between EU or foreign producers

Access to the EU market: opportunities and challenges

% of total EU imports from LB

% fully liberalised trade

% under special arrangements

Industrial Goods 78.4 100 0

Basic agri goods 17.3 87 13

Processed agri goods 4.3 95 4.3

Total 100 98 2.5

Source: Eurostat (COMEXT)

11%89%

The EU market is largely open

Source: Eurostat

EU-Lebanon Trade in Agricultural Goods(in million euros, excl. processed agricultural products)

+59%

+43%

+61%


+57%

+59%

+57%


EU-Lebanon Trade in Agricultural Goods(in million euros, incl. processed agricultural products)

EU-Lebanon Trade in Agricultural Goods(in million euros)

-2.4%

(excl. processed agricultural products) (incl. processed agricultural products)

+17%

-4.4%-6.7%

-4.6%

+17%


EU Imports in 2015

EU Exports in 2015

86 Mio €

984 Mio €


EU Imports for specific products(in thousand euros)


EU Exports for specific products(in thousand euros)


% of total EU imports from LB

% fully liberalised trade

% under special arrangements

Industrial Goods 78.4 100 0

Basic agri goods 17.3 87 13

Processed agri goods 4.3 95 4.3

Total 100 98 2.5

11%89%


The EU market is largely open

13% of Lebanese trade of basic agric. products for which there are special arrangements

(less than 30 product lines)

Under Tariff Rate

Quota (duty free)(15 product lines)

•Table grapes

•Olive oil

•Prepared/preserved

tomatoes

Under reduced duties

(compared MFN rate)(9 product lines)

•Oranges

•Lemons

Under Most Favored

Nation (MFN) duties (3 product lines)

•Flowers

•Sugar

•Wine

Use of EU TRQ's by Lebanon in 2015 / 2016(tonnes)

TRQ in 2015

Used TRQ 2015

% (in 2015)

TRQ in 2016

Used TRQ (Jan-Oct 2016)

% (Jan-Oct 2016)

New potatoes, from 1 January to 31 May 22.000 0 0 23.000 0 0

New potatoes, from 1 June to 31 July 44.000 0 0 46.000 0 0

New potatoes, from 1 October to 31 December 44.000 0 0 46.000 0 0

Tomatoes 17.000 0 0 18.000 0 0

Garlic 5.000 0 0 5.000 0 0

Garlic 3.000 0 0 3.000 0 0

Olives for uses other than the production of oil 1.000 0 0 1.000 0 0

Preserved olives for uses other than the production of oil 1.000 0 0 1.000 0 0

Table grapes, from 1 October to 30 April and 1 June to 11 July 6.000 373 6 6.000 217 4

Table grapes, from 1 October to 30 April and 1 June to 11 July 4.000 0 0 4.000 24 1

Apples 10.000 0 0 10.000 0 0

Apricots 5.000 0 0 5.000 1 0

Cherries 5.000 0 0 5.000 0 0

Nectarines and other peaches 8.000 0 0 8.500 1 0

Plums and sloes, from 1 May to 31 August 5.000 2 0 5.000 4 0

Olive oil 1.000 420 42 1.000 82 8

Tomatoes prepared or preserved 1.000 6 1 1.000 18 2

• The EU is an open market, very few tariffs remaining – no protectionism

• Lebanon has benefited from the liberalisation

• But is not fully utilising these opportunities

• Supply side issues e.g. competitiveness, infrastructure, business climate

• Demand side: EU consumers want safe and quality products

• EU protects public and consumer interest (food safety, environment, plant and animal health)

• Non-discriminatory – domestic and imports same rules

• Upgrading of Lebanese export capacities also useful to access regional and global market – EU ready to assist

Conclusion

• A flexible consultation mechanism

• Jointly analyzing the factors hindering trade – exports and imports

• Designing together future trade related development actions (horizontal reforms, sector reforms, business climate, productive capacity, quality standards)

• Liaising and getting input from the private sector

• Benefiting from expertise (EU technical bodies, IOs)

• Targeting better EU's trade related assistance linking into sector strategies and reforms, export opportunities

Ways forward: a Joint Working Group (JWG) to facilitate trade and investment

• Analyze export potential

• Industrial sectors: pharmaceuticals, textiles, …• Agriculture: fruits and vegetables, processed meat,

dairy, …

• Sector policies and strategies, reform agenda

• Improve Technical Regulation and SPS compliance

• Horizontal laws and regulations• Manufacturing process• Product quality

• Enhance services sector competitiveness

JWG: sectorial topics for discussion

• Statistics

• SMEs

• Awareness on market opportunities and import requirements

• Business and investment climate

• Transparency and predictability

• Customs

• WTO accession

JWG: cross-cutting topics for discussion

• Enhance services sector competitiveness

• Improve quality infrastructure for industrial products

• Food safety and SPS

• Agricultural value chains and rural development

• Increase value added of Lebanese products (Geographical Indicators, organic, voluntary labelling)

• Technical assistance in developing proper statistics

• Support WTO accession

JWG: Implementation and planning of EU's trade-related assistance to Lebanon – possible areas

• Export helpdesk on how to export to EU

• Information helping to also reach third countries' markets -Trade and Investment Facilitation Mechanism

• Specialised workshops

• SPS, food safety

• Medicines

• Other regulated products

Information on export conditions and opportunities

Documents

Strengthening trade and investment relations...EU-Lebanon Trade Relations I. EU engagement with neighbouring countries in the region – Lebanon focus II. EU-Lebanon trade and investment