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The Luxembourg Chamber of Commerce releases a publication on free trade

16.05.2017 12:51

Actualité et tendances N°19

The 19th edition of the Chamber of Commerce's publication "Actualité et tendances" is devoted to free trade. The main message that the Chamber of Commerce wishes to send to businesses, policy-makers and any other stakeholders interested in the liberalisation of trade can be found in the very  title of the publication: "Garder le cap face au risque de repli (in English: Keep a firm line in a context of disintegration)". This message comes at an auspicious time; free trade has been highly propagated in recent years especially regarding certain international trade agreements and more recently in the context of Brexit, American comments pertaining to the multilateral system for trade liberalisation and the French presidential elections.

Demystifying, raising awareness and encouraging - these are the objectives of the 19th Actualité et tendances  that highlights the benefits of trade openness and liberalisation, especially for small, mature and open economies such as the Grand Duchy. Moreover, the author goes to the bottom of the Western middle classes' growing feeling of discontent. What are the reasons behind the growing opposition to free trade and can overheated emotions be soothed by "win-win" solutions? The publication of the Chamber of Commerce focuses on the question of how to share the "fruits" of globalisation; a debate more compelling than ever, as society's acceptance of globalisation is directly related to its ability to contribute to people's well-being.

Since free trade is neither an end nor a purely economic consideration, the social and societal impacts of free trade must be considered as a matter of interest. As a common thread throughout Luxembourg's social and economic history, free trade has always been the cornerstone of Luxembourg's economic growth model and the driving force of the country's businesses, particularly since European integration. It contributed in many ways to the country's wealth, and enabled the creation of the generous welfare state the Luxembourg society cherishes today. While the Grand Duchy - the world's second most inclusive country, according to the World Economic Forum's Inclusive Development Index, and a strong economy with strong social cohesion - is much more convinced of the benefits of openness to trade than other countries which cannot rely on an equally solid social consensus, it is in the country's best interest to continue to defend and promote the values of openness and cooperation especially at a European level, knowing that the departure of the United Kingdom involves the loss of a committed and natural ambassador for cross-border trade for Europe.

The importance of free trade for the Grand Duchy is illustrated by the fact that a part of each euro earned in foreign markets enters the country as income and taxes, making it, for instance, easier to invest in major infrastructure projects. Foreign trade is thus an important driver of qualitative growth.

It is not, however, by "blindly" promoting it that free trade will continue to bear fruit for the Grand Duchy. Whilst it is clear that many long-standing projects need to be completed, not only at international but also at community level, the creation of the EU Single market has undoubtedly been, for Luxembourgish businesses, the most crucial step in the process of building the European project, even if the potential of the Single market remains largely under-utilised. The Chamber of Commerce analyses five areas that are of particular interest for Luxembourg’s companies: services, the principle of mutual recognition, geo-blocking, public procurement and labour mobility.

The publication concludes with the Chamber of Commerce's 10 avenues for optimising the benefits of free trade for the European Union and for Luxembourg in particular. These framework conditions fall into four areas of major importance for the Grand Duchy: trade policy, promoting the internationalisation of SMEs, geographical and industrial diversification and the European single market. 


Ensuring the sustainability of EU trade policy

No 1 Reviewing the governance of EU trade policy to avoid the repetition of the Walloon scenario in the context of the CETA negotiations, i.e. blocking of the signature of a free trade agreement between the European Union and a third-party country, since such a scenario not only delays the positive effects of trade agreements, but also risks undermining the Union vis-à-vis other potential trading partners.

No 2 Working towards more inclusive free trade by identifying the causes of "pain" and supporting those who lose out from free trade through a real redistribution policy which, instead of creating traps for employment, proposes measures that strengthen employability and social cohesion.

No 3 Defining a real strategy to ensure a "level playing field" and the reciprocity of commitments, particularly in public procurement, while maintaining a firm position vis-à-vis pernicious and discriminatory business practices.

No 4 Driving free trade means steering globalisation! In this respect, Luxembourg must play its natural role as a strong advocate of European integration and as a country that helps shape the Union’s development. The Grand Duchy can make a very significant contribution - disproportionate to its small size - to influencing the rules of EU trade policy and setting of exacting standards whilst ensuring respect for the level playing field. At the same time, it is important to support the European Union as its future weight in world trade will be reduced in favour of emerging countries.

Promoting the internationalisation of Luxembourgish companies

No 5 Ensuring that the recent reform of economic promotion can clarify the role of each partner involved, enabling Luxembourgish companies to differentiate between the actors who are responsible for organising initiatives to promote foreign trade and helping in this area. Duplication and lack of coordination are to be avoided. The Chamber of Commerce continues to commit itself to the success of this reform and to play its historic role as an anchor and a privileged partner of its member companies in the promotion of foreign trade and the internationalisation of SMEs in all business sectors.

No 6 Exploring the introduction of export tax credits for SMEs to help them develop their international business, similar to the instruments available in the United States and in France.

No 7 Promoting subcontracting and training of exportation experts since transferring the management of, inter alia, tax and legal matters to an expert, would allow small structures to focus on their core activities and stimulate their interest in engaging with an internationalisation strategy. The training of exportation experts could be part of a tertiary professional training programme.

Encouraging more geographic and industrial diversification

No 8 Diversifying the address book for exports and imports to better balance the risks of excessively concentrating on a few partner countries.

No 9 Further diversifying Luxembourg's industrial base to participate in international value chains by increasing the number of STEM (Science, Technology, Engineering, Mathematics) diplomas; by adapting training offered to low-skilled workers; by providing the infrastructure needed to develop new high value-added industrial niches; by providing common platforms to reduce research and development costs through the sharing of human and infrastructural resources; and by building bridges between basic and applied research.

The importance of “housekeeping”

No 10 Ensuring the sustainability of EU policy. It is only when all Member States assume their responsibilities that European cooperation can be achieved. To enhance the European single market’s efficiency, Luxembourg should for instance maintain regular contact with the organisations responsible for mutual recognition; organise information sessions to keep companies informed of the latest developments in e-commerce; proactively encourage Luxembourgish companies to take part in European public tenders; and address problems in terms of mobility and housing to encourage labour mobility and continue to attract highly qualified workers. 

To view the complete Actualité et tendances No 19 in French: click here

To order a printed version of Actualité et tendances No 19 in French: click here

To discover the Merkur dossier "Free trade: hotbed of tension and source of reconciliation" in English: click here