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01 Oct 2005

The EU Budget Process and International Trade Liberalisation

David Kernohan / Andreas Schneider / Jorge Núñez Ferrer

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This paper gives an overview of the channels by which the EU budget is directly or indirectly affected by the change in the external trade relations of the EU. In addition it discusses what role the EU budget can play, despite its limited size and scope, in addressing some other key challenges presented by globalisation and liberalised trade flows. The paper begins with a detailed theoretical explanation of the ways in which the EU budget is directly or indirectly affected by its revenues, structure and objectives. It then reviews how the EU budget has been affected by the changing challenges of trade liberalisation and expansion, in particular due to decisions at the WTO negotiations. This leads to an analysis of the possible impacts on the EU budget from the current DDA negotiations, and a discussion of how international economic and trade developments may challenge the EU and what role the budget can play in assisting the adaptation of Europe’s economy to these challenges.