European Commission

MEMO

Brussels, 18 June 2013

The EU’s free trade agreements – where are we?

Over the next two years, 90% of world demand will be generated outside the EU. That is why it is a key priority for the EU to open up more market opportunities for European business by negotiating new Free Trade Agreements with key countries. If we were to complete all our current free trade talks tomorrow, we would add 2.2% to the EU’s GDP or €275 billion. This is equivalent of adding a country as big as Austria or Denmark to the EU economy. In terms of employment, these agreements could generate 2.2 million new jobs or additional 1% of the EU total workforce. Below is an overview of the most important forthcoming and on-going free trade negotiations.

Forthcoming negotiations

United States of America – At the G8 Summit on 17 June 2013, US President Barack Obama, President of the European Commission José Manuel Barroso, President of the European Council Herman Van Rompuy and UK Prime Minister David Cameron officially launched negotiations for the Transatlantic Trade and Investment Partnership (TTIP) (SPEECH/13/544). Beforehand, EU Member States agreed on the negotiating guidelines by consensus and hence decided to give the European Commission ’the green light’ to start negotiations with the United States (IP/13/548). The first round of negotiations is set to start on 8 July in Washington.

The initiative of a transatlantic agreement is based on the recommendations of the EU-US High Level Working Group on Jobs and Growth that steered the deliberations on the future EU-US relations since late 2011. According to an independent study by the Centre for Economic Policy Research, London, an ambitious and comprehensive trans-Atlantic trade and investment partnership could bring the EU economic gains of €119 billion a year once the agreement is fully implemented. This would translate on average to an extra €545 in disposable income each year for a family of four in the EU (MEMO/13/211).

Agreement on investment protection with China

On 23 May, the European Commission asked the Member States to authorise the opening of negotiations with China in the area of investment protection (IP/13/458). Both sides already expressed their interest in engaging in such negotiations when they met at the 14th EU-China Summit in February 2012. The draft negotiating directives for the EU-China investment negotiations are now being considered by the Council, whose green light is needed for the Commission to start the talks.

This is the first ever proposal for a stand-alone investment agreement since foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty (December 2009). An EU-China investment agreement would streamline the existing bilateral investment protection agreements between China and 26 EU Member States into a single, coherent text.

On-going negotiations

Japan – The EU and Japan launched negotiations for a free trade agreement in April 2013 (MEMO/13/348) and will be meeting for the second round of talks in Tokyo from 24 June to 3 July in Tokyo to continue their work, with a further round expected in October.

Japan is the EU’s second biggest trading partner in Asia, after China. An FTA could increase EU GDP by 0.6% and boost EU exports to Japan by a third. 400,000 additional jobs are expected in the EU alone as a result of this deal.

The Commission is aware of concerns in some Member States, particularly as regards non-tariff barriers in Japan. This is exactly why the Commission agreed with Japan – even before potential negotiations started – that Europe could ’pull the plug’ on negotiations after one year if Japan does not demonstrate that it is removing certain non-tariff barriers.

Canada - Negotiations for an EU-Canada Comprehensive Economic and Trade Agreement (CETA) started in May 2009 and are now in their final leg. Canada is the EU’s eleventh most important trading partner whereas the EU is Canada’s second-largest trading partner, after the United States. In 2012, the value of bilateral trade in goods between the EU and Canada was €61.7 billion. An economic study jointly released by the EU and Canada before the negotiations were started showed that a comprehensive trade agreement could increase their bilateral trade by another €25.7 billion.

Association of Southeast Asian Nations (ASEAN) – The EU is about to start the talks for a Free Trade Agreement with Vietnam, the fourth country in the ASEAN region to enter into bilateral negotiations after the region-to-region approach was abandoned a few years ago. The first round of negotiations with Vietnam is scheduled for July 2013 in Brussels. The EU entered also recently started negotiations with Thailand (press release) and continues the talks with Malaysia (process launched in May 2010). The negotiating process with Singapore concluded successfully in December last year (IP/12/1380).

The EU remains open to start negotiations with other ASEAN partners and hopes one day to integrate these deals into a global region-to-region trade agreement. ASEAN as a whole represents the EU’s third largest trading partner outside Europe (after the US and China) with more than €206 billion of trade in goods and services in 2011.

India – Substantive progress has been achieved since the beginning of the negotiations in 2007. Now both sides need to go the final mile to put the package together. India combines a sizable and growing market of more than 1 billion people and is an important trading partner for the EU as well as an emerging global economic power.

Southern Mediterranean - The first round of negotiations between the EU and Morocco for a Deep and Comprehensive Free Trade Agreement (DCFTA) took place on 22 April (IP/13/344). The deal should strengthen EU-Morocco trade relations and will build upon existing agreements, including the Association Agreement of 2000 and the agreement on agricultural, processed agricultural and fisheries products of 2012. Morocco is the first Mediterranean country to negotiate a comprehensive trade agreement with the EU. The Commission has also a mandate to start a similar process with Tunisia, Egypt and Jordan soon.

Eastern Neighbourhood – Since early 2012, the EU has been also negotiating since a Deep and Comprehensive Free Trade Area with Armenia and Georgia. Georgia has already completed seven negotiating rounds. Armenia is progressing at a similar pace with the sixth round taking place still in June 2013. Most chapters of the future agreements have being provisionally closed and the negotiations are now in their final phase. The current realistic objective is to complete the three agreements by late November 2013, ahead of the Eastern Partnership Summit in Vilnius. Talks with Moldova have been successfully concluded in June 2013 (see further below).

The EU is the main trading partner for each the three countries. In 2011 trade with the EU represented 32% of overall trade for Armenia and 26.1% for Georgia.

Mercosur – At the EU-Mercosur trade ministerial meeting held in Santiago on 26 January 2013, the EU and Mercosur agreed to exchange offers on customs duties and quotas not later than in the last quarter of 2013. So far, nine negotiating rounds held between the EU and Mercosur focused on trade rules other than direct market access issues.

Gulf Cooperation Council – Negotiations for a free trade agreement were suspended by the Gulf Cooperation Council in 2008. Informal contacts between negotiators continue to take place.

African, Caribbean and Pacific countries (ACP) – Economic Partnership Agreements (EPAs) are trade and development partnerships between the EU and African, Caribbean and Pacific countries (ACP), based on the Cotonou Agreement (2000). EPA negotiations started in 2002 and have now been concluded with three regions, which have initialled (and then signed and ratified) an agreement: the Caribbean (CARIFORUM), the Pacific (the only country currently involved is Papua New Guinea), and Eastern and Southern Africa (ESA - Zimbabwe, Mauritius, Madagascar, the Seychelles). Negotiations are in a decisive phase in the Eastern African Community (EAC) and the Southern African Development Community (SADC) EPA Group. Progress is uneven in the rest of Sub-Saharan Africa.

The EU has eleven trade negotiations actively under way and several more trade and development negotiations (EPAs) ongoing.

Free Trade Agreements finished but not yet applied

Moldova – The EU and the Republic of Moldova successfully concluded on 12 June 2013 the final round of negotiations on a Deep and Comprehensive Free Trade Area (DCFTA), as a part of EU-Moldova Association Agreement. The official initialing of the Association Agreement is planned for the Eastern Partnership Summit on 29 November 2013 in Vilnius.

Even though Moldova represents a fairly small market for the EU, the EU is Moldova’s biggest trading partner, accounting for more than 50% of total trade flows. Our bilateral trade volumes have grown strongly over recent years. This trend should be accelerated even more now the DCFTA negotiations are finished.

Ukraine – The EU and Ukraine concluded the negotiations for a deep and comprehensive Free Trade Agreement (DCFTA) in December 2011. On 15 May 2013, the Commission adopted the proposals for Council decisions on the signing and provisional application of the EU-Ukraine Association Agreement, including its trade part (IP/13/436). The next step will be the signature of the Agreement by the Council, once the political conditions are met.

Singapore – The negotiations for a Free Trade Agreement (FTA) between the European Union and Singapore were concluded on 16 December 2012 (IP/12/1380). This agreement is the EU’s second ambitious agreement with a key Asian trading partner, after the EU-Korea FTA, and the first with a member of the 10-country Association of Southeast Asian Nations (ASEAN). Once fully implemented, the deal will open up markets on both sides in a number of sectors, including banking, insurance and other financial services industries. Both the EU and Singapore will now seek endorsement from their respective political authorities and envisage initialling the draft agreement in summer 2013. The procedures allowing the agreement to become effective are expected to be completed by the fall 2014. Singapore is the EU’s largest trading partner in South-East Asia. EU-Singapore trade in goods and services each grew by roughly 40% between 2009 and 2011 (MEMO/12/993).

Colombia – Colombia, together with Peru, concluded an ambitious and comprehensive trade agreement with the EU in June 2012. Colombia completed its internal ratification procedures in June 2013 clearing the way for provisional application of the agreement as of July 2013. The EU is the second largest trading partner of the Andean region after the US. It is expected that, once fully implemented, the deal with both Andean partners will result in total tariff saving of more than €500 million per year.

Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) - The Association Agreement between the European Union and Central America was approved by the European Parliament on 11 December 2012 (IP/12/1353). In Central America, the ratification process is well advanced. Nicaragua, Honduras and Panama have already ratified the Agreement. The others - Guatemala, El Salvador and Costa Rica - are expected to ratify and get ready to apply the agreement during the summer 2013. In order to apply the agreement properly, most of the Central American countries had to modify their legislation to allow for protection of the European geographical indications. All Central American countries, except Guatemala, have already taken this step.

Once the internal procedures are accomplished, this agreement will open up markets on both sides, helping to establish a stable business and investment environment. The agreement is also meant to reinforce regional economic integration in Central America. Bilateral trade in goods between Central America and the European Union is worth more than €50 billion annually.

There are also five Economic Partnership Agreements with African, Caribbean and Pacific States that have been negotiated but they have not yet entered into force. These are Cote d’Ivoire, Cameroon, the Southern African Development Community, Ghana and the Eastern African Community.

The EU has finished negotiating 9 trade agreements that have yet to enter into force.

Free Trade Agreements already in place

Peru, in force since 1 March 2013 – The FTA with Peru (a three-way FTA also including Colombia) has been provisionally in force since 1 March 2013 (IP/13/173). EU-Peru trade has grown significantly in recent years and its volume reached €9.2 billion in 2011, corresponding to 16% of Peru’s trade volume. The trade agreement represents among others an important opportunity for Peruvian agricultural and fisheries exports, which already represent almost a third of all the country’s exports to the EU.

South Korea, in force since 1 July 2011 - This agreement is the first of a new generation of free trade agreements that went further than ever before at lifting trade barriers and making it easier for European and Korean companies to do business together. As the FTA has lowered import tariffs for European products at the Korean border, it is estimated that in the first nine months EU firms have already made cash savings of €350 – from boosts in sales of European wine to high-quality fashion products (IP/12/708).

Mexico - Since the entry into force in October 2000 of this comprehensive Free Trade Agreement, total bilateral trade has doubled, passing from €21.7 billion in 2000 to €40.1 billion in 2011. On his recent visit to Mexico in November 2012, EU Trade Commissioner Karel De Gucht called for the current FTA to be upgraded (SPEECH/12/825).

South Africa - South Africa is the EU’s largest trading partner in Africa. The Trade, Development and Co-operation Agreement, in force since 2000, established a free trade area that covers 90% of bilateral trade between the EU and South Africa. The liberalisation schedules were completed by 2012.

Chile - The EU and Chile concluded an Association Agreement in 2002, which included a comprehensive Free Trade Agreement that entered into force in February 2003. The EU-Chile Free Trade Agreement is broad and comprehensive and covers all the areas of EU-Chile trade relations. EU is Chile’s second largest source of imports, after the USA. The EU is also Chile’s third largest export market, after the recent rise of China as an important export market for the EU.

On top of these "classic" free trade deals, Free Trade Agreements are a core component of many Association Agreements as well as Customs Unions (Andorra, San Marino, Turkey). Hence the EU also has free trade deals in force with a number of countries and territories in Europe (Faroe Islands, Norway, Iceland, Switzerland, the former Yugoslav Republic of Macedonia, Croatia, Albania, Montenegro, Bosnia and Herzegovina, Serbia) and the Southern Mediterranean (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority, Syria, Tunisia) and three with African, Caribbean and Pacific countries (Caribbean, Pacific and Eastern and Southern Africa).

The EU therefore has 28 trade agreements already in place. This does not include Syria as the trade provisions are not applied.

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