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The European Commission is championing a new generation of FTAs, to be concluded first and foremost with the world’s largest growth regions. The idea is to boost growth and employment levels in Europe by improving European companies’ global competitiveness.
The development of multilateral trading relations are a priority for both Germany and the European Union. In light of the bilateral FTAs that are being concluded by some of Europe’s important trading partners (including the US and Japan) and which could jeopardise the competitiveness of European companies on the global markets, the EU’s position on bilateral free trade agreements (FTAs) has evolved since 2007.
The new generation of free trade agreements that the EU aims to conclude with other countries is broad-based and covers a wide range of different aspects. These agreements not only touch upon the issue of tariffs (e.g. customs duties, export subsidies) but also set out rules for services, the elimination of non-tariff barriers to trade and other trade-related aspects such as investment and competition. As the scope of these agreements is wider than the WTO agenda, they are often referred to as ‘WTO + agreements’.
Click here(in German) for an overview of the existing free trade agreements that have been concluded by the EU.
EU-Canada: Comprehensive Economic and Trade Agreement (CETA)
On 15 February 2017, the European Parliament approved of the Comprehensive Economic and Trade Agreement (CETA). CETA eliminates most of the tariffs that still exist and provides for better mutual access to the goods and services markets in the EU and Canada. Following shared rules and creating open market access in this way will help the parties to CETA safeguard and expand their prosperity.
CETA not only creates better opportunities for European producers of industrial goods, agricultural produce and services. It also reaffirms social and environmental standards and provides for a modern form of investment protection. CETA is a modern agreement which creates a major opportunity for its parties to play an active role in globalisation and lay down fair and sound rules for this process. The high standards agreed between the EU and Canada will serve as a benchmark for future trade agreements.
CETA has been provisionally applied since 21 September 2017. This, however, applies only to those chapters for which the EU has sole responsibility. As a result of this provisional entry-into-force of the agreement, EU companies and citizens have been benefiting directly from CETA since 21 September 2017. Canada is abolishing all tariffs on 98% of all the goods being traded between the EU and Canada (in terms of tariff lines). This will save EU companies an annual €590 million in customs payments. They also gain the best level of access to the Canadian federal, provincial and municipal public-sector markets that has ever been granted to non-Canadian companies. CETA will not enter into force in its entirety before all Member States have ratified the agreement in line with their individual national procedures under constitutional law. Among the provisions that require ratification by all EU Member States are those governing investor-state dispute settlement procedures, which, under CETA, will be handled by an investment court that is held accountable by the public.
The EU is one of the most important trading partners for the US. Similarly, the US is Germany’s first export market outside Europe and also the market where German companies invest the most. The negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US have been suspended since Donald Trump took up office at the beginning of 2017 and are not being continued.
The European Commission agreed a trade agenda with the US Administration on 25 July 2018 with a view to addressing issues of mutual interest. The agreed cooperation covers several areas. These include the mutual liberalisation of trade in industrial goods - except for vehicles. Also, both sides are considering measures to facilitate trade in a number of specific sectors (services, chemicals, pharmaceuticals, health products, soya beans). Further to this, the European Commission and the US administration agreed on closer cooperation on standardisation and on strategic cooperation in the energy sector. This includes the goal of increasing imports of liquefied natural gas from the US. Both sides also agreed on a dialogue on WTO reform and a joint approach to tackling the global challenges of unfair trade practices. The US Administration and the European Commission will refrain from measures which are contrary to the spirit of their agreement whilst work on the joint agenda is continuing. Further information about the progress in the talks can be downloaded from the European Commission’s website.
Following the talks, the Council of the European Union issued two mandates for negotiation to the European Commission on 15 April 2019. These are a mandate to engage in negotiations with the US on an agreement to remove tariffs on industrial goods, and on an agreement on conformity assessment. According to both mandates, talks will be suspended if the US imposes further special tariffs on EU imports. Also, the mandate for an agreement on industrial tariffs provides that, before any agreement is concluded, the existing special US tariffs on steel and aluminium imports must be lifted.
The negotiations for a free trade agreement between the EU and several ASEAN (= Association of Southeast Asian Nations) countries have high significance for Germany in economic terms. The ASEAN region is growing dynamically and there is major potential for economic cooperation with Europe. The EU is currently negotiating with individual ASEAN members after initial negotiations with the region as a whole failed to deliver specific outcomes.
Singapore: The EU and Singapore signed a free trade agreement and an investment protection agreement at the ASEM Summit on 18-19 October 2018. The European Parliament approved both agreements in February 2019. Germany strongly welcomes the agreements because, despite its small size, Singapore is one of Germany’s most important trading partners in the ASEAN area. The ratification of the free trade agreement was concluded by a Council decision on 8 November, and the agreement entered into force on 21 November 2019.The investment protection agreement has yet to be signed by all EU Member States. The investment protection agreement sets high and unambiguous investment protection standards that preserve the state’s right to regulate, and it puts in place a reformed dispute settlement procedure modelled on CETA. You can find out more about the two agreements on the European Commission's website.
Viet Nam: On 30 June 2019, the EU and Viet Nam signed a free trade agreement and an investment protection agreement in Hanoi. Germany is Viet Nam’s largest trading partner within the EU and welcomes the signing of the agreement. The free trade agreement will provide easier access for German products to the growing Vietnamese market. Like the agreement signed with Singapore, the investment protection agreement with Viet Nam sets high and precise investment protection standards and puts in place a reformed dispute settlement procedure. The European Parliament gave its assent to both agreements on 12 February 2020. The free trade agreement took effect on 1 August 2020. The investment protection agreement has to be ratified by all EU Member States before entering into force.
In 2019, bilateral trade between Germany and Viet Nam totalled around €14 billion. The stock of German direct investment in Viet Nam amounted to around €840 million in 2017. More than 300 German companies are currently present on the Vietnamese market.
Malaysia: Talks towards establishing an EU-Malaysia free trade agreement began in October 2010. The negotiations have been stalled since the end of the 7th round in 2012. The European Commission is working towards reviving these talks.
Thailand: Negotiations for an FTA with Thailand began in May 2013. They have been paused since the fourth round of negotiations in April 2014, as the military took control of the country shortly afterwards. It will only be possible for the EU to conclude an agreement with a Thai government that has been elected in a democratic process.
The Philippines and Indonesia started negotiations on an FTA with the EU in 2016. Text-based negotiations began in 2017.
The EU is currently preparing to take up negotiations on an EU-Australia FTA. On 22 May 2018, the EU Trade Ministers decided to start negotiations on a Free Trade Agreement. The negotiations started in June 2018.
In 2019, the trade volume between the EU and Australia amounted to more than €53 billion, with a trade surplus of almost €18 billion to the benefit of the EU. EU exports to Australia comprise primarily finished goods, while Australia exports in particular mineral resources and agricultural products to Europe. EU businesses provide commercial services to Australia worth approx. €20 billion, and they invest around €160 billion in the country. The EU thus is Australia's third largest trading partner.
Negotiations on a FTA are also being prepared with New Zealand. On 22 May 2018, the EU Trade Ministers decided to start negotiations on a Free Trade Agreement with the country. The negotiations started on 21 June 2018.
The EU is New Zealand's second largest trading partner. In 2019, the trade volume totalled more than €9 billion. Agricultural products account for the largest share of New Zealand's exports to the EU, while the EU primarily exports finished and industrial goods to New Zealand. In 2019, Germany's trade surplus with New Zealand amounted to €2.7 billion, and EU businesses accounted for more than €10 bilion of foreign direct investment in New Zealand.
An FTA between the EU and India can help eliminate existing barriers to trade and give fresh impetus to our bilateral cooperation. India’s population is the second-
largest in the world, making the country a very important trading partner for German businesses. The Federal Government and the European Commission do, however, insist that any agreement must be comprehensive and ambitious.
Whilst negotiations for an FTA began as early as 2007, stark differences in expectations on both sides have resulted in these talks having been stalled since 2012.
The first EU FTAs to be concluded with Latin American countries were the Global Agreement with Mexico of 2000 and the Association Agreement with Chile of 2005. Going far beyond the scope of a mere free trade agreement, the Association Agreement and the Global Agreement also provide a broad contractual basis for political dialogue, economic relations, and economic cooperation. The EU and Mexico achieved agreement in principle on the key elements of a trade section of a modernised EU-Mexico Global Agreement on 21 April 2018. The details include future freedom from tariffs for 99% of all goods traded between the EU and Mexico. Transitional periods and quotas are initially envisaged for certain agricultural goods. In total, 340 food products from the EU will be protected by designations of geographical origin. Investor-state disputes are to be resolved by a publicly legitimised investment court. The new agreement is to cover not only market access but also issues like sustainability, regulatory cooperation and the fight against corruption. Once the last technical details have been clarified, the modernised agreement will need to be signed, approved by the Council and the European Parliament, and ratified by the Member States. The EU has also been negotiating with Chile since November 2017 on the modernisation of the existing Association Agreement. The aim is to include provisions on the fight against corruption, support for SMEs and sustainable development (social and environmental standards).
The trade section of the EU’s Association Agreement with Central America entered into force provisionally at the end of 2013. The association agreement between the EU and Central America marks the first time that the EU has concluded such an agreement with an entire region. Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama are all involved in the agreement. The EU’s plurilateral agreement with Columbia and Peru entered into force provisionally in 2013. Ecuador acceded to the agreement in January 2017.
On 28 June 2019, after almost 20 years, the European Commission successfully concluded the negotiations with the Mercosur countries Argentina, Brazil, Paraguay and Uruguay on the free trade part of the Association Agreement. With some interruptions, the negotiations had been going on since 1999.
The framework for the EU’s relations with Ukraine is provided by the Partnership and Cooperation Agreement (PCA), which entered into force in 1998. In 2014, the EU and Ukraine signed the Association Agreement that had been in preparation since 2008 and that is to both replace the existing Partnership and Cooperation Agreement and establish a deep and comprehensive free trade area. The political part of the agreement has been provisionally applied since 1 November 2014, to the extent that it falls within the scope of sole EU powers. The part of the agreement that provides for an FTA has been provisionally applied since 1 January 2016 – also to the extent that the EU has sole power of application.
Trade in Service Agreement (TiSA)
TiSA (= Trade in Services Agreement) is currently being drafted as a plurilateral agreement on trade in services. Above all else, it is to improve access to foreign services markets and to create fresh momentum for the negotiations on a multilateral trading system, which are largely stalled. The EU and the German Government hold the view that the new rules designed to facilitate the trade in services should, at a later stage, be embraced at WTO level. The EU is negotiating TiSA with 23 WTO member states which account for approx. 70% of the global trade in services.
The Environmental Goods Agreement (EGA), which is currently being negotiated, is to deregulate the market for environmental goods. Whilst EGA is being negotiated as a plurilateral agreement (i.e. by only a few WTO member states), there is hope that it will later evolve into a multilateral agreement adopted by all WTO members. The initiative builds upon what is called the APEC List of Environmental Goods – a document that was approved in Vladivostok in September 2012 and which sets out the goal of limiting tariffs on a total of 54 environmental goods to a maximum of 5 per cent of the value of these goods by 2015.
The EU is joined at the table by representatives from 13 non-EU countries. The first round of negotiations was held in Geneva in July 2014. After 17 rounds of negotiations, the aim now is to conclude the agreement by the end of 2016. For further information on the envisaged agreement, please visit the website of the European Commission.
Article - Trade Policy
Article:Fostering international trade and reducing barriers