Introduction to the European Free Trade Agreements

09/06/2011

Prof Claudio Dordi - Professor of International Law at Bocconi University (Milan), and MUTRAP III Team Leader.

Mr Federico Lupo Pasini - Lawyer and consultant specialized in international economic law and policy. Based in Hanoi.

Free trade agreements (FTAs) are becoming increasingly sophisticated and complex trade policy instruments. The European Union begun to systematically use FTAs in the nineties in order to extend its sphere of economic influence to neighbouring countries. With the time FTAs evolved to address also non-trade concerns. Indeed, compared with the initial wave of FTAs of the early nineties, which were used to address market access and trade in goods issues, the new generation of FTAs can be described as mature economic and foreign policy instruments that go well beyond reduction of trade barriers.

In general, the EU FTAs may be systematically categorized, on the basis of their respective scope and regulatory structure, into various groups. Each group has a different policy objective to be fulfilled, which in turn shapes also the form and the text of the Agreement.

1.      Agreements with geographically proximate countries, which might eventually accede to the EU.

This category encompasses the agreements that the EU has concluded with neighbouring third countries, including in the process of their accession to the Union (i.e., the Stabilisation and Association Agreements with the Western Balkans and the, now obsolete, Europe Agreements with the Central and Eastern European States);

2.    Agreements aiming at ensuring overall stability in the wider EU region.

This second category encompasses those agreements that the EU has concluded with the aim of establishing a climate of economic and political stability around its borders. The rationale behind the conclusion of such agreements is that any turbulent economic and political conditions in the wider EU region might result in negative spill-over effects within the EU itself; the possibility for any disruptions must, therefore, be minimized (i.e., the Euro-Mediterranean Association Agreements);

3.    Agreements whose primary focus is to foster the development of a certain region.

This category contains the agreements that the EU has concluded with third countries on the basis of historical and developmental considerations. Their conclusion aims at the reduction of poverty and at boosting the economic growth in developing and least developed countries that in the past had colonial ties with the EU (i.e., the EPAs with ACP Countries); and

4.    Agreements having as a primary objective to secure commercial benefits for the EU exporters.

This category encompasses trade agreements that the EU has concluded primarily with the goal of ensuring that its traders enjoy the greatest possible commercial benefits when exporting their products to the respective third countries. The Agreements with Chile, Mexico, South Korea, Colombia and Peru fall under this grouping.

In addition to these Agreements, the European Union has begun various talks with strategic trading partners in order to explore the possibility of signing free trade agreement. The new European strategy was set officially by the Commission in the communication “Global Europe – Competing in the World”, which spells out the new trade policy of the European Union. In the framework of such policy the singing of new and ambitious free trade agreement with strategic partners is among the priorities

In terms of content, Global Europe’s goal is to have strong, comprehensive, “WTO-plus” FTAs. Tariffs and quantitative restrictions should be eliminated. Presumably, this should apply to at least 90-95 per cent of tariff lines and trade volumes in order to comply safely with the “substantially-all-trade” criterion in Article XXIV GATT. There should be “far-reaching” liberalisation of services and investment. Services provisions should presumably be compatible with the “substantial sectoral- coverage” criterion in Article V GATS. A model EU investment agreement, developed in coordination with EU member-states, is envisaged. There should be provisions going beyond WTO disciplines on competition, government procurement, intellectual property rights (IPR) and trade facilitation. There should also be provisions on labour and environmental standards. Rules of origin (ROO) should be simplified. More generally there should be strong regulatory disciplines and regulatory cooperation, especially to tackle non-tariff barriers. This should involve improved transparency obligations, mutual recognition agreements, regulatory harmonization, regulatory dialogues and technical assistance.

On the basis of such new strategy, on 23 April 2007 the Council of the European Union authorized the EU Commission to start negotiating a FTA with the Association of Southeast Asian Nations (hereinafter, ASEAN). Negotiations were officially launched at the EU-ASEAN Economic Ministers Consultations held in Brunei Darussalam on 4 May 2007. Negotiations between the EU and ASEAN were intended to take place on a region-to-region approach, while recognizing and taking into account the different levels of development and capacity of individual ASEAN members. As progress in the EU-ASEAN negotiations was slow, both sides agreed in March 2009 to suspend the negotiations. On 22 December 2009, the EU Commission announced that EU Member States authorized the EU Commission to pursue negotiations towards FTAs with individual ASEAN countries.

Furthermore, the EU commission has begun talks with Canada, India, Mercosur, the Gulf Cooperation Council and has entered into negotiation for the signing of an association agreement with the Central American Republics of Costa Rica, EI Salvador, Guatemala, Honduras, Nicaragua and Panama.

Committee on International Trade Policies - VCCI