European flags flying high; Quelle: istockphoto.com/AntiMartina

© istockphoto.com/AntiMartina

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 and the successful conclusion of the Doha Round 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.

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 applying to services, to the removal of non-tariff barriers to trade, and to 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’.

EU-Japan Free Trade Agreement

Negotiations for an EU-Japan FTA were officially launched on 25 March 2013. The nineteenth and latest round of these talks was held from 12 to 30 June 2017. A political agreement ‘in principle’ was struck at the 24th EU-Japan Summit that took place on 6 July 2017. The negotiations are expected to be completed in late 2017.

Germany has a keen interest in concluding a comprehensive and ambitious EU-Japan FTA whose scope is to include not only the goods trade, but also services, rules on investment and competition, and on social and environmental standards.

This FTA is to secure better opportunities for German companies wishing to access the Japanese market. Whilst some important progress has been made in the negotiations, there are still some key questions that remain. The key requirement for the EU and for Germany is that the EU-Japan agreement must be ambitious across its entire scope and that it must abide by standards that are similarly high as those agreed with Canada in CETA. Click here for more information on the EU-Japan FTA.

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 to only to those chapters for which the EU undisputedly has sole responsibility. As a result of this provisional entry-into-force of the agreement, EU companies and citizens now benefit directly from CETA. Canada is abolishing all tariffs on 98 per cent 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 a investment court that is held accountable by the public.

Click here and/or visit the website of the European Commission for detailed information on CETA and the next steps to be taken.

EU-US: Transatlantic Trade and Investment Partnership (TTIP)

The EU is one of the most important trading partner 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 envisaged Transatlantic Trade and Investment Partnership between the EU and the US is an extraordinary joint project by the EU and the US intended to generate consierable growth and employment. A transatlantic agreement would boost growth and employment both in the EU and in the US. German SMEs, which do a great deal of business in the US, stand to be among the biggest winners of comprehensive trade liberalisation which would see tariffs and other barriers to trade eliminated.

The change in the US Administration has led to the negotiations being stopped for now and it is as yet unclear whether and how they are to be resumed. Click here for more information about the envisaged free trade agreement between the US and EU.

EU-ASEAN

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: In October 2014, the EU and Singapore concluded their negotiations for the EUSFTA (= European-Union-Singapore Free Trade Agreement); the chapter on investment protection was finalised in May 2015. Germany welcomes the success of these negotiations. Despite its small size, Singapore is one of Germany’s most important trading partners in the ASEAN region. The text of the EUSFTA was negotiated by the European Commission.

On 16 May 2017, the European Court of Justice (ECJ) ruled that parts of the EU-Singapore agreement go beyond the scope over which the EU has sole responsibility, but lie within that of shared responsibility between the EU and its Member States. This means that the agreement will have to be ratified by every single Member State, rather than just the EU. The ruling came after the European Commission had asked the ECJ to assess the legal nature of the FTA. The specific question to be clarified was whether the EUSFTA is a mixed agreement or an EU-only agreement.

Viet Nam: The negotiations with Viet Nam that started in October 2012 have been progressing well. After agreement ‘in principal’ on an FTA with Viet Nam had been struck in summer 2015, the President of the European Commission, Mr Juncker, and the Prime Minister of Viet Nam, Mr Nguyen, presented the outcome of the negotiations in early December that year.

The agreement will follow a new approach to investment protection. Viet Nam has accepted the EU proposals for a reformed dispute settlement procedure that will take place before a modern and transparent investment court.
The European Commission published the text of the FTA on 1 February 2016. The national parliaments, including the Bundestag and the Bundesrat, must give their approval before the agreement can enter into force. The text of the agreement will also be available in German in time for the deliberations.

Germany is Viet Nam’s largest trading partner within the EU and welcomes the fact that the negotiations have been successful. The FTA will secure access for German producers to the growing Vietnamese market, thereby allowing for existing jobs in Germany to be safeguarded and new ones to be created. By the same token, there will also be better more Vietnamese products available on the German 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. 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 are due to begin in 2017.

EU-Australia

The EU is currently preparing to take up negotiations for an EU-Australia FTA. These talks are to begin in late 2017.

EU-New Zealand

The EU is currently preparing to take up negotiations for an EU-New Zealand FTA. These talks are to begin in late 2017.

EU-India

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.

EU-Latin America

The first EU FTAs to be concluded with Latin American countries were the FTA with Mexico of 2000 and the Association Agreement with Chile of 2002. Going far beyond the scope of a mere free trade agreement, the Association Agreement with Chile provides a broad contractual basis for political dialogue, economic relations, and economic cooperation. It is soon to be modernised to allow for better access to the goods markets, more intensive dialogue both at political and scientific/academic level, stronger involvement of civil society, and the launch of expert forums on issues including energy, the environment, consumer protection, research, IT, culture, and education.

The trade section of the EU’s Association Agreement with Central Amerika 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, In November 2016, the EU and the other countries party to the agreement signed the accession of Ecuador to the agreement. The European Parliament gave its approval in December 2016. The trade agreement is very effective in reducing barriers to trade and preventing German and European companies from suffering potential competitive disadvantages vis-à-vis other industrialised countries wishing to access the markets of the parties to the agreement. The year 2010 saw the resumption of talks with the South American internal market Mercosur (Mercado Común del Sur or ‘Joint Market of the South’), formed of Argentina, Brazil, Paraguay, Uruguay, Bolivia and Venezuela. These negotiations had been abandoned in 2004. The talks, which gained fresh momentum in May 2016, are being held with these countries with the exception of Mercosur’s newest members, Bolivia and Venezuela, which have chosen not to be involved. Following an exchange of offers on market access in 2016, the latest round of negotiations took place in Buenos Aires in March 2017.

EU-Ukraine

The framework for the EU’s relations with Armenia (ARM) 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.

Click here for more detailed information on TiSa.

Environmental Goods Agreement (EGA)

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 on the EGA was held in Geneva in July 2014. For further information on the envisaged agreement, please visit the website of the European Commission.