Summary
The UNCTAD report highlights how the EU is ‘one of the most active negotiators of FTAs at the global level’. These EU trade agreements grant ‘EU companies more favourable trade conditions – including through reduced tariffs’, with these preferences providing a competitive advantage to EU exporters compared to companies in countries not benefitting from such FTA arrangements. While the report reviews the utilisation of tariff preferences under EU trade agreements with non-ACP countries it does provide insights into the commercial value of EU reciprocal preferential trade agreements. It also provides important background to the debate on future implementation of the concluded EU-ACP economic partnership agreements.
A report prepared by UNCTAD with the support of the National Board of Trade of Sweden highlights how the EU has conclude FTAs with a wide variety of countries from developed to developing and now even least developed countries. While it has been suggested that tariff preferences are not extensively utilised the report suggests this contention is not supported by the empirical data.
While the UNCTAD report estimates that EU exporters over pay on tariffs to the tune of $79 billion as a result of a failure to ‘take full advantage of the reduced tariffs offered by the FTAs that the EU as a bloc has signed with a variety of both developed and developing countries’, most EU exports by value take advantage of available tariff preferences offered under EU free trade area agreements (1). In all the study suggested exports valued at €139.1 billion (in 2013) benefitted from tariff preferences granted under EU concluded free trade area (FTAs) agreements (2).
According to the authors of the UNCTAD report ‘EU’s exporters use the agreements for 67% of their exports to countries with which FTAs exist’. The largest under-utilization of tariff preference provided under EU FTAs was ‘found among EU exporters in their trade with Tunisia, Morocco, Egypt, Lebanon and Mexico’. This ‘under-utilization of the possibilities for tariff reduction in these free trade agreements’ accounted for around ‘40% of the total value of exports or duty costs of not using the EU’s free trade agreements’ (2). Underutilisation of tariff preferences by EU exporters is thus concentrated on a limited number of trade agreements.
It is maintained the utilisation of preferential access by EU exporters could be improved if ‘border related aspects of their implementation’ were addressed since in some cases these border related aspects are ‘more cumbersome than the provisions of the FTAs themselves’ (1).
The report notes EU importers utilise tariff preferences even more extensively than EU exporters, with 90% of trade where tariff preferences apply utilising these tariff preferences. In total EU importers take advantage of tariff preferences under the reviewed traded agreements on some €104 billion of imports. Once again the underutilisation of available tariff preferences is concentrated under a limited number of agreements, namely the agreements with ‘Switzerland, Turkey, South Korea and Mexico’ (1).
According to the report ‘EU exporters utilise the EU’s free trade agreements to the highest value in absolute terms…more than partner country exporters’. However under-utilisation of preferences is also much more pronounced in the case of EU exporters than in the case of the third country exporters reviewed under the study. There is seen as being ‘a great potential for higher utilization of the available preferences in EU exports’ (2).
According to the report at the policy level the utilisation rate of tariff preferences included in trade agreements is held back by complex rules of origin.
Overall the report notes how ‘preferential duty savings constitute an incentive and competitive advantage’ for EU exporters when compared to ‘companies in countries that are not parties of the free trade agreement’.
| Comment and Analysis While the report does not look at preference utilisation rates under EU-ACP trade agreements (give the data period reviewed) the analysis does provide some useful insights into the context for the more generalised implementation of EU-ACP reciprocal economic partnership agreement commitments.The first point to note is that these trade agreements give EU exporters a competitive advantage vis a vis exporters from countries which do not have a free trade area agreement in place. EU exporting companies thus benefit from these trade agreements in terms of increased export earnings while EU economies benefit in terms of increased employment creation. Thus it needs to be recognised that the EU’s move over to reciprocal preferential trade agreements are in the interests of EU exporters and job seekers and are not primarily development agreements. The competitive advantages EU trade agreement provide EU exporters also throws into sharp focus just why the UK government is so keen to ‘roll-over’ existing EU trade agreements into bilateral UK-only trade agreements from the date of the UK’s scheduled departure from the EU (30th March 2019). However the extent to which EU trade agreements provide EU exporters with a competitive advantage over third country suppliers, highlights the extent to which EU exporters would actually have an interest in seeing the UK excluded from the benefits of EU negotiated FTAs once the UK is no longer a member of the EU and is simply another third country trading partner (like Switzerland, Norway or Turkey). The second point to note is that the value of EU trade agreements to EU exporters can be maximised by addressing border related aspects of trade facilitation and so called ‘behind border’ issues. Not surprisingly these dimensions are likely to become an increasing focus of EU policy interventions under the economic partnership agreements concluded with ACP countries, once the full implementation of these trade agreements gets underway. In this context it should be noted that EC’s efforts to eliminate all barriers to EU exports through the full implementation of EPA commitments is now being supplemented by a focus in the post-Cotonou negotiations on dialogues which ‘facilitate the process of economic reform’ and on promoting an ‘enabling regulatory environment’ (3) (see companion article ‘The EC’s Recommendations for the Post-Cotonou Negotiations: Some Implications for ACP Agro-food Sectors’, 19 February 2018). Given the growing insistence of EU member states that the future EU-ACP partnership should increasingly reflect EU interest and concerns, how this dialogue and support to the creation of an enabling environment is operationalised in practice is likely to become an important issue in ACP-EU relations (or rather EU relations within individual ACP regions, most notably Africa). |
Sources:
(1) UNCTAD, ‘$89 billion lost in underuse of European Union free trade agreements, report shows’, press release, 29 January 2018
http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1662&utm_source=UNCTAD+Civil+Society+Newsletter&utm_campaign=f387e7e382-UNCTAD+CSO+Newsletter+16+November&utm_medium=email&utm_term=0_2e2035bdbc-f387e7e382-69315309
(2) UNCTAD, ‘$89 billion lost in underuse of European Union free trade agreements, report shows’, full report, January 2018
http://unctad.org/en/PublicationsLibrary/EU_2017d1_en.pdf
(3) Annex: Recommendation for a Council Decision, ‘Authorising the opening of negotiations on a Partnership Agreement between the European Union and countries of the African, Caribbean and Pacific Group of States’, COM(2017) 763 final, 12 December 2017
https://ec.europa.eu/europeaid/sites/devco/files/pc-com-acp-2017-763-annex-20171212_en.pdf