EU highlights €1tn benefit of FTAs

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A new report has revealed that exports from the EU to its FTA partners surpassed €1 trillion in 2021.

A new report from the European Commission has highlighted the benefits brought to the EU from free trade agreements (FTAs) with nations around the world, as it was revealed that exports from the 27-member bloc to its preferential partners surpassed €1 trillion for the first time in 2021.

The Commission's second annual report, which examines how EU trade agreements are being implemented and enforced, also showcased some of the efforts that are being made to break down barriers to trade. It especially highlighted the role that small and medium-sized enterprises (SMEs) play in driving imports and exports in the bloc.

A record breaking year for EU trade

As well as breaking the $1 trillion mark for the first time in exports, 2021 also saw the EU import €800 billion worth of goods from its preferential partners. Overall, the 42 preferential agreements the EU has with 74 nations accounted for 44 percent of the EU's trade last year. This is expected to rise to 47.4 percent in the near future as agreements currently under adoption or ratification come into force.

The EU's largest preferential trading partner in 2021 was the UK, accounting for 23 percent of trade. This was followed by Switzerland (15 percent), Turkey (eight percent) and Norway and Japan (both seven percent). 

It also noted that In 2020, 94 percent of all EU exporters were SMEs, amounting to some – 631,000 businesses.

Executive vice-president and commissioner for trade Valdis Dombrovskis said the report provides "welcome news", especially given the large economic and geopolitical challenges currently faced by the EU.

"It highlights that our EU trade strategy is bearing fruit," he added. "We have removed more market access barriers and we have been able to better support our SMEs. Our focus now is on growing the EU's broad network of trade agreements."

On a regional basis, EU exports to central America rose by 23 percent between 2020 and 201, while imports climbed by 18 percent. In east Asia, Singapore was the biggest destination for EU products, with exports to the city-state rising by 13 percent year-on-year. Vietnam was the EU’s largest partner in the region for imports, increasing by 12 percent.

Progress made on disputes

The report also highlighted the progress that has been made on removing barriers to trade, including tariffs and other restrictions. In 2021, 39 such blockers were partially or fully removed, six more than in 2020.

Among these included Canada accepting EU harmonized rules on poultry certification and the resumption of EU exports of pork and poultry to South Korea in September 2022, after the Asian nation recognized the EU's strict measures to control outbreaks of African swine fever.

Elsewhere, Japan recognized 28 EU protected geographical indications, including on meat products, cheese and oils, while in return, the EU accepted 28 additional Japanese designations of origin on items such as agricultural and marine products.

The EU Trade Barriers Regulation also helped to resolve differences with Mexico over tequila exports, while the World Trade Organization was able to make progress in disputes with the UK over wind energy, with the US on aluminum and with Turkey on pharmaceuticals. 

As a result of dispute resolution efforts between 2015 and 2021 that have removed trade barriers, the EU's total exports in 2021 were €7.2 billion higher than they otherwise would have been.

What do the coming years hold for EU FTAs?

The next steps for the EU will be to continue advancing FTA agreements with other countries around the world. Major economies the bloc is currently negotiating preferential deals with include India and Indonesia, although efforts to finalize ratification of a deal with the Mercosur group of South American nations - which was agreed in principle back in 2019 but has yet to be implemented - may remain on hold for the foreseeable future.

Securing an FTA with Australia is also a key priority for the EU. Negotiations have been underway on this since 2018 and were recently reported to be back on track following the election of a new government in Canberra earlier this year that is seen as more aligned with EU policies. 

A key focus of such a deal will be fewer restrictions on the import of raw materials. Currently, the EU gets 24 percent of its critical raw materials from preferential trading partners, but this could rise to 46 percent if an FTA with Australia is agreed.

Mr Dombrovskis said: "Our focus now is on growing the EU's broad network of trade agreements, which play a crucial role in helping our economies to grow at this time of economic uncertainty, securing privileged access to key markets for our exports."

He added that diversified supply chains and cooperation with reliable global partners are more important than ever in a changing geopolitical landscape.