EU trade: What deals are on the horizon, and should Brussels be moving quicker?

Industry News | | MIC Customs Solutions |

A letter signed by 15 European Union governments suggests several countries within the bloc are unhappy with the pace at which the EU is negotiating and concluding free trade agreements.

Recent years have brought a number of challenges for the European Union, from the UK's decision to leave the bloc in 2016 to the COVID-19 pandemic and Russia's invasion of Ukraine.

These and other significant events have come together to create a uniquely complex picture for trade between EU nations and the rest of the world. 

According to a letter co-signed by 15 EU governments and sent to the European Commission, several countries within the bloc are growing increasingly discontent with its trade policies and want to see more decisive action to establish new deals with countries around the world.

'Wake-up call'

Reuters reported that the 15 economy, foreign and trade ministers putting their names to the letter emphasized the importance of greater supply chain resilience, stronger strategic partnerships and more open trade. They said these priorities have become particularly important in light of the war in Ukraine and the pandemic.

The letter also called for quicker action to conclude free trade agreements to pave the way for long-term economic growth and improve the EU's geopolitical status on the world stage. It noted that one in seven jobs across all member states depend on trade.

"This should be a wake-up call for Europe," the ministers said in their missive to EU trade commissioner Valdis Dombrovskis.

Brussels has been in negotiations with various countries around the world regarding new trade deals, but progress has often been slow. An agreement was reached in 2019 with the South American Mercosur trade bloc - which is made up of Argentina, Brazil, Paraguay and Uruguay - but concerns over deforestation in the Amazon prevented the accord from taking full effect.

The EU also struck an agreement with Mexico in 2018 but it has not yet been submitted for approval.

Sluggish progress in Brussels' trade talks is in contrast with other trade deals that have been signed around the world. The most noteworthy example is the Regional Comprehensive Economic Partnership (RCEP), which was signed in November 2020 and became effective on January 1st 2022.

The RCEP is the largest trade bloc in history, encompassing 30 percent of the world's population and the same proportion of global GDP. Its member countries include China, Japan, Australia, Indonesia, South Korea, New Zealand and Singapore.

To meet the expectations of the 15 governments that sent the letter to the European Commission, Brussels will have to make significant progress in the free trade negotiations in which it's currently engaged around the world.

What countries is the EU negotiating with?

One free trade deal the EU is particularly keen to get across the line, according to Politico, is with Chile. This is seen as a key agreement because it would give European countries better access to the South American country's Atacama salt flats, which produce large amounts of lithium, a crucial resource in battery production.

Germany is thought to be especially keen to strike an accord with Chile to support the transition of its automobile industry to electric vehicles.

Brussels has also been locked in ongoing talks with Mexico, having reached an agreement in principle in 2018 that was finalized in 2020, but has since stagnated. One of the reported stumbling blocks was the European Commission's suggestion to split up the deal in order to ratify the less problematic parts of it first, which was rejected by Mexico.

Elsewhere, the EU recently confirmed the formal resumption of free trade negotiations with India, which have been given an "ambitious" target of concluding by the end of 2023.

Mr Dombrovskis released a statement saying the EU sees its partnership with India as "one of the most important relationships for the upcoming decade". As well as increasing market access for European cars, alcoholic beverages and agri-food products, the deal currently being discussed could counter China's increasing influence in the Indo-Pacific region.

Indian commerce minister Piyush Goyal said this could prove to be "a defining moment for world trade in the 21st century".

Please note that there are more than 500 notified free trade agreements (FTAs) around the world to enhance trade among the participants and offer potential duty savings to companies yielding a competitive advantage. However, companies can only leverage such potential savings and competitive advantages by complying with a number of complex rules of origin and maintaining detailed documentation. FTAs should be used as a strategic management tool. This requires companies to establish processes for the calculation of the origin of goods which conform to applicable laws and auditing requirements in order to avoid possible fines and future unplanned costs.

This is where MIC's Origin Calculation System (MIC OCS) supports you! It provides the necessary tools for an optimized free trade agreement management along the entire process for a multitude of FTAs worldwide (e.g. CETANAFTA / USMCAJEFTAASEANEU-MERCOSUR, etc.).