The European Union (EU) is striving to strengthen the competitiveness of its economy, and free trade agreements play a crucial role in enabling European companies to explore business opportunities on a global scale.
This network of 42 preferential trade agreements offers significant advantages to European companies, particularly SMEs, enabling them to trade and invest under more predictable, transparent and flexible commercial conditions.
In this article, we analyze the main points of the European Commission's latest report on the implementation and application of EU trade policy, highlighting the impact of free trade agreements on the European economy.
A catalyst for unprecedented opportunities
The aim of free trade agreements is to remove tariff (customs duties) and non-tariff (formalities) barriers to trade between two countries or groups of countries.
The trade facilitated by trade agreements creates a plethora of opportunities for European companies, offering access to new markets and stimulating economic growth.
Over the past decade, free trade agreements have helped the bloc maintain 16-17% of world trade in goods and services, despite the changing global economy and the rise of China.
Greater resilience to geopolitical shocks
In times of international tension, free trade agreements help European companies to diversify their markets and reduce their dependence on certain countries.
For example, despite the drop in exports to Russia, the EU was able to offset this loss by increasing its exports to other trading partners, such as Mexico, Turkey and Canada.
Recent trade agreements, such as those with South Korea, Canada and Vietnam, have supported the growth of EU exports in a number of key sectors, including automobiles, dairy products and pharmaceuticals.
Essential import diversification
EU free trade agreements also play a crucial role in facilitating access to the inputs needed for EU economic growth, helping to diversify sources of supply and reduce external dependency.
For example, the agreement with Canada has enabled the EU to diversify its sources of supply of raw materials and energy products, reducing its dependence on Russia.
Mechanisms to facilitate the application of agreements
The European Commission is setting up mechanisms to identify and rapidly resolve obstacles encountered by European companies on foreign markets, thus ensuring uniform application of free trade agreements.
For example, the one-stop shop, created in 2020, enables companies to report obstacles to trade, helping the Commission to resolve them efficiently and initiate dispute settlement procedures if necessary.
Recent progress
- Changes have been made to the EU Trade Compliance Regulation to deal with blocked disputes.
- Three new autonomous instruments have been adopted by the EU, aimed at combating economic coercion and ensuring fair conditions of competition.
- Progress has been made in removing barriers to trade, with 31 obstacles removed in 19 partner countries.
- The EU has stepped up its efforts on trade and sustainable development, including dialogues with partners to bring their legislation into line with international standards.
- Measures have been taken to improve working conditions in countries such as Colombia and Peru, through in-depth dialogue and legislative reform.
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Determining preferential origin remains a requirement for goods under free trade agreements. Customs authorities carry out regular checks, encouraging companies to set up compliant and secure origin management processes. This is crucial to avoid fines and maximize the benefits offered by free trade agreements.
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