EU trade policy
Trade in goods and services makes a significant contribution to increasing sustainable growth and creating jobs. More than 30 million jobs in the EU depend on exports outside the EU. 90% of future global growth is predicted to happen outside Europe’s borders. Hence – trade is a vehicle for growth and a key priority for the EU.
The Council is committed to a strong, rules-based multilateral trading system. Responsible EU trade policy is accompanied by a high level of transparency and an effective communication with citizens about the benefits and challenges of trade an open markets.
Trade policy is an exclusive EU competence. This means the EU and not the member states legislates on trade matters and concludes international trade agreements. If the agreement covers topics of mixed responsibility, the Council can conclude it only after ratification by all member states. By acting together with one voice on the global stage, rather than with multiple separate trade strategies, the EU takes up a strong position when it comes to global trade.
The EU manages trade relations with third countries in the form of trade agreements. They are designed to create better trading opportunities and overcome barriers to trade.
The EU wants to make sure that imported products are sold at a fair and equitable price in the EU – no matter where they come from. Trade regulation in form of trade defence instruments is a means to protect EU producers from harm and tackle unfair competition by foreign companies such as dumping and subsidisation.
EU trade agreements
See full infographicWhat they are
The EU manages trade relations with third countries in the form of trade agreements. They are designed to create better trading opportunities and overcome related barriers.
EU’s trade policy is also used as a vehicle for the promotion of European principles and values, from democracy and human rights to environment and social rights.
Classification
Trade agreements differ depending on their content:
- Economic Partnership Agreements (EPAs) – support development of trade partners from African, Caribbean and Pacific countries
- Free Trade Agreements (FTAs) – enable reciprocal market opening with developed countries and emerging economies by granting preferential access to markets
- Association Agreements (AAs) – bolster broader political agreements
The EU also enters into non-preferential trade agreements, as part of broader deals such as Partnership and Cooperation Agreements (PCAs).
Negotiations of trade agreements are conducted in accordance with the rules set out in Article 218 of the Treaty of the Functioning of the European Union.
Trade agreements
Ongoing trade negotiation processes between EU and third countries include:
- Japan – a Free Trade Agreement (FTA) which entered into force on 1 February 2019; negotiating directives were adopted in 2012 and deal was ratified end of 2018
- Singapore – split FTA signed on 19 October 2018, to enter into force in 2019; negotiating directives were adopted under ASEAN, the Association of South East Asian Nations, in 2007
- Vietnam – split FTA signed on 30 June 2019; negotiating directives were adopted under ASEAN in 2007
- Mexico – text for the modernisation of the EU-Mexico Global Agreement to be finalised by end of 2018; negotiating directives were adopted in 1999
- MERCOSUR – negotiations concluded on 28 June 2019 for a trade agreement, part of the Association Agreement, with the South American trade bloc of Argentina, Brazil, Paraguay and Uruguay; negotiating directives were adopted in 1999
- Chile – negotiations to modernise the existing FTA are ongoing; negotiating directives were adopted in 2017
- Australia and New Zealand – FTA negotiations are ongoing; negotiating directives were adopted in 2018
New architecture of trade agreements
On 22 May 2018, the Council adopted conclusions addressing the way in which trade agreements are negotiated and concluded.
This set out the key principles which will underpin the Council’s approach towards trade negotiations from now on.
Concretely, the Council focused in particular on two issues:
- the European Commission’s intention to recommend splitting between separate agreements related to investment and other trade provisions
- and on the Council’s role in trade negotiations.
Infographic – EU trade negotiations
See full infographicRole of the Council
The Council plays a crucial role in shaping a new trade agreement.
In the opening stages, the Council authorises the European Commission to negotiate a new trade agreement on behalf of the EU. This is done through a “negotiating mandate”. With the related authorisation, the Council providers negotiating directives which include the objectives, scope and possible time limits of the negotiations.
The Commission then negotiates with the partner country on behalf of the EU, in close cooperation with the Council and the European Parliament.
After agreement on the text of the deal is reached with partners, the Commission submits formal proposals for adoption to the Council.
Following discussions, the Council adopts a decision for the signature of the agreement on behalf of the EU. It then transmits the signed agreement to the European Parliament for consent.
In the final stages, after the European Parliament gives its consent, the Council adopts the decision to conclude the agreement.
Trade benefits
- opening new markets for EU goods and services
- increasing investment opportunities and protection of investments
- making trade cheaper by eliminating customs duties and cutting red tape
- making trade faster by facilitating transit through customs and setting common rules.
Trading principles
The EU abides by the principles of the World Trade Organisation (WTO).
In June 2018, in the context of growing trade tensions across the world, the European Council stressed the need to preserve and deepen the rules-based multilateral system.
The EU also expressed its openness to improve, together with like-minded partners, the functioning of the WTO.
Trade agreements are generally very complex because they are legal texts covering a wide range of activities, from agriculture to intellectual property. But they share a number of fundamental principles.
Anti-discrimination
This WTO trade principle looks at two aspects:
- Most-favoured nation – countries cannot normally discriminate between their trading partners
- National treatment – imported and locally-produced goods should be treated equally
Predictability
According to WTO, promising not to raise a trade barrier can be as important as lowering one as if offers businesses predictability. In this way, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition – choice and lower prices.
Fair competition
Although generally describes as a “free trade” institution, the WTO sometimes allow tariffs and, in limited circumstances, other forms of protection. More concretely, it promotes a system of rules dedicated to open and fair competition.
Trade barriers
- tariffs – customs duties on imports which give a price advantage to locally-produced goods over similar imported goods
- technical regulations – different regulations applicable to products and services
- non-tariff barriers – costly restrictions that result from prohibitions, conditions, or specific market requirements.
The Multilateral Investment Court
The EU is the world’s largest exporter and importer of foreign direct investment. This brings jobs and economic growth. And it is why encouraging and retaining investments remains vital.
In order to achieve this strategic goal, the EU is looking to set up a permanent body to decide investment disputes – a Multilateral Investment Court (MIC).
According to the European Commission, MIC would replace the bilateral investment court systems involved in EU trade and investment agreements.
