In the absence of consensus to liberalise trade at the World Trade Organization level, free trade agreements (FTAs) have become an increasingly common means used to achieve the same goal. The central feature of all FTAs is the elimination of customs duties, usually on all, or nearly all, products traded between signatories. In addition, modern FTAs normally tackle a number of other issues such as trade in services, non-tariff barriers (e.g. product standards), investment rights, government procurement, intellectual property protection and even sustainable development issues.
European Union (EU) FTA developments related to South Korea, Peru and Columbia, Canada, India, Ukraine, Singapore and Vietnam are discussed below.
Negotiations between the EU and South Korea were concluded in October 2009. The EU-Korea FTA requires approval by the EU Council of Ministers as well as the European Parliament, but is expected to begin to apply by the second half of 2010. The agreement has been described as one of the most ambitious FTAs ever concluded by the EU. Some key aspects include: (1) the immediate elimination of most customs duties when the agreement enters into force and up to 98 percent (in terms of tariff lines) within seven years; (2) liberalisation of trade in services, including new opportunities for EU companies in a number of sectors, such as telecommunications, environmental, financial, construction and shipping services; (3) expanded intellectual property protection; and (4) a rapid dispute settlement mechanism, modeled on the WTO dispute settlement mechanism.
Peru and Colombia
The EU concluded FTA negotiations with Peru and Colombia at the beginning of March 2010. Although the substance of the agreement has been agreed in principle, it still needs to be approved by the Council and the European Parliament. The proposed agreement covers a wide range of trade matters, including trade in goods, trade in services and non-tariff barriers. Under the presently agreed terms, manufactured products from Peru and Colombia will immediately be eligible for duty-free access to the EU, whereas the same EU products will receive duty-free access within 10 years. The agreement also contains provisions on technical barriers to trade (product standards), intellectual property enforcement, establishment, investment, government procurement and development related issues. A key aspect in the area of investment is that all parties provide guaranteed access to the manufacturing sector (potentially opening opportunities for many EU companies).
It is notable that the agreement with Peru and Colombia followed a failed attempt to conclude a wider agreement with all the countries of the “Andean Community”, i.e. not only Peru and Columbia, but also Ecuador and Bolivia. Although agreement has not yet been reached with the latter two countries, the EU agreement with Peru and Colombia contains provisions which would permit third countries to join following its entry into force. Therefore, as recently stated by EU Trade Commissioner De Gucht, “the door remains open for both Ecuador and Bolivia to participate in this common initiative”. According to reports, Ecuador has already indicated that it would like to resume negotiations.
The EU began negotiations with Canada for a comprehensive economic trade agreement in May 2009. Since then, the EU and Canada have held two rounds of negotiations, most recently in Brussels in January 2010. The next negotiating round is planned for April of this year. Negotiations are moving at a relatively fast pace, with a first draft text already agreed in December. Offers on goods, and requests on public procurement and services and investment were the focus of the January round. Difficult discussions lie ahead in areas such as intellectual property rights/geographic indications, and in some areas of trade in goods, rules of origin and non-tariff barrier issues (e.g. technical barriers to trade and sanitary and phytosanitary measures). It is notable that Canada has proposed an investor-state dispute settlement clause, something which has not featured in any EU FTAs to date. However, the Commission has indicated that it opposes any such mechanism in the FTA.
Negotiations for an FTA between the EU and India were launched in June 2007. To date, eight rounds have been held, most recently in January 2010. The next negotiating round is foreseen for April 2010. Issues that remain to be resolved include market access for goods and the inclusion of government procurement. Until recently, the negotiations between India and the EU had only been making incremental progress. However, following a visit by EU Trade Commissioner De Gucht to India in March of this year, there appears to be a new resolve to conclude the negotiations quickly, with both sides expressing a desire to conclude the FTA negotiations ahead of the EU-India summit scheduled for October of this year.
FTA negotiations between the EU and Ukraine were launched in February 2008. The FTA will form part of the Association Agreement between the EU and Ukraine. To date, a number of rounds of negotiations have taken place, including a recent round in March 2010. As of December 2009, progress has been achieved on issues of tariff liberalisation, investment/ services, intellectual property rights, sanitary and phytosanitary standards and technical barriers to trade. Most notably, a draft text on an accelerated dispute settlement system for energy issues was tabled by the European Commission during December negotiations. This proposal is designed to establish that trade in energy matters functions according to a stable and legally enforceable practice. Discussions on regulatory approximation are expected to be covered more intensively in the next few rounds. The next negotiating round is currently scheduled to take place at the end of May 2010.
In December 2009, the EU officially decided to enter into FTA negotiations with Singapore. The first round of negotiations was held in Brussels in March 2010. The EU and Singapore have strong trade and investment ties. The EU is Singapore’s largest trading partner, whereas Singapore is the EU’s fifteenth largest trading partner. There are also significant investment flows between the EU and Singapore. Prior to the decision to enter into negotiations with Singapore, the EU had attempted to negotiate a broader regional trade agreement with ASEAN nations (i.e. Myanmar, Brunei, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam). However, the negotiations failed due to the wide range of priorities amongst the ASEAN nations. The new EU approach is to negotiate FTA’s with the individual ASEAN countries and then possibly consolidate results in the future.
As part of its new approach to negotiate separate FTAs with individual ASEAN countries, in early March 2010, the EU announced that it would also begin FTA negotiations with Vietnam. Before negotiations can officially begin, the Council must give the Commission a negotiating mandate. It is hoped that the mandate will be provided within the next few months.