Like most industrialized countries, the European Union (EU) has concluded trade agreements with selected countries with a view to liberalize trade among those countries. In most cases, the objectives of these agreements are rather ambitious. Objectives may be the establishment of an all-inclusive custom union, such as the one with Turkey, or a full association that facilitates accession to the European Union, such as the one with the Balkan countries.
Other objectives include the establishment of a comprehensive economic partnership with developing countries in order to foster their sustainable economic development, such as the case of the African, Caribbean, and Pacific (ACP) Group of States. In Latin America association and partnership agreements have been concluded with Mexico and Chile.
A Free Trade Agreement was recently concluded with Colombia and Peru. Negotiations for an Association Agreement were concluded with Central American countries4 and were revived with the Mercosur countries during the last EU-Latin America Summit in Madrid in May 2010.Trade agreements imply preferential trade treatment among the parties. As such, they must in principle meet the conditions of Articles XXIV of GATT and V of GATS. This means that an agreement must provide for reciprocal trade benefits for substantially all trade in goods between the parties, and it must have substantial sectoral coverage in relation to services. It can apply to selected countries as opposed to others. Trade preferences are also possible under the Enabling Clause. While in this case reciprocal trade benefits are not required, the preferences must be granted to developing countries only, and no discretionary selection of them is possible otherwise than through objective criteria.
It is the policy of the EU to only negotiate reciprocal trade agreements that match the requirements of Articles XXIV of GATT and V of GATS. Under the Enabling Clause, the EU only maintains a unilateral scheme of generalized tariff preferences.8 The time when the EU would conclude trade agreements with chosen countries, thereby granting them unilateral trade preferences, is over since this would clearly violate the GATT, the GATS, and the Enabling Clause.
For instance, the trade chapter of the Cotonou Agreement, which reserved important unilateral preferences to the ACP states, was authorized until it was covered by a special WTO waiver.However, the latter expired on 1 January 2008. Therefore the Cotonou trade preferences had to be reciprocated to the EU for ―substantially all trade‖ in order to be maintained. The expected expiration of the waiver entailed the 2002 launch of a new round of negotiations with the ACP states in order to determine the pace of their own trade liberalization towards the EU. The process is laborious and is still ongoing. The only comprehensive Economic Partnership Agreement (EPA) that has been concluded is that with the CARICOM countries and the Dominican Republic (the EU-CARIFORUM EPA).11 For the rest, the EU has concluded interim economic partnership agreements (Interim EPAs) with certain individual ACP states, while pursuing negotiations for comprehensive EPAs at sub-regional levels.
The EU’s reciprocal trade agreements generally encompass two aspects, in addition to a commitment to institutionalize and intensify political dialogue. The first aspect concerns the trade arrangements between the parties and tends to be very mercantilist in nature. The purpose of the agreement is to maintain the negotiated balance of tariff rights and concessions between the parties and the services commitments, when they exist. The second aspect concerns the provisions that are meant to proactively contribute to the economic development of the EU’s partners and in certain cases, facilitate their accession to the EU. These provisions relate to the EU’s neighborhood or development policy towards non-EU countries. In this context, the trade preferences constitute merely one part of a larger political objective, and care must be taken to ensure that the agreements themselves do not undermine that objective.
For instance, the stated objective of the Stabilisation and Association Agreements with the Balkan countries are to (1)―ensure peace and stability in the region by providing support for the strengthening of democracy and the rule of law and the development of a market economy;(2) to encourage reforms with a view to accession to the EU; and (3) to foster trade relations atregional level in the Balkans and with the EU. This type of Agreement entails a progressive alignment of the legislation of the countries concerned with that of the Community
David Luff. Addressing the Implementation of Prefential Trade Agreements.The Law and Pratice of the European Union-MJS.September 2011.Inter-American Development Bank.
The Inter-American Development Bank Policy Briefs present a particular policy issue and outline courses of action, including specific policy recommendations. The information and opinions presented in these publications are entirely those of the author(s), and no endorsement by the Inter-American Developme Bank, its Board of Executive Directors, or the countries they represent is expressed or implied. This paper may be freely reproduced provided credit is given to the Inter-American Development Bank.
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