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Progress in EU FTA negotiations with third countries

04 January 2013

According to press reports, the EC is considering launching FTA negotiations with the US in the first half of 2013. An interim report by a joint EU–US panel on the scope of an FTA, published in June, maintained that ‘an FTA would reap great benefits to both sides’. In July 2012, EU Trade Commissioner Karel De Gucht told the European Parliament (EP) that ‘the two sides could sign an accord as early as the end of 2014 if negotiations start soon.’ The EC is thought to see an agreement with the US as ‘a key to bolstering growth in the EU to overcome its fiscal and financial crises’.

In October 2012, the EP adopted a non-binding EP resolution, in which it expressed support for an FTA with the USA, while insisting that care should be taken when dealing with agricultural issues, including geographical indications, animal welfare and environmental concerns, food safety and health standards.

A Japanese press article in October reported an EC official’s estimate that it could take 3 to 4 years to conclude EU FTA negotiations with Japan. It is estimated that an FTA between the EU and Japan could boost EU exports to Japan by 71% ‘if tariffs and non-tariff barriers are reduced to their fullest possible extent’, although Japanese officials fear that negotiations with the US could be given a higher priority by the EU.

It has been suggested by the Indo-German Chamber of Commerce (IGCC), reported in the press, that the EU–India FTA negotiations are unlikely to be concluded in 2012, due to persistent differences over a variety of issues, including the ‘level of opening of the market’. A similar prognosis for the EU–Canada FTA was reported on 1 November 2012, with access for agricultural products described as ‘sensitive’, along with opening up of public procurement and pharmaceutical patents.

Also in October, ACP ministers at the ACP–EU Joint Ministerial Trade Committee expressed concerns over preference erosion, with explicit reference to preferences for bananas, sugar, rum, palm oil, cut flowers, tuna loins, canned tuna and clothing and textiles. It was argued that the Central American and Andean Pact agreements with the EU effectively jeopardised both ‘the balance sought in the Geneva Agreement on Trade in Bananas’ and the benefits gained from EPAs. ACP representatives acknowledged the inevitability of preference erosion and stressed the importance of EU assistance in addressing the ‘deep-rooted causes’ of the lack of competitiveness in ACP countries.

Editorial comment

The growing range of FTA negotiations being launched by the EU with major OECD countries, and the ongoing process of negotiations with major advanced developing countries such as India, can be seen as a direct consequence of the blocked WTO negotiations and also as a significant factor behind the EC’s efforts to finally complete the EPA negotiations process.

At the same time, the growing proliferation of EU FTA arrangements raises serious questions in the minds of many ACP governments as to the future value of preferential access to the EU market. The Caribbean rum sector can be seen as a case in point in this regard with, according to a Commonwealth Secretariat/ODI report (see ‘The impact of EU bilateral trade agreements with third countries on the Caribbean rum sector’, October 2012), the full implementation of EU FTA agreements with Central America, Peru, Colombia and potentially Mercosur resulting in an estimated decline in Caribbean rum exports of 16.5%. This, coupled with the current utilisation of US tax rebates in the US Virgin Islands and Puerto Rico to enhance the production and marketing of branded rums, is seen as posing a serious threat to the future of the Caribbean rum sector (see Agritrade article ‘Caribbean rum sector facing serious challenges in US and EU markets’, TBC). This is despite sustained regional efforts to restructure and reposition the Caribbean rum sector.

However, as the Caribbean rum sector experience highlights, the specific effects of each proposed EU FTA agreement needs to be analysed at the sector level to understand the likely trade implications for individual ACP economies. This would appear to be an important area for ‘aid for trade’ support.

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