Regional Trade Agreements (part 2)
Regional Trade Agreements with Argentina, Brazil, Paraguay, Uruguay and Venezuela (Mercosur), EU member states, Chile, Mexico, the Caribbean (CARIFORUM), South Africa, the Gulf states and other Mediterranean states (Euromed).
Regional Trade Agreements (RTAs) are preferential trading arrangements between countries or groups of countries. They are designed to encourage open and competitive markets for businesses in the participating countries.
As a member of the EU, the UK participates in EU RTAs, which are negotiated by the European Commission with other countries or trading groups.
Explained here are the different kinds of RTA in which the UK participates. For more information please see the other section on the RTA with Korea, India, Central America, Andean Community, ASEAN, Ukraine and Canada.
Regional trade agreements and the World Trade Organisation
The World Trade Organisation (WTO) has rules under which groups of countries can agree to trade together on preferential terms, known as a Regional Trade Agreement. There are different types of RTA including:
- free trade areas - where preferential rates for goods or services are exchanged but individual countries keep their own tariff rates
- customs unions - where members have both preferential rates for goods or services and the same external tariff rates
- asymmetrical agreements - where preferences are not exactly the same on each side - for example, one country may be given more time to put certain preferences in place
The WTO agreements cover goods, services and intellectual property.
Some 474 RTAs have been agreed with the WTO as of July 2010, which the WTO monitors.
The EU and Chile concluded negotiations in 2002 for an EU-Chile Association Agreement, which covers all parts of the EU’s trade with Chile as well as an improved structure for political dialogue and co-operation in areas of mutual interest.
The Agreement liberalises trade in all industrial goods as well as in over 90 per cent of agricultural, processed agricultural and fishery products.
EU-Mexico global agreement
The EU and Mexico signed an Economic Partnership, Political Co-ordination and Co-operation Agreement (Global Agreement) which came into force in October 2000. It includes a framework for strengthening political dialogue, increasing co-operation and liberalising trade between the two sides.
An EU-Mexico Joint Council was set up to implement the agreement and covers:
- an EU-Mexico Free Trade Agreement (FTA) in goods
- liberalisation of trade in services
- liberalisation of investment and related payments
- intellectual property rights
- methods for settling disputes
The EU is Mexico’s second largest trading partner after the USA. The work of the Joint Council gives EU companies similar access to the Mexican market as the USA and Canada, who are both Mexico’s partners in the North American Free Trade Agreement (NAFTA). It should also give a substantial boost to EU-Mexican trade.
Implementation of the Global Agreement is continuing and includes negotiations to expand trade in services, investment and agriculture.
Mexico and the EU have also now established a strategic partnership. Working together, they plan to co-operate on economic and trade relations, sustainable development and climate change, security, health, human rights and education, as well as science, technology and innovation and regional development.
EU-South Africa Trade, Development and Co-operation agreement
South Africa is the EU’s largest trading partner in Africa. As part of efforts to support political change and transition in South Africa, the EU and South Africa signed a Trade, Development and Co-operation Agreement (TDCA) in October 1999. This is designed to promote a close relationship between the EU and South Africa. It also aims to encourage the expansion and liberalisation of trade, and increased co-operation. It has given a significant boost to UK trade with South Africa.
The TDCA began operations in May 2004. Under the Agreement, the EU provides duty-free access for about 99% of South African industrial products and about 75% of its agricultural products. The Agreement also contains provisions on services, government procurement, intellectual property and competition policies.
The EU and South Africa also signed an agreement on wines and spirits, under which the EU provided a duty-free quota for imports of South African wine that increases by 5% each year from 2002 until 2011.
EU-European Free Trade Association agreement on the European economic area
The European Free Trade Association (EFTA) is an inter-governmental organisation established in 1960. Its member states are Iceland, Liechtenstein, Norway and Switzerland.
An agreement on the European Economic Area (EEA) came into force in 1994 and brings together all 27 EU member states and three of the EFTA countries - Iceland, Liechtenstein and Norway - in a single internal market. Switzerland is not part of the EEA Agreement but has a separate bilateral agreement with the EU.
Under the EEA Agreement, EU laws that cover the ‘four freedoms’ - the free movement of goods, services, persons and capital - apply in all 30 EEA States. The agreement includes co-operation in other important areas such as research and development, education, social policy, the environment, consumer protection, tourism and culture. It also guarantees equal rights and obligations in the internal market for citizens and businesses in the EEA.
EFTA’s trade agreements give members preferential access to the markets of its partners and although it only has four members, in 2008 they were the world’s tenth largest traders in merchandise goods and fifth largest in commercial services.
The EEA agreement does not cover the EU’s:
- Common Agriculture and Fisheries Policies - although it covers various aspects of trade in agricultural and fish products
- Customs Union
- Common Trade Policy
- Common Foreign and Security Policy
- Justice and Home Affairs (although EFTA Member States are part of the Schengen area)
- Monetary Union
EU-Gulf States RTA under negotiation
EU and the Gulf Cooperation Council (GCC) - which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates - signed an Economic Cooperation Agreement in 1988. This provides the foundation for the establishment of a bilateral RTA between the two regional blocs, formal negotiations for which began in 1990. However, it has not been possible to finalise the RTA and a number of issues have not been agreed.
The EU wants the proposed RTA to lead to a liberalisation of trade in goods and services with comparable market access that meets the rules of the World Trade Organisation and takes into account the level of development of the GCC countries. As a result, the RTA aims to foster economic integration between the EU and GCC countries.
However, co-operation between the EU and the GCC remains. The Joint Action Programme aims to co-operate on a number of areas by 2013, particularly their economies, trade, energy and the environment, transport, industry, telecommunications and information technology, education and scientific research and culture.
The EU-GCC Energy Experts’ Group aimed to strengthen and widen co-operation in the field of energy, including nuclear safety and security, natural gas and energy efficiency, notably through the EU-GCC clean energy network.
Union for the Mediterranean RTA under negotiation
In November 1995, the Euro-Mediterranean Conference of Ministers of Foreign Affairs marked the start of the Euro-Mediterranean (Euromed) Partnership - also known as the Barcelona Process. This provides the main framework for political, economic and social relations, as well as dialogue and regional co-operation, in the Mediterranean.
The Euromed Partnership aims to increase regional integration in the Mediterranean region through the liberalisation and facilitation of trade and to establish a Euro-Mediterranean Free Trade Area. At present, the Mediterranean countries in the Euromed Partnership are:
- Bosnia & Herzegovina
- Occupied Palestinian Territories
They form the least integrated trading region in the world with just over 1% of EU foreign direct investment. Trading routes have been under-used but geographical closeness and cultural heritage mean that there is potential for an effective trade agreement.
Each of the Mediterranean countries in the Euromed Partnership has a bilateral Association Agreement with the EU and the Agadir Agreement has been signed between Morocco, Tunisia, Egypt and Jordan. These Association Agreements already liberalise trade in industrial goods and deal with a number of non-tariff issues.
The Union is also establishing projects for, among other aims:
- de-pollution of the Mediterranean
- the establishment of maritime and land highways
- civil protection initiatives to combat natural and man-made disasters
- Mediterranean solar energy
- the Mediterranean Business Development Initiative focusing on micro, small and medium-sized enterprises
In 2010 the European Community and the Palestinian Authority agreed a draft accord on further liberalisation of EU imports of agricultural products, processed agricultural, fish and fishery products. The text was initialled, and both sides will now complete their internal approval procedures. The text foresees giving all agricultural products, processed agricultural products, fish and fishery products originating in the West Bank and Gaza Strip immediate duty free access to the EU market. Liberalisation will be temporary for 10 years - with a review after five years - and before the end of this period both sides will discuss the possibility of extending the arrangements.
EU-Mercosur RTA under negotiation
The EU is in favour of strengthened regional integration of the South American Mercosur countries - Argentina, Brazil, Paraguay, Uruguay and Venezuela. The EU is the largest trading partner for Mercosur and is the largest foreign investor into the region.
At present, the relationship between the EU and the Mercosur countries is based on the EU-Mercosur Inter-regional Framework Co-operation Agreement which came into force in July 1999. The main objective was to prepare for negotiations on an Inter-regional Association Agreement between the EU and Mercosur.
The proposed agreement has three main elements:
- political dialogue
- trade liberalisation - free trade in goods and services between the EU and the Mercosur region in line with World Trade Organisation rules
The agreement under negotiation is broad-based, covering:
- technical barriers to trade
- sanitary and phytosanitary regulations
- non-agricultural market access
- intellectual property rights
- government procurement
In 2010 negotiations to conclude and sign the RTA were relaunched. The EU also aims to get political approval for the conclusion of a comprehensive trade agreement between the EU, Peru and Colombia. Four negotiating rounds were held during 2010 and further rounds are scheduled through 2011. For more information see the guide on the Regional Trade Agreements (part 1).
EU-Caribbean CARIFORUM RTA
In most cases, the value of British and EU exports to the Caribbean far exceeds that of imports from the region. The CARIFORUM trade agreement aims to reduce this imbalance. Changes to trade preferences and competition from Latin America and elsewhere have affected sales of traditional Caribbean exports such as sugar and bananas. The WTO and the EU are helping to deal with the needs of the most vulnerable producers.
EU trade with the Caribbean amounts to more than £8 billion every year. EU exports to the Caribbean include chemicals, machinery and transport equipment. Caribbean exports to the EU include food, agricultural products, fuels and chemicals.
The Caribbean forms part of the Africa, Caribbean and Pacific (ACP) group. The EU’s trade relations with the ACP are governed by the ACP-EU Economic Partnership Agreements (EPA).
The CARIFORUM agreement is now law. EU participating countries are:
- Antigua and Barbuda
- The Bahamas
- The Dominican Republic
- Saint Lucia
- Saint Vincent and the Grenadines
- Saint Kitts and Nevis
- Trinidad and Tobago
Cuba is also a member of CARIFORUM but is not an ACP country.
The CARIFORUM EPA has resulted in the following:
- predictability in market access into the EU
- duty-free and quota-free market access into the EU for CARIFORUM products
- EU exports to be liberalised over 25 years with long phase-in periods (up to 25 years) for sensitive products
- improvements in the rules of origin in areas such as textiles
- market opening beyond WTO commitments in the services sectors including creative and entertainment industries
CARIFORUM firms can set up a commercial presence in the EU. Sales staff, investors and graduate trainees can also make short-term business visits and travel temporarily to Europe.
Published: 2 August 2012
Updated: 13 June 2013
- Fixing references to specialist guides
- First published.
Related guides: Regional Trade Agreements (part 1) Exporting military goods to the United States Trade preference agreements: import and export Removing trade barriers for UK exporters Anti-dumping duty, 'countervailing' and other trade defence measures The World Trade Organization and trading with developing countries