The EU's Free Trade Agreements: A Driver of Economic Growth and Resilience

Accords libre échange

The European Union (EU) is striving to strengthen the competitiveness of its economy, and free trade agreements play a crucial role in enabling European businesses to explore global trade opportunities.

This network of 42 preferential trade agreements offers significant benefits to European companies, especially SMEs, by allowing them to trade and invest under more predictable, transparent, and flexible trading conditions.

In this article, we will analyze the key points of the latest report from the European Commission on the implementation and application of the EU's trade policy, highlighting the impact of free trade agreements on the European economy.

A Catalyst for Unprecedented Opportunities

Free trade agreements aim to remove tariff (customs duties) and non-tariff (formalities) barriers to trade between two countries or groups of countries.

Trade facilitated by trade agreements creates a plethora of opportunities for European businesses, providing access to new markets and stimulating economic growth.

Over the past decade, free trade agreements have helped the bloc maintain 16-17% of global trade in goods and services, despite changes in the global economy and the rise of China.

More Resilience to Geopolitical Shocks

In times of international tensions, free trade agreements help European businesses diversify their markets and reduce their dependency on certain countries.

For example, despite the decline in exports to Russia, the EU has been able to offset this loss by increasing its exports to other trading partners, such as Mexico, Turkey, and Canada.

Recent trade agreements such as those with South Korea, Canada, and Vietnam have supported EU export growth in several key sectors such as automotive, dairy, and pharmaceutical products.

Essential Import Diversification

EU free trade agreements also play a crucial role in facilitating access to inputs necessary for EU economic growth, thereby contributing to diversifying sources of supply and reducing external dependencies.

For example, the agreement with Canada has allowed the EU to diversify its sources of supply for raw materials and energy products, thereby reducing its dependence on Russia.

Mechanisms to Facilitate Agreement Implementation

The European Commission is establishing mechanisms to quickly identify and resolve obstacles encountered by European companies in foreign markets, thus ensuring uniform implementation of free trade agreements.

For example, the Single Entry Point, created in 2020, allows businesses to report trade barriers, assisting the Commission in resolving them efficiently and initiating dispute settlement procedures if necessary.

Recent Progress

  • Changes have been made to the EU regulation on compliance with international trade rules to address stalled disputes.
  • Three new standalone instruments have been adopted by the EU, aiming to combat economic coercion and ensure fair competition conditions.
  • Progress has been made in removing trade barriers, with 31 barriers lifted in 19 partner countries.
  • The EU has stepped up its efforts in trade and sustainable development, including dialogues with partners to align their legislation with international standards.
  • Measures have been taken to improve working conditions in countries such as Colombia and Peru, through in-depth dialogues and legislative reforms.

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Determining preferential origin remains necessary for goods under free trade agreements. Customs authorities conduct regular checks, thereby prompting companies to implement compliant and secure origin management processes. This is crucial to avoid fines and maximize the benefits offered by free trade agreements.

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