UNCTAD: $89 billion lost in underuse of European Union free trade agreements, report shows

29 January 2018

The full potential of European Union free trade agreements (FTAs) remains untapped to the tune of almost 72 billion euros ($89 billion), UNCTAD and the National Board of Trade Sweden say in a new report.

This is the amount that European exporters overpaid because they did not take full advantage of the reduced tariffs offered by the FTAs that the EU as a bloc has signed with a variety of both developed and developing countries.

As governments hurry to negotiate or review FTAs it is important to understand if businesses are fully using the agreements, argues the report, which is the first to use the concept of utilization rates to systematically analyse FTAs entered into by the EU.

"This report challenges some enduring myths on preference utilization in free trade agreements," UNCTAD Secretary-General Mukhisa Kituyi and Anna Stellinger, Director-General of the National Board of Trade Sweden, write in the preface to the report. "For example, it is commonly believed that FTAs, in general, are not used to a high degree."

However, empirical data presented in the report indicates that companies in the EU mostly take advantage of FTAs with other countries but also that border-related aspects of their implementation might in some cases be more cumbersome than the provisions of the FTAs themselves.

 
Untapped Potential
 

The report concludes that, while some potential in the agreements remains untapped, companies are for the most part making use of them.

"The EU's exporters use the agreements for 67% of their exports to countries with which FTAs exist," co-author Stefano Inama of UNCTAD said.

"But we can also note that the EU's importers use the free trade agreements to an even greater extent. In 90% of cases where tariff reductions can be used, they are," co-author Jonas Kasteng of Sweden said. [...]

The Use of the EU’s Free Trade Agreements Exporter and Importer Utilization of Preferential Tariffs


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