How can the EU use FTAs to secure its global ambitions?
The conclusion of negotiations of a free trade agreement (FTA) between the European Commission and India ends a process started in 2007, when the EU obtained a mandate to negotiate comprehensive FTAs with South Korea, India and the eleven-member Association of Southeast Asian Nations. The EU has now secured nearly 50 FTAs and is awaiting ratification by EU legislators of deals with Mercosur, Indonesia and India. The EU has also finalised investment agreements with South Africa and Ecuador, and ratified a digital trade agreement with Singapore. This means that by 2030, the EU could have FTAs with most major economies in Latin America and the Asia Pacific region.
The rationale for FTAs goes beyond economics. In a speech delivered on 2 February, Mario Draghi argued that the purpose of FTAs is to strengthen the EU’s geopolitical position and realign relationships at a time where trade and security no longer fully overlap. However, leveraging the strategic value of these agreements requires a new trade policy that builds upon the existing network of preferential trade relations.
Three initiatives are worth considering. First, introducing a common protocol on rules of origin to reinforce the economic value of FTAs and enhance supply chain resilience. Second, developing new types of agreements incentivising investments with a particular focus on incentivising investments in green value chains. Third, negotiating specific agreements on decarbonisation and the elimination of overcapacity in sectors with hard-to-abate emissions.
European leaders’ primary objective must be obtaining the European Parliament’s endorsement for agreements with Mercosur, Indonesia and India no later than early 2027, then to begin development of a complementary trade agenda by the end of this Commission’s mandate in 2029. To do this, the case must be made that such agreements reinforce the EU’s global role.
The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy.
Authors
Ignacio García Bercero
Bruegel Senior Fellow
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