European Interest

EU loses billions in underused free trade agreements

Flickr/World Economic Forum/CC BY-NC-SA 2.0
“This report challenges some enduring myths on preference utilization in free trade agreements,” UNCTAD Secretary-General Mukhisa Kituyi (photo) and Anna Stellinger, Director-General of the National Board of Trade Sweden, write in the preface to the report.

The full potential of European Union free trade agreements (FTAs) remains untapped to the tune of almost €72bn, according to the United Nations Conference on Trade and Development (UNCTAD) and the National Board of Trade Sweden said 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 free trade agreements that the EU as a bloc has signed with a variety of both developed and developing countries.

“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.”

“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.

A large proportion of this under-utilisation is in exports from the EU to major free trade partners such as Switzerland and the Republic of Korea, while the biggest share of unused tariff reductions to the EU is in imports from Switzerland, Turkey, South Korea and Mexico. This hits imports to a value of €10.5bn.

If all FTAs are considered, the EU’s importers forfeit €600m in reduced tariffs every year. This ultimately means higher prices for the manufacturing industry and for consumers.

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