Europe’s Preferential Trade Agreements: Status, Content, and Implications

The Congressional Research Service, a department of the Library of Congress, conducts research and analysis for Congress on a broad range of national and international policy issues. Some of the CRS work is carried out specifically for individual members of Congress or their staff and is confidential. However, there is also much CRS compiled material which is considered public but is not formally published on the CRS website.

For that reason a number of other organisations try to keep track of these publications and make them publicly available via their own websites. Currently, ESO uses the following websites to track these reports and allow access to them in ESO:

EveryCRSReport.com
Federation of American Scientists (FAS)

In some cases hyperlinks allows you to access all versions of a report, including the latest. Note that many reports are periodically updated.Preferential trade agreements (PTAs) comprise a variety of arrangements that favor member parties over non-members by extending tariff and other non-tariff preferences. PTAs, particularly free trade agreements (FTAs), have proliferated in recent years. In the post-war period, the European Union (EU), which is a PTA itself, has developed the largest network of PTAs in the world. The main findings of this report are as follows:

+ Historically, Europe’s PTAs have differed among its partners in terms of provisions and commitments and they have been characterized by relatively modest ambition in terms of market-opening. In comparison, the U.S. approach has been more standardized in terms of its provisions and more focused on achieving reciprocal market access. These differences in approaches, however, have significantly narrowed since the EU adopted its more commercially oriented Global Europe strategy in 2006.

+ EU PTAs cover nearly twice as much trade (exports) in percentage terms (70% versus 40%) and seven times as much in value terms ($3.4 trillion versus $0.52 trillion) than U.S. PTAs. These numbers can be used to support the argument that U.S. firms may face more discrimination and possibly reduced sales than EU firms. At the same time, the data may overstate the degree of discrimination because the amount of trade covered by PTAs is not the same as the amount of trade conducted on a preferential (duty-free) basis.

+ Concerns about trade discrimination have been a factor in U.S. and EU efforts to negotiate and implement separate but similar PTAs with five trading partners (Israel, Mexico, Morocco, Chile, and Jordan). Based on market share data analyzed, neither side appears to have gained a competitive advantage from having negotiated a PTA. This, however, does not mean that individual firms and workers have not benefitted or that exports have not risen at faster rates after the PTA became effective.

+ In the past, Europe’s PTA program has not been a major factor affecting U.S. FTA policy, which currently is in flux. However, Europe’s recently completed FTA with South Korea raises the concern that U.S. exports will be disadvantaged due to the duty-free price advantage European-based producers will gain in the Korean market. The United States has also negotiated an FTA with Korea, but congressional approval is pending.

+ Ongoing negotiations between the EU and Canada over an ambitious and comprehensive FTA could also affect the U.S. FTA debate. If a robust agreement is reached, the EU and the United States would then both have FTAs with Canada and Mexico, making the absence of a FTA between the United States and EU all the more glaring after years of discussion.

+ It is not clear where Europe’s PTA policy is headed. There are only a few remaining major developed countries that fall outside the EU’s network of PTAs, including the United States, China, Japan, and Australia. While PTA negotiations with these countries could yield large economic benefits and provide a big impact (for good or ill) on the world trading system, some of these countries would likely demand liberalization of European agriculture and services, areas where there is widespread opposition in Europe.

Federation of American Scientists (FAS): Congressional Research Service [CRS] Reports https://fas.org/sgp/crs/index.html

EveryCRSReport.com https://www.everycrsreport.com/

---