As we wrap up the year, we had a lookback at what has happened on the preferential origin and free trade agreement front over the course of the last quarter, and what is on the horizon. A decent number of negotiations have been going on and some FTAs have been signed. In this blog we highlight the most important developments for the EU and UK over the course of the last three months.
Pan-Euro-Mediterranean (PEM) convention
On the 7th of December, the PEM joint committee, after 10 years of negotiations, finally agreed on modernised rules of origin, which will increase trade between the EU and neighbouring PEM countries. The agreement will take effect on 1 January 2025.
The provisions aim to simplify product-specific rules by eliminating cumulative requirements and thresholds for local value added, as well as introducing new double transformation for textiles.
Furthermore, the thresholds for non-originating materials will increase from 10 to 15% and full cumulation will be introduced. Finally, duty drawback will be allowed for most products, which will improve the competitive position of EU exporters.
EU-Chile Advanced Framework agreement
On the 13th of December, the European Union and Chile signed the EU-Chile Advanced Framework agreement, an updated version of the original trade agreement that went into force in 2005, along with an Interim Trade Agreement. With the modernisation, virtually all EU exports will be tariff and quota free, with the exception of some agricultural products and foodstuff. The agreements will be submitted to European Parliament. The Interim Trade Agreement will come into force when Chile’s Congress ratifies it and will automatically expire once the Advanced Framework Agreement, which includes investment protection provisions, enters into force.
EU-Mercosur Association Agreement
The EU and Mercosur have been negotiating an extensive association agreement for a long period of time. The benefit for EU traders is quite significant, with tariff reductions throughout a lot of commodities. Some quotas will remain, but the volumes of the quotas are also extended.
However, due to the new presidency in Argentina, the Mercosur has decided to halt the negotiations until the position of Argentina is clear. So, the final signature was not put under the agreement, as was initially expected to happen during the Mercosur summit in December.
EU-New Zealand FTA
In November, the final green light was given to the EU- New Zealand FTA. This put in place a new Free Trade Agreement, giving tariff-free access to the New Zealand market for goods originating from the EU. Even though it is tariff free, for a number of commodities there are still some restrictions that were put in place by means of quotas.
It is expected that the FTA will enter into force at the beginning of 2024 and the benefits of the agreement can be used.
Digital trade agreements
The EU has also commenced negotiations with South Korea, Japan, and Singapore regarding a digital trade agreement. For these three countries there are already FTAs in place, but no chapters on data economy and digital economy are included.
It is only logical that this discussion is taking place, because the EU and these three trade partners have major interest in these economies and the products that come out of them. We cannot wait to see what might come out of this!
The UK and South Korea already have a free trade agreement in place and announced in November that they are looking to update the current one. The one in place follows, by and large, the EU-South Korea free trade agreement that has been in force since 2012.
Even though few details are known yet, it is expected that the modernisation of the free trade agreement will revolve around including digital chapters in the free trade agreement itself. We will keep you posted on the updates!