Making EU trade agreements work: The role of rules of origin

This paper argues that the degree of improved market access, in terms of the amount of a country's exports to the EU which are actually granted favourable treatment, delivered by current EU trade agreements is much less in practice than on paper. This is not a new finding, but very little or nothing has been done to try and change this situation. So, for example, it is clear that the much vaunted 'Everything but Arms' agreement with the 48 least developed countries will not deliver duty free access for all exports from these countries to the EU. Similarly, trade preferences and free trade agreements with the Balkan countries, as a means to promote stability and integration, will not provide for all exports from these countries to enter the EU market free of duties. In fact it is quite possible that a free trade agreement will have very little impact on access to the EU market for the majority of a partner country's exports to the EU. It is agreements with these two groups of countries that are the focus of this paper, due to their current importance in EU foreign policy. The arguments are, however, equally pertinent to the recent agreements with South Africa and the revised Meds agreements and prospective agreements with Ukraine, Russia and Moldova on the soon to be enlarged EU's Northern borders. We argue that the EU should adopt a more rigorous approach to monitoring whether its objectives with regard to free trade agreements are actually being met, and, in particular, whether the agreements are actually fostering economic integration and increasing access to the EU market. We show that the precise impact of a free trade or preferential trade agreement, especially for small countries that have a narrow industrial base, depends very much upon the detailed rules that the EU imposes to govern eligibility for preferential treatment. These rules are very strict in key sectors for the developing countries and countries in the Balkans, such as textiles and clothing and footwear, and severely limit the amount of exports from these countries that receive improved access to the EU market. It is clear that what matters is not just the level of border barriers but the rules that govern the way they are administered. Unfortunately, there is little transparency or discussion of the latter, discussion is too often avoided on the grounds that these are technical matters, whereas in practice such rules can be just as restrictive as tariff barriers.