A quick snapshot on Trade Agreements

Trade agreements typically underpin the rules and guidance notes on how the members of the trading blocs should behave.

The European Union (EU) is a political and economic union. There are 28 member states in EU which are largely located in Europe. The EU has developed an internal single market by using a standardized structure of laws that applies to all the member states. EU policies intend to guarantee free movement of people, goods, services and funds in the internal market, enactment of legislation in justice and home affairs and keeping up common policies on trade, agriculture, fisheries and local development. Passport controls have been eliminated to travel within the Schengen Area. 

A monetary union was launched in 1999 and it was implemented in 2002 and included 19 EU member states which use the euro currency. The EU controls trade relations with third countries in the form of trade agreements. They are planed to make improved trading opportunities and conquer related barriers. In addition EU’s trade policy is used as a medium for the promotion of European principles and standards, from democracy and human rights to environment and social rights.

Trade agreements of EU differ depending on their content. The agreements include Economic Partnership Agreements (EPAs) which is support development of trade partners from African, Caribbean and Pacific countries. Free Trade Agreements (FTAs) which allow mutual market opening with developed countries and rising economies by granting better access to market. Furthermore, there is Association Agreements (AAs) which boost broader political agreements. Negotiations of trade agreements are carried out in keeping with the rules defined in Article 218 of the Treaty of the Functioning of the European Union. The EU also enters into non-preferential trade agreements, as part of broader deals for instance Partnership and Cooperation Agreements (PCAs).

Concretely, the Council focused particularly on:

  • The European Commission’s purpose to advocate splitting between separate agreements associated to investment and other trade provisions
  • And on the Council’s position in trade negotiations.

The Council plays a critical role in determining a new trade agreement. 

  • In the initial stages, the Council authorizes the European Commission to negotiate a new trade agreement on behalf of the EU. This is completed by “negotiating mandate”. Through the related authorization, the Council providers negotiating directives which comprise the objectives, scope and possible time limits of the negotiations.
  • Then the Commission negotiates with the partner country on behalf of the EU, in close collaboration with the Council and the European Parliament.
  • As the agreement on the text of the deal is achieved with partners; the Commission submits official proposals to the Council for adoption. 
  • After discussions, the Council implements a decision for the signature of the agreement on behalf of the EU. It then broadcasts the signed agreement to the European Parliament for approval. 
  • In the concluding stages, after the European Parliament provides its approval, the Council implements the decision to finish the agreement.
  • The EU stands by the principles of the World Trade Organization (WTO).
  • In June 2018, in the situation of rising trade tensions around the world, the European Council stressed the requirement to protect and intensify the rules-based multilateral system.  

This defines the main principles which will underpin the Council’s approach towards trade negotiations from now on.

No member state has withdrawn the EU or its predecessors; however the United Kingdom indicated intent to depart after a membership referendum in June 2016. The government of the UK invoked Article 50 of the Treaty on EU. The EU (Withdrawal) Act 2018 states “exit day” to be March 29th, 2019.

The Arab League officially known as League of Arab States is a regional organization which includes Arab states, around North Africa, the Horn of Africa and the Arabia. The association was established in Cairo on March 12th 1945 with six members: the Kingdom of Iraq, Lebanon, Kingdom of Egypt, Transjordan (renamed as Jordan in 1949), Syria and Saudi Arabia. Later, on May 5th 1945 Yemen joined the association as well. Currently, there are 22 members in the League. However, Syria’s membership has been suspended since 2011, as a result of the government repression during the Syrian Civil War.

In 1970s, the Economic Council of the Arab League presented a proposal to establish the Joint Arab Chambers of Commerce across the states of Europe. This lead to the set up of Arab British Chamber of Commerce which was mandated to encourage and aid bilateral trade among the countries in Arab world and its key trading partner, the UK.

The League aims to build and maintain closer relation among the member states and to encourage collaboration among them, to protect their independence and to consider the affairs and interest of the countries. The league aids the political, economic, cultural, social and scientific programs created to promote the interest of the Arab world through different organizations like the Economic and Social Council of the Arab, Council of Arab Economic Unity (CAEU) and the Arab League Educational, Cultural and scientific organization (ALECSO).

The league also serves as a forum for the member states manage their policy positions, to deliberate on the common matters of concern, to resolve any Arab disputers and to limit all conflicts like the Lebanon crisis of 1958. The League has provides a platform to draft and conclude several landmark documents encouraging economic integration. One example is the Joint Arab Economic Action Charter, which draws the standards for all the economic activities in the area.

The memorial stamp of the league establishment showed flags of the 8 founding countries which included Saudi Arabia, Egypt, the Mutawakkilite Kingdom (North Yemen), Syria, Kingdom of Iraq, Jordan and Lebanese Republic.

Every member state in the League council has one vote, and the decisions are just obligatory for those states that have voted for them. In 1945 the goals of the league were to reinforce and organize the political, economic, cultural and social programs of the member states and to resolve all disputes between them and any third party. In addition, an agreement was signed on April 13th 1950 on the Joint Defense and Economic Cooperation for enhanced coordination of military defense measures.

In March of 2015, the League’s general secretary made an announcement of the establishment of a Joint Arab Force with the goal of countering extremism and other risks to the Arab States. The result was attained whilst Operation Decisive Storm was increasing in Yemen. Involvement in the mission is voluntary, and the army interferes only at the demand of one of the member states.

The main reason behind the establishment of JAF, which is financed by different countries of Gulf area, is the increase in civil wars violation, terrorism and the growing militarization of the region.

Primarily in the year 1945, there were just 6 member states in the Arab League but currently the number has reached to 22 states including 3 African countries (Sudan, Algeria and Libya) and the biggest countries of Middle East (Saudi Arabia). The league also has 5 observer countries which have the right to express their opinion and provide advice but do not have the voting rights. The membership of the league is continuously increasing. The current 22 states are: Algeria, Bahrain, Comoros, Egypt, Iraq, Kuwait, Djibouti, Lebanon, Mauritania, Oman, Somalia, Libya, Morocco, Jordan, Saudi Arabia, Palestine, Qatar, Tunisia, UAE, Yemen, Syria and Sudan. The 5 observer countries in the League are: Eritrea, Brazil, Armenia, Venezuela and India.

On 22nd February 2011, Libya was suspended from the League after the start of Libyan Civil War and the excessive military force used against the civilians. The national Transitional Council, the partially recognized temporary government of Libya, sent a representative to be seated in the meeting of Arab League to participate in the discussions whether Libya should be readmit to the league or not.

On the 16th of November 2011 Syria was suspended from the League. However on March 6, 2013 the organization gave the Syrian National Coalition Syria’s seat in the League. On March 9, 2014, the secretary general Nabil Al-Arabi gave the statement that Syria’s seat in the League would remain vacant till the opposition fulfills the formation of its institutions.

The European Free Trade Association (EFTA) is an intergovernmental organization working to encourage free trade and economic assimilation for its affiliated states. It was established in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Furthermore, later Finland, Iceland and Liechtenstein joined EFTA as well. Nonetheless, at present there are just four EFTA countries including Iceland, Liechtenstein, Norway and Switzerland in EFTA, since the other members left at different times to join the European Union. Since 1995, just two founding members have continued to stay in EFTA including Norway and Switzerland. The rest of the five members, AustriaDenmarkPortugalSweden and the United Kingdom, later joined the European Union (EU). The preliminary Stockholm Convention was outmoded by the Vaduz Convention, which intended to give a booming framework for continuing the growth and liberalization of trade, both between the organization’s member states and with the rest of the world.

According to the Convention of EFTA, EFTA’s points are: continuous and balanced empowering of trade and economic relations amongst its members; supporting reasonable conditions of competition among its members; support for the free movement of goods, persons, services, and capital (the ‘four freedoms’); progressive liberalization of trade in services and of investment; making fair conditions of competition; opening its members’ public procurement markets; and protection of intellectual property rights.

The highest body that governs EFTA is the EFTA council. The council usually gets together to meet eight times in a year at the ambassadorial level. The council also meets twice in a year at the Ministerial level. In the council meetings the members delegate, negotiate and make decisions regarding issue in the EFTA. Every member state has a representative and a vote, but typically the decisions are reached through consensus.      

Even though EFTA is not a customs union but all the member states have full right to have a bilateral third country trade agreements, it does have a coordinated trade policy. Consequently the members of EFTA have mutually concluded free trade agreements with the EU and many other countries.  The EFTA also has a lot of free trade agreements with the non-EU countries along with declarations of the cooperation and cooperative workgroups to enhance trade. At present, the EFTA states have recognized and better trade relations with other 247 states and territories, additionally to the 28 members of the EU.

EFTA has made a lot of its power. The group’s FTAs with countries all around the world gives its exporter’s access to almost 900m customers which is extraordinary for a group which just covers 14m people. Furthermore, every state has its own bilateral deals. Norma has had problems in doing a deal with china after the Nobel peace prize was given to a jailed Chinese dissident in 2010. However, this did not stop Iceland from doing a deal with china.

Recently, Turkey planned on signing an expanded agreement with the EFTA in January 2018. The economic minister of the country will have its ministerial meeting in Geneva on November 24, 2018. Turkey has had a FTA with EFTA since the year 1991 and is also planning expanding it.

Australia is a significant and main export market for a lot of major manufacturing sectors of the US for instance aircraft, auto parts, machines, computers and other electronic products, chemicals, wood and paper products. Almost every state in the US exports to Australia. In addition Australia is amongst the top 25 export destinations for 48 of the 50 states in US. The leading states which export to Australia include Washington, Illinois, Texas, Michigan, New York, Ohio, Pennsylvania, Florida and California.

United States first proposed a free trade agreement with Australia in the year 1945. After that the prospect of the agreement were raised in the 1980s by the government of Hawke. In 1992 president George H.W. Bush of U.S. offered to initiate the FTA negotiations with Australia, however the efforts were turned down by the Australian Labor Part Prime Minister Mr. Paul Keating. The Australian-U.S (AU) FTA began to take shape in the year 2001 after the election of George W. Bush and with John Howard in power in Australia. Negotiations for the FTA among both countries began in April 2003 and after five rounds of negotiation the text was agreed in Feburary 2004. The FTA was signed in May 2004 b U.S trade representative Robert Zoellick and Australian Trade Minister Mark Vaile. The agreement was implemented on January 1st 2005.

Almost 99% of the good manufactured in US exported to Australia became duty free. The US-Australian Trade Agreement is quite similar to the NAFTA. It has a duty phase-out schedule, eligibility requirements, and Annex 2-B. it also contains special provisions for apparel and textiles. In implementation of the AU trade agreement the tariffs were eliminated over time and all the duties along with quantitative restraints. The agreement also contains chapter which covers the rules of origin, custom procedure, agricultural, phytosanitary and sanitary measures, government procurement, protection of intellectual property, investment, trade in services and settlement processes for nay dispute.  The agreement also covers administrative, civil penalties and criminal for ever business that violate any of the laws or customs of both countries.

After the AU free trade agreement was signed, there were primary apprehensions that the American agricultural sector would be against the agreement because of the fear that the FTA could get in the way with the government’s program for farm subsidies. But, with the FTA’s  time limits on the import of Australian agricultural products for instance beef and sugarcane managed to alleviate the distress of the American agricultural market (whilst seriously frustrating a lot of Australian producers).

The FTA also established a new system for cooperation amid the authorities in US and Australian to resolve certain bilateral matters regarding health of animals and plants. The trade agreement also established a predictable framework for the US investors that operate in Australia. Every kind of investment is protected under this agreement.    

Recently the president of USA Donald Trump has approved 25% of tariffs on across the boarder imports into the US and 10% on aluminium. The idea is that this tariff will boost domestic production of steel which will create almost 33,000 jobs in the USA as the steel industry would expand to make up the shortfall in imported steel. The US trade representative’s office has said that Australia is not going to be exempt from the tariffs imposed. However, the US president has allowed a 15 day negotiation time period for the countries to argue for an exemption. Hence this means that there will be job cuts to the Australian exports. It also raises an important question which is that how much of the FTA with the US is worth, which has been in implementation since 2004.

North American Free Trade Agreement (NAFTA)

One fourth of U.S. imports including crude oil, gold, vehicles, fresh produce, machinery, livestock and processed foods originate from Mexico and Canada. Both the countries are second and third largest suppliers of the imported good in the US. Furthermore, almost one-third of the exports in US such as machinery, vehicle parts, mineral oil/fuel and plastics are intended for Mexico and Canada.

NAFTA (North American Free Trade Agreement) was created during the presidency of George H.W. Bush, as the first stage of his enterprise for America’s initiative. Administration of Clinton signed NAFTA into the law in 1993, believing that it would produce 200,000 jobs in US within two years and 1 million jobs within five years as country’s export play a huge role in the economic growth. The administration also predicted a remarkable increase in US imports from Mexico in under the lower tariff.

The US initiated Bilateral trade negotiation with Canada almost 30 years ago, which lead to the US-Canada Free Trade Agreement, that entered into force in January 1989. In 1991, US started the bilateral talks with Mexico which Canada joined as well. The NAFTA followed, it entered with force in January, 1994. Tariffs were removed gradually and all the duties and quantitative restraints. NAFTA includes chapter which also covers rules of origin, customs process, agricultural, sanitary and phytosanitary measures, government procurement, investment, protection of intellectual property, trade in services and settlement procedures for disputes.  

NAFTA did not remove the regulatory requirements on companies which wished to trade internationally, including the rule of regulations and requirement of documents which prove that the good being traded can be traded under NAFTA.  This free trade agreement includes administrative, criminal and civil penalties for all business’ which violate any of the laws or custom process of all three countries. Two other regulations were added to the NAFTA which were: North American Agreement on Environment Cooperation (NAAEC) and the North American Agreement on labor (NAALC). These regulations were added to prevent businesses from relocating to other countries because of low wages, looser environmental regulation, lenient regulations reading worker health and safety.

In 2017 after the consultation of relevant congressional committees, the US trade Representative Mr. Robert Ligthizer informed the congress that president Trump plans to initiate negotiations with Mexico and Canada regarding NAFTA.

In an  interview with Reuters  on 17th January, 2018, President Trump said:

“We’re renegotiating NAFTA now. We’ll see what happens. I may terminate NAFTA. A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don’t realize how good it would be to terminate NAFTA because the way you’re going to make the best deal is to terminate NAFTA.”

The president of US has a lot of goals in the NAFTA negotiations which includes decreasing the trade discrepancy with Mexico, to strengthening the ‘rules of origin’ for the auto manufacturers, to limit the liability of internet companies, revising the mechanisms for investor-state dispute and to allow NAFTA to expire after ever five year if all of the three countries fail to renew it.

All three countries in the NAFTA have agreed that all the information that is exchanges in the NAFTA negotiations like the negotiating text, proposals of every government, the accompanying the explanatory material and all the emails related to the negotiations are to be kept confidential. This means that the information is not available under the Freedom of information Act.