INTRODUCTION
Following the 2 March European Council 1, this paper reviews the contribution that deepening relationships between the EU and its key trading partners can make to a comprehensive strategy to return to growth and job creation in Europe. It shows how trade agreements could boost growth via both the demand and supply sides, by securing a dynamic external demand pillar for the EU economy and fostering competitiveness-enhancing structural reforms.
Potential benefits of pursuing an ambitious external trade agenda include GDP gains of about 2 % or more than € 250 bn and the creation of more than 2 million jobs across the EU.
The paper provides estimates of the potential benefits of pursuing an ambitious external trade agenda, pointing to GDP gains of about 2 % or more than € 250 bn — equivalent to the size of the Austrian or Danish economy — and the creation of more than 2 million jobs across the EU. Most of these benefits would occur in the medium term, with the progressive implementation of agreements. Yet pursuing the agenda is crucial in the short term, as it would send a strong signal that the EU is serious about reforming at home and securing markets abroad. This would have an immediate impact on investors’ confidence.
More than two- thirds of the economic gains would come from potentially transformative agreements with the US and Japan.
Realising potential gains from trade assumes that the deals the EU is currently negotiating with important partners be concluded, with a satisfactory outcome. This year, free trade agreements (FTAs) are within reach with Canada and Singapore. Both are important precedents for other potential agreements with similar and/or neighbouring countries. A positive dynamic with South East Asian Nations (ASEAN) would reinforce EU’s position in Asia. More than two-thirds of the economic gains would come from potentially transformative agreements with the US and Japan, so reviewing the future of our relationships with these partners is crucial.
On-going FTA negotiations with large emerging economies such as India or the Mercosur countries, albeit very challenging, are important to prepare for the future. With China, the option of an FTA is currently not being considered, but we are looking at opening negotiations on an investment agreement. The key question for the EU remains whether we will be able to conclude these agreements within a realistic timetable, at an acceptable level of ambition and with a balanced outcome of gives and takes. Stepping up the pace of negotiation and ratification would be essential to reap the benefits of trade.
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