The issue of free trade negotiations has increasingly become the focus of the trade policy agenda. As such, it is increasingly important to base negotiating proposals and policy decisions on empirical data and objective facts. This report – prepared in collaboration between the National Board of Trade Sweden and the United Nations Conference on Trade and Development (UNCTAD) – constitutes a first effort to analyse the use of tariff preferences in free trade agreements from both parties and from both an exporter and importer perspective. The observations and findings are based on the EU’s free trade agreements with a number of developed and developing countries. The EU is one of the principal negotiators of free trade agreements on a global level and one of the few free trade parties where data on preference utilization is – more or less – publicly available. The findings may, however, be relevant for all free trade agreements in force and under negotiation.
This report challenges some enduring myths on preference utilization in free trade agreements. For example, it is commonly believed that free trade agreements, in general, are not used to a high degree. Empirical data, on the other hand, as presented in this report, indicates that the EU’s free trade agreements, in general, are used to a high degree and that border-related aspects of implementation of the free trade agreements in some cases might be more cumbersome than the provisions of the free trade agreements themselves. In addition, the report indicates that both the EU and partner countries – and both exporters and importers – are benefitting from the use of the EU’s free trade agreements. However, there is still a great potential to increase the preference utilization in the EU’s free trade agreements in the future.
The focus of this report is on the EU’s free trade agreements, but – hopefully – at some moment in time, the analysis of the use of free trade agreements might be expanded to also cover other regions, as soon as data on preference utilization become available. Ideally, however, analyses of the utilization of preferences should be carried out by the free trade parties themselves with the objective to target ‘pockets of underutilization’ and facilitate the utilization of preferences by all – different sectors of the economy, and large and small companies alike. UNCTAD and the National Board of Trade Sweden hope that the report “The Use of the EU’s Free Trade Agreements: Exporter and Importer Utilization of Preferential Tariffs” will inspire progress in the analysis of preference utilization of free trade agreements based on empirical evidence in the future.