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The EU is useless at negotiating Free Trade Agreements

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The Remain campaign, both before and after the referendum, have long argued that being part of the European Union’s Single Market and Custom’s Union benefits our non-EU trade. They argue that we benefit from the “clout” of being part of a large bloc, that goes around the world negotiating multiple trade deals on our behalf. We are told that the United Kingdom would never be able to do this on its own, and if it tried, it wouldn’t be as successful.

Does this claim have any merit? In order to answer this question, I have analysed data from the World Trade Organisation (WTO), and compared the EU’s performance in conducting Free Trade Agreements (FTAs) around the world with several other countries: namely Switzerland, Australia, Peru, Singapore, South Korea. These countries are all smaller than the UK, manage to run their own trade negotiations, and are from different continents to try and give a global outlook. Only trade deals listed at the WTO as “Free Trade Agreements” or “Economic Integration Agreements” have been used – agreements defined as “Partial Scope Agreements” by the WTO have been ignored. GDP Data is 2018 data in current US dollars from the World Bank. Where GDP data for countries is not available from the World Bank (small countries or countries not reporting data), then the most recent available year has been used, and from other sources if necessary (see data appendix).

So how do these relatively small analogue countries compare to the behemoth that is the European Union?

Firstly, it is claimed that the EU is the most prolific free-trading bloc on the planet. Looking at the total number of FTAs signed, it is clear that the EU has signed more than any of the selected analogue countries:

FTA_Markets2

The number of Free Trade Agreements signed by EU and a selection of different countries around the world. Source: http://rtais.wto.org/UI/publicPreDefRepByCountry.aspx

The EU has signed 43 Free Trade Agreements, which is not only more than any of the countries compared above, but also more than any other WTO member.

However, it is not only the sheer number of agreements that are signed which is important, but also the size and value of the markets to which preferential access is gained. In short, a Free Trade Agreement with the United States is far more valuable than one with the Wallis & Futuna Islands.

Summing the GDP of countries with which the EU has made an FTA reveals the value of the market which the FTAs have opened up. Doing the same with the selected analogue countries reveals a wholly different picture:

FTA_Markets3

The market size (measured in GDP) opened up by the EU and a selection of other countries via Free Trade Agreements. The data item “EU” represents the FTAs signed between the EU and non-EU countries. “EU inc. EU” includes the GDP of EU member states to this total.  GDP data is current US$ and is sourced from the World Bank.

The data is striking. It is immediately apparent that the EU as a whole has vastly under-performed with regards to agreeing FTAs with countries outside of its own borders – only opening up markets worth $13.7 trillion. Adding the GDP of the EU’s constituent countries (with which the EU has ensured frictionless trade) gives the “EU inc. EU” figure of $33.3 trillion – still lower than any of the analogue countries, and distinctly average in the WTO.

Meanwhile, the other countries have done far better. Peru has opened up markets worth $65.3 trillion, Switzerland $46.9 trillion, Singapore $52.5 trillion, South Korea $64.7 trillion and Australia $47.3 trillion. All have been remarkably successful at agreeing FTAs, easily outperforming the EU, despite the fact that they are all relatively small nations.

By plotting when these markets were opened up over time, it is possible to see when enhanced market access was achieved:

FTA_Markets

The market size enjoyed preferential access via FTAs, by country, over time. GDP data used are all 2018 values, irrespective of where they appear on the graph, and are in current US$. FTA data is from the WTO website. GDP data is from the World Bank.

The graph shows the “EU inc. EU” registering the first agreement, which was the formation of the EEC in 1957. Switzerland also registers during this early period, with the formation of EFTA in 1960.

The EU continued to enlarge throughout the 70s, 80s and the early to mid 2000s, and this is reflected in the slow upward trend of the “EU inc. EU” line. The “EU” line however, which only accounts for EU FTAs done with nations outside its own borders, shows how poorly the EU has performed compared to other countries around the world. Whilst the other analogue nations have been able to achieve multiple FTAs with large G20 nations, the EU has struggled.

The EU’s under-performance is summed up by the following: At the time of the 2016 referendum, the EU had only signed FTAs with two of the world’s 10 largest non-EU economies (IMF, 2019). Today, the EU has only managed to secure an FTA with only four of them, namely: Japan, Canada, South Korea and Mexico. Meanwhile, Peru has in place seven FTAs with the world’s top 10 non-EU economies. Singapore has secured six, whilst Switzerland, South Korea and Australia have secured five.

The data suggests that instead of boosting the UK on the world stage, the EU has held it back. The fact that even relatively small countries from Asia and South America can outperform the EU when it comes to negotiating Free Trade Agreements reveals the EU’s supposed superiority as a myth. The EU’s huge size is not an advantage, as Remainers would claim, but has simply led to the EU being unable to ratify agreements with others, in a global arena where agility and flexibility is important.

With the UK already signing multiple continuity Free Trade Agreements in anticipation of leaving the EU, it is clear that the best strategy with regards to international trade is to leave the EU’s Customs Union and Single Market, and take back full control of our International trade policy.

Appendix

These tables show the raw data used to create the graphs used in the main article.

EU 43 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
1957 Belgium 5.31767E+11
France 2.77754E+12
Germany 3.99676E+12
Italy 2.0739E+12
Luxembourg 69487922619
Netherlands 9.12872E+11
1971 French Polynesia 3,448,000,000 YR2000 World bank
French Southern Territories 0
Netherlands Antilles 3810000000 YR2007 wiki
New Caledonia 9900000000 YR2009 tradingeconomics
Saint Pierre and Miquelon 253000000 YR2013 wiki
Wallis & Futuna islands 188000000 YR2005 wiki
1973 Iceland 25878475760
1973 Norway 4.34751E+11
1973 Switzerland 7.05501E+11
Liechtenstein 6210000000 YR2016 tradingeconomics
1973 Denmark 3.513E+11
Ireland 3.75903E+11
United Kingdom 2.82521E+12
1977 Syria 73670000000 YR2012 tradingeconomics
1981 Greece 2.18032E+11
1986 Portugal 2.37979E+11
Spain 1.42619E+12
1991 Andorra 3236543909
1995 Austria 4.55737E+11
Finland 2.75683E+11
Sweden 5.51032E+11
1996 Turkey 7.66509E+11
1997 Faroe Islands 2689000000 YR2016 world bank
1997 Palestine 14500000000 YR2017 tradingeconomics
1998 Tunisia 39860715814
2000 Israel 3.6969E+11
2000 Mexico 1.22381E+12
2000 Morocco 1.18495E+11
2000 South Africa 3.66298E+11
2001 North Macedonia 12672131053
2002 Jordan 42290832158
2002 San Marino 1659000000 YR2017 world bank
2003 Chile 2.98231E+11
2003 Lebanon 56639155556
2004 Egypt 2.50895E+11
2004 Cyprus 24469841832
Czech Republic 2.44105E+11
Estonia 30284890757
Hungary 1.55703E+11
Latvia 34849078086
Lithuania 53251369047
Malta 14542039605
Poland 5.85783E+11
Slovakia 1.06472E+11
Slovenia 54235484383
2005 Algeria 1.80689E+11
2006 Albania 15058879129
2007 Bulgaria 65132951116
Romania 2.39553E+11
2008 Antigua and Barbuda 1623804016
Bahamas 12160000000 YR2017 world bank
Barbados 4797000000 YR2017 world bank
Belize 1925000000
Dominica 503646211.1
Dominican Republic 81298585403
Grenada 1207454556
Guyana 3610435299
Jamaica 15717858487
St Kitts & Nevis 1039875050
St Lucia 1876189778
St Vincent & the Grenadines 813093984.1
Suriname 3427269682
Trinidad & Tobago 23410353435
2008 Montenegro 5452173041
2009 Papua New Guinea 23431596214
Fiji 5479504926
2010 Serbia 50508366850
2011 Rep of Korea 1.61942E+12
2012 Madagascar 12100459087
Mauritius 14220348673
Seychelles 1590180446
Zimbabwe 31000519447
2013 Croatia 60805659436
2013 Costa Rica 60126014829
El Salvador 26056950000
Guatemala 78460447920
Honduras 23803230473
Nicaragua 13117859222
Panama 65055100000
2013 Colombia 3.30228E+11
Peru 2.22238E+11
2014 Cameroon 38502059858
2014 Georgia 16209818081
2014 Moldova 11309082555
2014 Ukraine 1.30832E+11
2015 Bosnia & Herzegovina 19781776101
2016 Cote D’Ivoire 43007045466
2016 Ghana 65556464056
2016 Botswana 18616018903
Eswatini 4703787507
Lesotho 2791762880
Mozambique 14457964381
Namibia 14521711630
2017 Canada 1.70933E+12
2018 Armenia 12433089919
2019 Japan 4.97092E+12
SWITZERLAND 31 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
1960 Austria 4.56E+11
Denmark 3.51E+11
Norway 4.35E+11
Portugal 2.38E+11
Sweden 5.51E+11
United Kingdom 2.83E+12
1970 Iceland 2.59E+10
1973 Belgium 5.32E+11
France 2.78E+12
Germany 4E+12
Italy 2.07E+12
Luxembourg 6.95E+10
Netherlands 9.13E+11
Ireland 3.76E+11
1981 Greece 2.18E+11
1986 Portugal 2.38E+11
Spain 1.43E+12
1991 Andorra 3.24E+09
1992 Turkey 7.67E+11
1993 Israel 3.7E+11
1995 Faroe Islands 2.69E+09 YR2016 world bank
1995 Finland 2.76E+11
1999 Morocco 1.18E+11
1999 Palestine 1.45E+10 YR2017 tradingeconomics
2001 Mexico 1.22E+12
2002 Jordan 4.23E+10
2002 North Macedonia 1.27E+10
2003 Singapore 3.64E+11
2004 Chile 2.98E+11
2004 Cyprus 2.45E+10
Czech Republic 2.44E+11
Estonia 3.03E+10
Hungary 1.56E+11
Latvia 3.48E+10
Lithuania 5.33E+10
Malta 1.45E+10
Poland 5.86E+11
Slovakia 1.06E+11
Slovenia 5.42E+10
2005 Tunisia 3.99E+10
2006 Rep of Korea 1.62E+12
2007 Egypt 2.51E+11
2007 Lebanon 5.66E+10
2007 Bulgaria 6.51E+10
Romania 2.4E+11
2008 Botswana 1.86E+10
Lesotho 2.79E+09
Namibia 1.45E+10
South Africa 3.66E+11
Eswatini 4.7E+09
2009 Japan 4.97E+12
2009 Canada 1.71E+12
2010 Albania 1.51E+10
2010 Serbia 5.05E+10
2011 Colombia 3.3E+11
2011 Peru 2.22E+11
2012 Hong Kong 3.63E+11
2012 Montenegro 5.45E+09
2012 Ukraine 1.31E+11
2014 Costa Rica 6.01E+10
Panama 6.51E+10
2014 China 1.36E+13
2015 Bosnia & Herzegovina 1.98E+10
2017 Georgia 1.62E+10
2018 Philippines 3.31E+11
PERU 18 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
1988 Bolivia 4.029E+10
Colombia 3.302E+11
Ecuador 1.084E+11
Venezuela 4.824E+11 YR2014 world bank
2009 United States 2.049E+13
2009 Chile 2.982E+11
2009 Canada 1.709E+12
2009 Singapore 3.642E+11
2010 China 1.361E+13
2011 Iceland 2.588E+10
Liechtenstein 6.21E+09 YR2016 tradingeconomics
Norway 4.348E+11
Switzerland 7.055E+11
2011 Rep of Korea 1.619E+12
2012 Mexico 1.224E+12
2012 Japan 4.971E+12
2012 Panama 6.506E+10
2013 Costa Rica 6.013E+10
2013 Austria 4.557E+11
Belgium 5.318E+11
Bulgaria 6.513E+10
Croatia 6.081E+10
Cyprus 2.447E+10
Czech Republic 2.441E+11
Denmark 3.513E+11
Estonia 3.028E+10
Finland 2.757E+11
France 2.778E+12
Germany 3.997E+12
Greece 2.18E+11
Hungary 1.557E+11
Ireland 3.759E+11
Italy 2.074E+12
Latvia 3.485E+10
Lithuania 5.325E+10
Luxembourg 6.949E+10
Malta 1.454E+10
Netherlands 9.129E+11
Poland 5.858E+11
Portugal 2.38E+11
Romania 2.396E+11
Slovakia 1.065E+11
Slovenia 5.424E+10
Spain 1.426E+12
Sweden 5.51E+11
United Kingdom 2.825E+12
2017 Honduras 2.38E+10
AUSTRALIA 13 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
1977 Papua New Guinea 2.34E+10
1983 New Zealand 2.05E+11
2003 Singapore 3.64E+11
2005 Thailand 5.05E+11
2005 United States 2.05E+13
2009 Chile 2.98E+11
2010 Brunei 1.36E+10
Myanmar 7.12E+10
Cambodia 2.46E+10
Indonesia 1.04E+12
Laos 1.81E+10
Malaysia 3.54E+11
Philippines 3.31E+11
Vietnam 2.45E+11
2014 Rep of Korea 1.62E+12
2015 Japan 4.97E+12
2015 China 1.36E+13
2018 Canada 1.71E+12
Mexico 1.22E+12
Peru 2.22E+11
S KOREA 18 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
2004 Chile 2.98E+11
2006 Iceland 2.59E+10
Liechtenstein 6.21E+09 YR2016 tradingeconomics
Norway 4.35E+11
Switzerland 7.06E+11
2006 Singapore 3.64E+11
2010 India 2.73E+12
2010 Brunei 1.36E+10
Myanmar 7.12E+10
Cambodia 2.46E+10
Indonesia 1.04E+12
Laos 1.81E+10
Malaysia 3.54E+11
Philippines 3.31E+11
Vietnam 2.45E+11
Thailand 5.05E+11
2011 Peru 2.22E+11
2011 Austria 4.56E+11
Belgium 5.32E+11
Bulgaria 6.51E+10
Croatia 6.08E+10
Cyprus 2.45E+10
Czech Republic 2.44E+11
Denmark 3.51E+11
Estonia 3.03E+10
Finland 2.76E+11
France 2.78E+12
Germany 4E+12
Greece 2.18E+11
Hungary 1.56E+11
Ireland 3.76E+11
Italy 2.07E+12
Latvia 3.48E+10
Lithuania 5.33E+10
Luxembourg 6.95E+10
Malta 1.45E+10
Netherlands 9.13E+11
Poland 5.86E+11
Portugal 2.38E+11
Romania 2.4E+11
Slovakia 1.06E+11
Slovenia 5.42E+10
Spain 1.43E+12
Sweden 5.51E+11
United Kingdom 2.83E+12
2012 United States 2.05E+13
2013 Turkey 7.67E+11
2014 Australia 1.43E+12
2015 China 1.36E+13
2015 Canada 1.71E+12
2015 New Zealand 2.05E+11
2016 Colombia 3.3E+11
SINGAPORE 24 RTAs
YEAR SIGNATORIES GDP GDP data yr (if not 2018) Source
1993 Brunei 1.3567E+10
Myanmar 7.1215E+10
Cambodia 2.4572E+10
Indonesia 1.0422E+12
Laos 1.8131E+10
Malaysia 3.5435E+11
Philippines 3.31E+11
Vietnam 2.4495E+11
Thailand 5.0499E+11
2001 New Zealand 2.0502E+11
2002 Japan 4.9709E+12
2003 Iceland 2.5878E+10
Liechtenstein 6210000000 YR2016 tradingeconomics
Norway 4.3475E+11
Switzerland 7.055E+11
2003 Australia 1.4322E+12
2004 United States 2.0494E+13
2005 China 1.3608E+13
2005 India 2.7263E+12
2005 Jordan 4.2291E+10
2006 Rep of Korea 1.6194E+12
2006 Panama 6.5055E+10
2006 Chile 2.9823E+11
2009 Peru 2.2224E+11
2013 Costa Rica 6.0126E+10
2013 Bahrain 3.7746E+10
Kuwait 1.4168E+11
Oman 7.9295E+10
Qatar 1.9201E+11
Saudi Arabia 7.8248E+11
UAE 4.1418E+11
2014 Chinese Taipei 5.8939E+11 YR2018 tradingeconomics
2017 Turkey 7.6651E+11

This post was originally published by the author on his personal blog: https://joelrwrites.wordpress.com/2019/09/26/the-eu-is-useless-at-negotiating-free-trade-agreements/

About Joel Rodrigues

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Joel was born and lives in the United Kingdom, and is a geophysicist working for an oil services company. He blogs in his free time about politics, mainly concerning Brexit. He identifies mainly with conservatism and civic nationalism.

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