The European Union: forging ever stronger economic relations

While internally the EU is entangled in various discussions on refugees, the euro and a possible Brexit, the EU is externally making headway in forging ever closer economic ties with important economic regions in order to boost the lagging European economy. What are the recent developments and are there any challenges looming?

Recent developments

Recently there has been some positive news for the EU. It is making progress after some serious delays negotiating free trade agreements (FTA) with various countries. EU Trade Commissioner Cecilia Malmström and Canada's Trade Minister Chrystia Freeland said in a statement this week that the legal review of CETA (the Comprehensive Economic and Trade Agreement) between Canada and the European Union had been "completed" and that both Canada and the EU were "confident" the controversial free trade deal would be signed in 2016 and enter into force in 2017. Freeland called it a "landmark trade agreement." Canadian and European leaders formally concluded the deal in 2014, but implementation has been delayed due to last-minute objections in Europe over provisions to create an investment protection system that would help protect companies from government intervention. This system is key to a similar but far more ambitious agreement (the Transatlantic and Investment Partnership or TTIP) currently under negotiation between the EU and USA which has drawn fierce criticism in Europe. Opponents say the measure favours big business, enabling companies to fight national regulations that violate the trade deal and threaten their investments. The new deal with Canada includes important modifications to the contested investor protection system under which a permanent tribunal, staffed with independent, qualified adjudicators, would hear any complaints. Canada signing off on the changes is a significant victory for the European Commission, which is facing huge pressure to have the USA agree to the same offer. The TTIP negotiators are hopeful about reaching an agreement by the end of the year.

Only last week Mercosur, the South American customs union and trading bloc, offered to open up 93% of its trade to competition from the EU to seal a long-sought free-trade deal. Negotiations with Mercosur started in the 1990s. Another FTA in the making is a potential agreement with India. The negotiations for the free trade pact have been held up since May 2013 as both sides failed to bridge substantial gaps on crucial issues, including data security status for the IT sector. On January 18, however, chief negotiators of India and the EU took stock of outstanding issues to assess where both sides stand and how India and the EU should go forward with the proposed deal.

Challenges

The road to a final FTA, ready to be implemented, can be long indeed. And marred by unexpected challenges as well. On 27 February 2016, Morocco declared that it was suspending ties with the EU in response to a European Court of Justice (ECJ) ruling that invalidated an EU-Morocco trade deal covering farming and fisheries. The court ruled that the deal should not cover Western Sahara, a former Spanish colony at the center of a decades-long dispute between Morocco and a separatist group, the Polisario Front, the political representative of the Saharawi people. The Front wants independence and called for the EU trade deal to be annulled, saying that it broke international law, to which the court agreed. Meanwhile, the EU has decided to appeal the ECJ decision. A spokesperson for the European External Action Service, the EU’s diplomatic arm, said the EU would provide “all the necessary information” to deal with Morocco’s concerns, “so that cooperation can be re-established as soon as possible.” After all, the EU needs to make progress on the FTA front to provide a sorely needed boost to the lagging European economy, but not without being sensitive to public opinion.