Preferential Trade updates January 2024

24 more African countries join AfCFTA pilot initiative

The African Continental Free Trade Agreement received a significant boost as twenty-four more countries join the Guided Trade Initiative, moving the continent closer to fully integrating into a single market.

According to a Bloomberg report, of the 47 countries that have ratified the African Continental Free Trade Area, 31 will join the GTI, up from seven in 2023. Trade ministers are formulating regulations on digital trade to boost online commerce on the continent, according to Mene. The African Development Bank estimates the region’s digital economy will catapult to $712bn by 2050, from about $115bn in 2023.

AfCFTA has a potential market of 1.3bn people with a combined gross domestic product of $3.4tn, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030. The World Bank forecasts the accord will increase trade within the region by 80 per cent to $532bn by 2035, partly helped by improved technology-driven efficiency.

Australia announces trade deal negotiations with UAE

The Albanese Government will commence negotiations with the United Arab Emirates (UAE) on a trade agreement (Comprehensive Economic Partnership Agreement), in the new year. The Government is committed to securing a trade agreement with the UAE to drive Australian exports, economic growth and create more well-paying jobs across the country. The UAE is a gateway to the region and beyond, with two-way goods and services trade valued at $9.26 billion in 2022. The UAE is already a key market for Australian goods and services exports including alumina, meat, oil seeds, and education, with three Australian universities having campuses in-country. A trade agreement with the UAE would create new commercially meaningful opportunities for Australian goods and services exporters seeking to diversify trade. It will also offer the opportunity to deepen our cooperation in our shared ambition to transition to net-zero, through greater investment.

China-Nicaragua free trade agreement comes into effect

the Free Trade Agreement (FTA) between China and Nicaragua came into effect, two years after both countries reestablished diplomatic relations and two weeks after elevating them to a "strategic partnership" level. Signed on August 31, 2023, the FTA begins to take effect from 01 January 2024, providing immediate access to that market for 60 percent of the products currently exported by Nicaragua with a 0 percent tariff such as beef, sugar, seafood, honey, harnesses, and textiles. In terms of goods trade, the two parties will eventually implement zero tariffs on 95 percent of products in their tariff lines, of which 60 percent will receive zero tariffs immediately. The remaining 35 percent will be gradually exempt from tariffs. The parties will achieve a high-level mutual opening in the fields of goods trade, trade in services, and market access for investment. Additionally, the agreement will foster economic and technical cooperation between the two parties in the areas of agriculture, textiles, logistics, tourism, and small and medium-sized enterprises, it underscored.

EU urged to conclude Mercosur trade talks

A total of 23 trade bodies have called for the swift approval of the EU-Mercosur free trade agreement, which will make it easier to export EU agri-food products including key dairy commodities to Argentina, Brazil, Paraguay and Uruguay and vice versa. From wine to cheese, many European agri-food products currently face high tariffs when exported to Mercosur countries, with EU and Mercosur producers both losing out on trade opportunities. The deal, the terms of which were agreed in 2019, is yet to be ratified, however, after a push-back from trade unions, NGOs and environmental groups caused the European Parliament to push ‘pause’ on the final approval, instead passing a resolution that the FTA ‘cannot be ratified as it stands’. More recently, in December 2023, the stage was set for the EU and the four Mercosur countries to sign the FTA in Rio de Janeiro – only for French president Emmanuel Macron to declare that the deal did not offer sufficient environmental safeguards, specifically regarding deforestation and sustainability. The deal has sparked controversy over the years, including from the European Ombudsman who criticized the Commission for not completing a sustainability assessment.

Egypt nears completion of free trade agreement with Eurasian Economic Union

In a significant stride towards economic integration, Egypt is nearing final negotiations to establish a free trade zone with the Eurasian Economic Union (EAEU). This latest development was confirmed by the Russian Trade Representative to Egypt, who underscored the potential benefits of such a pact in facilitating easier access to the Egyptian market for EAEU commodities.

EU and Kenya sign ambitious Economic Partnership Agreement with strong sustainability provisions

The EU and Kenya signed an Economic Partnership Agreement (EPA) to boost bilateral trade in goods, increase investment flows, and contribute to sustainable economic growth. The EPA provides a platform to support job creation on both sides, along with targeted cooperation to enhance Kenya's economic development. It is the most ambitious trade deal ever signed by the EU with a developing country when it comes to sustainability provisions such as climate and environmental protection, labour rights and gender equality. The signature took place during an official ceremony in Nairobi with European Commission President Ursula von der Leyen and Kenyan President Dr. William Samoei Ruto.

The EU is Kenya's first export destination and second largest trading partner, with a total of €3.3 billion in bilateral trade in 2022 - an increase of 27% compared to 2018. The EPA will create even more opportunities for Kenyan businesses and exporters, as it will fully open the EU market for Kenyan products upon entry into force. It will also incentivise EU investment in Kenya thanks to increased legal certainty and stability.

EU and Norway to continue cooperation in combating VAT fraud

The Commission has successfully completed the negotiations with Norway to amend the EU-Norway agreement on administrative cooperation, recovery assistance and combating fraud in the field of VAT. The purpose of the negotiations was to align the EU-Norway agreement with the latest amendments of the EU legislation on VAT administrative cooperation introduced after its conclusion in 2018. Once it has been signed and adopted, the amendment will provide Member States with new cooperation tools with Norway.

EU and Kenya sign ambitious Economic Partnership Agreement with strong sustainability provisions

The EU and Kenya concluded negotiations for an Economic Partnership Agreement on 19 June 2023. Beyond opening new economic opportunities, it is the most ambitious EU trade agreement with an African country on sustainability, and the first aligned with the EU’s strategy to promote sustainable growth through trade:

• Strong, enforceable sustainability commitments, supported by EU’s enhanced cooperation and engagement
• Commitments to Paris Climate Agreement and core labour standards 
• High-level obligations to combat illegal wildlife trade, illegal logging and illegal fishing
• Provisions on gender equality and women’s empowerment
• Strengthened role for civil society

GCC inks free trade deal with South Korea

The GCC deepens economic ties with major Asian partners, signing its second FTA this year, highlighting commitment to investment and economic diversification. The Gulf Cooperation Council (GCC) has taken a significant stride in strengthening economic ties with major Asian partners by signing its second free trade agreement (FTA) this year. The recent accord, inked with South Korea, underscores the bloc’s commitment to fostering investment connections and diversifying its economic portfolio. As part of the newly established FTA, South Korea has committed to removing tariffs on nearly 90% of all items, including critical energy resources such as liquefied natural gas (LNG) and other petroleum products. On the other side, the Gulf states will reciprocate by scrapping tariffs on 76.4% of traded products and 4% of traded goods. This mutual reduction in trade barriers aims to stimulate economic activity and create a more conducive environment for bilateral commerce. The scope of the agreement extends beyond tariff elimination, encompassing trade in goods, services, government procurement, and cooperation among small and medium-sized enterprises (SMEs).

Guatemala joins Korea-Central America FTA

South Korea's trade ministry said Tuesday that Guatemala has formally signed a deal to join Seoul's free trade agreement (FTA) with a group of Central American nations. The inclusion came around three years after South Korea and five Central American nations -- Costa Rica, El Salvador, Panama, Honduras and Nicaragua -- fully implemented their FTA in March 2021. 

South Korea mainly exports automobiles, fabric and petrochemical goods to Guatemala. Key imports from the Central American nation are agricultural products, including coffee and bananas, along with minerals, such as nickel and carbon. The state-run Korea Institute for International Economic Policy estimates that the inclusion will help South Korea's gross domestic production advance by 0.02 percent within five years after the implementation.

India-Oman FTA new round of talks from January 16

The new round of talks for the proposed free trade agreement (FTA) between India and Oman will start on January 16 and the negotiations for the pact are progressing well, according to official reports from India.

The talks on most of the chapters have been concluded by both sides for the pact, officially dubbed the Comprehensive Economic Partnership Agreement (CEPA). Economic relations between India and the Sultanate of Oman are witnessing a strong recovery, as bilateral trade has doubled from $5.4 billion in 2020-2021 to $12.3 billion in the fiscal year 2022-2023. India is one of the most important trading partners of the Sultanate of Oman, as it is among the top five countries in terms of the value of trade exchange with the Sultanate of Oman. The intra-regional trade with the Republic of India represents about eight percent of the total volume of trade exchange of the Sultanate of Oman with world countries in 2022. The trade balance of bilateral trade between the Sultanate of Oman and the Republic of India tends in favor of Oman, especially in the recent years 2021 and 2022.

Iran, EEU sign historic free trade agreement

Iran signed a groundbreaking free trade agreement with the Russia-led Eurasian Economic Union on December 25. The final round of negotiations leading to the agreement’s text was concluded on December 24. Post-signing, the agreement now awaits legislative approval in the parliaments of all six nations to become law and operational. The Iran-Eurasian Economic Union Free Trade Agreement promises to eliminate tariffs for a substantial 87% of traded goods. Both parties will compile a negative list, comprising items deemed sensitive by one party, exempt from tariff elimination. The remaining 13%, classified as the negative list, includes goods whose tariff reduction could adversely impact Iran’s domestic industry or agriculture. Conversely, the EEU countries will also present their list of sensitive goods, ensuring equitable regulation.

Pan-Euro-Mediterranean (PEM) countries agreed to unlock the full potential for trade in the region

On 7 December 2023, the PEM Joint Committee adopted the new and modernised rules of origin that aims to increase trade between the European Union and neighbouring countries in the Pan-Euro-Mediterranean (PEM) region. The rules of origin will be implemented as of 1 January 2025 and will modernise all preferential trade agreements among the 24 PEM trading partners by making the relevant ‘rules of origin' in those agreements more flexible and business-friendly. The PEM Joint Committee also agreed to develop the use of electronic certification of origin in the view of further simplification of customs formalities.

Taiwan signs landmark bilateral investment agreement with Canada, aims to join CPTPP

Taiwan and Canada signed a bilateral investment deal, boosting the Taiwanese government’s efforts to bolster business ties with like-minded democratic partners and possibly easing the island’s entry into a major pan-Pacific trade pact. Self-ruled Taiwan has been seeking greater diplomatic and moral support from major Western democracies, such as Canada, as it faces growing military and political pressure from China to give in to Beijing’s sovereignty claims over the island. As part of that, Taiwan has been seeking more trade deals with Western countries. The Foreign Investment Promotion and Protection Arrangement is part of Canada’s plan to increase trade and influence in the Indo-Pacific region. Canada holds the rotating chair of the CPTPP next year, a grouping China has also applied to join.

Tanzania signs Samoa agreement

Tanzania government has signed new partnership agreement with the Organisation of African, Caribbean and Pacific States (OACPS) and the European Union (EU) with its member states. The new partnership agreement will serve as the new legal framework for EU relations with 79 countries. This includes 48 African, 16 Caribbean and 15 Pacific countries. The key areas of cooperation in this agreement include sustainable economic growth and development, trade and investment; environmental protection and coping with the effects of climate change. From January next year, the new agreement named Samoa, will serve as the basis of policy and law to lead the cooperation and partnership with the EU for the next period.

UAE, Costa Rica agree terms on a comprehensive economic partnership agreement

The UAE Minister of State for Foreign Trade and his Costa Rican counterpart have signed a joint statement confirming the conclusion of negotiations toward a comprehensive economic partnership agreement. The UAE-Costa Rica CEPA is intended to eliminate or lower tariffs; reduce barriers to trade; promote private sector collaboration; and create pathways for investment, said a media statement on Thursday. Bilateral non-oil trade between the two nations has been growing consistently year on year, climbing 23 percent in 2022 to reach $60.4 million, more than double the value recorded in 2018.

US agrees preliminary deal with Africa on extending AGOA by 10 years

The US has reached preliminary agreement with African nations to extend their preferential trade access by another decade, pending approval by Congress. The South African government sought to conclude the renewal of the deal early this year, enabling more than 30 African countries to continue exporting goods to the American market duty-free. Their special access under the so-called African Growth & Opportunities Act (AGOA) is scheduled to expire in September 2025.