ISLAMABAD: The full potential of European Union free trade agreements (FTAs) remained untapped to the tune of almost 72 billion euros ($89bn), UNCTAD and the National Board of Trade Sweden said in a new report on Monday.

This is the amount that European exporters overpaid because they did not take full advantage of the reduced tariffs offered by the FTAs that the EU as a bloc has signed with a variety of both developed and developing countries, the report added.

As governments hurry to negotiate or review FTAs it is important to understand if businesses are fully using the agreements, argues the report, which is the first to use the concept of utilisation rates to systematically analyse FTAs entered into by the EU.

“This report challenges some enduring myths on preference utilisation in free trade agreements,” UNCTAD Secretary-General Mukhisa Kituyi and Anna Stellinger, Director-General of the National Board of Trade Sweden, wrote in the preface to the report.

Empirical data presented in the report indicates that companies in the EU mostly take advantage of FTAs with other countries. However border-related aspects of their implementation might in some cases be more cumbersome than the provisions of the FTAs themselves.

The report concludes that while some potential in the agreements remain untapped, companies are for the most part making use of them.

“EU exporters use the agreements for 67 per cent of their exports to countries with which FTAs exist,” co-author Stefano Inama of UNCTAD said.

“But we can also note that the EU’s importers use the free trade agreements to an even greater extent. In 90pc of cases where tariff reductions can be used, they are,” co-author Jonas Kasteng of the National Board of Trade Sweden said.

A large proportion of this under-utilisation is in exports from the EU to major free trade partners such as Switzerland and South Korea, while the biggest share of unused tariff reductions to the EU is in imports from Switzerland, Turkey, South Korea and Mexico. This hits imports to a value of 10.5bn euros ($12.9bn).

Published in Dawn, January 30th, 2018