Making trade policy

Trade topics

Trade policy

What is trade policy?

The European Union manages its trade and investment relations with non-EU countries through its trade and investment policy.

Trade outside the EU is an exclusive responsibility of the EU, rather than the national governments of member countries. This means the EU institutions make laws on trade matters, and negotiate and conclude international trade agreements.

The EU's responsibilities cover:

trade in goods and services;
the commercial aspects of intellectual property, such as patents;
public procurement, and;
foreign direct investment.

Article 207 of the Treaty on the Functioning of the European Union sets out the rules on EU trade policy.

An open, sustainable and assertive EU trade strategy

On 18 February 2021, the European Commission set out its new trade strategy for the coming years.

Reflecting the concept of ‘Open Strategic Autonomy’, it builds on the EU’s openness to contribute to the economic recovery by supporting the green and digital transformations.

The strategy includes a renewed focus on strengthening multilateralism and reforming global trade rules to ensure that they are fair and sustainable.

Where necessary, the EU will take a more assertive stance in defending its interests and values, including through new tools.

Why the EU negotiates trade deals

By acting together as one, EU countries benefit from increased negotiating power when making trade deals with other countries.

The EU negotiates trade agreements to strengthen our economy and create jobs.

EU trade agreements help to do that in two ways. Trade agreements let European businesses:

access more easily and at lower prices the raw materials and other inputs they need, helping them to stay competitive, and;
compete more effectively abroad and export more to countries and regions outside the EU.

This increase in trade leads to growth in the economy and helps create jobs. It also gives consumers a wider choice of products at lower prices.

In addition, projecting EU rules and values in trade agreements helps the EU shape globalisation, especially on issues like human rights, working conditions and environmental protection.

How the EU negotiates trade deals

First, the European Commission requests authorisation from the Council of the EU ('the Council') to negotiate a trade agreement with a trade partner. The Council's authorisation can include 'directives'. These are often referred to as the 'mandate' and set out what the Commission should achieve in the agreement.

Then the Commission negotiates with the trading partner on behalf of the EU. During the negotiations, the Commission:

works closely with the Council's trade policy committee;
keeps the European Parliament fully informed;
holds meetings with representatives of civil society, and;
publishes:
- EU position papers;
- proposed texts for the agreement;
- reports of negotiations;
- impact assessments;
- background papers, and;
- factsheets.

Negotiations might include:

removing or cutting customs duties (taxes) on goods that European companies export;
scrapping any limits (quotas) on the amounts the partner country allows EU firms to export to it;
allowing EU businesses to provide services and bid for public contracts in the partner country, and;
cutting bureaucracy to make it easier for EU firms to export, but maintaining things like health and safety standards or environmental protection.

Once the Commission completes the negotiations, it publishes the agreement and presents the deal to the Council and the European Parliament.

The Council and the European Parliament examine the final deal and decide whether or not to approve it.

If they both approve it, the EU can conclude the agreement.

If the trade agreement covers areas where EU countries have responsibility, it can only be fully concluded after EU countries also ratify and sign the agreement.

Putting EU trade policy into effect

The European Commission helps put EU trade policy into effect. This sometimes involves updating the EU's existing trade laws.

Two of the ways it does so are delegated acts and implementing acts.

Between signing and ratifying the deal, parts of the agreement can be 'provisionally applied' – put into effect before ratification – if the Council decides to do so.

Provisional application usually only takes effect once the European Parliament has given its consent.

More information on bilateral deals