The element of cumulation in the new generation agreements of the EU

Abstract

Just like all economic powers, the EU has a variety of preferential trade agreements with various countries or groups of countries around the world. So as to be in conformity with GATT rules, which stipulate that there should be no forms of trade discrimination between one GATT member country and another, most of these "special relationships" take the form of a free trade area. With the formation of an FT A however the free rider and trade deflection problems arise. These problems arise due to the basic difference between a free trade area and a customs union. All parties to an FT A are not bound to regulate their tariffs towards imports from third countries. In a customs union however, the opposite is true. In an FT A therefore, products from a third country would be deflected to the country in the FT A which has the most lenient tariff barriers towards that third country. To solve this problem, specific rules were designed to enable countries to test whether a product could be considered as originating in the country party to the agreement or not. [excerpt]