EU free trade agreements: Basics, examples and current developments 2025

What are free trade agreements?

Free trade agreements (also known as foreign trade agreements, or FTAs for short) are subject to an international treaty that sets out decisions on trade between two or more countries. The aim of the agreement is to increasingly reduce barriers to trade between countries. These include tariff barriers to trade, i.e. customs duties for the import of goods in the partner country, as well as non-tariff barriers to trade, for example:

• Restrictions on the movement of goods
• import quotas
• subsidies

However,free trade agreements can also aim to establish common standards for intellectual property or investment protection.

Difference between free trade agreements and customs unions

Important: Despite a free trade agreement, countries retain their autonomy when it comes to trade issues with third countries. This is precisely what distinguishes a free trade area – i.e. an area between several states with a corresponding agreement – from a customs union. Therefore, not every free trade agreement is immediately a customs union, but every customs union is also a free trade agreement.

Free trade agreements in contrast to other trade agreements

Strictly speaking,free trade agreements also differ in content from other types of trade agreements. Economic Partnership Agreements (EPAs) focus on economic growth in certain regions, including Africa and the Caribbean. An association agreement, on the other hand, covers many different intergovernmental decisions at a political level.

Last but not least, there are also partnership and cooperation agreements (PCAs), which exist primarily between the European Union and many Eastern European and Central Asian countries. At the heart of these agreements are a wide range of arrangements in areas such as trade, science, migration and organized crime. In return, the EU contracting partners benefit from cooperation on EU decisions.

What types of free trade agreements are there?

There are basically three different types of EU free trade agreements , depending on the composition of the contracting states:

• Bilateral: free trade agreements between two countries
• Multilateral: free trade agreements between all WTO member states
• Plurilateral: free trade agreements with a specific focus between selected WTO member states

Current agreements and their status

Agreements in force

🇬🇭 Ghana – since 2021, interim EPA in force

• Economic Partnership Agreement (EPA) with asymmetric market opening
• Preferential tariffs for agricultural and fishery products
• Gradual liberalization for EU goods Rules of origin and preferences relevant for cocoa/processed goods and textiles

Breakthrough in protracted negotiations

🌎 EU-Mercosur free trade agreement – a historic breakthrough after 25 years

Status: Ratification process ongoing (as of January 2026)

It has been a long road: the EU and Mercosur have been negotiating a free trade agreement since 1999. After countless rounds, political crises and temporary standstills, the breakthrough finally came in December 2024. Political agreement was reached and the European Parliament also gave the green light at the beginning of 2026. For German exporters, this means that the world’s largest trading market is opening its doors. Over 750 million consumers in Argentina, Brazil, Paraguay and Uruguay are waiting for German quality products – from machinery to innovative environmental technologies.

What does this mean for companies?

When exporting machinery to Brazil, for example, companies still pay up to 35% customs duty. The Mercosur agreement will largely eliminate this burden in the future. This not only makes German products more competitive, but also opens up completely new market opportunities.

The figures speak for themselves: < with a combined gross domestic product of over 20 trillion euros and an existing trade volume of 88 billion euros per year between the EU and Mercosur, it is clear that the largest free trade area in the world is being created here. A historic opportunity for German companies.

The most important facts at a glance:

• 91% of all industrial tariffs will be abolished
• Up to 35% tariff savings on machinery and equipment
• Simplified access to public tenders
• Protection of intellectual property in accordance with EU standards

Focus on sustainability

In contrast to previous trade agreements, sustainability is at the top of the agenda this time. The agreement contains binding climate protection requirements and mechanisms to protect the rainforests. This is a clear competitive advantage for German companies that already rely on sustainable products.

The next steps

It will still take some time before German exporters can really benefit. All 27 EU member states still have to ratify the agreement – and this could take some time. France and some other countries remain skeptical. Realistically, the agreement is not likely to come into force until 2027 at the earliest.

What does this mean for companies?

When exporting machinery to Brazil, for example, companies still pay up to 35% customs duty. The Mercosur agreement will largely eliminate this burden in the future. This not only makes German products more competitive, but also opens up completely new market opportunities.

The figures speak for themselves: with a combined gross domestic product of over 20 trillion euros and an existing trade volume of 88 billion euros per year between the EU and Mercosur, it is clear that the largest free trade area in the world is being created here. A historic opportunity for German companies.

The most important facts at a glance:

• 91% of all industrial tariffs will be abolished
• Up to 35% tariff savings on machinery and equipment
• Simplified access to public tenders
• Protection of intellectual property in accordance with EU standards It will be particularly exciting for companies from the mechanical engineering, automotive and chemical sectors. But tech companies and environmental technology providers can also benefit from the new opportunities.

Focus on sustainability

In contrast to previous trade agreements, sustainability is at the top of the agenda this time. The agreement contains binding climate protection requirements and mechanisms to protect the rainforests. This is a clear competitive advantage for German companies that already rely on sustainable products.

The next steps

It will still take some time before German exporters can really benefit. All 27 EU member states still have to ratify the agreement – and this could take some time. France and some other countries remain skeptical. Realistically, the agreement is not likely to come into force until 2027 at the earliest.

Recently concluded agreements

🇮🇩 Indonesia (CEPA) – Conclusion September 2025

Historic breakthrough after ten years of negotiations After long negotiations, which intensified due to the rise in trade tensions between the USA and other countries, Indonesia and the European Union concluded a historic free trade agreement in September 2025. The Comprehensive Economic Partnership Agreement (CEPA) was signed by representatives of both parties in Bali in September 2025.

Economic significance and market potential The CEPA creates a free trade area with over 700 million consumers . Indonesia, as the largest economy in Southeast Asia with over 270 million inhabitants, offers enormous market potential for European companies . The agreement will significantly strengthen European trade and investment in this strategically important region.

Tariff reduction and affected sectors The agreement will almost completely abolish customs duties on EU goods imported into Indonesia. This applies, among other things, to:

• Automotive industry: German car manufacturers in particular will benefit from the elimination of import duties
• Mechanical engineering and industrial equipment: Easier market access for European technology
• Chemical industry: Reduced trade barriers for chemicals and pharmaceuticals

Strategic importance in a geopolitical context The agreement is particularly important against the backdrop of escalating trade tensions between the USA and other countries. It strengthens the EU’s position in the strategically important ASEAN region and offers an alternative to traditional trade routes. The CEPA is expected to reshape exports, foreign direct investment (FDI) and market access for foreign companies in both regions.

Implementation and outlook The agreement is to be implemented gradually, with the first trade facilitation measures potentially taking effect as early as 2025. The agreement significantly boosts the export hopes of both sides and is seen as a milestone for future trade relations between Europe and Southeast Asia.

Ongoing negotiations

🇦🇪 United Arab Emirates – Negotiations since May 2025

• Start of formal EU free trade negotiations (FTA/CEPA-oriented)
• Focus on goods, services, investment and sustainability
• Diversification beyond oil, facilitation for industry and high-tech

🇮🇳 India – negotiations reactivated since 2024

• Intensified FTA round incl. investment and geographical indications chapters
• Key points: Tariffs on industrial/consumer goods, services, data flows, sustainability
• Challenges: Market access, rules of origin, regulatory harmonization; further rounds in 2025

🇹🇭 Thailand – negotiations reactivated in 2024

• Focus: Market access for goods/services, TBT/SPS, sustainability
• Status 2025: ongoing rounds, rapprochement on industrial tariffs; further talks on procurement/data flows

🇦🇺 Australia – negotiations failed (2023)

Despite efforts since 2018, the negotiations failed in October 2023, mainly due to disagreements in the agricultural sector.

Economic opportunities for EU companies

The trade agreements offer:

• Additional market development in new regions
• Elimination of customs duties and reduced bureaucracy
• New investment opportunities
• Increased competition as a driver of innovation
• Wider product range and lower prices for consumers

Current challenges

EU trade strategy is evolving in the context of new geopolitical realities, including changing US trade policy and the need to reduce dependencies on individual countries such as China.