Extra-EU International Trade - statistics and facts

On the other hand, the EU runs a large trade deficit when it comes to energy and fuels, as no member state is a significant fossil fuel producer and therefore the bloc must import oil, gas, and other mineral fuels. This manifested itself in an overall trade deficit for the EU in the years between 2004 and 2011, before this was reversed in the decade that followed, as the EU opened up an increasingly large goods trade surplus with the rest of the world (however this was temporarily reversed in 2022 due to complications related to the war in Ukraine). This recent trade surplus has been driven by the weak aggregate demand in Europe due to a decade of slow economic growth and austere fiscal policies, as well as by the success of net-exporter countries such as Germany in exporting manufactured goods to emerging global markets such as China. Services represents a growing aspect of the EU's international trade, with the member states running a significant trade surplus in services, largely driven by success in ICT, business and financial services.

The foundations of the EU's international trade

The European Union has two distinct policies for international trade that its member states abide by. Firstly, there is the internal market of the EU, also known as the single market, which effectively means that there are no barriers to trade between member states of the EU. Secondly, there is the EU's common commercial policy, which defines the trade of the member states with all non-EU countries. International trade policy is one of the most centralized of the policy areas under the competency of the EU, as it is almost entirely defined by union-level institutions (European Commission, European Council, European Parliament) rather than by the member states. This is a necessity of the single market, as the free flow of goods, services, capital, and people within the European Union could not function properly if each member state could make its own individual trade deals with the rest of the world. The EU institutions, led by Directorate General Trade (the trade department of the European Commission), negotiate trade agreements with non-EU countries, which seek to lower trade barriers and expand access to markets for EU exports, as well as companies importing goods into the EU.

Trade partners old and new

The EU's external trade has historically been conducted with a small group of large trade partners, most of whom it has had stable levels of trade with over the years. For instance, the United States is one of the EU's largest trade partners, being the second largest exporter to the European Union and the largest single importer of EU goods. The United States' share of EU exports and imports has remained relatively stable over the past two decades, experiencing only minor declines as new emerging markets have become important for the EU. The United Kingdom, which left the European Union in 2020, represents a declining share of EU imports and exports. While still being the EU's second largest market for the export of goods, it is rapidly being caught up on by China, the third largest export market. In terms of imports, the European Union imported less from the UK than it did from Russia in 2021.

China is responsible for the most dramatic shift in the EU's international trade since the beginning of the 21st century. Imports from China represented only around 8 percent of the EU's total imports from the rest of the world in 2002. By 2021, China had risen to become the biggest exporter to the EU, accounting for over 22 percent of goods imported into the bloc. China's importance as an export market for EU goods also rose sharply since 2002, more than tripling. Other notable trade partners for the EU include countries in its region who have not joined the union, such as Switzerland, Türkiye (Turkey), and Norway, as well as newer trade partners in South and East Asia, such as Japan, South Korea, and India. Russia is likely to decline as a significant trade partner over the 2020s, as trade sanctions due to the invasion of Ukraine will cause their share of EU exports and imports to decrease, and the EU aims to end its reliance on Russian energy by 2027.

Negotiating new trade agreements in a fractured global economy

As the European Union attempts to retain its place as a key player in international trade and the global economy in the 21st century, it is trying to expand the reach of its exporting companies and to reap the benefits of lower-cost imports through new free trade agreements. In recent decades, the EU has concluded important agreements with partners such as Japan, South Korea, Vietnam, and Ukraine, helping to foster connections with these markets, which are a growing share of EU trade. The EU-Canada Comprehensive Economic and Trade Agreement (CETA) is also currently provisionally applied between the two, while the EU member states are yet to ratify the agreement in their parliaments. CETA came under fire from environmental and labor activists who see the bill as increasing the EU's reliance on fossil fuels, as Canada is a key global energy exporter, as well as for stipulations in the agreement which allow companies to bring governments to court, known as Investor-State Dispute Settlement (ISDS) processes.

As geopolitical and trade tensions between the U.S. and China, and other global economic and military powers may deepen in the 2020s, the EU could struggle to find new markets for its goods and services. This is because the global economy is becoming increasingly fragmented, with countries and regions splitting into separate trade blocs, rather than engaging in truly global trade. The EU notably does not have a trade agreement with the United States, China, India, or Russia. Negotiations for the Transatlantic Trade and Investment Partnership (TTIP) with the United States were suspended by President Donald Trump in 2016. TTIP was controversial from the outset, with many civil society groups in Europe opposing the deal, due to fears that it would lead to a 'race to the bottom' in terms of labor and environmental standards. The United States has not sought to re-open negotiations under President Biden, indicating that a trade agreement is now unlikely to be concluded between the EU and U.S. in the near future.