The European Union said it was negotiating a “modern and ambitious” free-trade agreement with the United Arab Emirates.

Ursula von der leyen

On April 10, 2025, a pivotal announcement was made by the European Union (EU) and the United Arab Emirates (UAE) regarding the initiation of negotiations for what is being termed a "modern and ambitious" Comprehensive Economic Partnership Agreement (CEPA). This groundbreaking initiative is designed to significantly deepen the existing bilateral trade relations, enhance investment opportunities, and foster cooperation in various strategic sectors. Among these sectors, particular emphasis is placed on renewable energy, the burgeoning field of green hydrogen, and the supply of critical raw materials, which are essential for various industries and technologies in the modern economy.

A Strategic Shift in EU-UAE Relations

The announcement of this agreement signifies a substantial strategic shift in the relationship between the EU and the UAE. Historically, the UAE has been a proponent of engaging in direct bilateral talks with the EU, thereby moving away from the more generalized framework of the Gulf Cooperation Council (GCC). This shift is particularly noteworthy given that previous trade negotiations between the EU and the GCC have been stalled since 2008. The stagnation of these talks can largely be attributed to ongoing disagreements related to oil trade and public procurement tenders. By opting for a bilateral agreement, the UAE aims to streamline and expedite economic collaboration, addressing specific mutual interests in a more focused and effective manner, which could lead to a more tailored and responsive economic partnership.

Economic Significance

The economic implications of this partnership are profound. Currently, the EU stands as the UAE’s second-largest trading partner, accounting for approximately 8.3% of its non-oil trade, which was valued at around $68 billion in 2024. This relationship is further underscored by the fact that the UAE is the EU’s largest export destination and investment partner within the Middle East and North Africa region. The proposed CEPA is anticipated to not only reduce tariffs but also enhance market access significantly. This enhancement is expected to open up new opportunities across various sectors, including advanced manufacturing, healthcare, logistics, and the rapidly evolving field of artificial intelligence. By facilitating easier access to each other's markets, both the EU and the UAE stand to benefit from increased trade flows and investment opportunities, thereby driving economic growth in both regions.

Broader Context

The initiation of these negotiations comes at a time of heightened global trade uncertainties, particularly in the wake of recent developments such as the imposition of tariffs by the United States. These tariffs have resulted in significant market volatility, prompting countries around the world to actively seek alternative trade partnerships and diversify their economic relationships. In this context, the EU-UAE agreement emerges as a reflection of a mutual commitment to uphold open, rules-based trade practices while also pursuing economic diversification strategies. This partnership is not only timely but also essential for both parties as they navigate the complexities of the current global economic landscape.

Future Outlook

Looking ahead, the negotiations for the CEPA are expected to progress at a swift pace, with both parties expressing a strong sense of optimism regarding the potential to reach a comprehensive agreement. This agreement is envisioned to not only bolster economic growth but also enhance regional prosperity, fostering a more integrated economic environment. The development of the CEPA underscores the evolving dynamics of international trade and highlights the strategic importance of EU-UAE relations in the current global economic framework. As both regions work towards finalizing this agreement, they are likely to set a precedent for future bilateral trade agreements, showcasing the benefits of collaboration in an increasingly interconnected world.