EU Trade Policy in the Indo-Pacific: from hub-and-spoke to a trusted global production network
By Dr. Koen Berden
Imagine exporting a machine to the EU
Individual trade agreements increase market access for companies in the trading partner’s markets through reductions in tariffs, non-tariff measures and through commitments in other non-trade areas like sustainable development, investment protection, intellectual property rights, supporting SMEs, and alignment in standards. But with global supply chains involving many countries can FTAs also allow benefits through interacting with each other?
Imagine a Japanese producer exporting a five-axis computer numerical control (CNC) machining center to a German automotive-components producer under the EU–Japan Economic Partnership Agreement (EPA). The machine’s likelihood of obtaining preferential access depends on whether its share of production sufficiently satisfies the EPA’s Japanese-origin requirements. Inputs from other EU preferential partners (e.g. South-Korean inputs through the EU-South-Korea FTA) still count as non-originating under the EPA unless the relevant rules explicitly allow cumulation— allowing parts made in other countries to count as Japanese parts.
Now consider a different approach. What if, under mutually established conditions between the EU and its trading partners through EU FTAs, inputs originating from all participating EU free-trade-agreement partners could count as ‘Japanese’ when a product is exported from Japan to the EU? A Japanese producer could combine Japanese design with components or materials from several other countries the EU has an FTA with without automatically losing the ability to qualify for lower tariffs in the EU.
This sounds like a technical change to rules of origin (the rules used to determine which country a product comes from). Strategically, however, it could address a central weakness in the EU’s trade architecture with significant implications for the Indo-Pacific: Europe has built an exceptionally broad network of bilateral agreements, but those agreements remain largely separate from one another. The EU has connected many economies to Europe; it has not connected those economies into a production network.
From bilateral FTAs to a network
The economics of 21st-century trade increasingly rests on production networks. Firms decide where to locate design, components, assembly, software, and services across several economies. Yet preferential trade agreements still frequently determine origin on an agreement-by-agreement basis. This creates a mismatch between internationally fragmented production and bilateral preferential rules.
That mismatch matters significantly in the Indo-Pacific. The Regional Comprehensive Economic Partnership’s (RCEP)—the trade agreement with China, Japan, South Korea, Australia, New Zealand and the ten ASEAN countries as members—strength is not that its disciplines are uniformly deeper than those in EU agreements; it is that its rules can support production across a large regional manufacturing space. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) similarly combines multiple economies within one common preferential architecture. By contrast, the EU’s agreements with partners such as Japan, South Korea, Singapore, Vietnam, Canada, and others mainly connect each partner to the EU market.
A broader system of cumulation could begin to connect those spokes. The objective would not be to create another conventional mega-regional agreement like RCEP or CPTPP, nor to reopen every existing EU FTA. It would be to make the EU’s existing set of FTAs more like an integrated network for production intended for the European market.
Why this approach matters in the Indo-Pacific
First, broader cumulation could make existing EU FTAs much more useful to firms. Rules of origin impose compliance costs and can prevent companies from claiming preferences even in the event of reduced or eliminated tariffs. Making it easier to combine qualifying inputs from trusted partners could, therefore, increase exponentially the practical value of EU Agreements already negotiated.
Second, the approach could affect supply-chain choices. A firm deciding where to source a component or locate a production stage does not look only at tariff rates. It also considers whether that choice fits into the wider production chain. If production in one EU FTA partner could more readily combine with production in other participating partners for EU-bound goods, the network value of those relationships would rise.
Third, such architecture could support de-risking without requiring decoupling. In a weaponized global economy, resilience increasingly depends on having alternative suppliers and routes rather than on replacing one dependency with another. A wider preferential production network could give firms additional commercially viable sourcing combinations across Europe’s trade partners while leaving them free to participate in RCEP, CPTPP and other trade arrangements.
Finally, EU FTA membership itself could become more valuable. Today, an FTA partner primarily obtains preferential access to the EU market. In a connected system, participation could also provide access to a wider production ecosystem built around that market. As the network expands, that arrangement becomes more attractive to existing and prospective partners.
A trusted network, not unrestricted cumulation
The concept is not akin to a simple declaration that all inputs from all EU FTA partners automatically qualify everywhere. Existing agreements contain different product-specific origin rules, documentation requirements, and safeguards. Trade deflection, verification, and customs enforcement would remain legitimate concerns.
The practical direction should therefore be gradual and conditional. The EU could explore a common framework under which willing FTA partners (possibly Canada) accept compatible requirements for origin verification, customs cooperation, and data exchange in return for broader and differentiated possibilities to cumulate originating inputs. Some partners might remain within existing bilateral arrangements, while others that meet additional conditions could participate in deeper forms of cumulation.
This would also allow trade policy and economic-security policy to more strongly reinforce one another. Conditions could be designed around trusted-trader systems, traceability, and effective customs cooperation. The key principle is that greater connectivity would be earned through greater interoperability and confidence.
A different model of EU trade power
The EU has spent decades negotiating a wide network of FTAs that cover more than 50 percent of EU trade. The next strategic question is whether the EU can extract more value from the existing network of FTAs, because further expanding the trade agreement coverage becomes increasingly hard. Instead of viewing every FTA as a separate bilateral achievement, Europe could treat its Agreements as building blocks of a wider production architecture.
That would give the EU a distinctive leverage in the Indo-Pacific. RCEP offers large-scale regional production integration and CPTPP offers a common high-standard rulebook across its members. The EU could develop a third model: deep bilateral agreements combined with a trusted, progressively connected production network and access to the EU single market.
Such a model would not force partners to choose between China and the West. Japan, Vietnam, Singapore, and other economies could remain embedded in Asian and trans-Pacific arrangements while also participating in an EU-linked production network. This connectivity is important in a world where regulatory influence increasingly depends not only on writing rules, but also on making economic relationships sufficiently attractive, reliable, and interoperable so that others choose to connect to them.
The strategic opportunity is therefore straightforward: connect the spokes. Generalized cumulation, introduced carefully and conditionally, could turn part of the EU’s existing bilateral FTA architecture into a trusted global production network. Before implementation, the legal, economic, and sectoral implications would require a detailed analysis of the projected implications. But as a direction for EU trade strategy, it deserves serious consideration.
Dr. Koen Berden, is a Bertelsmann Foundation Fellow 2026 and Managing Director, Trade Impact BV