RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/72
14 June 2000
(00-2252)
Trade Policy Review Body Original:  English
TRADE POLICY REVIEW
THE EUROPEAN UNION
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Commission of The European Union
is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on The European Union.The European Union WT/TPR/G/72
Page 3
CONTENTS
Page
I. INTRODUCTION 5
II. KEY DEVELOPMENTS IN THE EU SINCE THE LAST REVIEW 5
III. THE EU TRADE POLICY FRAMEWORK 6
IV. THE SINGLE MARKET 7V. THE EU AND THE WTO 7
(1) A S
TRONG AND WELL-FUNCTIONING MULTILATERAL TRADING SYSTEM 7
(2) P REFERENTIAL TRADE AGREEMENTS 9
(3) N ON-PREFERENTIAL AGREEMENTS AND REGIONAL TRADE DIALOGUES 11
VI. FUTURE POLICY DIRECTIONS - A NEW TRADE ROUND 13
(1) T HE EU’ S POSITION ON A COMPREHENSIVE ROUND 13
(2) S EATTLE AND AFTER 14
(3) T HE CONTINUED CASE FOR A NEW ROUND 14
(4) C ONCLUSION - PREPARING FOR THE LAUNCH OF A NEW ROUND 15The European Union WT/TPR/G/72
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I. INTRODUCTION
1. This is the first full review of the EU under the revised TPRM arrangements. The review
comes at a key moment in international trade policy , as international trade continues rapidly to expand
and as the launch of a comprehensive Round of negotiations remains of the utmost importance.
Recent key developments have demonstrated that the EU remains as committed as ever to the
multilateral trading system and to further trade liberalization. The EU's proposals for a new Roundreflect its wish to harness globalization in the context of sustainable development for further growth
and employment for the benefit of all citizens, in the EU and world-wide.
2. A number of key developments have taken place within the EU  since the last review of the
EU. The launch of the euro represents a crucial step in the process of European economic and political
integration. The EU has engaged itself in a truly historical process of unprecedented widening in theform of enlargement. Agenda 2000 has set important parameters for internal reform in particular in
terms of agriculture and enlargement and has provided a secure financial basis for the years to come.
Important steps have been taken towards further liberalization, economic and structural reform that
will increase the EU's international competitiveness a nd contribute to an even stronger integration into
world markets from a strong domestic basis.
3. Significant progress has been achieved in the Single Market .  Intra-EU investment, trade in
manufactures and in services all continue to gr ow with potential for further growth through
improvements in a number of sectors. The growth a nd predictability provided by the internal market
also benefits countries wishing to export to the EU. The euro constitutes a major contribution to the
development of the EU's single market with bene fits both for business and consumers. The European
Economic Area-agreement extends the borders and the benefits of the Single Market to Norway,
Iceland and Liechtenstein.
4. As was demonstrated e.g. during the Asian crisis, the EU continues to remain an open
economy fully committed to an open, equitable and truly multilateral trading system  with a well-
functioning dispute settlement system. Regional preferential trade agreements as well as other forms
of regional co-operation reinforce the EU's links with the rest of the world. The EU continues to
search for improved market access for the benefit of EU business and consumers world-wide. It hasfaithfully implemented its obligations resulting from the Uruguay Round and has contributed to the
success of the Singapore and Geneva ministerial meetings. The EU remains convinced that the
integration of the developing countries in the world economy must be a key priority for the WTO and
has acted accordingly.
5. The most important and indeed pressing task ahead for the Members of the WTO remains,
however, the launch of a new Round . The EU is determined to play its role in order to enable all
countries in the WTO to meet the challenges and reap the benefits of a globalised economy.
II. KEY DEVELOPMENTS IN THE EU SINCE THE LAST REVIEW
6. The euro was successfully launched  in January 1999, representing a defining moment in the
process of European integration. In the eleven Member States that adopted the euro, monetary policyis conducted by the independent European Central Bank in Frankfurt and has the primary objective of
achieving price stability.  A Stability and Growth Pact has been adopted to ensure that balanced and
sustainable fiscal policies are followed by the countries in the euro area, thus maintaining the fiscal
discipline achieved in the run up to the launch of the euro. As a result of the new macroeconomic
policy framework, euro area countries enjoy lower interest rates that promote economic growth.  The
introduction of the euro has created a major international currency for payments and transactions,WT/TPR/G/72 Trade Policy Review
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underpinned by low and stable inflation in the euro area. The euro has already greatly increased the
liquidity of European securities markets and, over time, it is likely that its importance as an
international reserve currency will increase.
7. The EU remains committed to enlargement . Accession negotiations are currently taking
place with Cyprus, the Czech Republic, Estonia, Hungary, Poland and Slovenia (since March 1998)
and, since February 2000, with Bulgaria, Latvia, Lithuania, Malta, Slovakia and Romania, while inDecember 1999 the EU decided to accept Turkey as a candidate for membership.
8. On 26 March 1999, at the European Council in Berlin, the Heads of Government or State
concluded a political agreement on the reform package "Agenda 2000" . Agenda 2000 is an action
programme whose main objectives are to give the European Union a new financial framework for the
period 2000-06 with a view to enlargement and to strengthen EU policies (reform in agriculture andregional development funding). Under this reform programme, the EU has continued reforming the
common agricultural policy through further shifts from price support to direct payments, which partly
compensate for the reduced price support. This has particularly been the case for the arable, beef and
the dairy sectors. The EU has also further developed a coherent rural policy to accompany the reform
process by re-organization of the existing rural policy instruments, such as structural andenvironmental measures.
9. The EU will continue to pursue its strategy to improve its international competitiveness . At
a meeting of the European Council in Lisbon in March 2000 the EU Heads of State and Government
traced out a new strategic objective for the Union in the economic and social arena, namely, "to
become the most competitive and dynamic knowledge-based economy in the world capable of
sustainable economic growth with more and better jobs and greater social cohesion". The confidence
expressed in Lisbon draws from the sound macroeconomic conditions in the Union, in particular, lowinflation, falling unemployment levels and healthy public finances. To realize the new objective a
wide range of targets were established ranging from completing by the end of 2000 the legal
framework for electronic commerce, stimulating greater competition in the telecoms sector by 2002
and establishing fully integrated financial and capital markets at the latest by 2005. This goal is also
relevant for the future work of the WTO. A strong commitment was made to pursue existing structuraleconomic reforms, including further opening of the ga s, electricity, post and transport markets, as well
as to maintain current macroeconomic policies. Th e meeting also focused on how to boost the skills
and knowledge EU citizens will need in the emerging new economy, and promoting efforts to foster
social inclusion and to maintain the downtrend of unemployment.
III. THE EU TRADE POLICY FRAMEWORK
10. The formulation and implementation of trade policy in the EU  takes place in an efficient,
transparent and democratically accountable manner. Article 133 of the Treaty on European Union
constitutes the legal base for the EU trade policy. Decisions on the direction of trade policy are taken
by the Council of Ministers, and the Commission ensures the uniform representation of EU trade
policy views both bilaterally and multilaterally, assisted by a consultative Committee (Article 133Committee) composed of representatives of Member States. The European Parliament is also kept
informed and consulted systematically. In addition, the European Commission implements a policy of
transparency and wide dialogue with stakeholders, inter alia , by organizing regular meetings and
dialogue sessions with representatives of interest groups and civil society, including representatives
from industry, the social partners and the NGO community.
11. The EU' trade policy  should be viewed within the context of its general approach to
sustainable development . The EU's Treaty (Article 6) requires integrating environmental concernsThe European Union WT/TPR/G/72
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into all EU policies as the best way to achieve sustainable development, which is one of the key
objectives of the EU (Article 2).  It is important to remember that this same overarching goal of
sustainable development is also an objective of the WTO.  The EU’s commitment to sustainable
development is reflected in its environment and development-related proposals for a New Round. The
Commission’s preparations for a new Round include th e launch of a Sustainability Impact Assessment
(SIA), an exercise which will continue throughout the course of a new Round.
IV. THE SINGLE MARKET
12. A fully implemented internal market , which ensures the interests of business and
consumers, is the EU’s cornerstone for microeconomic policies and central to its process of structural
reform. Significant progress has been made to achieve it, also in terms of Member States
implementation. Since 1993, intra-EU manufacturing trade has significantly outpaced the growth ofEU GDP, which is all the more remarkable given that manufacturing has been falling as a percentage
of total GDP.  The value of inward investment flows in 1998, whether between Member States or
from outside the EU, was double the value recorded in 1997, which itself broke all previous years’
records. The EU will continue to take action in all sectors in which important internal market potential
remains to be unlocked. Structural reforms as well as completing the transposition of legislation willbe necessary elements. To ensure efficient action, an effective framework for ongoing review and
improvement based on the Internal Market Strategy is being put in place. Moreover, increased
economic benefits are expected to flow from the synergetic application of internal market,
competition and state aid rules. The internal mark et contributes to a quicker European growth with
benefits for countries wishing to export to the EU.
13. The euro has made a major contribution to the development of the EU's single market.
Businesses no longer have to deal with exchange rate uncertainty within euro area.  The transactionscosts involved in trading in different currencies have been reduced and will essentially be removed
within the euro area as notes and coins are introduced in 2002.  The euro has created a liquid
integrated market for corporate debt giving European companies access to cheaper debt finance.  This
has enabled cross-border merger and acquisition activity in Europe on an unprecedented scale. The
euro has already played a part in encouraging the creation of more liquid and integrated Europeanmarkets for equity finance, a process that is likely  to gain pace in the future. The euro makes prices
more transparent between countries, thus enhancing competition as consumers can more readily
compare prices in different Member States.
14. The European Free Trade Association (EFTA) States Norway, Iceland and Liechtenstein are
closely linked to the Internal Market through the Agreement on the European Economic Area
(EEA) . The European Commission and the EFTA Surveillance Authority ensure uniform application
of the common rules, while the EU Court of Justice and the EFTA Court exert judicial control. Until
now, the transposition of Internal Market rules is high and a sign of the good functioning of the
agreement is that no infringement case has had to be referred to the EFTA Court.
V. THE EU AND THE WTO
(1) A S
TRONG AND WELL-FUNCTIONING MULTILATERAL TRADING SYSTEM
15. An open and strong multilateral trading system  is the best guarantee against the threat of
unilateralism. The EU will continue to assume l eadership in working towa rds reinforcing the WTO,
enlarging and enhancing its system and promoting a wider and more active participation of all its
Members. The EU will continue to work assiduously for the earliest possible accession  on
commercially viable terms of all candidates having applied to join the WTO.WT/TPR/G/72 Trade Policy Review
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16. The WTO agreements constitute a unique set of rights and obligations. The EU attaches the
greatest importance to the correct and timely implementation of the agreements  to which all WTO
members have subscribed as an essential element for a well-functioning MTS. Implementation issues
should be resolved in a way that will genuinely help Members’ efforts at full and faithful
implementation of the Uruguay Round agreements. The implementation programme of the General
Council can make an important contribution to address implementation concerns. Improvements ofexisting agreements could be introduced as part of the new Round negotiations.
17. At the same time, the EU has consistently argued that there is a strong case for the WTO to
enlarge its scope of activities  in order to face the process of globalization by defining, through
multilateral negotiations, rules in new  areas, such as investment, competition and trade facilitation.
Important trade and environment issues such as the need to clarify the relationship between WTOrules and trade related measures taken for the protection of the environment should also be addressed.
18. In the light of this, the EU has actively participated in the work programme established at
Singapore.  The Singapore work programme has allowed the WTO to develop a better understanding
of the issues at stake through analytical work. The EU has been advocating to move those issues from
the analytical phase to the negotiating table.
19. The EU has also participated in the launch of the built-in agenda negotiations  on agriculture
and services, which started smoothly in January. These negotiations evidently address only a part of
the pressing challenges facing the international community in terms of trade-policy. The EU remains
convinced that these issues would most efficiently be concluded in the context of a comprehensive
Round. The EU notes that in the absence of any new mandate at Seattle, those negotiations
necessarily begin on the basis of Article 20 of the Agreement on Agriculture, and Article XIX of
GATS. In the absence of a decision at Seattle to launch a new round as a single undertaking, thereremains no timeframe for the conclusion of these negotiations. The EU has also participated in the
TRIPs built-in agenda.
20. The EU has continued to resort actively to the WTO dispute settlement . However, only
about 50 percent of the cases in which the EU requested consultations actually lead to a panel request.
This figure demonstrates that the negotiation of amicable settlements is still an important avenue forthe resolution of trade disputes.
21. As a complainant , the EU has been involved in a number of cases of major systemic
importance. The two separate panels on Section 301 of the U.S. Trade Act of 1974 and on the import
measures on certain products from the EU addressed for instance the issue of unilateral determination,
which has been a matter of concern to most WTO Members for several years. The case on "BritishSteel" ( DS 138 ) is highly relevant to the process of privatization, which is not yet fully completed in
the EU and still ongoing in Eastern Europe and in a number of developing countries. More generally,
the EU has also been very active against the abusive use of trade defence instruments.
22. Similarly, the most important among the few cases in which the EU was the defendant
touched upon the increasingly important issues of the protection of human health. In both the"hormones" and the "asbestos" cases, the WTO is called to strike a balance between the sovereign
right of the Members to seek protection of the health of their population on the one hand, and the
protection of the negotiated rights of third countries on the other hand. Despite the real difficulties that
the EU is encountering in relation to the implementation of the "hormones" and "banana" cases, the
EU rests fully committed to implementing the panels as soon as possible.The European Union WT/TPR/G/72
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23. Finally, it is hardly necessary to mention that  it is in the period under review that major
lacunae in the provisions on implementation of the DSU came to the fore, in particular with respect to
the sequencing of Articles 21.5 and 22.6 DSU, as illustrated in the banana case. The EU has therefore
played an active role in the DSU review .
24. The full integration of developing countries , including in particular the least developed
countries, in the multilateral trading system and the global economy is a key priority for the EU.  TheEU has therefore suggested immediate action in the WTO for improved market access, to address
implementation concerns and for a new approach to trade related technical assistance. As regards
market access, the EU is committed to grant duty-free and quota-free access to essentially all exports
originating in LDCs by 2005 at the latest.  The EU  intends to announce further steps this year. While
the EU already offers free access for 99% of current LDC exports, further improvements to theexisting market access should allow LDCs to deve lop their full export potential. Experience shows
that many countries have difficulties in making use of the trade opportunities offered, and improved
market access therefore must be complemented by capacity building measures.  The EU supports a
new approach to trade related technical assistance, with the objective of better targeted assistance
based on recipients’ demands and enhanced co-operation among donors, taking due account of needsin relation to the implementation of WTO rights and obligations. A new approach should also address
capacity building in a broader sense, supply side cons traints and the ability to trade. The EU believes
this goes beyond the competence of the WTO Secretariat as such and would require closer co-
operation among international organizations, including in particular the Bretton Woods institutions as
well as UNCTAD and UNEP, which has recently created a joint task force on capacity building.  This
is one of the fundamental considerations underlying the EU initiative on coherence in global
economic policymaking, which aims at enhanced coherence for a comprehensive approach to tradeand development to help developing countries integrate in the global economy.
25. The EU also favours an implementation work programme  under the aegis of the General
Council to consider a number of implementation concerns and is ready to address developing
countries priorities within the context of a comprehensive Round.
26. The access of EU goods and services to markets around the world for the benefit of
consumers world-wide and EU business re mains a priority for the EU. The EU's Market Access
Strategy  of 1999 will focus on the launch and implementation of a barriers removal programme ,
under which the EU, in keeping with attachment to the multilateral trading system, will concentrate its
efforts on priority cases, by using to the full the various multilateral and bilateral instruments and
opportunities at its disposal, including dispute settlement mechanisms. The needs of small andmedium sized enterprises and the interests of specific regions affected by particular trade barriers will
be specifically taken into account.
27. The EU retains the option to use, if necessary and appropriate, relevant trade defence
instruments , i.e. in the form of anti-dumping and anti-subsidy measures for the protection of the
European industry when faced with unfair trading practices from third countries. It is noteworthy thatalthough EU legislation provides for the possibility to apply safeguard measures, the EU has not
recently applied safeguard measures against imports from other WTO members. The EU attaches the
highest importance to all WTO members adhering to effective WTO-disciplines in the area of trade
defence.
(2) P
REFERENTIAL TRADE AGREEMENTS
28. The EU remains committed to promoting and further liberalizing international trade. In
addition to supporting multilateral trade liberalization, the EU is engaged in boosting trade flows withWT/TPR/G/72 Trade Policy Review
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various trade partners in the world through a number of preferential trade agreements  in conformity
with relevant WTO provisions and in particular Article XXIV of the GATT. Through their trade
enhancing effect, these agreements underpin and are mutually supportive to the multilateral trading
system. In light of the increasing use of regional trade agreements, the EU in the Amsterdam
European Council conclusions of 1997 underlined that the rules for regional trading agreements in the
WTO should be clarified, inter alia , in order to guarantee the proper functioning of the multilateral
trading system. When considering the negotiation of preferential trade agreements, the EU is
committed to ensuring conformity with WTO rules. Th is approach is reflected in the EU preferential
trade policy in the period under review.
29. Since the Europe Agreements with Estonia, La tvia and Lithuania have entered into force on
1 February 1998, and with Slovenia on 1 February 1999, such agreements now link the EU with allten Central and Eastern European Countries. Cyprus  and Malta  have Association Agreements  with
the EU. Turkey  applies Common Customs Tariff together w ith the EU on the products subject to the
EU-Turkey Customs Union. In 2000, Turkey and the EU have also begun negotiations for the
liberalization on trade in services and public procurement. An Accession Partnership for Turkey is
also being prepared.
30. The new ACP-EU Partnership Agreement of Suva,  whose trade provisions took effect as
from 1 March 2000, provides for new WTO-compatible arrangements, removing progressively
barriers to trade and enhancing co-operation in all trade-related areas, to be concluded and put into
effect after a preparatory period of eight years. The appropriate request for a waiver from GATT
Article I obligations has been presented to the WTO and the issue is currently under examination in
the Council for Trade in Goods. In the meantime, and in order to facilitate the transition, the non-
reciprocal trade preferences applied under the 4th Lomé Convention have been maintained. Theseinclude duty-free access for all industrial and a large part of agricultural and processed agricultural
products as well as preferential tariffs for almost all the remaining agricultural products. Beef and veal
and sugar protocols are also maintained during the preparatory period but will be reviewed in the
context of the new trading arrangements. Preferential access is also provided for ACP bananas under
the EU banana regime, which is presently under review.
31. The EU has concluded or is still negotiating bilateral association agreements with the
Mediterranean countries . These agreements contain a political component, a trade component, and a
co-operation component. The agreements with Tunisia (1 March 1998) and Morocco (1 March 2000)
have entered into force. Entry into force of the agreement with Jordan (signed in November 1997) is
foreseen for 2000. The trade provisions of the agreements with Israel (signed in November 1995) andthe Palestinian Authority (signed in February 1997) are both being applied on an interim basis. The
negotiations on an agreement with Egypt have been finalized although not signed or ratified yet.
Negotiations are ongoing with Lebanon, Syria and Algeria. The individual agreements foresee in
particular the establishment of a free trade area between each country and the EU for goods. In
addition, they contain provisions for liberalization in the area of services, capital movement andcompetition.
32. The EU and Mexico,  in the framework of the 1997 Economic Partnership, Political Co-
ordination and Co-operation Agreement, conc luded on 23 March 2000, a comprehensive trade
agreement covering the area of goods, government procurement, competition and dispute settlement
as well as services, investment and related payments, and intellectual property rights. The agreement
establishes a free trade area in the sense of Article XXIV of the GATT 1994 (covering around 95% of
bilateral trade) and Article V of GATS and will enter into force during 2000.The European Union WT/TPR/G/72
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33. At the Summit of Rio de Janeiro in June 1 999, EU, Mercosur and Chile Heads of State and
Government launched trade negotiations between the EU and the Mercosur  countries (in the
framework of negotiations to conclude an Interregional Association Agreement) and the EU and
Chile  (in the framework of negotiations to conclude a Political and Economic Association
Agreement). The aim is bilateral, gradual and reciprocal trade liberalization, without excluding any
sector and in accordance with WTO rules encompassing liberalization of trade in goods and trade inservices, government procurement, intellectual pr operty rights, competition, investment, trade defence
instruments, and a dispute settlement mechanism.
34. The EU concluded with South Africa  a Trade, Development and Co-operation agreement
(TDCA) on 24 March 1999. The TDCA was signed on 11 October 1999 and its trade provisions put
provisionally into effect on 1 January 2000. Under this agreement, 95% of EU imports from South
Africa will be fully liberalized at the end of a transition period of ten years. On the other side, 86% of
South Africa's imports from the EU will be fully liberalized at the end of a transition period of
12 years. Within these transitional periods, the bulk of liberalization of industrial products will take
place for the EU within the first four years and for South Africa after the first six years. The combined
coverage will be more than 90% of current trade between the parties. Supplementary agreements are
being negotiated on protection of wines and spirits denominations and fisheries. The EU and South
Africa committed themselves to design their free tr ade agreement in a way so as to support the
process of regional economic integration in the Southern Africa region.
35. Trade relations with Switzerland, based on the Free Trade Agreement of 1972 continue to
develop. In 1999 a number of new sectoral agreements, including on the mutual recognition of
conformity assessment, on trade in agricultural products and on public procurement have been signed.
These will enter into force after ratification by both sides, expected for 2001.
36. The EU sees trade policy as crucial for the reconstruction of the Western Balkan Countries .
The EU grants trade preferences on an autonomous basis to Albania, Croatia and Bosnia and
Herzegovina and on the basis of a Co-operation Agreement to the Yugoslav Republic of Macedonia.
The appropriate request for a waiver from GATT Article I obligations has been presented to the WTO
and the issue is currently under examination in the C ouncil for Trade in Goods. With all of them, the
EU intends to negotiate, when eligibility criteria will so allow, Stabilization and Association
Agreements which comprise the establishment of a free trade area for both goods and services. Given
the non respect of political and economic criteria by the Federal Republic of Yugoslavia, this country
has been excluded from this regime.
37. Since 1995, the EU Scheme of Generalized Trade Preferences (GSP)  is implemented on
the basis of Regulations covering periods of three to four years. The present regulation entered into
force on 1 July 1999. The EU GSP now covers virtua lly all sectors. Instead of duty free access for
limited quantities it grants limited tariff reductions without quantitative restrictions. The preferential
margin depends on the sensitivity of a product so that while very sensitive products enjoy a smaller
preference, non sensitive products enter duty free. This is also the case for essentially all productscovered by the scheme originating in LDCs. Some 11 Latin American countries fighting drug
production and trafficking enjoy similar advantages. In order to contribute to sustainable
development, the EU GSP offers additional preferences to countries which demonstrate compliance
with certain internationally agreed social and environmental standards.
(3) N
ON-PREFERENTIAL AGREEMENTS AND REGIONAL TRADE DIALOGUES
38. The EU is continuously engaged in developing and upgrading trade relations with other trade
partners through bilateral non-preferential agreements  or regional trade dialogues .WT/TPR/G/72 Trade Policy Review
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39. Trade relations between the two biggest trade entities in the world, the EU and United States
remain robust and have been marked by the launch in 1995 of the New Transatlantic Agenda (NTA)
(which reaffirmed the shared commitment of the EU and the US to strengthen the multilateral trading
system and by agreement to the Transatlantic Economic Partnership (TEP) of 1998 which aims to
break down remaining - now mainly regulatory - barriers to trade across the Atlantic while preserving
a high level of protection for health, safety, consumers and the environment. Negotiations areongoing, in particular concerning the mutual recognition of certain technical regulation in the area of
goods and the mutual recognition of qualifications in the area of services (architects, engineers,
insurance). The EU and the United States also agreed in 1999 on a set of principles to provide for a
more effective "early warning" system in order to prevent conflicts and facilitate their resolution at an
early stage before they risk undermining the much broader EU-US relationship.
40. Trade relations with Canada  are marked by the EU-Canada Joint Declaration and Action
Plan of December 1996. The Action Plan has borne early fruit with agreements on Mutual
Recognition. Agreements were also signed on Mutual Recognition of Conformity Assessment,
Customs Co-operation and co-operation regarding competition matters and veterinary equivalence.
Furthermore, the EU and Canada agreed to undertake the EU-Canada Trade Initiative (ECTI), whichis a comprehensive programme covering multilateral and bilateral trade areas.
41. The EU and Japan  share a strong commitment to the Multilateral Trading System. The EU
has put the emphasis of its bilateral economic dialogue on facilitating market access for goods and
services and improving the investment climate in Japan through structural reform. A two-way
deregulation dialogue was launched in 1994 in the framework of which the EU and Japan exchange
an annual list of proposals for regulatory reform in their partner’s respective markets.
42. Joint declarations on bilateral relations with Australia  (1997) and with New Zealand  (1999)
provide the framework for further liberalization of trade in goods and services.  Mutual Recognition
Agreements in relation to conformity assessments for goods have also been concluded with each of
these countries. In 1996 a veterinary agreement was concluded with New Zealand.
43. The growing importance of Asia for the EU wa s demonstrated by the creation in 1996 of the
Asia-Europe Meeting (ASEM) , a process for dialogue on political, economic and cultural issues. In
the economic field, ASEM aims, inter alia, to improve trade and investment opportunities for both
partners through mechanisms such as the Investment Promotion Action Plan and the Trade
Facilitation Action Plan. Both Action Plans have rece ntly been upgraded to reinforce the elimination
of barriers to trade and investment. ASEM-Partners and the private sector respectively are currently
drafting a priority list identifying the most important generic obstacles to trade and investment in bothregions. ASEM partners will thereafter report yearly on voluntary actions to remove or reduce these
obstacles.
44. Korea  has remained one of the EU's key Asian trade and investment partners after its
impressive recovery from the recent economic crisis. The EU welcomes Korea's commitment to
market-based economic and regulatory reform, which would further improve trade and investmentconditions.
45. Bilateral trade and investment flows with India continue to grow. The EU and many potential
investors follow with intense interest the recently enhanced pace of economic reforms in India.
Meanwhile the EU and India continue to engage in  a close high level economic dialogue that centres
not only on bilateral trading issues but also on wa ys to strengthen the multilateral trading systems.The European Union WT/TPR/G/72
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46. A strengthening of trade relations between China  and the EU is happening at both the
multilateral and the bilateral level. The EU is a keen advocate of China's accession to the WTO.
Bilaterally, the EU is addressing trade issues through its dialogue with China, the main forum for
which are the EC-China Joint Committee and its subordinate bodies. The EU is seeking to intensify
this dialogue in areas that are crucial for WTO implementation and economic reform. Moreover, the
EU supports China's economic and trade reforms by offering EU expertise through a range of co-operation  programmes; it also stimulates co-operation in the fields of investment promotion and
technological co-operation.
47. In the framework of the San José Dialogue , the EU and the Central American Countries are
engaged in a process which includes the consideration of economic, trade and investment issues. A
similar dialogue takes place with the Latin American countries under the umbrella of the EU-Rio
Group  dialogue.
48. The EU concluded a Partnership and Co-operation Agreement (PCA) with the Russian
Federation  in 1994, which entered into force in 1997, and which provides for the parties to grant each
other MFN and national treatment. The parties may not apply quantitative restrictions on imports from
the other party; separate agreements apply to EU imports of textiles and clothing, and iron and steelproducts. PCAs have also been concluded with Azerbadjan, Kazakhastan, Kyrgyzstan, Moldavia
and Ukraine,  respectively. An agreement on trade, commercial and economic co-operation with
Mongolia  provide for the parties to grant each other MFN treatment.
VI. FUTURE POLICY DIRECTIONS - A NEW TRADE ROUND
49. During the period under review the EU has been at the forefront of efforts to launch a new
comprehensive round  of trade negotiations in the WTO in 2000. It considers that a comprehensive
trade round, conducted as a single undertaking  and offering a balance of benefits to all WTO
members will make an important contribution to global economic growth and sustainable
development as well as strengthening further the rules-based trading system.
(1) T
HE EU’ S POSITION ON A COMPREHENSIVE ROUND
50. The Commission's substantive proposals  for a Round were set out in the 1999
Communication from the Commission to the Council and to the European Parliament concerning theEU Approach to the WTO Millennium Round.  This Communication set out a possible EU agenda for
the Round, covering among other things further liberalization or rule-making in the fields of
agriculture and services, non-agricultural tariffs, in vestment, competition, trade facilitation, trade and
environment, TRIPS and public procurement. It stressed that results in all areas should support and
contribute to sustainable development, and proposed a detailed agenda to ensure that the needs andinterests of developing countries would be concretely reflected in the negotiations. The
Communication noted how it had been sought to involve, and reflect the views of, the European
Parliament and representatives of civil society in developing its approach to the new round, and noted
the strength of European business support for a Round. It also noted the need to develop a better
understanding of how to progress in relation to social and labour issues.
51. A separate economic appraisal of the Round  prepared by the Commission concluded that
further multilateral liberalization on the lines of the EU’s agenda could result in global annual welfare
gains of US$400 billion, of which about US$90 billion would accrue to the EU but over half the gains
would accrue outside the main industrialized countries i.e. in the developing world. Independent
studies commissioned by other WTO memb ers show closely comparable results.WT/TPR/G/72 Trade Policy Review
Page 14
52. In its conclusions of 26 October 1999, the EU Council  unanimously supported the proposal
to launch a comprehensive Round. The Council recognized that a new trade round could constitute an
important means to improve the European economy, to foster global economic growth and
development, and ensure the successful management of globalization. The Council also stressed that a
comprehensive Round offers the best way to take account of the trade interests of the WTO
membership as a whole. These Conclusions constituted the basis for the EU’s position at the SeattleMinisterial Conference and remain the EU’s position.
(2) S
EATTLE AND AFTER
53. Like other WTO Members, the EU was profoundly disappointed by the failure of the Seattle
conference to launch a new round. It believes that there are lessons that all Members can draw from
this.
54. One of these lessons  to be drawn from Seattle is that in future the WTO needs to work in a
more inclusive and transparent way vis-à-vis all Members , and improve communication with the
outside world. Work also needs to be organized more efficiently. There may be scope for short-term
improvements in working methods, particularly in preparing for and managing ministerial
conferences, where greater transparency, efficiency, and means to ensure fuller participation bydeveloping countries seem warranted. In the longer term, we may need to examine options for broader
improvements to the system, in particular to ensure  the greatest possible transparency towards, and
dialogue with, the wider public.  However, we should not let "institutional reform" detract from the
goal of launching a Round. Nor should the WTO system be made the scapegoat for failure to bridge
gaps on the substance of negotiations.
55. The second – and key - conclusion that no delegation can fail to draw from Seattle is on the
substance of the discussions.  Despite continued differences on several points of the negotiating
agenda, can one conclude that those differences could not have been bridged given better preparation
in Geneva? Is it not possible that with more time in Seattle and appropriate flexibility all round,
negotiations could have been launched? And does this  not mean therefore that it should be possible to
bridge those differences in the future?
(3) T
HE CONTINUED CASE FOR A NEW ROUND
56. Against this background, the EU continues to support the launch of a comprehensive Round ,
along the lines supported by a large group of countries before and at Seattle: a Round in the sense of
an inclusive approach in which all WTO Members can find their interests addressed.
57. The fundamental reasons in favour of a broad agenda remain valid. First, as regards further
trade  liberalization,  both developed and developing countries seek improved market access for their
products and services, in order to increase economic growth. It was clear at Seattle that only a
comprehensive approach  to market access, covering all sectors, can enable all Members to exploit
their comparative advantage and thus increase their trade.
58. Secondly, the WTO also still needs to update its rules  to respond to the effects of
globalization, so that our traders and investors can enjoy a predictable, transparent and non-discriminatory framework in which to make their economic decisions and to compete. Basic rules on
investment  and competition  are necessarily part of such an agenda and will go some way towards
providing this environment. There continues to be  solid support from a large number of Members for
the inclusion of these issues in a negotiation. It is capital to launch negotiations on two subjects of
such systemic importance and of benefit to companies and consumers around the world. It is equally
important to begin negotiations either on trade facilitation  or on improvements to rules in areas likeThe European Union WT/TPR/G/72
Page 15
trade defence  or technical barriers to trade , all of which would contribute to more predictable
market access conditions and to the freer flow of goods. Also, WTO rules on government
procurement are in serious need of updating.
59. Third,  Seattle also highlighted acutely the need to better integrate developing  countries  into
the trading system through better market access, improved special and differential treatment, better
co-ordinated capacity building, and a more active role within the WTO mechanisms. The EU remainswilling to address comprehensively the priority is sues for developing countries in a Round. Indeed, it
is only in the framework of a comprehensive approach that the developing countries’ trade agenda –
including more sensitive issues – can be fully addressed.
60. And finally the WTO must still answer questions of concern to governments and the wider
public.  The potential interlinkages of the trading system with the environment, sustainable
development, social issues and consumer health and safety, need to be addressed in a way that
safeguards both the trading system and these concerns. The EU initiative in relation to a Sustainable
Impact Assessment of a new Round is an integral part of this approach. While the EU position on
some of these issues would benefit from being clarified, the EU's fundamental objectives remain
valid. The EU stands ready to consider the options available to achieve these objectives in order toensure that any further clarification of the rules resolves the very complex equation of meeting
legitimate societal and ethical objectives while bringing greater legal security to all Members,
preserving the fundamental principles of the WTO, and preventing unjustified discrimination or
disguised restrictions on trade.
61. In addition the EU will continue its efforts to develop a meaningful dialogue involving the
ILO and the WTO on questions relating to trade, labour and social development .
62. The EU will continue to promote transparency  in trade policy. Internally, it has launched a
campaign of awareness, information and exchange of views with all actors of the civil society. This
will be a permanent feature of the EU internal trade policy making. In Geneva, the EU has argued in
favour of the greatest possible transparency of the WTO vis-à-vis the outside world.
(4) C
ONCLUSION - PREPARING FOR THE LAUNCH OF A NEW ROUND
63. The Council, meeting in Seattle on 3 December, confirmed that the elements of the EU’s
comprehensive approach, as set out in those conclusions, should continue to be pursued. The EU is
therefore continuing actively to make the case for a comprehensive new round and is working with all
its trading partners to maintain and broaden support for a round,  which it wishes to see launched
this year. It is more than ever necessary to adapt the multilateral trading system to the economic
realities of today and to harness the powers of globalization for the benefit of all countries. WTO-members have put their priorities clearly on the table at various occasions. The launch of a
comprehensive round, which takes everybody's concerns  into account, but without unduly prejudging
the outcome, is achievable if the necessary political capital is invested in an inclusive and transparent
process.  
64. An intensive process of consultation, review, and where necessary, adjustment constitutes the
best way to restore momentum, to find conver gence and to bridge outstanding differences.
65. In the shorter term, the EU has been among those WTO members calling for the adoption of
confidence building measures , and was gratified that elements of this could be adopted in the WTO
in May. The EU’s contribution includes the pledge of duty and quota free treatment for essentially all
products from least developed countries, and proposals to support implementation of the Uruguay
Round agreements, capacity building and transparency.WT/TPR/G/72 Trade Policy Review
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66. In sum, the proposed approach reflects the EU will to continue to assume its responsibilities
within the WTO  and to maintain the momentum for further liberalization and rule making. The EU
will work to ensure that the future negotiations ar e put on the most solid basis possible, that flexibility
is brought into the debate, that the problems identified by developing countries are being properly
addressed, and that the functioning of the WTO is being improved. On this basis the EU is confident
that a comprehensive trade round can be launched  this year and that it can be successfully
concluded in the near future.
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