PRESS/TPRB/66
27November 1997
TRADE POLICY REVIEW BODY TRADE POLICY REVIEW BODY TRADE POLICY REVIEW BODY
REVIEW OFTHEEUROPEAN UNION REVIEW OFTHEEUROPEAN UNION REVIEW OFTHEEUROPEAN UNION
TPRB 'SEVALUATION TPRB 'SEVALUATION TPRB 'SEVALUATION
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) concluded itssecond
review oftheEuropean Union 'strade policies on25and26November 1997. Thetextofthe
Chairperson 'sconcluding remarks isattached asasummary ofthesalient points which emerged during
thediscussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairperson 'ssumming-up, together withthesetworeports,
willbepublished induecourse asthecomplete trade policy review ofMexico andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Brazil (1992 &1996),
Cameroon (1995), Canada (1990, 1992, 1994&1996), Chile (1991 &1997), Colombia (1990 &1996),
Costa Rica(1995), Côted'Ivoire (1995), theCzech Republic (1996), Cyprus (1997), theDominican
Republic (1996), Egypt (1992), ElSalvador (1996), theEuropean Communities (1991, 1993, 1995
&1997), Fiji(1997), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991),
Iceland (1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992 &1995),
Kenya(1993),Korea,Rep.of(1992&1996),Macau(1994),Malaysia(1993),Mauritius(1995),Mexico
(1993 &1997), Morocco (1989 &1996), NewZealand (1990 &1996), Nigeria (1991), Norway (1991
&1996),Pakistan(1995),Paraguay(1997),Peru(1994),thePhilippines(1993),Poland(1993),Romania
(1992), Senegal (1994), Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), Sri
Lanka (1995), Sweden (1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia
(1994), Turkey (1994), theUnited States (1989, 1992, 1994&1996), Uganda (1995), Uruguay (1992),
Venezuela (1996), Zambia (1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
Review oftheEuropean Union
CONCLUDING REMARKS BYTHE CHAIRPERSON
Overthelasttwodays, theTrade Policy Review Body (TPRB) hasconducted thefourth review
-thesecond under WTO provisions -oftheEuropean Union 's(EU) tradepolicies andpractices. The
review oftheEUisthefirsttobeconducted under the"interim review" framework agreed in1996
bytheTPRB fortwo-yearly reviews; assuch, ithasfocused ondevelopments intrade policies inthe
pasttwoyears andonselected sectoral issues, rather thanbeing fullycomprehensive incoverage.
Thediscussion developed under fivemainthemes: (i)theinterface between thesingle market
andmultilateral liberalization; (ii)theEU'senlargement andnetwork ofregional orpreferential
agreements; (iii)systemic trade policy issues; (iv)sectoral questions; and(v)theEUandthefuture
ofthemultilateral system.
Participants raised alargenumber ofquestions inwriting. Therepresentative oftheEuropean
Union provided written replies inthecontext ofthemeeting andundertook tosupply further details
asnecessary.
Members welcomed thestatements made bytheEUrepresentative concerning itsparticipation
in,andcommitment to,theWTO-based multilateral trading system. However, many questions were
raised onspecific aspects oftheEU'stradepolicies andpractices astheyaffect other WTO members.
Anyactions bytheworld 'slargest trading entity werebound tohaveanimportant effect onthetrading
system andthiswasamajor concern ofmany participants.
Theinterface between thesingle market andmultilateral liberalization: institutional issues
Members noted withsatisfaction that,inagrowing number ofareas, thesingle market and
external liberalization hadbeenmutually supportive, resulting inimproved market access forexternal
suppliers andincreased exposure oftheEUeconomy tocompetition. Forexample, aspects oftheEU's
participation inrecent multilateral services negotiations drew oninternal reforms.
However, Members noted thatsignificant impediments totrade andefficient allocation of
resources remained, withpotential adverse effects onexternal suppliers. Members mentioned thehigh
levelofStateaidanditsconcentration onrelatively fewsectors, andlimitations intheopening ofpublic
procurement. While recognizing thatWTO ruleswereagrowing point ofreference intheelaboration
ofEUpolicies, Members urged thatfurther efforts toensure thatallEUregulations respected the
principles oftransparency, non-discrimination andwereproperly notified totheWTO. Some Members
posed questions concerning "Community competence" fortradenegotiations. Specific concerns were
raised about recent moves tostrengthen measures regarding health, safety andenvironmental protection.
Some members expressed concern thattheshare ofintra-EU trade inmanufactures during thepast
fewyears mayhaveincreased attheexpense ofextra-EU trade inmanufactures.
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Inreply, therepresentative oftheEuropean Union emphasised thattheinternal process of
harmonisation could beequated withliberalization. Third country suppliers benefitted fullyfrom
measures aimed ateliminating obstacles tointra-Community trade. Increased intra-trade hadnotbeen
attheexpense ofnon-EU countries; these accounted forasteady 40percentoftotalEUimports and
arising share ofdomestic demand formanufactures. Heprovided details oftheAction Plantoremove
remaining sectoral obstacles tomarket integration andundertook tosupply information onproposals
tosimplify EUlegislation.
Therepresentative stated thatthenewArticle 133oftheRome Treaty would clarify thequestion
oftheCommunity 'scompetence. Herecalled thattheCommunity hadexclusive competence intrade
ingoods, andthatthere wasno"domaine réservé" formember States inservices andTRIPS.
EUenlargement andnetwork ofpreferential agreements
Members noted theproposals forfurther enlargement oftheEUandthecontinued expansion
ofitsnetwork ofregional andother preferential agreements. They questioned theeffects ofthese
arrangements onthirdcountries 'trade. Concerns wereexpressed inrelation topotential tradediversion;
inthisrespect, members mentioned tariffandnon-tariff barriers withrespect tosectors suchastextiles,
agriculture andautomobiles. Members stressed thatregional integration should remain consistent with
relevant WTO rules. Inthisconnection, onediscussant raised theneedtoensure thatWTO rulesare
adequate todealwiththegrowth andnewstructure ofpreferential andregional agreements. Members
tooknoteoftherecent callbyEUMinisters formore careful consideration oftheWTO conformity
ofpreferential agreements, aswellasclarification ofWTO rules onregional trading arrangements.
Questions werealsoposed concerning theharmonization of,andcumulation provisions in,theEU's
preferential rules oforigin.
WhilesomeMembersreportedthattheyhadsatisfactorilyconcludedArticleXXIV:6negotiations
withtheEUoncompensationfollowingtheaccessionofAustria,FinlandandSwedentotheCommunity,
other Members saidthatnegotiations hadnotyetbeencompleted andcalled forarapid conclusion.
OneMember emphasized that,infuture enlargement, negotiations should beundertaken inadvance.
Anumber ofparticipants expressed systemic concerns about certain newaspects oftheEU's
GSPscheme, inparticular eligibility criteria relating benefits toenvironmental protection orlabour
conditions, concern about linkage withthefightagainst drugs wasalsoraised. These aspects went
against thefundamental principles oftheGSP. Clarification wasalsosought onthecriteria forsector
orcountry graduation.
Therepresentative oftheEuropean Union replied thattherewasnocontradiction between the
WTO objective ofprogressive multilateral liberalization, andpreferential agreements. Hestressed
thatfreetrade wasonlyonecomponent oftheEU'sagreements which covered such aspects as
democracy, economic cooperation, political andsecurity relations, approximation oflaws, migration,
financial assistance forstructural reforms, etc.TheEUhadbeencareful toensure theconsistency
ofitsagreements withtheWTO. Hegavedetails ofrecent andcurrent negotiations onpreferential
agreements, aswellaspartnership andcooperation agreements. Healsogave some details of
Article XXIV:6 negotiations, andnoted thatthese didnothavetobecompleted prior toenlargement.
TheEUrecognized thatvarying rulesoforigin could create problems fortraders andcustoms
authorities. Uniform origin rules, including "diagonal cumulation", hadtherefore beenintroduced
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intheEurope Agreements andthesameruleswereproposed forthe"new generation" ofMediterranean
Agreements. TheEU'srules oforigin were seenasconsistent withWTO Agreements.
TheEUGSPscheme, although autonomous andnotcreating absolute rights, wasthemost
comprehensive intheworld. Itencouraged theintroduction ofpolicies fortheprotection ofworkers '
rights andtheenvironment. Thespecial incentive scheme wasavoluntary scheme tosupport theefforts
ofcountries tocombat thedrugs trade, ortointroduce forward-looking environmental orsocial policies.
Systemic trade policy issues
Ingeneral, Members acknowledged theEU'ssteady progress towards amore liberal trade
régime inthelasttwoyears, inparticular through theimplementation ofWTO tariff commitments
andthephasing outofquotas andvoluntary export restraints. They recognized thattheEUhadplayed
akeyroleinthenegotiations onbasic telecommunications andinformation technology products and
wasadriving force behind current negotiations infinancial services.
However, Members noted thatimport protection, various forms ofassistance andtheuseof
contingency measures remained ofimportance insensitive sectors, some ofparticular interest to
developing countries. While average industrial tariffs werenowbelow 5percentandshould beunder
3percentin2000,significantpeaksremainedintextilesandclothing,automobiles,andcertainconsumer
electronics. Inagriculture, veryhighratesstillaffected important products suchascereals, meat, dairy
products, poultry, sugar andtobacco. Inaddition, theEU'stariffstructure continued todisplay some
degree ofescalation. Thetrade-restricting impact oftariff reclassification wasalsoraised.
Anumber ofparticipants regretted thehighincidence ofanti-dumping, theconcentration of
recent actions ontextile products andtheuseofanti-circumvention provisions; thecombination of
hightariffprotection andquota limitations fortextiles withintensive useofanti-dumping actions added
furtheruncertaintyinaccesstoanalreadyprotectedmarket.Questionswereposedastothecompatibility
ofcertain provisions oftheEUanti-dumping legislation withtherelevant WTO Agreement.
Members stressed thegrowing impact of"internal" measures, suchasState aid,onexternal
trade andstressed theneedforstricter subsidy disciplines ontheMember States. Concerns were
expressed about thelowlevel ofopening ofpublic procurement markets andcompliance withthe
Government Procurement Agreements. Members alsoemphasized thatEUhealth, safety and
environmental directives should notconstitute unnecessary obstacles totrade. Inthisrespect, some
participants raised systemic concerns about the"zero risk" approach apparently contained incertain
tradeprohibitions,affectingbothEUandnon-EUMembers,includingthoseconcerningmeatandrelated
animal products deemed tocarry BSEagents, andnewmeasures on"specified riskmaterials" tobe
introduced on1January 1998. Other Members sought greater transparency inthemanagement of
theEUEco-Label scheme.
Therepresentative oftheEuropean Union provided details onitstariff nomenclature aswell
astariff andcustoms administration andassociated national andCommunity judicial processes. He
alsogaveextensive replies toquestions ontheEU'santi-dumping rules andprocedures. These, he
said,wereintended torestore fairtradeandwereinconformity withtheWTO; thenumber ofinitiations
was,moreover, diminishing. Heasserted thatprocedures wereopenandtransparent, andthatthere
wasnospecific "targeting" ofsectors orexporters. While special regard wasgiven todeveloping
countries, theCommission could onlyaccept constructive solutions which remedied injurious dumping.
Onintra-Community trade, anti-dumping actions were excluded intheintegrated market; instead,
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competition ruleswereenforced todealwithsuchissues aspredatory pricing. The"anti-absorption"
clause allowed there-assessment ofexport prices or"normal values" incases where pricemovements
toremove injury hadnottaken place. The"lesser duty" rulewasusedsystematically andhadoften
moderated anti-dumping dutylevels. TheWTO recognized theneedtocounter deliberate circumvention
ofanti-dumping measures.
TherepresentativeemphasisedthattheEUhadnotifieditsstateaidstotheWTO.Heappreciated
therecognition ofitsefforts toprovide transparency atCommunity, national andsub-national levels,
andprovided details ontheoperation ofstructural funds, including inspecific sectors. Stateaidsshould
beusedwithrestraint andbetransparent. Surveys hadshown along-term reduction intheirusein
theEU,andtheEUbelieved thistrend must continue.
Therepresentative alsoprovided information ontheoperation ofEUcompetition policy, its
Market Access Strategy Database, theapplication ofitsTrade Barriers Regulation toBrazilian
"conhaque ",andtheEU'sexport promotion programme. Responses werealsogiven onenvironmental
standards andeco-labelling; thelatter scheme wasnon-discriminatory andsteps werebeing taken to
takeaccount oftheinterests ofallproducers. Metric-only labelling wasinkeeping withISOstandards
andwasintended tosimplify procedures. Heclarified thattheMRA between theEUandthe
United States contained norule-of-origin provisions. Theintention wastoextend thescope ofMRAs
toother suppliers.
Therepresentative emphasized theEU'sreliance onstrong andsecure intellectual andindustrial
property rights. Hegaveexamples oflegislation inforce orunder consideration andreplied tospecific
questions insuchfields aselectronic commerce, protection ofdatabases andnational treatment. The
Government Procurement Agreement (GPA) hadthefulleffect ofCommunity law.ByJuly1996140
outof155national measures implementing EUdirectives hadbeennotified totheEC.Theabsence
ofharmonization didnotnecessarily imply divergence fromEUrulesorGPArequirements, forexample
where theywere already compatible. Contracts below ECandGPA thresholds didnotneedtobe
published. Further details onGPA implementation wereprovided; notification totheWTO would
bemade by31December 1997.
Sectoral issues
Inagriculture, theimplementation oftheCAPreform andofWTO commitments, while largely
aided byfavourable market trends, wasseenasastepintherightdirection. Average tariffs hadbeen
reduced buthighout-of-quota ratescontinued toprotect sensitive products; producer subsidy equivalents
hadincreased. Import arrangements formeat, dairy products, rice,fruitandvegetables continued
tobeamatter forconcern. Members called forcontinued policy reforms inthesector, withfurther
shifts towards direct payments andreduced reliance onprice support andexport subsidies. Inthis
respect, therecent Commission 'sAgenda 2000 proposal waswelcomed, although some Members
wondered whether itwentfarenough interms ofimproved resource allocation aswellasmarket access;
information wassought about EUMember States 'initial reactions totheproposal.
Members acknowledged improved market access inmanufacturing under thecombination of
single market provisions, thereduction oftariffandnon-tariff measures, andnewcommitments under
theInformation Technology Agreement. However, several participants expressed disappointment about
theslowliberalization oftextiles andclothing imports andbackloading ofrestrictive items tothelast
stages ofintegration under theATC. Inaddition, Members noted thatsectors suchasautomobiles
faced difficulties inadjusting tonewmarket trends andcostconditions, alsobenefitted fromhightariff
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protection andsignificant financial assistance. Some participants underlined theEUindustry 'shigh
specialization inmedium-technology products.
Most Members appreciated theEU'sefforts toliberalize trade inservices bothinternally and
externally, inparticular intelecommunications andfinancial services. Some Members asked theEU
whether,asservicesliberalizationgeneratedsubstantialbenefitsfordevelopedcountries,itwouldsupport
thelinkage ofservices negotiations withother areasofinterest todeveloping countries inthenextphase
ofWTO negotiations.
Therepresentative oftheEuropean Union noted thatthetextiles andclothing sectors werein
theprocess ofre-integration intotheGATT. TheEU'sschedule waswholly consistent withits
liberalization obligations. However, theEUwould review itsStage 1integration inlinewiththe
recommendations oftheTMB. Heexplained theprovisions foraccess under theEurope Agreements,
noted thatapplied tariffs werenotabove bound ratesandthatthehighest ratescould notbedescribed
as"peaks". TheEUhadnotyetdrawn upplans forStage 3ofintegration under theATC.
Therepresentative provided some initial responses toarange ofquestions onagriculture and
fisheries, promising written answers atalaterstage. These referred principally toSPSmeasures,
measures taken inresponse totheBSEcrisis, further CAPreform, andthefruitandvegetable regime.
InsomecasesMemberswerereferredtoinformationprovidedtootherWTOCommittees,e.g.,regarding
tariffquotaadministration.TheEUwascomplyingwithitsWTOobligations,includingthoseofinternal
support. TheEUdidnotconsider itsintervention agencies asState-Trading Enterprises. Reform of
thewinesector wasunder consideration.
Therepresentative noted thatsome questions ontheongoing reform intheservices sector went
beyondWTOobligations,andinternalreformsdidnotnecessarilyhaveanimpactonexternalobligations.
TheEUwasseeking liberalization byitstrading partners commensurate withwhat itwasoffering,
butitalsorecognized thebeneficial effect ofinternational commitments ontheinternal agenda. Details
were provided onaspects ofthesingle market programme andexternal market opening infinancial
services andtransport, theVAT Directive fornon-EU service providers intelecommunications and
media ownership andthe"Television Without Frontiers" Directive inaudio-visual services. Therules
onelectronic commerce were currently being examined.
TheEUandthefuture ofthemultilateral trading system
Members emphasized thatthereview wastaking placeinaperiod ofmajor policy developments
intheEU.Much attention wasdevoted tothepossible consequences ofthemove towards economic
andmonetary union andofnewenlargements ontheEUandthirdcountries. Some Members stressed
thepotentially beneficial effects ofthesingle currency ontransparency andonthesecurity and
predictability oftrade flows intotheeuroarea. However, further analysis wasrequested from the
EUontheconsequences ofEMU forEuropean countries which were notintheeuroarea.
Members generally recognized thatthedeepening ofEuropean integration, withsingle market
completion, preparations fortheintroduction ofasingle currency andthereform ofCommunity
institutions, hadnotreduced theEU'sinvolvement inthemultilateral system. Onthecontrary, itwas
recognized thattheEUhadcontributed tothesuccess ofpost-Uruguay Round negotiations, promoted
theuseofdispute settlement procedures, including byacceptance ofPanel reports going against the
EU,andsupported thedevelopment ofnewissues ontheWTO agenda. Some members welcomed
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thestatements made bytheEUrepresentative concerning theneedforcomprehensive, rather than
sectoral, negotiations inanyfuture WTO round.
Therepresentative oftheEuropean Union recalled hisopening statement confirming theEU's
attachment tothemultilateral system. Heoutlined theprogrammes thathadbeenorwould beestablished
under "Agenda 2000" fordomestic reform andtheinitiation ofaccession negotiations withapplicant
governments. TheEUwould observe itsobligations under therelevant provisions oftheGATT 1994
andGATS. Enlargement oftheEUwould alsoimply abroader Single Market. Asinthepast,internal
integration andexternal liberalization would continue inparallel.
Itwastoosoontojudge theprecise trade effects ofthecreation oftheeuro. Theclear aim
wastohaveastable currency. Alarge number oftechnical questions would havetobesolved.
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Conclusion
Thisreview hasillustrated thattheEU'sinfluence onthemultilateral trading system andits
evolution isclearly recognized byMembers. Thishastwoconsequences: thatMembers greatly value
thepositive effects ofsuchliberalizing activities astheSingle Market, andthatMembers arestrongly
sensitive toanytrade policies ormeasures oftheEUthatareseenaspotentially trade-distorting.
Members havealsoshown theirconcerns about thesystemic effects oftheexpansion oftheEU,the
development ofanewgeneration oftrade agreements withneighbouring andother countries, anda
widerange ofspecific andsectoral issues. Certainly thetrade policies andactions oftheEUdonot
leaveanyWTO Member indifferent; thishasbeenclearly seeninthelargenumber ofadvance questions
covering amultitude ofissues, andthelevelofthedebate inthemeeting.
Although thisisan"interim" review, itcomes atanimportant timeforthedevelopment of
EUtradepolicies. Many newdevelopments areunderway, notleastthemove toeconomic andmonetary
union (leading tofurther integration andliberalization ofthesingle market), therevision oftheLomé
Convention, andstepstoward further EUenlargement. Wehopethatthecomments made inthepast
twodayswillbetaken intoaccount bythecompetent organs oftheEuropean Union -theCommission
andtheMember States -indeveloping theirexternal relations within themultilateral trading system
andinformulatingtheEU'sinternalpolicieswhichhavedirectorindirectimplicationsforthemultilateral
trading system.
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