RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/136 
1 October 2004  
 
(04-4103) 
Trade Policy Review Body Original: English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by  
 
THE EUROPEAN COMMUNITIES1 
 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakech Agreement Establishing the World Trade 
Organization), the policy statement by the European Communities is attached. 
 
 
                                                      
1 Previous Trade Policy Reviews of the European Communities had used the "European Union" in the 
title.  At the request of the Commission, the title has been changed to the "European Communities". 
Note: This report is subject to restricted circu lation and press embargo until the end of the 
meeting of the Trade Policy Review Bo dy on the European Communities. European Communities WT/TPR/G/136 
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CONTENTS 
 
Page 
 
I. INTRODUCTION 4 
II. KEY DEVELOPMENTS IN THE EC (2002-04) 4 
 (1) I NSTITUTIONAL DEVELOPMENTS  4 
 (2) D EVELOPMENTS IN THE INTERNAL MARKET AND CENTRAL POLICY AREAS  5 
 (3) D EVELOPMENTS IN TRADE  7 
III. THE EC TRADE POLICY FRAMEWORK 8 
IV. THE EC’S TRADE POLICY AT GLOBAL LEVEL 8 
 (1) EC  EFFORTS TOWARDS THE HARNESSING OF GLOBALISATION  8 
 (2) T HE EC AND THE WTO 12 
 (3) R EGIONAL , BI-REGIONAL AND BILATERAL TRADE RELATIONS  15 
 (i) Relations with countries in the geographical vicinity of the EC 15 
 (ii) Relations with developing countries 16 
 (iii) Relations with other partners 19 
V. CONCLUSION  20 
 
 
 WT/TPR/G/136 Trade Policy Review 
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I. INTRODUCTION 
1. The last trade policy review of the European Communities (EC) took place in July 2002. In 
the period since then, there have been several impo rtant developments in the EC with a direct or 
indirect influence on its trade policies. Among other things, the EC has embarked on the creation of a 
new Constitution, and launched and carried out reform s to strengthen the functioning of the internal 
market and other EC internal policies. This has amon gst other things led to far-reaching reform of the 
Common Agricultural Policy.  
2. As of 1 May 2004 the EC was enlarged with th e historic accession of ten new Member States, 
broadening the single market and the coverage of the EC’s common commercial policy, and yielding 
even greater benefits for third country traders and investors. 
3. Within the WTO, the EC during the period under review has been the driving force behind 
progress in the Doha Round, and played a key role  both in reviving negotiations after the Cancun 
ministerial meeting, and in successfully reach ing agreement on a negotiating framework on 
1 August 2004. An active bilateral and regional trade agenda, aiming notably at promoting the 
integration of developing countries into the global tr ading system, has been pursued in parallel to the 
EC’s participation in the WTO negotiations.  
4. In sum, EC trade policy in the period under review has continued to be characterised by 
activism, innovation and leadership, has been underpi nned by a strong social and institutional reform 
agenda, and consciously pursued in a way that serv es and promotes sustainable development globally.  
II. KEY DEVELOPMENTS IN THE EC (2002-04) 
(1) INSTITUTIONAL DEVELOPMENTS  
5. The key developments since the last trade polic y review have been related to: preparing the 
final stages of enlargement of the EC; the stre ngthening of policies in pursuit of the Lisbon and 
Gothenburg strategies aiming at achieving sustaina ble development through economic, social and 
environmental renewal; and the reform of internal  policies, including on agriculture, in order to 
promote more sustainable economic growth in the medium and long-term. 
6. A decisive moment in this enlargement of the European Union  was reached on 
16 April 2004 with the signing, in Athens, of the Treaty of Accession for the Czech Republic, the 
Republic of Estonia, the Republic of Cyprus, the Re public of Latvia, the Republic of Lithuania, the 
Republic of Hungary, the Republic of  Malta, the Republic of Poland, th e Republic of Slovenia and the 
Slovak Republic who conc luded accession negotiations with the EU at the European Council in 
Copenhagen in December 2002. This marked the formal  end of the division of Europe at the end of 
the Second World War and the culmination of an  enlargement-process initiated as early as 1989 by 
the launch of the PHARE-programme aiming at assis ting the countries which would later apply for 
EU membership to convert planned economies into efficient and functioning market economies. That 
programme was later supplemented by the Europe Agreements providing for progressive integration 
of the signatory countries to the EU, through co-operation in the field of environment, transport and 
customs as well as the legislative approximation with EC legislation, particularly in the areas relevant to the internal market, such as st andardisation, competition and prot ection of intellectual, industrial 
and commercial property. Enlargement has t hus taken place over more than a decade. 
7. Enlargement itself implies that the EC’s comm on commercial policy is extended also to cover 
the ten new Member States, whose previous arrangeme nts are superseded by those of the EC. This has 
led to substantial Liberalization,  with exporters from third count ries benefiting already from the European Communities WT/TPR/G/136 
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extension to the ten new Member States of the EC’s transparent and open trade regime, with a single 
set of trade rules and with bound tariffs being si gnificantly lower. Enlargement has also led to 
increased opportunities for third country exports and investors by extending further the single market, consisting of more than 450 million citizens, accounting for roughly 18% of world trade and 
contributing to more than 25% of the world's Gr oss Domestic Product. The extension of the ‘four 
freedoms' to the new Member States will simplify and enhance the access of third country investors 
and exporters to the EU market. Investors and expor ts will also benefit from the adoption of higher 
regulatory standards, notably in the protection of  intellectual property right s, access to government 
procurement markets or in the field of competiti on, which will safeguard better the interests of 
investors and traders in the new Member States. A gr eat number of third countries have also benefited 
from the ten new Member States becoming parties to the EC’s preferential arrangements, including the GSP. The EC has now in conformity with its  obligations under the GATT and GATS entered into 
negotiations with trading partners, whose rights ma y have been affected by EU enlargement.  
8. Accession negotiations have continued with Bulgaria  and Romania with a view to their 
joining the EU in 2007. Turkey has also since Dece mber 1999 been a candidate for membership of the 
EU, and relations between the EC and Turkey ha ve accordingly broadened and deepened during the 
period of the review. Croatia and the Former Yugos lav Republic of Macedonia have also applied to 
become members.  
9. While reaching agreement on revision of the existing treaties through the Treaty of Nice  in 
December 2000, the European Council also recognised the need to pursue further institutional reform 
so as to better equip the European Union for the future. A Declaration as to this effect was adopted at 
the European Council in Laeken in Belgium on 15 December 2001, establishing a European 
Convention  to examine essential questions raised by futu re developments of the European Union, 
including: better distribution of the Union’s powers, simplification of instruments for taking action, 
providing better guarantees for democracy, transparen cy and effectiveness in the Union, notably in 
view of EU enlargement; simplification of the curre nt Treaty and other reforms. On 20 June 2003 the 
President of the Convention presented, on behalf of the representatives from the 15 member states and 
the 13 candidate countries, the results to the Europ ean Council meeting in Thessaloniki, in the form of 
a proposed new EU constitution. Following furt her inter-governmental negotiations, the EU 
Constitution was agreed by the European Council at  its meeting in Brussels on 16-18 June 2004. As 
and when adopted, the EU Constitution may have imp lications for the conduct of the EC’s external 
trade policy. This will be, however, a subject for a future trade policy review of the EC.  
(2) D
EVELOPMENTS IN THE INTERNAL MARKET AND CENTRAL POLICY AREAS  
10. During the period covered by this review, considerable progress has been made with 
implementation of the Lisbon Strategy . A number of new initiatives have  been launched in the areas 
of environment and employment, e.g. a Community st rategy for health and safety at work, a directive 
on the status of temporary workers and a comm unication on corporate social responsibility.  
11. The social policy agenda , a programme covering the period from 2000 to 2005, reached its 
midpoint in 2003. To take account of changes in so ciety and the labour market, and in view of the 
forthcoming enlargement, a mid-term review of the agenda was conducted and appropriate changes 
made to the strategy, notably to update it. In 2003 the EC also formulated a simplified and more 
effective European employment strategy, based on a streamlined approach to the employment 
guidelines. Moreover further streamlining of policy c oordination processes in various areas of social 
protection (inclusion, pensions, healthcare and employment incentives) took place in order to 
reinforce the social dimension of the Lisbon strategy.  WT/TPR/G/136 Trade Policy Review 
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12.  Similarly, as part of its agenda for sustainabl e growth, the EC launched  on 15 July 2003 the 
"European action for growth " initiative,  based on stimulating investment in trans-European networks 
and infrastructure, as well as research and de velopment projects for strengthening and improving 
competitiveness, employment, and investment in physical and human capital.  
13. Encouraged by the 10th anniversary of the 'single market' , a series of priorities were set out 
in 2003 as part of the internal market strategy for the next three years,  notably to achieving full 
transposition by the Member States of legislation already adopted at EC level. In the area of services, 
considerable progress was made in implementing the ac tion plan for financial services. With regard to 
taxation, the EC adopted a legislative package whic h had been under discussion for several years, thus 
paving the way for more effective combating of harm ful practices and fewer distortions in the internal 
market, primarily with regard to the taxation of sav ings. In the enterprise field, the EC designed an 
action plan for modernising company law and adopt ed a regulation on European cooperative societies 
complementing existing legislation. Significan t progress was also made regarding accounting 
regulations, particularly with regard to better inte gration of international accounting standards. Lastly, 
significant progress was also made in simplifying the legislation on public procurement. All of these 
reforms will improve the transparency and effi ciency of the European business environment.  
14. In September 2003, the EC a dopted a far-reaching reform of the Common Agricultural 
Policy  (CAP), designed to change fundamentally th e way in which the EC provides support for the 
farming sector.  
15. The revised CAP has increased its focus on the in terests of consumers and taxpayers, while at 
the same time giving Europe's farm ers more freedom to gear their production to market needs. In the 
future, the largest share of subsid ies will be allocated independently  of the volume of production, and 
Member States will only have the possibility, so as  to prevent certain fo rms of production being 
abandoned to maintain a limited link between subsidies and producti on, on well-defined terms. The 
aim of this 'decoupling' is to increase the compe titiveness of Europe's farmers while assuring them a 
stable income. It also significantly reduces trad e distortions. The new system of payments will 
strengthen Community policies in favour of rural development and be linked to the observance of 
environmental, food safety and animal welfare standa rds. The different elements of the reform will 
enter into force in 2004 and 2005. The single fa rm payment will enter into force in 2005.  
16. On 22 April 2004 the CAP reform was continued by adoption of a thorough reform of 
agricultural policy support for the tobacco, olive, co tton and hops regimes. These reforms will lead to 
enhanced competitiveness, stronger market-orientation, improved environmental respect, less trade 
distortion, and stabilised incomes for farmers. For th e four sectors concerned, a significant part of the 
current production-linked payments will be transfe rred to the de-coupled single payment. For tobacco, 
before full de-coupling, Member States may decide to maintain coupled elements over a transition 
period of four years. A part of the current tobacco premium will be used to finance restructuring programmes in affected regions from 2010. For olive oil, the EC has decided that Member States may 
maintain a coupled payment of up to 40%. For co tton, the EC has agreed to de-couple 65% of the 
subsidies, while 35% will be maintained as a pe r hectare payment. Restructuring programmes in 
favour of rural development will also be introduced . The subsidies for hops will be fully de-linked 
from production and the EC may decide to keep up to 25% coupled. All these reforms will start in 
2006, except hops (2005 or 2006). In July 2004 proposals for reform also of the EC’s sugar regime were presented to the Council of Ministers. Di scussions on these options are currently under way. 
17. Building on the reform of the Common Fisheries Policy  in 2002, further steps were taken in 
2003 to better implement certain aspects of that re form. These included measures to ensure a uniform 
and effective implementation of the Common Fi sheries Policy, management measures for the European Communities WT/TPR/G/136 
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sustainable exploitation of fisheries resources in the Mediterranean, measures for the recovery of 
certain stocks and the introduction of regional advi sory councils. In addition, the Community paid 
particular attention to the fishing industry in the outermost regions: measures were adopted to offset 
the additional costs incurred in disposing of fishery products from some of those regions.  
(3) DEVELOPMENTS IN TRADE  
18. In 2003, the EC-15 recorded a trade deficit in merchandise trade of € 11.5 bio, against a 
surplus of € 7.9 bio in 2002, reflecting a fall in EC exports, while imports remained stable. EC-15 
trade flows with its major partners were mixed, with falls recorded in imports from USA (-14%), 
Switzerland (-5%) and Japan (-3%) and in exports to the USA (-9%), Japan (-6%), Switzerland (-3%). 
On average, EC imports increased by 7.7% annually from 1995-2003 whereas EC exports rose 6.9% 
annually over the same period. The highest EC trade deficit in 2003 was recorded with China (€-55.0 
bio). The highest surplus was registered with the USA increasing from € +66.7 bio in 2002 to € +69.3 bio in 2003. EC-15 trade with Japan showed an in crease in EC-deficit (€-26.7 bio in 2003 compared 
to €-25.8 bio in 2002). The EC’s largest trading pa rtners remain the USA, China, Switzerland, Japan, 
and Russia. 
19. The most notable increases in 2003 were for trad e with China (imports +16%, exports +17%), 
Russia (import +9%, export +9%) and Turkey (impor ts +9%, exports +15%). About three quarters of 
EC imports are composed of primary products, machinery, and other manufactured products, in 
roughly equal shares. About 87% of EC exports are manufactured products, primarily machinery 
(28%), transportation materials (17%), and chemical  products (16%). The energy deficit increased (€ -
118.1 bio in 2003 compared to € -112.3 bio in 2002), while the surplus for machinery and vehicles 
decreased (€ +87.0 bio compared to € +95.3 bio). Th e surplus in the chemical s sector remained nearly 
stable (€ +74.0 bio compared to € +73.5 bio). 
20. The EC-15 is the world’s largest trader of services with 25% of world imports and 26% of 
world exports in 2002. The EC maintained a small surplus in its services balance (€ +22 billion) in 
2002. Services have mainly been exported to the US A (35% of total) and Switzerland (12% of total). 
Japan accounted for 5% whereas around 4% was expor ted to the 10 accession countries. About half of 
EC services’ exports consists of "Other business services" (26%) and "Transportation" (24%). The 
fastest export growth in recent years has been in computer and information services, which grew by 
over 26% on average annually from 1996 to 2002. EC se rvices’ imports have mainly come from the 
USA (35% of total) and Switzerland (11%). Around 3% originated in Japan. "Travel" and "Other 
business services" each accounted for 27% of imports and "Transportation" for a further 24%. As in 
the case of exports, computer and information services was the fastest growing sector, with 17% 
average annual growth rate from 1996 to 2002. 
21. The EC accounts for over 40% of all world out ward FDI flows. In 2002, EC FDI outflows 
exceeded inflows by € 45 bio. On average, almost half of EC FDI outflows go to the USA, 13% to 
EFTA, and 10% to the LATAM 20 countries. In 2002,  EC outward FDI flows were only about one 
third of the exceptionally high flows seen in 2000.  The strongest declines were in FDI flows to 
industrialised countries, whereas FDI flows to China,  ASEAN and Russia were higher in 2002 than in 
2000. 
22. The EC remains the largest importer and expor ter of agricultural products.  In 2003 the EC 
imported € 60.4 bio and exported € 57.9 of agricultu ral products. The EC also remained the world's 
largest customer for farm products from devel oping countries, importing as much as the US, Japan, 
Canada, Australia and New Zealand taken together . The EC alone absorbs around 85% of Africa's 
agricultural exports.  WT/TPR/G/136 Trade Policy Review 
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III. THE EC TRADE POLICY FRAMEWORK 
23. The formulation and implementation of the EC’s common commercial policy takes place 
in an efficient, transparent and democratically  accountable manner. Article 133 of the EC Treaty 
forms the basis for EC trade policy, according to which any measure to be taken within the Common 
Commercial Policy is proposed by the European Commission and decided by the Council of 
Ministers. The Commission ensures the uniform representation and exercise of EC trade policy at 
both bilateral and multilate ral level, assisted by a consulta tive Committee (Article 133 Committee) 
composed of representatives of the Member States,  which meets every week. The ten new Member 
States began to participate fully in the work of this Committee already on April 2003. The day to day 
management of EC trade policy is the task of the Commission’s Directorate General for Trade, 
serving to the Trade Commissioner. The European Parliament is kept informed of trade policy developments and is consulted on a regular basi s. In addition, the Commission implements a 
systematic policy of transparent and open dialogue with representatives of in terest groups and civil 
society, including representatives from industry,  the social partners and the NGO community. 
24. The Treaty of Nice  introduced a substantial reform of Article 133 of the EC Treaty, aimed at 
adjusting Article 133 and the scope of the Common  Commercial Policy to an additional number of 
policy areas, so as to reflect the increasingly broa d reach of today’s trade policy. The Nice Treaty 
introduced further steps to ensure the applicati on of uniform rules and procedures regarding the 
conclusion by the EC of agreements in the fi eld of trade in services and the trade aspects of 
intellectual property. The EC and its Member States continue to act together on issues for which they 
share competence, such as the conclusion of agre ements relating to trade in social, cultural, 
educational and health services which
 would go beyond the Community's internal powers in these 
areas. The revised Article 133 thus improves the formulation and implementation of trade policy in the EC by means of a clarification of powers a nd procedures, and through greater uniformity and 
flexibility in decision-making. 
IV. THE EC’S TRADE POLICY AT GLOBAL LEVEL 
(1) EC
 EFFORTS TOWARDS THE HARNESSING OF GLOBALISATION  
25. Both at the multilateral and the bilateral level th e EC’s trade policy is conceived not only as 
an end in itself, but as a means to promote sustainable development more broadly. In the EC’s view this means a trade policy centred not  solely on further trade opening, but also on the development of 
stronger international trade rules, measures to st rengthen the coherence between trade policies and 
other areas of policy such as social development or the environment, and the use of trade policy as a 
development instrument.  
26. The EC, in partnership with developing countri es and least-developed-countries, therefore 
seeks greater consistency and synergies between trad e and development initiatives. Efforts to assist 
the developing countries in achieving growth, al leviating poverty and improving social equality 
within a framework of sustainable development have to be undertaken through a range of policy 
tracks, including trade policy. To this end, th e EC remains a strong promoter of the Doha 
Development Agenda, the conclusion of regional and bilateral agreements giving even greater access 
to the EC market and fostering local trade, the ex tensive use of GSP-regimes for developing countries, 
and not least the provision of duty- and quota-free access to exports from all LDC countries, under the Everything-But-Arms initiative. In February 2004 th e EC launched a Helpdesk to foster developing 
country access to EU markets by providing comp rehensive information to developing country 
exporters on market access requirements and conditi ons. Similar facilities have  also been established 
by many Member States of the EC. Another importa nt step for further enabling developing countries European Communities WT/TPR/G/136 
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to access better the EU market was taken with the adoption of a Commission green paper focusing on 
simplifying both the procedures and the substantiv e requirements related to preferential rules of 
origin.  The EC has and will continue to strongly advocate that similar arra ngements be introduced by 
other developed countries.  
27. The EC has also continued to work assi duously for the earliest possible accession on 
commercially viable terms of all candidates having app lied to join the WTO, in particular LDC’s. The 
recent accessions of Nepal and Cambodia were thus particularly welcome.  
28. The EC also remains a major partner of deve loping countries by providing assistance to 
enable them fully to take advantage of trade oppor tunities. In the autumn of 2002 the EC policy on 
trade and development was further elaborated th rough a major policy Communication: "Trade and 
Development: Assisting developing Countries to Be nefit from Trade (COM (2002) 513). This paper 
underlined the importance of mainstreaming trade in  the overall development strategy of countries 
and to base Trade Related Assistance programme s on a comprehensive analysis of needs; and 
prescribed that trade should be an important item in the policy dialogue with partner countries. The 
paper also identified key areas on which to con centrate assistance for trade capacity building, 
including assistance for WTO accession and mu ltilateral trade negotiati ons, support for the 
implementation of existing and future WTO ag reements and support for policy reforms and 
institution-building necessary to enha nce economic efficiency and to ensure greater participation in 
the world economy. Improving market access for developing countries is, in itself, not enough. Development aid plays an important role in im proving supply-side capacities and infrastructure, 
helping developing countries identify and develop new markets, and encourage institutional reform 
and sound administration, which are pre-requisites for a stable trade and investment climate.  
29. The EC and its Member States ar e the largest donors of trade related technical assistance with 
the amount of TRA provided in 2001 and 2002 reachi ng over € 2 billion. This corresponds to almost 
half of all trade related assistance provided globall y. (This figure excludes assi stance in areas such as 
port or transport infrastructure which obviously have  a direct bearing on trade performance). The EC 
assistance is provided at the multilateral, regional and bilateral level. The EC and its Member States 
contribute to about 60% of the funding of the WT O Doha Development Agenda Global Trust Fund, 
and are also important supporters of the Inte grated Framework for Trade-Related Technical 
Assistance for LDC’s. The EC and its Member States continuously rein force co-ordination in order to 
ensure the efficiency of the assistance provide d and partnership with the recipient countries. 
30. Globalisation has created challenges for the WTO system. It provides new opportunities for 
growth and higher living standard s throughout the world, but a much stronger degree of multilateral 
governance is needed to ensure th at the forces behind globalisation are channelled in a manner that 
promotes sustainable development and the equitable sh aring of the economic bene fits of globalisation. 
At the policy level this implies the adoption of strategies for sustainable development aimed at 
reconciling economic growth, social cohesion and environmental protection. The EC accordingly 
plays a leading role in international fora concerne d with trade and sustainable development issues, and 
remains particularly supportive of increased action at multilateral level, including through the WTO, 
and through the implementation of key multilate ral environmental agreements, in favour of 
sustainable development.  
31. The so-called ‘Cardiff process’ calls for the in tegration of sustainable development objectives 
in all EC policies. The EC and its Member St ates are thus committed to pursuing a positive and 
reinforcing interaction between ec onomic, environmental and social po licy in order to make parallel 
progress on the economic and social fronts to the bene fit of all. A market-economy need not mean a 
market society. WT/TPR/G/136 Trade Policy Review 
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32. The EC’s own experiences serve to demonstr ate the positive relationship between economic 
growth, environmental policies protection, and soci al and labour rights. The EC has created a single 
market with free movement of goods, services, cap ital and people, based on a strong and transparent 
regulatory framework. Economic a nd monetary union has pushed the process further still, opening up 
new opportunities for producers of goods, providers of services, and consumers. In doing so, it has 
contributed to improving living conditions of its c itizens and in particular for those in the least 
developed Member States. The GDP per capita of Spain and Portugal has increased from respectively 71% and 54% of the EC average in 1985, when they  joined the EC, to 86% and 71% in 2002, while 
that of Ireland has jumped from 60% in 1973 to over 125% in 2002. These achievements have taken 
place in parallel with the development of strong social and environmental dimensions. Practical 
experience of the relevance of strong social and e nvironmental policies for countries in the process of 
economic transition has also been seen recently in the context of the EC's latest enlargement. 
33. The role of social and environmental policy is integral to the dynamic development of 
modern, open economies and societies and it brings cu mulative benefits through time. The social and 
environmental dimensions, in their diverse forms with in the EC, have played a crucial role in helping 
maintain continually rising productivity and living standards across the Union, while helping ensure 
that benefits are widely shared and establishing soci al cohesion. Social and environmental policies are 
not simply an outcome of good economic performance  but are at the same time an input and a 
framework. In the experience of the EC, they facili tate capacity to adjust to changes stemming from 
the internationalisation of the economy and help to turn new opportunities into net benefits for the 
economy and society.  
34. The absence, or insufficiency, of social a nd environmental policy would create major 
economic costs. Without social policies, the EC a nd its Member States might be more inclined - under 
pressure of its population - to consider restric tive trade measures to fend off perceived negative 
impacts stemming from the internationalisation of th e economy. As the EC has much to benefit from 
openness in trade, social policy provides a buffer against adverse effects. Without environmental 
policies the environmental implications arising notab ly from increased economic integration and trade 
Liberalization could prove extremely costly in the medium and long run. 
35. Good social and environmental conditions also  underpin sustainable productivity growth and 
promote the efficient production of high quality goods and services generating a net added value. 
Empirical evidence in the EC shows that qualit y in work is a component of competitiveness. 
Investment in people, providing real opportunities for all, policies that mitigate the adverse effects of 
a changing economy on specific groups of people or regions, good social services accessible to all, social dialogue, the respect for fundamental social  rights including core labour standards, minimum 
standards for working conditions and for ensuri ng workers’ upstream involvement in managing 
change, all play a crucial role. They not only cater for basic needs of solidarity and social justice but 
also constitute an important investment following the EC’s economic development.  
36. It is against this background that the EC remains committed to develop a meaningful 
dialogue, involving in particular the ILO and the WTO, on questions relating to trade, labour, and 
social development. The promotion of social rights is a positive element in fostering the 
competitiveness of one country and not an impedime nt to the development of competitive advantage. 
The EC remains of the view that the discussion a nd pursuit of environmental and social issues should 
not be used for protectionist purposes, and it re jects any unilateral sanctions-based approach. The 
objective is to further environmental and social pr ogress with a view to promoting benefits for all. 
37. The EC therefore welcomed the creation of the World Commission on the Social Dimension 
of Globalisation under the aegis of the ILO, as well as the reinforcement of the ILO in order to European Communities WT/TPR/G/136 
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promote social development, and the adoptio n of higher labour standards worldwide. The 
recommendations in the final report of the World Commission constitutes an important contribution to 
these efforts, and will serve in particular to a ddress in a more objective and effective way  the 
relationship between trade, growth and social development policies, important for all members 
undergoing social and economic adjustment. The EC l ooks forward to concrete  steps being taken in 
order to ensure the necessary follow-up to the re port in the EC, in all relevant international 
organisations as well as by governments and other interested groups. In order to contribute to the 
effective follow-up, the Commission adopted on 18 May 2004 a Communication on the Social 
Dimension of Globalisation (COM(2004)383 final). 
38. Environmental and social policies have to be part of the cooperation with third countries and 
development policy – and therefore of developmen t assistance – in order to assist developing 
countries in improving social stability, productivit y, competitiveness and economic growth and in 
moving towards a sustainable development. S ound macro-economic policies, effective social 
governance, human capital development, proper ma nagement of natural resources and environment 
and improved market access as well as strong trade rules to underpin domestic reform: all these are 
essential ingredients of a country’s strategy for sustainable economic development. Trade-related 
assistance and capacity building can help developing countries to integrate these elements.  
39. The EC has also pursued social and environmental development objectives in regional, bi-
regional and bilateral arrangements. All its most  recent agreements recognise and promote social 
rights. The EC has thus for example entered into  dialogue and co-operation with countries such as 
Chile, South Africa and bi-regionally with the ACP (Africa, Caribbean and Pacific) countries as well 
as a number of other regions. The EC has also granted further trade preferences under the Generalised System of Preferences (GSP) to those developing countries that assure the respect of the core labour 
rights as defined by the ILO or comply with interna tionally recognised standards on sustainable forest 
management. This does, however, not imply an eros ion of the preferences or an unequal playing-field 
for the poorest, as they in any case benefit from full access under the EC’s Everything-But-Arms-
initiative. With respect to EBA beneficiaries the EC  continues to rely on dialogue and development 
aid to promote social rights.  
40. The EC has also launched a partnership with the private sector in the promotion of social and 
environmental standards by furthering corporate soci al responsibility, encouraging the private sector 
to voluntarily integrate social and environmental concerns in their business activities world-wide, in 
their international operations, wherever they operate.  It is important that companies from other parts 
of the world endorse also these responsibilities and we are seeing more and more companies worldwide develop their own guidelines for corporate social responsibility. In relation to labour issues 
these should take into account relevant internationall y agreed standards and be seen as complementary 
to legislation, its enforcement and collective agreem ents.  The EC has been at the forefront of the 
successful review of the OECD Guidelines in 2000 which established a multilaterally agreed 
"checklist" of basic good corporate behaviour and which contain an implementation mechanism with 
National Contact Points. The EC has also during the period under view initiated a debate on the 
relationship between trade and corruption, r ecognising that both the business community and 
governments have an equal role to play in comb ating corruption, which damages the economies and 
societies of many countries, both developed and developing. Finally, the EC has promoted marketing 
of fair trade products into EC markets via the co-financing of awareness raising campaigns among 
consumers throughout Europe. 
41. Two other important means of ensuring a more su stainable trade policy have also been given 
increased priority during the period covered by this re view. First, the EC has carried out a number of 
Sustainability Impact Assessments (SIAs)  of both its WTO DDA objectives and of several bilateral WT/TPR/G/136 Trade Policy Review 
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FTA negotiations. The objective of SIAs as a tool  for policy makers is to identify how best to 
maximise the social, environmental, and developmen t benefits of trade Liberalization, and identify 
where flanking measures might be needed to optimise outcomes or offset possible negative side effects of market-opening.  
42. The second instrument to improve trade policy co herence has been to extend transparency in 
the trade policy making-process and participation in that process of civil society. Domestically, the 
EC has intensified and further structured its effo rts at policy dialogue and consultation with social 
partners and representatives of broader civil society,  recognising that it is primarily at the domestic 
level that such consultation and ar bitration between different partners and interests must take place. 
Further steps have also been taking to strengthen the parliamentary dialogue. The EC believes that all 
members of the WTO and the trading system as a whole can benefit from more frequent and structured dialogue with parliaments and civil society representatives. Through such dialogue, 
misunderstandings about the nature  - and limitations - of trade policy can be removed, and greater 
mutual understanding and support for policies and fo r economic adjustment can be established among 
different sectors of society and interest groups. Th is is essential for any democratic policy-making 
function. 
(2) T
HE EC AND THE WTO 
43. In trade policy as in all other areas of public policy, the EC is committed, above all, to 
multilateral institutions and multilateral solutions. To this end, the EC h as been active in its efforts to 
maintain the primacy of the multilateral trading syst em, and to enable the WTO to respond to current 
and future challenges.  
44. The EC has thus attached the greatest importance to the timely implementation and 
compliance with the agreements to which memb ers of the WTO have bound themselves. It has 
participated actively in the Dispute Settlement  System as a defendant, a complainant and as a 
respondent. The EC’s record of timely compliance with Dispute Settlement Understanding Panel and 
Appellate Body rulings, and with the rules and agre ements of the WTO, are a testament to its support 
for keeping intact and strengthening the multilatera l trading system. While the foundations for this 
system were already laid by the last Round, the EC  has played an active role in the DSU review in 
order to improve its rules. The EC has also pus hed hard for negotiations aimed at making the WTO 
more responsive to the realities of the modern economy , the aspirations of its society, and the need of 
developing countries to integrate more into the trading system. To this end, the EC has throughout the 
course of the Doha negotiations, ta bled comprehensive proposals in all areas aimed at further market-
opening and stronger multilateral rules.  
45. It is perhaps useful at this juncture to briefly outline some of the positions taken by the EC in 
the DDA in the course of the last two years, and the contributions it has made  to the negotiations.   
46. Market access – for goods and services – is a core business of the WTO and improvements to 
market access is vital to foster global economic gr owth, and to help developing countries to fully 
participate in the global economy. Agriculture, ser vices and non-agricultural tariffs are all key areas. 
47. As regards agriculture, the EC as one of the world’s largest exporters and importers of 
agricultural goods, attaches importance to ambitious r esults in the negotiations. The EC has used the 
impetus created by two major reforms of the Common Agriculture Policy in the span of less than a 
year. Real progress, however, will require movement  on all issues covered by the Doha mandate - 
market access, domestic support, export support and ot her trade concerns - in a balanced fashion. A 
formula needs to be established for progressing on market access, and that reflects both the defensive European Communities WT/TPR/G/136 
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and offensive interests of members. Very substa ntial reductions in all forms of trade-distorting 
support must be aimed at by all. The EC has firm ly responded to developing countries’ call for early 
action on cotton and committed itself through the recent domestic reform efforts to eliminate all forms 
of export support and the elimination of most trade distorting domestic subsidies. The EC’s 
engagement on all these issues was crucial fo r the adoption of the framework modalities on 
agriculture on 1 August 2004.  
48. Non-agricultural market access represents one of  the most significant potentials for global 
trade gains in this round. The EC thus conti nues to press for an ambitious outcome. A single, non-
linear, ambitious formula, accompanied by flexibi lities for developing countries remains the best 
means to achieve this ambitious outcome. As re gards LDC’s and the simila rly week and vulnerable 
developing economies, a meaningful increase in ta riff bindings would be appropriate, while further 
steps should be taken to provide duty and quot a-free access to goods fro m LDC’s. The EC was 
pleased therefore that the 1 August Decisions of the General Council preserved all of these aims.  
49. Services negotiations are equally important and should not lag behind. Services are an 
essential part of today’s economies and further Libera lization, including in the area of procurement, 
offers great potential gains for developed and develo ping countries alike. The EC has been actively 
contributing to the negotiations since they were launched in 2000 and strongly encouraged increased 
participation by all countries. To this end, th e EC has submitted to a large part of the WTO 
membership requests that, far from being standard, ar e targeted and differentiated on the basis of the 
level of development of the country concerned. Th e EC has also tabled a substantial initial offer 
aiming to give developing countries a better deal especially in sectors of interest to them via the 
temporary entry of foreign nationals into the EC to provide services. The EC has invited and expects 
other WTO Members also to table, by the deadline of May 2005, ambitious offers to make the DDA a 
success. 
50. As stated earlier, the EC strongly believes that market opening should be conducive to 
sustainable development. The EC is therefore pl eased that concern about the relationship between 
environment policy and trade Liberalization, an im portant component of sustainable development, 
was included in the DDA. The next phase of negotiations should pay special attention to areas where trade can help sustainable development, fo r instance by creating market incentives for 
environmentally friendly goods.  
51. More generally environmental c onsiderations should be reflec ted throughout the negotiations 
as a whole. The trade round provides the first real opportunity to demonstrate that it is possible to 
develop real policy coherence between trade Libe ralization and environmen tal protection. All WTO 
members would benefit from clarification of the relationship between the rules of the WTO and the 
multilateral environmental agreements (MEAs), and from maximising synergies between trade, 
environment and development through trade Libe ralization in environmental goods and services. 
Increased co-operation and inter-action between the WTO and international environmental bodies 
(UNEP and MEAs) is also needed to ensure c oherence and best identify synergies for improving 
mutual supportiveness between trade and environment. 
52. The EC’s approach to the multilateral trade ne gotiations has been to complement further 
market opening with stronger rules and disciplines.  One important subject that combines market-
access and rule-making is that of geographical indicati ons. The EC has been at the forefront of efforts 
to complete negotiations on a multilateral register a nd the extension of the coverage of geographical 
indications for the benefit of business and consum ers around the world. These efforts have been met 
by an increasing number of friends of geographical indications. Regrettably some trading partners 
have refused to engage seriously in this negotiati on. The EC has also par ticipated actively in the WT/TPR/G/136 Trade Policy Review 
Page 14 
 
 
examination of the relationship between the TRI PS-agreement, the Convention on Biodiversity and 
protection of traditional knowledge, reflecting a commitment to developing countries’ interests in this 
area.  
53. Developed and developing countries alike need to create optimal conditions for cross border 
trade (trade facilitation), to encourage a climate attr active to productive foreign direct investment, to 
promote fair competition, and to procure of the best goods and services at fair prices.  
54. The EC has thus been a strong promoter of rules in these four areas in view of their 
importance to the global economy, and their role in creating a more stable and transparent environment for trade and investment. The stream lining of customs and other border procedures, 
cutting costs and red tape which continue to be a major constraint on WTO members’ export 
performance (especially for SME’s), will complement market-opening negotiations. It will, however, 
also imply significant savings as governments improve e fficiency of controls and, ultimately, enable 
higher revenue intakes. Negotiations should obvi ously provide the necessary flexibility for smaller 
developing countries to take on any new commitment in a progressive way, compatible with their 
trade, financial and development needs, and techni cal assistance will be important. The EC in its 
capacity as one of the main sources for FDI around th e world seeks a balanced framework of rules 
that will ensure more a stable and predictable investment environment worldwide. Developing countries for their part need to encourage more  long-term foreign direct investment. As for 
competition, all Members would benefit from basic ru les to deal with anti-competitive practices that 
damage their trade competitiveness, while for gove rnment procurement, rules on transparency, 
without questioning existing preferences to domestic  suppliers, would result in cost savings to 
Members and their tax-payers. Though these three subj ects will not be part of the Doha Development 
Agenda, the EC was heartened by the decision on 1 August 2004 formally to open negotiations on 
trade facilitation.  
55. EC leadership in the WTO, most notably after the failure of the WTO Ministerial in Cancun, 
was more than instrumental in enabling the WTO me mbership to revive the DDA and adopt the vital 
negotiating frameworks on 1 August 2004. The EC, like others after the failure of the WTO 
Ministerial in Cancun, carried out a thorough reassess ment of its position and policy options. It was 
necessary to re-evaluate whether the original reasons  for proposing a trade round remained valid, and 
whether there remained sufficien t support for the multilateral system on the part of other WTO 
members to make the negotiations worth pursuing.  
56. The first conclusion the EC reached was that the WTO must remain the principal forum for 
trade opening and the strengthening of trade rules.  The multilateral approach, based on the principles 
of transparency and non discrimination, remains th e most effective and legitimate means to manage 
the globalisation process and trade relations between  countries, and is the best guarantee against the 
threat of unilateralism. 
57. The EC also concluded that the Doha Declara tion remained valid. The negotiations continue 
to offer great potential to foster long-term economic growth, to stimulate trade and investment, and to 
promote sustainable development. The DDA has an importa nt role to play in our efforts to attain the 
Millennium Development Goals, and has a still largel y untapped potential to st rengthen relations with 
other international organisations, in the interest s of more coherent and effective international 
governance in addressing linkages between the economic, social and environmental fields for the sake 
of sustainable development.  
58. Having drawn these conclusions, and in order to revive the multilateral system, in the 
beginning of May the European Trade Commissione r, Pascal Lamy, and his colleague Agricultural European Communities WT/TPR/G/136 
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Commissioner Fischler sent a letter to all members of the WTO, indicating movements on several key 
DDA subjects and encouraging all members to agree on negotiating framework modalities on key issues such as agriculture, NAMA, trade facilitation and development. That letter gave a clear signal 
of the EC’s unwavering commitment to the negot iations, and by indicating the EC’s readiness to 
move was instrumental in rebuilding momentum. The negotiations in Geneva in the end of July 2004 
which led to the August Framework Agreement pr oved to be a major success for the entire WTO 
Membership. While achieving important results and giving new impetus in the areas of NAMA, agriculture, services, development issues and trade facilitation, the agreement was also important for 
putting the DDA back on track, demonstrating that th e multilateral approach to trade negotiations 
remains valid.  The Framework Agreement creat es a good basis for even greater efforts in the 
negotiations to come.   
59. The EC’s participation in the negotiations lead ing to the Framework Agreement is a clear and 
unquestionable reflection of the EC’s commitment to the multilateral approach to trade policy. This 
remains unchanged and is a top priority in EC's exte rnal relations. The EC will continue to work with 
friends of the multilateral trading system in order to  improve and reinforce it. The EC therefore calls 
on all members to join in defining improvements to the functioning of the WTO, so that it remains 
able in the future to deliver results for its members. The EC looks forward to continuing the 
examination of WTO reform with the Consultative Group on the WTO’s future role established by the 
WTO Director General.  
60. For the EC the key priority therefore continues to be to conclude the Doha negotiations with 
results that boost the European economy, trade and employment; that better integrate developing 
countries in the multilateral trading system and the global economy; and that strengthen at the 
international level the tools to manage globalisati on. The Doha round still provides the possibility for 
achieving all these aims.  
(3) R
EGIONAL , BI-REGIONAL AND BILATERAL TRADE RELATIONS  
61. In addition to its support for the multilateral trad ing system the EC is engaged in developing 
trade relations with other trade partners in the world through a number of preferential trade 
arrangements, including bi-regional and bilateral free-trade areas, a nd bilateral agreements aiming at 
facilitating cross border trade with the EC’s closest neighbours.  
62. The broad geographical coverage of these relationships reflect s the global economic and trade 
reach of the EC. In terms of trade policy, the EC’s regional and bilateral trade initiatives are designed 
to complement multilateral efforts, and in many instances extend significantly beyond the scope of the 
WTO’s Liberalization and rule-making agenda.    
(i) Relations with countries in the geographical vicinity of the EC  
63. A number of European countries outside the European Union have sought close relations to 
their EU neighbours, including through trade arrangements. Norway, Iceland and Liechtenstein  are 
closely linked to the Internal Market through th e Agreement on the European Economic Area (EEA), 
while Switzerland  has entered into seven agreements in th e sectors of free movement of persons, air 
and land transport, scientific and technological co -operation, agriculture, conformity assessment and 
public procurement. Negotiations have progressive ly continued to other areas including services, 
processed agricultural products, co-operati on against fraud and taxation on savings.  
64. While the Europe Agreements with the ten ne w Member States have been replaced by their 
membership of the EC, Europe Agreements  still exist with the candidate countries Bulgaria  and 
Romania , and constitute the framework for progressive integration of these countries’ economies into WT/TPR/G/136 Trade Policy Review 
Page 16 
 
 
that of the EC in the preparatory phase for EU a ccession. As for Turkey, the EC has established a 
Customs Union covering industrial products as we ll as processed agricultural goods. The agreement 
also provides for progressive Liberalization of ag riculture throu gh ongoing negotiations on mutual 
concessions with a view to establishing a free trade area, and progressive Liberalization of services 
and public procurement. These ag reements have been linked to the EEA, including through the pan-
European cumulation of origin, so as to foster increased regional Liberalization. 
65. The EC is, as part of efforts to strengthen the political stability and economic development of 
the Western Balkans , progressively entering into Stabilisa tion and Association Agreements (SAA) 
with the countries of that region, on the basis of the individual countries’ merits. SAAs have, so far, 
been concluded with the Former Yugoslav Republic  of Macedonia and Croatia and negotiations with 
Albania are ongoing. These agreements will supersede existing autonomous trade measures that abolish tariffs for nearly all products and provided for progressive Liberalization of trade in services. 
In addition to establishing a free trade area with the EC, these ag reements provide for political 
dialogue, legislative approximation and deep co-opera tion in many diverse areas. They are expected 
to prepare the signatory countries for eventual EU  membership, like the Europe Agreements did for 
the new Member States.  
66. The EC’s Partnership and Co- operation Agreements (PCA’s) re main the central plank of 
relations with Russia, Ukraine, Belarus, Georgia, Moldova and Kazakhstan . One of the main 
objectives of the agreements is the promotion of trade and investment as well as the development of 
harmonious economic relations betw een the Parties. The EC recognises the fundamental role that 
WTO membership can play in anchoring and ceme nting economic reforms in these countries and has 
therefore strongly supported their WTO accession pr ocesses. Accession will provide greater stability 
and predictability; and better terms of access for business. The signing on 21 May 2004 of the 
bilateral market access negotiations for the accessi on of the Russian Federation to the WTO was a 
decisive step in Russia’s acces sion process, which the EC hopes can be matched by other accession 
partners.  
67. In November 2002 the EC launched reflec tion on a New European Neighbourhood policy 
aiming at fostering relations with its neighbours through a long-term strategy for promoting reform, 
sustainable development and trade. In March 2003 the Commission adopted a Communication which 
suggests that all the neighbouring countries should be  offered the prospect of a stake in the EC’s 
internal market, by building on the existing frame work to promote the establishment of a more 
integrated and unitary pan-European market based on stable economic rules protecting producers and 
consumers and inducing investment.  
(ii) Relations with developing countries 
68. The EC's relations with the ACP are today governed by the ACP-EC Partnership Agreement, 
signed in Cotonou on 23 June 2000 an d concluded for a period of 20 y ears. This provides for one-way 
preferential access of ACP-products to the EC market  and is primarily conceived as an instrument of 
development cooperation.  In September 2002 the EC initiated fo rmal negotiations of Economic 
Partnership Agreements with ACP-countries, whic h are based on the principle of partnership and 
entailing rights as well as obligations for both sides.  Through the EPA’s the Communities will further 
open up its market to ACP products and tackle all other trade barriers. The ACP States for their part 
must be prepared to implement appropriate polic ies to strengthen their supply capacity, to reduce 
transaction costs, to open progressively their market s, and above all to further their own regional 
integration.   European Communities WT/TPR/G/136 
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69. Since the negotiation process got under way in September 2002, the ACP and the EC, during 
a first phase, have conducted clarification meet ings on EPA’s at the all-ACP level. Specific 
negotiations with individual ACP regions were launched in October 2003 with West Africa and 
Central Africa, and in February 2004 with East ern and Southern Africa. Negotiations with the 
Caribbean started in April 2004. For the other regions, Southern African Development Community 
(SADC) and the Pacific, negotiations were formal ly launched respectively in July and September 
2004.  
70. The EPA initiative forms an integral part of efforts to foster the integration of the ACP 
countries into the global economy, and reflects two things. First, the political decision of the ACP 
States to base their own integration into the world economy on regional economic integration; and 
second, the EC’s belief that regiona l economic integration within the developing world offer a better 
long-term prospect for development than perpet uating dependence solely on unilateral preferences 
granted by northern markets according to a hub and spoke development model: EPAs will therefore 
be based on existing regional integration initiatives ex isting in the ACP, and stimulate further regional 
integration, as provided for in the Constitutive Ac t of the African Union or as agreed among the ACP 
States as a whole. The content of the EPAs should of course build on the rules of the WTO, taking 
account of the results of the Doha Development Ag enda. The EPAs, in addition to further market 
opening, are expected to define more specific and more operational bilateral trade-related provisions 
in areas such as sanitary and phytosanitary standa rds, or regional customs and trade facilitation 
measures. EPAs are intended to tackle prac tical barriers to trade among the ACP countries 
themselves, and not only any that may exist betwee n the ACP and the EC. Closer integration among 
the parties will be supported through extensive trad e-related assistance and aid, including for building 
institutions and improving infrastructure. The EPAs are scheduled to enter into force by 1 January 
2008 at the latest. The non-reciprocal Cotonou trade pr eferences will continue to be applied during the 
interim period (2000-2007).  
71. At the EU-Latin America and Caribbean summ it in May 2002, the decision was taken to 
launch negotiations for new Political Dialogue and Cooperation Agreements to  deepen and broaden 
the partnership between the EC and Central America (CA) as well as the Andean Community 
(CAN) . The co-operation is a reflection of the CA and the CAN countries’ desire also to use regional 
integration to achieve economies of scale, raise regional living standard s, and thus be better placed to 
participate in the global economy. Regional integr ation should contribute towards establishing a more 
stable regulatory framework with a very positive pot ential impact for trade and foreign and domestic 
investment, higher levels of economic growth, and increased influence of the CA and CAN countries 
in international trade. The EU-Latin America a nd Caribbean summit in Guadalajara in May 2004 
declared that the conclusion of FTAs with CA and the CAN is the long term objective.  The Heads of 
State and Government stipulated that together with the completion of the DDA, a high level of 
regional integration is also a sine qua non for regi on-to-region free trade agreements with the EC, it 
being self-evident that for the EC any such FTAs wo uld be economically attractive only if the partner 
region effectively offered a single market comparable to that of the EC. 
72. The present regulation governing the EC GSP-scheme entered into force in 1 January 2002 
and will cover the period until the end of 2005 (after  its extension for an extra year). The EC GSP 
now covers virtually all sectors and fully incorp orates the new EBA initiative which was adopted in 
February 2001 and which grants duty free acces s to all products from LDCs, except armaments. 
Under the current scheme, tariff modulation has been  simplified with the establishment of just two 
categories of products according to their sensitivit y. Procedures concerning graduation, withdrawal, 
safeguards and special incentive arrangements have been harmonised and clarified. The preferential 
margins that were eroded as a result of progressive  trade Liberalization have been restored by 
reducing ad valorem duties on sensitive products by a flat rate  of 3.5 percentage points and specific WT/TPR/G/136 Trade Policy Review 
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duties by 30%. The special incentive arrangement s have been made more attractive by further 
reducing ad valorem and specific duties by an addi tional 5 percentage points and 30% respectively. 
Finally, the GSP’s role as a tool to foster sustai nable development has been reinforced; predictability 
has been enhanced by requiring that graduation and exclusion only occur where the conditions are 
fulfilled during three consecutive years. A new G SP scheme to replace the current one after 2005 is 
now under consideration. 
73. Under the EC Treaty, since 1958, the Overseas Countries and Territories  (OCTs) are 
linked to the Community under a specific Associa tion arrangement aiming at promoting the economic 
and social development of these dependent countries and territories through closer economic relations 
between them and the EC as a w hole. In November 2001, the "Overseas Association Decision" was 
amended in order to improve the co-operation and promote the effec tive integration of the OCTs in 
the global economy for goods and services vis-à-vis regional and world markets by stepping up Liberalization and co-operation in services and trad e-related areas. The decision covers a ten-year 
period ending on 31 December 2011.
  
74. The Euro-Med agreements concluded with eight Mediterranean countries  (Tunisia, 
Morocco, Jordan, Egypt, Lebanon, Algeria, Israel a nd the Palestinian Authority) continue to be the 
basis for intensifying bilateral and regional co-opera tion in support of an area of peace, stability and 
shared prosperity. The trade part of these very comprehensive association agreements allows for the 
progressive elimination of tariff and non-tariff barriers to trade in manufactured products in accordance with timetables negotiated between the pa rtners, while trade in agriculture is to be 
progressively liberalised through reciprocal pref erential access among the parties. Trade in services, 
including right of establishment, is also to be pr ogressively liberalised, with due regard to the GATS 
agreement. The Mediterranean Partners themselv es have also begun to enter their own Free Trade 
Agreements (e.g. the Agadir Agreement between Eg ypt, Jordan, Morocco and Tunisia) in order to 
increase levels of trade between them and maxi mise the region's potential for economic growth. 
Consequently, the process encourages a South-Sout h model of regional integration of Partners' 
economies, a necessary step in preparing the regi on for the creation of a Euro-Mediterranean Free 
Trade Area by 2010.  
75. The EC has been engaged in talks with the Cooperation Council for the Arab States of the 
Gulf (GCC)  on an ambitious FTA between the EC and the GCC as a whole. During the period of this 
review these negotiations after a long period of be ing dormant have made significant progress with 
the aim of achieving substantial commitments on bot h sides not only to trade Liberalization but also 
to regulatory changes.  
76. Negotiations between the EC and MERCOSUR  have also continued during the period under 
Review with the aim of achieving a greater le vel of political and ec onomic co-operation and 
integration, not least within the MERCOSUR group itself, by supporting the development and 
strengthening of common institutions at the MERCO SUR level and by libera lising substantially all 
trade in goods and services between itself and ME RCOSUR. Again, this bi-regional FTA is posited 
on the effective establishment of a single market wi thin MERCOSUR, comparable to that of the EC, 
in order to guarantee equivalence of acc ess and free circulation for both parties.  
77. The EC’s Cooperation and Free Trade agreements with Mexico and Chile remain in place 
and contribute towards promotion of trade as well as dialogue also on multilateral issues. Relations 
with South Africa  have continued to develop on the basis of the 1999 agreement on Trade, 
Development and Co-operation and South Africa’s special membership of the ACP Group. Awaiting 
the ratification of the bilateral agreement, talks have  been aiming at sorting out technical issues that 
are pending in areas such as agricultural trade, ru les of origin, anti-dumping, which are necessary for European Communities WT/TPR/G/136 
 Page 19 
 
 
progressively establishing a free-trade area and ensuri ng South Africa’s participation in intra-regional 
trade. With respect to India and Pakistan , dialogue and partnership has increased over the last two 
years through further agreements on co-operation in fi elds such as customs, technical standards, and 
combating fraud. However, there remains still consid erable scope for deepening trade relations with 
these important partners.  
(iii) Relations with other partners 
78. In addition to the FTA or regional integration initiatives described above, the EC has also 
established frameworks with a number of developed countries for continued dialogue on trade issues, 
and certain more specific bilateral initiatives relate d to trade facilitation. The focus of co-operation 
with a number of developed countries has largel y been on tackling remaining regulatory barriers 
while preserving a high level of protection for health , safety, consumers and the environment. Mutual 
Recognition Agreements on product testing and certification requi rements, agreements or co-
operation in SPS and veterinary ma tters, and co-operation on customs and competition issues have all 
proven to be helpful instruments to remove barriers or prevent their creation. The EC has also sought 
to use such bilateral frameworks for preventing disputes. Co-operation with key industrialised country 
partners encompasses both bilateral issues and multilat eral issues, and reflects the shared commitment 
to strengthen the multilateral trading system and to  improve the bilateral regulatory environment.  
79. In relation to the United States  co-operation has continued within the framework of the New 
Transatlantic Agenda, the Transatlantic Partners hip (NTP) and with the launch of the Positive 
Economic Agenda which has furthe r expanded co-operative efforts to other areas where mutually 
beneficial arrangements can be found. In relation to Canada , co-operation has significantly stepped 
up during the period of this review with the ad option of the EC-Canada Trade and Investment 
Enhancement Agreement (TIEA) identifying areas to be  covered by the future negotiations as well as 
the broad objectives sought for each of those areas. One of the key elements of the TIEA will be 
cooperation between EC and Canadian  regulators, which will be devel oped on the basis of a voluntary 
Framework being currently prepared by the European  Commission and the Canadian Government. As 
regards Japan , the deregulation dialogue which was launc hed in 1994 and the launch on 8 December 
2001 of the "EC-Japan Action Plan" are just two ex amples of a broad and deep cooperation. With 
respect to Korea  similar co-operation has continued on th e basis of the Framework Agreement for 
Co-operation and Trade of 1 April 200 1. Co-operation between the EC and Australia  has led to a 
mutual recognition agreement of conformity assessm ent procedures. In spring 2003 agreement was 
also reached on the removal of the rules of origin requirement in that Agreement, and a deeper and 
broader cooperation was agreed by both sides. Nego tiations are currently being pursued with a view 
to reach agreements on wine and veterinary matters. EC relations with New Zealand  have since the 
adoption of Joint Declaration in 1999 led to agreements on mutual recognition of conformity 
assessment procedures as well as veterinary matters. A wine-agreement is currently under negotiation.  
80. The EC has stepped up its co-operation with China  since her accession to the WTO in 
December 2001. As of 2004 the EC and China launch ed a formal "Trade Policy Dialogue", covering 
multilateral as well as bilateral areas, backed up by  an extensive set of co-operation programmes in 
many trade areas. The EC has also continued to supports Chinas implementation of the WTO agreements and her economic and trade reforms. As for Chinese Taipei , the EC attaches importance 
to this economic and commercial partner, with whom  it has solid relations in areas, such as economic 
relations, science, education and culture. The trade dialogue with Chinese Taipei  will be deepened 
and broadened in future   
81. The EC's trade relationship with Asia continues also to be fostered by the Economic Pillar of 
the Asia-Europe meeting (ASEM) which was established in 1996, cr eating closer links between the WT/TPR/G/136 Trade Policy Review 
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EC, Japan, China, Korea, Thailand, Malaysia, the Philippines, Singapore, Indonesia, Vietnam, and 
Brunei. On the trade side, ASEM provides a non-ne gotiating framework for dialogue and practical co-
operation on measures to facilitate trade and investme nt. In January 2004 a roadmap and a work-plan 
was agreed between the EC and ASEAN Ministers for the establishment of a "Trans-regional EC-
ASEAN Trade Initiative" (TREATI) which is aimed at expanding the trade and investment flows 
between the two regions, including by addressing more  closely technical barriers to trade and sanitary 
and phytosanitary (SPS) measures, trade and investment facilitation and promotion, trade and environmental issues, IPR, trade in forestry products and tourism. 
V. CONCLUSION  
82. During the period under review, the EC’s number one trade policy priority has been to move 
the Doha Development Agenda forward. In the afte rmath of the WTO Ministerial meeting in Cancun, 
the EC reconfirmed its commitment to further mu ltilateral market-opening and stronger international 
trade rules, and strongly welcomes the agre ement in Geneva which revives the DDA.   
83. The EC thus remains strongly committed to the Round, and looks forward to concluding an 
ambitious and balanced package representing the right policy mix between further improvement of 
rules and progressive Liberalization, and encouraging sustainable development.  
84. In parallel, the EC has continued, and will c ontinue, to foster its regional- bi-regional and 
bilateral relations, notably with the aim of inte grating developing countries in the global economy. 
However, this has not been pursued at the expen se of multilateralism: MFN-based trade continues to 
account for approximately three-quarters of a ll the EC’s trade with third countries.  
85. The key plank of the EC’s trade policy in the co ming year will thus continue to be the Doha 
Round. EU enlargement, further consolidati on of the single market, a renewed emphasis on 
strengthening social and economic structures, and continued economic and institutional reform, have 
all underpinned the EC’s international trade policy agenda during the period c overed by this review, 
and have laid the ground for sustainable economic  growth and increasing trade openness in the years 
to come. 
 
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