WORLD TRADE
ORGANIZATIONWT/TPR/M/30
26 January 1998
(98-0268)
Trade Policy Review Body
25-26 November 1997
TRADE POLICY REVIEW
EUROPEAN UNION
MINUTES OF MEETING
Chairperson:  H.E. Mr. Munir Akram (Pakistan)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 2
II. OPENING STATEMENT BY THE REPRESENTATIVE OF 3
THE EUROPEAN UNION
III. STATEMENT BY THE FIRST DISCUSSANT 5
IV. STATEMENT BY THE SECOND DISCUSSANT 6V. STATEMENTS BY MEMBERS 8
VI. REPLIES BY THE REPRESENTATIVE OF THE EUROPEAN UNION
AND ADDITIONAL COMMENTS 13
VII. CONCLUDING REMARKS BY THE CHAIRPERSON 25WT/TPR/M/30
Page 2
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The Chairperson, introducing the fourth re view of the European Union, welcomed the
delegation of the European Union, the discussants (Ambassador John Weekes, Canada, and
Ambassador Nestor Osorio Londoño, Colombia) and Members of the Trade Policy Review Body
(TPRB).  The TPRB was to base its work on two reports, one submitted by the European Union(WT/TPR/G/30) and the other by the WTO Secretariat (WT/TPR/S/30).  A large number of
delegations had submitted advance questions in writing.WT/TPR/M/30
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF THE EUROPEAN UNION
2. The Representative of the European Union said that recent events showed that international
trade continued to be a key factor of the Community's economic growth.  Domestic growth had
reached  a modest 2 per cent on average per year, of which a high share could be attributed to exports.
This resulted, for a large part, from the willingnes s of the business community to exploit new market
opportunities offered by the Uruguay Round and from the growing integration of countries and
regions into the international trading system.
3. The EU's good trade performance in the past two years made the arguments for further trade
liberalization even more compelling. International trade and the prosperity of Europe were closely
connected.  As a result, the EU advocated further progressive liberalization within the WTO
framework.  In the previous two years, the EU 's outward and forward-looking strategy had been
confirmed; EU integration had not been conducted at  the expense of its international role.  Whether it
be the consolidation of the internal market, preparations for future enlargement of the Union or
external trade policies, all had been pursued in ways which supported EU's existing WTO
commitments and favoured further liberalization within the multilateral framework.
4. The representative then focused on what he viewed as the three main themes of the trade
policy review:  the relationship between the single market and its impact on the Community'smultilateral commitments;  the relationship between EU's bilateral or regional arrangements and the
WTO;  and, the EU's current and future multilateral policies.
5. In respect of the single market, he said that the previous two years had been a period of
consolidation rather than new directions.  The harmonization of legislation was nearly completed; this
had created a single Community regime in goods and services, benefiting both home and overseastraders.  Some problems remained, in particular the uneven transposition of EU legislation across the
Community, but this did not affect the right to Co mmunity-wide treatment.  He emphasized that the
single market and multilateral liberalization had been mutually supportive. However, he also said that
the Community's agenda had gradually been moving on from the traditional scope of the single
market to creating the internal conditions to future enlargements and Economic and Monetary Union(EMU).  The single currency would not per se affect EU's rights and obligations in the WTO;
nevertheless, it was likely to improve the terms of trade between the euro zone and the rest of the
world, by making the single market more transparent, more competitive and by reducing transactions
costs.
6. In respect of regional policies, the representative said that many of the EU's agreements were
a response to fundamental issues such as the transition to market economies, democratic stability,
development needs or the creation of a broader European architecture.  Trade was thus only onefeature of these wider objectives.  He recognized that the EU and its partners should ensure
compatibility with the WTO, as had been the case, although more precision and clarity were needed in
the multilateral rules.  In the previous two years,  the  EU has sought comprehensive coverage within
its preferential agreements and simplified preferenti al rules of origin to form a pan-European system
of cumulation.  The EU also sought to strengthen relations with other regions in the world and hadmaintained a high level of involvement in the mu ltilateral trading system, implementing its Uruguay
Round commitments and spearheading further liberalization.  MAN imports continued to account for
the bulk of Community's imports.  He emphasized that, in many cases, EU's bilateral preferential
arrangements had improved the regulatory or economic conditions in the partner countries or been
instrumental in assisting their integration into the multilateral trading system.  He concluded that the
EU's form of regionalism had been and continued to be complementary to liberalization in the WTO.WT/TPR/M/30
Page 4
7. Concerning the implementation of Uruguay Round commitments and the EU's role in the
WTO, he said that the Community had firmly en gaged in the implementation of its commitments.
This included, in particular, the second phase of liberalization of textiles and clothing and the annual
reduction of tariffs, price supports and other types of intervention in agriculture.  Following the
enlargement of the Union to three new countries (Austria, Finland and Sweden), the EU had alsoengaged in Article XXIV:6 negotiations with affected countries.  He stressed that the EU had used
trade defense instruments in conformity with its multilateral commitments. He drew the attention to
the limited application of safeguards and countervailing measures and emphasized the reduction in the
number of anti-dumping initiations in the last two years.   The EU had also rejected the use of
unilateral measures to resolve trade disputes and supported the WTO's dispute settlement mechanism,
even when judgments went against the Community.  In this respect, the Trade Barriers Regulation and
the Market Access Strategy were subordinated to EU's obligation under the WTO dispute settlementsystem.  He concluded that the EU had not been satisfied with an WTO agenda confined to the
implementation of existing commitments.  This is why the EU had, in parallel, participated in the
"built-in" work programme, and assumed leadership in all negotiations undertaken since the end of
Round.
8. Looking ahead, he said that a key part of the Community's approach to external trade policy
remained its commitment to further multilateral liberalization.  The EU was committed to further
work under the built-in agenda and further liberalization in key areas.  It fully supported the decisions
taken in Singapore to include aspects of investment, competition and procurement in the WTO work
programme.  The Community also intended to further the agenda of trade facilitation, play a full role
in the accession of new WTO Members and work to ensure that traditional market access issuesremain in the forefront of future work.  All thes e issues provided for an opportunity for further
liberalization.  Such opportunities should, however, be grasped in a comprehensive, global way.  The
EU's position was that difficult market access and rule making challenges should be best addressed
not sectorally, but globally, enabling all participants to take the widest view of the economic and other
interests.  Seizing this opportunity was, accordin g to the Representative, the first task for the
Community in the years to come.  The Community, he said, stood ready to provide the necessary
leadership.WT/TPR/M/30
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III. STATEMENT BY THE FIRST DISCUSSANT
9. The first discussant recalled that the EU, as the world's largest trading entity, had a profound
systemic impact on the WTO and the trading system, which made the present review all the more
important.
10. The discussant noted that exports had been the main contributing factor to economic growth
in the EU and the EU's statement that its external trade policy "reflected a fundamental commitment
to an open and dynamic market economy supporting appropriate levels of social provisions and
protection, as well as sustainable developments" (p aragraph 4 of the EU policy statement contained in
document WT/TPR/G/30).  He invited the EU or other WTO Members to comment on whether there
had been any incompatibility or tension between this dynamic contribution of trade to economic
growth and the latter commitment.  He also rema rked that extra-EU exports accounted only for
9 per cent of EU GDP, while the average ratio of goods an services to GDP for developed countrieswas around 20 per cent and for non-oil exporting developing countries was 30 per cent.  Did this give
the EU a relatively lesser stake in the WTO?
11. He commented that, while evidence seemed to show a strong positive connection between the
single market and international liberalization, one could wonder whether this was reflected in business
attitudes.  Clearly business had been mobilized by the single market.  Was there a similar belief thatmultilateral liberalization would yield similar benefits and had business been acting accordingly?  If
not, could any lack of business support weaken political support for multilateral liberalization?
12. Concerning the EU's approach in external trade policy, the discussant welcomed the EU's
commitment to further multilateral liberalization but at the same time noted the EU's impressive
network of bilateral and regional agreements.  He therefore asked whether there was a risk that thisdemanding series of engagements distracted the EU from multilateral objectives.  Noting that many of
EU's bilateral or regional initiatives envisaged deadlines early in the next century, he also asked
whether, without similar ambitious objectives in the WTO, the regional interests would dominate EU
trade policy, and, in that case, what would be the repercussions for the trading system.
13. He also called on the Members to reflect on how to further encourage EU's recent progress
towards a more liberal policy regime, and the growing role of multilateral rules as a point of reference
in the elaboration of the Union's internal and external policies.
14. The discussant encouraged Members to focus their attention on the planned introduction of a
single currency in the European Union.  He noted the WTO Secretariat report's statement that "the
introduction of the single currency is likely to be the most important macroeconomic factor governing
the external trade relations of the EU and its Member States in the next few years, and that two effects
are generally foreseen: an effect on the denomination of international trade flows, and an effect on thepredictability and security of trade flows into and out of the euro area".  He sought greater precision
from the representative of the European Union on the trade effect of the single currency, in relation to
that statement.
15. Finally, he suggested Members consider the impact of future enlargement on EU's trade
policy and on third countries.  Noting that the EU Council of Ministers had recently called for a "morecareful consideration of the WTO conformity of preferential agreements as well as a clarification of
the WTO rules on regional trading arrangements", he wondered what would happen if other WTO
Members did not respond to an equally ambitious multilateral agenda as that of the EU.WT/TPR/M/30
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IV. STATEMENT BY THE SECOND DISCUSSANT
16. The second discussant said there had been no major changes in the direction of the general
trends and sectoral aspects of EU trade policy in th e previous two years.  He praised the EU for the
consolidation and deepening of the single market and recent progress in WTO implementation, but
concentrated his remarks on remaining problems.
17.   Concerning the general trends, he praised the EU for the overall reduction in import tariffs.
However, while average import tariff stood at 10 per cent, high tariffs persisted in the textiles,
automobiles and consumer electronics sectors.  In agriculture, average rates had been reduced, but in
many sensitive areas such as cereals, meat and meat products, dairy, sugar and tobacco, tariffs
remained at levels that hampered market access.  He  also mentioned the high level of State aid in the
Community and its concentration on relatively few sectors.  He expressed concerns about certain new
aspects of the EU's GSP scheme, notably the new incentives linked to criteria on labour standards,environmental protection.
18. He highlighted the recent developments in the textiles, automobiles and services sectors.  He
said that the EU had a decisive role to play in  the implementation of the WTO Agreement on Textiles
and Clothing (ATC).  He referred to the revi ew of the Council for Trade in Goods on the
implementation of the ATC, and reflected on the frustration of the developing countries after the firstintegration stage.  He pointed in particular to the absence of high value-added products and restricted
items in the EU's list of products for integration in the 1st phase, and to the use of anti-dumping
actions.  A total of 32 measures had been imposed on textiles imports between 1992 and 1996, 14 of
which in the last two years.  He called for a discussion of these issues, given the trade impact of such
measures.
19. Concerning the motor vehicle sector, he noted th at the EU market and EU industries were still
the largest in the world, but the European industry was currently confronted with demand and
competitiveness problems.  He noted that, despite an increase of 30 per cent in the last five years, the
level of productivity in the EU industry still lagged behind those of its U.S. or Japanese competitors.
He established a parallel between this and the combination of high tariffs, State aid and marketfragmentation in the sector.
20. He emphasized the role of the services sector in the EU economy (two-thirds of total
Community value-added and employment) and EU's trade, and appreciated the EU's efforts to
liberalize trade in services both internally and extern ally.  He recognized the EU's role in promoting
the negotiations in the areas of telecommunications and financial services.  To a lesser extent, recent
steps had been taken to open up "core" public services such as electricity, gas and postal services.  In
this context, he asked the EU whether, as services liberalization had generated substantial benefits fordeveloped countries, it would support the linkage of services negotiations with other areas of interest
to developing countries (such as textiles or agriculture) in the next phase of WTO negotiations.  He
also asked a question relating to the possible impact of the introduction of the euro on competition in
the financial services in Europe, both within and without  the euro zone.
21. Turning to the future, he focused on the prospects of future EU enlargement to countries in
Central and Eastern Europe and the impact on the rest  of the world.  He said that the EU was the main
investor and trader in the world, and was also very important in individual regions such as Latin
America, and its enlargement was likely to have major repercussions on third-countries.  It was
therefore indispensable that the EU keep a balanced approach in its trade policies, taking into account
the interests of all parties.
22. He welcomed the recent Commission's proposals for further reform in agriculture, in the
context of the "Agenda 2000" framework.  He not ed that, given the positive effects of the CAPWT/TPR/M/30
Page 7
reform, the further adoption of market-oriented reforms would benefit both market access and EU's
competitiveness.  He said that the Commission's proposals for further shift towards direct payments,
reduced reliance on price support and export subsidies were a step in the right direction, although he
wondered that the proposals went far enough in terms of improved resource allocation and market
access.  He asked the EU delegation what had been the first reactions of EU Member States to the"Agenda 2000" proposals.WT/TPR/M/30
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V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
23. The representative of India commended the EU for its positive role in the WTO and, in spite
of differences in some areas, expressed his country's positive appreciation regarding the
implementation of EU trade policies.  However, as the EU was India's largest trading partners, he
wished to address some concerns relating to import protection and the use of contingency measures.He pointed to the repeated use of anti-dumping investigations against certain textiles products, most
of which were already under restraint by MFA quotas, thereby creating a double level of protection.
He contested the legality of the procedures used in these cases.  He also expressed concerns about the
slow liberalization of textiles imports under the ATC and urged the EU to implement the Agreement
in its letter and spirit.  He pointed to some problems relating to EU's import regime for rice, and
doubted that its operation was consistent with EU's Schedule of Concessions.  Finally, while
acknowledging that regional and preferential trade arrangements had their advantages, he stressed theneed for compatibility with the multilateral system.
24. The representative of Canada said that bilateral relations had entered a new and productive
phase with the recent Canada-EU Action Plan, which he briefly described.  While recognizing the
EU's accomplishments in the WTO in the previous tw o years, he drew attention to several problems.
Citing fish as an example, he highlighted the potentially prejudicial effects of bilateral arrangementson third parties, and urged the EU to respect both the letter and spirit of GATT Articles XXIV
and XXVIII in future enlargements.  He raised ma rket access issues of bilateral concern regarding
agriculture (cereals, wine) and stressed the growing trade effects, in that sector, of EU regulations
related to the protection of health, safety and environment.  He cited several examples such as the ban
on Canadian tallow and its derivatives or the difficult approval process for genetically modifiedorganisms.  He also noted the high level of State aid in the Community and emphasized the potential
effects of such subsidies on foreign exporters.  He noted the increase in competition policy cases in
the EU and called for the finalization of the bilateral cooperation agreement in this field.  Finally, the
representative of Canada said that his country was looking forward to furthe r reform of the CAP, in
the context of future enlargement.
25. The representative of Mexico said that his authorities had asked written questions covering a
wide range of policy issues, e.g., preferential trade agreements, agriculture, services, preferential rules
of origin, customs cooperation, the Government  Procurement Agreement and the protection of
intellectual property rights.  He kindly requested replies on these matters.
26. The representative of New Zealand agreed with the Secretariat report's assessment that the
interface between the single market and existing or new WTO commitments had been working to the
benefit of both the European Union and its trading partners.  While welcoming encouraging signs ofliberalization in agriculture, he said that EU's polic ies in this sector remained his country's main area
of concern.  He underlined the EU's high reliance on tariff protection (including very high rates),
export subsidies, reference price arrangements and domestic support policies, which maintained
significant distortions for both the EU and trading partners.  He expressed concerns about policies
regarding the protection of food geographic indications and designations of origin.  He called for thecontinuation of reforms in agriculture.  He shared EU hopes for a more substantial outcome for the
WTO's Committee on Trade and Environment and welcomed the EU's strong commitments to current
trade negotiations.
27. The representative of Chile stressed the importance of the EU in bilateral trade and
investment flows.  The implementation of EU 's commitments in the WTO was an important
contribution to the multilateral trading system.  In addition the single market process had benefited
external suppliers.  The process of EU enlargement was being observed closely in Chile.  While
regional integration was a natural evolution, Chile believed that this process should not work at theWT/TPR/M/30
Page 9
expense of relations with third countries.  In this context, the representative noted that exports of Latin
America to the EU had declined in recent years, a nd encouraged the EU to strengthen bilateral trading
links.  He said that this was Chile's own desire and strategy, and, in this context, he cited the signature
of the Framework Agreement in 1996.  He called for further progress of bilateral talks.  He expressed
satisfaction that on many WTO issues (competition policy, ITA, support for a Millennium Round), theposition of Chile and the EU converged, but he encouraged the EU to reform further the CAP.  In this
regard, he welcomed the "Agenda 2000" proposals.  Finally, he kindly requested replies to written
questions on agriculture, competition policy, standards and anti-dumping.
28. The representative of Indonesia, on behalf of ASEAN countries
, noted with pleasure that
bilateral relations had grown closer since the first Asia-Europe summit meeting in Bangkok.  He
SAID that the ASEAN market was a promising market for the EU, citing recent growth in bilateral
trade.  However, in the period under review the share of intra-EU trade in total EU trade hadincreased.  ASEAN countries hoped that this was not  an indication of inward-looking effects of the
single market.  Then, the representative raised more specific points.  In respect of GSP, he urged the
EU to reconsider the suspension of Myanmar from GSP benefits and sought clarification on the
criteria for sector or country graduation, as well as on the specific conditions related to environment
and labour.  The generally low level of EU tariff s was acknowledged but improvements with respect
to tariff and non-tariff measures in agriculture and textiles were also expected.  The reference price
system applying to the importation of certain agricultural commodities was questioned.  The trade-
restricting impact of tariff reclassification was raised.  He questioned certain aspects of the EU's anti-
dumping legislation and practices, in particular the re-opening of an investigation, the determination
of reference prices and normal values, the lesser-duty rule, anti-circumvention procedures, the notionof Community interest, defense opportunities and cumulation,  questioning in certain cases the
conformity of EU rules to WTO Agreements.
29. The representative of Hong Kong, China joined others in stressing the effects of EU's recent
policy developments (enlargement, planned introduc tion of the euro, single market) on outsiders.  He
praised the EU for its constructive role in the WTO since its creation, in particular in the consolidationof financial services offers in 1995, the conclusion of agreements on telecommunications services and
information technology products, and the defence of the dispute settlement mechanism, even when it
had lost sensitive cases.  He wholeheartedly suppor ted the EU's plea for a further round of multilateral
trade liberalization.  He also raised a number of areas of concern, including the accelerated
liberalization of trade in textiles and clothing under Europe Agreements, the maintenance of
preferential rules of origin and the use of anti-dumping measures.
30. The representative of Switzerland emphasised the strength of his country's relationship with
the EU.  The recent conclusion of mutual recognition agreements (MRAs) between the EU and some
of its main trading partners was welcomed.  Similar negotiations had been undertaken between
Switzerland and the EU and were already well-advance d.  In this context, the representative wondered
whether MRAs negotiations could be multilateralized and, in this context, whether Article 6: 3 of
TBT would offer the appropriate framework for this.  Regarding BSE, he recalled that imports from
Switzerland of certain animal products were banned by the EU, and questioned the scientific
justification of such measures as well as their compatibility with EU's international obligations.  He
also said that Article XXIV:6 negotiations with the EU had not yet been completed.
31. The representative of Brazil stressed the EU's new challenges (the euro, enlargement) and
questioned their impact on EU's trade policy in the futu re, in particular in agriculture.  As the EU was
Brazil's first trading partner, EU anti-dumping polic y was of particular concern to Brazil.  He had
noted the increase in the number of anti-dumping measures in force in the last two years.
Clarifications about the future of the CAP were sought.  Written questions addressing Brazil's
concerns had been transmitted to the EU delegation.  They covered the environment and labourWT/TPR/M/30
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criteria for the GSP scheme, the EU Eco-label scheme, SPS issues, Article XXIV:6 compensations,
and the EU Directive on the legal protection of data base.
32. The representative of Norway stressed the de facto  participation of his country to the EU's
single market, as a member of the EEA.  Norway was therefore appreciative of recent progress made
in that area.  However, given the interdepende nce of the Norwegian economy with that the EU,
Norway was following carefully the growth and unemployment situation in the EU.  The
representative raised four specific questions or comments.  First, he wondered whether the recent
reduction of anti-dumping initiations was a temporary phenomenon or the beginning of a long-term
trend.  Second, he invited the EU to comment on the structural weaknesses observed by the
Secretariat Report in the automobile or electronics sectors.  Third, he sought clarification on the EU's
position with regard to labour standards and their relation with trade.  Finally, he commended the
EU's recent market access initiative for LDCs and the simplification of rules of origin.
33. The representative of Australia felt that, as a Quad Member and a main trading entity, the EU
had a special responsibility to lead the way in pursuing further multilateral trade liberalization.  In this
regard, he welcomed the EU's commitment to a balanced agenda for future negotiations and its
support for further talks on industrial tariffs.  He noted the EU's attachment to the principle of non-
discriminatory multilateral liberalization, and, in this connection, recommended that its preferentialagreements be fully consistent with WTO rules.  He encouraged the EU to persist with internal
reforms in the areas of government procurement, services and state aid.  He welcomed the
commitment to continuing CAP reform set out in the "Agenda 2000" proposal but was somewhat
disappointed by the scope of the proposed reform.  He therefore encouraged the EU to adopt a more
comprehensive approach in the perspective of the next WTO negotiations on agriculture in 1999.  Inthe meantime, he expressed concerns about the use of export subsidies in particular areas as well as
about import prohibitions of so-called Specified Risk Material associated with the BSE disease.
Australia was looking forward to working with the EU in the WTO for a balanced comprehensive
agenda for further negotiations.
34. The representative of Japan said that the EU enlargement process had to be observed carefully
and that further integration should remain open to third countries.  Preferential tariff reductions
granted by the EU to associated countries on motor vehicles, and its detrimental effects, was an
element for concern.  Prior to the next enlargement, the EU should start Article XXIV:6 negotiations
with third countries, contrary, he said, to what had been done for the previous enlargement.  This was
inconsistent with GATT rules.  Clarification was also sought on the implications for the European
Commission's competence of the modification of Article 113 of the Rome Treaty.  The representative
also addressed a number of issues relating to EU anti-dumping policy, such as the calculation ofdumping margin or anti-circumvention provisions.  Questions were posed on the application by the
EU of its commitments under the WTO Government Procurement Agreements, and the
implementation by the Member States of EU Directives in this field.  As for some other Members, he
pointed to the potentially restrictive effects of tariff reclassifications.  He commended the EU for
adhering to the WTO dispute settlement mechanism, even when cases went against the EU, and wasinterested in obtaining more details on the EU's admini stration of tariff quotas in agriculture.  Finally,
he expressed concerns about the EU's decisions on risk materials relating to the BSE disease.
35. The representative of Pakistan recognized th e importance of the EU in both bilateral and
world trade, and praised the EU for its pioneering role  in the multilateral system.  He went on to focus
on issues of bilateral interest.  While acknowledging the legal right of the EU to recourse to anti-
dumping actions, he expressed concerns about the pattern and sequence of their use.  Second, he
believed that the EU's integration programmes for the first two stages under the ATC had contributed
little to trade liberalization, and urged to EU to make further progress in this area.  Third, he also
questioned certain aspects of the EU's GSP scheme, in particular with respect to sector and countryWT/TPR/M/30
Page 11
graduation.  Finally, he referred to the increase of intra-EU trade in total trade and wondered whether
this was an indication of increased inward-looking orientation of EU's trade.
36. The representative of the Republic of Korea welcomed recent trends in EU's trade policy,
which had demonstrated the EU's solid commitment to multilateral trade policy.  He commended the
EU in particular for its role in the successful conclusion of recent liberalization initiatives.  Like manyother Members, he raised the issue of preferential trade agreements and the necessary compliance
with both Article XXIV:4 of the GATT and Article V:4 of the GATS.  He asked the EU how it would
take account of third countries' interests in future enlargements.  He said that one-fifth of Korean
exports were affected by EU anti-dumping measures, especially in sectors that were also subject to
high tariffs. He also raised a number of procedural concerns with respect to the application of EU's
anti-dumping legislation (anti-circumvention, prefer ential treatment for the C EECs, etc.).  He also
addressed questions in relation to internal taxation in the EU, the implementation of the WTOAgreement on Basic Telecommunications and EU competence in respect of dispute settlement
procedures;  further questions in writing had been transmitted to the EU delegation.
37.  The representative of the United States referred to the questions posed in writing and looked
forward to the answers by the EU.  He praised the EU  for its constructive role in the negotiations on
information technology products, telecommunications and financial services;  referring to the NewTransatlantic Agenda, he hoped that the United States and the EU would continue to work together to
liberalize trade throughout the world.  He posed questions on specific areas of concern to the
United States, including the WTO consistency of th e EU's approach to concluding regional trade
agreements, the exclusion of agriculture, the EU's guidelines for future negotiations, and the
percentage of EU trade covered by trade preferences.  He also sought information on recent measurestaken by the EU on health, safety and environmental grounds, such as directives concerning cosmetics
and specified risk materials linked to BSE, products containing genetically modified organisms and
the proposed ban on furs caught in leghold traps.  Further clarification was sought from the EU on
issues such as subsidies, the extension of th e Commission's competence with regard to services,
intellectual property rights and customs procedures and appeals, and the operation of the labourcriterion in the EU's GSP scheme.
38. The representative of the Czech Republic considered that the Europe Agreement proved to be
a valuable instrument for the development of mutual trade with the EU.  However, he had questions
on the use of anti-dumping measures, and on the interpretation of Articles 30, 34 and 107 of the
Europe Agreement relating to anti-dumping.  His delegation was unclear about whether the European
Agreement incorporated any preferential treatment in respect of anti-dumping, and whether all
alternative possibilities had in the past been explored before the EU imposed final anti-dumpingduties.
39. The representative of Argentina said that his country shared the position of the EU on many
trade policy issues, in particular on the idea of a Millennium Round or on regional trade agreements.
However, he expressed his concern about BSE-related measures and the absence of a scientifically-
convincing response from the Community at this stage.  He noted the systematic approach taken bythe EU on these issues.  He raised the wider problem of how the level of protection was determined
and whether there was any intention to come back to the zero-risk concept in SPS-related cases.  He
also raised other issues relating to agriculture such  as the level of support, the system of entry price
and the use of subsidy accumulation in certain sectors.
40. The representative of Venezuela questioned the linkage of EU's GSP Scheme to the fight
against drug and other environmental or labour standards-related  criteria.  In respect of preferential
agreements, he welcomed the conclusion by the EU of Framework Agreements with MERCOSUR
countries and Chile.  He encouraged the EU to move  in a similar direction with the Andean countries,
which should have the same level of priority.WT/TPR/M/30
Page 12
41. The representative of Cuba said that the EU was Cuba's first trading partner and foreign
investor, despite the threat of sanctions under the United States' "Cuban Liberty and Democratic
Solidarity Act". He encouraged the EU to pursue th at direction.  He raised concerns about the EU's
import regime for oranges and the application of special safeguards.  He detailed its impact on Cuban
exports of fresh sweet oranges and questioned the consistency of EU measures with its commitments
under the Uruguay Round.
42. The representative of Egypt considered its relations with the EU as one of the priority of its
foreign policy, both politically and economically, as reflected by the negotiation of an association
agreement which he hoped to conclude soon.  As other Members, he sought clarification on anti-
dumping actions on textiles products, which he felt, was impeding the development of trade relations
with Northern Mediterranean countries.  He encouraged the EU to take account of its WTO
commitments when negotiating the agricultural part of  the association agreement.  He also urged the
EU to stick to the Singapore Declaration with rega rd to labour standards and urged the EU delegation
not to provide any response to the questions posed on this matter.
43. This later request was supported by the representative of India.  The representative of Brazil ,
while supporting the view that labour issues did not belong to the WTO, indicated that he maintained
his request for an answer to his specific question about the linking by the EU of GSP benefit to what
the EU described as "forward-looking social and environmental policies".
44. The representative of the Slovak Republic emphasized the importance of the Europe
Agreement for the integration of his country into the EU.  He did not share the other Members'
concerns about potential adverse effects of these agreements, but he understood disappointments in
respect of EU's anti-dumping policy.  In general,  he commended the EU for the liberalization of its
external trade regime and its role in the multilateral system.  He felt that the EU had a generally
liberal regime, with the few exceptions of agriculture and textiles.
45. The representative of Romania joined other representatives of Central and Eastern European
countries in their appreciation of the benefits of association agreements on the development of
bilateral trade relations with the EU.  He said that, at the same time, improvements had beenaccompanied by a general increase of Romanian foreign trade with all the other members of the
WTO, evidence of open regionalism.  He congratulated the EU for maintaining its strategy with
respect to regionalism, but pleaded at the same time for compatibility with the multilateral system.
He supported future enlargements of the EU, and hoped that, at its next meeting, the European
Council would take wise decisions concerning the start of the enlargement discussions towards
Eastern and Central European countries.WT/TPR/M/30
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VI. REPLIES BY THE REPRESENTATIVE OF THE EUROPEAN UNION AND
ADDITIONAL COMMENTS
46. In introduction to its replies to the Members, the representative of the European Union wished
to address a number of points raised by the first discussant.  As to the future policy directions, he said
that the EU was committed to further multilateral liberalization under the "built-in agenda" andguidelines adopted in the Singapore Ministerial Conference, to further the agenda of trade facilitation,
to continue to play a full role in the accession  of new Members to the WTO, and to ensure that
traditional market access issues remain in the forefront of the WTO's future work.  The accessions
process, the built-in agenda and the WTO's work provided together an unparalleled opportunity for
further liberalization and wider participation by all countries in the global economy.  In this respect,
the EU saw a clear need to tackle this task in a comprehensive, global way.
47. To the question about the attitude of th e business community towards multilateral
liberalization, he said that the corporate sector was looking forward to an ambitious multilateral
agenda.  While sectoral negotiations could bring substantial short-term gains, the business community
favoured a global approach.  The fear that EU members would give priority to their internal objectives
at the expense of their external goals was largely unjustified, as shown by recent history.  He said that
European integration had always been closely linked to the process of world trade liberalization.
48. The other replies by the representative of the European Union were then divided into the five
themes on which the discussion had been structured during the first day: (i) recent developments in
the single market and the interfaces with the multi lateral trading system; (ii) enlargement and the EU's
network of bilateral and regional preferential arrangements; (iii) specific trade policy issues; (iv)
sectoral issues;  (v) and the EU and the future of the multilateral trading system.
(i) Recent developments in the single market and the interfaces with the multilateral trading
system
49. The representative began by thanking delegates for their recognition of the positive
contribution made by the EU to the multilateral system over the last two years:  in terms of the
completion of the single market; in terms of the completion of Uruguay Round commitments, whichled among other things to a situation of low tariffs;  in terms of the EU's observance of WTO rules;
and in terms of the EU's efforts at further liberalization in fields such as the ITA and services.
50. Turning to the single market, the representative stressed that the EU harmonization process
equated to liberalization.  The single market had not entailed any heightening of trade barriers with
the rest of the world.  In areas addressed by the Single Market process, changes in access conditions
for third countries - whether in goods or in services - had amounted in unequivocal reductions in
barriers to the EU market.  Figures on the impact of  the single market showed that in the period 1985-
95 extra-EU manufacturing imports had increased their share of total consumption from 14.1 to
16.9 per cent over the period, thus indicating that third-country operators had equally benefitted from
measures aimed at eliminating obstacles to intra-Community trade.
51. Several examples illustrated some of the benefits for third-country manufacturers of the single
market.  Third country operators may have reacted more quickly to the abolition of customs and fiscalfrontiers formalities by adapting their distribu tion networks while EU companies displayed some
inertia.  The abolition of technical trade barriers also facilitated the intra-EU marketing of non-EU
products, so that  third-country operators only needed to comply with a single set of specifications and
tests of conformity.  Third-country operators establ ished in the EU also benefited without distinction
from Single Market cross-border provision of services and action to develop a business frameworkconsistent with a single market.  Market opportunities for trading partners of third countries had beenWT/TPR/M/30
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expanded, given that subsidiaries of third-country parent companies were treated as Community
companies once the subsidiary was established under the laws of one Member State.
52. Concerning standards, EU regulations, and mutu al recognition, the representative said that the
mutual recognition principle applied in the EU at several levels.  First, by virtue of EU law, Member
States had to accept the importation on their territory of products legally made and marketed in otherMember States unless they could demonstrate that the legislation in other Member States did not give
adequate levels of protection.  National regulations may carry technical specifications on the level of
safety of products, on test methods or on certification.  Where such national tests were not recognized
by other Member States, the Community drew up Community rules which required national
authorities to recognize products which conformed to such rules.  These Community texts may
contain the same types of elements as national texts.
53. EU regulations may differ in their contents.  Some regulations simply listed products accepted
on the EU market, others identified the precise requirements to be fulfilled for market access in terms
of, for example, certification requirements.  Normally, when the EU adopted a Directive or technical
regulations Member States had to accept the products which conformed to it and could not set higher
levels or requirements for imported products.  In certain cases, Member States could set
supplementary requirements for products produced on their own territories but these were not appliedto products from other countries.  In the framewor k of regulations for protection of the environment
and workplace safety Member States often set supplementary requirements to those set out in the EU
legislation, thus risking the creation of problems for free circulation within the Community market.  In
such cases the Community's task was to ensure th e removal of such divergences through, for example,
the introduction of supplementary regulations.
54. The representative provided details on the new Commission's Action Plan, which aimed at
removing the remaining sectoral obstacles to market  integration.  He mentioned several initiatives in
the areas of investment and pension funds, the libera lization of gas and electricity supply, air transport
and telecommunications services, intellectual pr operty protection, European company statute,
competition policy and other matters.
(ii) Enlargement and the EU's network of bila teral and regional preferential arrangements
55. The representative of the European Union addressed the issue of the Community's
competence to negotiate and conclude international agreements in intellectual property and certain
services sectors. He recalled that the Community was a full member of the WTO and that it exercised
competency both in the field of services and intelle ctual property.  While admitting that the situation
was not always clear for trading partners, he hoped that the new paragraph 5 of Article 133 of the
Treaty of Amsterdam (formerly Article 113 of the EU Treaty) would clarify the situation.  As far asdispute settlement was concerned, he said the Community had exclusive competence in the field of
goods under Article 113 of the Treaty.  For services and TRIPS issues, he recalled that in its Opinion
1/94, the European Court of Justice ruled that there was no " domaine réservé " for EU Member States.
56. In respect of the 1995 enlargement of the Community and subsequent Article XXIV:6
negotiations, he said that those negotiations should  be completed prior to enlargement.  The EU on
this, as on previous occasions, had promptly made the required notifications to permit Article XXIV
negotiations to begin once the formal ratification on the actual enlargement had taken place.  The
timing of such negotiations was therefore a consequence of the final decision to enlarge.
Article XXIV did not require that such tariff negotiations be completed before the duty changes were
made.  It only required the customs unions to apply "substantially the same duties" by each of itsmembers to the trade of third countries.  He recalled that issues relating to coffee and tobacco with
Brazil had been the subject of intensive bilateral consultations in the period 1995-96, and that a
comparison of 1995 rates and final Uruguay Round ra tes showed that enlargement of the CommunityWT/TPR/M/30
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resulted in a significant overall positive balance for Brazil for both agricultural and non-agricultural
products.  He addressed other questions posed by the United States and regretted the delays of
bilateral negotiations with Switzerland.  He was l ooking forward to a rapid settlement of these talks,
hopefully early in the following year.
57. Concerning preferential arrangements, he felt that it was healthy that the TPRM take stock of
Members' preferential arrangements and agreements since their relevance to international trade and
their relationship within the multilateral system had become increasingly apparent over recent years.
He referred to the geopolitical aspects of the EU's network of regional and bilateral agreements with
Central and Eastern Europe, the Baltics, and the Mediterranean.  Other agreements such as those with
developing countries under Lomé and a generation of Partnership and Co-Operation Agreements with
countries of the former Soviet Union fulfilled essential developmental or other strategic objectives.
58. While he thought that the TPRM was not the forum to assess the WTO consistency of the
EU's agreements, he agreed that it allowed a collective understanding of their rationale and how in a
structural sense they integrated into the objectives of the WTO.  However, he drew a distinction
between the traditional free trade area, based on removal of tariffs and quotas, and a more
comprehensive concept of regional integration.  In many cases, these arrangements were designed as
bridges to an enlarged European Union.  Free trade was only one component of such agreements.Against this background, the Community had been careful to ensure the consistency of its preferential
agreements with the provisions of the WTO.  Evidence indicated that while EU agreements had
stimulated an increase in trading activity by its partners, the overall performance in the EU market of
non-preferential partners had remained stable. He said that, in value terms, the OECD had recently
calculated that more than 60 per cent of imports to the Community were not affected by preferentialarrangements.  Future lowering of tariffs and increases in duty-free treatment would reduce the
proportion of preferential trade to total trade further.
59. In reply to the questions raised on various aspects of the EU's preferential agreements, he
believed, in particular, that the WTO commitment in GATT Article XXIV was not "to achieve free
trade within ten years" - as one member suggested - but to establish a free trade area as defined inArticle XXIV:8(b) within ten years (subject to the possibility of a longer transitional period in the
appropriate circumstances).  He said that the Community considered its agreements to be consistent
with GATT Article XXIV.
60. He confirmed that agriculture was incorporated into the Community's agreements with the
Mediterranean countries and other countries.  The Community and its partners were committed in
each case to taking the process of agricultural liberalization forward.  In respect of Switzerland,
Iceland, Liechtenstein and Norway, the Community noted that its obligations underGATT Article XXIV related to the creation of the free trade area, not to a single free trade agreement.
These agreements had been notified and examined by GATT working parties in the past, and they had
not been found inconsistent with the Community's  GATT obligations.  Imports into the Community
from Europe Agreement partners of products covered by HS Chapters 25-97 were now almost entirely
free, or likely to become so in the very near futu re.  Residual restrictions on free trade in respect of
these products often related to imports into the partner country, reflecting the economic situation in
each case.  In general, taking into account the transitional nature of the economies in question, these
agreements had provided for the extremely rapid establishment of the almost entirely free trade in
industrial products and for a growing level of real liberalization in agricultural products, which were
fully covered by the agreements.
61. The Community agreed that raising MFN duties, while at the same time negotiating free trade
agreements to provide preferential treatment to a si gnificant proportion of a country's trade, was often
a matter of concern.  However, it did not arguably raise questions about consistency with
Article XXIV:5(b), because that provision used the word "applicable" which was only susceptible toWT/TPR/M/30
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being interpreted as a reference to bound duties rather than applied duties in circumstances where
applied duties were lower than bound duties.  For the Community, this had been a matter of repeated
concern in respect of the operation of the NAFTA agreement.  For the EU, this was one of the
systemic issues which it was important to address as part of the mandate of the CRTA to examine
WTO rights and obligations with a view to considering whether they need to be clarified.
62. The EU's agreements with the Russian Federation and with other states of the former
Soviet Union did not amount to preferential agreements .  In conferring MFN status (as they did), the
representative said that they were fully consistent with WTO rules.  He confirmed that the bilateral
framework agreements with MERCOSUR, Mexico and Chile still needed to be signed and ratified
before they could enter into force.  None of th ese agreements contained an explicit commitment to
free trade negotiations.  The agreement with Mexico provided for the possibility of preferential
liberalization to be examined by a joint process;  the other two agreements provided a commitment to
consider progressive and reciprocal liberalization in future, consistent with WTO rules.
63. Concerning Community's negotiations with South Africa, he confirmed that the
representatives of the Government of South Africa and of the European Commission had met in
Pretoria on 3 and 4 November 1997 for their fourteenth round of discussions on an envisaged bilateral
agreement on trade, development and co-operation between the EU and South Africa.  Both partiesreviewed progress in the negotiations.  They reaffirmed their commitment to work towards a
comprehensive bilateral agreement between the Go vernment of South Africa and the EU (which
would cover trade, development and a series of other aspects of co-operation).
64. Concerning the scope and complexity of the Community's preferential origin rules, he said
that the WTO Agreement on Origin explicitly recognised the role of preferential rules of origin.  TheEU considered, however, that the rules of origin should not create problems for traders and customs
authorities.  As a result, the EU had made more uniform the origin provisions of the different Europe
Agreements and provided for diagonal cumulation.  Currently, with the exception of the bilateral
agreements with certain Mediterranean countries, the preferential rules of origin applied by the
Community since 1 July 1997 in the rest of its agreements were identical.  In order to unify andfacilitate their application the same set of preferential rules of origin had been proposed to the said
Mediterranean countries.  He added that the rules of origin foreseen in the framework of preferential
agreements such as EEA, EFTA, CEECs, etc., were  in line with the Common Declaration on Rules of
Origin contained in Annex II to the Agreement on Rule s of Origin as set out in the Final Act of the
Uruguay Round.  The rules of origin contained in the Protocols annexed to those agreements would
not result in higher tariff barriers to third countries.  He said that the EU had adopted, as part of its
autonomous programme  in favour of the LDCs, a simplification of the rules of origin.
65. He affirmed that the Community's GSP system was the most comprehensive in the world, and
noted that it was an autonomous regime which did not create absolute rights for its recipients.  Since
GSP was an instrument of development, the EU had also introduced a special incentive scheme as to
support the efforts of countries to combat the drugs trade - which was a major impediment to
development - or to introduce forward-looking environm ental or social policies as part of their overall
development.  The schemes were adapted to meet development needs against a changing panorama.
He said that, contrary to what one delegation had suggested, the EU's special incentive scheme was
not a limitation to GSP but constituted an added incentive, of a completely voluntary nature.  He
therefore denied that such a scheme was of a punitive nature.
66. The first discussant wondered whether the WTO was equipped with an adequate set of rules
to deal with regional integration.  This would indeed be a major challenge for the organization, in the
future. The second discussant asked whether any future enlargement would not distract the EU from
its traditional relations with developing countries.   He reflected on the difficulty of linking theprinciple of non-discrimination with the extension of preferential arrangement and stressed the needWT/TPR/M/30
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for further talks in the WTO Committee on Regional Trade Agreements.  He agreed that the EU's
GSP Scheme was an autonomous programme but said that the new incentives relating to
environmental protection and labour standards posed questions about its nature and philosophy.
67. Several representatives, including those of  Japan, Brazil and Argentina agreed that the TPRM
was not aimed at verifying the legal conformity of members' free-trade agreements, but offered a
useful opportunity to discuss wider policy considerations and systemic issues including the
competence of the European Commission in the fields  of subsidies and intellectual property.  The
representatives of New Zealand, Australia and Japan stressed the sectoral aspects of free-trade
agreements.  They felt that free-trade agreements should not introduce sectoral distortions anddiscrimination against third-country suppliers. The representatives of Brazil, Thailand and Pakistan
again questioned the new provisions of the EU's GSP scheme.
68. Other specific points were made during the rest of the discussion.  The representative of Japan
confirmed his position about the interpretation of Article XXIV:6, in particular the need for
negotiations with third parties to precede the application of common external tariff rates.  The
representative of Hungary said that preferential arrangements did not work against third countries, and
provided statistical evidence concerning his country.  He said that accession to the EU would notcreate new trade barriers in Hungary.  However, the representative of Japan felt that it was important
to examine the possibility of distortions by examining trade item-by-item.  The representative of
Hong Kong, China asked questions on the increase of intra-EU trade in total EU trade.  The
representative of the United States sought further clarifications about EU's customs procedures.
69. The representative of the European Union acknowledged the divergences of opinions on the
new GSP scheme.  He stressed again that the EU's scheme was not discriminatory.  He agreed that the
issue of regional integration was crucial for the future of the WTO.  Regional trade agreements should
not constitute "building blocks" against multilateralism.  He questioned the nature of certain existing
agreements outside the Community, and stressed the need for members to resolve trade disputes under
multilaterally-agreed rules, not in a regional contex t.  He provided explanations about the current
process of revision of the Lomé IV Convention and possible options.
(iii) Specific trade policy issues
70. The representative provided clarifications about the Community's customs nomenclature and
procedures.  He referred to the EU submission to the WTO integrated Data Base, which contained the
EU Community Customs tariff and accompanying duty rates.  He recalled that the EU nomenclature
was based on the Harmonized System and that the 1998 tariff had already been published.  He
answered several questions regarding customs clearance procedures, in particular about the respective
competence of the Community and the Member States, and the possibility to challenge customs'decisions in the courts.  He gave details about recently concluded bilateral agreements on customs
cooperation and mutual assistance in customs matters.
71. The representative addressed many of the questions posed on EU anti-dumping policy, which
he felt did not reflect very new concerns.  He emphasized that, while being the world's first trader, the
EU was only the second user of anti-dumping measures, and that the number of initiations haddeclined in the last two years.  He said that injurious dumping was an unacceptable practice
condemned by international law.  The EU initiated anti-dumping proceedings and commence
investigations only upon receipt of a properly documented complaint from the Community industry.
The Commission's procedures were open and transparent, allowing economic operators to be aware of
the timetable of a proceeding.  It was not correct to say that the EU targeted investigations againstcertain exports or certain exporting countries.  In fa ct, it only followed the prescribed provisions in
EU legislation, which obliged the EU to initiate a proceeding upon receipt of a properly documentedWT/TPR/M/30
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complaint containing prima facie evidence of injurious dumping from the Community industry
concerned.  This was what had occurred with regard to the proceedings concerning cotton fabrics.
72. He said that the existence of quantitative restrictions did not preclude the application of anti-
dumping legislation.  Dumping ste mmed from price discrimination, and its effects could be injurious
even if import quotas were in place.  The EU applied its anti-dumping legislation in a non-discriminatory manner across all sectors and no special provisions existed for the textile sector, nor
for any other sector.  However, he was also well aware of Article 7 of the ATC, and the relevant
provisions concerning dumping and the use of subsidies in textiles and clothing trade.  He also replied
to a number of procedural questions regarding the scope of so-called "absorption reviews", the delays
and deadlines applying the various stages of a proceeding, the lesser-duty rule, the calculation of the
anti-dumping margin, preferential treatment grante d to the CEECs and other matters.  He explained
the purpose of the anti-absorption clause (enablin g the Community to verify why price movements
deemed necessary to remove injury had not taken place) and said the EU procedure was in strict
accordance with Article 2 of the WTO Anti-Dumping Agreement.
73. He confirmed the Community's belief in the legitimacy of action to counter the deliberate
circumvention of anti-dumping measures and consid ered that the EU's anti-circumvention provisions
(and related provisions for registration of imports) were in full accordance with the WTO Agreement.He said that the Ministerial Declaration taken at Marrakech recognized circumvention as a problem,
and expressed the desirability of achieving uniform rules in this area.  The Committee on Anti-
Dumping Practices established the Informal Group on Circumvention precisely to fulfil this
Ministerial remit.  The EU meanwhile would conti nue to apply its own provisions, in a manner which
was entirely consistent with the current WTO Agreement on anti-dumping.  He also responded toseveral other questions of technical nature and offered written replies to questions that could not be
answered orally.
74. Concerning competition policy, he explained that competition rules replaced anti-dumping
rules in intra-EU trade, as markets were increasingly integrated.  Since then, competition policy had
been applied rigorously, with the objective of integrating further the Member States' markets.Competition rules concerned predatory pricing, the concentration of enterprises and the abuse of
dominant positions.  The effectiveness of this legi slation was ensured by supranational authority with
autonomous powers of investigation and enforcement.  He explained the EU's policy on vertical
restraints and provided clarifications on the br eakdown of competencies between the EU and the EU
Member States in the area of competition policy.
75. Concerning State aid, the representative thanked WTO members for the acknowledgement of
EU's transparency's efforts.  He encouraged other members to do likewise.  He answered a number ofdetailed questions regarding EU's structural funds, and the specific state aid rules applying to
shipbuilding, motor vehicles, coal and steel.  He indicated that the Commission had updated its
compendium on State aid, which comprised the various guidelines, frameworks and rules applicable
in the Community.  State-aid decisions were published in the EC's official Journal and increasingly
available on the Internet.  Procedural improvements to the framework on State aid were regularlyintroduced at the occasion of Treaty revisions.  He confirmed that EU's policy was to continue to
work towards the reduction of subsidies within and outside the Community and to abide by existing
disciplines.
76. The representative provided further details on the EU's Market Access Strategy.  He said that
the strategy was fully subordinated to the WTO system and its disciplines, and that it was onlydesigned to make sure that trading partners fulf illed their WTO commitments.  He provided details
about the Market Access Strategy Database, which included information on bound and applied tariffs,
WTO services schedules and sectoral and trade barriers reports.  He said that the Commission did its
best to check the accuracy and ensure the transparency of the information available in the database.WT/TPR/M/30
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The representative gave a few explanations on the recent proceedings introduced under the EU's
Trade Barriers Regulation.
77. Turning to export measures, the representative answered questions on the provision of export
credit insurance by the EU Member States.  He said that there was no financial support scheme at the
EU level.  Besides, Member States were bound by a set of internationally agreed rules known as the
OECD Consensus Arrangement to which the Community  was a party on behalf of the Member States.
He also gave details on the operations of EU's export promotion programmes, in particular that for
Japan, known as Exprom.
78. The representative recalled that strong and secure intellectual and industrial property
protection provided the basis for the technological advance and commercial development of an
economy.  As a result, the EU attached great impor tance to IPR protection.  He provided examples of
the numerous acts adopted at the EU level and informed members of the proposals currently underconsideration (on the protection of designs and models, the patenting of biotechnological inventions,
and copyright and neighbouring rights in the information society).  He said that the EU was strongly
committed to the TRIPS Agreements, to which EU legislation conformed.
79. The representative responded to questions on Government Procurement.  He said that the
GPA had been implemented in Community law, with legal effect throughout the EU, by a Decision ofthe Council of Ministers on 22 December 1994.  Accordin g to the specific character of the GPA, the
Agreement was subsequently completed by the adoption of a decision following an exchange of letter
between the EU and the United States.  As a result, the GPA had full effect in EU law and no further
legal Act was required to give effect to the GPA in the Community.
80. At the same time, a distinction could be drawn between the full and effective legal application
of the GPA and the discretion that could be exercised by a legislature to clarify its internal legal
regime.  This was what the EU had done in adopting two directives on Public Procurement. The same
applied to the implementation of EU directives.  He noted that by July 1996, over 140 of the
155 national measures required to implement the directives had been notified to the Commission.
Moreover, the absence of identity of harmonization of Member States' laws did not always represent adivergence from EU rules or GPA requirements.  He also said that the Single Market regime had
provided an 8-fold increase in the number of notices of invitation to tender published in the Official
Journal.  The absence of publication by procuring entities was often explained by the low value of
contracts.  This also explained the relatively low percentage of purchasing across national boundaries.
In addition, contracting by foreign companies with legal presence in the Single Market were not
covered by the statistics.  The  representative pr ovided detailed answers to certain specific questions
about the EU's government procurement regime.
81. On investment, the representative provided replies to members on notification requirements
under EU competition policy law for foreign direct  investment incentives and on the EU position in
the OECD's negotiation on a Multilateral Agreement on Investment.
82. The representative also offered a number of comments on environment and eco-labelling
issues.  He reiterated that the Community's legislation on trade-related environment issues wastransparent, non-discriminatory and had been notified to the WTO.  The EU was conscious, when
regulating in this area, of the need to adopt the least trade-restrictive means possible.  He gave details
of EU's policy with regard to the importation of fu rs of certain animal species caught with leghold
traps.  He also described the proposed changes to the EU Eco-Labelling Scheme, aimed at increasing
its transparency.  He said that current practice wa s already transparent and open to the participation of
foreign producers, as shown by the recent participation of some member to the establishment of
environmental criteria.  The proposal for a revised Scheme would officially formalize existing
practice by ensuring that foreign and domestic producers be treated on an equal footing.WT/TPR/M/30
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83. Concerning the issue of standards and mutual recognition agreements, he provided details on
the EU's decision to apply metric-only labelling from the year 2000;  this decision aimed at having a
single system of measurement units in Europe and at eliminating consumer confusion.
Directive 80/181/EEC established the metric (System International) system as the legal system of
units. The system was described in the ISO 1000 standar d.  He also said that the EU's bilateral mutual
recognition agreement with the USA was not discri minatory.  He believed that the TBT Agreement
did not require or even recognise comprehensive multilateral treatment of other WTO members'
certification.  The Agreement even encouraged bilateral or plurilateral agreements.  It specifically
allowed parties to demand a balanced situation in respect of the products covered under the
agreements.  The Community had considered taking a plurilateral route to MRAs rather than bilateral
agreements.  While an interesting concept, a plurilateral MRA raised difficult issues concerning the
establishment of confidence between the parties;  the methods of implementation on such a wide scalewere unclear.
84. The second discussant returned to the issue of anti-dumping, where he felt that the question
was not so much about the legitimacy of the use of anti-dumping actions or the legality of EU
provisions vis-à-vis the relevant WTO agreements, as about the number of measures and frequency of
use of such mechanisms.  When repeated against certain products, this could become an element ofprotection, and even double protection in the case of textile and clothing products already under
restraint.
85. Several representatives, including that of Malaysia, Egypt and Pakistan agreed with the
second discussant.  The problem essentially related to the pattern of use of anti-dumping and the
targeting of certain sectors.  However, the representatives of Japan, the Republic of Korea, and
Hong Kong, China and  again expressed doubts about the legality of selected aspects of the EU
legislation, such as the anti-circumvention clause.  The representative of Canada sought a further
response on the relatively high tariff affecting certain sectors in the EU.
86. The representative of the European Union said that the use of anti-dumping procedures in the
EU was market-driven and that the Commission was not applying any targeting or harassment.  He
stressed that the EU legislation was published and transparent.  Recourse to the European Court of
Justice to challenge Community's decisions was possible and even frequent.  While he felt that he
might not manage to convince his partners, he nevertheless offered to continue the discussion in the
Committee on Anti-Dumping.
(iv) Sectoral issues
87. The representative of the European Union focused on agriculture, textiles and clothing, and
services.  In respect of Agriculture and SPS issues, he addressed at length the consequences of the
BSE disease and promised a further response in writing.  He said that the Community had already
discussed with several partners their concerns about potential trade problems arising from BSE-
related measures.  He recalled that EU legislation was based on scientific advice, but reviews could
always be undertaken in the light of further scientific information.  Both the basic "Serious Risk
Materials" (SRM) Decision and the Cosmetic Directive had now been redrafted and a new textdealing with pharmaceuticals had been prepared.  The new draft texts were being under discussion
within the Community and decisions could be expected in December 1997.  The most important
proposed changes were that: the SRM decision would apply to products produced after
1 January 1998; imported bovine, bovine and caprine products would only be subject to the decision if
intended for food or fodder (industrial use would no longer subject to the decision); SRMs mightcontinue to be used for essential medicines; the products subject to declaration that they are SRM free
would in principle be listed for clarity.  The Commission had proposed a regulation on pharmaceutical
products exempting tallow derivatives and providing that only those products which were granted
authorization and marketed after 1 January 1998 would be required to be SRM-free.  ProductsWT/TPR/M/30
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authorized before that date would have until 1 January 1999 to adapt to the new rules.  Stocks of
medicinal products manufactured before the new rules apply could be used until shelf-life expiry.
88. The representative also answered various other questions relating to agriculture.  He
confirmed that the EU was in a process of internal evaluation of the Common Agricultural Policy, in
the context of the discussion of the "Agenda 2000" proposal.  It was, however, premature to draw anyconclusion.  He also informed one member that the Commission's services were reflecting on a reform
of the wine sector and another member that a first assessment of the cumulative recovery system for
husked rice would take place in January 1998, after six month of operations.  To questions relating to
EU subsidies and the increases in PSE for certain sect ors, he said that the EU was complying with its
WTO commitments.  He encouraged members to refer to EU notifications on issues such quota
administration or the use of special safeguards.
89. The representative said that the Community's integration schedule was wholly consistent with
the EU's liberalization obligations under the Ur uguay Round.  EU integration plans were aimed at
ensuring a gradual, transparent and predictable return of textiles and clothing into the WTO.  More
rapid acceleration of that programme would be disruptive for both exporting and importing interests.
Concerning liberalization under the Europe Agreements and its effects on third countries, he said that
the EU's tariffs and the removal of quantitative restrictions on textile and clothing products derivedfrom the relevant provisions of and protocols to the Europe Agreements with the Members in
question.  The EU had duly notified any restricti ons with such Members under Article 3 of the ATC.
The EU did not equate this position with that in respect of the quantitative restrictions notified under
Article 2 of the ATC.
90. In reply to a question, he said the EU's curren t common customs tariff showed that the EC did
not apply any rates above the bound rates.  In respect to tariff peaks in textiles and clothing, final
Uruguay Round rates were 0% for raw materials, 4- 5% for yarns and man-made fibres, 8% for fibres
and 12% for made-up articles.  None of these rates could be described as a tariff peaks.  He also said
that, during the Uruguay Round, the EU was not able to  obtain the liberalization it had sought from its
partners in this sector.  The EU had not yet drawn up any plans for Stage 3 of integration under theATC, but it intended to review its first stage integration in line with the findings and recommendation
of the TMB.  It had recently communicated revisions of its first (and second) stages of integration to
the TMB in order to ensure conformity with the obligations concerning percentage requirements of
1990 imports coming from products in the four groups:  tops and yarns, fabrics, made-up textile
products and clothing.
91. Turning to services, the representative expressed his satisfaction that WTO members, and the
TPRM as a whole, was giving services the attention it deserved in view of their increasingimportance in international trade and the WTO.  He noted that most questions concerned ongoing
regulatory reform within the Community, often in areas beyond current WTO commitments.  While
such reforms did not necessarily have an impact on EU's external commitments, they had an influence
on EU's objectives for the future.  The EU had intended to ensure a positive relationship between
these internal reforms and its external profile. On the one hand, the Community had a clear interest inobtaining from trading partners liberalization commensurate to what was offered to them as a result of
the Single Market;  on the other hand, the EU was pe rfectly aware of the impetus that could be given
to its internal agenda by entering into beneficial international commitments.
92. On financial services, he confirmed that the EU was prepared to agree to non-application of
its reciprocity clause for non-EU countries on the basis of a satisfactory, fully MFN-based WTOAgreement being reached in December 1997.  However, he said that the EU did not intend to allow
foreign banks established through a branch in an EU Member State to establish additional branches in
other EU Member States without having specific authorization.  He confirmed that all EU Member
States were fully complying with the commitments  undertaken in the WTO in July 1995.  Given thatWT/TPR/M/30
Page 22
this was an interim agreement, the continuation or possible improvement of these commitments would
depend on the outcome of the WTO negotiation in this sector.
93. On telecommunications services, he said that the objective of the planned amendment to the
Directive on VAT for non-EU services providers was to restore fiscal neutrality and avoid tax
evasion.  The temporary measure - a Decision - ha d already been introduced and provided for an
interim regime up to 31 December 1999.  A proposal for a Council Directive, currently under
discussion, contained the new definitive regime to be applied as from January 1999.  Both the
Decision and the Directive replaced the former criterion of the place of establishment for non EU
operators of telecommunications services for purposed of the application of EU VAT.  The Decision
authorised Member States to take action to appl y VAT for the first time to third country telecom
operators providing telecom services to customers in their Member States.  Taxation would take place
in the country where their client was established.  Under the definitive regime of the proposedDirective, third country operators would be 'identified for VAT purposes' only in one Member State
for the total of their activities within the EU.  With  respect to the acceptance of the fourth Protocol, he
said that ratification decisions were to be taken by 30 November 1997, and the that EU and its
Member States were taking the necessary steps to accept the Protocol in the days ahead.
94. On audio-visual services, he said that the proposed Community legislation on media
ownership in the Broadcast Directive was not being pursued for the time being.  He also provided
information on the status of the "Television Without Frontiers Directive".  The Directive laid down
the framework conditions in which the public could be guaranteed free access to the broadcast of
major events.  Each EU Member State would be entitled to draw up a list of events which had to be
broadcast unencrypted even if exclusive rights had been bought by pay-television channels.  On thebasis of the mutual recognition principle, they would have to ensure that the various channels
respected each of these lists.  He detailed the main provisions of the new Directive and provided
information on the timing for implementation.
95. The representative also answered a number of questions concerning transport services.  In
particular, he provided details on the state of domestic liberalization in air transport. He said that theliberalisation process had so far produced a number of positive results, without leading to major
disruption. While the number of intra-Community routes operated by one carrier still represented
72 per cent of the total number of routes, when the calculation was made on the basis of weekly seats,
the share of capacity on routes operated by one carrier fell to 31 per cent.  Moreover, the number of
scheduled routes had increased significantly.  Of the 1,830 international city-pairs operating in 1996
within the Single Market, 644 were started up after the introduction of the Third Package which
entered into force on 1 January 1993.  However, it was true that the impact of the liberalizationprocess on air fares had not been completely satisfactory.  On the one hand, nearly 90 per cent of air
travellers currently travelled at reduced rates;  on the other hand, the effect of liberalization on the
level of the fully flexible fares had been less evident on many routes.  He also confirmed that, as a
result of the increasing congestion at some of the major Community airports, the issue of slot
allocation had become a key issue.  The Commissi on intended to make a new proposal very soon to
facilitate the transfer of slots and to avoid a static and inflexible situation at congested airports.
Finally, he provided information on latest developments in rail and road transport.
96. On electronic commerce, he said that the EU was currently examining the implications for the
GATS of the development of electronic commerce.  Electronic commerce was essentially a
technological means to supply a service;  the EU was examining whether the current rules are
sufficient to ensure that the supply of services through electronic means can be fully ensured and
expanded.
97. The subsequent discussion focused on BSE-related measures and on textiles and clothing.
While not contesting the WTO conformity of EU's measures to avoid the spread of the BSE disease,WT/TPR/M/30
Page 23
the representatives of Argentina and Australia  again stressed the growing use of SPS measures and
offered further comments on the "zero-risk approach".  The representative of  Hong Kong, China
came back to his earlier comments on textiles and clothing, and said that his main concern was about
the acceleration of tariff schedules for textiles and clothing imports from Central and Eastern
European Countries and the growin g gap between the treatment of those countries and MFN partners.
98. The representative of the European Union answered that the EU was ready to consider a
general acceleration of tariff schedules in the textiles and clothing sector, but its main partners could
not agree on such an approach.  On BSE matters, he said that he took good note of all comments.  It
was not only appropriate but also urgent that the WTO took up health-related issues.  The general
public was expecting a response from policy makers at all levels.  This was important for the
credibility of the organization.
(v) The EU and the future of the multilateral system99.   The representative reflected on the process and timing of future EU enlargement.  He recalled
that the Commission had recently issued its Opinions on the requests for accession by certain
countries and had presented a first evaluation of the reforms necessary to cope with such enlargement.
The European Council, on 12-13 December 1997 in Luxembourg, was expected to decide on the
actual opening of accession negotiations and take the necessary decisions on the overall enlargementprocess including practical arrangements for the initial phase of negotiations.  It was also expected
that negotiations would be initiated during the UK Presidency of the European Union, starting January
1988.  It was too early to say when the first accession(s) would take place.  Those countries starting
negotiations simultaneously would not necessarily join the EU at the same time, for each country
would proceed at its own pace during the negotiations.  The duration of the negotiations woulddepend largely on the level of preparation of each candidate as well as on the complexity of the
negotiations.
100. The representative also replied to questions on the effect on the Community's multilateral
obligations of future enlargement.  He said that the process of preparation for future enlargement of
the EU did not involve the development of any particular market access arrangements by the EUbeyond the implementation of the free-trade areas in goods already notified to the WTO under GATT
Article XXIV, or the services integration agreements notified under GATS Article V.  At the time of a
future enlargement, the resulting enlarged custom s union and services integration agreements would
be notified under the relevant WTO provisions.  Candidate countries for accession to the EU were
committed to a process of legislative harmonisation and gradual adoption of the acquis
communautaire  as part of an agreed pre-accession strategy.  He saw this as a great benefit to both
European countries and third-country exporters.
101. He said that the effect on the products of third countries arising from the enlargement process
would be extremely limited:  the relevant free-trade areas and services economic integration
agreements had been notified to the WTO and implemented.  The Community tariff would be
unaffected.  Conditions of market access in the partner countries in Central and Eastern Europe were
not a matter of direct relevance to the trade policy of the EU at present.  The EU considered that all ofits arrangements with partner countries in Central and Eastern Europe (and elsewhere) were fully
consistent with WTO rules.  The Community was also studying the practical consequences of
enlargement for the EU's internal and external regi mes.  Agenda 2000 represented the first attempt to
identify and quantify the changes necessary to ac commodate a major increase in the size of the
Community and changes in its economic and social structure.  It recognised that changes might beneeded to Community institutional arrangements and to funding as a result of the future accessions.
These changes could have an impact on the funding of the Common Agricultural Policy, provision of
state aids and other areas.  But he felt that these subjects would be better left to the next review of the
Community.WT/TPR/M/30
Page 24
102. The second discussant  stressed that the next enlargement was likely to have great
repercussion on trade partners.  The EU played a preponderant role in world trade today.  With further
enlargement, its weight, responsibilities and powers in the multilateral trading system would be
increased.  The EU's influence on recent WTO negotiations, on the development of the multilateral
agenda and on the promotion of dispute settlement procedures had been positive.  However, it wasimportant that the EU achieved progress on protection (textiles and clothing, agriculture, the use of
subsidies and anti-dumping) and stimulate further competition on world markets.  He also hoped that
the TPRB meeting would help achieve progress on the bilateral issues raised during the two days of
the discussion.WT/TPR/M/30
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VII. CONCLUDING REMARKS BY THE CHAIRPERSON
103. Over the last two days, the Trade Policy Re view Body (TPRB) has conducted the fourth
review  - the second under WTO provisions - of the European Union's (EU) trade policies and
practices.  The review of the EU is the first to be conducted under the "interim review" framework
agreed in 1996 by the TPRB for two-yearly reviews;  as such, it has focused on developments in trade
policies in the past two years and on selected sectoral issues, rather than being fully comprehensive in
coverage.
104. The discussion developed under five main themes: (i) the interface between the single market
and multilateral liberalization;  (ii) the EU's enlargement and network of regional or preferential
agreements;  (iii) systemic trade policy issues;  (iv) sectoral questions;  and (v) the EU and the future
of the multilateral system.
105. Participants raised a large number of questions in writing.  The representative of the European
Union provided written replies in the context of the meeting and undertook to supply further details as
necessary.
106. Members welcomed the statements made by the EU representative concerning its
participation in, and commitment to, the WTO-based multilateral trading system.  However, many
questions were raised on specific aspects of the EU's trade policies and practices as they affect otherWTO members.  Any actions by the world's largest trading entity were bound to have an important
effect on the trading system and this was a major concern of many participants.
(1) The interface between the single market and multilateral liberalization:  institutional issues
107. Members noted with satisfaction that, in a growing number of areas, the single market and
external liberalization had been mutually supportiv e, resulting in improved market access for external
suppliers and increased exposure of the EU economy to competition.  For example, aspects of the
EU's participation in recent multilateral services negotiations drew on internal reforms.
108. However, Members noted that significant impediments to trade and efficient allocation of
resources remained, with potential adverse effects on external suppliers.  Members mentioned the
high level of State aid and its concentration on relatively few sectors, and limitations in the opening ofpublic procurement.  While recognizing that WTO rules were a growing point of reference in the
elaboration of EU policies, Members urged that further efforts to ensure that all EU regulations
respected the principles of transparency, non-discrimination and were properly notified to the WTO.
Some Members posed questions concerning "Community competence" for trade negotiations.
Specific concerns were raised about recent moves to strengthen measures regarding health, safety and
environmental protection.  Some members expressed concern that the share of intra-EU trade in
manufactures during the past few years may have increased at the expense of extra-EU trade inmanufactures.
109. In reply, the representative of the European Union emphasised that the internal process of
harmonisation could be equated with liberalization.  Third country suppliers benefitted fully from
measures aimed at eliminating obstacles to intra-Community trade.  Increased intra-trade had not been
at the expense of non-EU countries;  these accounted for a steady 40 per cent of total EU imports anda rising share of domestic demand for manufactures.  He provided details of the Action Plan to
remove remaining sectoral obstacles to market integration and undertook to supply information on
proposals to simplify EU legislation.WT/TPR/M/30
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110. The representative stated that the new Article 133 of the Rome Treaty would clarify the
question of the Community's competence.  He recalled that the Community had exclusive competence
in trade in goods, and that there was no "domaine réservé"  for member States in services and TRIPS.
(2) EU enlargement and network of preferential agreements
111. Members noted the proposals for further enlarg ement of the EU and the continued expansion
of its network of regional and other preferential agreements.  They questioned the effects of these
arrangements on third countries' trade.  Concerns were expressed in relation to potential trade
diversion;  in this respect, members mentioned tariff and non-tariff barriers with respect to sectors
such as textiles, agriculture and automobiles.  Members stressed that regional integration should
remain consistent with relevant WTO rules.  In this connection, one discussant raised the need to
ensure that WTO rules are adequate to deal with the growth and new structure of preferential and
regional agreements.  Members took note of the recent call by EU Ministers for more carefulconsideration of the WTO conformity of preferential agreements, as well as clarification of WTO
rules on regional trading arrangements.  Questions were also posed concerning the harmonization of,
and cumulation provisions in, the EU's preferential rules of origin.
112. While some Members reported that they had satisfactorily concluded Article XXIV:6
negotiations with the EU on compensation following the accession of Austria, Finland and Sweden to
the Community, other Members said that negotiations had not yet been completed and called for a
rapid conclusion.  One Member emphasized that, in future enlargement, negotiations should be
undertaken in advance.
113. A number of participants expressed systemic concerns about certain new aspects of the EU's
GSP scheme, in particular eligibility criteria relating benefits to environmental protection or labourconditions.  Concern about linkage with the fight against drugs was also raised.  These aspects went
against the fundamental principles of the GSP.  Clarification was also sought on the criteria for sector
or country graduation.
114. The representative of the European Union replied that there was no contradiction between the
WTO objective of progressive multilateral liberalization, and preferential agreements.  He stressedthat free trade was only one component of the EU's agreements which covered such aspects as
democracy, economic cooperation, political and security relations, approximation of laws, migration,
financial assistance for structural reforms, etc.  The EU had been careful to ensure the consistency of
its agreements with the WTO.  He gave details of recent and current negotiations on preferential
agreements, as well as partnership and cooperation agreements.  He also gave some details of
Article XXIV:6 negotiations, and noted that these did not have to be completed prior to enlargement.
115. The EU recognized that varying rules of origin  could create problems for traders and customs
authorities.  Uniform origin rules, including "diagonal cumulation", had therefore been introduced in
the Europe Agreements and the same rules were proposed for the "new generation" of Mediterranean
Agreements.  The EU's rules of origin were seen as consistent with WTO Agreements.
116. The EU GSP scheme, although autonomous and not creating absolute rights, was the most
comprehensive in the world.  It encouraged the introduction of policies for the protection of workers'rights and the environment.  The special incentive scheme was a voluntary scheme to support the
efforts of countries to combat the drugs trade, or to introduce forward-looking environmental or social
policies.WT/TPR/M/30
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(3) Systemic trade policy issues
117. In general, Members acknowledged the EU's steady progress towards a more liberal trade
régime in the last two years, in particular through the implementation of WTO tariff commitments and
the phasing out of quotas and voluntary export restrain ts.  They recognized that the EU had played a
key role in the negotiations on basic telecommunications and information technology products andwas a driving force behind current negotiations in financial services.
118. However, Members noted that import protection, various forms of assistance and the use of
contingency measures remained of importance in sensitive sectors, some of particular interest to
developing countries.  While average industrial tariffs were now below 5 per cent and should be under
3 per cent in 2000, significant peaks remained in textiles and clothing, automobiles, and certain
consumer electronics.  In agriculture, very high rates still affected important products such as cereals,
meat, dairy products, poultry, sugar and tobacco.  In addition, the EU's tariff structure continued todisplay some degree of escalation.  The trade-restricting impact of tariff reclassification was also
raised.
119. A number of participants regretted the high incidence of anti-dumping, the concentration of
recent actions on textile products and the use of anti-circumvention provisions;  the combination of
high tariff protection and quota limitations for textiles with intensive use of anti-dumping actionsadded further uncertainty in access to an already protected market.  Questions were posed as to the
compatibility of certain provisions of the EU anti-dumping legislation with the relevant WTO
Agreement.
120. Members stressed the growing impact of "internal" measures, such as State aid, on external
trade and stressed the need for stricter subsidy disciplines on the Member States.  Concerns wereexpressed about the low level of opening of public procurement markets and compliance with the
Government Procurement Agreements.  Members also emphasized that EU health, safety and
environmental directives should not constitute unneces sary obstacles to trade.  In this respect, some
participants raised systemic concerns about the "zero risk" approach apparently contained in certain
trade prohibitions, affecting both EU and non-EU Me mbers, including those concerning meat and
related animal products deemed to carry BSE agents, and new measures on "specified risk materials"
to be introduced on 1 January 1998.  Other Members sought greater transparency in the management
of the EU Eco-Label scheme.
121. The representative of the European Union provided details on its tariff nomenclature as well
as tariff and customs administration and associated  national and Community judicial processes.  He
also gave extensive replies to questions on the EU's anti-dumping rules and procedures.  These, he
said, were intended to restore fair trade and were in conformity with the WTO;  the number ofinitiations was, moreover, diminishing.  He asserted that procedures were open and transparent, and
that there was no specific "targeting" of sectors or exporters.  While special regard was given to
developing countries, the Commission could only accept constructive solutions which remedied
injurious dumping.  On intra-Community trade, anti-dumping actions were excluded in the integrated
market;  instead, competition rules were enforced to deal with such issues as predatory pricing.  The
"anti-absorption" clause allowed the re-assessment of  export prices or "normal values" in cases where
price movements to remove injury had not taken place.  The "lesser duty" rule was used
systematically and had often moderated anti-dumping duty levels.  The WTO recognized the need to
counter deliberate circumvention of anti-dumping measures.
122. The representative emphasised that the EU had notified its state aids to the WTO.  He
appreciated the recognition of its efforts to provide transparency at Community, national and sub-
national levels, and provided details on the operation of structural funds, including in specific sectors.WT/TPR/M/30
Page 28
State aids should be used with restraint and be transparent.  Surveys had shown a long-term reduction
in their use in the EU, and the EU believed this trend must continue.
123. The representative also provided information on the operation of EU competition policy, its
Market Access Strategy Database, the application of its Trade Barriers Regulation to Brazilian
"conhaque ", and the EU's export promotion programme.  Responses were also given on
environmental standards and eco-labelling;  the latter scheme was non-discriminatory and steps were
being taken to take account of the interests of all producers.  Metric-only labelling was in keeping
with ISO standards and was intended to simplify pr ocedures.  He clarified that the MRA between the
EU and the United States contained no rule-of-origin provisions.  The intention was to extend the
scope of MRAs to other suppliers.
124. The representative emphasized the EU's reliance on strong and secure intellectual and
industrial property rights.  He gave examples of legislation in force or under consideration and repliedto specific questions in such fields as electronic commerce, protection of data bases and national
treatment.  The Government Procurement Agreem ent (GPA) had the full effect of Community law.
By July 1996 140 out of 155 national measures implementing EU directives had been notified to the
EC.  The absence of harmonization did not necessarily imply divergence from EU rules or GPA
requirements, for example where they were already compatible.  Contracts below EC and GPAthresholds did not need to be published.  Further details on GPA implementation were provided;
notification to the WTO would be made by 31 December 1997.
(4) Sectoral issues
125. In agriculture, the implementation of the CAP reform and of WTO commitments, while
largely aided by favourable market trends, was seen as a step in the right direction.  Average tariffshad been reduced but high out-of-quota rates continued to protect sensitive products;  producer
subsidy equivalents had increased.  Import arrangements for meat, dairy products, rice, fruit and
vegetables continued to be a matter for concern.  Members called for continued policy reforms in the
sector, with further shifts towards direct payments and reduced reliance on price support and export
subsidies.  In this respect, the recent Commission's Agenda 2000 proposal was welcomed, althoughsome Members wondered whether it went far enough in terms of improved resource allocation as well
as market access;  information was sought about EU Member States' initial reactions to the proposal.
126. Members acknowledged improved market access in manufacturing under the combination of
single market provisions, the reduction of tariff and non-tariff measures, and new commitments under
the Information Technology Agreement.  However,  several participants expressed disappointment
about the slow liberalization of textiles and clothing imports and backloading of restrictive items to
the last stages of integration under the ATC.  In addition, Members noted that sectors such asautomobiles faced difficulties in adjusting to new market trends and cost conditions, also benefitted
from high tariff protection and significant financial assistance.  Some participants underlined the EU
industry's high specialization in medium-technology products.
127. Most Members appreciated the EU's efforts to li beralize trade in services both internally and
externally, in particular in telecommunications and financial services. Some Members asked the EUwhether, as services liberalization generated substantial benefits for developed countries, it would
support the linkage of services negotiations with other areas of interest to developing countries in the
next phase of WTO negotiations.
128. The representative of the European Union noted that the textiles and clothing sectors were in
the process of re-integration into the GATT.  The EU's schedule was wholly consistent with itsliberalization obligations.  However, the EU would review its Stage 1 integration in line with the
recommendations of the TMB.  He explained the provisions for access under the Europe Agreements,WT/TPR/M/30
Page 29
noted that applied tariffs were not above bound rates and that the highest rates could not be described
as "peaks".  The EU had not yet drawn up plans for Stage 3 of integration under the ATC.
129. The representative provided some initial responses to a range of questions on agriculture and
fisheries, promising written answers at a later stage.  These referred principally to SPS measures,
measures taken in response to the BSE crisis, further CAP reform, and the fruit and vegetable regime.In some cases Members were referred to information provided to other WTO Committees, e.g.,
regarding tariff quota administration.  The EU was complying with its WTO obligations, including
those of internal support.  The EU did not consider its intervention agencies as State-Trading
Enterprises.  Reform of the wine sector was under consideration.
130. The representative noted that some questions on the ongoing reform in the services sector
went beyond WTO obligations, and internal reforms did not necessarily have an impact on external
obligations. The EU was seeking liberalization by its trading partners commensurate with what it was
offering, but it also recognized the beneficial effect of international commitments on the internal
agenda.  Details were provided on aspects of the single market programme and external market
opening in financial services and transport, the VAT Directive for non-EU service providers in
telecommunications and media ownership and the "Television Without Frontiers" Directive in audio-
visual services.  The rules on electronic commerce were currently being examined.
(5) The EU and the future of the multilateral trading system
131. Members emphasized that the review was taking place in a period of major policy
developments in the EU.  Much attention was devoted to the possible consequences of the move
towards economic and monetary union and of new enlargements on the EU and third countries.  Some
Members stressed the potentially beneficial effects of the single currency on transparency and on thesecurity and predictability of trade flows into the euro area.  However, further analysis was requested
from the EU on the consequences of EMU for European countries which were not in the euro area.
132. Members generally recognized that the deepening of European integration, with single market
completion, preparations for the introduction of a single currency and the reform of Community
institutions, had not reduced the EU's involvement in  the multilateral system.  On the contrary, it was
recognized that the EU had contributed to the success of post-Uruguay Round negotiations, promoted
the use of dispute settlement procedures, including by acceptance of Panel reports going against the
EU, and supported the development of new issues on the WTO agenda.  Some members welcomed
the statements made by the EU representative concerning the need for comprehensive, rather than
sectoral, negotiations in any future WTO round.
133. The representative of the European Union recalled his opening statement confirming the EU's
attachment to the multilateral system.  He outlined the programmes that had been or would beestablished under "Agenda 2000" for domestic reform and the initiation of accession negotiations with
applicant governments.  The EU would observe its obligations under the relevant provisions of the
GATT 1994 and GATS.  Enlargement of the EU would al so imply a broader Single Market.  As in the
past, internal integration and external liberalization would continue in parallel.
134. It was too soon to judge the precise trade effects of the creation of the euro.  The clear aim
was to have a stable currency.  A large number of technical questions would have to be solved.
Conclusion
135. This review has illustrated that the EU's in fluence on the multilateral trading system and its
evolution is clearly recognized by Members.  This has two consequences:  that Members greatly value
the positive effects of such liberalizing activities as the Single Market, and that Members are stronglyWT/TPR/M/30
Page 30
sensitive to any trade policies or measures of the EU that are seen as potentially trade-distorting.
Members have also shown their concerns about the systemic effects of the expansion of the EU, the
development of a new generation of trade agreements with neighbouring and other countries, and a
wide range of specific and sectoral issues.  Certainly the trade policies and actions of the EU do not
leave any WTO Member indifferent;  this has been clearly seen in the large number of advancequestions covering a multitude of issues, and the level of the debate in the meeting.
136. Although this is an "interim" review, it comes at an important time for the development of EU
trade policies.  Many new developments are underway, not least the move to economic and monetary
union (leading to further integration and liberalization of the single market), the revision of the Lomé
Convention, and steps toward further EU enlargemen t.  We hope that the comments made in the past
two days will be taken into account by the compet ent organs of the European Union - the Commission
and the Member States - in developing their extern al relations within the multilateral trading system
and in formulating the EU's internal policies which have direct or indirect implications for the
multilateral trading system.
__________