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IV. TRADE POLICIES AND PRACTICES BYSECTOR
(1) Overview
1. Asnoted inprevious chapters, theperiod under review hasbeenoneofimplementation of
WTO Agreements andofdeepening oftheSingle Market, notofmajor regulatory change. Byreducing
border protection inindustry, putting pressure onsupply-managed andprice intervention systems for
agriculture,andpromotingincreasedfreedominthesupplyofservices,theinternalandexternalprocesses
arecontributing toredefining theplaying fieldinmany sectors, creating amore open, competitive
marketplace from which fewer firms canremain isolated.
2. Inagriculture, favourable market prices havehelped topromote theprocess ofCAP reform
andfulfilment ofWTO commitments, facilitating thesector 'sexposure tocompetition inagradual
manner. Budgetary pressures andtheprospect offuture EUenlargement, aswellastheforthcoming
WTO negotiations onagriculture arelikely toaddpressure forfurther reform. Themanufacturing
sector hasbeensubject tocontinued reductions oftariffs andtheuseofnon-tariff barriers, atrend
which willbereinforced bytheimplementation oftheITA, buttariff peaks remain intextiles and
clothing, automobiles andconsumer electronics. Asdemonstrated bytherapid growth ofEUexports
inrecent years, trade liberalization offers newmarket opportunities inindustry.
3. TheEUauthorities areconcerned about theneedtoimprove competitiveness onworld markets.
EUindustries indifferent market segments facestiffcompetition bothfrom theemerging countries
andfromthemostadvanced industrialized countries. Concerned thathighcostsinservices might affect
theglobal competitiveness oftheEUeconomy, inthelasttwoyears theCommunity hasfocused on
thedeepening oftheSingle Market inservice areas (such astelecommunications, airtransport, and
energy), andhasalsostrongly supported sectoral negotiations under theGATS.
(2) Developments inAgriculture
(i) Policy trends
4. Asdescribed inprevious Trade Policy Reviews, theEUassists theagricultural sector through
acombination ofmeasures, including tariffs andtariff quotas, production controls, price supports,
export subsidies andstructural aid,anddirect payments. While agriculture accounts foronlysome
2percentofGDP, itabsorbs over50percentoftheCommunity budget, butthisshare isdeclining.
Since theprevious review in1995, theWTO Agreement onAgriculture hasbegun tobeimplemented,
building onthecompleted CAP reform. Inconsequence, there hasbeenbothanoverall reduction
inthelevelofassistance andchanges inthemanner inwhich assistance isprovided, withamovement
towards direct payments. Despite thechanges, farmincomes havecontinued torise,helped byhigh
world prices andthechanging pattern offarmsupports (OECD, 1997).1Nevertheless, there hasbeen
aredistribution ofincomes between products andMember States, particularly infavour ofproducers
ofcereals andmeatother thanbeef, essentially asaresult ofthecrisis related to"mad cow" disease.
5. Byproviding foranoverall 20percentcutinassistance programmes, asmeasured bythe
Aggregate Measure ofSupport, anda36percentcutinexport subsidies overtheimplementation period,
theapplication oftheWTO Agreement iscontributing toreducing reliance onprice supports, while
placing greater emphasis ondirect support withlesslinkage toproduction levels. Other WTO
1Onaverage, farm incomes have grown intheCommunity by20percentbetween 1992 and1996.European Union WT/TPR/S/30
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requirements,suchastheestablishmentofminimumaccessconditionsbyproductgroupandthereduction
ofaverage tariffs by36percentshould, induecourse, increase theexposure oftheagricultural sector
tocompetition. Chart IV.1, based ondataprovided bytheCommission, shows thatthesimple average
tariff foragricultural products (including "tariffied" products) hasfallen by25percentsince 1995
toreach 20.8percentin1997. Thetariff profile shows highpeaks forcereals and,toalesser extent,
meat andmeat products, dairy andpoultry, sugar andtobacco products. Nearly 280tariff linesat
HSten-digit level carry rateswhose advalorem equivalents exceed 50percent. Thehighest-tariff
items (above 120percent)involve meatofcattle, pigsandsheep, edible offalofanimal origin, milk
andcream, some cheese, rice,wheat flourandbran, andmanufactures ofprepared animal feed; while
average tariffs foroilseeds, fruitandvegetables, andplants, aresignificantly below theagricultural
average orzero, seasonal peaks mayafford significant additional protection toEUproducers ata
particular timeoftheyear(Table IV.1).2
6. Inthelasttwoyears, anumber ofquestions havebeenraised intheCommittee onAgriculture
about theimplementation oftheEU'sWTO commitments. These concerned theuseofvolume-based
special safeguards inthefruitandvegetable sector3,theunder-fill oftariff quotas foranumber of
products4,theallocation ofimport licences inadministration oftariffquotas andother aspects oftariff
quota administration5,thetreatment ofexport subsidies paidonproducts incorporated inexports of
processed cheese inexcess oftheEU'sexport subsidy reduction commitment levels oncheese6,and
thecarry-over ofunused export subsidy commitments onpoultry from themarketing year1995/96
into1996/97.7
2With thetariffication ofvariable levies andquantitative restrictions, thenewrateshavepredominantly been
expressed inspecific terms (about 750tariff lines outofatotalof10,800 lines atHSten-digit level intheEU
tariff). Advalorem equivalents (AVE) ofspecific duties have beencalculated bytheCommission, onthebasis
oftheEU1997 tariff andEUimport values andvolumes pertariff linefor1July1995 to30June 1996. The
calculationstakeintoaccountthechangesinproductnomenclaturesduringthatperiod.TheCommission'sestimates
have been usedforthecalculations oftariff averages, which aremade onanunweighted basis. Anyestimates
oftheadvalorem incidence ofspecific rates must generally beinterpreted withsome caution since there may
bevariations intariff incidence within theperiod, depending onprice andexchange rateconditions. Another
source ofuncertainty might arise when trade flows arenegligible; thismayleadtovery high, possibly not
representative, advalorem equivalents. Inturn, thesmall amounts oftrade maybeadirect consequence ofthe
veryhighdutyrates. Asinprevious TPRs, higher seasonal tariffs, covering some 1,200 tariff lines, which affect
essentially fruitandvegetables, have notbeen taken intoaccount forthecalculation ofaverages inagriculture
(only thebaserates have beenused). Ifmaximum seasonal rates were included, theaverage agricultural tariff
would risebyabout 3to4percentage points.
3WTO document G/AG/R/7, 26November 1996.
4Several questions concerned theunder-fill ofthequota onbovine meat which wasrelated tolowdemand
following theBSEcrisis (WTO document G/AG/R/11, 28July1997).
5Thequestions were based ontheEUnotification inWTO document G/AG/N/EEC/3, 12March 1997
(Table MA:1), andthequestions andanswers arereported inWTO document G/AG/R/11, 28July1997.
6WTO documents G/AG/R/10, 23April 1997, andG/AG/R/11, 28July1997. Other WTO members have
argued thattherefunds arecircumvention oftheexport subsidy limits oncheese.
7WTO document G/AG/R/11, 28July1997.WT/TPR/S/30 Trade Policy Review
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Table IV.1
Principal traded agricultural andfoodproducts, 1997
HS4 ProductNo.of
linesSimple average
applied rate
1997Range
(percent)Standard
deviation
0102 Livebovine animals 13 78.6 0-120.2 51.3
0201 Meat ofbovine animals, fresh orchilled 6 107.5 93.9-124.7 11.5
0210 Meat andedible offal 26 57.6 2.0-826.2 157.6
0302 Fish, fresh orchilled 71 11.3 0-23.0 6.4
0304 Fishfillets &other fishmeat 69 11.4 0-18.0 4.0
0306 Crustaceans whether ornotinshell, live,frozen 28 12.5 6.0-18.0 3.5
0401 Milk andcream, notconcentrated orsweetened 5 59.3 6.6-134.6 57.1
0405 Butter, andother fatsandoilsderived from milk 2 11.7 11.7-11.7 0.0
0406 Cheese andcurd 37 60.2 1.3-156.3 37.4
0407 Birds'eggs 4 19.8 10.6-35.3 10.9
0603 Cutflowers andflower budsforbouquets 12 17.1 14.2-20.0 3.0
0803 Bananas, including plantains, fresh ordried 3 64.2 18.7-155.1 78.8
0901 Coffee 6 10.5 3.3-15.8 3.6
0902 Tea 4 1.1 0-4.4 2.5
1001 Wheat andmeslin 34 76.8 17.6-106.6 29.3
1005 Maize (corn) 16 48.7 0-95.9 48.8
1006 Rice 33 92.3 10.6-141.2 44.0
1201 Soybeans 2 0.0 0-0 0.0
1206 Sunflower seeds 3 0.0 0-0 0.0
1207 Oilseeds andoleaginous fruit 18 0.0 0-0 0.0
1511 Palm oil&itsfractions 6 10.0 2.7-17.6 5.9
1517 Margarine 6 19.1 4.0-42.1 13.2
1604 Prepared, preserved fish;caviar 36 18.8 5.5-25.0 6.2
1605 Crustaceans, molluscs 9 17.5 0-26.0 7.5
1701 Cane orbeetsugar 4 61.8 18.7-78.8 28.8
1806 Chocolate 13 14.7 9.3-36.3 7.6
1902 Pasta 11 29.1 11.9-57.4 14.3
2009 Fruit &vegetable juices 124 31.0 12.0-113.8 16.6
2204 Wine offresh grapes 116 19.9 0.3-46.7 16.1
2303 Starch andsimilar residue 5 75.1 0-375.6 187.8
2304 Soybean oilcakeandother solid residues 1 0.0 0-0 ...
2401 Tobacco unmanufactured 21 18.8 13.0-45.5 7.3
Note: Averages takeintoaccount advalorem equivalents ofspecific rates, calculated asthesimple average ofin-andout-of-quota rates,
where applicable.
Source: WTO Secretariat estimates based onCommission data.WT/TPR/S/30 Trade Policy Review
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7. In1995-96, theEUcompleted theCAP reform agreed in1992, except inthebeefsector.8
Thereform began aprocess ofdecoupling support payments from production quantities andprices,
which hashelped toreduce direct transfers from consumers toproducers andshiftCAP costs to
taxpayers. Intervention prices forcereals were cutbyathird between 1992/93 and1995/96, while
beefintervention prices werecutby15percent. Incompensation, farmers received income support,
either intheformofdirect payments contingent onset-aside requirements forcropproducers, orthrough
premia forsuckler-cows, male bovines andsheep. Theimplementation ofinternal reform and
international commitments hassofarbeenconsiderably facilitated byfavourable world market price
conditions formostcommodities, inparticular forcereals, asdiscussed below.9Higher market prices,
bothdomestically andinternationally, helped theEUtoachieve anoverall reduction inexport subsidies
andinternal pricesupport. Prices ofother products, suchasdairy andpoultry showed upward trends.
8. Theoverall impact ofhighworld prices, CAPreform, and,more recently, theimplementation
ofWTO commitments isreflected intheOECD 'smost recent estimates ofconsumer andproducer
subsidy equivalents (CSE andPSE) (Table IV.2).10These measures, which capture boththetransfers
from government expenditure andthetransfers from price distortions (e.g., through tariffs), show a
decrease inPSEs, CSEs, andtotaltransfers toagriculture (notthesameasthePSEs andCSEs) between
1995 and1996. ThePSEs hadcontinued torisebetween 1986-88 through 1994, before stabilizing
in1995 (despite theeffects ofEUenlargement) asprice support reductions matched direct payment
increases, andfalling in1996, mainly duetohighworld prices. InthecaseofCSEs, theshiftfrom
internal pricesupport todirect payments hadalready reduced thenetimplicit taxation ofEUconsumers
(asshown bythesmaller, negative CSEs), andthisshiftcontinued in1996. Overall, CSEs havebeen
reduced toagreater degree thanPSEs.
Table IV.2
Transfers associated withagricultural policies, 1986-88 and1994-96
1986-88 1994 1995a1996b Change 1995-96
(%)
PSE (ECU billion) 61.6 68.6 73.3 67.0 -8.7
(%) 48 49 49 43
CSE (ECU billion) -51.6 -46.1 -42.0 -27.9 -33.5
(%) -44 -38 -34 -22
Total transfers (ECU billion) 103.1 n.a. 106.0 94.7 -10.7
a Provisional
b Estimate.
Note: EU12 for1986-88, EU15, including former GDR for1995-96. Total transfers arenottheaddition ofPSEs andCSEs; theycover
thetotalvalue ofproduction andinclude other transfers toagriculture, notincluded inthePSEs andCSEs.
Source: OECD (1997).
8AmajorobjectiveundertheCAPreformwasthereductionintheceilingforinterventionbuyingfrom750,000
to350,000 tonnes by1997. Because oftheBSEcrisis, implementation waspostponed until 1998.
9Reflecting sharp increases in1995, foodprices increased inrealU.S. dollar terms by16percentbetween
1991 and1995. OECD (1996a).
10TheProducerSubsidyEquivalent(PSE)isaconcisewayofmeasuringthetransfersasaresultofgovernment
policies toproducers. Itcanbemeasured: (i)bytracing direct andindirect government expenditure toproducers;
or(ii)byimputing theeffects ofpolicies bycalculating thedifference between actual domestic prices andwhat
theywould have been intheabsence oftrade interventions. SeeOECD (1997), forafurther discussion.European Union WT/TPR/S/30
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9. Although overall assistance toagriculture hasfallen, financial transfers havecontinued togrow.
In1996, spending under theGuarantee Section oftheEuropean Agricultural Guidance andGuarantee
Fund (EAGGF) rosetoECU 39.2billion in1996, from ECU 35.4billion in1993, reflecting both
theinclusion since 1995 ofthethree newMember States andthegradual expansion ofdirect income
payments (Chart IV.2). However, figures alsoconfirm thedeclining trends ofagricultural spending
asashare oftheEUbudget (from 55percentin1994 to50.5percentin1996). Thereduction of
export subsidies, storage expenditure andinternal prices should translate overtimeintosignificant
savings fortheEUbudget, asconfirmed bythe1997 draftbudget.
10. Budgetary considerations, inparticular thepossible impact fortheCAPbudget ofthenextEU
enlargement toCentral andEastern European countries, seem likely tocontinue toimpose constraints
onfarmsubsidies. Measures toaddress these concerns andprepare theground forthesecond phase
ofnegotiations under theWTO Agreement onAgriculture arecontained inaproposal ("Agenda 2000")
made on16July1997bytheCommission. Inthisproposal, further emphasis isgiven totheadoption
ofmore market-oriented measures, entailing lessreliance onprice support mechanisms andexport
subsidies, reduction inintervention, afurther shifttodirect income support, amore decentralized
approach toCAPimplementation, modulation offarmsubsidies according tofarmsizeandincomes,
andashiftinaidpayments tosupport rural tourism andsmall businesses.
11. Theaccession ofthetenCEECs would increase theareaofcultivated landintheEUby
50percentanddouble thenumber offarmers. TheCommission 'sestimates ofthetotalcostforthe
CAP ofEUenlargement vary(from ECU 10to30billion) anddepend onthenumber ofcountries
concerned andagricultural priceprojections. Theproposed package features further cutsinintervention
prices, tobeimplemented inphases from 2000, by20percentforwheat (from ECU 119to
95pertonne), 30percentforbovine meat(from ECU 2,780 to1,950 pertonne between 2000 and
2003) and10percentforbutter andmilk. Incompensation, thesystem ofdirect payment, notlinked
toproduction, would beextended, although compensation would notnecessarily beproportional to
price cuts. Set-asides inthearable sector (5percentin1998) would disappear. Reallocations of
spending between structural funds andtheEAGEF arealsoproposed.
12. Plans forthefarm sector areincreasingly taking account ofwider issues such asrural
development andenvironmental issues. These arealsofinanced fromcommon structural funds, although
some measures areco-financed attheleveloftheMember States.
13. TheEUhascompleted bilateral negotiations tocompensate trading partners forreduced market
access resulting fromtheaccession ofAustria, Finland andSweden.11TheUnited States, Australia,
Canada andNewZealand among others were accorded tariff quota increases ortariff reductions on
specific products. TheEUalsoagreed toincrease preferential tariffquotas by23percentforimports
from sixEurope Agreement countries (Hungary, Poland, theCzech Republic, theSlovak Republic,
Romania andBulgaria), inthecontext ofseparate negotiations (Chapter II(5)(ii)(a)). Preferential
agreements concluded since theprevious TPR (Association Agreement with Slovenia, and
Euro-Mediterranean Agreements withIsrael, Morocco andTunisia), orwhich arecurrently under
negotiation,alsoincludevariousreciprocalagriculturalconcessionsincludingtariffreductionsonproducts
ofbilateral interest.
11Therevised agricultural schedule resulting from these negotiations hasyettobeformally approved bythe
WTO.WT/TPR/S/30 Trade Policy Review
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(ii) Sectoral developments
14. ThecompletionoftheCAPreforminthe1995/96seasonaffectedindividualagriculturalproducts
differently. Forexample, themove frommarket pricesupport towards greater useofdirect payments
mainly affected cereals, oilseed andprotein crops and,toalesser extent, beef(OECD, 1996). For
cereals andoilseeds, thedirect payments werelinked tohistorical areas andyields aswellasset-aside
requirements (except forsmall producers). Inthelightofhighworld prices anddemand forcereals,
set-asides havebeenreduced inthree successive seasons, andtheintervention price, which hadbeen
reduced overtheprevious three years, wasfrozen forthe1996/97 season. Export taxes forwheat
wereintroduced attheendof1995andthrough thefirsthalfof1996, andexport subsidies wereresumed
fromSeptember 1996. Duetothemarket situation, export taxes werereintroduced on31July1997.
Oilseed payments havebeenreduced by4percentbecause market prices exceed thereference price.
Reform ofthericesector hadalready beenagreed attheendof1995; thisentails reduced intervention
prices andtheintroduction ofareapayments within thelimits ofthemaximum guaranteed areas.
15. Developments inthelivestock sector were dominated bytheBSEcrisis (Box IV.1). Beef,
asotherproducts, issubject topricesupport, intervention purchases, direct protection based onlivestock
numbers,substantialtariffprotectionandexportsubsidies.Directpayments,basedonreferencenumbers
("headage payments") increased significantly in1996. Additional payments perheadofcattle were
paidtocompensate producers forthedrop inprices which followed theslump inconsumption.
Payments, 70percentfinanced bytheEUand30percentbythemember States, werepaidtofarmers,
mainly intheUnited Kingdom, whowereobliged tocullherds affected bythedisease andintroduce
adequate stock tracing systems. Some Member States granted additional, national aid.Deficiency
payments usedtosupport sheep meat production fellwhen market prices rose. TheEUapproach
concerning theuseofhormones inmeatandmilkproduction hasbeenthesubject ofadispute settlement
caseintheWTO (Chapter III(2)(ix)(b)).
16. Although there wasareduction inthedairy herdto22.3million head, thiswascompensated
byanincrease inyields. Adetailed description ofmarket trends wasprovided totheWTO Secretariat
bytheCommission. Export refunds wereadjusted onseveral occasions totakeaccount ofUruguay
Roundcommitments.Between1January1996and31August1997,refundswerereducedby23percent
forprocessed cheese andbetween 14and45percentforother types ofcheese. Ontheother hand,
tomaximize theuseofexport quotas, refunds were increased by18.8percentforbutter, 17.1per
centforbutter oil,16.7percentforskimmed-milk powder and4.6percentforwhole-milk powder.
Since 1August 1997, export refunds foralldairy products havebeencutby5percent. Ingeneral,
theexport subsidy reduction commitments havenotimposed significant constraints, inthelightofhigh
world prices andreductions inexported volumes. Inthecaseofcheese, forwhich there wasstrong
export demand, subsidized exports in1995-96 wereveryclose tothereduction commitments. Inward
processing arrangements havesubsequently beenintroduced, under which processed cheese isexported
withitssubsidized ingredients being counted against theEU'sexport subsidy commitments.12
17. Changes weremade tothefruitandvegetables regime inlate1996, tobeimplemented over
asix-year period; thereform reduces thevolume ofproduce which canbewithdrawn fromthemarket
andtheamount ofcompensation available (OECD, 1997). Under thearrangements fortheseasonal
import offruitandvegetables, theCommission laiddown detailed rulesfortheapplication ofspecial
volume safeguard provisions allowed under theWTO Agreement onAgriculture. Import volumes
arebeing monitored using asystem oflicences.
12Asnoted earlier, thishasbeen questioned byother members intheWTO Committee onAgriculture.WT/TPR/S/30 Trade Policy Review
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BoxIV.1: Bovine spongiform encephalopathy (BSE)
ThefirstBSEcases appeared inthemid-1980s intheUnited Kingdom, andonasmaller scale, inother
EUmembers (Ireland, France, Germany, Denmark, Portugal andItaly) aswell assome non-EU
countries andterritories (Switzerland, Oman, theFalkland Islands, Canada). Measures tolimit the
expansion ofthedisease were taken attheEU-level in1985. Restrictions onthetrade ofcattle andmeat
from theUnited Kingdom have been adopted. Theuseofmaterials from anymammalian animal inthe
production ofcattle andother ruminant feedthroughout theEUandtrade ofspecified bovine offal (SBOs
i.e.,brain, spinal cord, tonsils, thymus, spleen andintestines) andother tissues were prohibited. The
United Kingdom wasrequired toapply equivalent conditions toexports tonon-EU countries.
Thecrisis re-emerged inthespring of1996 withasurvey establishing apossible linkbetween BSEand
thehuman Creutzfeldt-Jacob disease. Asaresult, theCouncil ofMinisters decided tostrengthen
existing measures bydeclaring acomplete banonexport oflivecattle, their semen andembryos, meat
ofcattle andthedifferent products obtained from it,andmammalian-derived meat-and-bone meal tothe
EUandnon-EU countries; forbidding UKcattle older than30months ofageandSBOs from animals
lessthan30months ofageatslaughter toenter thehuman food oranimal feed chains. Anewheat
treatment forprocessing animal waste toinactivate BSE agents wasdecided. From itsside, the
United Kingdom undertook toengage inselective slaughter ofcattle considered tobemost atrisk.
Apart from measures directly related tohealth protection, theCouncil ofAgriculture Ministers adopted
inNovember 1996 apackage ofsupport forthebeefsector aimed atrebalancing supply anddemand.
Theplanincluded emergency, medium- andlong-term measures. Emergency measures provided forthe
opening ofintervention forcattle storage inthefallof1997, andtheincreasing ofthe1996 intervention
ceiling to550,000 tonnes. Medium-term measures included intervention arrangements foryoung male
animals andalso measures tolimit production ofbeef andveal. These measures include acalf-
processing premium (slaughter ofnew-born calves) oranearly marketing premium forcalves, a
reduction inthetotal number ofproducers 'rights topremiums formale bovines, andmeasures to
encourage theextensification ofproduction (theincreasing oftheextensification premium (36ECU)
applicable when thedensity factor islessthan1.4LUperhectare, andencouragement (52ECU) for
producers wishing togobeyond 1LUperhectare). Along-term reform ofbeef policy toalign the
supply ofbeefintheUnion totheprobable long-term level ofaggregate demand wasalsoagreed.
Tomeet therequests ofcertain Member States, theplan alsoprovides fortaking intoaccount the
difficulties intheEuropean beefsector, inthecontext ofnegotiations withCentral andEastern European
countries onimports oflivecattle.
TheECU 1.2billion required tofinance these measures during 1997 willbemade available bydelaying
1997 oilseeds advance payment until the1998 farm accounting year.
TheCommunity alsotook anumber ofsteps tocompensate farmers forthesharp fallinconsumer
demand. Aformal commitment wasobtained tosetaside asupplement ofECU 500million fora
one-off capital injection forfarmers having suffered losses inincome duetothe"mad cow" crisis.
There willbeanadditional ECU 20million forthepromotion ofmeat (ECU 30million intotal).
LU=Livestock unit.
Source: WTO Secretariat.
18. Discussions aretaking place onfurther reform inthedairy, tobacco, wineandoliveoilsectors.
Inthesugar anddairy sectors, administered prices andproduction quotas areusedinconjunction with
import protection andexport subsidies; therewerenochanges inprices orquota levels foreither sugar
ordairy products in1996.European Union WT/TPR/S/30
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19. TheEUbanana regime wasdescribed intheSecretariat report fortheprevious Trade Policy
Review. Asnoted inChapter II(Table II.4), thishasbeenthesubject ofadispute settlement case.
ThePanel Report, circulated toWTO Members on22May1997, found theEUregime tobeinconsistent
withseveral provisions oftheWTO Agreement, asintwoprevious GATT Panel Reports (WTO
documentWT/DS27).FollowinganappealbytheEU,theAppellateBodyessentiallyupheldthefindings
ofthePanel initsreport circulated on9September 1997. TheAppellate Report andthePanel Report
asmodified bytheAppellate Body, were adopted bytheDSBon25September 1997.
20. Thecombined effect ofCAPreform, highworld prices, andWTO implementation isevident
from theproducer subsidy equivalents ofassistance tomain products, asestimated byOECD (1997)
(Table IV.3). ThePSEs show thatthemajor beneficiaries oftheCAParethedairy andbeefandveal
sectors, followed bywheat. However, PSEs forcrops fellsubstantially in1996, mainly because of
highworld prices, withworld prices forbarley andwheat exceeding EUprices inthefirsthalfofthe
year; export taxes wereusedtoprevent EUprices forwheat rising toworld prices. Therelatively
highPSEforcrops (36percent)islinked todirect payments rather thanmarket pricesupports. There
waslittlechange inthePSEformeat; although beefprices fellontheworld andEUmarkets, this
wasoffset bytheincrease indirect payments andcompensation made available toproducers following
theBSEcrisis, asmentioned above.
Table IV.3
Producer subsidy equivalents bymain product, 1986-88 and1994-96
(ECU million andpercent)
1986-88 1994 1995 1996aChange 1995-96
(%)
Wheat 7,649 9,155 8,514 6,069 -40.29
Maize 2,684 2,559 2,730 1,817 -50.25
Other grains 5,068 6,372 6,660 5,092 -30.79
Rice 424 377 527 506 -4.15
Oilseeds 3,240 2,684 2,671 3,114 14.23
Sugar (refined equivalent) 2,961 2,186 1,837 2,253 18.46
Allcrops 22,027 23,158 22,939 18,851 -21.69
Milk 19,555 19,911 22,773 21,849 -4.23
Beefandveal 13,560 18,617 19,896 19,486 -2.10
Pigmeat 1,161 1,388 1,739 1,878 7.40
Poultry 1,709 2,159 2,093 2,190 4.43
Sheepmeat 3,346 3,330 3,510 2,772 -26.62
Wool n.c. n.c. n.c. n.c. n.c.
Eggs 218 48 366 -59 n.d.
Alllivestock products 39,550 45,453 50,378 48,116 -4.70
Allproducts 61,577 68,590 73,317 66,968 -9.48
a Estimate.
n.c. Notcalculated.
n.d. Notdefined.
Note: EU12 for1986-88, EU15, including former GDR for1995-96. SeeOECD (1997) forfurther explanations.
Source: OECD (1997).
21. Thecropandlivestock sectors havetraditionally accounted forequal shares ofEUagricultural
production. However, asaresult ofthestrong demand forandproduction ofcereals, andtheimpact
oftheBSEcrisis, there havebeensome important shifts inthestructure ofproduction since thelast
review (Chart IV.2). Production ofcereals in1996wasestimated at202million tonnes, arecord level,
resulting fromincreases inthesown area(asset-asides werereduced) andalarge increase inyields.WT/TPR/S/30 Trade Policy Review
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22. Spending under theEAGGF (European Agricultural Guidance andGuarantee Fund) hasshifted
verysubstantially infavour ofcereals, which tookover41.8percentofguarantee funds in1996,
compared to18.6percentin1994. Thiswasattheexpense ofmost other sectors, withonlymeat
holding itsshare offunds atsome 20percent.
23. Reflecting higher world commodity prices (especially wheat), export refunds havecontinued
todecline, from ECU 9.5billion in1993 toECU 8.1billion in1994 andECU 7.8billion in1995.
Intervention spending rosetoECU26.2billion duetotheexpansion ofproduction aidschemes (acreage
payments, set-asides, suckler-cow premiums andpremiums formale bovine animals) introduced as
partofthe1992 CAP reform. Asaresult offavourable market conditions storage expenditure fell
sharply, from ECU 5to1.3billion.
(3) Manufacturing
(i) Overview
24. Following astrong recovery in1994 (5.3percent), thepaceofindustrial activity hasproved
erratic inthelasttwoyears. Realmanufacturing output intheEUgrew by4.1percentin1995 but
fellby0.2percentin1996, compared withoverall realGDPgrowth of2.4and1.6percent. Apick-up
inactivity wasexpected in1997. Strong export growth compensated forsluggish domestic demand,
bothinmature industries suchastextiles andclothing andbasic chemicals, and"modern" sectors such
asoffice equipment andaerospace (Chapter I(3)).13ItalyandSpain, among thelargest Member States,
andGreece andIreland, among thesmaller, haveexperienced thehighest growth inextra-EU exports.
TheEUexport drivebenefited fromacombination ofstrong external demand, notably fromfast-growing
m.f.n. partners inNorth andLatin America, andAsia, andthemoderation ofunitlabour costs.
25. Nevertheless, structural weaknesses inkeysectors suchasautomobiles orcertain segments
oftheelectronics industry (components, andconsumer electronics) havebeenasubject forconcern
within theCommunity. Surveys havepointed toinsufficient product andgeographical specialization,
losses ofmarket shares, andacertain lossoftechnological advantages.14While theEUposition in
theAsian market hasrecently improved, itsbilateral tradeandinvestment linkscontinue tobeweaker
thanthose oftheUnited States andJapan (Chapter I(3)(i)).15WTO Agreements suchastheITA,
combined withSingle Market measures, active competition policies, andactions todiscipline State
aidpolicies arelikely toincrease theexposure ofsuchindustries tointernational competition.
26. Asdescribed inChapter III(2)(i)(a), simple average m.f.n. tariffs onimports ofmanufactures
havecontinued todecline, from6percentin1995to4.9percentin1997, reflecting Uruguay Round
commitments. Some higher m.f.n. tariffs persist inthetextiles, automobiles andconsumer electronics
sectors although none exceed 15percentonasimple average basis (Chart IV.3). Further tariff
reductions, aspartoftheimplementation oftheUruguay Round andtheITA, willresult inaverage
m.f.n. industrial tariffs under 3percentbytheturnofthecentury. Under preferential arrangements,
tariffs onimports from theCEECs andTurkey havebeenphased out.
13Extra-EU manufacturing exports grew byover 9percentin1995 and1996.
14Structural andspecialization problems ofEUindustries areanalyzed inthe1995 and1996 reports ofthe
Competitiveness Advisory Group, agroup of"wise men" established bythePresident oftheCommission to
formulate proposals ontheways toimprove EUindustrial performance. Further analysis isprovided inthe
Commission 's1996 report ontheCompetitiveness oftheEUIndustry.
15European Commission (1996b).WT/TPR/S/30 Trade Policy Review
Page 94
(ii) Adjustment intraditional industries
(a) Textiles andclothing
Recent economic developments
27. Although thetextiles andclothing industries account foradeclining share ofEUmanufacturing
value added (about 4percent)andemployment (8percent), theyremain important activities incertain
localareas. Regions suchasLombardy (Italy), Catalunya (Spain), Bayern andNordrhein-Westfalen
(Germany), Norte (Portugal), Wallonie (Belgium) orRegion duNord (France) show theheaviest
concentration ofemployment. Asinmostother industrialized countries, theindustry isundergoing
aprocess ofrestructuring andadjustment toreduce costs andincrease productivity.16Between 1985
and1994, imports oftextiles andclothing rose, respectively, from 15to25percentandfrom 12to
20percentoftheEUmarket. Import penetration seems, however, tohavestabilized in1995 and
1996. Total employment fellbyabout 25percentbetween 1984and1995, withalossofabout 850,000
jobsfrom atotalof3.2million in1984.
28. Affected byflatdomestic demand andstrong import pressure, thevolume ofEUtextile and
clothing production hasfallen slightly inthelasttenyears (-0.5 percentperyearintextiles and
-2percentinclothing). Themodest recovery of1994didnotcontinue in1995and1996, when real
output fell17;joblosses areestimated atalmost 100,000 in1996alone. Despite continuous adjustment,
theindustry stillsuffers fromovercapacity. EUproducers responded tosuchchallenges bymodernizing
production through theuseofcapital-intensive andinformation-technology based techniques, developing
outward-processing andsourcing arrangements, andbeing more reactive toconsumer demand. While
thisstrategy helped toincrease productivity andcompetitiveness incertain areas, ithasnotstemmed
joblosses, asnoted.
29. Building onquality improvements andgreater specialization, EUtextiles andclothing producers
havesought tocompensate forthelossofdomestic markets byincreasing exports, which grew atan
annual rateof5percentbetween 1985and1995. TheEU'smainexport markets aretheUnited States,
Switzerland, Japan andother OECD countries.
30. However, themain evolution inrecent years hasbeentherapid riseofbilateral trade with
partners inCentral andEastern Europe andtheMediterranean region (athree-fold increase inthelast
fiveyears). Countries suchasPoland, Turkey, Tunisia andMorocco havebecome important trading
partners bothontheexport andimport side,reflecting thegrowing importance ofoutward-processing
trade (currently about 15percentoftotalEUexternal trade).18Asdescribed below, thisevolution
mayberelated tothe(faster) liberalization oftradeunder preferential agreements, withmeasures such
asthecomplete elimination oftariffs onimports fromtheCEECs, theharmonization ofrulesoforigin
16Labour productivity increased in1994 by8percentintextiles and6percentinclothing. European
Commission (1995c).
17European Observatory forTextiles andClothing (1996).
18InGermany, more thantwothirds oftotaltrade intextile andclothing products withtheCEECs arepart
ofoutward-processing operations.European Union WT/TPR/S/30
Page 95
ortheregular increase inoutward-processing trade(OPT) quotas.19Chart IV.4shows thattheimport
shares ofChina andHong Kong China, forclothing, andtheUnited States andSwitzerland, fortextiles,
declined between 1991and1995. Atthesametime, theshares ofPoland, Turkey, Tunisia andMorocco
inEUimports ofclothing increased.
31. According totheCommission, theInternal Market Programme hashelped theEUindustry
tore-orientitselftowardsthemoredynamichigh-qualityandfashion-ledsegmentsofthemarket,although
theabolition ofnational import quotas hasalsoresulted ingains inmarket share forlow-cost countries
intheEU.20Other benefits oftheSingle Market include reductions intransport costs andindelays,
bothlinked totheabolition ofinternal border controls.
32. Following theabolition ofnational quotas, theCommunity established EU-wide rulesandquotas
foroutward-processing arrangements, withharmonized rules oforigin. TheCommunity 'sOPT
Agreements aremulti-annual andcontain growth ratesbyproduct, withflexibility clauses. OPTquotas
withWTO Members havebeennotified totheWTO.21OPTquota agreements withnon-WTO Members
(Belarus, Ukraine, Moldova, VietNamandChina) arereviewed every 2-3years. Reflecting strong
growth inoutward-processing tradewiththese countries, quotas onimports fromUkraine andBelarus
havebeenincreased since 1996. However, Poland, theCzech Republic andtheCEECs ingeneral
haveremained byfarthelargest EUpartners inoutward-processing trade, Germany andItalyamong
theEUMember States, being themain users.22
33. TheCommunityanditsMemberStatesoperateajointaidprogramme(RETEX)aimedathelping
thediversification andreconversion ofregions withahighdependence ontextiles andclothing activities.
Theprogramme, defined fortheperiod 1993-97, focuses onthedevelopment ofsynergies between
firms within aregion andtheintroduction ofnewtechnologies inproduction. Anexport promotion
scheme (EXPROM) provides support fortradefairs, exploratory missions andinvestigation ofpotential
newmarkets. Nonewprogramme hasbeenintroduced attheCommunity levelsince the1995 TPR.
Support forthetextiles andclothing industries isalsoprovided byindividual Member States. Two
recent programmes, theFrench "Plan Textile" andtheBelgian "Plan Merabel", which werebothaimed
atreducing labour costs(notably byexempting firms fromsocial contributions onnon-qualified labour),
havebeeninvalidated bytheCommission under State aidrules.
19Thetariff gapforimports from EAAgreement countries andm.f.n.countries issignificant. While imports
oftextiles andclothing from Bulgaria, Hungary, Poland, Romania, theCzech Republic andtheSlovak Republic
have entered theEUduty-free since 1January 1997 (seesection "other developments" below), imports from
m.f.n sources were subject toaverage rates ofdutyof9and12percent, respectively (Chart IV.3).
20Eurostat (1997).
21WTO documents G/TMB/N/64 andG/TMB/N/65 of28April 1995.
22About 70percentofOPT imports originate intheCEECs. Thisshare, which hadincreased rapidly in
recent years, seems tohave stabilized. According totheCommission, thepurecostadvantage oftheCEECs
istending todiminish vis-à-vis other regions butother criteria (proximity, reliability ofthelabour force) are
alsotaken intoaccount byEUfirms. Recent estimates from theEuropean Observatory forTextiles andClothing
show, however, thatEastern Europe 'shourly labour cost, atanaverage ofUS$2, remains extremely attractive
(bycomparison, Northern European rates average US$20 andSouthern European rates wellunder US$10).
Inclothing, theaverage hourly rateinPortugal wasin1995 US$4 andinGreece, US$7.WT/TPR/S/30 Trade Policy Review
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European Union WT/TPR/S/30
Page 97
34. NewrulesgoverningStateaidtothesynthetic-fibresindustryenteredintoforceon1April1996,
replacing theprevious codewhich expired on31March 1996. ThenewCode specifies notification
requirements andconditions forauthorization, which aredescribed inBoxIV.2.
BoxIV.2: New rules governing State aidtothesynthetic fibres industry
The1996 Code setsoutnewrules fornotification andauthorization ofaid. Member States arerequired
tonotifiy anyproposed aidinsupport oftheextrusion/texturization offibres andyarnbased onpolyester,
acrylic orpolypropylene; polymerization (ifcombined with extrusion intheproduction process); and
other traditional processes linked totheuseofextrusion/texturization capacities. Certain categories of
aid(fortraining, oraidalready approved under theCommmunity framework governing aidforR&D and
environmental protection) areexempted from notification. Allforms ofaidother thanthose refered to
above aresubject tonotification.
Therules forauthorization ofinvestment aidhave been substantially modified. Under theoldCode,
authorization wasautomatically dependant onsignificant capacity reductions. Under thenewrules, the
market situation, product innovation andthesizeofentreprises aretaken intoconsideration bythe
Commission. Forthelarger firms, investment aidofupto50percentoftheapplicable aidceilings will
beauthorized ifaidresults insignificant capacity reduction, orifthemarket ischaracterized bya
"structural shortage ofsupply" andifaiddoes notresult insubstantial capacity increase. Forsmall and
medium-size entreprises (SMEs), aidwillbeauthorized atlevels upto75percentoftheceiling ifthe
same conditions apply. Aidcould beauthorized upto100percentoftheceiling ifoneadditional
condition ismet, i.e.thattheproduct concerned is"innovative". TheCode specifies thecriteria tobe
used bytheCommission toassess thesituation ofthemarket, ifachange incapacity issignificant and
whether aproduct isinnovative.
Source: WTO Secretariat onthebasis ofinformation provided bytheCommission.
35. ByApril 1997, textiles wasthesecond group ofproducts mostaffected byEUanti-dumping
actions, with24measures inforce (Chapter III(2)(v)(a)). Measures inforce mostly concern polyester
yarns andfibres. Thefigures reveal anincrease overtheprevious yearininvestigations andmeasures
affecting cotton fabric andpolyester yarns, raising fears among certain trading partners thatthe
liberalizationoftheEU'stextilesimportswouldbeaccompaniedbyanincreaseinanti-dumpingactivity.23
There arenomeasures inforce onclothing.
TheUruguay Round Implementation Process
36. On16December1996,theCommunityanditsMemberStatesnotifiedthesecondlistofproducts
forintegration intheGATT, representing 17.99 percentof1990import volume covered bytheATC.24
Following thatintegration, effective from1January 1998, overonethirdoftheEU'simport volume
of1990 willhavebeenintegrated intotheGATT.25
23"Invisible Barriers", FarEastern Economic Review, 12June 1997.
24WTO documents G/TMB/N/207, 31January 1997 andG/TMB/R/30, 11June 1997.
25Under theWTO Agreement onTextiles andClothing, quantitative restrictions vis-à-vis anumber of
developingcountriesandcountriesintransition,carriedoverfromtheformerMFAregime,arebeingprogressively
phased outasproducts areintegrated intotheGATT. With integration, anyrestrictions ontheproducts are
eliminated.Onthedateofentry-into-forceoftheWTOAgreemen t(1January1995),Memberswhichhadretained
(continued...)WT/TPR/S/30 Trade Policy Review
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37. Inthesecondlist,topsandyarnsaccountfor11.63percent;fabricsfor2.22percent;made-ups
for2.06percentandclothing for2.09percent. TheCommunity 'snotification covers 23categories
ofproducts, ofwhich fourareoftopsandyarns, fouroffabrics, sixofmade-up textiles products and
nineofclothing. Ofthe23categories ofproducts, 12aresubject toquotas vis-à-vis certain WTO
Members (overall fiveMembers). TheRepublic ofKorea willseeseven ofitsrestrictions lifted; for
Hong Kong China, thefigure willbefour; forArgentina, Brazil andMacau, oneeach. Anoverview
ofthelistisprovided inTable AIV.1.26Todate, theEUhasnotinvoked thetransitional safeguard
mechanism available toprevent further import surges from causing orthreatening tocause serious
damage todomestic industry.
Other developments
38. Upon theentry intoforce ofthefinalstage oftheCustoms Union Agreement between theEU
andTurkey on1January 1996, allEUtariffs andquotas affecting Turkish products werephased out.27
Asaresult oftheAgreement, Turkey aligned itstextiles andclothing regime withthatoftheEU.
39. ProtocolsontextilesandclothingproductsundertheEuropeAgreementswithBulgaria,Hungary,
Poland, Romania, theCzech Republic andtheSlovak Republic provide forfullliberalization by
1January 1998. Onthatdate,allremaining quantitative restrictions affecting these countries willbe
removed; imports havealready entered theEUduty-free since1January 1997. Since therehavenever
beenanyrestrictions applied onproducts from theBaltic countries andSlovenia, by1January 1998
trade withthetenEurope Agreement countries willbealmost totally liberalized.28
40. Agreements ontextiles andclothing products withthirdcountries notMembers oftheWTO
wererenewed during 1995or1996. Forthose countries subject toquantitative restrictions (theRussian
Federation, Belarus, Ukraine, Uzbekistan, VietNamandChina), theAgreements generally resulted
inquota increases. With regard toimports from thecountries oftheformer Yugoslavia quotas on
products fromBosnia-Herzegovina, Croatia andtheformer Yugoslav Republic ofMacedonia (FYROM)
wereincreased in1996, while quantitative restrictions werere-introduced forproducts originating in
theFederal Republic ofYugoslavia (Serbia andMontenegro). Quotas onproducts fromSlovenia were
25(...continued)
theright tousethespecial safeguard under theATC were required tointegrate products accounting fornoless
than16percentoftheir 1990 import volume; afurther minimum 17and18percentaretobeintegrated by
1January 1998 and1January 2002, respectively. Allremaining products willbeautomatically integrated at
theendofthetransition period on1January 2005. Products fromeachoffourcategories -topsandyarns, fabrics,
made-up textiles products, andclothing -must beincluded inthefirstthree phases butthechoice ofthebasket
ofgoods tobeintegrated ineachphase islefttotheimporting Members 'discretion. Atleast12months inadvance
ofanimplementation stage, Members arerequired tonotify theMonitoring Body oftheir precise intentions.
TheEuropean Union hasopted forastage-by-stage approach, unlike other Members which have submitted a
programme forthefullperiod.
26After thedecision oftheGeneral Affairs Council onthesecond listofEUproducts, thepress reported
mixed reactions from theprivate sector, inparticular from some retailers andwholesalers associations, who
expressed disappointment thatmore substantial openness oftheEuropean market hasnotbeenachieved (Europe
of28November 1996).
27Textiles represent about 40percentoftotal Turkish exports totheEU.
28Tariffs onafewproducts from Slovenia andtheBaltics willbephased outoveralonger timeframe.European Union WT/TPR/S/30
Page 99
liftedin1996,whilerestrictionsonproductsfromFYROMwereremovedin1997(ChapterIII(2)(iii)(b)).
41. Trade intextiles andclothing islikely tobeamong themainbeneficiaries oftheharmonization
oftherulesoforigin among European countries andthecreation ofasingle territory fororigin between
theEU,otherEEAMembersandtheCEECs.CombinedwiththeliberalizationoftradewiththeCEECs,
thenewsystem might provide further stimulus toindustrial cooperation andoutward-processing
operations within thezone.
(b) Steel andcoal
Steel
42. TheEUremains theworld 'slargest steelproducer withproduction ofabout 150million tonnes
ofcrude steelin1996, followed byJapan andtheUnited States. Some 80percentofEUproduction
isconcentrated among fourMember States (Germany, Italy, France andtheUnited Kingdom) and
tencompanies, Usinor-Sacilor, British Steel, Thyssen andIlvabeing thelargest. Reflecting worldwide
overcapacity andincreasing competition fromdeveloping economies andsubstitute products, theEU
steelindustry experienced adecade ofsevere cutbacks inproduction andlabour, aggravated bythe
recession.29Production recovered somewhat in1994 and1995, butfellagain byabout 7percentin
1996.Continuousrationalizationeffortsandimprovedproductiontechniqueshaveresultedinanaverage
30percentproductivity increase since 1986. TheEUremains anetexporter ofsteel. Imports, which
grew by35percentin1995, fellbysome 20percent199630;more thanhalfofthevalue ofimports
originated inRussia, Ukraine andtheCEECs. Despite theprojected recovery ofdemand in1997,
thesituation ofworld-wide excess production seems unlikely toimprove intheshort-term asseveral
large non-EU producers arecontinuing toexpand theircapacities.31
43. External commitments anddomestic reform aregradually increasing thesector 'sexposure to
international competition. M.f.n. tariffs oniron,steelandrelated products (anaverage of4percent
in1997 forHSChapters 72and73)arecurrently being phased outandwillbevirtually eliminated
attheendoftheUruguay Round implementation period. Escalation hasalready beenreduced and
willalsolargely disappear by2000 (Chapter III(2)(i)(a)). However, ironandsteelandrelated or
processed products remain thegroup mostaffected byanti-dumping measures (Chapter III(2)(v)(a)).
44. Imports ofECSC steelproducts from countries inCentral andEastern Europe havebeen
significantly liberalized. Quotas affecting ECSC imports from theCzech Republic andthe
Slovak Republic were phased outattheendof1995 andreplaced byasystem ofdouble-checking
surveillance. While certain flat-rolled andlongproducts originating inRussia, Ukraine andKazakhstan
aresubject toCommunity quotas under bilateral agreements, quota entitlements havebeenincreased
by50percentinthelasttwoyears. Agreements fortheprogressive liberalization ofimports from
RussiaandtheUkrainewereconcludedinearly1997andasimilaragreementisexpectedtobenegotiated
29Employment intheEUsteel industry fellfrom 850,000 to520,000 between 1984 and1994. Afurther
reduction of7percentoftheworkforce wasrecorded in1995 andof5percentin1996.
30Foralmost allrolled products, thepenetration rateofEUimports hasincreased inthelastfewyears.
Between 1991 and1995, third country share intheEUmarket grew from 6to15percentforhot-rolled coils,
andfrom 9to24percentformedium andheavy plate (Resolution oftheECSC Consultative Committee onSteel
Imports intotheEU(96/C138/07)).
31OECD (1996b).WT/TPR/S/30 Trade Policy Review
Page 100
withKazakhstan (Chapter III(2)(iii)(c)). Inparallel withthefinalstageoftheCustoms Union Agreement
between theEUandTurkey, afree-trade agreement forECSC products wasconcluded, under which
trade insteelproducts willbefullyliberalized by2002.32Intheinternal market, theentry intoforce
ofthenewEUCode onAidtothesteelindustry marks animportant stepinthedirection ofbringing
State aidrules intolinewithgeneral Community guidelines (Chapter III(4)(iii)(b)).
45. TheEUhassupported theideaofaMultilateral SteelAgreement intheWTO context todeal
withstructural excess capacity andover-supply problems. Itstarted discussions attheendof1996
withtheUnited States onanagreement which might helplifttrade restrictions andlimitgovernment
subsidiesinthespecialitysteelsector.Discussionsareexpectedtofocusontariffsandnon-tariffbarriers,
thelimitation ofnewsubsidies andthegrandfathering ofoldones, acodeofconduct ontheuseof
trade remedies, andanewconsultation mechanism toprevent disputes. Government-to-government
discussion builds onearlier contacts between theU.S.andEUindustry associations in1995.
Coal
46. TheEuropean coalindustry hasfaced acontinuous, steady decline inthelastdecade, witha
dropof42percentinproduction and63percentofemployment, implying alossof265,000 jobs.
Theindustryhasbeenparticularlyvulnerabletotheshifttowardscheapersourcesofenergy,andgrowing
imports.33Despite serious rationalization andrestructuring efforts, recent EUestimates indicate that
theaverage production costofEUcoalremains three times higher thantheaverage import price
(ECU114pertonneagainstECU40pertonnein1993)andcostshavecontinuedtoincreaseinGermany,
thelargest producer.34Although productivity increases andmineclosures brought EUproduction costs
down by22percentbetween 1986and1994, thedecline ofimport prices wasevenhigher (40percent)
asaresult ofexcess production intheinternational market, linked inparticular totheentry ofnew
exporters andexchange ratedevelopments. Anoverview ofoutput andproduction costs intheEU
isprovided inTables IV.4andIV.5.
Table IV.4
Changes intheunitproduction costs ofcoalinvarious Member States, 1991-93
(ECU/TCE)
1991 1992 1993 1993/92
Germany 138 143 151 +5%
Belgiuma228 n.a. n.a. n.a.
Spain 154 147 131 -11%
France 91 100 110 +10%
Portugal 103 121 112 -7%
United Kingdom 74 71 62 -12%
Community average 109 112 114 +2%
n.a. Notapplicable.
a Lastcoalmine closed inlate-September 1992.
Source: European Commission (1995), Report ontheapplication oftheCommunity rules forState aidtothecoalindustry in1993,
COM(95) 656Final, Brussels.
32Two-way trade insteelproducts between theEUandTurkey grew by50percentbetween 1994 and1995
(Europe of14August 1996).
33Thefallinthecostofoilandtheelimination ofCommunity restrictions ontheuseofnatural gasfor
electricity generation alsoexacerbated thedifficulties ofthecoalsector.
34ECSC Consultative Committee (1996).European Union WT/TPR/S/30
Page 101
Table IV.5
Production ofhard coal, 1991-94
(Million tonnes)
1991 1992 1993 1994
Germany 72.7 72.2 64.2 57.6
Belgium 0.6 0.2 0.0 0.0
Spain 17.9 18.6 18.4 18.2
France 10.1 9.5 8.6 7.5
United Kingdom 92.7 84.0 67.5 47.7
Community averagea194.4 184.7 158.8 131.2
a Including 12Member States.
Source: Eurostat.
47. Inrecent years, EUMember States haveengaged insignificant efforts toreduce subsidies for
uneconomic production, leading tolarge capacity reduction. Belgium (1992) andPortugal (1994)
terminated coalproduction. However, thegapbetween average EUworld andproduction prices has
beenassociated withanincrease inaidpertonne (32percentbetween 1986and1993). Total production
aidauthorized in1993 intheEUamounted toECU 5billion, orECU 32pertonne, withapeakin
Germany (nearly ECU 70pertonne). France 'saverage subsidy pertonne wasECU 22andSpain's,
ECU 21.
48. TheCommission hasbeenseeking tomake existing aidschemes more transparent. Under
Decision 3632/93/ECSC, Stateaidmayonlybeauthorized ifchannelled through public budgets (since
1997) and,since1994, uponpresentation ofprofit-and-loss account asaseparate itemofrevenue distinct
fromturnover. Inaddition, Member States aretosubmit inadvance totheCommission arestructuring
planaimed atcutting production costs, oraclosure planwithprecise deadlines. Attheexpiry ofthe
ECSC Treaty inyear2002, thecoalindustry istobesubject tonormal Single Market rules, including
those relating toState aid.
(c) Motor vehicles
49. With ashare inworld production ofabout 30percentin1996, theEUremains thelargest
producer ofmotor vehicles andthelargest market forpassenger cars. Therecovery ofproduction
andsalesbetween 1994and1996(respectively, from13.3million to14.5million units, andfrom12.8
million to13.7million units) hasnotprevented afurther reduction inemployment by40,000 between
1993 and1995. Facing weak demand projections for1997 (anincrease ofabout 1.5percentforthe
EUmarket) andfierce pricecompetition, European manufacturers areseeking toincrease productivity
andreduce costs inanincreasingly globalized market. Inthelastfiveyears, European plants have
already achieved anincrease inproductivity of30percent. Recent statistics indicate, however, that
theproductivityofEuropean-ownedplantslagstheaverageproductivityofbothU.SandJapanese-owned
plants inEurope, aswellasplants located intheUnited States andinJapan.35Table IV.6shows that
35While thenumber ofhours necessary toproduce avehicle inEuropean-owned plants inEurope was27.1
in1995 (10percentmore thantheaverage ofU.S. andJapanese-owned plants inEurope), thecorresponding
figures forplants located intheUnited States was21.7 andinJapan, 16.2. European Commission (1996j).WT/TPR/S/30 Trade Policy Review
Page 102
unitlabour costs intheEUautomobile industry aregenerally higher thanintheUnited States andin
Japan.36
50. Therecovery oftheFrench andSpanish markets intheperiod 1994-96 isduepartly to
government-sponsored financial incentives forcarreplacement. TheItalian Government introduced
asimilar scheme inearly 1997. While totalcarsalesincreased inFrance by10percentin1996, the
Government decided toterminate thescheme attheendoftheyear,considering that"itdistorted market
forces" and"benefited foreign manufacturers more thanFrench ones".37
Table IV.6
Unitlabour costaintheautomobile industry: aninternational comparison, 1980-95
(Percent)
1980 1993 1995b
France 72 59 54
Germany 77 78 74
Italy 67 69 59
Spain 64 55 46
United Kingdom 92 66 59
Belgium 74 60 60
Netherlands 72 63 68
Japan 44 44 50
United States 63 47 44
a Labour costperunitofgross value added.
b Preliminary data.
Source: European Commission (1996), European Automobile Industry, COM(96)327 Final, Brussels.
51. Average tariffs inthesector arebound todecline byanaverage of25percentovertheUruguay
Round implementation period, asagainst 40percentintheindustrial sector asawhole. Current EU
tariffs onlightvehicles, public transport vehicles andtrucks areabout twice theaverage industrial tariffs
(10percentforcars, 13percentforpublic transport vehicles andtrucks).
52. Japanese exports ofmotor vehicles (oflessthan5tonnes) totheEUaregoverned bytheterms
ofanarrangement (so-called "consensus") concluded inJuly1991, providing forthegradual opening
oftheEUmarket; itprovides thatJapan willmonitor itsexports totheCommunity andthefiveMember
States (France, theUnited Kingdom, Italy, Spain andPortugal) thatpreviously applied restrictions,
foratransitional period ending on31December 1999. From thatdateonwards, theEuropean market
willbefullyopentoJapanese imports. Thearrangement includes forecasts ofexports in1999, based
onassumptions about demand inthatyear. Forecasts forintervening years aremade through bilateral
36TheCommission alsopoints torelatively higher input manufacturing costs, suchasenergy costs, inthe
EU.TheEUautomotiveindustryisata25percentcostdisadvantagecomparedwiththeUnitedStates.European
Commission (1996j).
37Declaration bythethenPrime Minister A.Juppé, reported byLeMonde of8October 1996. Thequestion
astowhether thescrappage premia resulted in"net" sales over themedium term remains unanswered. The
collapse ofthelightcarmarket inFrance in1997 would tendtoconfirm thatcustomers were induced toanticipate
purchases thatwere already scheduled. There arealsoindications thatthepremium hasnotledtoareduction
oftheaverage ageofthestock ofvehicles, which waskeptconstant inFrance atabout seven years bothbefore
andafter theintroduction ofthepremium.European Union WT/TPR/S/30
Page 103
consultations between theEuropean Commission andJapan taking intoaccount market developments.
InMarch 1997, themonitoring levelforthe1997ceiling wassetat1.09million units, based onforecasts
ofEU-wide demand of13.92 million vehicles, aslight increase of1.4percentover1996.38Monitoring
levels forthefiveMember States concerned wereestablished at179,900 unitsfortheUnited Kingdom,
102,700 unitsforFrance, 88,100 unitsforItaly, 51,800 unitsforSpain and33,200 unitsforPortugal.
53. Since the1995Trade Policy Review, theCommission hastaken initiatives aimed atcompleting
theSingle Market andintroducing more competition atthelevelofdistribution. Inrespect oftheSingle
Market, anewCommunity-wide typeapproval system forvehicles wasintroduced in1996 andwill
become mandatory forallnewcarsin1998. National approvals arenolonger allowed fornewtypes.
Inrespect ofdistribution, theblock exemption Regulation ontheselective andexclusive distribution
ofcarswasrenewed andextended until1999. ThenewRegulation allows distributors tosellandservice
different vehicle brands ("multi-franchising") under specified conditions. Itestablishes sanctions against
abuse oftheRegulation, which mayleadtothewithdrawal oftheexemption. According tothe
Commission, these changes, together withmarket forces, arelikely toresult infurther concentration
inthefieldofdistribution.39
54. TheseinitiativesmaycontributetoincreasedharmonizationandcompetitionintheSingleMarket,
butobstacles tomarket integration remain, asshown bythepersistence ofconsiderable pricedispersion
forautomobiles across national markets. While differences intaxation (which ranges from15percent
inGermany to200percentinDenmark), exchange ratefluctuations, producers 'market strategies,
andconsumer preferences fornational brands maylargely explain suchgaps; national registration
procedures forvehicles purchased abroad orillicit commercial practices alsoplayarole.40In1996,
theCommission published aninterpretative noteonadministrative treatment ofregistration forvehicles
purchased abroad. Inaddition, Directorate IVoftheCommission publishes monthly reviews ofmarket
prices ofcarswithin theCommunity toencourage greater competition.41
38ReflectingtheappreciationoftheYen,andtoacertainextent,theimprovedcompetitivenessoftheEuropean
industry, imports ofvehicles from Japan totheEUdropped by8percentin1995 to800,000 vehicles, some
250,000 vehicles below theagreed ceiling. However, declining imports have been offset byan8percentrise
insales oflocally produced Japanese brands, which arenotcovered bythe"consensus". European Commission
(1996j).
39Accordingtoarecentsurvey,thereareabout100,000cardealersintheEU,halfofwhichare"maindealers"
andtheother half"sub-dealers" (supplied bymain dealers). Onaverage, main dealers sell266newcarsper
yearandperdealer outlet, asagainst 674intheUnited States. Harbour Wayne Brown (1996).
40Several "parallel" importers ofcarshave filed complaints before theEUCourt ofFirst Instance against
allegedcommer cialpracticesthataimtokeepsuppliesfromreachingtheimportersmandatedbynationalcustomers
tofindcheaper prices, thusfragmenting themarket inviolation ofTreaty Article 85.Regulation 1475/95 of
June1997, which governs thedistribution ofmotor vehicles, clearly forbids initsArticle 6anydirect orindirect
hindrance ofparallel trade. Thiscomprises, interalia,therefusal ofdealers tosupply aconsumer simply because
heisaresidentofanotherMemberStateandforhinderingtheactivitiesofintermediariesauthorizedbyconsumers.
TheCommission hasstated inthecontext ofthisreview thatit"will continue totakeallnecessary measures
ifundertakings, through anti-competitive practices oragreements, isolate national markets bylimiting parallel
trade" (Chapter III(4)(i)).
41CarPrices Within theEuropean Union, Monthly Review, Brussels.WT/TPR/S/30 Trade Policy Review
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(iii) Performance intheelectronics industry42
55. Theelectronics sector ismaking anincreasingly important contribution toproduction andtrade.
In1995 thesector 'svalue added wasaround ECU 80billion, nearly equivalent tothatofthemotor
vehicles andparts sector. While theEUhasconsistently runatrade deficit inthesector during the
lasttenyears, itsperformance hasbeen stronger insome segments thaninothers. Trade in
telecommunicationsequipment,oneofthelargestandmostintegratedsub-sectors,isnormallyinsurplus.
Theelectronics components andconsumer electronics industries, which ranadeficit ofabout
ECU 20billion in1995, arefacing competitive pressure fromfast-growing economies inAsia, atthe
lower endofthemarket, andfromtheUnited States andJapan atthehigher value-added end.43Vertical
andhorizontal alliances areincreasingly being sought outinorder toconsolidate market power and
tohelpspread increasing R&D costs, which areestimated ataround 10to20percentoftotalcost.
Theemployment effects ofthisstructural adjustment havebeenconsiderable, with, according tothe
Commission, approximately 260,000 jobsbeing lostintheindustry during thelastfiveyears.
56. Given current levels ofspending inresearch andapossible lossofitstechnological leadin
thefast-growing electronics andinformation-technology industries, theEUisimplementing anumber
ofprogrammes toencourage pre-competitive, collaborative research attheEuropean level(forexample,
ESPRIT forinformation technologies, ACTS foradvanced communications andtelecommunications
andMEDEA, thesuccessor ofJESSI, formicro-electronics. Thesame eligibility criteria apply to
allfirms, including foreign subsidiaries, established intheEU.Third-country firms ororganizations
areeligible onaproject-by-project basis. TheEUalsopromotes more advanced applications such
astheTrans-European Digital Network. EUfirms attheregional levelalsoreceive financial support
through Structural Funds toupgrade technology. Training andresearch isalsoencouraged through
theHuman Capital Mobility Programme. However, according totheCommission, EUindustries also
needtoachieve progress intranslating basic research results intoindustrial products.
57. Thesigning oftheITAislikely tohelpopenmarkets tointernational competition andprovide
newopportunities forEUexports tofast-growing economies. Fivemaincategories oftechnology-based
products areincluded intheITA. Asanimportant player innewtechnologies, theEUwasamajor
promoter oftheITAandagreed toeliminate duties onaround 400tarifflinesaspartofitscommitments
toopenmarkets (Chapter II(6)(ii) andChapter III(2)(ii)(a)).
Computers andoffice equipment
58. With amarket andproduction volume ofabout ECU 60billion (twice thesizeofthe
telecommunications equipment andelectronic components markets), thecomputer andoffice equipment
industry isthelargest segment oftheEU'selectronics sector. Itisdominated inthecomputer segment
byU.S.-owned multinationals suchasIBMandDigital Equipment; Japanese firms, suchasFujitsu
andToshiba, dominate theoffice equipment segment. Theeconomic slowdown intheearly 1990s,
42Theindustry includes thefollowing sub-sectors: dataprocessing andoffice automation, telecommunications
equipment, electronic components andconsumer electronics.
43Over recent years, Japan andeastAsian economies haveconsiderably increased theirpresence inthissector.
Electronics isthesecond area, after banking, forJapanese FDIinEurope; itisthefirstforKorean FDIand
theNICs (UNCTAD (1996)).European Union WT/TPR/S/30
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fierce pricecompetition, andrapid technological change haveledtheindustry torestructure.44Former
"nationalchampions"haveincreasinglysoughtoutstrategicallianceswithforeigncompetitors(Bull-NEC,
ICL-Fujitsu, Olivetti-DEC) torefocus theiractivities andadapt tochanging demand.45TheEUmarket
recovered slightly in1994 and1995 although investment remains subdued. According tostatistics
provided bytheEuropean Information Technology Observatory (1996), totalspending ininformation
systemsbyEuropeanfirmsaveraged2percentofGDPcomparedwithspendingbyU.S.firmsaveraging
3percentofGDP.
Telecommunications equipment
59. Thetelecommunications equipment industry hastraditionally beenoneoftheEU'sstrongholds.
Eight ofthetop20companies intheworld arefrom theEUanddespite aslump intheearly 1990s,
theEUcontinued torecord anettrade surplus.46Therecent opening oftelecommunications markets
especially inAsiaandLatin America andincreased adoption oftheEuropean GSM standards bymany
radio operators hasgiven production andexports aboost. European companies arealsolikely to
concentrate their research efforts onhigher value-added products asstandardization makes lower
value-added products accessible toawider group ofproducers.
60. Theindustrial structure inthetelecommunications market isalsosettochange. Inthepast,
incommon withmostother industrialized economies, preferential supply relationships withmonopoly
service providers intheMember States havebeenanimportant factor behind theexpansion ofthelarge
EUfirms. Acombination offalling telecommunication equipment prices, liberalization in
telecommunicationsservicesmarketsandtheemergenceofnewtechnologicallyadvancedmarketsegments
suchashigh-speed datatransmission systems, islikely toplace greater competitive pressure onEU
producers. Thus, thetendency towards greater concentration thanisalready apparent, seems likely
tocontinue. However, theimpact onemployment inthecoming years isuncertain.
Electronic components
61. TheEU'selectronic components industry hasproved tobethemost vulnerable segment of
theelectronics industry inrecent years. EUmanufacturers suffer fromlower levels ofintegration with
userindustries,greaterdependenceontheEUmarket,higherlabourcost,andlowerlevelsofprofitability
thantheirUS,Japanese orsouth-east Asian competitors. While three EUcompanies (Philips, SGS-
Thomson andSiemens) areamong thetenlargest intheworld, fewsmall andmedium-sized companies
havebeenabletodevelop advanced niche products.47Thelarge companies haveincreasingly sought
outinternational alliances inresearch anddevelopment inthefaceofrising production costsandrapidly
changing technologies. Import penetration at40percent, hasbeenhigh, although relatively stable,
overthelastdecade. Output intheEUcomponents industry wassluggish, averaging justover3percent
between 1985 and1990. Restructuring, however, ledtorapid growth in1994and1995. Moreover,
44Employment inthecomputer andoffice equipment segment declined onaverage by8percentperyear
between 1992 and1995 (Eurostat, 1996).
45Thanks torapid technological development, demand forcomputer systems hasshifted inrecent years from
large tosmall ormedium-size information systems.
46Employment inthesector, aswithalloftheother high-technology segments, hasdeclined considerably,
with1995 employment levels being significantly below those of1985.
47Eurostat (1995).WT/TPR/S/30 Trade Policy Review
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astheshare ofelectronic components inthecostofelectronic equipment isrising (from lessthan
18percentin1986 toover20percentin1994), thissector islikely toshow strong growth inthe
coming years.
Consumer electronics
62. Theinternational market forconsumer electronics isdominated byJapanese companies (around
ECU130billion in1994), followed bytheUnited States (ECU 81billion) andtheEU(ECU 45billion).
Value added intheEUconsumer electronics industry in1994wasaround halfthatofthepharmaceutical
sector (ECU 15billion). After growing atanaverage rateofalmost 7percentduring 1985-90, growth
inproduction wasonly2percentbetween 1990and1994.48Since then, bothproduction andexports
havegrown atamore rapid rate,responding tothegeneral economic recovery intheEU.However,
despite improved growth, thesector remains relatively vulnerable, facing consistently highandgrowing
trade deficits. Thesegment isalsoaccorded relatively greater protection thanmostother industries.
Maximum tariff ratesforsome sectors, including television andvideo monitors andvideo recorders
were14percentin1997. Moreover, some ofthese products considered bytheEUas"recreational
products", asdistinguishable frominformation technology products, arenotincluded intheEU'sITA
schedule (Chapter II(6)(ii)).49
(4) Services
(i) Overview
63. Asinother advanced economies, services isthesingle most important economic activity in
theEU,accounting forabout twothirds ofvalue added andemployment. Energy andwater supply,
communications, transport, financial andbusiness services constitute important inputs forthewhole
economy. Transport costs account forupto7percentoftotalexpenditure inthecement industry.
Telecommunications represent 8percentofcosts inthefinancial services industry, andenergy isa
majorexpenditureiteminthesteel,aluminiumandautomobileindustries(upto10percent).Concerned,
asshown inrecent competitiveness reports, thathighcostsinsome oftheseareas (electricity, transport
charges) maypenalize EUproducers andputthem atacompetitive disadvantage inglobal markets,
theCommunity hasmade theremoval ofrestrictions tocompetition andtradeinservices afocalpolicy
objective.50
64. Sofar,theEUhasadopted agradual andpragmatic approach towards liberalization inservices,
possibly atalower cost,butalsoataslower pacethaningoods markets. Many services markets in
Europe continue tosuffer fromsome degree offragmentation. Inmostservices areas, theliberalization
process initiated attheEUlevel isaimed atestablishing common rules toguarantee theright of
establishment, opencompetition andaccess tonetworks. Thesuccess ofliberalization isconditional
upon efforts byMember States toensure timely implementation.
48Eurostat (1996).
49Ingeneral, those products suchasmagnetic tapes, which facerelatively lowaverage tariffs of3percent,
areincluded intheEU'sITAschedule, while products withhigher average tariff ratesareclassified asrecreational
products andarehence notincluded (Official Journal, No.L155/1, 12.6.97).
50European Commission (1996a).European Union WT/TPR/S/30
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65. There havebeennomajor newlegislative developments since the1995TPR. Theperiod has
been marked bypreparations forfullliberalization oftheinternal market inairtransport and
telecommunications. Intelecommunications andfinancial services, theinternal market process isclosely
linked tomarket globalization andinternational liberalization under theWTO, resulting innewmarket
opportunities forforeign suppliers. TheCommunity anditsMember States havealsoundertaken to
selectively openup"core" public services suchaselectricity, gasandpostal services, albeit withlong
transition periods. Insuchareas, theneedisoften seentomaintain abalance between public service
obligations andmarket opening. Thus, inthecontext oftelecommunications liberalization, theEU
authorities paidparticular attention tothedefinition ofauniversal service obligation which would ensure
theprovision ofanumber ofservices atanaffordable price. Generally, insectors withastrong tradition
ofpublic service, thepolicy oftheEU(asdifferentiated from Member States) isaimed atdefining
minimum rules, leaving Member States toestablish theirownbalance between liberalization andpublic
service requirements.
(ii) Telecommunications services
(a) Economic background
66. With atotalrevenue ofECU 130billion in1995 (around 29percentoftheworld total), the
EUtelecommunications services market isthesecond largest aftertheUnited States. Thesector 's
rapid expansion, atanannual rateof8percentin1995, hasbeendriven bythedevelopment ofnew
services, suchasmulti-media andmobile communications.
67. Telecommunications infrastructure andservices areduetobefullyopened tocompetition in
mostMember States on1January 1998. Theexisting legalframework iscurrently being adapted to
guarantee competition, harmonize network access andinterconnection conditions, andensure consumer
protection anduniversal service access. TheEU'scommitments under theWTO Agreement onBasic
Telecommunications willextend thebenefits oftheliberalization oftheEUmarket toforeign suppliers.
68. Inanticipation oftheentry ofnewoperators intheEUvoice telephony market, former
telecommunications monopolies areforming alliances witheachother toconsolidate orimprove their
positionsineachothers'marketsandexpandinternationally.TheCommissionisfollowingthesealliances
under EUcompetition policy toensure thattheinternal market, when liberalized, willprovide alevel
playing fieldforincumbents andglobal alliances aswellasfornewplayers.
(b) Regulatory framework
69. Thepresent EUtelecommunications policy wasinspired bytheCommission 's1987Green Paper
onthedevelopment ofthecommon market intelecommunications services andequipment. Onthat
basis, the1990 Directive onCompetition inTelecommunication Services (90/388) laidthebasis for
thegradual opening upofthevarious telecommunications services tocompetition andtheOpen Network
Provision Directive (ONP) (90/387) ensured thatnewoperators begiven, ateach stage ofthe
liberalization process, open, transparent andnon-discriminatory access topublic networks. Asaresult,
datatransmission services, telex, mobile telephones, andpaging andsatellite services wereliberalized
between 1990 and1995.
70. Since theprevious review oftheEU,newliberalizing stepshavebeentaken. Asof1July1996,
operators ofcable TVnetworks wereallowed toprovide telecommunications services (Commission
Directive 95/51). Alternative infrastructure (e.g.belonging totransport andenergy distributors) was
alsoopened fortheprovision ofliberalized telecommunications services on1July1996. TheprovisionWT/TPR/S/30 Trade Policy Review
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ofmobile communication services andnetworks wasfully liberalized in1996 byCommission
Directive 96/2.
71. Theliberalization process willculminate on1January 1998 withthefullopening ofbasic
telecommunications infrastructure andvoice telephony services, which represent thelargest share
(90percent)ofthetelecommunicationsservicesmarketandwhicharestillmonopolizedinmostMember
States (Commission Directive 96/19). Aspecific "Voice Telephony Directive" (Directive 95/62 of
theEuropean Parliament andtheCouncil) wasadopted attheendof1995 andentered intoforce a
yearlater. Itdefines andguarantees abasic levelofservice andtherights ofusers toabasic voice
telephony service andinterconnection, establishes general pricing principles forsuchaservice, and
clarifies thescope ofuniversal andbasic services ineachMember State. However, "single passport"
provisions willnotapply tothetelecommunications sector. After 1January 1998, regulatory control
andthegranting ofoperating licences tooperators willremain within thecompetence ofeachnational
regulatory authority, sothatnewapplicants wishing tooperate onanEU-wide basiswillhavetoseek
authorization andmeettheregulatory requirements ofeachMember State inwhich theyoperate.
72. The"liberalization" Directives areaccompanied byDirectives harmonizing andadapting the
rulesforinterconnection, thecosting andfinancing oftheuniversal service, orthelicensing ofnetworks
andservices inthenewly liberalized environment. TheInterconnection Directive wasadopted bythe
Council inJune1996.51TheLicensing Directive, adopted inMarch 1997, laysdown common rules
forauthorizingoperationsandgrantinglicences.52ItclearlyforbidsMemberStatesfromrefusinglicences
forreasons others thanfrequency limitations orrelated physical constraints.
73. Theavailability ofauniversal service isafocalpolicy objective. Thedefinition ofuniversal
service attheEuropean levelincludes theprovision ofanaffordable voice telephony service viaaline
supporting theuseoffaxandlowspeed datatransmission, aswellasdirectory enquiry services and
ofpublic payphones forallusers. Particular attention willbegiven tovulnerable groups suchasthe
elderly andverylow-income users. Theprinciples governing thefinancing oftheuniversal service
funds aredefined inthedraftInterconnection Directive. Toensure thattheburden ofproviding universal
service doesnotfallunfairly ontheincumbent operator, theMember States maysetupnational universal
service funds and/or impose supplementary charges payable bynon-network-based market players to
theincumbent. Todate,twoMember States (France andItaly) havedecided tosetupuniversal funds.53
51Theterminterconnectionisdefinedasthephysicalandlogicalconnectionoftheinstallationoforganizations
providing (cable) networks and/or telecommunications services. Thedraft Directive onInterconnection inthe
telecommunicationssectorandtheguaranteeofauniversalserviceandinterworkingbyapplyingtheONPprinciples,
hasthreebasicaims:first,itprovidesasharedframew orkforinterconnectionbasedontransparency,objectiveness
andnon-discrimination, second, itgives priority tocommercial negotiations between negotiating parties subject
toconditions fixed apriori bythenational telecom regulator, andthird, itprovides specific responsibilities for
thenational regulator inkeeping withtheprinciple ofsubsidiarity (European Report, 1997a).
52Ageneral authorization doesnotrequire candidates tolodge specific requests forlicenses andisapplicable
tovoice telephony services intended forlimited user groups, personal satellite communications, mobile
communications, leased linesandvalue added datatransmission services. Individual license applications onthe
other handrequire formal notification bythecandidate seeking tobecome anoperator. European Report (1997a).
53European Commission (1997i).European Union WT/TPR/S/30
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74. TheCommission 'srequirements inrespect ofbasic services arethatallnewly installed fixed
telephone networks must becapable ofcarrying advanced information services suchastheInternet.
Telecom companies withatleast25percentofthemarket, would havetoofferextra facilities such
astheidentification bytelephone number ofincoming calls, andspecial network access. Mobile
telephoneoperatorsarenotcurrentlysubjecttothesameprovisionsasfixedoperators,withtheexception
ofconsumer protection measures (e.g., freeemergency callsandpublication ofinformation ontariffs).54
TheCommission proposes toreview thissituation attheendof1999.
75. TheMember States areadjusting theirdomestic legislation tomeetEUrequirements. New
telecommunications legislation wasadopted inGermany andFrance insummer 1996. TheNetherlands
hasadopted aninterim lawwhich allows early competition inthebasic telecommunications market;
finallegislation wasexpected tobeenacted inthefirsthalfof1997. Legislation ispresently being
discussed inParliament inBelgium, Austria, ItalyandSpain, andinpreparation inIreland, Portugal
andGreece.55Therequirement, under EUlaw,toestablish anindependent regulator byJanuary 1991
hasnotyetbeenfulfilled bysome Member States (Portugal, Greece, ItalyandAustria).56While the
UnitedKingdom,Sweden,Finland,DenmarkandtheNetherlandshavealreadyliberalizedtheirmarkets,
mostother EUMember States donotplantocomplete liberalization before theJanuary 1998deadline.
76. Some EUMember States, inparticular thosewithlessdeveloped telecommunications networks,
could apply foralonger transition period -uptofiveyears from January 1998 -toliberalize their
markets.Luxembourg,becauseofitssmallnetwork,hasbeengrantedanextratwoyears.Spain,Ireland,
Greece andPortugal haverequested suchaderogation, butinongoing negotiations theCommission
hasaimedtobringforwardthedateasmuchaspossible.CommitmentsmadeundertheWTOAgreement
canbeconsidered asmaximum limits, butnegotiations forearlier intra-EU liberalization havecontinued.
Atpresent,Spainhasadvanceditstransitionperiodto30November1998,whenvoicetelephonyservices
willbeopened uptocompetition (companies wishing toenter theSpanish market will,however, be
allowed tosubmit theirtenders totheSpanish authorities from1August 1998). TheCommission has
alsoagreed toallow Ireland toopen upitsvoice telephony market by1January 2000, although its
alternative infrastructure willbeopened by1July1997andtheinternational interconnection ofGSM
operators willbeallowed inJanuary 1999.57
54Financial Times, 12September 1996.
55Inarecent report (May 1997) ontheimplementation ofEUlegislation inthetelecommunication sector,
theCommission notes thateight Member States arestilllagging behind inadopting therelevant Directives and
predicts thatinfourMember States (Belgium, Greece, Portugal andSpain) fullliberalization might bedelayed
ifnoadditional efforts were made. Italy, Austria andBelgium have received formal notification thattheyhave
failedtomeetderegulationdeadlines,andIrelandwasexpectedtobenotifiedshortly.Sincethereportwaspublished
Belgium hassubmitted newproposals forliberalization which arebeing examined bytheCommission (European
Commission, 1997j).
56European Report (1997b).
57Negotiations withPortugal, Greece andLuxembourg have been completed. Portugal hasbeen granted
atransition period equal tothatagreed withIreland, Luxembourg hasbeen granted atransition period ofsix
months, andGreece hasbeen granted atransition period forvoice telephony andinfrastructure upto
1January 2001, withliberalization ofalternative infrastructure on1October 1997.WT/TPR/S/30 Trade Policy Review
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(c) Market developments
77. Inpreparation forthe1998deadline andinresponse tothecompetitive pressure generated by
newentrants (call-back services, mobile telephony), thelarge EUtelecommunications operators have
beengradually cutting international andlong-distance ratesandimproving thequality ofservices.58
Between 1990 and1995, average ratesontransatlantic callsoriginating intheEUdeclined bymore
than40percent,while ratesonlong-distance callsdeclined by22percent.59Ingeneral, priceindicators
seem toplace theEUaround theOECD average (Tables IV.7andIV.8), butwidedifferences persist
between theMember States. Rates insome segments arestillfarfrom being competitive.60
Table IV.7
Average residential andbusiness telephone costs inmajor Member States, 1995
(Index (OECD average =100))
Country Residential Business
Belgium 111.23 102
France 101.82 97.10
Germany 116.47 122.42
Netherlands 71.69 63.03
Sweden 65.49 60.38
United Kingdom 74.72 82.17
EU14a103.1 100.93
United States 83.84 99.87
OECD 100 100
a Tariffs forLuxembourg notavailable.
Source: Adapted fromOECD (1997), tables 6.2and6.12, which express theaverage annual spending byaresidential andbusiness user
in1995, including tax.
78. Anunprecedented number ofglobal alliances andmergers involving theEU'slarge, basic
telecommunications operators, mobile telephone companies andcablecompanies havetaken placesince
1990. Alliances between EUandnon-EU companies, especially North American operators, arealso
increasingly taking place inpreparation forafullyopenandglobalized market in1998 (Table IV.9).
Deutsche Telekom andFrance Telecom, forexample, haveformed ajointventure fortheEUmarket
(Atlas) andalsowiththeAmerican long-distance operator Sprint Communications (Global One) for
theinternational market. Amajor merger between British Telecom andanother U.S.long-distance
operator, MCI, isunder discussion; theSpanish operator Telefónica hasformed analliance withBritish
58Inrecent years, several EUoperators have introduced services such asitemized billing, calling-line
identification orcall-barring anddiversion atnoadditional charge.
59Asmonopolies,mosttelecommunicationsoperatorsfinancedunprofitablelocalserviceswithrevenuetransfers
fromprofitable long-distance andinternational telecommunications services. Suchtransfers (cross-subsidization)
wereestimatedbyPelkmansandSuntobeapproximatelyECU16billionperyearintheEU.Increasedcompetition
onlong-distance andinternational rates have ledthemajor telecommunications operators to"rebalance" rates,
i.e.toprice each individual service onthebasis ofcosts (Pelkmans andSun, 1995, pp.635-663).
60While leased-line tariffs have declined recently, highcapacity leased linesintheEUcanbeconsiderably
(uptotentimes) more expensive thanintheUnited States.European Union WT/TPR/S/30
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Telecom andMCItoincrease itsactivities intheLatin American market, which italready dominates.
These operations aremonitored under EUcompetition policy (Chapter III(4)(i)). Overall, thenumber
ofbasictelecommunications operators intheEUincreased from22in1991to30in1995. Privatization
plans forthemajor operators arebeing implemented before theJanuary 1998deadline toprovide them
withgreater flexibility andaccess toprivate financing inthenewenvironment (Table IV.10).
Table IV.8
Average peak international tariff rates foroneminute, 1993-96
(U.S. dollars)
1993 1994 1995 1996
Austria 1.28 1.18 0.94 1.06
Belgium 1.12 0.76 0.77 0.88
Denmark (Tele Dan.) 0.82 0.77 0.69 0.62
Finland (Telecom Fin.) 0.69 0.63 0.63 0.58
France 1.02 0.88 0.81 0.89
Germany 0.97 0.91 0.93 0.65
Greece 0.97 0.81 0.78 0.81
Ireland 1.37 0.79 0.81 0.84
Italy 1.37 0.87 0.77 0.69
Luxembourg 0.97 0.96 0.81 0.80
Netherlands 0.97 0.92 0.89 0.78
Portugal 1.56 1.25 1.14 0.97
Spain 1.57 1.25 1.03 1.08
Sweden 1.08 0.80 0.70 0.66
United Kingdom (BT) 0.78 0.66 0.59 0.61
OECD average 1.24 1.06 1.01 0.95
Source: OECD (1997) .
Table IV.9
Alliances andmergers intheTelecoms market
Partners Company
Deutsche Telekom, France Telecom Atlas
France Telecom, Deutsche Telekom, Sprint (USA) Global One
Telecom Eireann, PTTTelecom (Netherlands), Telia
AT&T, Telefonica (Spain) Unisource
Telefonica, British Telecom, MCI
British Telecom, MCI(USA) Concerta
KPN (Netherlands), Telia (Sweden), Swiss Telecom andAT&T (USA) Uniworld
Deutsche Bahn, Mannesmann, AT&T, Unisource DBKom GmbH
Vebe AG,Cable andWireless, RWE AG Vebakom GmbH
Companie Général desEaux (CGE), British Telecom, MannesmannbCegetel
Veba, RWE o.tel.o.
Viag, Telenor (Norway), British Telecom Viag Interkom
Deutsche Bahn, Mannesmann ConsortiumcMannesmann Arcor
a Concert willbeanewcompany formed fromtheacquisition byBritish Telecom ofMCI, pending conclusion ofnegotiations and
approval bytheregulatory authorities.
b International partners areUnisource andAT&T.
c AT&T, Mannesmann, Unisource, Deutsche Bank, AirTouch.
Source: WTO Secretariat.WT/TPR/S/30 Trade Policy Review
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79. Fairaccess tonewentrants willdepend largely onthelevelofinterconnection charges, which
arecurrently being negotiated insome Member States bythenewcompetitors andthelarge utilities
thatownthenetworks. Theproblem isoneofdetermining charges thatreflect thetruecosts of
interconnection forevery service, which requires aprecise knowledge ofcoststructures ineachmarket.
Inthemajority ofcountries, suchcharges mustbeapproved bythenational regulator, andpublished.
Among thelargest Member States, France, ItalyandtheUnited Kingdom havealready revealed their
initial ratesforinterconnection, while Germany hasnot(negotiations areunder way).
Table IV.10
Main privatization measures inEuropean telecommunications inpreparation ofthe1998 liberalization
Country Main carrier Measure
France France Telecom Second half1997: Flotation ofthefirsttranche of20%ofthecapital.
Germany Deutsche Telecom Second half1996: Flotation ofafirsttranche of20%ofthecapital.
Italy Telecom Italia Byendof1997: Theprivatization oftheSTET State holding (owning 56.5% of
Telecom Italia), scheduled forthesecond half1996 ispostponed totheendof1997.
Netherlands KPNetherlands 1997: Theremaining 45%share ofcapital heldbytheState willbesoldin1997.
Portugal Portugal Telecom 27%soldinJune1995, 22%soldinJune1996 and26%willbesoldbytheendof
1997.
Spain Telefonica Firsthalf1997: Flotation ofthelast20%tranche ofthecapital.
U.K. British Telecom Fully private (theBritish State keeps agolden share).
Source: WTO Secretariat.
80. Inresponse torequests from Member States, theCommission hasrecently introduced value
added tax,averaging around 20percent,oncall-back services provided fromoutside theEUtoalign
conditions withthose ofEUoperators whoaresubject tovalue-added tax.61Given theextent ofthe
price differential between callsmade through EUoperators andthrough call-back operators located
outside theEU(upto70percentontransatlantic traffic), theadditional levyisnotexpected to
dramatically reduce themarket share ofoutside providers ofthiskind.62
(d) External commitments
81. TheEUplayed amajor roleintheWTO negotiation onbasic telecommunications, which was
successfully concluded on15February 1997, withcommitments by69participating governments.
TheEUmade specific commitments inallfourmodes ofsupply, cross-border supply, consumption
abroad, commercial presence, andthepresence ofnatural persons. Fullcommitments weremade for
allbasic telecommunications services sub-sectors.63Commitments were alsomade onregulatory
61TheVAT charge istobeimplemented intwostages. Thederogation, orexception toArticle 9ofthe
sixth VAT Directive (77/388) becomes effective immediately, allowing thelevyoftheVAT onCommunity
customers forservices provided bynon-EU based operators. Asof1999, telecommunications operators outside
theEUwillberequired toregister inaMember State andwould besubject totheVAT rateofthatMember
State. Atthesame time, theCommission plans topropose anamendment totheDirective, including thischange.
62Financial Times of30January 1997.
63Broadcasting wasnotcovered bythenegotiations.European Union WT/TPR/S/30
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principles covering competition safeguards, interconnection, universal services, licensing, independent
regulators andtheuseofscarce resources.
82. TheEUagreed toextend thebenefits ofthefullliberalization oftheCommunity 'sbasic
telecommunications services market, scheduled for1January 1998, toallnon-EU firms. Itcommitted
toprovide, onanm.f.n. basis, thesame degree ofopenness asguaranteed totheEUMember States.
Firms from WTO Member States willtherefore beentitled toaccess networks andprovide allbasic
telecommunications services, notonlycross-border, butalsothrough commercial presence, including
theability toownandoperate independent telecom networks andcompanies. Non-EU companies will
beallowed toownequity upto100percentfrom1January 1998, withafewexceptions (seebelow).
83. Theexceptions maintained bytheEUrelate tothetransition periods allowed forcertain Member
States (seeabove, section (b)).TheSingle Market andtheWTO Agreement haveproved tobemutually
supporting processes inthesense thatsome Member States, suchasSpain, agreed during theWTO
negotiation toliberalize morerapidly thaninitially envisaged under theSingle Market timetable.64There
arealsoafewlimitations onforeign direct investment inPortugal andFrance. InPortugal, direct
andindirect foreign investment isrestricted to25percent(except cable television companies) and
inFrance direct foreign ownership islimited to20percent;65Portugal restricts thesupply ofbasic
telecommunications services tocompanies established inPortugal.
84. Since the1995Trade Policy Review, theEUhassigned mutual recognition agreements (MRAs)
fortelecommunications equipment certification withAustralia, NewZealand, andtheUnited States
(Chapter III(2)(ix)(b)). AnMRA concluded withSwitzerland willbesigned upontheconclusion of
bilateral negotiations inother areas including transport andfreemovement ofpersons. MRAs arealso
currently being negotiated withCanada, Japan andHungary, andsimilar agreements areexpected to
benegotiated withPoland andtheCzech Republic during thecourse of1997/98.
(iii) Financial services
(a) General regulatory framework
85. Themaindevelopment intheregulatory fieldforfinancial services hasbeentheentry intoforce
on1January 1996 oftheInvestment Services Directive (ISD), thelastofthethree "framework"
Directives establishing aSingle Market forfinancial services intheCommunity.66TheISD,which
isapplicable toinvestment firms andbanks involved ininvestment services, isbased onthesame
principlesunderlyingthebankingandinsuranceDirectives:home-countrycontrol,whichassignsprimary
responsibility forregulatory oversight tothehome-country regulator; the"single passport" (i.e.the
64Asaresult, theEUintroduced thefollowing limitations initsSchedule ofCommitments: Spain willfully
liberalizeitsmarketon30November1998butoneadditionalnationwidelicencewillbegrantedasearlyasJanuary
1998; Ireland willliberalize public-voice andfacilities-based services by1January 2000; Portugal committed
toliberalize public voice telephony by1January 2000 andfacilities-based services by1July1999; Greece will
liberalizebothpublic-voiceandfacilities-basedservicesby1January2003.IrelandandPortugalarealsoexpected
toprovide international interconnection ofmobile networks by1January 1999.
65During thecourse ofthenegotiation, Portugal alsoagreed topartially remove theforeign equity restriction
of25percent, subject toParliamentary approval, by1999.
66TheSecond Banking Directive entered intoforce on1January 1993 while theThird LifeandNon-Life
Insurance Directive tookeffect on1July1994.WT/TPR/S/30 Trade Policy Review
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principle ofmutual recognition oflicences), under which anauthorization obtained inoneMember
Stateallows afirmtoestablish freely, operate, andprovide services throughout theEU;andmutual
recognition byeachMember State oftheothers 'financial lawsandregulations.67
86. These three framework Directives arecomplemented byaseries ofDirectives establishing
minimum prudential requirements forallEU-incorporated financial institutions. They include, among
others, theOwnFunds Directive, theSolvency Ratio Directive, theCapital Adequacy Directive, the
Large Exposures Directive, theDeposit Guarantee Scheme Directive andthe"post-BCCI" Directive.
87. TheSingle Market inthissector represents amajor shiftfromthepreviously highly regulated
andfragmented national markets. Most host-country controls havenowbeenabolished inbanking
andinsurance, administrative burdens reduced andcapital requirements forbranches eliminated. A
large majority ofEUDirectives havenowbeentransposed byallMember States.
88. Thesingle passport andhome-country controls approach represent asignificant improvement
forEUandEEA-incorporated firms interms ofmarket access andnational treatment. Once licensed
inoneMember State, banks, insurance companies andinvestment firms receive allthebenefits ofthe
single passport. Thehome-country control principle mayevenresult inEUorEEA-incorporated firms
receiving better thannational treatment when licensed inahome country thatallows foralarger range
ofservices tobeprovided thanthehostcountry. Presently, thesingle passport doesnotapply tothe
establishment ofbranches ofinsurances companies.
89. Financial institutions fromthirdcountries receive national treatment, regardless oftheirform
ofrepresentation (branch orincorporated subsidiary). Thesingle passport isonlyavailable, however,
tothose withincorporated subsidiaries intheEU.Non-incorporated branches arenotcovered bySingle
Market Directives; theymust beauthorized ineachMember State andmaybesubject todifferent
capital andprudential requirements, country bycountry.
90. Financial institutions operating intheEUcontinue tofaceanumber ofresidual host-country
requirements.Theyconcerngenerallywell-acceptedcontrolsforprudential,monetarypolicyorstatistical
purposes, andrules related totheconduct ofbusiness ortheprotection ofconsumers. Inbanking,
EUlegislation andECJcaselawallow theMember States torestrict thefreeprovision ofservices
orreintroduce apriori controls iftheactivities oftheinstitutions concerned aredeemed togoagainst
thegeneral good. However, thescope ofthegeneral goodclause hasremained undefined, sometimes
giving risetoconcerns from theprivate sector.68Arecent ECJruling provides thatsuchmeasures
must beapplied inanon-discriminatory manner andaninterpretive noteissued bytheCommission
inJune 1997 clarifies theprinciples governing theuseofsuch clauses (non-discrimination,
proportionality, etc.). Toprevent anyrestrictive useoftheremaining host-country controls, the
Commission defines where abanking service takes place, andthus, whether abank issubject to
notification tothehostcountry, andwhatconstitutes abanking operation.69
67TheISDallows freebranching andfreeprovision ofservices forlicensed investment firms, subject to
notification provisions intheMember States. Host-country authorities mayrequire thatthefirms concerned
trade onregulated markets, beresident inthatcountry orrespect rules onthe"conduct ofbusiness".
68Lannoo (1996).
69TheCommission isconsidering astricter interpretation ofwhat constitutes abranch operation (subject
tomore stringent supervisory controls bythehost-country) andawider interpretation ofwhat arecross-border
(continued...)European Union WT/TPR/S/30
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(b) Market developments
91. TheSingle Market has,todate, essentially developed inwholesale andcorporate markets.
Retail business inbanking andinsurance isunder pressure torestructure duetocompetition fromother
networks(Girobanks,electronicbanking),makingitdifficulttodevelopfurtherundertheSingleMarket.
Itisexpected thattheintroduction ofasingle currency andfurther fiscal harmonization along with
consolidation within thefinancial services industries mayprovide anadditional stimulus tothismarket.
Whilethesituationvariesamongcountriesandfinancialinstitutions,thepreparationsfortheintroduction
ofasingle currency havebecome amajor taskandinvolve major competition challenges (Box IV.3).
Box IV.3: Preparations fortheintroduction oftheeuro inthefinancial services industry
Technical preparations fortheintroduction ofasingle currency areintensifying atabout 500days from
the1January 1999 deadline. Financial institutions must takethenecessary practical steps tobeready for
thechangeover bythestarting date. Measures range from theadaptation ofhundreds ofsoftwares for
theintroduction oftheeuro inwholesale markets foreign exchange operations, tothehandling ofboth
dualcurrency units andaccounting inretail markets during the1999-2002 transition period. Financial
institutions areworking onthebasis ofassumptions andscenario, since essential parameters (such asthe
number ofeligible countries, theconversion rates, themodalities oftheconversion ofpublic debt
instruments) willbeknown onlyatalater stage.
While, atthenational level, several governments have already putinplace joint taskforces with the
private sector tostudy thevarious implications oftheeuro, banks have started toprepare internally. The
degree ofpreparation depends, however, onthecountry concerned andthesizeoftheinstitution, with
thehighest involvement reported inGermany, Belgium and, toalesser extent, France. Large banks,
suchastheDeutsche Bank, mayhave project teams ofupto150people. London-based firms have also
started preparations buttheLondon Investment Banking Association hasrecently warned thatmomentum
would wane ifthere wasnopolitical confirmation thattheUnited Kingdom would jointhesingle
currency, atleast atsome stage. Thetotal costofthechangeover fortheindustry asawhole isyet
unknown butcurrent estimates range from ECU 6to12billion.
Financial institutions arealsopreparing forthenewcompetitive conditions stemming from thesingle
currency. Itisexpected thattheeuro willsimplify thecross-border provision ofretail services, still
limited intheSingle Market, asitwilleliminate foreign exchange risks forfirms andhelpstandardize
products. Further market integration should result inagreater number ofmergers andacquisitions,
reflecting thedesire offinancial institutions toacquire aEuropean dimension inaSingle Market and
single currency environment.
Source: Graham, G.(1997), "Preparations forEMU inthebanking sector", Financial Times, 28May
1997).
92. TheSingle Market hasalsoaffected thestructural forms ofrepresentation andestablishment
offinancial institutions operating intheCommunity. Taking advantage ofthesingle passport procedure,
financial institutions already operating subsidiaries intheCommunity before theSingle Market, notably
EU-based institutions, have developed cross-border branching; according totheCommission,
cross-border branching inbanking increased by58percentbetween 1992 and1995. Financial
69(...continued)
services.Forexample,thepresenceofbankautomatictellermachinesinoneMemberStateshouldnotbesufficient
toqualify thisasabranch.WT/TPR/S/30 Trade Policy Review
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institutionsfromthirdcountrieshavereorganizedtheiractivitiestoexploitexistingEuropean-incorporated
subsidiariesratherthanbranchingdirectlyfromtheparentcompany.Between1993and1996,43foreign
banks from 12countries notified theirintention toestablish asubsidiary intheEU. According toa
Bank ofEngland survey, theSingle Market hasreceived thegreatest response from U.S.banks, the
main foreign players intheEUmarket.70
93. Since the1995 TPR, theEUbanking andinsurance industries havecontinued torestructure.
Theunderlying factors wereintensification ofcompetition under theSingle Market, globalization of
theindustry andadeterioration ofprofitability duetolargelosses inrealestate andcorporate markets.
Awave ofmergers, acquisitions andother restructuring hastaken place inseveral Member States,
notablyFrance,Italy,SpainandtheUnitedKingdom.Inbanking,largeoperationsincludedthetakeover
inFrance ofBanque Indosuez byCredit Agricole andofCredit duNord bySociété Générale; mergers
involvedforexampleBFCEandCréditNational(France),CompagnieFinancièredeSuezandLyonnaise
desEaux (France), Banco diNapoli, INAandBanco diLavoro (Italy); intheUK,anumber oflarge
building societies havechanged frommutual tolimited company structure inorder toexpand intonew
fields offinancial activities. Ininsurance, amajor merger between AxaandUAP gavebirthtothe
world 'ssecond largest insurance group. Several large operations between banks andnon-banks are
aimed atexploiting economies ofscaleanddeveloping worldwide inamore integrated andglobalized
marketplace (SBC-Warburg-Dillon-Read; Deutsche Bank-Morgan Greenfell).
94. TheCommission closely monitors State aidinthefinancial services industry onthebasis of
Article 92oftheTreaty. In1994, theCommission issued Community guidelines onState aid"for
therescuing andrestructuring offirms indifficulty"; these guidelines, described inthe1995 TPR,
remain unchanged. According totheCommission, itsassessment isbased notonlyon"thesystemic
impact ofpossible failure" overthewhole industry buttakes intoaccount alsothe"negative effects
oftheaidoncompetitors".71
(c) External commitments
95. Under theSecond Banking Directive andtheThird LifeandNon-Life Insurance Directive,
market access forthirdcountry suppliers issubject toreciprocity, under provisions described inthe
1995TPR. EU-incorporated subsidiaries orbranches benefiting fromthesingle passport aresubject
toauniform reciprocity testwhile direct branches aresubject toreciprocity ineachMember State
(branches established andoperating intheEUbefore theentry intoforce oftheDirective were
grandfathered). Sofar,theCommunity hasnever referred totheapplication ofitsreciprocity provision
infinancial services, consistent withitsm.f.n. obligation under theGATS.
96. TheEUsought toputtogether aGATS Agreement onFinancial Services onaninterim basis
inJuly1995afterthefailure toreach suchanagreement bytheinitial June1995deadline. Members
agreed totheEUproposal thatparticipants intheSecond Protocol totheGATS maintain theirbest
offers onanm.f.n. basis until1November 1997, when aperiod begins forMembers toreview their
commitments. Thisperiod endson12December 1997.
70Bank ofEngland (1994).
71TheCommission guidelines stipulate thatcapital injections bytheState should notbeadisguised form
ofaidandrequire theexistence ofacredible restructuring plan. Inarecent decision, theCommission estimated
thatthe"highlyprecarioussituation"ofthefinancialinstitutionconcernedandthe"lackofanadequaterestructuring
plan" raised "serious concerns astothecompatibility oftheaid"withtheSingle Market (Commission Decision
"Société Marseillaise deCrédit" of18September 1996, Bulletin oftheCommission 9/96).European Union WT/TPR/S/30
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97. Under theSecond Protocol, theEUanditsMember States maintained infulltheApril 1994
commitmentsbuildingmarketaccessandnationaltreatmentonanm.f.n.basistoallformsofcommercial
presence (including subsidiaries, direct branches, acquisition ofshares inanEUcompany and
representative offices). Incorporated financial institutions benefit from single passport provisions.
TheEUschedule annexed totheSecond Protocol inJuly1995extended these benefits geographically
through theenlargement oftheEU,byincorporating theschedules ofthethreeacceding Member States
(Austria, Finland, andSweden).
98. The1995 schedule alsointroduced improvements for:
-Greece: theremoval ofa40percentlimitonnon-EU participation inestablished banks,
aswellasarelaxation oftheminimum amount offoreign exchange required tobeimported
fortheestablishment ofabranch ofaforeign bank; andtheremoval ofarequirement
thatthemajority ofthedirectors ofabankestablished inGreece beEUnationals residing
inGreece.
-TheNetherlands: removal ofarequirement thatbranches andsubsidiaries ofanon-EU
bankneedpermission tolead-manage guilder-denominated papers.
99. Belgium hasconfirmed thatitwillrespect itscommitments under theSecond Protocol, pending
ratification byitsParliament.
100. Committed torespecting them.f.n. principle, theEUanditsMember States guaranteed that
theywould notlimitorsuspend thepossibility ofnewaccess byWTO Members under thereciprocity
clauses during thelifetime oftheSecond Protocol. TheCommission confirmed inthecontext ofthis
review that,itsobjective being theconclusion ofapermanent andm.f.n.-based agreement withbroader
participation, theEUanditsMember States would beready toagree tothenon-application ofits
reciprocityclauses"ifthelevelofliberalizationcommitmentsachievedinDecember1997wasconsidered
assatisfactory". Itsfinalposition onthismatter depends ontheoutcome ofthenegotiation.
(iv) Transport
(a) Airtransport services
Internal liberalization
101. On1April 1997, theEUcompleted thelaststage oftheten-year internal liberalization ofair
transport bylifting thelastrestrictions onintra-EU cabotage forEUairlines. Asofdate,Community
airlines arefreetoservice anydomestic market onanydomestic line,subject tocertain safeguards
aimed, according totheCommission, at"preserving public interest".72
102. TheApril 1997 deadline waslargely anticipated bytheEuropean airline industry, which had
already taken advantage ofthenewrights provided inthe1993 "third liberalization package". The
number ofroutes increased from 490in1993 to520in1996 and20airlines were created. The
intensification ofcompetition wasmainly perceptible inthelargest domestic markets, which haveseen
72Asexplained below inthesection onforeign presence, globalization oftheairtransport market andair
transport agreements, theliberalization ofintra-EU traffic rights concerns onlyEU-based carriers, notforeign
carriers.WT/TPR/S/30 Trade Policy Review
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theentry ofnewplayers andthearrival ofcharter companies onregular routes. Asaresult, thetotal
number ofdomestic routes operated bytwoormore competitors doubled, withthegreatest impact
inFrance, thelargest European market with20million passengers, Germany, andSpain.73Although
thenumber ofroutes operated forcabotage doubled, theyremained relatively marginal (about 1percent
ofthemarket).74
103. Recent impact studies indicate thatcompetitive opportunities havenotyetbeenfullyexploited.75
Only6percentofallintra-EU routes areoperated bythree ormore competitors, leaving 94percent
ofEUroutes under either duopoly ormonopoly (64percentunder monopoly). TheCommission
considers thatrealcompetitive conditions havebeenestablished onlyinahandful ofinternational routes
(Paris/London, London/Dublin, etc.) (Chart IV.5). Onmany routes, however, congestion, slot
availability problems, andlowprofitability duetocompetition fromother modes oftransport mayhave
discouraged theentry ofnewcompetitors.
73Theextent towhich former national airlines have lostshares intheir domestic market varies among EU
Member States. InFrance, AirLiberté, AOM, orTAT havealready captured athirdofthetraffic from Groupe
AirFrance. That proportion mayeven behigher inthesmaller Member States.
74UnderRegulation2408/92,cabotagewasonlyallowedasanextensionofinternationalservicesunderspecified
conditions butCommunity carriers made little useofthatfreedom, waiting instead forthefullelimination of
allcabotage restrictions on1April 1997.
75European Commission (1996k).European Union WT/TPR/S/30
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104. Overall, theeffects ofliberalization onfaresaremixed. Price competition exists forcharter
flights, which account forabout halfoftheEUairtransport market. Inaddition, alarge majority
ofpassengers travel atdiscount rates. TheCommission noted thatonroutes where there werethree
competitors ormore, tariff reductions could reach 50percentormore. However, fullfares for
scheduled flights, notably faresfortravel without restrictions ontransferable tickets, business andfirst
classtariffs, haveactually tended torise.TheCommission hasannounced itsintention tostudy certain
excessively highfaresunder EUcompetition rules, andcalled forgreater transparency ontheconditions
forpromotional fares.76
105. The1993 liberalization package allows Member States toimpose public service obligations
oncertain regional routes and,asnecessary, torestrict access toonlyonecarrier selected bypublic
tender (Council Regulation 2408/92). About 100routes arecurrently operating onthatbasis, ofwhich
80areinFrance,andtheothersintheUnitedKingdom,Portugal,IrelandandSweden.TheCommission
stressed theneedtomonitor closely public service obligations sothat"they donotbecome adisguised
means ofrestricting themarket".77
106. Asinother industrialized countries, themain European airports areaffected bycapacity
constraints linked tosaturation ofinfrastructure, airtraffic control andlimited slotavailability. As
noted inthe1995 TPR, theworld 'sfivemostfrequented airports interms ofaircraft movements are
located inthenorthern EU(London-Heathrow, Paris-Charles deGaulle, Frankfurt, Amsterdam and
Brussels). Provisions against protectionist useofslotentitlements areembodied inCouncil Regulation
95/93. Areview ofthisRegulation, which waslaunched in1996, isaimed inparticular at"stimulating
mobility" inthemarkets forslotsatcertain large airports (recent years havebeenmarked bythe
emergence ofa"shadow" leasing market forslotinsuchairports). Chart IV.6indicates thatthemain
EUcarriers keeprelatively highshares oftake-off andlanding slotsintheirhome airports. Strategic
alliances between large airlines involving slotsarrangements aremonitored under EUcompetition
policy.78
107. Operational costs intheEUairtransport industry havebeenidentified asanimpediment to
competitiveness. Infrastructure charges, which alone account forabout 25percentoftotalcosts on
Community routes, arebelieved tobe40percenthigher thantheaverage intheUnited States.79Several
initiatives havebeenundertaken toreduce costs, themostconcrete being theadoption ofanewDirective
76Article 3and5(1)ofCouncil Regulation 2409/92 established theprinciple ofprice freedom forCommunity
aircarriers onintra-EU routes. Airfarescannolonger besubject toauthorization intheMember States. However,
several articles oftheRegulation allow theMember States todisallow "excessively highfares" aswellasprevent
large drops inprices withthepossibility ofexamination ofsuch adecision bytheCommission.
77European Commission (1996k), p.5.Thecriteria forimposing public service obligations arerelatively
tight, involving inparticular theabsence ofa"reasonable alternative" andtheimpossibility tooperate theroute
inan"economically viable way".
78TheavailabilityofairslotsatHeathrowairporthasbecomeamajorcompetitionissueintheBritishAirways-
American Airlines alliance. TheCommission haslinked itsdecision onthesurrender byBritish Airways of
about 350take-off andlanding slots. Given thatslots atHeathrow maybeworth uptosome US$2.5 million,
thequestion astowhether slots, likeother rents, could betraded remains open(TheEconomist, 18January 1997).
British Airways reportedly rejected theCommission 'sdemands on5September 1997 (LeMonde, 7September
1997).
79European Commission (1996k).WT/TPR/S/30 Trade Policy Review
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onground-handling services, which liberalizes self-handling inallEUcommercial airports from
1January 1998andthird-party handling ayearlater. Possibilities ofexemptions andtransition times
areprovided bytheDirective.80Rights fornon-EU carriers toself-handle andentry intothemarket
bynon-EU handlers aretobedetermined byeachMember Stateonareciprocal basis. TheCommission
introduced aproposal onairport charges inthefirsthalfof1997.
108. Certain forms ofbusiness co-operation (joint capacity-planning, co-ordination ofschedules,
agreements ontheuseofcomputer reservation systems) arecovered byblock exemptions regulations
(Chapter III(4)(i)). Since 1996, consultations oncargo fares havebeenexcluded from thescope of
suchregulations.
109. Large State aidpackages intheperiod 1992-94 ledtheCommission toclarify thecriteria on
which itbases itsdecisions inthesector. These guidelines haveremained unchanged since the1995
TPR.Recentaidapplicationsincludedfollow-upsofthe1994decisionsonAirFrance,OlympicAirways
andTAP. Newaidpackages forOlympic Airways andAlitalia arebeing scrutinized bytheCommission.
80Exemptions arepossible forairports operating ground-handling services onamonopoly orduopoly basis.
However, competition must beintroduced on31December 2002 atthelatest. Forcertain categories ofservices
(baggage handling, ramp handling, fuelling, freight andmailhandling) theMember States cancontinue torestrict
thenumber ofsuppliers (even toone)under thecontrol oftheCommission.European Union WT/TPR/S/30
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Foreign presence, globalization oftheairtransport market andairtransport agreements
110. Theliberalization ofintra-EU traffic rights applies onlytoEU-based carriers. Traffic rights
arenotcovered bytheGATS andnearly allextra-EU relations continue tobegoverned bybilateral
agreements withMember States. Since 1992, several EUMember States (theNetherlands, Austria,
Belgium,Denmark,Finland,Luxembourg,SwedenandGermany)haveconcludedbilateral"openskies"
agreements withtheUnited States. Anagreement between theUnited Kingdom andtheUnited States
iscurrently being negotiated, withstrong potential implications fortheindustry (theU.S.-UK route
represents 70percentoftheNorth Atlantic market). Such agreements allow bothparties 'carriers
tooperate "fifth freedom" routes butnottoconduct cabotage operations within thepartner country.
111. Theconclusion of"open skies" agreements withtheUnited States reflects theimportance for
mostEUairlines ofthetrans-Atlantic route, which represents thelargest market byfaroutside Europe
(about athirdoftheirinternational revenue, asagainst 15percentforU.S.airlines). Intheabsence
oflargehubsontheU.S.territory,mostEUairlineshavedeveloped,oraredevelopingbusinessalliances
withmajor U.S. carriers involving code-sharing orschedule arrangements.81Thealliance recently
concluded byBritish Airways andAmerican Airlines, which would represent 60percentoftheNorth
Atlantic market, needs tobeapproved bythecompetition authorities oftheUnited States, the
United Kingdom andtheCommunity.
112. Foryears,theCommissionhastriedtodiscourageEUMemberStatesfromsigningsuchbilateral
"open skies" agreements withtheUnited States, deemed toharm itslong-term efforts toestablish a
mutually advantageous airregime. InJune1996, theCommission obtained fromtheCouncil alimited
mandate fornegotiations withtheUnited States ontheestablishment ofacommon regulatory and
competition framework forbothEUandU.S.carriers. Issues relating toco-operation between anti-trust
authorities andownership andcontrol rulesarealsobeing addressed. Tworounds oftalkshavetaken
place, inOctober 1996andApril 1997. Inasecond phase ofthenegotiations, market access conditions
aretobediscussed. Thepresent bilateral agreements willremain inforce untiltheestablishment of
aCommon Aviation Area.
113. TheCommission hasreceived amandate from theCouncil tostartnegotiations withtheten
Europe Agreement countries onmarket access issues. Work isalsobeing completed toharmonize
theairtransport legislation ofthese countries withthatoftheEU.Negotiations withSwitzerland are
continuing, but,according totheCommission, theiroutcome islinked toprogress onlandtransport
negotiations.
(b) Maritime services
114. TheEU'smerchant shipping fleetcapacity hasbeendeclining sincethemid-1980s andin1996
wasaround 30percentoftheworld total. Greece remains themost important maritime country,
accounting foraround 7percentoftheworld 'sdeadweight tonnage in1995.82Germany hasthelargest
fleetofcontainerships,controllingaround10.5percentoftheworldtotal.Thetotaldeadweighttonnage
under EUflags hasbeendeclining steadily, from over30percentofworld deadweight tonnage in
1970 toaround 14percentin1996. Themain reasons forthisinclude "open registry" andattempts
81Todate,allianceshavebeenformedbetweenthefollowingcompanies:Delta,Sabena,SwissairandAustrian
Airlines; Lufthansa, United Airlines andSAS; KLM andNorthwest Airlines; andrecently British Airways
andAmerican Airlines.
82UNCTAD (1995). More thanhalfoftheGreek fleet fliestheCypriot flag.WT/TPR/S/30 Trade Policy Review
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toreducelabourcosts,whichareencouragingoperatorstoregisterundernon-EUflags.TheCommission
estimates thataround 56percentoftheEU'stonnage wasflagged outbythemid-1990s.
115. TheCommunity 'sshipping regime isbased onfourregulations dating from themid-1980s,
andfullyapplicable since 199383,which introduced thefreedom toprovide intra-EU andinternational
maritime services andtheapplication ofCommunity competition rules tointernational transport.84
Thisbroad regulatory framework hasremained unchanged since the1995 TPR.
116. Since theprevious review oftheEU,themain policy action hasconsisted ofareview bythe
Commission ofCommunity shipping policy in1995, presented inMarch 1996.85Thecommunication
proposed threedirections inEUpolicy, external action, action toimprove competitiveness andaction
topromote maritime safety, which wereadopted bytheCouncil inMarch 1997. Theearlier suggestion
ofanalternative EU-wide register waswithdrawn inJanuary 1997.
117. Concerning external action, theCommission presented totheCouncil in1997aCommunication
onexternalmaritimerelations.86TheproposalsuggestsstrengtheningpresentEUshippingpolicythrough
bilateral agreements andconsultations withthird countries andthrough action toaddress restrictive
tradepractices bytrading partners andtosecure faircompetition onacommercial basis. Theproposal
would setupanewconsultation procedure between theCommission andMember States toensure
coherence inEUshipping policy vis-à-vis thirdcountries andtoensure thefulfilment ofCommunity
objectives innegotiations withthirdcountries ornegotiations ininternational organizations. Ifadopted,
itwould replace Council Decision 77/587/EEC onrelations between Member States andthirdcountries
inshipping matters andonaction relating tothese matters ininternational organizations.
118. Following thepostponement ofthenegotiations onmaritime transport services under theGATS
untiltheyear2000, theEUhaswithdrawn itsmarket access offer. However, theCommission continues
tobelieve thatasatisfactory multilateral agreement onmaritime transport would bethemosteffective
means toachieve thewidest possible liberalization ofthesector. Inthemeantime, theEU'scurrent
framework forcommercial defence remains inplace. Thebasic policy iscontained intwoCouncil
Regulations, 4057/86, which laysdown EUprocedures tocounter unfair pricing practices, and4058/86,
which provides forcoordinated action inthecaseofrestrictive tradepractices. Since the1995review
oftheEU,noanti-dumping action hasbeentaken bytheCommunity inthissector.
119. Withregard tocompetition policy, thelasttwoyearshaveseenpersisting disagreements between
theEUandtheTrans-Atlantic Conference Agreement concerning thescope ofthegroup exemption
forlinerconferences (Box IV.4). InDecember 1996 theCommission approved amerger between
P&OandNedlloyd forcontainerized maritime transport.87TheCommission iscurrently alsoexamining
83Council Regulations 4055/86, 4056/86, 4057/86 and4058/86 .
84Specifiedformsoftransport,notablylinerConferences,remainsubjecttoblockexemptionsfromcompetition
lawunder thisregulation.
85European Commission (1996l).
86European Commission (1997k).
87Oneofthebases forapproving themerger wasthatthenewcompany P&O Nedlloyd Container Linewill
notcontrol more than5percentofcontainer transport activities globally.European Union WT/TPR/S/30
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aproposal fromP&O andStena, twoferrycompanies thatareproposing tomerge theirferryinterests
ontheshort searoutes between England andFrance.
BoxIV.4 TheTrans-Atlantic Conference Agreement (TACA)
TheTACA isarevised version oftheTrans-Atlantic Agreement (TAA), themajor difference being that
TACA hasauniform common tariff, unlike thetwo-tier structure oftheTAA.
InJuly 1994 theTACA submitted anapplication totheCommission seeking exemption under its
competition rules. InJune 1995, theEuropean Commission adopted astatement ofobjections tothe
TACA, declaring itsintentions toliftanyimmunity from fines relating toinland rates. AnEuropean
Inland Equipment Interchange Agreement (EIEIA), establishing acomputerized information system for
containers, ensuring greater efficiency intheconclusion ofbilateral agreements between member States,
wassubsequently notified totheCommission. TheCommission however rejected theexemption ofthe
EIEIA under Article 85.3 arguing thatprice fixing forcarrier haulage services wasnotnecessary for
such information exchange. Thedecision toliftimmunity from fines wastaken inNovember 1996
although theCommission hasnotyetimposed anyfines.
TheCommission hasalsoobjected totheTACA ongrounds thatitrestricts competition; adecision is
expected in1997.
Source: European Commission.
(v) Audiovisual services88
120. Following several years ofdecline, growth intheaudiovisual sector intheEUhasbeenstrong
since1994, withannual growth averaging almost 9percentin1995, slightly above worldwide growth
inthesector. Cinema, which waspartly eclipsed bythegrowth ofthevideo industry whose totalrevenue
fromsalesandrentals exceeded thatfromcinema boxoffice receipts in1993, hasalsostarted toregain
itspopularity, withattendance growing ataround 6percentin1996, atrendthatisexpected tocontinue.
Feature length filmproduction hasalsogrown gradually, upfrom 519(including co-productions) in
1994, thelowest since 1983 when 583films were produced, to550in1995.89Television hasbeen
another growth areainthelastfewyears. Thetotalnumber ofpublic television channels increased
from30to42between 1980and1994, while private television channels withnational reception grew
from8toabout 200during thesame period, alarge majority ofwhich areyetunprofitable. Thanks
tothedevelopment ofsatellite anddigital technologies, thegrowth ofsmaller television channels through
cableandsatellite transmission, aswellasnewservices suchaspay-per-view services, wasevengreater.
121. Public support totheaudiovisual sector, thebulkofwhich isprovided byindividual Member
States, remains significant within theEU. Assistance isprovided intheform ofdirect subsidies,
reimbursable loans, taxincentives andlocal-content requirements. Policy attheEUlevel isaimed
atproviding support totheindustry, encouraging private investment, andthebroadcast ofEuropean
works.
88Thissection describes onlyCommunity initiatives inthesector, although thebulkofsupport activities are
concentrated intheMember States. Noinformation hasbeenprovided onMember State-specific developments.
89European Audiovisual Observatory, Statistical Report 1996.WT/TPR/S/30 Trade Policy Review
Page 124
122. TheCommunity provides financial support forthedevelopment anddistribution ofEuropean
audiovisual workthrough theMedia IIprogramme (ECU 265million overaperiod offiveyears, starting
in1996). Overthesame period, Media IIwillalsoprovide training foraudiovisual professionals with
support ofaround ECU 45million from theEuropean Commission.
123. Inorder toincrease private participation inthesector, theCommission hasproposed establishing
afive-year ECU 60million, European Guarantee Fund, which would provide aguarantee forinvestors
incinema andtelevision production. Theproposal isbased ontheexperiences ofseveral Member
States thatprovide similar national guarantee instruments. TheGuarantee Fund would complement
theMedia IIprogramme byfocusing primarily onthefinancing ofEuropean cinema andtelevision
films.90Aconsensus ontheplan, which needs unanimity tobeadopted intheCouncil, hasnotyet
beenreached.
124. TheTelevision Without Frontiers Directive, 89/552/EEC, wasrevised andadopted initsrevised
forminJune1997. TheDirective ensures thefreedom ofreception andretransmission oftelevision
programmes between Member States oftheEUandalsoestablishes minimal rules forbroadcasting.
Article 4oftheDirective, moreover, specifies thatbroadcasters should, "where practicable andby
appropriate means", reserve amajority portion oftheirtransmission timeforEuropean works.91This
proportion should beachieved gradually andMember States arerequired toreport ontheapplication
ofthisarticle totheCommission onceevery twoyears. Thelatest review bytheCommission shows
thatbroadcasting channels inaround halfoftheEUMember States werenotabletoreach thistarget.92
125. Themain changes introduced in1997 relate toaclarification oftherules onjurisdiction and
theprotection ofminors, andtothenewrules concerning thebroadcasting ofmajor events and
teleshopping. Thescope oftheDirective remains unchanged andwillnot,asproposed, cover "new
areas" inaudiovisual services (video-on-demand, etc.). Proposals made tostrengthen EUbroadcasting
quotas havenotbeenadopted.
126. Tofacilitate theestablishment andfreemovement ofmedia, theCommission introduced in
1996 adraftproposal foraDirective onmedia ownership. TheCommission argued thatdifferences
innational laws onmedia ownership make itdifficult forcompanies tocompete andengage in
cross-border investments.93ThefirstdraftofthisDirective proposed todismantle ownership restrictions
based onshare-holding limits andonthenumber ofmedia controlled bythesameperson, andtoreplace
itbylimits based onmedia audience, withamaximum limitofa30percentshare ofthetotalaudience
inareference area.94However, intheview ofthevarious interests involved, theCommission has
90European Commission (1995d).
91Thisexcludesthetimeallocatedfornews,sportsevents,games,advertising,teletextservicesandteleshopping.
92European Commission (1996m).
93Ownership restrictions maintained byseveral Member States vis-à-vis third-country companies donotfall
within thescope ofthedraft Directive.
94Thereference areaisdefined astheareawithin which themedium isaccessible tothepublic (European
Report, 1997c).European Union WT/TPR/S/30
Page 125
introducedaflexibilityclausewhichallowsMemberStatestorequestexemptionsfromtheserequirements
foruptotenyears. Discussions onthedraftDirective continue.95
127. Theemphasis onincreasing theEuropean content ofaudiovisual services wasalsoreflected
intheEU'snegotiations onmarket access during theUruguay Round. Under Article IIoftheGATS
theEUmade exemptions withregard totheaudiovisual sector. These exemptions include theproduction
anddistribution ofaudiovisual works suchasradio, television andcinema, through broadcasting or
other forms oftransmission, andmeasures toprevent unfair actions taken bytrading partners thatmay
haveanadverse impact ontheEU'saudiovisual sector.
95Thisproposed Directive ispresently being revised forsubmission totheCollege ofCommissioners inlate
1997.WT/TPR/S/30 Trade Policy Review
Page 126
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