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PRESS/TPRB/198
26 July 2002
(02-4125)
TRADE POLICY REVIEW: EUROPEAN UNION
As key trade liberalization supporter, EU keeps markets open —
except for textiles and agriculture
Pursuing trade liberalization through multilateral, regional and bilateral initiatives, the European
Union has maintained its markets largely open — except for textiles and agriculture — says a new
WTO report on the trade policies on the EU. The EU’s position as the world’s leading exporter of
goods and the second largest importer is testimony both to the importance of trade to theEuropean consumer and producer, and to the significance of the EU as a market for most WTO
Members, notably developing countries, the report adds.
The new WTO report, along with a policy statement by the European Commission, will serve as the
basis for the trade policy review of the EU which will take place on 24 and 26 July 2002 in the
Trade Policy Review Body of the WTO.
Since its last trade policy review, the EU has ma intained the momentum of its internal economic
integration agenda, the report says. It has continued to advance towards the completion of itsInternal Market by pursuing product and capita l market reform, has undertaken the final step
towards a single currency in the euro area, largely maintained control of public finances despite
lower economic growth, and has actively enforced competition policy.
The report states that maintaining a supportive policy environment for economic operators has
been vital to reviving growth prospects of the European economy in 2002. Economic growth in the
EU slowed sharply in 2001 (1.7%) , down from 3.3% in 2000, mainly as a result of external shocks
(higher oil prices, burst of technology bubble, 11 September, etc.). GDP growth in 2002 is
expected to be 1.5%, followed by a rebound to 2.9% in 2003. Inflation rose to 2.3% in 2001, from2.1% in 2000 (the medium-term target by the European Central Bank is 2%). Unemployment
continued to decline in most Member States in 2001 despite slower economic growth.
The report notes that the strategic goal for the EU for 2010, set by the Lisbon European Council, is
“to become the most competitive and dynamic kn owledge-based economy in the world capable of
sustainable growth with more and better jobs and greater social cohesion”. The 2002 BroadEconomic Policy Guidelines for the EU and the Member States emphasize safeguarding
macroeconomic stability by fulfilling pledges for budgetary balance made in the Stability and
Growth Pact and continued moderation in wage demands.PRESS/TPRB/198
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The single currency facilitates cross-country price comparisons, and thus strengthens the Internal
Market, the report notes. Non-EU countries also benefit through lower costs for international trade
transactions.  The main benefit of Economic and Monetary Union (EMU), however, is the lasting
contribution of price stability to the foundations for sustained economic ac tivity, the report adds.
The report states that progress in other areas of  the Internal Market has been slower. Political
agreement was reached at the Barcelona European Council in March 2002 to open non-householduse of electricity and gas to competition as of 2004, and to ensure cross-border electricity
interconnectivity of at least 10% of production capacity by 2005. On postal services, the scope of
business segments reserved to the incumbent postal operator is to be reduced in 2003 and againin 2006, and a decisive step to full liberalization could take place in 2009.
The EU continues to pursue trade liberalization through multilateral, regional, and bilateral
initiatives, the report says. At the multilateral level, the EU played a leading role in building
support for the launch of the Doha Development Agenda. At the regional level, new trade
agreements were concluded and existing agreements with candidate countries were deepened.Bilateral negotiations on prospective extra-regional agreements also continued. In addition, a new
scheme for the grant of preferences to developing countries was adopted, including enhanced
preferences for least-developed countries.
The EU grants preferential access to most of its trading partners for some or all imports: in 2002,
nine WTO Members are subject to exclusively Most-Favoured-Nation (MFN) treatment in allproduct categories: Australia; Canada; Chinese Taipei; Hong Kong, China; Japan; Republic of
Korea; New Zealand; Singapore; and the United States. These countries accounted for 45.2% of
EU’s total merchandise imports in 2001. For other trading partners, the most beneficial treatment
is granted to Least Developed Countries (LDCs)  and the Overseas Countries and Territories,
followed by the African Caribbean Pacific (ACP) countries and countries having concluded free-
trade agreements with the EU, and then countrie s under the Generalized System of Preferences
(GSP) only.
The report notes that the EU market for non-agricultural products continues to be largely open.
Except for textiles and clothing products, where following its WTO commitments , the EU has only
lifted restrictions on 20% of products restricted in 1990, leaving the elimination of the remaining
80% of restricted imports “back-loaded” for the final stage at the end of 2004.
The overall simple average MFN tariff is estimate d at 6.4% for 2002. The simple average applied
tariff on non-agricultural products is 4.1%, slightly lower than at the previous TPR, due to tariffreductions for certain chemicals, textiles, iron and steel products, and toys. The simple average
tariff on agricultural products is, at 16.1%, about four times higher than that on non-agricultural
products, with above average tariffs on products subject to the Common Agricultural Policy (CAP).Tariff escalation remains, in particular on processed products.
On agriculture, according to the Organisation for Economic Co-operation and Development
(OECD), support to producers declined to € 97.9 billion in 2000 from € 107.6 billion in 1999,
mainly due to world market prices rising faster than domestic prices, as well as currency
movements, rather than significant changes in policy. The report states that opportunity to reformthe milk quota or sugar quota regimes was not seized, with extensions adopted instead. Pressures
to adapt the CAP to new requirements are arising from enlargement, where the EC has proposed a
progressive introduction of direct payments. Decline in consumer confidence in the CAP is due to anumber of food safety crises, which the Community is addressing, notably by a new framework forPRESS/TPRB/198
Page 3 of 25
food safety law. The report notes that funding for the CAP continues to represent the single largest
expenditure; 44% of the total budget of € 93 billion in 2000.
The report states that on trade remedies, the EU is the second most frequent user of anti-dumping
measures, behind the United States, but some 40% of the anti-dumping investigations initiated bythe EU are terminated without measures being taken. Safeguard action was taken in March 2002
on 15 steel products in response to the United States’ safeguard action on steel imports. The EU
continues to make frequent use of the special safeguard mechanism under the WTO Agreement onAgriculture to impose “snap-back” tariffs.
The EU and the Member States have put in place new regulations for certain products — notably in
relation to the safety of products and the disposal of waste — requiring economic operators,
including those outside the EU, to adapt. The report notes that certain trading partners of the EU
perceive these new product regulations as sign ificant trade barriers, and are concerned with
preserving the viability of the international standard-setting process. A controversy exists
concerning the placement on the EU market of genetically modified organisms (GMOs) and
products that may contain GMOs or GMO derivatives. Amendments to the legislation are underconsideration to ensure compliance with WTO rulings.
The report notes that the long-standing proposal  for a European company was adopted in October
2001, to be in place by 2004, and will simplify company law requirements for enterprises
established in at least two Member States. Foreign companies will also have this option, under
certain conditions. The Commission has continued to vigorously enforce the rules on antitrustactivities and mergers with a Community dimension, to complement national competition law
enforcement.
The report notes that to strengthen intellectual property rights protection, the EU adopted
harmonizing directives on resale rights for the author of an original work of art, and copyright and
related rights for the digital environment. No ag reement has been reached on the EC’s proposal to
create a unitary Community patent, due to issues of translation as well as jurisdiction.
Note to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For
each review, two documents are prepared: a policy statement by the government of the member
under review, and a detailed report written independently by the WTO Secretariat. These two
documents are then discussed by the WTO’s full membership in the Trade Policy Review Body(TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly
afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of
intellectual property rights have also been covered.
For this review, the WTO’s Secretariat report, together with a policy statement prepared by the
European Commission, will be discussed by the Trade Policy Review Body on 24 and 26 July 2002.The Secretariat report covers the development of all aspects of the European Union’s trade
policies, including domestic laws and regulations, the institutional framework, trade policies and
practices by measure, and developments in selected sectors.
Attached to this press release are the Summary Ob servations of the Secretariat report and parts of
the government policy statement. The Secretaria t and the government reports are available underPRESS/TPRB/198
Page 4 of 25
the country name in the full list of trade policy reviews at
http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm . These two documents and the minutes
of the TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due
course and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne,
1211 Geneva 21.
Since December 1989, the following reports have been completed:  Argentina (1992
and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992and 2000), Barbados (2002), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil
(1992, 1996 and 2000), Brunei Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and
2001), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia(1990 and 1996), Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the Czech
Republic (1996 and 2001), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador
(1996), the European Communities (1991, 1993, 1995, 1997, 2000 and 2002), Fiji (1997), Finland(1992), Gabon (2001), Ghana (1992 and 2001), Guatemala (2002), Guinea (1999), Haiti (2002),
Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India
(1993, 1998 and 2002), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica(1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992,
1996 and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993,
1997 and 2001), Malawi (2002), Mali (1998), Mauritius (1995 and 2001), Mexico (1993, 1997 and2002), Morocco (1989 and 1996), Mozambique (2001), New Zealand (1990 and 1996), Namibia
(1998), Nicaragua (1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS
(2001), Pakistan (1995 and 2002), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and2000), the Philippines (1993 and 1999), Poland (1993 and 2000), Romania (1992 and 1999),
Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic (1995 and 2001), Slovenia
(2002), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland(1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)),
Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998),
Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and2001), Uganda (1995 and 2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996)
and Zimbabwe (1994).PRESS/TPRB/198
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TRADE POLICY REVIEW BODY
EUROPEAN UNION
Report by the Secretariat — Summary Observations
The European Union (EU) plays a vital role in the WTO and its support for the rules-based
multilateral trading system is crucial to the ability of the system to deliver the benefits from trade
to all its Members. The EU’s position as the world’s leading exporter of goods and the second-largest importer is testimony both to the importance of trade to the European consumer and
producer, and to the significance of the EU as a market for most WTO Members, notably
developing countries. This interdependence is the result of a longstanding commitment to themultilateral trading system, in addition to an extensive network of regional trade agreements and
preferential trade arrangements.
The EU was very important in building support for the launch of the Doha Development Agenda
(DDA) in November 2001. The EU, together with its trading partners, worked to rebuild confidence
and cooperation within the WTO. It has also sought to improve public understanding of the WTOthrough greater transparency and interaction with parliamentarians and civil society
representatives. The continued commitment of the EU to the WTO and the multilateral trading
system will be critical to the success of the DDA.
Recent Economic Developments
Since its last Trade Policy Review in mid 2000, the EU has maintained the momentum of itsinternal economic integration agenda. It has continued to advance towards the completion of itsInternal Market by pursuing product and capita l market reform, has undertaken the final step
towards a single currency in the euro area, largely maintained control of public finances despite
lower economic growth, and has actively enforced competition policy, to complement MemberState domestic reform. Trade policy developmen ts have been supportive of this agenda, by
maintaining largely open markets for non-agricultural products (except for textiles and clothing),
proceeding on WTO liberalization commitments, an d supporting further deepening of multilateral
commitments, while further expanding the extensive system of regional trade agreements.
Maintaining a supportive policy environment for economic operators has been vital to reviving
growth prospects of the European economy in 2002.  Economic growth in the EU slowed sharply in
2001, with a slight contraction in GDP in the final quarter of the year. Growth was 1.7% in 2001
down from 3.3% in 2000. The slowdown is attributed by the Commission mainly to a sequence ofexternal shocks — higher oil prices, the burs t technology bubble, weak external demand,
exacerbated by the shock to confidence of the events of 11 September. The Commission’s Spring
2002 forecasts are for a recovery to develop in the course of the year, due in part to thestrengthened economic prospects of the United States, the EU’s main external trade partner. A
weaker first half, however, is expected to lead to a decline in the growth rate recorded for 2002 as
a whole, to 1.5%, followed by a rebound to 2.9% in 2003.
Inflation in the EU rose to 2.3% in 2001, from 2.1% in 2000 and 1.2% in 1999. Contributing
factors in 2000 were higher energy prices and the decline of the euro and, in early 2001, risingfood prices. Price pressures eased in mid 2001, bu t higher food prices and indirect tax increases
lifted inflation in early 2002. Although euro area inflation in 2001 was above 2%, the medium-
term target set by the European Central Bank (ECB), the Commission expects the target to be metin Q2 2002.PRESS/TPRB/198
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Unemployment rates continued to decline in most Member States in 2001 despite slower economic
growth. The Commission expects a slight rise in unemployment in the EU as a whole in 2002, evenas the recovery proceeds, due to the lagged nature of employment adjustment to cyclical upturns.
A decline to 7.5% is forecast for 2003.
Slower economic growth had a marked impact on  external trade developments in 2001. The value
of merchandise exports rose by 4% in 2001, compared with 23% in 2000, while imports were 1%
lower in value. Merchandise exports were estimated at € 1,051 billion and imports at € 1,020billion in 2001, reducing the EU’s merchandise trade deficit to € 45 billion in 2001, from € 91
billion in 2000.
Policy Developments
The strategic goal for the EU for 2010, set by the Lisbon European Council, is “to become the mostcompetitive and dynamic knowledge-based economy in the world capable of sustainable growth
with more and better jobs and greater social cohesion”. The 2002 Broad Economic PolicyGuidelines (BEPG) for the EU and the Member States emphasize safeguarding macroeconomic
stability by fulfilling pledges for budgetary balance made in the Stability and Growth Pact (SGP),
and continued moderation in wage demands. Other objectives include raising productivity throughproduct market reform, fostering entrepreneurship and the knowledge-based economy, and
financial market integration. Member States are to reduce labour costs, strengthen incentives for
people to take up work and participate in the labour force, and remove barriers to labour mobility.Sustainable development is to be promoted.
The 11 Member States that launched the euro area on 1 January 1999 were joined by Greece on 1
January 2001.  Euro banknotes and coins were put into circulation on 1 January 2002, to be used in
all transactions. The single currency facilitates cross-country price comparisons, and thus
strengthens the Internal Market. Non-EU countries also benefit through lower costs forinternational trade transactions.  The main benefit of Economic and Monetary Union (EMU),
however, is the lasting contribution of price stability to the foundations for sustained economic
activity.
The ECB conducts monetary policy for the euro area with the core objective of price stability. After
progressively tightening monetary policy throughout 2000 in the face of persistent inflationarypressures, the ECB shifted to a more accommodating stance in May 2001 as price pressures
eased. After the euro fell below a level that the ECB considered posed a risk to price stability, the
ECB intervened to support the euro in September 2000 in a concerted G-7 action, and on its ownin November 2000. The euro has since recovered to about US$0.90, 25% below its level of 1
January 1999.
Following the progress made in 2000 by all Member  States, towards the goal of budgetary balance
or surplus, slippage occurred in 2001 due to the onset of slower economic growth. Most
governments still in deficit position anticipated even greater difficulty in meeting their deficit
targets in 2002. To maintain the credibility of th e SGP, activation of the early warning system was
considered for certain Member States whose deficits were forecast to be close to the 3%
“excessive deficit” level, but activation was set aside following pledges to meet agreed balancedbudget targets by 2004. Pressures on deficits should ease in 2003 as a result of the anticipated
recovery. Other public finance concerns are the relatively high levels of government debt in certain
Member States, as well as the substantial pressu re of ageing populations on social welfare
systems.PRESS/TPRB/198
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Under EMU, structural reforms have assumed a greater importance in fostering the conditions for
growth, due to the combination of a strict anti-inflationary monetary policy stance and fiscal policyconstraints under the SGP. Since the last Review of the EU in mid 2000, good progress has been
made on achieving the goal of fully integrated securities markets by 2003 and financial markets by
2005 under the Financial Services Action Plan (FSA P), and on fostering the “information society”
through more competitive markets for telecommunications services and a new framework for
e-commerce.
Progress in other areas of the Internal Market has been slower. Political agreement was reached at
the Barcelona European Council in March 2002 to open non-household use of electricity and gas to
competition as of 2004, and to ensure cross-border electricity interconnectivity of at least 10% ofproduction capacity by 2005. On postal services, the scope of business segments reserved to the
incumbent postal operator is to be reduced in 2003 and again in 2006, and a decisive step to full
liberalization could take place in 2009.
Institutional Developments
The Treaty of Nice was agreed in December 2000,  to prepare EU institutions for enlargement in
the light of the objective of the candidates’ participation in the 2004 elections to the EuropeanParliament. Of particular significance to the WTO is the exclusive Community competence that
would apply to negotiations of agreements that concern services (with certain exceptions), and the
commercial aspects of intellectual property rights upon ratification by all Member States of theTreaty of Nice (ten had done so by May 2002). To prepare for the next phase of work on the EU
treaties in 2004, the Convention on the future of  Europe, launched in March 2002, is engaged in a
deeper and wider debate about the future of the European Union.
Transparency in the functioning of the EU has been further enhanced during the period under
review by a new policy adopted in 2001 to give all persons, regardless of their nationality, accessto documents of Community institutions, subject to limits for the protection of public and private
interests. The Commission has made increasing use of public consultations to provide input into
proposals for Community action, in keeping with the White Paper on European Governance.
External Trade Relations
The overall objectives of the EU’s trade policies have remained largely th e same during the period
under review. The EU continues to pursue trade liberalization through multilateral, regional, andbilateral initiatives. At the multilateral level, the EU played a leading role in building support for the
launch of the DDA in November 2001. At the region al level, new trade agreements were concluded
and existing agreements with candidate countries were deepened. Bilateral negotiations onprospective extra-regional agreements also cont inued. In addition, a new scheme for the grant of
preferences to developing countries was adopted, including enhanced preferences for least-
developed countries.
Notable actions undertaken by the EU to build support for the launch of the DDA include: the
“Everything-but-arms” (EBA) initiative, adopted in March 2001, to expand market access for least-developed countries (LDCs); supporting the resolution of implementation-related concerns; and
providing resources for enhanced levels of trade-related technical assistance, for which the EU and
Member States are major donors.
In addition, the EU continues to be an active participant in all the regular activities of the WTO and
periodically notifies its trade policy developments to the WTO. The EU is among the leading usersof the dispute settlement procedures to enforce the multilateral trade obligations of its tradingPRESS/TPRB/198
Page 8 of 25
partners, and is frequently involved as a respondent. Disputes with the United States continue to
be the leading category.
Preferential trade agreements and arrangements
The EU grants preferential access to most of its trading partners for some or all imports: in 2002,nine WTO Members are subject to exclusively MFN treatment in all product categories: Australia;
Canada; Chinese Taipei; Hong Kong, China; Japan; Republic of Korea; New Zealand; Singapore;
and the United States. These countries accounted for 45.2% of EU’s total merchandise imports in
2001. For other trading partners, the most beneficial treatment is granted to LDCs and theOverseas Countries and Territories (OCT), followed by the ACP and countries having concluded
free-trade agreements with the EU, and then GSP-only countries.
The EU expanded its free-trade agreement with Switzerland through the completion of seven
bilateral agreements, on land-based transport, ai r transport, free movement of people, agriculture,
research, procurement, and technical barriers to tr ade, which should enter into force in 2002. With
the ten candidates from Central and Eastern Europe (CEEC), protocols on reciprocal tariff
concessions on agricultural products raised the share of CEEC duty-free agricultural exports to the
EU to 75%, and the share of EU duty-free exports of agricultural products to the CEEC to 61%.Free-trade agreements are also being used as an instrument to integrate the Western Balkans.
Stabilisation and Association (SAA) agreements were concluded with the Former Yugoslav Republic
of Macedonia (FYROM) and Croatia. Albania and certain countries and territories of the formerYugoslavia — Bosnia-Herzegovina, the Federal Republic of Yugoslavia, including Kosovo — remain
under the regime of Autonomous Trade Measures (ATM), which runs until the end of 2005.
Further progress was also made on the “Euro- Med” agreements to replace non-reciprocal
agreements, and advance the goal of a Euro-Med free-trade area by 2010.
A new Council Decision on the OCT association arrangements was adopted in November 2001 to
continue the regime without major modification until the end of 2011. A revised GSP scheme
applies for 2002-04, with GSP-plus treatment ava ilable to LDCs under the EBA, as well as to
countries that combat drug production and trafficking, and to encourage adherence to core labourstandards or to environmental standards.
Trade Policy Measures
The EU market for non-agricultural products (except for textiles and clothing products) continuesto be largely open. In addition to tariffs, import ed products are subject to value-added tax (VAT)
and excise duties in the Member State of destination. The EU has bound 100% of its tariff lines in
the WTO, and tariffs applied on products  are closely aligned to bound levels.
The overall simple average MFN tariff is estimate d at 6.4% for 2002. The simple average applied
tariff on non-agricultural products is 4.1%, slightly lower than at the time of the previous Reviewin mid 2000, due to tariff reductions for certain chemicals, textiles, iron and steel products, and
toys. The simple average tariff on agricultural pr oducts is, at 16.1%, about four times higher than
that on non-agricultural products, with above average tariffs on products subject to the CommonAgricultural Policy (CAP). Evidence of tariff escalation remains, in particular on processed products.
Tariffs well above the average also apply to textiles and clothing products. The EU has long
maintained restrictions on imports of textile and clothing products from a number of developing
countries and transition economies. Following its WTO commitments, the EU integrated a further
18.08% of textiles and clothing products on 1 January 2002, bringing to 51.39% the importsintegrated into GATT 1994 since 1995. It involved the lifting of restrictions on 11 productPRESS/TPRB/198
Page 9 of 25
categories, accounting for 15% of products restricted in 1990. To date, the EU has lifted
restrictions on 20% of products restricted in 1990, leaving the elimination of the remaining 80% ofrestricted imports “back-loaded” for the final stage at the end of 2004.
As of 1 January 2002, the EU had in place definitive anti-dumping measures (duties and/or
undertakings) on 175 product categories, down from 192 in 1999. The EU is the second most
frequent user of these measures, behind the United States, but some 40% of the anti-dumping
investigations initiated by the EU are terminated without measures being taken. Products importedfrom China are the most frequently affected. The EU also had 16 definitive countervailing
measures in place, up from 6 in 1999, with products from India the most frequently affected.
Safeguard action was taken in March 2002 on 15 steel products in response to the United States’
safeguard action on steel imports. Supplementary  duties are to be triggered by volumes rising
above 2001 levels to prevent diversion of trade from the U.S. market onto the EU market. The
Commission also proposed the Council agree additional duties of between 8% and 100% on
imported products from the United States as “re-balancing” measures, given the failure of the two
parties to agree compensation for the Article XIX measure on steel imposed by the United States.The EU continues to make frequent use of the special safeguard (SSG) mechanism under the WTO
Agreement on Agriculture to impose “snap-back” tariffs.
During the period since the last Review in mid 2000, the EU and the Member States have put in
place new regulations for certain products — notably in relation to the safety of products and the
disposal of waste — requiring economic operators, including those outside the EU, to adapt.Although international standards may be used as the basis for regulations, to facilitate trade, the
Commission has stated that “standards cannot replace governmental responsibility to safeguard a
high level of protection concerning health, safety and the environment”. Certain trading partnersof the EU perceive these new product regulations as significant trade barriers, and are concerned
with preserving the viability of the international standard-setting process. Another concern is
ensuring that the multilateral processes for consultation on proposed regulations are effective.While proposed regulations are subject to WTO notification requirements to allow concerned
Members to comment, participation in the consultations phase, before the Commission issues the
proposal, is also desirable should resources permit.
To build consumer confidence in food safety after a number of food scares on the Community
market, the EU adopted a new framework for national food law and food safety procedures.Scientific evidence is to underpin food safety policy, with the precautionary principle to be used
where appropriate. A new European Food Safety Au thority (EFSA) was also established to provide
scientific advice to the Commission on food policy matters, as well as to Member States shouldthey so request. A number of Member States have established authorities with mandates at
national level to ensure independent scientific advice. New regulatory requirements have also been
put into place with respect to labelling of food products of all origins to ensure traceability.One area of reported controversy concerns the placement on the EU market of genetically modified
organisms (GMOs) and products that may contain GMOs or GMO derivatives. Although the new
legislative framework for authorizations is tighte r in a number of respects , certain Member States
remain opposed to placement on the market wi thout comprehensive labelling requirements on
traceability, currently under consideration. Another area of controversy concerns the ban on the
use of hormones as growth promoters, on which the Commission has conducted a risk assessmentin recent years. Amendments to the legislation are under consideration to ensure compliance with
WTO rulings.PRESS/TPRB/198
Page 10 of 25
A key objective of the EU is to manage waste more effectively, as a result of which new
requirements on producers have been imposed or  are under consideration. The EU directive on
end-of-life vehicles and the proposed directive on waste electronic and electrical equipment
(WEEE) depart from the previous practice of dele gating waste management to public authorities by
introducing “producer responsibility” for the treatment, recovery, and disposal of products. This isintended as a financial incentive for producers to design their products to facilitate waste
management, particularly recycling.  Other requ irements could also result from the Integrated
Product Policy currently under elaboration.
The burden of conformity assessment procedures is reduced for certain non-EU third countries
through Mutual Recognition Agreements (MRAs). New MRAs were recently concluded with Japanand Switzerland, and are already in force with Australia, Canada, Israel, New Zealand, and the
United States. A similar outcome is secured for the CEEC under concluded Protocols to the Europe
Agreements on Conformity Assessment and Acceptance of Industrial Products (PECAs). Although anumber of developing countries would also be nefit from a reduced burden of conformity
assessment as a result of MRAs, the EU has established its own criteria for such agreements to be
concluded.
Measures Affecting Production and Trade
The EU has continued to pursue the objective of a more integrated environment for companyactivity in the EU, currently segmented into 15 Member State regimes, although harmonized in anumber of respects under Community law. The long-standing proposal for a European company
was adopted in October 2001, to be in place by 2004, and will simplify company law requirements
for enterprises established in at least two Member States. Foreign companies will also have thisoption, under certain conditions. The Commission plans to propose the consolidation of the tax
base for European companies to facilitate their operation. Another significant proposal concerns
the use of International Accounting Standards (IAS) by 2005, which will enhance the transparencyand comparability of financial statements, currently subject to national reporting standards.
Competition policy
The Commission has continued to vigorously enforce the rules on antitrust activities and mergerswith a Community dimension, to complement national competition law enforcement. To focus its
efforts on fighting cartels and other serious infringements of antitrust rules, the Commission has
proposed a major simplification of the notification requirements for individual agreements. In2001, a record number of cartel cases were closed, with fines reaching € 1.8 billion.
Merger activity continued to be high. For merg ers of a transnational character, the Commission
has cooperated actively with the competition policy authorities of EEA members and, on the basis
of bilateral agreements, with those in Canada , the United States, and the CEEC, to promote
convergence of decisions and remedies; an agreem ent with Japan is also expected. To promote
convergence on a wider basis, the Commission played a leading role in the launch of the
“International Competition Network (ICN)” in late 2001. The EU has long been an advocate of a
multilateral agreement on competition.
A development of major significance to consumers in the EU, where car price differentials remain
high, is the Commission’s proposed new draft block-exemption regulation for motor-vehicle
distribution and servicing agreements between carmakers and dealers, to enter into force on 1
October 2002. Foreign carmakers that have not established a distribution system in the EU will
also benefit, as most restrictions on multi-brand sales are to be lifted.PRESS/TPRB/198
Page 11 of 25
Subsidies
At EU level, funding for the CAP continues to represent the single largest expenditure; 44% of the
total budget of € 93 billion in 2000. Structural operations account for 35% of the budget, with
research and technological development a distant third.
At Member State level, latest available figures show that State aid was € 80 billion in 1999,
amounting to 1% of the EU’s GNP. Member States have pledged to reduce levels of state aid by
2003, and to shift the emphasis of subsidies from supporting individual companies or sectorstowards tackling horizontal objectives of Community interest, such as employment, regional
development, environment and training or re search. More generally , Member States are
encouraged to increase public and private in vestment in R&D to promote a knowledge-based
European economy.
The Commission has played a supportive role in efforts to advance domestic reform by vigorously
enforcing rules on state aid to individual enterprises, in particular for non-notified aid. In July
2001, the Commission launched a large-scale state aid investigation into business taxation
schemes, which are said to be less transparent than other forms of assistance, and raise thepotential for harmful tax competition.
Also significant is the Commission’s decision to firmly abide by state aid rules on airline carriers in
the aftermath of the events of 11 September, with the exception of assistance for supplementaryinsurance. To ensure a more level playing field with non-EU carriers and fill a void in the GATS
Agreement, the Commission proposed a new instrument to react against unfair competition from
subsidized third-country airlines.
In certain sectors, the Commission has faced greater difficulty. Aid to shipbuilding was to be
discontinued but its prolongation has been prop osed on a “defensive” basis to pursue a WTO
dispute settlement proceeding. Aid to the coal mining industry will continue until 2010. Although
most EU mines cannot compete with imported coal, the industry that remains in four Member
States has long been assisted on social and regional grounds.
Intellectual property rights
To strengthen intellectual property rights protection, the EU adopted harmonizing directives onresale rights for the author of an original work of art, and copyright and related rights for thedigital environment. A new unitary right on a Community design was created, in addition to the
Community trade mark and Community plant variety. No agreement has been reached on the
Commission’s proposal to create a unitary Community patent (including a centralized court for itsenforcement), due to issues of translation as well as jurisdiction. Also outstanding is the proposal
to harmonize legislation for patents on software (computer-implemented inventions).
On enforcement, customs authorities reported an  increase of one third in seizures from 1999 to
2000 under legislation implementing the TRIPS Ag reement at the border. The trend continued in
2001 with a further increase of 27% in the number of cases. The Commission has attributed therising trend to (a) an increased focus of customs authorities, better targeting and sharing of
information; and (b) an increase in and expanded  range of counterfeit and pirated goods that are
traded. In 2002, the Commission intends to propose a harmonizing directive on enforcement ofIPRs, which is said to be stricter than the minimum standards required by the TRIPS Agreement.PRESS/TPRB/198
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Developments in Selected Sectors
Agriculture
Since its last Review in mid 2000, the EU has implemented the Agenda 2000 reforms to the CAP
agreed in Berlin in March 1999; the opportunity to  reform the milk quota or sugar quota regimes
was not seized, with extensions adopted instead. Pressures to adapt the CAP to new requirementsare arising from enlargement, where the Commissi on has proposed a progressive introduction of
direct payments. Other pressures to adapt the CAP are arising in the context of the ongoing WTO
negotiations on agriculture, where the EU has su bmitted a proposal. Also of potential significance
is the decline in consumer confidence in the CAP due to a number of food safety crises, which the
Community is addressing, notably by a new framework for food safety law, as noted above.
According to the latest publicly available OECD figures, support to producers declined to € 97.9
billion in 2000 from € 107.6 billion in 1999, mainly due to world market prices rising faster than
domestic prices, as well as currency movements, rather than significant changes in policy.
Fisheries
Since its last Review in mid-2000, the EU has been moving towards consideration of possible
revisions to the Common Fisheries Policy (CFP), to apply as from 2003, although no concreteproposals had been made as of 1 May 2002. Negotiations on subsidies to fisheries are on the DDA.
The Commission’s Green Paper issued in 2001 on the operation of the CFP to date notes the
difficulty of reconciling objectives in the sector — supporting fishing activity in regions and areas of
the Community where it is of social and economic importance, while attempting to protect
increasingly fragile fishery resources. A number of measures were taken by the Community in2000 and 2001 to address fishery conservation concerns, including lower catches for 2002 to
prevent further deterioration of certain stocks. Reaching political agreement on a new fleet
management policy has been more difficult, although Commission estimates point to significantexcess capacity as one of the causes of resource depletion.
Financial services
Completion of the FSAP occupies a central role in the Lisbon strategy to lower costs of capital and
foster a more entrepreneurial culture. Financial market integration is among the key potential
benefits of the euro. Between 2000 and March 2002, the EU adopted 15 legislative measures,including to complete the regulatory frameworks for the banking and insurance sectors through
provisions on reorganization and bankruptcy, mo ney laundering, and reducing the cost of cross-
border payments in euros. A new “Lamfalussy” approach to securities-market legislation wasagreed with the Council and European Parliament to focus legislation on core principles and
delegate implementing powers to the European  Securities Committee (ESC), chaired by the
Commission, and advised by a Committee of Eu ropean Securities Regulators (CESR).
A large number of legislative proposals are under consideration for adoption. The Barcelona
European Council agreed in March 2002 that priority attention should be given in 2002 by the
Council and the European Parliament to adoption of the proposed Directives on collateral, marketabuse, insurance intermediaries, the distance marketing of financial services, financial
conglomerates, prospectuses, occupational pension funds, and the IAS Regulation. The
Commission also intends to issue a revised proposal for a Takeover Bids Directive (rejected by theEuropean Parliament in mid 2001).
Telecommunications and information society
Fostering the “information society” is a central plank of the Lisbon strategy. Under the eEurope
Action Plan, the local loop unbundling (LLU) regulation was in place as from January 2001, a
revised legislative package for electronic communications was adopted in February 2002, to bePRESS/TPRB/198
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transposed by May 2003, and the legislative framework for e-commerce was substantially
advanced to build trust and confidence in the Internet.
For the future, the Commission sees substantial benefits for the European economy from extensive
use by consumers of high-speed Internet connections and wireless 3G technologies. Although theEU is among the world leaders in mobile communications, household use of the Internet lags that
of other OECD countries, although business use is comparable. A new eEurope Action Plan for
2005 is to be adopted at the Sevilla European Council in June 2002.
As from January 2000, all Member States were re quired to have initiated the process of LLU to
foster infrastructure-based competition on the local access network and thereby accelerate thesupply of broadband connections. Incumbent te lecom operators were required to provide
competitors with physical access to local loops, but progress is conceded to have been slow. The
new electronic communications package contains changes intended to bring about morecompetitive licensing conditions and fee structures orientated to cover administrative costs. In
addition, a progressive alignment with competition policy is to be achieved in market segments
where effective competition has been achieved.
A proposed privacy directive is under consideration. It would require providers of public
telecommunication services and networks to guarantee the security of their networks, to ensurethe confidentiality of communications and to delete traffic data. Under current legislation, transfers
of personal data to a non-EU third country ar e only permitted when “adequate” protection is
determined, or under limited conditions. The Commission has progressively extended the scope forsuch transfers by recognizing the adequacy of the data protection regimes of Hungarian, Swiss,
and U.S. companies participating in the “safe harbour” arrangement, and certain data transfers to
Canada.
The e-Commerce Directive, which entered into force on 17 January 2002, establishes that
contracts concluded by electronic means are recognized as such, and legal barriers to theirconclusion are removed, complementing the e-signat ures Directive.  In addition, a new regulation
on jurisdiction and the enforcement of judgments in civil and commercial matters gives EU
consumers the right to sue foreign Internet providers of goods and services in the consumers’ localcourt rather than in the foreign jurisdiction.
In February 2002, the EU adopted a new policy on the value-added taxation of electronic deliveries
of information society services (e.g., software, music, video) to consumers in the EU from service
providers established outside the EU, which are currently not assessed VAT.PRESS/TPRB/198
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TRADE POLICY REVIEW BODY
EUROPEAN UNION
Report by the Government — Part IV
The EU’s trade policy at global level
The EU and the WTO
Strengthening and promoting the multilateral system
An open and strong multilateral trading system  is the best guarantee against the threat of
unilateralism and constitutes one of the key tools to manage the process of globalisation. The EU
will continue to work to reinforce the WTO, enlarging and improving its system and promoting amore active participation of all its Members, including in the negotiations now underway. The EU
has continued and will do so in the future to work assiduously for the earliest possible accession
on commercially viable terms of all candidates having applied to join the WTO, in particular LDCs.In this respect, the EU very much welcomes the Peoples’ Republic of China and Chinese Taipei
accession to the WTO during the period covered by  this review, after 15 years of long and arduous
negotiation. Their accessions constitute a big step towards making the WTO a truly globalorganisation
.
The EU attaches the greatest importance to the correct and timely implementation of the
agreements  to which all WTO members have subscribed as an essential element for a well-
functioning multilateral trading system. In this context, the EU welcomes the fact that during the
period under review, both before and at Doha, ma ny concerns related to implementation could be
resolved, and that agreement was reached on a fr amework to address the outstanding issues. The
EU continues to actively participate in implementation-related discussions, including those related
to special and differential treatment, with a view to settling all outstanding issues to thesatisfaction of all WTO members, and remains open to considering proposals to readjust
agreements as part of the single undertaking.
During the period of this review, the EU has participated actively in the various phases of the WTO
negotiations on agriculture and services since the launch of the built-in-agenda negotiations in
January 2000. In that respect, the EU and other Members have submitted several papers onagriculture, including a comprehensive negotiating prop osal. Other technical papers submitted
cover such issues as export competition and non-trade concerns (labelling and food safety). The
EU position, based on Article 20 of the Agreemen t on Agriculture (AoA), takes into account the
need to aim at a balance between trade concerns  (market access, export competition, domestic
support) and non-trade concerns (the protection of  the environment, the sustained vitality of rural
communities, food safety and other consumer concerns including animal welfare), which reflectimportant societal goals. Moreover, the EU considers that further liberalisation and expansion of
trade for agricultural products are an important contribution to sustained and continued economic
growth, in both developed and developing countries.
On the services side, during the period covered by this revi ew the EU played an active part in the
work of the Council for Trade in Service, the Special Sessions and their respective subsidiarybodies. The EU has tabled proposals not only on its overall approach to the services negotiations
but also for most of the sectors covered by the GATS.PRESS/TPRB/198
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As regards intellectual property rights, the EU has continued to participate in the TRIPs  built-in
agenda and acted as a facilitator in the discussions on TRIPS and health when preparing for thenew round. Following the successful decision on TRIPS and Health taken at Doha, the EU is now
developing ideas to improve access to medicines for countries without domestic production.
The EU continues to be an active user of the WTO dispute settlement mechanism . Since the
date of the previous report, the EU has requested consultations with other WTO Members on seven
occasions. Those procedures are still ongoing.
As a complainant , and also as a third party, the EU has been especially active in the field of trade
defence (Anti-dumping, Countervailing duties and Safeguards). The dispute settlement activity in
this area has significantly contributed to the clarification of key provisions of the relevantagreements. In this regard, the EU would highlight the systemic importance of the case against
the 1916 US Anti-dumping Act (DS136), which concerned the use of instruments other than duties
against dumping of exports, and the cases on safeguard measures, such as “US-Wheat Gluten”
(DS166). The interest of the EU in preventing the misuse of trade defence instruments is broadly
shared among WTO Members. The complaint against the US Continued Dumping and Subsidy
Offset Act (DS217), which has been brought by 11 co-complainants, best exemplifies this general
concern within the WTO Membership. Other impo rtant areas where the EU has brought dispute
settlement cases are intellectual property and subsidies. In the latter field, the landmark “FSC”
case (DS108) on the use of tax breaks as export subsidies provided further evidence of the needto address the sequencing of Articles 21.5 and 22.6 DSU.
Regarding the cases in which the EU was the defendant , the EU would like to underscore the
results of the “asbestos” case (DS135), which reaffirmed that health protection can be set as an
overriding goal of public policy. The EU would also highlight its efforts to achieve mutually
satisfactory settlements to trade disputes, which have notably led to a solution that puts an end tothe longstanding “banana” dispute (DS27). The EU remains fully committed to the successful
resolution of the other cases where the EU is the defendant.
A key EU priority continues to be the full integration of developing countries , in particular the
least developed countries (LDCs), in the multilateral trading system and the global economy, so as
to help them benefit from the opportunities for growth and development. The EU was thereforeone of the main proponents of the development-centred round of new negotiations launched in
Doha, and in addition to this has taken action autonomously to help developing countries in their
efforts to integrate. In particular, the EU adop ted in February 2001 the Everything But Arms (EBA)
initiative, which grants duty-free and quota-free access for all LDC exports to the EU. The EBA has
already taken effect, with only three products — rice, sugar and bananas — subject to a transition
to duty -free and quota-free access. The EU welcomes the subsequent commitment by otherdeveloped countries to enact similar initiatives in favour of LDCs.
Experience has shown that many countries have difficulties in making use of the trade
opportunities offered, and improved market acce ss therefore must be complemented by capacity
building measures. The EU supports trade related assistance and capacity building  in its
bilateral programmes and as part of its participation in multilateral co-operation. As regardsbilateral programmes, the EU redefined its develo pment policy priorities in 2000, identifying trade
as a development priority, and has since then begun to mainstream trade actions in all bilateral
and regional programmes, including support for WTO negotiations, rule-making and supply side. At
the multilateral level, the EU was the primary contributor to the WTO Doha Development Agenda
Global Trust Fund , with the European Community and Member States together contributing more
than 60% of total pledges made in March 2002. The EU believes that the needs for trade relatedassistance go beyond the competence of the WTO Secretariat as such and requires increasedPRESS/TPRB/198
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efforts and closer co-operation among international organisations, in particular the Bretton Woods
institutions, UNCTAD, UNDP and ITC, including in the Integrated Framework for Trade-relatedTechnical Assistance for LDCs and other similar mechanisms.
The access of EU goods and services to markets around the world for the benefit of consumers and
business world-wide remains a primary objective for the EU. The EU’s market access strategy
focuses on the elimination of important market access barriers, by using to the full the various
multilateral and bilateral instruments and opportunities at its disposal: the WTO dispute settlementprocedure, consultation and bilateral agreements with WTO members and others, and the new
negotiating round. A new version of the market access database, the operational tool of the
strategy, was released on the internet during the period of this review.
The EU retains the option to use, where necessary and appropriate, relevant trade defence
instruments, in the form of anti-dumping and anti-subsidy measures, to counter unfair injurioustrading practices from third countries. Given the importance of its trade flows, the EU is an overall
moderate user of such instruments. In its actions, the EU takes care of the concerns of developing
countries. It is noteworthy that although EU legislation provides for the possibility to applysafeguard measures, the EU has made very limited use of this instrument since the entry into
force of the WTO agreements. Indeed, the EU has only imposed one such measure since 1992. The
exceptional measure on imports of steel was take n in 2002 in full conformance with the safeguards
agreement. It followed the own US safeguard measures which effectively closed the US steel
market. On the contrary, the EU’s safeguard measures took the form of generous TRQs, which
preserved traditional levels of imports on its market. The EU attaches the greatest importance toall WTO members adhering to effective WTO disciplines in the area of trade defence.
Preparing and launching a broad and balanced round
Drawing from the lessons of the Seattle Conference, which failed to launch a new round ofmultilateral trade negotiations, the EU like others adapted its approach to the new round, in
particular by recognising that the WTO needed to work in a more inclusive and transparent way
vis-à-vis all Members, and improve communication with the outside world. On the substance of thelessons drawn from Seattle, the EU took into account other Members’ opinions — especially
developing countries — and continued bridge buil ding efforts with trading partners in order to
overcome differences. This modified approach was set out in the EC strategy paper of
December 2000  which was generally well-received as a sign of flexibility and creativity. The EU
thereafter continued efforts to launch an ambiti ous round, recognising that only a broad agenda
could both reconcile different Members’ views and take account of all Member’ essential interests.Supported by the EU’s extensive consensus building efforts with other WTO Members, in particular
developing countries and LDCs, the modified strategy was certainly one element in securing
support for the successful launch of a new round of trade negotiations at the 4
th Ministerial
Conference at Doha in November 2001.
The DDA, encompassing both market access and rule making, and driven by a strong development
objective, offers a major opportunity to promote global economic growth and sustainable
development, and to further strengthen the rules-based multilateral trading system.
The fundamental reasons for a broad round that pe rtained before Seattle have remained valid in
the preparatory period before Doha  and beyond. First, as regards further trade liberalisation ,
both developed and developing countries seek improved market access for their products and
services, in order to increase international economic growth, to fully participate in the globaleconomy and to restore business confidence at a critical juncture of the world economy.
Agriculture, services and non-agricultural tariffs  are all therefore key ar eas for improving market
access.PRESS/TPRB/198
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On agriculture , the EU was already committed to negotiations under the built-in agenda and
recognised that in a new round many participants expected to go beyond Article 20 of the
Agreement on Agriculture in terms of the level of ambition. The EU continuously showed its
readiness to play its part in these negotiations by setting the pace and gradient of further reform,including a deadline for the conclusion of the negotiations. The EU aimed at Doha to ensure that
the outcome would balance its interests in its capacity as a major exporter and importer of
agricultural products, while taking account of the non-trade dimension of agricultural policy. TheDoha Ministerial brought a satisfactory outcome on agriculture, in confirming the commitment to
negotiate on market access, domestic support and all forms of export subsidies, without prejudice
to the final outcome, and clearly acknowledging the multifunctional nature of this sector and theneed to take fully into account the interest of developing countries.
As far as services  are concerned, the EU’s objective was to make progress in the ongoing GATS
2000 negotiations on liberalisation of international trade in services. Apart from reaching improved
market access world-wide for its services exports, the EU encourages an increased participation by
developing countries in the negotiations. The EU therefore welcomes the agreement reached inDoha on the dates for the submission of requests and initial offers which are important elements to
ensure progress in the negotiations, and hopes to see through the negotiations an increase in the
number and quality of market access and national treatment commitments across services sectorsand modes of supply, as well as further develo pment of regulatory disciplines. Developing
countries in particular are likely to benefit significantly from further liberalisation of services
sectors which continue to grow in importance. Liberalisation of the service sector however needs tobe accompanied by an appropriate institutional and regulatory framework to ensure competition,
to allow governments to pursue non-economic objectives, and to ensure continued access to
essential services for the poor. Implementing appropriate institutional and regulatory safeguards isparticularly a challenge for many developing countries, which is why the EC and its Member States
are putting such emphasis on trade related technical assistance and capacity building (TRTA/CB).
In respect of non agricultural  market access , the EU in the period under review continued to
favour an ambitious mandate that includes the elimination of barriers with a comprehensive
product coverage without any a priori exclusio ns. The EU was therefore pleased that at Doha
agreement was reached on a mandate that is more ambitious than those of previous rounds, and
more specific in that Members have agreed to reduce or as appropriate eliminate tariff peaks, high
tariffs and tariff escalation. As with other elements of the Doha Agenda, negotiations on marketaccess for non-agricultural goods are likely to have more fruitful results if placed within the wider
framework of the DDA negotiations aimed at achieving a more transparent and predictable
multilateral system of rules.
Regarding WTO Rules , the EU’s view during the period under review continued to be that the
scope of WTO rule making needed to be broadened if the multilateral system were to respond tothe effects of globalisation, and if traders and investors world-wide were to enjoy a predictable,
transparent and non-discriminatory framework in which to make economic decisions and to
compete. Decisions to negotiate multilateral agreements on investment, competition, tradefacilitation and public procurement as well as a clarification of the interaction of important trade
and environmental issues therefore continued to co nstitute a key element of the EU agenda for the
round. From an EU point of view it has continued to be equally important to seek improvements toexisting rules in such areas such as trade defence or technical barriers to trade, and regional trade
agreements, in order again to improve transparen cy and predictability for traders, investors,
consumers and governments.PRESS/TPRB/198
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As part of its revised strategy for the new trade Round, the EU in the period under review
consciously decided to adjust its negotiating objectives in several key rulemaking areas, to takeaccount of the opinions of other WTO Members. On investment , the EU sought simply to put
manufacturing investment on the same footing that services FDI already enjoyed in the GATS —
an approach with several years of history and with which WTO Members were by then familiar. TheEU strongly welcomes therefore the objective se t at Doha to establish a multilateral framework
aimed at improving the conditions for Foreign Direct Investment  world-wide. The result is of high
importance for the EU in its capacity as one of the main sources for FDI around the world, butindeed constitutes a golden opportunity for all WTO members to develop a balanced framework of
rules that will ensure a level playing field with more stable and predictable investment conditions
world-wide and be conducive to sustainable development.
On competition , the EU in its revised strategy suggested some basic rules that would help all
Members to strengthen their ability to deal with anti-competitive practices. The decision at Doha towork towards a multilateral framework on competition policies, following the current preparatory
phase, will contribute towards the more effective application of domestic competition regimes and
be of benefit for consumers and EU business operating abroad around the world.. The elements forsuch a framework agreed at Doha correspond to those proposed by the EU, and reflect a realistic
and progressive approach towards the development of competition disciplines at multilateral level,
including the need to respond to the particular interests and concerns of developing countries.It was equally important to the EU to seek a WTO agreement on trade facilitation  aiming at
streamlining customs procedures, cutting costs and red tape, which continues to be a major
constraint on developing countries’ export performance. Such an agreement would implysignificant savings by helping governments to improve efficiency of controls and, ultimately, higher
revenue intakes. The Doha mandate on trade facilitation reflects the objective shared by many
Members of simplifying customs and related trade procedures, including transit measures to boosttrade between developing countries in particular. The mandate also reflects the development
objectives of trade facilitation, including the notion that assistance to build capacity should be an
integral part of the work and be approached in a systematic manner.
Regarding government procurement, the EU had in the period of this review argued in favour of
negotiating a set of rules on transparency, as a means to reduce the trade-distorting effect thatdifferent procurement practices may have. The EU welcomes the fact that the WTO at Doha
recognised the important contribution that procurement makes to the economy and its effect on
trade, and launched negotiations. Multilateral rules on transparency in government
procurement  although not requiring the opening up  of procurement to WTO Members, will
increase knowledge of procurement methods and promote contract opportunities while maintaining
existing preferences to domestic suppliers.
On environment , an issue of importance for trade predictability but also a domestic sensitive
issue for the EU, it was made clear that the EU’s agenda was a finite one –the objective was not tochange WTO disciplines but to clarify or confirm the existing rules especially as interpreted by
recent panels. The EU sought for a mandate on environment that was specific, that the outcome
should be clarification, and that it should be non-discriminatory and non-protectionist. Theagreement in Doha to begin a negotiation to better frame the interaction between the WTO and
environmental issues is thus a significant step for the trading system, and reflects the EU’s and
other members’ calls for increased action in the WTO in favour of sustainable development.Regarding trade defence rules , the EU in the period under review was receptive to the proposal
for a balanced negotiation on WTO rules to take place that will meet the demands of developing
countries and allow them to search for improvem ents to the existing WTO Agreements without
calling into question their basic principles. These objectives have been met in the Doha mandate.PRESS/TPRB/198
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As regards regional trade agreements , the EU objective to start negotiations for clear and quite
strict rules defining the conditions to be met, for FTAs and regional agreements to be WTO-
compatible, was also satisfactorily agreed.
The EU approached Doha with se veral objectives regarding the TRIPS agreement, all of which
have been met. The Doha declaration contains a clear provision that negotiations on multilateral
register will have to be completed by the 5th WTO Ministerial Conference and refers also to theTRIPs mandate for negotiations on extension of the coverage of geographical indications for the
benefit of business and consumers around the world. It also stipulates that the issue of TRIPS/CBD
relationship and protection of traditional know ledge be examined and that appropriate action
should be taken, reflecting the EU’s commitment to take account of developing countries interests
in this area.
In addition to helping to launch negotiations on TRIPS within the Doha agenda, the EU also played
a crucial bridge-builder role in the adoption of a Declaration on TRIPs and public health, that
reflects the EU’s conviction according to which the TRIPs Agreement can and should be interpretedand implemented in a manner supportive of WTO Me mbers’ right to protect public health. This
Declaration, which is in line with the position adopted by the EU, is a major achievement, which
succeeds both in safeguarding the TRIPs Agreement while recognising the importance of Membersbeing able to pursue their legitimate public health goals.
The EU has played an active role in the DSU review . In accordance with the Doha Declaration, the
DSU negotiations aim to agree on improvements and clarifications not later than May 2003. The
EU has recently submitted a comprehensive contribution to the negotiation process that it hopes
will help WTO Members to fulfil the Doha mandate.
In all its considerations regarding the future shape of the negotiating agenda the EU was at pains
to ensure that the round included the interests of developing countries . This concerns in
particular negotiations to improve market access in key sectors like agriculture and textiles,
strengthening and tightening of trade defence rules, a review of the development aspects of the
subsidies agreements, extension of TRIPS to cover products of importance to developing countries,an across the board review of special and differe ntial treatment provisions, and substantial support
to build capacity.
The EU has also remained committed in the past two years to develop a meaningful dialogue,
involving in particular the ILO and the WTO, on questions relating to trade, labour, and social
development . The Commission’s communication 18 July 2001 on “Promoting Core Labour
Standards and Improving Social Governance in th e Context of Globalisation” addressed the issue
in a comprehensive manner by suggesting a multi-disciplinary work programme. The EU is
committed to help promote the effective application of core labour standards globally, whileeschewing the use of trade sanctions to enforce them. Internationally, it recognises the key role of
ILO and the need to strengthen ILO instruments for the effective application of core labour
standards. All Member States but two have ratified all eight core ILO conventions. In addition, thejoint forum between ILO and WTO — which since Seattle has emerged as the preferred way
forward — remain a key element of the strategy. In this context, recent ILO developments —
notably the creation of the World Commission on the Social Dimension of Globalisation — are verypositive. The EU aimed at Doha for a statement reflecting Members’s attachment to improving the
WTO/ILO dialogue on social development questions. Although the Doha outcome on trade and
social development is from an EU point of view too modest, it does still provides a basis to makePRESS/TPRB/198
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progress on the issue, and the EU will work to ensure that WTO does indeed contribute
constructively to the ILO process.
Finally, improvements were registered du ring the period under review regarding transparency
and the participation of Civil Society. Domestically, the EU intensified its efforts at policy
dialogue and consultation with representatives of civil society, recognising that it is primarily at the
domestic level — within the jurisdiction of each Member — that such consultation and arbitration
between different social partners and interests must take place. Within the WTO, the EUconsistently encouraged more frequent and structured dialogue with parliaments and civil society
representatives, and was pleased that it was po ssible, both before and at Doha for Members to
discuss issues in a constructive way with a civil society which is now playing a fuller role in WTOwork than ever before and with no detrimental effect on the essentially — and rightly —
intergovernmental nature of the WTO. Fewer in numbers and less prominent in Doha than in
Seattle, civil society’s influence was nonetheless more clear: the Doha outcome on TRIPs andhealth for example reflects a commendably prompt  and operational WTO response, inter alia to a
civil society campaign launched less than two years earlier. The EU will continue to seek
improvements to the transparency and effectiveness of the organisation, including possibleinstitutional improvements. In this respect, the Doha declaration, despite not being very specific,
clearly provides a mandate for greater transpar ency, above all vis-à-vis the members of the
organisation. In addition, on issues such as consultation and open meetings, the Secretariat will,with its greater autonomy, be able to launch more intensive dialogue with parliaments and civil
society. Further thought needs however to be given to WTO reform in order to improve in
particular the efficiency of decision-making. Finally, part of the efforts to improve the institutionalworking of the WTO relates to the ongoing review of the DSU, where the EU favours the
introduction in the DSU of sufficient flexibility for parties to decide whether all or parts of the
proceeding should be open to the public, as well as a better definition of the framework and
conditions for the submission of amicus curiae  briefs.
In sum, the far-reaching results  of the Doha Conference reflect very well the EU’s overall
objectives for the next negotiating round: a fourfold agenda to further liberalise market access,
update and improve WTO rules, promote a deve lopment agenda and address issues of public
concern. The declarations are both faithful to the EU’s negotiating mandate and reflect our broadpolitical and economic objectives, the interest of business and civil society as well as the global
economic interest, including the needs of developing countries. The emphasis on developing
country needs and on sustainable de velopment is particularly welcome.
As the  major systemic gain , Doha potentially takes the WTO into a new era where its
commitment to sustainable development — always central to its mandate — is now made moreexplicit and more operational. The result of this new round should over time significantly improve
the contribution of the WTO to sustainable development and improve international economic
governance, policy aims that find their parallel in the EU’s own continued construction. Bothmultilaterally and within the EU, a balance between rule making and progressive liberalisation
continue to represent the right policy mix to encourage sustainable development and the better
management of economic change. The EU sees its immediate task now to carry out negotiations ina way that reflects the objectives of the Doha Development Agenda and the EU’s own goals.
Bilateral and regional trade relations
In addition to its support for the multilateral trad ing system the EU is engaged in developing trade
relations with other trade partners in the worl d through a number of preferential trade regimes,
free-trade areas and regional initiatives, and other bilateral relations. Many of these relationships
reflect the global economic and trade reach of the EU — which remains the major trading partnerPRESS/TPRB/198
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for many countries — or are the expression of broader geopolitical objectives. As a matter of trade
policy however, the EU’s active engagement in a range of regional trade initiatives reflects aboveall the view that in the right circumstances such relations can — and indeed must — contribute to
and strengthen the multilateral system.
Preferential trade regimes
The new ACP-EU Partnership Agreement signed on 23 June 2000 in Cotonou, and whose trade
provisions took effect from 1 August 2000, provides for the negotiation of new WTO-compatiblearrangements, which progressively remove barriers to trade and enhance co-operation in all trade-
related areas, to be concluded and put into effect by the end of 2007. In the meantime, and in
order to facilitate the transition, the non-reciprocal trade preferences applied under the 4th LoméConvention have been maintained and are sanction ed by a waiver obtained at Doha. The Cotonou
preferences include duty-free access for all industrial and a large part of agricultural and processed
agricultural products as well as preferential tariffs for almost all the remaining agriculturalproducts. The beef and veal and sugar protocols ar e also maintained during the preparatory period
but will be reviewed in the context of the new trading arrangements.
The present regulation governing the EU scheme for Generalised trade preferences, GSP, entered
into force in 1 January 2002 and will cover the period until the end of 2004. It is based on the
guidelines the EU adopted for the period 1995 to 2004. The EU GSP now covers virtually all sectorsand fully incorporates the new EBA initiative which was adopted in February 2001 and which
grants duty free access to all products from LDCs. The tariff modulation has been simplified with
the establishment of two categories of products /sensitivity. Procedures concerning graduation,
withdrawal, safeguard and the special incentive a rrangements have been harmonised and clarified.
The preferential margins that were eroded as a re sult of progressive trade liberalisation have been
restored by reducing ad valorem duties on sensitive products by a flat rate of 3,5 percentage
points and specific duties by 30%. The specia l incentive arrangements have been made more
attractive by further reducing ad valorem and spec ific duties by an additional 5 percentage points
and 30% respectively. Finally, the GSP’s role as a tool to foster sustainable development has beenreinforced, predictability has been enhanced by re quiring that graduation and exclusion only occur
where the conditions are fulfilled during three consecutive years.
In order to strengthen the political stabilisation and economic development of the region, the EU
introduced on 18 September 2000 (amended on 20 November 2000 and 18 December 2001)
Autonomous Trade Measures (ATMs) in favour of the countries of Western Balkans  to be
applied until 31 December 2005. Based on a form er rather liberal trade regime towards the
Western Balkans, the ATMs abolish the remaining tariff ceilings for practically all industrial
products with the exception of certain textile products and improve market access for agriculturaland fishery products. ATMs are the forerunner to the conclusion of Stabilisation and Association
Agreements (SAA), already concluded with the Former Yugoslav Republic of Macedonia ( FYROM )
and Croatia.  Trade provisions of the EU-FYROM SAA entered into force on 1 June 2001, those of
the EU-Croatia SAA on 1 January 2002 by means of an Interim Agreement. They aim at creating a
free trade area on goods over a transitional pe riod of ten years for FYROM and six years for
Croatia and envisage a progressive and reciprocal lib eralisation of trade in services. They also set
out obligations in areas such as competition and state aid rules and intellectual and industrial
property rights. The three other Western Balkan countries (Bosnia-Herzegovina, Albania and
Federal Republic of Yugoslavia) which benefit from the ATMs are eligible for such Agreements assoon as they meet the relevant political and economic criteria.
Under the EC Treaty, since 1958, the Overseas Countries and Territories  (OCTs) are linked to
the Community under a specific Association, the purpose of which is to promote the economic andPRESS/TPRB/198
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social development of these dependent countries and territories, and to establish close economic
relations between them and the Community as a whole. In November 2001, the “OverseasAssociation Decision” was amended to better contribute to these aims and to promote the effective
integration of the OCTs in the global economy, as well as developing their trade in both goods and
services vis-à-vis regional and world markets. Ther efore, in addition to confirming the free access
to the EU already provided for OCT goods, the decision seeks to step up liberalisation and co-
operation in services and trade-related areas over  a ten-year period ending on 31 December 2011.
Free trade areas
The EU has been linked to all ten Central and Eastern European countries  by Europe
Agreements since 1999. As a result, industrial products are now in free circulation between thesignatories and the EU since the beginning of 2001. Restrictions remain in only a few sectors, such
as agriculture. The Europe Agreements also contain provisions regarding the free movement of
services, payments and capital in respect of trade and investments, free movement of workers,and co-operation in the field of environment, tran sport and customs. Furthermore, they provide for
legislative approximation with EU legislation, particularly in the areas relevant to the internal
market, such as competition and protection to intellectual, industrial and commercial property. TheAssociation Agreements with Cyprus and Malta  cover similar fields. The EU has established a
Customs Union with  Turkey  covering industrial products. Steel and coal products are in free
circulation, whereas concessions have been exchanged by both parties in trade in agriculturalproducts. Further negotiations started in 2000 to liberalise trade in services and public
procurement.
The EU’s bilateral trade relations with Switzerland  are based on the existing agreements: the
free-trade agreement of 1972. Since 1994 the EU and Switzerland have been involved in
negotiations covering a wide range of specific sectors. Seven new agreements in the sectors offree movement of persons, air and land transport, scientific and technological co-operation,
agriculture, conformity assessment and public procurement will enter into force in summer 2002.
Since June 2001, negotiations have been underway in the additional areas of statistics,environment, trade in processed agricultural products and co-operation against fraud, while
negotiations on the taxation of savings are about to start. In April 2002 the European Commission
decided to propose the start of negotiations with Switzerland in four new areas, including theestablishment of an FTA on services.
The EU has concluded bilateral association agreements with 8 Mediterranean countries . These
agreements contain a political component, a trade component, and a co-operation component. The
agreements with Tunisia, Morocco and Jordan have entered into force in March 1998, March 2000
and May 2002 respectively. The trade provisions of the agreements with the Palestinian Authority
(signed in February 1997) are being applied on an  interim basis. Concerning Israel, a new Euro-
Med Association agreement entered into force on 1 June 2000. Agreements with Egypt and Algeria
have been signed and need still to be ratified. The agreement with Lebanon has been initialled andthe parties intend to implement the commercial  part on the basis of an Interim agreement.
Negotiations are ongoing with Syria. The individual agreements foresee the establishment of a free
trade area between each country and the EU for goods and progressive opening of the agriculturalmarkets. In addition, they contain provisions for liberalisation in the area of services, capital
movement and competition.
The negotiations between the EU and the Cooperation Council for the Arab States of the Gulf
(GCC) have also restarted in earnest since the GCC decided to apply a common customs tariff at
the latest in 2005 and the adjustment of the original EU negotiating mandate, which dated from1991.PRESS/TPRB/198
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The EU and  Mexico Free Trade Agreement entered into force on 1 July 2000. The positive trade
performances of both sides demonstrated the potent ialities of this agreement: the EU has inverted
the tendency to lose market share after the Mexico entry into NAFTA and Mexican products have
found new diversified market opportunities in the EU. To favour a better use of the market accessopportunities given by the progressive eliminatio n of import duties, parties are now enhancing
regular cooperation on non-tariff barriers. The FTA covers trade in goods to be fully completed for
the most part by 2003 with limited longer transitional periods for Mexican industrial products until2007 and for agricultural products until 2010. The FTA also covers services, public procurement,
competition and IPR.
Negotiations on an Association Agreement between the EU and Chile , which started at a first
round of negotiations in April 2000, were finalised on 26 April 2002. The agreement will include a
political dialogue, a co-operation pillar and a trade pillar. As for trade, apart from a free trade areain goods, services and government procurement,  the future agreement is to include provisions
regarding investment, customs and trade facilitation, intellectual property rights, competition and
a dispute settlement mechanism. The future agreement is currently under internal adoptionprocedures.
Negotiations on an Interregional Association Agreement with Mercosur started in April 2000. The
future agreement is to include a political dialogue, a co-operation pillar and a trade pillar.
Negotiations are taking place on a bi-regional basis from customs union to customs union. This
reflects one of the key objectives of the EU vis-a-vis Mercosur, notably the strengthening of theMercosur integration process. The second stage of negotiations where launched in July 2001. By
now, most text proposals on the different negotiating items have been exchanged. In addition,
both sides have exchanged their tariff offers. The third stage of negotiations is currently being
prepared.
Following the conclusion with South Africa  of a Trade, Development and Co-operation Agreement
in 1999, agreements on trade in wine and spirits were signed on 28 January 2002. They have been
applied provisionally since then. Negotiations on fisheries have yet to be concluded.
Regional initiatives
The EU’s trade relationship with Asia continues to be an important priority. The Economic Pillar of
the Asia-Europe meeting (ASEM) , established in 1996, links the EU and the 15 EU Member
States with Japan, China, Korea, Thailand, Malaysia, the Philippines, Singapore, Indonesia,
Vietnam, and Brunei in a dialogue process aimed at facilitating trade and improving investment
between all partners. The most recent Trade Facilitation Action Plan for defines a number ofobjectives intended to reduce and eliminate barriers to trade in areas such as standards and
certification, customs, IPR, SPS, and electronic commerce. In trade terms, the Asian ASEM
partners accounted for approximately 26% of worl d exports in 2000 with the EU being their largest
partner, and this region is the EU’s own second most important destination for its imports.
The EU’s relationship with the San José group  and the Andean Community  is based on two
regional Framework Cooperation Agreements that entered into force 1999 and 1998 respectively.Both regions benefit from the EU’s GSP. The Ma drid Summit in May 2002 agreed to new initiatives
to negotiate political and co-operation Agreements between the EU and the two regions
respectively, as well as to intensify bi-regional economic and trade cooperation. The aim is toestablish conditions under which, after the completion of the DDA, bi-regional Free Trade
Agreements between the EU and each of the two regions could become feasible and mutually
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Other bilateral relations
Good trade relations between the EU and the United States  have traditionally constituted an
important element in the overall management of  the trading system. During the period under
review, close EU-US cooperation was certainly instrumental in achieving a successful outcome at
Doha. Bilateral trade relations between the two biggest trade entities in the world have alsoremained robust marked by the launch in 1995 of the New Transatlantic Agenda (NTA) and by an
agreement in 1998 on the Transatlantic Economic Partnership (TEP). Through the establishment of
this framework the parties reaffirmed their shared commitment to strengthen the multilateraltrading system and agreed to aim at breaking down remaining –mostly regulatory — barriers to
trade across the Atlantic while preserving a high level of protection for health, safety, consumers
and the environment. This partnership produced  substantial results in particular on mutual
recognition of certain technical regulations in the area of goods, while negotiations are ongoing in
the area of services (architects, engineers, insurance). Moreover, in 2002, the European
Commission and the US federal authorities developed a set of Guidelines for Regulatory Co-operation and Transparency and agreed to launch a Positive Economic Agenda designed to expand
this co-operative effort to other areas where mutually beneficial arrangements can be found. The
EU and the US also agreed in 1999 on a set of principles to provide for an effective Early WarningSystem designed to prevent a number of disputes from escalating by facilitating their resolution at
an early stage. However, some disputes remain and among these our two major disagreements
concern the US safeguard measures on steel and the lack of progress by the US in complying withWTO rulings on Foreign Sales Corporations (FSC/ETI). Both sides continue to seek ways to
conclude an agreement on trade in wines. Di scussions on an agreement are also ongoing to
replace the current withdrawal of concessions in the ‘hormones’ case by compensation.
Trade relations with Canada  are marked by the EU-Canada Joint Declaration and Action Plan of
December 1996. Furthermore, the EU and Cana da agreed to undertake the EU-Canada Trade
Initiative (ECTI), which is a comprehensive programme covering multilateral and bilateral trade
areas. This framework of co-operation bore early fruit with the conclusion of agreements on Mutual
Recognition of Conformity Assessment, Veterinary equivalence, Customs co-operation and co-operation regarding competition matters. Negotiat ions towards the conclusion of an agreement on
trade in wines and spirits are ongoing. In additi on, Canada and the EU are currently engaged in an
assessment of future measures to enhance their trade and investment relationship. Thisassessment would start with the examination of the results of an on-going business survey on
existing barriers to EU-Canada trade and invest ment. Finally, the Canadian Government and the
European Commission have recently agreed to in itiate a new regulatory co-operation dialogue.
The EU and Japan share a strong commitment to the Multilateral Trading System. The close EU-
Japan co-operation contributed to the adoption of the DDA. The EU has put the emphasis of itsbilateral economic dialogue on facilitating market access for goods and services and improving the
investment climate in Japan through structural reform. A two-way deregulation dialogue was
launched in 1994 in the framework of which the EU and Japan exchange an annual list of proposals
for regulatory reform in their partner’s respective markets. On 1 January 2002 a Mutual
Recognition Agreement (MRA) entered into force which permits acceptance of conformity
assessment conducted in one party according to the regulations of the other in four product areas.
This marks an important step in facilitating market access. On 8 December 2001, the EU-Japan
Summit launched a decade of co-operation by adop ting the “EU-Japan Action Plan”, which includes
the objective of strengthening the EU-Japan economic and trade partnership.
Joint declarations on bilateral relations with Australia (1997) and with New Zealand  (1999)
strengthen the dialogue for further liberalization of trade in goods and services. Mutual RecognitionPRESS/TPRB/198
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Agreements in relation to conformity assessments for goods have also been concluded with each
of these countries, and agreement was reached on a veterinary agreement with New Zealand.A strengthening of trade relations between China  and the EU is happening at both the multilateral
and the bilateral level. The EU, which has been a keen advocate of China’s accession to the WTO,
has a three-fold strategy vis-à-vis China: monitoring the implementation by China of hercommitments made in the context of her WTO accession; supporting this implementation and
China’s economic and trade reforms through partners hip, in particular by offering EU expertise
through a range of co-operation programmes; developing cooperation with China on the DDA andengaging constructively in the new multilateral negotiations. Bilaterally, the EU is addressing trade
issues through its dialogue with China, the main forum for which are the EC-China Joint Committee
and its subordinate bodies.
The current relationship between Korea  and the EU is founded on increasingly shared political
values, strong economic links, and support for South Korea’s “sunshine” policy of engagement withthe North. A notable sign of the progress in EU relations with Korea was the entry into force, on 1
April 2001, of the Framework Agreement for Co -operation and Trade. This Agreement commits
both parties to work towards fostering growth of  two-way trade and investment, while providing a
better framework for economic co-operation.
EU relations with Russia and other countries of the CIS  are based on the Partnership and Co-
operation Agreements (PCAs) concluded over the last decade. Preliminary discussions have taken
place between the EU and Russia to explore the concept of a “Common European Economic
Space”, which the two sides launched at the EU-Russia Summit in May 2001. The focus of thisinitiative is in the regulatory field. Stable relations with Russia and with the other CIS countries will
remain critical for the EU, particularly as the next EU Enlargement will bring a number of Central
and Eastern European Countries into the Union. Trade and economic issues will remain animportant element of the EU’s overall relationship with them. In addition, the EU has continued
and will do so in the future to work for the early accession to the WTO on appropriate terms of
Russia and other CIS countries that are not yet members, as this will promote the closerintegration of these countries into the global economy.
The EU and India  continue to deepen their bilateral trade reflecting the potential of the two sides,
to strengthen their development and economic cooperation and to improve the quality of the
economic and trade links. Both sides continue to engage in a close “High level Economic Dialogue”
and its sub-commissions where regular consultations on trade and others issues are held. At the28 June 2000 Summit both sides agreed to establish a regular high level dialogue on WTO issues.
The EU-India summit in autumn 2001 adopted the “Joint Initiative on enhancing trade and
investment” with key joint recommendations.
Regarding EU- Pakistan  relations, a number of actions have been prepared, including the
signature of a 3
rd Generation Co-operation Agreement in November 2001. A comprehensive
package of trade preferences was agreed by th e Council. Measures include a quota increase of
15% for textiles and clothing products and zero duty imports of clothing products under the GSP
drug regime for the period 2002-2004. In May 2002, the European Commission adopted a fiveyear strategy (2002-2006) for its cooperation with Pakistan. Priorities set in this Country Strategy
Paper include the development of trade.
END