European Communities WT/TPR/S/136 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. The EC's basic trade regime has remained larg ely unchanged since its last TPR. The average 
applied MFN tariff rate has remained fairly stable at 6.5% in 2004, with rates ranging from 0% to 
209.9%; agricultural products still attract the highest rates. Ad valorem  and non- ad valorem  duties 
account for some 90% and 10% (respectively) of the 2004 tariffs. The non- ad valorem  duties are 
specific, compound, mixed or variable.  They appl y to agricultural products, also subject to tariff 
quotas filled at 67% on average.  The EC's wide network of preferential trade agreements has 
confined the application of its MFN tariff to impor ts from nine WTO Members (some 34% of its total 
merchandise imports in 2002).  
2. The value-added tax (VAT) and excise duties apply to imports and locally produced goods 
(and services for the VAT) at the same rates;  these rates are not harmonized among EC member 
States, although minimum rates are set at the Community level. In terms of number of actions, the EC remains a leading user of contingency trade reme dies; in 2002 and 2003, it initiated a total of 28 anti-
dumping, 5 countervailing and 3 safeguard investiga tions.  Under its "Customs 2007 programme", the 
EC is improving customs administration in the Community through, inter alia , the implementation of 
various communication and information exchange systems to support the creation of a paperless 
(electronic) customs environment. 
3. The EC's import licensing system is maintained on grounds of surveillance, quota 
management, and safeguards.  Technical require ments, including standards, and sanitary and 
phytosanitary measures, have been under continued re view by the Commission;  in certain areas, they 
have not been fully harmonized among member St ates.  Export subsidies, based on the difference 
between Community prices and world prices, are pr ovided for several agricultural products;  they 
amounted to € 2.5 billion (some 90% of total OECD export subsidies). 
4. The EC is taking steps to simplify, modernize, and make more flexible its public procurement 
regime; the reforms planned at the time of its previo us TPR are at an advanced stage of being adopted. 
Measures have been taken regarding the enforcemen t of competition rules in areas such as the motor 
industry, insurance services, and state aid for employment. Regulations have been adopted on, inter 
alia, the registration of Community designs, protecti on of geographical indications and designations 
of origin for agricultural products and foodstuff, a nd on measures to combat counterfeiting and piracy.  
5. As part of their accession process, the ten acc eding countries have aligned their trade and 
trade-related legislation (in particular) on the EC acquis . However, transition arrangements exist for  
the countries, either as a group or individually.  
(2) M
EASURES DIRECTLY AFFECTIG IMPORTS  
(i) Customs procedures and valuation 
6. The EC's customs procedures have been established in accordance with the relevant 
provisions of its Treaty and are influenced by th e customs-related arrange ments of international 
organizations, including the WTO, United Nations  Economic Commission for Europe (UNECE), and 
the World Customs Organization (WCO).1 The EC's Customs Code (CC) and its implementing 
                                                      
1 During the period under review, the European  Communities undertook steps to accede, to the 
Protocol of Amendment to the International Convention on the Simplification and Harmonisation of Customs Procedures (Kyoto Convention), with the ex ception of appendix III of the protocol. WT/TPR/S/136 Trade Policy Review 
Page 38 
 
 
regulation provide the basic legislative fr amework for customs procedures in the EC.2 The CC aims to 
bring together the general rules and all customs procedures applicable to goods traded between EC 
member States and third countries, in a single and coherent body of law. 
7. According to the CC, goods brought into the customs territory of the EC can be placed under 
customs procedures or other types of customs-approved treatment.3 Placing goods under customs 
procedures requires a declaration to that effect4, while entry for other types of customs-approved 
treatment or use normally requires only a physical act.5  The customs declaration must, under normal 
procedures, be made in writing and consist of the Single Administrative Document, accompanied by 
pertinent documents (e.g. invoices or other documents  for customs valuation purposes, certificates of 
origin for application of preferential tariffs or derogations from the Common Customs Tariff and any 
other document required by any specific legal re gulations on the importation of the goods, for 
instance, health certificates, certificates of conformity  and authenticity). It can also be made through 
data processing techniques or by means of any other relevant act.6 The customs authorities may grant 
permission to simplify the completion of formalities and procedures.7 The code applies uniformly 
throughout the customs territory of the Community to exports and imports of goods.8 
8. The basic customs valuation regime has remained  unchanged since the last TPR of the EC. Its 
provisions are contained in the Customs C ode, and are based on: the WTO Agreement on 
Implementation of Article VII of GATT 19949; and decisions and instruments of the relevant 
committees of the WTO and the World Customs Organization (WCO).10 During the period under 
review, modifications were made to customs valua tion regulations with rega rd to defective goods and 
the threshold limit for customs va lue declaration. Under EC regulation No. 444/2002, the price agreed 
between buyers and sellers can be modified by cust oms officials to take into account defective goods; 
and the threshold limit for customs valuation info rmation declaration was raised from € 5,000 to 
€ 10,000 in order to take into account monetary ch anges, as well as to simplify import formalities.  
                                                      
2 The Customs Code is available online at: http://europa.eu.int/eur-
lex/en/consleg/pdf/1992/en_1992R2913_do_001.pdf; the implementing regulation is contained in Regulation 
(EEC) No. 2454/93, 2 July 1993.  
3 Customs procedures are required for the release of goods for free circulation; transit; customs 
warehousing; inward processing; processing under customs control; temporary admission; outward processing; 
and exportation. The other customs-approved treatments or uses are: entry of goods into a free zone or free warehouse; their re-exportation from the customs territory of the Community; their destruction; and their 
abandonment to the Exchequer. 
4 CC Art 59(1). 
5 CC Art 169(1); for a detailed analysis of EC Customs Legislation see Lux (2002). 
6 CC Art 61. 
7 CC Art 76. The CC distinguishes three types of simplified procedure: a declaration that omits some of 
the required particulars; a simplifi ed commercial or administrative docu ment to be lodged in place of the 
declaration; and a recording of entry,  thereby removing the requirement for th e declarant to pres ent the goods to 
Customs.  
8 Defined as comprising the European territories of th e member States (including the territorial waters, 
the inland maritime waters and airs pace) with certain excep tions: the Faroe Islands and Greenland from the 
territory of Denmark; the Island of Heligoland and the territory of Buesingen from the territory of Germany; the 
municipalities of Livigno and Campione d'Italia and certain waters of Lake Lugano from the territory of Italy; 
Ceuta and Melilla from the territory of Spain.  Certain Eur opean territories outside of the territorial frontiers of 
the member States are also included in the Community customs territory. The territory of Germany includes the 
Austrian territories of Jungholz and Mittelberg, the terri tory of France includes the Principality of Monaco, and 
the territory of Italy includes the Republic of San Ma rino; a customs union agreement between the EC and San 
Marino entered into fo rce on 1 December 1992. 
9 Customs Valuation Agreement. 
10 The Customs Valuation Committee of the WTO an d the Technical Committ ee on Customs Valuation 
of the WCO. European Communities WT/TPR/S/136 
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9. In general, customs declaration is not require d for imported goods entering certain free zones  
(of control type 1) and free warehouses. Appeals ag ainst customs decisions are to be lodged initially 
with national customs authorities and can subsequently  be brought before a national court, and then 
the European Court of Justice, under Article 230 of the EC Treaty.  
10. The uniform implementation of common customs procedures by EC member States has been 
a challenge due to variations in the availability of electronic access to customs (for data entry for 
electronic customs declaration), limited interfaces for interoperability between systems, and different 
interpretation given to EC customs legisl ation by national customs administrations11; the situation is 
likely to be accentuated with the enlargement of the Union.12 The challenge is being addressed within 
the context of the EC's "Customs 2007" progra mme, adopted on 11 February 2003 and to be 
implemented until 31 December 2007.13 The programme aims to ensure that member States' customs 
administrations interact and perform their duties as efficiently as a single administration; improve trade facilitation; protect the EC's interest agai nst fraud and criminal activities as well as health and 
environmental concerns; and take steps to prepare and support the enlargement and integration of new 
member States. Actions to be implemented incl ude establishment of communication and information 
exchange systems, benchmarking
14, exchange of officials, seminars and other training activities, 
monitoring, and technical assistance.  
11. Various communication and information exchange  systems are being put in place to support 
the creation of a paperless (electronic) customs environment. Member States have been implementing a new computerized customs transit system (NCTS) designed to speed up transit procedures and 
monitor the transit system to tackle fraud. As of 30 June 2003, the EC-15 member States were 
reported to have met the deadline for its implem entation. Other Community-wide electronic customs-
related systems in place include the common communications network/common systems interface 
(CCN/CSI)
15; the data dissemination system (DDS)16; the information system on the integrated tariff 
of the Community to support automatic customs cl earance (TARIC); the European binding tariff 
information system (EBTI)17; the tariff quota surveillance ma nagement systems (QUOTA); the 
inward processing relief system; and the suspensi ons information system. All these systems are 
expected to help improve cons istency and uniformity in the application of the EC's customs 
procedures, improve controls, and reduce complianc e costs and the time required to obtain customs 
clearance . 
                                                      
11 Information available online at: http://www.eu committee.be/Pops/2003archive/ecustoms4252003 
.pdf. 
 12 COM(2003) 452 final, 24 July 2003, availabl e online at: http://www.hmc e.gov.uk/about/reports/eu-
electronic-customs.pdf.  
13 "Customs 2007" programme is an extension of the previously implemented "Customs 2002" 
programme. Further information is available online at: http://europa.eu.int/co mm/taxation_customs/customs 
/c2007/customs_2007_0_en.htm. 
14 Comparing working methods and agreed common indicators of performance in order to learn from 
good practices. 
15 The CCN/CSI is to improve control standards and provide the basis for e-customs in an enlarged 
community. The system also permits the rapid transmission of control and crisis information to customs posts at 
the community's external frontiers. 
16 The Community's online data base on the integrated tariff (TARIC) and tariff quota are estimated to 
have attracted 2.5 million consultations per month during their first six months of operation. 
17 Binding Tariff Information (BTI) is a decision made by the customs administration of a member 
State on the tariff classifica tion of a specific product. It enables economic operators to classify their goods in 
accordance with the EC's tariff and sta tistical nomenclature. A collection of a ll valid BTIs is available online at: 
http://europa.eu.int/comm/taxation_customs/dds/en/ebticau.htm. WT/TPR/S/136 Trade Policy Review 
Page 40 
 
 
12. Legislative reforms are also taking place to improve trade facilitation at EC borders. On 
18 December 2003, the Commission adopted a regulation allowing online publication of non-confidential extracts from its binding tariff informa tion database; amending pr ovisions governing the 
use of the Single Administrative Document to take into account technological progress, in particular 
computer-based clearance methods; clarifying the competent author ities to whom applications for 
single authorizations are to be submitted; a nd extending the surveillance system to exports.
18  
Proposed amendments to the CC and its implementi ng regulation are scheduled  by the Commission 
in 2004.  The amendments are to require that el ectronic declarations and messages are the rule and 
paper-based declarations the exception. Other pro posals aiming to simplify customs procedures 
include the reduction of the number of customs treat ments and the improvement of the application of 
the Single European Authorization. Furthermore, th e EC envisages a greater role for national customs 
administrations in the application of security , public health, and environmental issues. 
13. In the framework of the EC enlargement in 2004, the Act of Accession contains transitional 
customs measures. Under this Act authorizations granted by new member States, before the date of accession, for the use of inward processing, pro cessing under customs control or outward processing 
procedure may run until the end of th eir validity or one year after the date of accession, whichever is 
earlier. Other provisions relate to post-clearance  payments, repayments, and remission of duty.
19  
(ii) Common Customs MFN Tariff 
14. The EC's Common Customs Tariff schedule is c ontained in a regulation published annually in 
the Official Journal of the European Union. The nomenclatur e in the tariff schedule, to which the 
MFN duty rates and statistical units are associated , are known as the Combined Nomenclature. As a 
party to the International Convention on the Ha rmonized Commodity Description and Coding System, 
the EC has based its Combined Nomenclature on the Harmonized System (HS): the first six digits are 
identical to the relevant HS sub-headings.20 The Combined Nomenclature introduces sub-divisions for 
Community purposes at the eight-digit level.21 A further subdivision (at the 10-digit level), referred to 
as the TARIC Nomenclature, identifies the various trade policy measures applying to specific imports 
and, in some cases, exports.22 In some cases, the TARIC nomenclature establishes four additional 
codes, for agricultural components, anti-dumping duti es, dual-use items, and export subsidies. All EC 
member States have to follow this nomenclature, but are allowed to introduce sub-divisions or 
additional codes for national purposes (e.g. VAT or excise duties). In accordance with the provisions 
of the Community Customs Code and its impl ementing provisions, member States' customs 
administrations are obliged to issue binding inform ation on classification (binding tariff classification) 
upon written request by importers.  
15. The EC has bound all its tariff lines in Schedul e CXL (Table III.1). The applied and bound 
tariff rates are identical for almost all (99.6%) lines.   The EC applies several types of tariff: mainly ad 
valorem ; specific; compound (a combination of both ad valorem  and specific duties); mixed 
                                                      
18 Commission Regulation (EC) No 2286/ 2003, OJ L343/1, 18 December 2003. 
19 These provisions require that customs debt incurred in the new member States before the date of 
accession are recovered in accordance with the regulations  applying before their acce ssion. Further information 
is available online at:  http://europa.eu.int/eur-l ex/pri/en/oj/dat/2003/l_236/l_23620030923en07970802.pdf 
20 The HS is implemented by the EC through Council Regulation (EEC) 2658/87, as amended. The 
European Court of Justice has consistently held that explanatory notes and the cla ssification opinions of the 
WCO are an authoritative source for the interpretation of the EC's customs nomenclatur e in the absence of any 
relevant Community provisions.  
21 If a heading or subheading of the HS is not further subdivided for Community purposes, the seventh 
and eight digits are '00'.  
22 TARIC is derived from French: Tarif Intégré des Communautés Européennes. European Communities WT/TPR/S/136 
 Page 41 
 
 
(alternative duties with a minimum or a maximum) ; and variable duties, which vary with value 
thresholds (i.e. increasing functions of ranges of c.i.f. prices of goods). Furthermore, for certain 
products, particularly agricultural goods, the custom s duties vary with the season. Of the 10,174 lines 
(Combined Nomenclature) of the 2004 tariff, ad valorem  and non- ad valorem  duties account for 
90.1% (9,167) and 9.9% (1,007) r espectively (Table III.2).  Certain agricultural goods are subject to 
tariff quotas (Chapter IV(2)(ii)(a)).  Ad valorem  duties apply to the c.i.f. customs value. 
16. For purpose of the tariff analysis, ad valorem  equivalents (AVEs) of non- ad valorem  duties 
(46% of agricultural tariff lines, and 39 non-agricultur al tariff lines) were used when available. Data 
on AVEs were supplied by the Commission and refe r to 2002. In the absence of AVEs for certain 
non-ad valorem  duties, such as compound or mixed duties, the ad valorem  components were used for 
the analysis. The analysis covers some 87.2% of the non- ad valorem  duties, i.e. some 129 tariff lines 
were excluded from the analysis. The analysis may, to a certain extent, be biased. For instance, the 
elimination of specific components of compound duties as well as the use of 2002 AVEs for the present analysis, is likely to introduce a downward bias in the estimate;  world prices of certain 
agricultural products having fallen and the euro (€ ) having recently appreciated. Furthermore, the use 
of variable duties (entry price duties) also adds its part.
23 
17. Subject to the preceding observations, the averag e applied MFN tariff rate remained fairly 
stable over the period under review, at 6. 5% in 2004 and 6.6% in 2002 (Table III.1).24  Tariff rates 
range from zero to 209.9% (Table AIII.1). The coefficient of variation of 1.8 depicts high dispersion of tariff rates. Some 27% of tariff lines carry the zero rate and 82% bear rates below 10%; the modal 
range (nearly 32% of tariff lines) was between 0% (e xcluded) and 5% (include d). The modal rate is 
zero (Chart III.1).  
18. In aggregate, the tariff shows mixed escalation, negative from the first stage of processing 
(average tariff of 8.4%) to semi -processed goods (average rate of 4.8%), and then positive to fully-
processed products (tariffs averaging 7.0%).  Further disaggregation of the tariff at ISIC (Revision 2) 
two-digit level depicts mixed escalation in, inter alia , wood, paper, chemical, and basic metal 
industries; and positive in food (including beverages and tobacco), textiles (including wearing apparel 
and leather), non-metallic products  (excluding petroleum and coal),  and fabricated metal products 
(including machinery and equipment) industries (Chart III.2). 
19. Agricultural products (WTO definition) are the most tariff-protected goods, with an average 
tariff rate of 16.5%  (more than twice the overall average); tari ffs on non-agricultural products average 
4.1%.  Using ISIC (Revision 2) definition, agricu lture remains the most protected sector, with an 
average tariff of 10%, followed by manufactur ing (6.4%), and mining and quarrying (0.2%) 
(Table III.3); 4% of tariff lines in agriculture  carry rates higher than 50% (Chart III.3). 
                                                     
 
23 See WTO (2000a), and WTO (2003b), for further details on the implications of the imposition of 
non-ad valorem  duties. 
24 The analysis is based on the ad valorem  duties and the ad valorem  equivalents where information on 
the unit values of imports is available for their computation.  Therefore, for this analysis, 129 tariff lines were not 
taken into account.  WT/TPR/S/136 Trade Policy Review 
Page 42 
 
 
Table III.1 
Structure of the EC MFN tariff, 2002 and 2004  
(Per cent) 
 2002 2004 2004  
Bound rates 
1.   Bound tariff lines (% of all tariff lines) 100.0 100.0 100.0 
2.   Duty free tariff lines (% of all tariff lines) 20.8 26.9 26.8 
3.   Non- ad valorem tariffs (% of all tariff lines) 9.7 9.9 9.9 
4.   Tariff quotas (% of all tariff lines) 3.3 3.3 3.3 
5.   Non- ad valorem tariffs with no AVEs (% of all tariff lines) 2.7 2.7 2.7 
6.   Simple average tariff rate 6.6 6.5 6.5 
 Agricultural products (HS01-24) 16.7 16.6 16.7 
 Non-agricutural products (HS25-97) 3.9 3.7 3.7 
 Agricultural products (WTO definition)a 16.6 16.5 16.6 
 Non-agricultural products (WTO definition)b 4.3 4.1 4.1 
7   Domestic tariff "spikes" (% of all tariff lines)c 5.7 5.8 5.8 
8.   International tariff "spikes" (% of all tariff lines)d 8.6 8.6 8.6 
9.   Overall standard deviati on of applied rates 11.4 11.5 11.5 
10.   Nuisance applied rates (% of all tariff lines)e 12.9 6.8 6.8 
.. Not available. 
a WTO Agreement on Agriculture. 
b Excludes petroleum. 
c Domestic tariff spikes are defined as those exceeding three times the overall simple average applied rate (Indicator 6). 
d International tariff peaks are defined as those exceeding 15%. 
e Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: Indicator 1 is calculated taking into account all tariff lin es (i.e. in-quota and out-of-quota lines) while others exclud e in-quota 
 lines. 
Source: WTO Secretariat calculations , based on data provided by the European Commission. 
Table III.2 
Structure of the EC MFN tariff, by WTO sectors, 2004 
 All products: HS 01-97 WTO Ag riculture WTO non-agriculture a 
 No. of lines % No. of lines % No. of lines % 
Total 10,174 100.0 2,091 100.0 8,083 100.0 
Ad valorem 9,167 90.1 1,123 53.7 8,044 99.5 
   Duty free 2,734 26.9 393 18.8 2,341 29.0 
   Dutable 6,433 63.2 730 34.9 5,703 70.6 
Non- ad valorem  1,007 9.9 968 46.3 39 0.5 
   Specific 642 6.3 637 30.5 5 0.1 
   Mixed 76 0.7 43 2.1 33 0.4 
   Compound 199 2.0 199 9.5 0 0.0 
   Other 90 0.9 89 4.3 1 0.0 
a Includes petroleum. 
Source:  WTO Secretariat estimates, based on date  provided by the European Commission. 
 European Communities WT/TPR/S/136 
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(1.4)(2.3) (1.8)(27.2)(31.9)
(23.6)
(8.6)
(3.2)
05001,0001,5002,0002,5003,0003,500
Duty free >0-5 >5-10 >10-15 >15-20 >20-25 >25-50 >500.010.020.030.040.050.060.070.080.090.0100.0
Figures in parentheses are the shares of total lines.
WTO Secretariat estimates, based on data provided by EC authorities.Chart III.1
Applied MFN tariff distribution, 2004
Number of tariff lines
Note:
Sourc e:Per cent
Number of lines (% of total)
Cumulative per cent
 
 
0.02.04.06.08.010.012.014.016.018.020.0Chart III.2
Tariff escalation by ISIC 2-digit, 2004
Per cent
Source: WTO Secretariat estimates, based on  data provided by EC authorities.All products
Food, beverages
Textiles,
apparel
Wood products
Paper, printing
Chemicals ,
plastics
Non-metalli c
minera l
products
Basic meta l
products
Fabricated meta l
products
Other manufac -
turingNOT APPLICABLEAgricuture
MiningRaw materials Semi-processed Fully processed
 
 WT/TPR/S/136 Trade Policy Review 
Page 44 
 
 
Table III.3 
Summary analysis of the EC MFN tariff, 2004  
  Applied 2004 rates 2002 
Analysis No. of linesa No. of lines 
used Simple avg. 
tariff (%) Range (%) 
Std-dev (%) CV  Imports  
 (US$ million)
Total 10,174 10,145 6.5 0-209.9 11.5 1.8 813,399.9 
By WTO definitionb        
Agriculture 2,091 1,962 16.5 0-209.9 21.9 1.3 55,351.8 
Live animals and products thereof 332 300 26.1 0-192.2 29.4 1.1 4,475.3 
Dairy products 160 108 41.7 0.2-209.9 37.7 0.9 824.4 
Coffee and  tea, cocoa, sugar, etc. 303 279 16.6 0-114.4 15.6 0.9 9,496.3 
Cut flowers and plants 65 65 4.1 0-19.2 4.4 1.1 1,560.2 
Fruit and vegetables 452 452 15.3 0-150.1 15.8 1.0 12,388.1 
Grains 55 55 39.6 0-101.1 27.7 0.7 2,745.7 
Oil seeds, fats, oils and their products 164 160 6.7 0-75.8 12.3 1.8 11,196.7 
Beverages and spirits 274 264 12.8 0-71.3 14.6 1.1 4,697.8 
Tobacco 30 30 18.3 2.2-74.9 21.2 1.2 1,232.9 
Other agricultural products 256 249 4.7 0-76 9.4 2.0 6,734.5 
Non-agriculture (excl. petroleum) 8,042 8,042 4.1 0-26 4.2 1.0 661,895.9 
Fish and fishery products 381 381 12.6 0-26 6.4 0.5 11,983.6 
Mineral products, precious stones and 
precious metals 518 518 2.4 0-12 2.8 1.2 59,967.2 
Metals 1,043 1,043 1.8 0-10 2.3 1.3 52,589.3 
Chemicals and photographic supplies 1,397 1,397 4.4 0-23.3 2.7 0.6 74,438.8 
Leather, rubber, footwear and travel 
goods 291 291 4.7 0-17 4.6 1.0 21,817.5 
Wood, pulp, paper and furniture 449 449 1.2 0-10 2.3 1.9 38,016.3 
Textiles and clothing 1,329 1, 329 8 0-12 3.2 0.4 67,759.9 
Transport equipment 273 273 4.7 0-22 5.0 1.1 59,416.9 
Non-electric machinery 1,033 1,033 1.7 0-9.7 1.4 0.8 112,710.1 
Electric machinery 605 605 2.8 0-14 3.4 1.2 97,760.9 
Non-agricultural articles n.e.s. 723 723 2.4 0-14 2.0 0.8 65,435.5 
By ISIC sectorc        
Agriculture and fisheries 607 603 10.0 0-150.1 16.9 1.7 31,473.2 
Mining 132 132 0.2 0-8 1.0 5.0 112,339.8 
Manufacturing 9,434 9,319 6.4 0-209.9 11.1 1.7 667,428.7 
By stage of processing        
Raw materials 1,224 1,219 8.4 0-150.1 15.3 1.8 170,238.5 
Semi-processed products 2,956 2,935 4.8 0-134.5 6.4 1.3 112,196.7 
Fully-processed products 5,994 5,891 7.0 0-209.9 12.4 1.8 530,964.7 
a Total number of lines is listed. Tariff rates are based on a lower frequency (number of lines) since lines with no ad valorem  
equivalents are  excluded.  
b 41 tariff lines are excluded from both WTO agriculture and non-agriculture definitions (essentially petroleum products).  
c International Standard Industrial Classification (Rev.2).   Electricity, gas and water are excluded (1 tariff line). 
Note: CV = coefficient of variation. 
Source : WTO Secretariat estimates, based on data provided by European Commission. 
 European Communities WT/TPR/S/136 
 Page 45 
 
 
26.9
25.5
91.7
33.354.8
56.5
8.3
37.211.6
11.4
17.62.8
2.6
5.31.3
1.3
2.01.4
1.3
4.0
01,0002,0003,0004,0005,0006,000
All products
Manufacturing
Mining
Agriculture
Duty free 0- 10% 10- 20% 20- 30% 30- 50% >50%Chart III.3
MFN tariff distribution by s ector (ISIC1 definitions)a, 2004
Number of lines
a
Source:Labels are share by sector. Due to non- ad valorem  duties, they may not sum to 100%.
WTO Secretariat calculations, based on data provided by EC authorities. 
 
20. The zero rate applies to, inter alia , bamboos, cotton liners; ores, slag and ash; pulp; paper and 
paper board; printed books, newspapers; tin; st eel; and products covered by the Information 
Technology Agreement. Products attracting relativ ely high duties include: whey and products of 
natural milk constituents (209.9%); edible offal of bovine animals, swine, sheep, goats, horses, asses, 
mules or hinnies (192.2%); meat of sheep or goats, fresh, chilled or frozen (172.9%); garlic (150.1%); 
meat of bovine animals, frozen (149.9%); mushr ooms (134.5%); meat of swine, fresh, chilled or 
frozen (120.8%); bananas, including plantains (118. 1%); manioc or cassava (117.9%); beet sugar 
(114.4%); live bovine animals (107.8%); milk and cream (103.3%); semi or wholly-milled rice 
(101.1%).  
(iii) Other duties and taxes 
(a) Value-added tax (VAT) 
21. VAT applies to imports and locally produced goods at the same rates.25 While the tax base is 
fully harmonized, the rates applied by member States are not. The EC legislation requires a standard VAT rate not lower than 15%, with one or two re duced rates not lower than 5% (Table III.4). A 
"definite" list of exemptions without right of deduc tion on certain goods and services is foreseen. The 
current strategy of the Commission is to simplif y and modernize the VAT system, work towards a 
more uniform application of the present arrangements, and facilitate closer administrative 
                                                     
 
25 Exporters and importers are required to record their own VAT information and compile detailed 
trading records, filing them regularly with the national authorities. The administrative costs under this system 
could be considerable for cross-border trading. WT/TPR/S/136 Trade Policy Review 
Page 46 
 
 
cooperation. In the longer term, however, a definite origin-based system (based on the country of sale) 
remains a Community goal; this would require great er convergence in the application of VAT rates.26  
Table III.4 
VAT rates applied in EC memb er States (as at 1 May 2003) 
Member State Super reduced rate Reduced  rate Standard rate Parking rate 
Belgium - 6 21 12 
Denmark - - 25 - 
Germany - 7 16 - 
Greece 4 8 18 - 
Spain 4 7 16 - 
France 2.1 5.5 19.6 - 
Ireland 4.3 13.5 21 13.5 
Italy 3 10 20 - 
Luxembourg - 6 15 12 
Netherlands - 6 19 12 
Austria - 10 20 - 
Portugal - 5/12 19 - 
Finland - 8/17 22 - 
Sweden - 6/12 25 - 
United Kingdom - 5 17.5 - 
Source : Directorate-General Taxation and Customs Union, DOC/2908/2003. 
 
22. A new online service to validate VAT identifica tion numbers was launched on 14 June 2002. 
The service gives businesses partial access to the VA T Information Exchange System (VIES), thereby 
reducing the need to contact tax officials for such in formation. This system is expected to reduce both 
the time and costs for EC businesses in meeting their tax obligations. 27 
23. On 7 May 2002, the Council adopted a directiv e related to electronic commerce, and radio 
and television broadcasting.28 Under these new rules, VAT is co llected at the place the service is 
consumed (recipients destination). Hence, EC radio and television broadcasting services, and 
electronically supplied service providers are no l onger obliged to collect VAT when selling on 
markets outside the EC (exports). On the other hand,  these services, when provided by third-country 
suppliers to recipients in the Community (imports ), would be subject to VAT. These rules are meant 
to address previous inadequacies in the taxatio n of these products and certain distortions in 
competition (in particular, disadvantages faced by EC companies).29  Additional measures have been 
introduced to facilitate registration for e-commer ce operators for VAT purposes and for distributing 
the VAT receipts to the member States where servi ces are used. All these measures came into effect 
on 1 July 2003. 
24. Similar initiatives have taken place for gas and electricity supplies. On 7 October 2003, a 
directive was adopted changing the place of taxation of natural gas in pipelines and of electricity, 
                                                      
26 COM (2001) 260 final, "Tax policy in the Eu ropean Union - Priorities for the years ahead". 
27 See EC online information available at :http://europa.eu.int/comm/taxation_customs/databases 
/vies_en.htm. 
28 Council Directive 2002/38/EC, 7 May 2002; and Council Regulation (EC) 792/2002, 7 May 2002. 
29 Under the previous regime, EC suppliers had to charge VAT when supplying digital products, even 
in countries outside the EC.  European Communities WT/TPR/S/136 
 Page 47 
 
 
from the place of supply to the place of consumption.30 This was deemed necessary due to differences 
in the determination of the place of supply among member States, resulting in double taxation or non-
taxation and distortion of competition. The Directive will take effect on 1 January 2005. Furthermore, 
a proposal has been presented seeking to change the place of supply of services, for VAT purposes 
(where the customer is a trader), from the place wh ere the supplier is established or has a fixed place 
of business to the place where the customer is located.31  
25. The Commission has presented a proposal that ai ms to simplify the rules on reduced rates of 
VAT in order to ensure uniform application.  The purpose of the proposal is to allow member States 
equal opportunity to apply reduced rates in certain fields (e.g. restaurants, housing, and the supply of 
gas and electricity) and to rationalize the nu merous derogations cu rrently being applied.32 
Furthermore, a proposal has been adopted allowing nine member States to continue applying, for 
another two years, the experimental reduced ra tes applied to selected labour-intensive services.33 A 
preliminary evaluation of this pilot project showed that it had not led to any substantial employment 
creation, reduction of the black economy, or lower prices.34  
26. All acceding countries will take over and implement the EC's acquis in taxation upon 
accession, subject to some transitional arrangements, mainly aimed at postponing the adjustment of 
VAT levels to the requirements of the acquis  in socially sensitive sectors. Under these arrangements, 
reduced VAT rates may continue to be applied (a fter accession) by some of the acceding countries in 
restaurant, construction, and certain heating ser vices; and exemptions may be maintained on 
foodstuffs, books, and pharmaceutical  products. All acceding countries w ill also be allowed to exempt 
international passenger transport from VAT, and to  maintain a higher VAT and registration and 
exemption turnover threshold. According to the Commission, most acceding countries should have no 
particular difficulty in applying the acquis in taxation. 
(b) Excise taxes 
27. Excise duties are applied at the same rates on imports and domestically produced goods. The 
rates are not harmonized among EC member States (T able III.5).  Nevertheless, common definitions,  
units of measurement, and minimum rates are requi red on alcoholic beverages, manufactured tobacco 
products, and mineral oils.  
28. On 1 July 2002, a new directive revising the rates and structure of excise duties on 
manufactured tobacco entered into force. The Di rective introduced a second requirement for the 
minimum excise duty to be applied to cigarettes on  the most popular price category, in order to 
narrow differences between tax levels in member States. To address health concerns, the changes also 
align more closely excise duties on fine-cut tobacco with the level on cigarettes. Similar efforts to 
harmonize taxation of commercial diesel fuel are under way. 
                                                      
30 Council Directive 2003/92/EC, 7 October 2003. 
31 Some service subsectors related to immovable pr operty and transport services will be exempted.  
32 Commission Press Release, IP/03/1024, 16 July 2003. 
33 COM(2003) 825 final, 16 December 2003; and MEMO/04/31, 11 February 2004.  
34 This initiative was first adopted in 1999 for an experimental three-year period (to test its impact on 
job creation, and in combating the black economy); it allowed the application of reduced rates to specified 
labour-intensive subsectors, such as bicycle repair, shoes and leather goods repair, window cleaning, and hairdressing. WT/TPR/S/136 Trade Policy Review 
Page 48 
 
 
Table III.5 
Excise duties, end 2003a 
(Euros) 
 Beer 
(/hl/°alc. or 
/hl/°Plato) Wine (/hl) Intermediate 
products (/hl) Ethyl alcohol (/hl) Petrol and gas oil 
(1000 lit) Liquid petroleum 
gas (LPG) and 
methane (/1000 
kg) Heavy fuel oil 
and kerosene 
(/1000 kg) Cigarettes 
(/1,000 
pieces) 
 min max min max min max min max min max min max min max  
B 1.5 1.7 14.9 161.1 74.4 161.1 1660.9 1660.9 5.0 551.8 0.0 37.2 0.0 551.8 18.7 
DK 0.0 68.7 60.6 189.2 60.6 142.0 2019.6 2019.6 281.7 626.2 356.8 468.5 281.3 405.8 65.9 
D 0.4 0.8 0.0 136.0 102.0 153.0 730.0 1303.0 61.4 721.0 60.6 161.0 25.0 654.5 61.7 
EL 0.6 1.1 0.0 0.0 0.0 45.0 454.0 908.0 21.0 337.0 0.3 100.0 19.0 245.0 4.5 
E 0.0 0.8 0.0 0.0 29.7 49.5 647.5 739.0 84.7 428.8 0.0 125.0 14.4 315.8 3.9 
F 1.3 2.6 3.4 8.4 214.0 214.0 835.0 1450.0 54.9 636.7 39.4 100.2 16.8 571.0 7.7 
IR 19.9 19.9 91.0 546.0 273.0 396.1 3925.0 3925.0 47.4 553.0 35.9 104.7 13.45 325.2 133.4 
I 1.4 1.4 0.0 0.0 49.6 49.6 645.4 645.4 121.0 541.8 16.0 284.8 63.8 337.5 3.9 
L 0.4 0.8 0.0 0.0 47.1 66.9 1041.2 1041.2 5.0 424.1 0.0 101.6 0.0 295.0 11.9 
NL 5.5 31.4 29.5 201.2 72.9 201.2 1775.0 1775.0 46.6 703.7 0.0 78.9 15.5 337.3 55.5 
A 1.3 2.1 0.0 144.0 73.0 73.0 540.0 1000.0 69.0 479.0 43.0 261.0 36.0 282.0 21.4 
P 3.0 21.3 0.0 0.0 51.3 51.3 440.3 880.5 87.9 548.7 7.5 100.0 13.0 264.3 40.7 
FI 1.7 28.6 4.5 235.5 428.9 706.4 168.0 5046.0 70.6 676.2 0.0 0.0 59.6 319.4 15.1 
S 16.1 16.1 0.0 242.4 279.5 464.1 5505.2 5505.2 317.7 592.9 145.2 291.9 317.7 409.5 22.0 
UK 0.0 19.5 77.9 351.4 252.8 337.1 3116.1 3116.1 67.2 895.3 0.0 143.4 0.0 848.7 154.3 
a B: Belgium;  DK: Denmark;  D: Germany;  EL: Greece;  E: Spain;  F: France;  IR: Ireland;  I: Italy;  L: Luxembourg; 
 NL:  the Netherlands;  A: Austria;  P: Portuga l;  FI: Finland;  S: Sweden; UK: the United Kingdom. 
Source : DG General Taxation and Customs Union, "Excise Duty Tables", December 2003. 
29. In June 2003, a decision was taken to com puterize the system under which goods under 
excise duty suspension arrangements are moved between traders in the Community.35 This was 
considered necessary in the light of the cumbersome paper-based system and the increasing levels of 
tax evasion, particularly involving alcohol and t obacco. Apart from stemming fraud in the payment of 
excise duties, the new system is expected to simp lify procedures, reduce costs, and enable faster 
release of goods. It is estimated to take six years to be fully implemented.  
30. On 27 October 2003, Council approved a proposed directive on a Community framework for 
the taxation of energy products.36 The proposal seeks to reduce distortions in competition between 
member States as a result of differences in excise duty rates; reduce differences in excise duty rates on 
energy products between member States; increase th e incentive to use energy more efficiently; and 
allow member States to offer tax incentives to comp anies in return for specific undertakings to reduce 
emissions.  
31. All acceding countries, with the exception of Malta and Cyprus , have transitional 
arrangements to postpone compliance with EC le gislation on the level of excise duty rates on 
cigarettes until after accession. The expiry date of the transitional provision ranges from 2007 to 2009. 
Furthermore, Poland has a one-year transitional a rrangement to apply a reduced excise duty rate on 
certain ecological fuels; this is also the case of Cyprus for the exemption of excise duties on mineral 
oils for specific uses. A derogation allowing the ap plication of reduced excise duty rates on spirits 
distilled from own fruits, strictly for personal cons umption and under certain limitations, is also 
granted to the Czech Republic, Hungary, and the Slovak Republic.  
                                                      
35 Commission Press Release, IP/03/788, 3 June 2003. 
36 Directive 2003/96/EC, 27 October 2003.  European Communities WT/TPR/S/136 
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(iv) Duty and tax exemptions and concessions 
32. The customs code of the EC provides for customs duty relief on account of special 
circumstances37; on re-imported Community goods; on products fished from the sea by member State 
vessels; and on goods re-exported after inward pro cessing under the drawback procedure, or because 
they are defective, or do not comply with the terms of the contract.38 Furthermore, customs duties are 
suspended under various customs approved treat ments, including: external transit; customs 
warehousing; inward processing; temporary impor tation; and free zones and free warehouses.  
33. The EC has established regulations providing for VAT exemption (or refunds) for taxable 
persons under various situations. Under the 13th VAT  Directive, member States are, in general, 
required to refund VAT paid by a non-EC-taxab le person on goods and services supplied in the 
territory of the Community. Such refunds may be  conditional on third countries agreeing to take 
comparable measures. Another directive also  provides for the exemption from VAT on final 
importation of certain goods, includi ng personal property belonging to  natural persons transferring 
their residence from a third country to a member Stat e of the EU, in case of marriage and inheritance, 
with the exclusion of certain goods (e.g. alcoho lic and tobacco products, and commercial means of 
transport). Under specific conditions, VAT exempti ons are also granted upon final importation of 
school outfits, scholastic materials, and othe r scholastic household effects; capital goods and 
equipment imported on the transfer of activities; goods of negligible value; certain agricultural 
products or products intended for agricultural use;  therapeutic substances, medicines, laboratory 
animals, and biological or chemical substances;  goods for charitable or philanthropic organizations; 
goods imported in the context of international re lations; goods for the promotion of trade; goods 
imported for examination, analysis or test purpo ses; various documents intended for official bodies; 
and fuel and lubricants present in land mo tor vehicles and in special containers.  
34. Further arrangements exist for exemption fro m VAT payment by taxable persons established 
in a country of the EC, but who, over a limited period of time39, have not had in that member State: 
the seat of their economic activity; fixed establishment from which business transactions were 
effected; or a normal place of residence.40 The exemptions also apply if the taxable person has not 
supplied any goods or services in that member St ate, with the exception of transport services and 
related ancillary services, and other services for which the tax is payable by the person to whom they 
are supplied.  
35. The EC is a signatory to the Convention on Temporary Admission, hence goods imported 
under temporary admission are exempted from VAT.41  
                                                      
37 Regulation No. 918/83 lists the goods that qualify for duty relief on account of special circumstances. 
These include personal property imported by private individuals; goods of negligible value and goods imported by private individuals; articles imported for the purpose of carrying out activities in the public interest; capital 
goods and other equipment belonging to a firm definitely ending its activities in a third country and moving to 
the Community; selected products obtained by Community  farmers on properties located in third countries; 
consignments sent to organizations protecting copyright or industrial and commercial patent rights; tourist 
information material, photographs, and stamps; selected goods needed to carry out transport operations; and funerary materials. 
38 CC Articles 124 to 128, and Articles 184 to 188. 
39 A period of not less than three months or not more than one calendar year, or during a period less 
than three months where that period repr esents the remainder of a calendar year. 
40 Eighth Council Directive 79/1072/EEC, 6 December 1979. 
41 Council Decision 93/329/EEC, 15 March 1993. Under the temporary admission customs procedure, 
goods may be imported into the territory of a member State for a specific purpose (with total or partial relief WT/TPR/S/136 Trade Policy Review 
Page 50 
 
 
36. Small consignments of goods of a non-comme rcial nature from third countries are also 
exempted from excise duties and VAT, under certain conditions and limits.42 Tobacco products and 
alcoholic beverages are subject to quantitative restri ctions. Similar provisions apply to goods in the 
personal luggage of travellers betwee n EC member States and third countries.43  
(v) Rules of origin 
37. The EC applies both non-preferential and preferen tial rules of origins. Its non-preferential 
rules of origin are contained in the customs c ode and corresponding implementing regulations; the 
preferential rules of origin are set out in the re levant preferential trade agreements/arrangements (in 
the implementing provisions of the customs code for autonomous/non-reciprocal preferential 
arrangements). Non-preferential origin rules are ap plied mainly for purposes such as trade defence, 
import surveillance and restricti ons, export refunds, and trade sta tistics. In determining both non-
preferential and preferential origin of products that are not wholly produced in a country, the EC uses 
the sufficient work or process test, defined through: (i) criteria based on the change of tariff headings; 
(ii) economic criteria based on value-added44; and (iii) technical or industrial criteria based on 
processing operations.  In general, origin certificat es are required mainly for preferential treatment 
purposes.45  
38. An important feature of the EC's preferential ru les of origin is the provision for cumulation, 
which allows the use of materials originating in a partner country (other than the exporting country) to 
be considered as originating in the exporting coun try. The EC applies three types of cumulation 
scheme: bilateral, diagonal, a nd full. Bilateral cumulation invo lves only two partners (e.g. EC-
Mexico); under diagonal cumulation, materials orig inating in specific countries, linked through a 
network of preferential agreements, may be counted  as originating in the exporting country (e.g. pan-
European system of cumulation)46; and under full cumulation, any working or processing operations 
done within the free-trade area will count together to wards the determination of origin (e.g. the EEA). 
Furthermore, certain EC preferential rules of or igin apply the absorption principle and include 
tolerance rules, especially with regard to textiles.47  
39. Recent studies found the EC's preferential origin ru les to be more restrictive for products with 
higher preferential margins, such as beverages,  tobacco, textiles, cl othing, and footwear.48  Some view 
origin cumulation as reducing barriers and fac ilitating trade among participating economies by 
developing complementary synergies in the area and giving more freedom in investment decisions.  
Some consider that cumulation extends the preferen tial nature of an individual preferential trade 
                                                                                                                                                                     
from import duties and taxes) and then re-exported within a specified period without having undergone any 
change. 
42 Council Directive 78/1035/EEC, as amended, 19 December 1978. 
43 Council Directive 69/169/EEC, as amended, 28 May 1969. 
44 Value-added requirements range from 40% to 75%; e.g. under non-preferential rules of origin, the 
value of the non-originating materials used in making textile watch straps must not exceed 40% of the ex-works 
price of the product, whereas for magnetic tape recorders, the value-added must be at least 45%. The highest 
value-added requirements are in chapters 84 to 94 of the Combined Nomenclature as alternative rules of origin.  
45 Certificate EUR.1, EUR.2, or Form A, invoice declaration. 
46 The pan-European system of cumulation of origin provides for the application of a single set of rules 
of origin. It is widely used by participating countrie s as a basis for most other preferential trade agreements. 
47 Under the absorption principle, when a non-orig inating material acquires originating status by 
meeting the corresponding processing requirement, it is  considered to be fully  (100%) originating once 
incorporated into a final product; tolerance rules allow th e use, in the manufacture, of a limited percentage of 
non-originating materials supplied by non-cumulation-beneficiary countries that would otherwise not be 
accepted.  
48 Estervadeordal and Suominem (2003); Brenton and Manchin (2002); and Ghoneim (2003). European Communities WT/TPR/S/136 
 Page 51 
 
 
agreement (PTA) to other PTAs without any legal basis.49  Furthermore, the operational and 
administrative costs of certifying and verifying orig in are potentially large and can increase efficiency 
losses. An earlier study estimated the costs of co llecting, managing, and storing the information 
needed for origin verification and administration in  Europe to about 3% of product prices. Such high 
costs could lead traders to abandon the idea of claiming preferences after having weighed the net 
benefit to be negligible if not negative.50  
40. The European Commission has recently publis hed a Green Paper (consultation document) on 
the future of preferential rules of origin. The paper indicates areas where actions are required:  
determination of a product of origin ;  the fair application of origin rules;  establishment of procedures 
to reduce the operational and administrative costs of  certifying and verifying origin; and ensuring a 
balance of responsibilities between traders and public authorities.51 
(vi) Tariff preferences 
41. Under its preferential trade agreements (PTAs)52, the EC provides, on a reciprocal basis, duty-
free access to imports of nearly all non-agricultura l goods (exceptions sometime s exist, e.g. textiles 
and aluminium products)53; and various tariff preferences (including preferential tariff quotas) on 
selected agricultural products (Chapter II(5)(i) and (i ii)). The tariff preferences are subject to proof of 
origin, with different cumulation of orig in schemes depending on the agreement.  
42. Tariff preferences are also provided under the EC's non-reciprocal preferential arrangements 
(Chapter II(5)(iii)(c)). Arrangements with the ove rseas countries and territories (OCT) provide for 
duty-free treatment on all products originating in the OCT. Under the EBA initiative, the EC also 
provides duty-free access to all goods except banan as, rice and sugar, which are scheduled for duty-
free access between 2006 and 2009. Under the Cot onou agreement, 78 ACP countries benefit from 
duty-free access for industrial, process ed agricultural, and fishery products, subject to a safeguard 
clause, which, according to the Co mmission, has not so far been i nvoked.  Non-processed agricultural 
products are generally subject to reduced duties. For certain products (bananas, beef and veal, and 
sugar), the EC provides special market access unde r "commodity protocols" . Under the EC's GSP 
scheme, agricultural goods mainly benefit from re duced tariff rates, whereas non-agricultural goods 
benefit from both duty-free entry and reduced tariff rates, depending on whether the good is classified 
as "sensitive" or not;  the non-sensitive products benefiting from duty-free entry.  
43. Observing that sensitive sectors in multilateral negotiations are also sensitive sectors in PTAs, 
a recent WTO study concludes that "the degree of  liberalization achieved in PTAs is less than one 
may be led to believe".54 This conclusion would appear to be valid for most of the EC's PTAs. For 
instance, since the EC already provides low duty rates on non-agricultural goods, the removal of 
tariffs on these products represents a limited degree of  liberalization. On the other hand, market access 
in sensitive products (agricultural and non-agricultural products) is in cluded in some cases, albeit with 
less generous tariff preferences.  
                                                      
49 For a detailed discussion on rules of origin regimes, see WTO document WT/REG/W45, 
5 April 2002.  
50 Garay and Quintero (1997).  
51 Further information is available online at: http://europa.eu.int/comm/taxation_customs/customs/ 
origin/rules_origin/rules_of_origin_en.htm. 
52 These include: the EEA; Euro pe agreements; customs union with Turkey; stabilization and 
association agreements; eu ro-Mediterranean agreements; and free-tr ade arrangements with Mexico, South 
Africa, and Switzerland. 
53 For some of the PTAs, duty-free access will materialize only after a transition period. 
54 WTO document WT/REG/W/46, 5 April 2002. WT/TPR/S/136 Trade Policy Review 
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(vii) Import prohibitions, restrictions, and licensing 
44. The EC endorses measures restricting trade a nd economic relations under resolutions of the 
United Nations Security Council (UNSC); these may in clude trade prohibitions and restrictions under 
the competence of the Community. For instance, in  accordance with UNSC Resolution 1478, the EC 
prohibits the direct and indirect imports into the Community of all rough diamonds, and logs and 
timber products originating from Liberia. In accord ance with UNSC resolution 1483, the EC adopted 
a regulation removing restrictions to trade with Iraq, maintaining only specific restrictions on 
proceeds from all exports of petroleum, pe troleum products, and natural gas from Iraq.55 Furthermore, 
a prohibition remains in place for trade in items bel onging to institutions of Iraqi cultural property, 
and other items of archaeological, historical, cultu ral, rare, scientific, and religious importance, 
illegally removed from Iraq.56 Measures restricting the importation of diamonds from Sierra Leone 
expired in June 2003.  
45. The EC also implements import prohibitions, licensing requirements, and other restrictive 
trade measures in accordance with international conv entions and treaties, in cluding the Convention on 
International Trade in Endangered Species of W ild Fauna and Flora (CITES), the Basel Convention 
on the control of transboundary movements of haza rdous waste and their disposal, and prescriptions 
of the International Commission for the Cons ervation of Atlantic Tunas (ICCAT) and the 
Commission for the Conservation of Antartic Marine Living Resources (CCAMLR). On 4 March 2002, the EC adopted the Fourth Amendmen t to the Montreal Protocol on substances that 
deplete the ozone layer.
57 Furthermore, prohibitions apply to the importation of pelts of certain wild 
species (e.g. beavers and otters) from countries that  permit leg-hold traps or trapping methods that do 
not meet international humane trapping standards, su ch as those established in a 1998 Agreement with 
Canada, the Russian Federation, and the United Stat es.   The EC also applies import prohibitions, 
surveillance, and controls on grounds of technical  requirements (including standards, sanitary and 
phytosanitary, and environmental requirements). 
46. Import licences are required for surveillance,  quantitative restrictions and safeguard 
purposes.58 Community surveillance measures apply to certain iron and steel imports from all 
countries, and to certain agricultural, tex tiles, and footwear imports from VietNam.  
47. The EC maintains 89 tariff quotas, for protecti on of some 38% of its agricultural production 
(Chapter IV(2)(i)(a))59; it has made available online, through its data dissemination system (DDS), 
information on current levels of quota utilization for each of the tariff quotas.60 Import licences are 
required, for quota management purposes, on all agri cultural products (subject to tariff quotas), such 
as cereals and cereal products, rice, sugar, oils and fats, milk products, beef and veal, sheep and goat 
meat, fresh fruit and vegetables, a nd processed fruit and vegetables. 
48. Under the WTO Agreement on Textiles and Clothing (ATC), the Community maintains 
quantitative restrictions on textiles against: Argent ina; Brazil; People's Republic of China; Hong 
Kong, China; India; Indonesia; Macao, China; Ma laysia; Pakistan; Peru; Philippines; Singapore; 
                                                      
55 The proceeds must be deposited into the Development Fund for Iraq under conditions set out in 
UNSC resolution 1483.  
56 Council Common Position 2003/495/CFSP; and Council Regulation (EC) No. 1030/2003. 
57 OJ L72/18, 14 March 2002. 
58 WTO documents G/LIC/N/3/EEC/6, 9 Oc tober 2003 and G/LIC/N/EEC/6/Add.1, 
11 November 2003. 
59 World Bank (2003). 
60 This information is available online at:  http://europa.eu.int/comm/taxation-customs/databases 
/quota-en.htm. European Communities WT/TPR/S/136 
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Republic of Korea; Sri Lanka61; Chinese Taipei; and Thailand. The EC has bilateral arrangements on 
trade in textile and clothing products with the following WTO Members: Armenia; Bangladesh; 
Croatia; Egypt; Kyrgyz Republic; Moldova; Mongolia ; and Sri Lanka. Under these arrangements, the 
EC applies double-checking surveillance without quantitative restrictions.  The EC applies 
quantitative restrictions, on an autonomous b asis, on imports from Bosnia and Herzegovina, 
Democratic People's Republic of Korea, and Serb ia and Montenegro. Furthermore, surveillance of 
imports of textile and clothi ng products under the double-checking system also applies under 
agreements with certain countries not members of  the WTO: Belarus, Bosnia and Herzegovina, 
Cambodia, Croatia, FYROM, Kaza khstan, Laos, Moldova, Mongolia, Nepal, Russian Federation, 
Tajikistan, Turkmenistan, Ukraine, United Arab Em irates, Uzbekistan, and VietNam (surveillance and 
quantitative restrictions).62  The EC also maintains quantitative restrictions on imports (from selected 
countries) of goods resulting from economic outward  processing traffic (OPT) arrangements. These 
arrangements are available only to established EC producers and have the objective of maintaining 
certain industrial activities in the EC. In practice, they have been used to import clothing products 
made of textiles that have been exported from the EC and worked or processed in third countries.  
These imports from countries such as Morocco ar e currently free of quantitative restrictions . OPT 
restrictions are currently in place for Belarus; Ch ina; India; Indonesia; Macao, China; Malaysia; 
Pakistan; Philippines; Singapore; Sri Lanka63; Thailand; and VietNam. 
49. Annual quota growth rates are negotiated and ar e in part dependent on the base levels for 
individual countries; in general, growth rates fo r small countries are higher. The quotas are managed 
by means of licences issued upon presentation of origin certificates from exporting countries; the 
quantity to be imported must fall within the relevant country quota.64 There are no licensing fees or 
administrative charges.  Amendments to this regi me during the period under review relate to the 
exemption from quantitative restrictions, licensing  requirements, and administrative charges for 
samples of textile products; rules of origin; a nd a specific safeguard clause on imports from China.65 
The EC's quota regime on textiles and clothing was to be extended to the acceding countries upon 
accession on 1 May 2004;  it has been adjusted to ensu re that trade with the ten new member States 
can fully take place as before, for the remaining eight months for which the regime is in place.  During the period under review, amendments were also  made to annexes I, III, V, VII and VIII of the 
basic regulation to ensure that the Community meet s its international obliga tions, including under the 
WTO Agreement on Textiles and Clothing.
66   
50. Under the ATC, the EC is currently implementing stage 3 of the integration of the textiles and 
clothing sector into the GATT. At the commencemen t of stage 3, on 1 January 2002, an additional 
18.08% of the 1990 volume of imports was integrated into the GATT67, through the elimination of 38  
quotas. This brings the cumulative share of the vol ume of imports integrated into the GATT since 
                                                      
61 The application of quotas to imports from Sri Lanka has been suspended (Council Decision 214/2001 
of 26 February, 2001, OJ L 80, 20 March 2001). 
62 WTO document G/LIC/N/3/EEC/6, 9 October 2003. 
63 Currently suspended under the Memoranda of Understanding in force. 
64 Council Regulation (EEC) No. 3030/93, OJ No. L 275, 8 November 1993.  Import authorizations are 
to be issued within a maximum of five working days, served on a first-come, first-served basis, and valid for a 
period of six months, which can be extended for three further three-months periods.  
65 Council Regulation (EC) No. 138/2003, 21 January 2003.  The clause is intended to bring EC 
legislation into conformity with paragraph 242 of th e report of the working party on the accession of the 
People's Republic of China to the WTO. 
66 Commission Regulations (EC) No. 797/2002  (OJ L 357, 31 December 2002) and (EC) 
No. 2344/2002 (OJ L 357, 31 December 2002). These annexes define specifi c restrictions that  apply to 
particular textile products and supplier countries. 
67 In 1990, 3.9 million tonnes were imported. WT/TPR/S/136 Trade Policy Review 
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1995 to 51.39%, with the corresponding elimination of 52 (out of possible 219) quotas since 1995. 68 
Of the 51.39% textile products integrated, 19.86%  are from yarns, 13.07% from fabrics, 9.71% from 
made-ups, and 8.75% from clothing69; and of the 52 product categories a total of 23 have been 
integrated into the GATT. 70  However in terms of trade under quo ta restriction in 1990, only about 
20% has been integrated into the GATT, leaving 80 % to be integrated on 31 December 2004. Hence, 
the liberalization of quantitative restrictions (as required under the ATC) has been back-loaded to the 
end of the transition period. 
51. Existing quotas have been increasing at annual gr owth rates of between 0.18% and 16.37%, 
depending on the product category and country; the annua l average rate is 6%. Figures released by the 
International Cloths and Textiles Bureau show the annual growth rate of the value of imports of 
textiles to be much higher from preferential sour ces than from other countries, with the former 
growing by 7.9% per annum and the latter by 3.5%.71  In 2001, 40 out of possible 219 quotas (18.3%) 
applicable to WTO Members were utilized at 95% or more, mostly on shirts, T-shirts, jerseys, 
pullovers, overcoats, raincoats, and other coats.  
52. On 6 November 2002, the EC signed an MOU with  Brazil. In general the agreement provides 
for binding of Brazil's tariffs on textile and clothing products and suspension of quantitative 
restrictions on imports of Brazilian clothing and te xtiles to the Community. MOUs have been signed 
with India, Pakistan, and Sri Lanka.  
53. A special regime applies to the EC's impor t arrangements with certain third countries: 
Albania, Armenia, Belarus, People's Republic of China, Georgia, Kazakhstan, Democratic People's 
Republic of Korea, Kyrgyz Republic, Moldova,  Mongolia, Russian Federation, Tajikistan, 
Turkmenistan, Ukraine, Uzbekistan, and VietNam.  Under this regime, quantitative restrictions, 
including surveillance measures could apply. For instance, during the period under review, the EC 
applied import quotas on certain products from China,  due to their "sensitivity" in the Community. 
The products include footwear, tableware, and kitc henware; the quotas will lapse at the end of 2004. 
On 3 March 2003, a regulation was adopted on, inter alia , a timetable for the phasing-out of the quota 
regime on these products.72 For the year 2003, the quotas increased from 21% to 52%.  
(viii) Contingency trade measures  
(a) Safeguards 
54. Council Regulation (EC) No. 3285/94 provides the main legislative framework for the 
application of safeguard measures to WTO Members.73 Safeguard measures are applied where a 
product is imported into the Union in such signifi cantly increased quantities, and or on such terms or 
conditions as to cause, or threaten to cause seri ous injury to Community producers. The regulation 
                                                      
68 Stages 1 and 2 saw the integration of 16.2% and 17.1%, respectively of textiles and clothing into the 
GATT. Bilateral quotas eliminated so far, including that  applied to the People's Republic of China, total 82 
(WTO document G/TMB/N/363, 4 January 2001). 
69 WTO document G/C/W/325, 22 October 2001. 
70 Twelve during the second stage and 11 during the third stage. 
71 See information online, available at: http ://www.itcb.org/Documents/ITCB-TDEU02.pdf . 
 72 Council Regulation (EC) No. 427/2003 of 3 March 2003 on a transitional product-specific safeguard 
mechanism for imports originating in the People's Republic of China and amending Regulation (EC) No. 519/94 
on common rules for imports from certain third coun tries. Available online at: http://europa.eu.int/eur-
lex/pri/en/oj/dat/2003/l_065/l_06520030308en00010011.pdf.  
73 OJ L349/53, 31 December 1994, as last amende d by Regulation (EC) No. 2472/2000, OJ L286, 
11 November 2000. European Communities WT/TPR/S/136 
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provides for the definition of serious injury, or th reat of serious injury; the consultation procedure74; 
the investigation procedure75, including the opening up of investig ations and collection of information 
from exporting countries and interested parties; time  limits for the initiation  and determination of 
investigations; and the types of safeguard measur e that could be implemented. If the safeguard 
measure leads to the establishment of a quota, account  is taken of the need to maintain traditional 
trade flows and the volume of goods exported und er contracts concluded on normal terms and 
conditions before the entry into force of the safegua rd measure. In general, the quota is not to be 
lower than the average level of imports over the last  three representative years for which statistics are 
available.  
55. Separate safeguard provisions  apply to non-WTO members76, and to imports of textile 
products from certain third countries.77 On 3 March 2003, the EU adopted  a regulation, that amended 
its regulation on non-WTO Members78, to bring into line its safeguard provisions on imports from the 
People’s Republic of China with the transitional provisions contained in China's Protocol of 
Accession to the WTO.  
56. Furthermore, EC safeguard regulations provide  for the possibility to reduce the extent of 
"double protection" resulting from the combined effect of anti-dumping or anti-subsidy measures with 
safeguard measures. Measures that can be taken in  this respect may involve amending, suspending, 
repealing, and providing for exemptions of an ti-dumping or countervailing measures in place; the 
measures are limited in time and applicable only when  the relevant safeguard measures are in force.  
57. Of the 21 steel products for which the Commissi on had initiated its safeguard investigations 
at the time of its last TPR, a positive de termination was made on seven products79. However, the 
measures were repealed in December 2003 following  the withdrawal of the U.S. safeguard measures 
on the same products. 80  The EC has also commenced a safeguard investigation on prepared or 
preserved citrus fruits under the WTO Agreement on Safeguards, and provisional measures were 
imposed in November 2003.81 A parallel safeguard investigation, initiated at the same time and for the 
same products, under the transitional safeguard provisi ons contained in the Protocol on the Accession 
of the People’s Republic of China,  was terminated in December 2003.82  Furthermore, in March 2004, 
a safeguard investigation under the WTO Agreem ent on Safeguards was in itiated on farmed salmon.83 
58. The EC also applies the special safeguar d (SSG) provisions of the WTO Agreement on 
Agriculture on certain products.  Under the SSG pr ovisions, the Community notified the WTO of 17 
products subject to its price-based safeguard ac tion and 22 products to its volume-based special 
safeguard actions during the 2001/02 marketing year . Products affected by the price-based action 
include certain poultry and meat products, cane or beet sugar, and cane or other molasses; volume-
                                                      
74 This is undertaken at the request of a member State or on the initiative of the Commission. 
75 This is only undertaken if it is apparent that ther e is sufficient evidence to justify the initiation of the 
investigation.  
76 Regulations (EC) No. 519/94, OJ L 67, 10.3.94, p. 89, as last amended by Regulation (EC) 
No. 427/2003 (OJ L 65, 8.3.2003, p. 1). 
77 Regulations (EC) No. 3030/93, OJ L 275, 8.11.93, p. 1, as last amended by Regulation (EC) 
No. 138/2003 (OJ L 23, 28.1.2003, p. 1);  and Regulations (EC) No. 517/94, OJ L 67, 10.3.94, p. 1, as last amended by Regulation (EC) No. 2309/2003 (OJ L 342, 30.12.2003, p. 21). 
78 Regulation (EC) No. 427/2003, OJ L 65, 8.3.2003, p. 1. 
79 WTO documents G/SG/N/8/EEC/1 and G/SG/N/10/EEC/1, 11 September 2002.  
80 OJ L 321, 6.12.2003, p. 11. 
81 WTO document G/SG/N/6/EEC/2. 
82 OJ L 323, 10.12.2003, p. 11. 
83 WTO document G/SG/N/6/EEC/3. WT/TPR/S/136 Trade Policy Review 
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based measures apply to certain fruits and vegeta bles including tomatoes, cucumbers, courgettes, 
oranges, clementines, apples, pears, and plums.84  
59. All EC safeguard measures in place will be applied by the new members States at the time of 
accession and whatever safeguard actions the new memb ers have in place will be repealed. Within the 
framework of the internal market, the Treaty of A ccession also contains safeguard provisions for new 
members, allowing them to apply for authorization to take protective measures, for a period of three 
years following accession, if sectoral difficulties persist or there is a serious deterioration in their economic situation. Existing member States (the EC -15) may also apply for authorization to take 
protective measures with regard to one or more of the new member States under similar 
circumstances.
85  
(b) Anti-dumping  
60. Council Regulation 384/96, as amended86, provides the main legal basis for the EC's anti-
dumping measures.87 On 23 July 2003, the regulation w as amended to extend coverage to goods 
previously under the ECSC Treaty (Chapter II(1)).88 According to the regulation, anti-dumping duties 
are to be imposed if three conditions are met: (i) a finding of dumping89; (ii) a determination of 
material injury to the Community industry90;  and (iii) it is in the interests of the Community.91  The 
Commission is responsible for investigating compla ints and assessing whether they are justified. It 
can also impose provisional measures; however definitive measures can only be imposed by the 
Council. Proceedings for an investigation can be initiated by written request from the Community 
industry or from a member State. Investigations ar e normally concluded within 15 months of initiation 
of the proceeding, during which provisional anti-dump ing measures could be imposed within the first 
nine months. The conclusion of an investigati on may lead to termination without measures or 
imposition of definitive anti-dumping duties. If duties are imposed they will expire five years after 
their date of imposition or after the conclusion of th e review of the measures concerned. According to 
the Commission, duties imposed are calculated accord ing to the dumping or injury margin, whichever 
is lower.  
                                                      
84 WTO document G/AG/N/EEC/43, 5 June 2003. 
85 See online information available at: http://europa.eu.int/comm/enlargement/negotiations 
/treaty_of_accession_2003/pdf/3_act_of_accession/aa00003_re03_en03.pdf. 
86 A 2002 amendment formally recognized Russia as a ma rket economy in the cont ext of anti-dumping.  
The March 2004 amendments cover streamlining of the EC's internal decision-making procedure, the introduction of mandatory deadlines in review inves tigations, and some improved rules on enforcement of 
measures. 
87 Amended by the following Acts: Council Regulation (EC) No. 2331/96, OJ L 317, 
6 December 1996; Council Regulation (EC) No. 905/98, OJ L 128, 30 Ap ril 1998; Council Regulation (EC) 
No. 2338/2000, OJ L 257, 11 October 2000.  
88 Details are contained in Council Regulations (EC) No. 963/2002 and (EC) No. 1310/2002.  
89 A product is considered dumped if its export pr ice to the Community is less than the comparable 
price for a like product established in the ordinary course of trade within the exporting country. Computations of 
the dumping margin could be complicated, as the necessar y adjustments for differences in market structure (a 
distinction is made between market and non-market economies), taxation, time of sales, and range of products 
considered to be affected have to be taken into account.  
90 The determination of injury requires evidence of: significant increases in  the volume of dumped 
imports, either in absolute terms or relative to produc tion or consumption in the Community; price undercutting; 
and the adverse impact on Community industry in relation to production and utilization of capacity, stocks, sales, market share, price changes, profits, returns on investments, cash flow, and employment. The Regulation 
stipulates that there must be a cau sal link between dumping and injury.  
91 The interests of the Community include those of the industry, and of the users and consumers. The 
cost to the Community of taking measures must not be disproportionate to the benefits.  European Communities WT/TPR/S/136 
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Chart III.4
Total anti-dumping measures imposed, 1991-03
By target country By HS section
Chemical 
products (VI )
19.3Machinery,  
electrical equipment 
(XVI )
18.6Textiles (XI)
9.8Plastic and 
rubber (VII)
4.9 Wood 
products (IX)
2.7
Other
11.0
China
16.7 Base metal (XV)
33.7Korea
7.2Japan
6.8Hungary
6.8Russia
6.4Thailand
5.7Chinese 
Taipei
4.5Ukraine  4.5Poland  4.2Indonesia 3.8Malaysia 3.8Other 29.5
Source: WTO documents.Share of total measures (per cent)
 
 
61. During 2002, the EC initiated 20 new investigati ons;  seven were initiated in 2003 and three 
during the first three months of 2004. Fifteen provi sional measures were imposed during 2002, nine in 
2003, and three during the first three months of 2004;  and 25 definitive anti-dumping measures in 
2002 (thereby ranking second be hind India), three in 200392, and five in the first three months of 2004 
(Table III.6).  The anti-dumping measures were mainly ad valorem duties applied at rates ranging 
from 3.7% to 75%93. The main products subject to definitive anti-dumping measures during 1 January 
2002 to 31 March 2004 were: urea, ferro-molybdenum , zinc oxides, compact disk recordables, 
sulphanilic acid, tube and pipe fittings, welded tub es and pipes, polyester filament yarn, para-cresol, 
fufuryl alcohol, silicon metal, bed linen, sodium cy clamate, and trout. During the same period, a total 
of 24 investigations were terminat ed for reasons such as negative de termination of injurious dumping 
or withdrawal of the complaint, and 42 measures e xpired after their five-year period of duration. On 
31 March 2004, the EU had a total of 147 definitive me asures in force, of which 32 concerned imports 
from exporters originating in the People’s Republic of  China, followed by India and Russia (11 each), 
and Chinese Taipei and the Republic of Korea (9 each).  
                                                      
92 According to the Commission, the sharp decline in 2003 is attributable to: the stabilization of the 
steel market following the imposition of safeguard measures in 2002; the non-initiation of investigations on imports from the ten acceding countries; and the cyclical  nature of complaints submission and the consequent 
imposition of measures. 
93 A considerable number of companies received a 0% duty rate if they are found not to engage in 
injurious dumping. The average duty rate for companies found to have dumped was 25%. WT/TPR/S/136 Trade Policy Review 
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Table III.6 
Anti-dumping measures, 1998-03 
 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 
Initiations 20 39 21 43 33 24 42 21 66 31 27 20 7 
Definitive 
measures imposed 19 17 19 19 13 23 23 26 18 40 12 25 3 
Measures in force 101 114 117 124 129 143 138 139 151 175 175 174 156 
Source: WTO Secretariat, based on information provided by the European Commission.  
 
62. At the time of their accession, new members must apply EC anti-dumping measures in place; 
their own measures will lapse.  
63. A study on the EC's anti-dumping policy metions that anti-dumping duties lead to both a 
decrease in imports from countries with companies subjected to the measures and an increase from 
countries with companies not subjected to the meas ures. Therefore, protection afforded to domestic 
industry through such measures may not be that signi ficant since some of the benefits accrue to 
countries not subject to the measures.94 
(c) Countervailing measures 
64. Council Regulation (EC) No 2026/97, as amende d, provides the main legal framework 
governing the EC's countervailing measures. Apar t from the provisions on the definitions and 
calculation of subsidies, this regulation is similar to that on anti-dumping, particularly with regard to 
the determination of injury, the definition of Co mmunity industry, initiation procedures, imposition of 
provisional and definitive measures, and terminat ion of proceedings. The three conditions to be 
satisfied before the imposition of a countervailing measure are that: (i) the subsidy must be specific 
(i.e. an export subsidy, or a subsidy limited to a company, an industry or a group of companies or 
industries); (ii) a material injury to Community industry must exist; and (iii) the interest of the 
Community must be taken into account. Amendments  to the regulation, made in March 2004, cover 
streamlining of the EC's internal decision-making procedure, the introduction of mandatory deadlines 
in review investigations, and some impr oved rules on enforcement of measures.  
65. During 2002, the EC initiated three new investig ations, one in 2003, and none during the first 
three months of 2004. Two provisional measures we re imposed during 2002, one in 2003, and none 
during the first three months of 2004; and three definitive measures were imposed in 2002, two in 
2003, and one in the first three months of  2004. The measures imposed were mainly ad valorem 
duties applied at rates ranging from 4.1% to 34 .8%. The main products subject to definitive 
countervailing measures during 1 January 2002 to  31 March 2004 were: ring binder mechanisms, 
suphanilic acid, polyester filament yarn, recordab le compact disks, DRAMs, and bed linen. During 
the same period, a total of three investigations  were terminated for reasons such as negative 
determination or withdrawal of the complaint; thr ee measures expired after their five-year period of 
duration. On 31 March 2004, the EU had a total of 18 definitive countervailing measures in force 
(Table III.7), of which ten concerned imports from expor ters originating in India. At the time of their 
accession, new members have to apply the EU count ervailing measures in place; at the same time, 
their own measures will lapse. 
  
                                                     
 
94 Specifically, three years after the initiation of anti- dumping proceedings, the median of import values 
by targeted countries falls by about 60%, while that of non-targeted count ries increases by 40%. Lasgni (2000). European Communities WT/TPR/S/136 
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Chart III.5
Total contervailing measures imposed, 1991-03
By target country By HS section
Chemical 
products (VI )
9.5Machinery,  
electrical equipment 
(XVI )
9.5Textiles (XI)
19.0Plastic and 
rubber (VII)
23.8
Other
4.8
India
42.9Base metal (XV)
33.3Chinese 
Taipei
9.5Indonesia
9.5Malaysia
9.5 Other 28.6
Source: WTO documents.Share of total measures (per cent)
 
 
Table III.7 
Countervailing measures, 1996-04 
 1996 1997 1998 1999 2000 2001 2002 2003 2004  
(3 months) 
Initiations 1 4 8 20 0 6 3 1 0 
Definitive measures imposed 0 1 2 3 11 0 3 2 1 
Definitive measures in force 2 3 3 5 17 16 19 17 18 
Source: WTO documents; and information provi ded by the European Commission. 
(ix) Technical barriers to trade 
66. Products placed on the market of a member St ate must comply, where necessary, with both 
relevant national and Community-wide legisla tion. The compliance of a product with the 
requirements of applicable technical regulations is established by means of conformity assessment procedures. Due to the impact differences in technical regulations and conformity assessment procedures could have on trade both amongst member States of the EC, and between the EC and third 
countries, the removal and avoidance of unnecessary technical barriers to trade, while pursuing a high 
level of environmental or consum er protection, remain key aspects of the EC's internal market 
strategy and trade policy. 
67. Where they exist, EC's technical regulations lay down product characteristics or their related 
processes and production methods, and may include or deal with terminology, symbols, packaging, 
marking or labelling requirements as they a pply to a product, process or production method.
95 Such 
regulations are developed at Community level ("harm onized" areas) for EC-wide application, or at 
national level ("non-harmonized" areas). Exporters benefit from Community harmonization as one set 
                                                      
95 WTO (2002). WT/TPR/S/136 Trade Policy Review 
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of regulations replaces 15 (25 as from 1 May 2004).96 In 2001, non-harmonized products accounted 
for about 21% of the total tariff lines.  
68. Product regulations at the Community level are of  two main types: those laying down detailed 
specific technical requirements (old-approach di rectives) and those with essential (limited) 
requirements (new-approach directives) defined to  meet health, safety and environmental objectives.97 
The old-approach directives apply to motor ve hicles, cosmetics, chemicals, foodstuff, and 
pharmaceutical products, whilst the new-approach directives cover a wider range of products, 
including toys, construction products , machinery, pressure equipment, medical devices, electrical and 
electronic equipment, and gas appliances. Under the new-approach directives, the technical solutions 
to meet the requirements are to be found through voluntary European harmonized standards (such as 
those of the European standard-setting bodies) or manufacturers own initiatives.  
69. European standardization bodies (CEN, CEN ELEC, and ETSI) have developed harmonized 
standards for some of the new-approach direc tives. The application of these standards by a 
manufacturer presumes conformity with the essential requirements.98 These bodies have accepted the 
TBT Code of Good Practice for the Preparation, Ad option and Application of Standards. About two-
thirds of the standards developed by CEN and CE NELEC are identical to or based on ISO and IEC 
standards.99  There are presently around 14,000 European-wide voluntary standards. 
70. Under the new-approach directives, the pers on placing a product on the Community market 
assumes responsibility for compliance with the Commun ity legislation. The manufacturer must affix 
the "CE" marking on the product to indicate conformity  with the applicable EC requirements, without 
which the product cannot be placed on the Community market.100 The steps a manufacturer must take 
in order to affix the "CE" marking depends upon the sector.101 General guidelines and detailed 
procedures for conformity assessment under the new- approach directives have been established under 
a global approach to certification and testing.102 Conformity assessment of industrial products is 
carried out by bodies designated by member States in accordance with the Community procedure for 
the notification of bodies. The list of such bodies is published online and in the Official Journal of the 
European Union . However, for some products, the EC accepts  the supplier's declaration of conformity 
of the product to the relevant legislation without any mandatory third party intervention.103 Market 
                                                      
96 Mutual recognition may still be required. 
97 It is estimated that trade in products covered only by the major sectors regulated by the new-
approach directives is in excess of € 1,500 billion per year. 
98 The European Committee for Standardization (CEN), and the European Committee for 
Electrotechnical Standardization (CENELEC) develop European standards in a consensual process with national committees (representing the EC-15 member States, Norw ay, Switzerland, Iceland, the Czech Republic, and 
Malta). ETSI is the European Telecommunications Standards Institute. About 85% of the work of the European 
standardization bodies is market-driven, with only 15% consisting of standards mandated by the Commission.  A CEN standard is estimated to take on average eight  years for final clearance; a CENELEC standard takes 
three to four years and an ETSI stan dard over two years.  There are plans to reduce these long lead times. 
99 CEN has an agreement with IS O and CENELEC with the IEC. 
100 Information available online at:  http://e uropa.eu.int/comm/enterprise/newapproach 
/legislation/guide/legislation.htm 
101 DG Enterprise (2000). 
102 Council Decision 90/683/EEC, 13 December 1990 and Council Decision 93/465/EEC, 
22 July 1993; Council Decision 93/465/EEC establishes a range of procedures for assessing the conformity of industrial products to the objectives or "essential requirements" laid down by the technical harmonization 
directives. 
103 WTO document G/TBT/W/218, 30 June 2003. This mainly applies to products under the new-
approach directives (e.g. electrical eq uipment, machinery, toys, medical de vices, personal protective equipment, European Communities WT/TPR/S/136 
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surveillance is carried out by national authorities and involves monitoring products for compliance, 
and remedial actions when they do not comp ly, including penalties for false or misleading 
declarations. Under a safeguard clause procedure,  the Commission is allowed to verify measures 
taken by the national authorities that restrict the movement of "CE" marked goods. 
71. Assessments show that the new-approach directives work well in removing certain aspect of 
technical barriers to trade (regulatory and no n-regulatory). Nonetheless, a recent Commission 
Communication (2003/C282/02) on the directives identif ies the need: for a more coherent approach to 
conformity assessment and designation of notified bodi es; to revise the safeguard clause procedure; 
and to strengthen enforcement measures, including market surveillance.104  Subsequently, the 
European Council adopted a resolution mandating the Commission to follow-up the Communication. 
72. In non-harmonized areas, member States may le gislate to provide increased transparency, and 
to prevent unjustified restrictions to trade; th ey are required to notify the Commission of draft 
technical regulations and standards. Furthermore, th e EC applies the principle of mutual recognition 
in the internal market. Hence, goods lawfully pr oduced in one cannot be banned from sale on the 
territory of another, even if they are produced to  meet technical or quality specifications different 
from those applied to locally pro duced goods, except in cases of overri ding general interest (such as 
health, consumer or environment protection), of which the Commission must be notified. Information 
on the requirements in non-harmonized areas can be obtained from the TBT enquiry points of the EC member States.
 105A recent report by the Commission gives a favourable assessment of the 
notification system in avoiding the creation of barri ers to the free movement of goods and services. 
However according to the Commission, non-applicati on of the mutual recognition principle cut trade 
by up to € 150 billion in 2000.106 In November 2003, the Commission published a communication 
clarifying the mutual recognition principle. This communication aims to improve the application of 
mutual recognition by providing a summary of how it should work and the rights it gives to economic 
operators. It also clarifies the burden of proof and summarizes when and how the free movement of 
goods can be restricted.107  
73. Under the TBT Agreement, the EC and its me mber States notified the WTO of 95 measures 
in 2002 and 76 in 2003 (Table III.8). Some rece nt regulatory developments affecting the EC's 
technical barriers to trade regime are summarized in Table AIII.2.  
74. The acceding countries are to take over the acquis  on the free movement of goods on 
accession; this implies the implementation of the EC's  technical regulations. During the period leading 
to accession, the EC has helped the acceding countri es to realign their standards with those of the 
Community. Furthermore, European standard setti ng bodies have been working in partnership with 
national partners in the acceding countries. Protoc ols to the Europe Agreements on Conformity 
Assessment and Acceptance of Industrial Products (PECAs) have been signed with seven of the 
acceding countries (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia, and Slovenia) and 
an Agreement on Conformity Assessment and Accepta nce of Industrial Products (ACAA) with Malta. 
PECAs and the ACAA represent a recognition of progress made in adopting the relevant EC legislation on industrial products, and in creating the necessary administrative infrastructure required 
for their effective implementation. According to  the Commission, the acceding countries have well 
understood the new-approach legislation; the necessar y institutional capacity is in place and is mostly 
                                                                                                                                                                    
 
recreational craft, radio and telecommunication equipment, and equipment for use in potentially explosive 
atmospheres).  
104 COM(2003) 240 final, 7 May 2003. 
105 For contact details of enquiry points, see WTO document G/TBT/ENQ/24, 9 March 2004. 
106 COM(2003) 238 final, 7 May 2003. 
107 OJ C265, 4 November 2003. WT/TPR/S/136 Trade Policy Review 
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functioning satisfactorily.108 Transitional provisions will apply, how ever, to Cyprus, Lithuania, Malta, 
Poland, and Slovenia in the marketing of medicinal products and medical devices.109 The PECAs and 
the ACAA were repealed on 1 May 2004 upon accession of the partner countries.  
Table III.8 
WTO notifications of technical regulatio ns by the EC and member States, 1995-03 
  EU-15 
Year Total EU B DK D EL E F IR I L NL A P FI S UK 
1995 123 31 17 28 2 0 4 1 0 0 0 33 0 0 4 5 0 
1996 123 46 13 15 3 0 7 2 0 0 0 0 0 0 7 30 0 
1997 437 20 48 23 3 0 5 15 1 0 1 287 2 0 5 22 5 
1998 276 36 49 40 3 0 9 20 0 0 2 91 1 0 5 18 2 
1999 185 34 23 27 3 0 9 21 0 0 1 48 2 0 3 9 5 
2000 148 16 19 25 0 0 6 7 0 0 0 46 0 0 5 15 9 
2001 110 7 26 7 0 0 9 9 0 0 0 40 0 0 3 8 1 
2002 95 17 11 6 0 0 12 7 0 1 0 15 0 0 5 17 4 
2003 76 21 1 16 0 0 5 14 0 2 0 4 0 0 0 9 4 
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Sp ain;  F:  France;  IR:  Ireland;  I:  Italy;  L:  Luxembourg;    
 NL:  the Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  the United Kingdom. 
Source: WTO documents;  and information provi ded by the European Commission. 
75. Third country assessment bodies (CABs) can take  part in the EC's conformity assessment 
activities through mutual recognition agreements (MRAs). The EC has negotiated MRAs with 
Australia, Canada, Israel, Japan, New Zealand, th e United States, and Switzerland. The main sectors 
covered are medical devices, pharmaceuticals, telecommunication equipment, electrical equipment, pressure vessels, machinery, aircraft, automotive an d lawn mowers, recreational craft, and marine 
equipment. The agreement with Switzerland is broa der, extending to measuring instruments, toys, 
phytopharmaceuticals, dangerous substances and prep arations, construction site equipment, electrical 
equipment for explosive atmospheres, gas appliances, and tractors.  
76. Within the framework of trade or cooperation agreements, the EC is engaged in assistance 
programmes for standardization, certification, metrolog y, and quality with several trading partners in 
Central and Eastern Europe, the Commonwealth of Independent States, the Mediterranean, the Middle 
East, the Far-East, Latin America, and the ACP States. These programmes include the provision of 
information, technical support, upgrading of ph ysical infrastructure, conformity assessment and 
accreditation, and improving the capacity of the co untry in meeting European quality requirements.
110  
77. The EC is also a partner in various multila teral and plurilateral initiatives on technical 
harmonization, including with the OECD, the international Conference on Harmonization of 
Technical Requirements for Registration of Ph armaceuticals (ICH), the United Nations Economic 
Commission for Europe, the Global Harmonization Task Force for Medical Devices, and the 
International Civil Aviation Authority. 
                                                      
 108 European Commission (2003c). 
109 DG Enlargement (2003). 
110 DG Trade (1997). European Communities WT/TPR/S/136 
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(x) Sanitary and phytosanitary measures 
78. The Treaty establishing the European Community  empowers the Council to adopt legislation 
for the functioning of the Common market, including the common agricultural policy.111  In doing so, 
it needs to take into account pu blic health, consumer protecti on, and environmental concerns.112 The 
EC and its member States are members of the Codex Alimentarius Commission.113 
79. Five general principles are laid down by Re gulation (EC) No. 178/2002 for the EC's food 
safety regime: (i) a high level of food safety at a ll stages of the food chain, from primary production 
to the consumer; (ii) risk analysis as a fundame ntal component of food safety policy; (iii) full 
responsibility of operators for the safety of pr oducts they import, produce, process, place on the 
market or distribute; (iv) traceability of products at all stages of the food chain; and (v) entitlement of 
citizens to clear and accurate information from public authorities.114 The regulation also provides for 
the establishment of the European Food Safety Aut hority (EFSA); strengthens the rapid alert system 
for human food and animal feed115; and gives special powers to the Commission to implement 
emergency measures to contain serious risks to human or animal health, or to the environment in the 
EC (Table III.9). It also provides risk managers  (decision takers) with the option of pursuing the 
"Precautionary Principle" when decisions have to be  made to protect health but scientific information 
concerning the risk is inconclusive or incomple te. Furthermore, the regulation allows for risk 
management actions not only based on scientific assess ment, but also on other factors "legitimate" to 
the matter under consideration. This provision has attracted some criticism, however, as the definition 
of "other factors" is not clearly defined. 
Table III.9 
Notification of emergency measures 
WTO Notification Description of content Date of notification 
G/SPS/N/EEC/177 The measures laid down in Decision 2002/757/EC apply to the introduction or the spread 
of Phytophthora ramorum , the production and movement of known host plants of 
Phytphthora ramorum within the Community , the control of Phytphthora ramorum and 
to a more general surveillance for th e presence or continued absence of Phytophthora 
ramorum in the member States. 9 October 2002 
G/SPS/N/EEC/181 Emergency measures to prevent the introduction of Pseudomonas solanacearum  (Smith) 
Smith (Potato brown-rot) into the  Europ ean Communities in potatoes originating in 
Egypt from pest-free areas which have been  approved in Egypt in  accordance with the 
FAO-ISPM. 19 December 2002 
G/SPS/N/EEC/205 The urgent measures notified provide th at member States shall prohibit the import of hot 
chilli and hot chilli products in whatever fo rm, intended for human consumption unless 
an analytical report accompanying the consig nment demonstrates that the product does 
not contain Sudan red 1. 23 June 2003 
G/SPS/N/EEC/207 Special conditions imposed on the import of Br azil nuts in shell originating from Brazil   9 July 2003 
Source : WTO documents. 
                                                      
111 Treaty on European Communities, Article 37(2). 
112 Articles 152, 153, and 95.  
113 The EC adopted a decision to submit a request  for accession to the Codex Alimentarius Commission 
on 17 November 2003, OJ L 309/14. Council Decision 2003/822/EC, 26 November 2003. 
114 Regulation (EC) No. 178/2002 harmonizes the concepts, principles, and procedures to be used by 
member States in their adoption of national food safety standards.  Food safety activities cover the entire food production chain, ranging from animal and plant health to the labeling of food products, as well as animal 
welfare.   
115 This is a Commission system for the rapid exchange of information among member States (third 
countries are also allowed to participate) in  the event of a serious  and immediate risk. WT/TPR/S/136 Trade Policy Review 
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80. The EFSA provides the Commission with independ ent scientific advice on all matters with 
direct or indirect impact on food safety. Though decisions on food safety are taken by the Council and 
in certain cases the Commission116, the opinions of the EFSA are important in shaping policies and 
forming legislation related to food safety. Throu gh an Advisory Forum, the EFSA is expected to 
develop close collaboration and partnerships w ith representatives of competent bodies in member 
States, thereby forming an EC-wide scientific ne tworking system on food safety and leading to 
efficient sharing of information.117  
81. Various Community-wide legislation has b een adopted, in the area of sanitary and 
phytosanitary standards, on, inter alia , animal feeding stuff, animal  health conditions, and plant 
health. On animal feedingstuff, it relates to cont rol by sampling and analysis; control of composition 
(e.g. additives), undesirable substances, protein sour ces; and marketing. On animal health conditions 
of imports from third countries, it relates to veteri nary checks, health sta ndards, countries from which 
imports are authorized, inspections, control of sp ecific diseases, and marketing of specific products. 
The plant health regulations cover protective me asures against diseases of plants and pesticide 
residues, and the marketing of seeds and the propag ating material for agriculture, horticulture, and 
forestry. Some of these regulations have been the subject of several criticisms from third countries, 
including that they are much stricter than interna tional regulations (e.g. Code x Alimentarius and OIE), 
and there are high administrative costs in meeting them.118 
82. Under current arrangements, in order to export pr oducts of animal origin to the EC, a country 
must be approved for the relevant commodity, and the products must originate in an establishment 
approved to export to the EC.  Where there are no specific Community provisions, food (and feed) is 
to be considered safe when it conforms to the specific provisions of the national law governing its 
safety in the territory in which it is circulated. SPS pr ovisions are also contained in several EC's trade 
agreements; however their coverage and depth vary  as some reiterate the obligations under the WTO 
SPS agreement, while others include more compre hensive annexes (e.g. EC-Chile). Under the SPS 
Agreement, the EC and its member States (the EC-15) notified the WTO of 43 measures in 2002 and 
59 in 2003. 
83. Under a Council Directive adopted on 16 December 2002119, member States are required to 
implement a number of new measures to, inter alia , prevent food business operators from causing the 
spread of diseases transmissible to animals; subj ect products of animal origin intended for human 
consumption to veterinary certification; and to  carry out official animal health controls.120 
Furthermore, the directive requir es member States to take measur es to ensure that third country 
imports of products of an imal origin intended for human consump tion comply with the general animal 
health rules governing all stages of production, pro cessing, and distribution.  In order to ensure 
compliance with Community rules, a list of third countries or regions of third countries, from which imports of specified products of animal origin ar e permitted, is prepared by the Commission. Under 
the directive, a third country can only appear on su ch a list if its audit by the Community has taken 
place and its competent veterinary authority has provided appropriate guarantees as regards 
                                                     
 
116 In the case of emergency safety measures. 
117 In the event of an unresolved substantive diverg ence over scientific issues between the EFSA and 
the competent body in a member State,  a joint document clarifying the co ntentious issues and identifying the 
relevant uncertainties in the data is to be prepared for Council to take the decision. 
118 Otsuki, Sewadeh, and Wilson (2000) estimate that  the implementation of EC standards on aflatoxin 
levels in food compared with regulations based on international standards, would reduce health risk by 
approximately 1.4 deaths per billion a year and could de crease African exports by more than US$670 million. 
119 Council Directive 2002/99/ EC, 16 December 2002.  
120 Nonetheless, experts from the Commission may also carry out on-the-spot checks. European Communities WT/TPR/S/136 
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compliance with Community legislation. Veterinary  certificates showing that products of animal 
origin meet Community legislation are required on importation. 
84. Regulation No. 1774/2002 (adopted on 3 Oct ober 2002) provides that the importation and 
transit of animal by-products and processed products  (not intended for human consumption) are to be 
prohibited unless in accordance with  Community legislation. It thus establishes conditions ensuring 
that products imported from a third country are of hygiene standards equal or equivalent to those 
applied within the EC. To this end, the regula tion introduces a system of approval for imports of 
animal by-products from third countries, including  an inspection procedure, health certificates and 
relevant animal institutions.121 The regulation has been applied since 1 May 2003.122  
85. Since its last TPR, the EC has adopted two re gulations related to food and feed products 
produced from genetically modified organisms (GMOs).123 Under a regulation adopted on 
22 September 2003, applications for authorization to place genetically modified food and feed 
products on the EC market are to be lodged with  the EFSA through a competent national authority. 
The EFSA is expected to give its opinion to the Commission within six months.124 On the basis of the 
EFSA's opinion and "other factors" (not specified), the Commission is empowered to take a decision 
in consultation with the Committee on Food Chain and Animal Health within three months. The 
implementation of the 2003 regula tion should pave the way for lifting the moratorium on new 
authorizations.125 The second regulation concerns the traceability and labelling of GMOs, and the 
traceability of food and feed products produced from GMOs.126 According to this regulation, when 
placing a genetically modified product on the Commun ity market, operators must transmit to those 
receiving the product certain details indicating that it contains GMOs. Operators are also required to 
have in place systems and procedures that support the holding of this information for a five year 
period. Operators are also required to ensure that  products containing GMOs be labelled as such. 
86. In response to the WTO ruling on the EC's ban on the use of hormones as growth promoters, 
the Community adopted a directive seeking to  bring its legislation into compliance.127 The new 
directive confirms the prohibition of substances having hormonal action for growth promotion and 
reduces the circumstances under which one of the ho rmones (oestradiol 17-beta) may be administered 
to food-producing animals for purposes other than gr owth promotion. As regards the remaining five 
hormones, the Commission considers the scientific ev idence gathered so far to be insufficient to 
propose a permanent prohibition128;  therefore, the prohibition in the amended directive is provisional. 
The Commission is to review regularly scientific in formation that may become available, and seeks to 
obtain additional information.129 
87. Two laws, aimed at reducing the incidence of food-borne diseases in the EC through 
zoonotics, were adopted during the period under re view. The laws seek to reduce the occurrence of 
                                                      
121 WTO document G/SPS/N/EEC/103/Add.4, 16 September 2003. 
122 In response to comments receive d from third countries,  and to help them comply with all its 
provisions, the Commission adopted regulations laying down  a general "transitional period" for third countries 
that ended on 31 December 2003. Furt her transitional arrangements have since been granted to Australia, 
Canada, People's Republic of China, and the United States, provided that certain conditions are met. 
123 Regulation (EC) No. 1829/2003, 22 September 2003. 
124 This can be extended if further information is  required. The EFSA consults with the relevant 
national competent authorities in giving its opinion.  
125 The moratorium was decided by a majo rity of EC member States in 1999. 
126 Regulation (EC) No. 1830/2003, 22 September 2003. 
127 Directive 2003/74/EC, 22 September 2003. 
128 Testosterone, progesterone, trenbolone acetate, zeranol, and melengestrol acetate. 
129 European Commission Press Release IP/03/1393, 15 October 2003. WT/TPR/S/136 Trade Policy Review 
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zoonotic agents and to monitor them.130 Other measures adopted include a directive relating to plastic 
materials and articles intended to come into contact with foodstuff131; a decision concerning the 
performance of analytical methods to be used for detecting certain substances and residues thereof in 
live animals and animal products; the inclusion of tw o exotic parasites - small hive beetle and the 
parasitic mite - to the lists of notifiable animal diseases; and a complete publication (in one source) of 
the lists of authorized additives in feeding stuffs.132  
88. A Commission Decision of July 4 2003 imposed prohibitions on imports of Brazil nuts in 
shell originating in or consigned from Brazil133, unless the consignments are accompanied by a report 
containing the results of official sampli ng and analysis and a health certificate.134 On 20 June 2003, 
the Commission introduced emergency measures prohibiting member States from importing hot chilli 
and hot chilli products (ex CN code 09042090)135, unless an analytical report accompanying the 
consignment or a test within the EC demonstrat es that the product does not contain Sudan red 1dye.136 
The EC also prolonged the duration of the ban on the placement on the EC market of toys and 
childcare articles intended to be placed in the mouth by children under three years of age, made of soft 
PVC containing certain phthalates.137  
89. During the period under review, restrictions came  into force affecting the marketing and use 
(within the EU) of creosote and hexachlorothene,  certain azodyes, and short-chain chlorinated 
paraffins. On 12 August 2002, the Commission adopted  a new mechanism for the allocation of quotas 
to producers and importers for hydrochlorofluor ocarbons for the period 2003 to 2009, limiting their 
respective percentages to the 1999 levels and taki ng into account the allocation and claims on import 
quotas in previous years.138 Furthermore, through a common syst em of notification and information 
on trade with third countries, the EC controls th e trade in certain chemicals that are banned or 
severely restricted on account of their effects on human health and environment; the EC applies the international notification and prior informed c onsent (PIC) procedure established by the United 
Nations Environment Programme (UNEP) and th e Food and Agriculture Organization (FAO).  
90. All the ten acceding countri es have transposed the EC  acquis related to food safety into their 
national legislation  and are to implement them upon accession. Six new member States have 
requested transitional periods to further upgrade food-processing plants.
139 Other transitional 
arrangements relate to quality requirements for seeds, animal nutrition, plant protection, and 
marketing of forest reproductive material.  
(xi) Government procurement 
91. In 2002, public procurement represented some 16% (€ 1,493 billion) of the EC's GDP. 
Ensuring transparency and increasing the level of effective competition in the EC's public 
procurement market remains a priority of the internal market strategy.  
                                                      
130 European Commission Press Release IP/03/1306, 29 September 2003.  
131 Commission Directive 2002/72/EC, 6 August 2003.  
132 European Commission Notice No. 2002/C329/01.  
133 OJ L168/33, 5.7.2003. 
134 These measures were taken after the Commission' s Food and Veterinary Office (FVO) carried out 
an assessment mission in Brazil. 
135 OJ L154/114, 21 June 2003. 
136 This measure was taken after France discovered the dye in hot chilli products originating from 
India. 
137 Decision 1999/815/EC, 19 April 1999. 
138 Council Directive 76/769/EEC, as amended. 
139 Products coming from plants under transitional prov isions are required to be clearly marked, and are 
not allowed to be sold outside the national borders; other plants not meeting EC standards will be closed down.  European Communities WT/TPR/S/136 
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92. Since the last TPR of the EC, there have been  no legislative changes to its basic public 
procurement regime.140 Under the current legislative frame work, there are directives on public 
supplies, works, and services141, complemented by a remedies directive. Another directive concerns 
the procurement by publicly owned entities and private entities with special or exclusive rights 
operating in the water, energy, transport, and tel ecommunication areas (utilities directive); this is also 
complemented by a remedies directive. The scope  of application in each of the directives is 
established by minimum thresholds for contracts,  which correspond where necessary to those in the 
GPA, while below-threshold contracts are covered by the provisions and principles of the EC Treaty. The thresholds have been established at € 200,000 for public supply and public service contracts
142, 
and € 5 million for public works contracts.  
93. Under the current provisions, member States' cont racting authorities are, in general, required 
to define their technical specifications by re ference to EC approved standards or technical 
specifications. However, under EC Law, contracting authorities may not reject tenders with technical 
solutions equivalent to the specifications they have defined. Contracting authorities can choose 
between open and restricted procedures to award c ontracts;  negotiated procedures are available under 
the conditions set out in the directives. The select ion of participants is based on their technical, 
economic, and financial capabilities. The criteria for awarding contracts include either the lowest 
price or the economically most advantageous tender.143 Contracting authorities have an obligation to 
inform, within 15 days, any unsuccessful applican t or tenderer who requests the reason for the 
rejection of his application or tender.  
94. Under the relevant remedies directive, an uns uccessful applicant or tenderer is entitled to 
challenge contract award procedures by contractin g authorities before national review bodies.  In 
respect of the remedies available prior to the signa ture of the contract, national review bodies must be 
empowered to take, at the earliest opportunity an d by way of interlocutory procedures, interim 
measures including the suspension of the award proce dure. National remedies must also provide for 
the possibility to set aside illegal decisions such as by removing discriminatory specifications or by 
cancelling the award decision. For utilities only (directive 93/38/EC), and pursuant to Directive 92/13/EEC, some member States have replaced thes e two remedies by such measures as the payment 
of daily fines with the aim of correcting infring ements and preventing in jury to the interests 
concerned. Under both remedies directives, when the c ontract is signed, national review bodies, or in 
some member States a distinct body such as a Civil Court are empowered to award damages to aggrieved tenderers. In addition, at  EC level (Article 226 of the EC Treaty), dissatisfied applicants or 
tenderers can lodge a complaint relating to a contra ct award procedure covered by the EC Directives 
with the Commission services. Where appropriate , the Commission can initiate an infringement 
procedure against the member State concerned for failure to comply with its obligations under EC 
                                                     
 
140 The common public procurement rules relate to: (i) the definition of the type of public purchaser 
and the scope of contracts subject to the Directives; (ii) the definition of the type of contract award procedure 
public purchasers should normally use; (iii) technical specifications, whereby prefer ences are to be given to 
Community standards and discriminatory technical requirements are banned from the contract documents; (iv) 
advertisement, i.e. tender notices must be published in the Official Journal of the EC, comply with specific 
requirements concerning deadlines, and be drawn up in accordance with pre-established models; 
(iv) participation, establishing objective criteria for qualitative selection and for the award of contracts; and 
(v) obligations as regards statistical reporting to permit the Commission to monitor the functioning of these rules  (European Procurement Brochure, available online at: http://www.simap.eu.int/EN/pub/src/welcome.htm).  
141 Directives 93/36/EC and 93/37/EC, 14 June 1993; and 92/50/EC, 18 June 1992, amended by 
Directive 97/52/EC, 13 October 1997. 
142 The minimum thresholds for supply and service contracts relating to entities operating in the water, 
energy, transport and telecommunication sectors is € 400,000.  
143 Contractors may be excluded if they are bankrupt or have not met their fiscal obligations with the 
tax authorities. WT/TPR/S/136 Trade Policy Review 
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Law. Thereafter, if the Commission considers that  the member State did not take the appropriate 
measures to correct the alleged infringement, it can  bring the dispute before the European Court of 
Justice, which will give a definitiv e ruling on the alleged infringement.  
95. Where appropriate, the EC's public procurement market is subject to the disciplines of the 
Government Procurement Agreement (GPA), to which the EC is a party. Consequently, suppliers of 
goods and services from GPA member countries may tender for contracts above specified thresholds
144, in accordance with the commi tments assumed by the EC.145 On 12 December 2002, the 
EC notified the WTO of modifications to its Ge neral Notes in Appendix I to the GPA. This 
modification entitles suppliers and service providers  from Switzerland to challenge the award of 
contracts by EC entities listed in Annex 2 of th e GPA (in accordance with the bilateral agreement 
between the two parties). Other EC preferential tr ade agreements (Chapter II(5)(iii)) also provide 
reciprocal access to procurement markets.146 
96. As part of the preparation for accession, the acceding countries were required to align their 
public procurement legislation with that of the EC and implement the latter upon accession. As at 
March 2004, some of the acceding countries were at the final stages of aligning their legislation on 
public procurement with that of the EC directives.  None of the ten acceding countries are party to the 
GPA, however they all have observer status in the Committee on Government Procurement, with the 
exception of Cyprus. As a result of their accessi on to the EC, from 1 May 2004, the same rights and 
obligations under the GPA have become applicable  to the ten acceding countries as to the 15 existing 
member States.  
97. Trends in EC public procurement transparency show a slight increase in the percentage of 
public procurement contracts published in the Official Journal (an indicator of market transparency) 
to 16.3% in 2002 from 15.4% in 2001. As a percenta ge of GDP, the value of public procurement, 
which was openly advertised, increased from 2.5% in 2001 to 2.7% in 2002 (Table III.10). According 
to the Commission, relatively fewer results of pr ocurement competitions are being made known, as 
recent trends point to a growing gap between the nu mber of invitations and contract award notices 
published; of the award notices published in the Official Journal , direct cross-border procurement 
accounted for only 1.26% of award notices in 2001 (1.5% in 2000).147 A recent study by the 
Commission shows that f oreign subsidiaries bidding for contracts in the member State where they 
are located tend to have a slightly higher rate of success than member State firms bidding for 
contracts in their own home countries.148 
                                                      
144 The thresholds for the 2004-05 period ranged from € 154,014 under Anne x I entities for goods and 
services other than construction to € 5,923,624 un der Annex III entities for co nstruction services (WTO 
documents GPA/W/285 and GPA/W/285/Add.4). 
145 Council Decision 94/800/EC, 23 December 1994.  The EC's commitments cover the procuring 
entities listed in Annexes 1, 2 and 3 of Appendix I of its Schedule. These include central government entities, sub-central government entities, and other entities such as those supplying utilities. The contracts are subject to 
minimum thresholds. Selected goods and services are specifi ed in positive lists (Annexes 4 and 5 of Appendix I) 
(WTO document GPA/W/35/Rev.1, 8 July 1999). 
146 For instance, the Europe Agreements  and Euro-Mediterranean Agreements. 
147 COM(2002) 743 final, "Economic Reform: report on the functioning of the community product and 
capital market". 
148 For further details, see DG Internal Market (2004). European Communities WT/TPR/S/136 
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Table III.10 
Open procurement indicators, 1995, and 2000-02 
 EC-15 Membersa 
 EC-15 B DK D EL E F IR I L NL A P FI S UK 
Openly advertised public procurement (% of total procurement) 
1995 8.4 6.9 16.4 5.1 34.1 8.5 5.5 11.4 9.8 5.2 4.8 4.5 15.5 8.0 10.5 15.0
2000 14.9 15.6 20.9 5.6 31.9 25.4 14.6 21.4 17.5 12.3 10.8 13.5 15.0 13.2 17.9 21.5
2001 15.4 18.6 15.8 5.7 35.3 23.4 16.8 19.3 15.3 10.7 12.5 14.6 17.7 15.1 23.4 21.5
2002 16.3 15.8 14.5 7.5 45.7 23.5 19.1 18.0 18.9 13.3 8.9 15.5 19.4 13.9 19.3 21.1
Openly advertised public procurement (% of GDP) 
1995 1.44 0.99 2.67 0.91 4.87 1.18 0.94 1.54 1.23 0.8 0.99 0.83 2.19 1.3 2.41 3.28
2000 2.41 2.32 3.55 0.96 4.37 3.25 2.44 2.6 2.17 1.67 2.19 2.31 2.12 2.01 3.67 3.81
2001 2.48 2.79 2.90 0.96 4.58 2.97 2.75 2.55 1.94 1.52 2.58 2.36 2.46 2.37 4.68 3.83
2002 2.65 2.40 2.73 1.28 5.77 3.06 3.18 2.39 2.25 2.06 1.90 2.55 2.58 2.28 3.95 3.89
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Sp ain;  F:  France;  IR:  Ireland;  I:  Italy;  L: Luxembourg;   
 NL:  the Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  the United Kingdom. 
b All figures are estimates. 
Note The term "openly advertised" refers to publication in the Official Journal . 
Source:  Eurostat, Public procurement 1 and 2 , Key Indicators.  
98. The Commission observes that increased tran sparency resulting from the adoption of a 
comprehensive set of rules on public procurement at EC level, together with a more systematic 
approach in its infringement policy, has highlighted  problems of implementation of the EC regime by 
the member States. This is evident in the high num ber of infringements related to public procurement. 
For instance, the Commission handled 403 complaints  concerning the award of contracts in 2002, and 
389 in 2003.149 According to the Commission, the EC's  public procurement market is still not 
sufficiently open and competitive; public purchasers, particularly at the local government level, are 
unaware of the full extent of the rules, whic h may account for the low level of cross-border 
procurement.150 It is estimated that a 5% cost reduction,  resulting from more competitive and efficient 
public procurement, would save over € 70 billion. Under the Internal Market strategy (2003-06), a number of actions have been pr oposed to address the situation.
151 
99. Measures are being put in place to simplify, m odernize and make more flexible the public 
procurement market in the EC. A common procurem ent vocabulary (CPV) seeking to standardize and 
simplify the description of the subject of contract notices was adopted in 2002.152 The last TPR of the 
EC referred to two proposals for new directives on public procurement, one on the coordination of 
procedures for the award of public works contract s, public supply contracts, and public service 
contracts, and the other coordinating the procurem ent procedures of entities operating in the water, 
energy, transport and postal services sectors. These two new directives were approved by the 
European Parliament and Council in the beginning of 2004;  they are expected to enter into force in 
May 2004. EC member States will have up to 21 mo nths to implement the new directive, until which 
time the current directives will continue to be applicable. According to the Commission, the new 
                                                      
149 The Commission has decided to follow a more system atic, horizontal approach in handling cases of 
infringement of the public procuremen t rules rather than just reacting case-by-case to complaints received 
(COM(2001)309, p.88). 
150 Cross-border public procurement is estimated to have stagnated at about 10% since 1998. 
151 COM(2003) 238 final, dated 7 May 2003. Available online at:http://europa.eu.int/eur-
lex/en/com/cnc/2003/com2003_0238en01.pdf 
152 Regulation (EC) No. 2195/2002, 5 November 2002. WT/TPR/S/136 Trade Policy Review 
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thresholds in the draft directives would neither ch ange the effective application of the procurement 
rules nor pose any issues regarding the GPA.153  
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration and documentation 
100. With the exception of goods placed under the out ward processing or transit procedure, all 
Community goods intended for export are to be  placed under the export procedure. Under the 
Common Customs Code (section (2)(i)), Community goods  declared for export are subject to customs 
supervision from the time of the acceptance of the customs declaration until the time they leave the 
customs territory of the Community. Under the normal procedure, the declaration consists of a Single 
Administrative Document (SAD), as well as other documents, including the certificate of origin 
necessary for the provision of preferential treatme nt by importing countries (when applicable), and 
licences for products covered by the Common Agri cultural Policy. Customs authorities can grant 
permission to simplify the completion of export formalities and procedures.  
(ii) Export taxes, charges and levies 
101. There is no provision, at the Community leve l, for the imposition of duties or charges on 
exports.  
(iii) Export prohibitions, restrictions, and licensing  
102. Under the EC's regulation on the common rules for exports154, restrictions are permitted on 
grounds of public morality, public policy, the pr otection of health and life of humans, animals or 
plants, and national cultural treasures.155 The restrictions remain under the competence of both the 
Commission and member States. The regulation also provides for measures to be taken in order to 
prevent a critical situation arising from a shortage of essential products. 
103. Export prohibitions are adopted by the Community and its member States as part of the 
Common Foreign and Security Policy (CFSP). During the period under review, the EC, in accordance 
with United Nations Security Council (UNSC) Re solution 1483, adopted a regulation repealing all 
existing comprehensive restrictions to trade with Iraq. However a ban remains in place on the sale or 
supply of arms and related material, other than  those required to serve the purposes of UNSC 1483.156 
The embargo on export of arms to Angol a (UNITA) was removed in December 2002.157 Furthermore, 
pursuant to the Lusaka Agreement, the arms embarg o in place on the Democratic Republic of Congo 
was amended to allow supplies for personal use by  UN personnel; humanitarian or protective use; and 
landmine clearing equipment. Other countries facing embargoes on EC exports of arms, munitions, 
military equipment, and (in some cases) equipm ent for internal repression, are Bosnia and 
Herzegovina, China (P.R.), Iraq, Liberia, Libya,  Myanmar, Sierra Leone, Somalia, Sudan, and 
Zimbabwe. 
                                                      
153 WTO document WT/TPR/M/102/Add.2, 31 March 2003.  
154 Council Regulation (EEC) No. 2603/69, 20 December 1969. 
155 For instance, exports of foodstuffs and feedstuffs with high levels of radioactive contamination are 
banned; and archaeological objects, sc ulpture, and books (more than 100 y ears old) require export licences.  
156 Council Common Position 2003/ 495/CFSP; and Council Regula tion (EC) No. 1030/2003, 
16 June 2003. 
157 Council Common Position 2002/991/CFSP.  European Communities WT/TPR/S/136 
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104. The EC's regulation on the control of exports of dual-use items and technology (i.e. items for 
civil and military purposes) provides a list of items considered as such, a Community export authorization system, and rules for information ex change and consultation between member States 
concerning decisions to grant export licences.
158 In January 2003, the EC amended and updated the 
regulation concerning the use of dual-use items and technology in order to enable member States to 
comply with their international commitments.159 In June 2003, the Council adopted a Common 
Position on the control of arms brokering to avoid the circumvention of UN, EC, or OSCE embargoes 
on arms exports, as well as the criteria set up in  the EC's Code of Conduct on Arms Exports.160  
105. During the period under review, export licences we re required for certain  products under the 
common market organization and under tariff- quota commitments with trading partners. 
(iv) Export subsidies  
106. The EC provides export subsidies for several commodities, including wheat and wheat flour, 
coarse grains, rice, rapeseed, olive oil, sugar, butte r and butter oil, skim milk powder, cheese, other 
milk products, beef meat, pig-meat, poultry meat, eggs, wine, fresh and processed fruit and vegetables, raw tobacco, and alcohol. The subs idies cover the difference between the higher 
Community prices (Chapter IV(2)(ii)) and the lower world market prices of the products; therefore, 
they change with world prices, exchange rate  fluctuations, and domestic price levels.  
107. For the marketing year 2001/02, total export subs idies granted by the EC were € 2.5 billion. It 
is estimated that the EC accounts fo r 90% of all OECD export subsidies.
161 The products receiving the 
highest share of export subsidies were sugar (18.8%)162, "incorporated products" (16%), milk products 
(15.6%), beef (15.1%), butter and butteroil (12.6% ), and cheese (7.3%). Overall, the actual export 
subsidy outlays were about 35% of the EC's WTO export subsidy commitments; however, they were 
high for specific commodities, such as incorporated products (99.2%), sugar (96.7%), and rice (82.3%).
163 
108. Studies evaluating the effects of the phasing out of  the European agricultural export subsidies, 
after the full implementation of the Agenda 2000 CAP reform, indicate that there will be notable 
reductions in EC domestic prices as well as a declin e in exports, in particular of dairy products; 
however, there will be a limited impact on arable crop production, prices, and land. In general, the 
EC's agriculture sector is expected to suffer a we lfare loss; however, gains in consumer welfare are 
estimated to overcompensate this loss, thereb y leading to a net welfare gain to the EC.164 
109. According to the Commission, the EC maintain s its readiness to negotiate further reductions 
in export subsidies on condition that all forms of export subsidization (expor t credits, abuse of food 
aid, unfair practices of state trading enterprises) are disciplined.165  
                                                      
158 Council Regulation (EC) No. 1334/2000, 22 June 2000. 
159 Including the Wassenaar Arrangement, the Miss ile Technology Control Regime, the Nuclear 
Suppliers Group, the Australia Group and the Chem icals Weapons Convention (Council Regulation (EC) 
No. 149/2003, 27 January 2003).  
160 Council Common Position 2003/468/CFSP. 
161 World Bank (2003). 
162 This does not include exports of sugar of ACP and Indian origin.  
163 WTO document G/AG/N/EEC/44, 11 June 2003. 
 164 Gohin and Gautier (2003); OECD (2000); and Leetma (2001).   
165 WTO document WT/TPR/M/102/Add.2, 31 March 2003. WT/TPR/S/136 Trade Policy Review 
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(v) Export assistance 
110. The EC does not have a policy of direct or indirect assistance to exports. However, such 
assistance can be offered by individual member Stat es, subject to Community rules. The coordination 
of credit insurance policies, guarantees, and financia l credits is governed by Council Decision 73/391, 
as amended. This regulation establishes the consulta tive procedure to take place when a State, state 
organization, or any body for credit insurance or finance, proposes to grant or guarantee, fully or 
partially, foreign credits linked to exports of goods or services, which depart from specified Community norms.
166 The Community norms, which cannot be departed from without consultation, 
refer to the duration of credits, the percentage of local expenditure, and leasing contracts. The 
duration of any credit granted, whether supplier cred it or financial credit must not exceed five years 
calculated from specified starting points depending on the type of good or service; in the case of guaranteed private credits, the balance of the local  expenditure portion payable on credit must not 
exceed 5% of the contract price
167; leasing contracts are also to be treated as credits and where their 
total duration is not expressly restricted, a duration  in excess of five years is defined as a deviation from Community norms.  
111. The Council Decision 82/854/EEC (10 December 1982)  deals with the problem raised by 
subcontracting (with parties in other member States or in third countries) for the provision of export guarantees and finance; it establishes thresholds belo w which subcontracts are to be included in the 
cover granted to a principal contractor
168, and contains provisions on the financing of such 
subcontracts. Furthermore, a regulation on recipr ocal obligations of export credit insurance 
organizations in member States aims to improve the competitiveness of Community exports on third 
country markets by facilitating co-operation betw een export undertakings in different members 
States.169 A directive aslo exists to harmonize the main provisions on export credit insurance for 
transactions with medium and long -term cover.170 
112. The Community is party to the OECD Arrangement on guidelines for officially supported 
export credits.171  
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) State-owned enterprises 
113. Notifications made by the EC to the WTO indi cate that there are currently two state-trading 
enterprises in the EC: Gaz de France, which produ ces gas;  and Entreprise Minière et Chimique, 
which produces fertilizers.172  Gaz de France is also engaged in export activities. Since the last 
Review of the EC, there have been no developments  on the external tradin g activities of sate-trading 
enterprises in the EC. 
                                                      
166 The norms are listed in Annex I of the Decision. 
167 Consultation shall not be instituted in the case of contracts that provide for payment of the local 
expenditure portion to be made, at the latest, upon the expiry of a period of three months, calculated from the 
final completion of the works or deliveries. 
168 The tresholds are 40% for contracts of a value less than € 7.5 million; € 3 million for contracts of a 
value between € 7.5 million and € 10 million; and 30 % for contracts of a value over € 10 million. 
169 84/568/EEC, 27 November 1984. 
170 98/29/EC, 7 May 1998. 
171 Council Decision 2002/634/EC, 22 July 2002. 
172 WTO documents G/STR/N/5/EEC , G/STR/N/6/EEC, and G/STR/N/7/EEC, 23 January 2002; and 
G/STR/N/3/EEC, 23 July 2002. European Communities WT/TPR/S/136 
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(ii) Competition policy and regulatory issues  
114. The legal basis for the application of comp etition policy in the EC is in its Treaty.173 Member 
States are required to adopt an economic policy "c onducted in accordance with the principle of an 
open market economy with free competition". The EC's  competition policy aims to improve consumer 
welfare and to enhance the competitiveness of European  industry. This rests on four main areas: anti-
trust rules, merger regulation, liberalization of m onopolistic economic sectors, and the control of state 
aid.  
115. During the period under review, major reforms ha ve taken place in most areas of the EC's 
competition policy in order to meet the challeng es of an enlarged union, as well as to address the 
structural problems that limit the competitiveness  and hamper the growth opportunities of the 
European economy.174 
(a) Anti-trust 
116. The Treaty prohibits (as incompatible with the common market) anti-competitive agreements 
between undertakings that may affect trade between member States175, except for those exempted as 
being beneficial on balance to economic  efficiency and consumer interest.176 Exemptions may be 
granted by the Commission on an individual basis, following an examination of a particular 
agreement, or on the whole (i.e. block exemption) . The Commission's work in  this area has focused 
increasingly on preventing the most serious forms of anti-competitive behaviour, such as price-fixing 
and market-sharing cartels.  
117. On 16 December 2002, a regulation was adopted to  modernize the enforcement system for EC 
competition rules on restrictive agreements and th e abuse of dominant positions. The new regulation 
abolishes the centralized notification system, in operation since 1962; hence, companies will no longer have to notify their individual agreements to the Commission for clear ance if they wish to 
obtain an exemption. Under the new directly app licable exception system, companies are required to 
ensure that their agreements do not restrict comp etition or, in case they do, that they qualify for 
exemptions under the EC's directly applicable exception system.
177 The Commission argues that these 
reforms reduce bureaucracy since, after 40 years of th eir application, companies are generally capable 
of evaluating the legality of their need. A second feature of the new regulation is that it allows for joint enforcement of the rules governing restric tive practices by the Commission, the national 
competition authorities, and the national courts. In pa rticular, the application of the exception rules on 
anti-trust exemption has been extended to allow for their application by national authorities and 
courts.
178 To facilitate this process, the Commission is  setting up a network of European Competition 
                                                      
173 Articles 81 to 90. 
174 "EC competition policy after May 2004", Speech by Mario Monti, EC Commissioner for 
competition policy, Speech/03/ 489, 24 October 2003. 
175 No definition of these undertakings is provided by the Treaty; however, the term is understood to 
encompass a wide range of legal forms, including companies, partnerships, cooperatives, nationalized industries, 
and other kinds of public corporations, and individuals, engaged in the production and distribution of goods and 
services.   
176 Article 81(1) of the Treaty prohibits agreements tha t: (i) directly or indirectly fix purchase or selling 
prices or any other trading conditions;  (ii) limit or control production, markets, technical developments, or 
investment; (iii) share markets or sour ces of supply; (iv) apply dissimilar conditions to equivalent transactions 
with other trading partners; and (v) ma ke the conclusion of contracts subject  to the acceptance by other parties, 
for further obligations unrelated to the subject of the contract. Article 82 prohibits, as incompatible with the 
common market, the abuse of a dominant position, without exception. 
177 These agreements will be valid automatically as long as the exception criteria are met. 
178 Under the old legislation, exemption was solely in the hands of the Commission. WT/TPR/S/136 Trade Policy Review 
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authorities (including from the acceding countries) to ensure that anti-trust rules are enforced in a 
consistent manner. Applicants can bring their cases of complainant or leniency to authorities they 
consider best placed to handle them. The Commissi on will continue to handle cases (primarily, but 
not exclusively), affecting more than three member States. The regulation is set to enter into force on 
1 May 2004, the date of accession of the ten acceding countries.179 The Commission expects the new 
regulation to enable it focus on the most ser ious forms of anti-competitive behaviour.  
118. A new regulation seeking to reduce the inciden ce of anti-competitive practices in the EC's 
motor industry, in particular on the distribution and servicing agreements between car-makers and 
dealers, entered into force on 1 Octobe r 2003, after a one year transition period.180 Under the 
regulation, motor vehicle manufacturers can choose between an exclusive or selective distribution 
system.181 According to the Commission, the new regulati on lifts most of the restrictions that made 
multi-brand dealership sales uneconomic in practice,  such as requirements for separate premises, and 
management and sales teams for different brands.182 Other provisions under the new regulation 
include: the liberalization of after-sales services (such as through granting distributors the choice of 
carrying out after-sales servicing themselves or sub- contracting it and allowi ng independent repairers 
to become authorized within the manufacturer's network without the obligation to sell new cars); 
allowing manufacturers of components, normally supp lied to vehicle manufacturers, to sell these parts 
directly to all repairers; and improved access to a ll technical information for independent operators, 
such as repairers and distributors. However, th e latest available figures (November 2003) indicate 
that, though there is a trend towards greater conve rgence in car prices within the EC, European 
consumers can still make significant savings by bu ying their cars in other member States, i.e. 
competition and cross-border trade have not yet brought about significant price convergence.183 Since 
the figures captured the situation before 1 October 2003 (the date of the full implementation of this 
regulation), the anticipated convergence in prices might not be fully reflected. 
119. On 27 February 2003, the Commission adopted a new insurance block exemption 
regulation.184 The regulation exempts certain types of in surance agreements from the general rule 
governing prohibition in this area185, provided that the cooperation does not go beyond what is 
justified by consumer interest, and in particular, does not concern the coverage, terms, or premiums 
charged in insurance policies offered to consumer s. The exempted agreements cover: the joint 
calculations of risks; joint studies of future risk s; the establishment of non-binding standard policy 
conditions; the establishment and management of in surance pools; and the testing and acceptance of 
security equipment not subject to EC-wide harmoniza tion. The new regulation came into effect on 31 
March 2003 and will be valid until 31 March 2010.186 
120. On 26 February 2003, Council adopted a regul ation giving the Commission clear enforcement 
powers to review cases relating to air transport between the EC and third countries.187 The regulation 
                                                      
179 This regulation repeals Regulation 17/1962, 21 February 1962. 
180 Commission Regulation (EC) No. 1400/2002, 31 July 2002. 
181 Under the exclusive distribution system dealers ar e allocated a given territory. A qualitative and/or  
quantitative criterion is used  for the selective distribution system unde r which any dealer meeting the criterion 
can join the distribution network; no dealer can be prevented from supplying cars to consumers from abroad. 
182 Car makers may require distributors to display thei r cars in brand-specific ar eas within a showroom.  
183 Further details are available online at: http://europa.eu.int/comm./competition/car_sector.  
184 Regulation No. 358/2003 repeals the previous insurance block exemption, Regulation No. 3932/92. 
185 Article 81 of the EC Treaty.  
186 European Commission Press Release, IP/03/291, 27 February 2003. 
187 Council Regulation (EC) No. 41/2004, 26 February 2004. The airline industry is the only sector 
where the Commission has no clear-cut powers to enforce the competition rules insofar as it involves non-EC carriers.  European Communities WT/TPR/S/136 
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also empowers the Commission to grant block exemp tions on air transport agreements between EC 
carriers and those of third countries, with the exception of merger cases.188 Furthermore, a draft 
regulation concerning unfair competition from subsidized third-country airlines is under consideration; the regulation proposes that complain ts be examined to find out whether damage has 
been caused to the EC airline industry as a result of  the subsidy. An out-of-court settlement may be 
found at any time with the third country. However,  in the event of a positive determination, the 
Commission, with the assistance of  an advisory committee, may impose duties on air carriers from 
third countries benefiting from subsidies. The draf t proposal is expected to be adopted by the 
European Parliament and Council in 2004, and enter into force in the same year. Furthermore, in 
March 2003, the Commission began a review of the re gulation on the application of competition rules 
to maritime transport.
189 Under the regulation, price fixing and supply agreements or consultations 
among liner shipping conferences (normally consider ed as hardcore restrictions) are exempted from 
EC competition rules. The purpose of the review is  to ascertain whether certain provisions of the 
regulation, in particular the bloc k exemption immunity granted to liner conferences, are still justified 
and continue to produce the expected benefits.190  
121. The total number of new anti-trust cases increas ed from 284 in 2001 to 321 in 2002; the cases 
initiated by the Commission increased from 74 to 91 . Total cases closed declined from 378 in 2001 to 
363 in 2002. Nine cartel cases were handled in 2002,with fines imposed totalling € 1 billion. 
(b) Mergers 
122. The EC's regulation on merger control seeks to  avoid a situation in which competition is 
significantly impeded, in particular by creating or strengthening a dominant position, created or 
reinforced as a result of mergers and acquisitions.191 Under the Merger Regulation, the Commission 
assesses proposed concentrations with a "Community  dimension", defined according to turnover, on 
the basis of whether a dominant position is created or strengthened.  
123. During the period under review, Council adop ted a revised Merger Regulation, which 
introduces a new substantive standard for the analys is of mergers on compe tition grounds (including 
oligopolies)192; rationalizes the timing for the notification of  proposed mergers to the Commission, by 
introducing the possibility for notification prior to the conclusion of a binding agreement, and by 
abolishing the requirement that transactions be notified within a week of the conclusion of an 
agreement; seeks to reduce the incidence of "multiple  filing", by adopting a system for the referral of 
merger cases from the Commission to member State competition authorities193; introduces more 
flexibility into the time-frame for the conduct of merg er investigations, by adding three weeks to the 
timetable following the submission of a remedy offe r; and strengthens the Commission's fact-finding 
powers, by enabling it to impose higher fines fo r failure to comply with requests to supply 
information. The revised regulation w ill be applicable from 1 May 2004.  
124. Furthermore, in January 2004, the Commission adopted draft guidelines on the assessment of 
mergers between competing firms, in order to pr ovide a transparent and predictable environment 
                                                      
188 European Commission Press Release, IP/03/284, 26 February 2003, and IP/04/272, 
26 February 2004.  
189 Regulation 4056/86, 22 Decemeber 1986.  
190 Commission Press Release, IP/03/445, 27 March 2003.  
191 The EC's merger regulation was elaborated in the report for the previous review of the EC (WTO, 
2002). The main regulation governing merger control in the EC is Council Regulation 4064/89, 
21 December 1989. 
192 Commission Press Release, IP/04/70, 20 January 2004. 
193 That is, the best placed authority shou ld examine a particular transaction.  WT/TPR/S/136 Trade Policy Review 
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regarding decisions on mergers. The guidelines deal with how to analyse the effect of a merger on 
competition in a market; and factors that could mitigate an initial finding of likely harm to competition (such as buyer power, ease of entry, etc.).  A first draft of the guidelines was subject to 
public consultations until March 2003. The Commissi on is also seeking to explore, with member 
States, several options aimed at ensuring sp eedier judicial reviews in merger cases. 
125. The number of mergers and acquisitions notif ied to the Commission declined from 279 in 
2002 to 212 in 2003. The Commission took 231 final decisions in 2003, of which only eight required in-depth investigations, as opposed to 20 in 2 001; all eight transactions were finally approved.
194 
There were no prohibition decisions in either 2003 or  2002, but there was a record number of five in 
2001; two of them had no conditions attached.   
(c) State aid 
126. The legislative environment governing the award of  state aid in the EC has remained largely 
unchanged since its last TPR. In accordance with th e provisions of the EC Treaty, state aid that 
distorts intra-Community competition is prohibited.195 However, under certain circumstances, 
exceptions to this prohibition may be applied for the purposes of regional development; certain 
horizontal objectives, such as supporting small and medium-sized enterprises, research and 
development, environmental protection, rescue and restructuring of firms in difficulty, employment, 
and training; and specific sectors, including coal and steel196, synthetic fibres, motor vehicles, ship 
building, agriculture, fisheries a nd aquaculture, and transport. The current focus of policy is the 
reduction of the levels of state aid and its redir ection towards horizontal objectives, as confirmed at 
the Brussels European Council meeting in March 2003.197 
127. During the period under review, the Commission adopted a block exemption regulation on 
state aid for employment.198 The regulation permits EC public authorities to provide aid to enterprises 
to increase their levels of employment, in particul ar, of workers from certain specified disadvantaged 
categories199; however, the aid granted should not adversel y affect trading conditions in the common 
market. Other sector-specific state aid rul es adopted relate to the film industry200, ship building, and 
the steel and coal sectors (following the expiry of  the ECSC Treaty). Furthermore, a multisectoral 
framework on regional aid was adopted to create great er transparency and to reduce the overall level 
of subsidies for large investment projects. 201 
128. In 2003, about 1,000 cases of state aid were registered, of which over 100 were non-notified 
cases initiated by the Commission; final decisi ons were taken on 617 cases and 53 (around 8.6%) 
were observed to be incompatible with the co mmon market. The latest figures released by the 
Commission show that € 86 billion was granted in state aid by the EC-15 in 2001202, up from 
                                                      
194 According to the Commission, this was because the companies involved submitted undertakings that 
removed the original competition problems (in five cases), or the initial competition concerns were not confirmed by the in-depth investigation (in two cases). 
195 Article 87. 
196 Communication from the Commission concerning certa in aspects of the treat ment of competition 
cases resulting from the ECSC Treaty, OJ C 152, 26 June 2002. 
197 COM (2003) 225 final, 30 April 2003 [Online] . Available at: http://europa.eu.int/comm/competition 
/state_aid/scoreboard/2003/en.pdf.  
198 Regulation No. 2204/2002, 12 December 2002. 
199 Commission Regulation No. 2204/2002, article 2(f), 12 December 2002.  
200 Communication from the Commission on certain legal aspects relating to cinematographic and other 
audiovisual works, OJ C 43, 16.2.2002, p. 6-17. 
201 OJ C 70, 19.3.2002, p. 8-20. 
202 Excluding aid to the railway sector, total stat e aid granted amounted to € 49 billion in 2002. European Communities WT/TPR/S/136 
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€ 85.7 billion in 1999 and € 85.2 in 2000. In relative terms, this represents a marginal decline from 
about 1% of the EC's GDP in 1999 and 2000 to about 0.99% in 2001. However, there are significant disparities between member States. For instance, in  2001, the share of total state aid to GDP ranged 
from 0.66% in the United Kingdom to 1.58% in Finland (Table III.11).
203 The indicator of total aid 
minus aid to agriculture, fisheries, and trans port, shows the Netherlands (0.15%), Luxembourg 
(0.16%), and the United Kingdom (0.17%) to have the lowest allocation of state aid, and Portugal (0.77%), Denmark (0.68%), and Ireland (0.65%) to have the highest. In absolute terms, Germany 
granted the highest level of aid (€ 23 billion) in 2001, followed by France (€ 16 billion), and Italy 
(€ 12 billion).  
Table III.11 
EC State aid as p ercentage of GDP, 2001 
 EC-15 Membersa 
Type EU B DK D EL E F IR I L NL A P FI S UK 
 
Total 
aid 0.99 1.34 1.36 1.14 1.02 0.74 1.10 1.20 1.01 1.30 0.98 0.99 1.04 1.58 0.71 0.66 
Total 
aidb 0.38 0.31 0.68 0.58 0.36 0.42 0.42 0.65 0.35 0.16 0.15 0.26 0.77 0.29 0.19 0.17 
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Sp ain;  F:  France;  IR:  Ireland;  I:  Italy;  L: Luxembourg;    
 NL:  the Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  the United Kingdom. 
b Total state aid less agriculture , fisheries, and transport. 
Source : COM (2003)  225 final. 
129. In 2001, most aid went to transport (46%) and manufacturing (25%).204 The agriculture sector 
received 15% and coal and services received 7% and 4% respectively. Significant differences existed 
in the distribution of aid across member States. For instance, 74% of Luxembourg's sectoral aid was 
allocated to transport, whereas the equivalent allocation for Portugal was 2%. Similarly, Finland 
allocated 65% of its sectoral aid to agricultu re, whereas Denmark and Germany each allocated 9% 
(Table III.12). In 2002, aid earmarked for horiz ontal objectives, including cohesion objectives, 
accounted for 73% of total aid minus agriculture, fisheries, and transport. According to the 
Commission, member States have continued to redirect aid towards horizontal objectives of 
Community interest: the share increased from an  average of 62% in 1998-00 period to 69% in 
2000-02. Furthermore in 2002, some 59% of state aid granted to the manufacturing and services sectors by the the EC-15 was in the form of grants, 24% in tax exemptions, 6% in soft loans, 3% in 
guarantees, 3% in tax deferrals, a nd 6% in equity participation. 
130. All acceding countries will take over and implement the EC's acquis in competition policy 
upon accession, including state aid, subject to a few transitional arrangements. The transitional 
provisions apply to the phasing-out of EC-incom patible fiscal aid to small and medium-sized 
enterprises, and offshore companies; the conversion of  incompatible fiscal aid to large companies into 
regional investment aid; and the provision of st ate aid for environmental protection and for the 
restructuring of shipbuilding and steel industries. The expiry date for these transitional arrangements 
ranges from 2005 to 2011. According to the Comm ission, the Czech Republic, Malta, Poland, and 
Slovakia must enhance efforts to ensure proper enforcement of all state aid measures.
205 
                                                      
203 The high proportion in Finland is due to the high proportion of aid to agriculture (accounting for 
some 65% of total aid in the country).  
204 Some 63.3% of state aid granted to the manufacturing sector by the the EC-15 was in the form of 
grants, 26.1% in tax exemptions, 6.6% in soft loans, 3.1% in guarantees, 0.5% in tax deferrals, and 0.3% in 
equity participation.  
205 European Commission (2003c). WT/TPR/S/136 Trade Policy Review 
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Table III.12 
EC State aid by sector, 2001b 
(Per cent) 
 EC-15 Membersa 
Type EU B DK D EL E F IR I L NL A P FI S UK 
 
Manufacturing 25 18 26 33 35 22 21 35 33 11 15 24 17 16 20 12 
Tourism 0 0 - 0 - 0 - 2 1 - - 1 1 - - 0 
Financial services 2 - - 0 - - 10 8 - - - - 1 - - - 
Media, culture and services 1 0 1 0 0 1 2 2 0 2 1 - 39 1 6 1 
Employment and training in 
manufacturing and services 3 5 23 0 - 11 0 7 1 - 0 1 16 1 1 11 
Transport 46 66 41 40 46 28 40 27 56 74 62 31 2 17 51 64 
Agriculture and fisheries 15 11 9 9 18 16 21 18 10 13 22 42 25 65 21 11 
Coal 7 - - 18 - 22 6 - - - - - - - - 1 
a B:  Belgium;  DK:  Denmark;  D:  Germany; EL:  Greece;  E:  Sp ain;  F:  France;  IR:  Ireland;  I:  Italy;  L: Luxembourg;    
 NL:  the Netherlands;  A:  Austria;  P: Portugal;  FI:  Finland;  S:  Sweden;  UK:  the United Kingdom. 
Source : COM (2003) 225 final. 
(iii) Intellectual property rights protection 
131. The intellectual property rights regime in the EC is governed by both Community-wide 
legislation and legislation of member States. Since the ratification of the Nice Treaty, the EC has assumed a greater role in the external comp etence on intellectual property rights protection 
(Chapter II(2)). Member States' legislation ta kes into account Community legislation, and 
commitments under international agreements, includi ng with the European Patent Convention, World 
Intellectual Property Organization (WIPO) conventi ons and treaties, and the WTO TRIPS Agreement. 
According to the Commission, the protection of intellectual property rights by international conventions has led to some standardization of nati onal legislation in specific fields. However, it does 
not provide an adequate basis for the completion of the single market. Therefore, the Commission seeks to further harmonize member State national legislation.  During the period under review, there were further developments to strengthe n the EC's intellectual property regime. 
(a) Industrial property 
Trade marks and industrial designs 
132. On 27 October 2003, the European Council adopt ed a decision approving the accession of the 
Community to the Madrid Protocol concerning the international registration of marks.
206 In this 
regard, a new regulation on the Community trade mark was adopted.207 The new legislation allows 
Community trade mark holders and applicants to apply for international protection for their trade 
marks under the Madrid Protocol. It also allows holders of internationally registered (under the 
Madrid Protocol) trade marks to apply for protection under the Community trademark system. The Protocol will enter into force for the EC in the last quarter of 2004. Currently, the EC's Office of 
Harmonization in the Internal Market (OHIM) is pr eparing to receive the first of these applications. 
Community trade marks are valid for ten years follo wing the filing date and can be renewed for an 
indefinite number of ten year periods. 
                                                     
 
206 The Protocol was adopted in Madrid on 27 June 1989. 
207 Council Regulation (EC) No. 1992/2003, 27 October 2003.  European Communities WT/TPR/S/136 
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133. In 2002, OHIM received 45,104 applications a nd registered 35,896 Community trade marks; 
a total of 168,190 were registered between 1996 and 2002. 
134. On 21 October 2002, the Commission adopted a regulation allowing OHIM to begin 
registering community designs in early 2003. Regist ration of Community designs (CD) is expected to 
offer companies EC-wide protection for a maximum of 25 years.208 OHIM started receiving 
applications for Community designs on 1 April 2003 . 
135. On 19 February 2004, Council adopted a regul ation seeking to improve the Community trade 
mark (CTM) system209, with respect to the system of search es, which, under the previous regime, was 
considered to unnecessarily prolong the procedure for registration, and to have a high administrative 
burden, without providing applicants with a valuab le and cost-effective tool for monitoring purposes. 
Furthermore, the new regulation envisages that professional representations registered with OHIM 
would be able to conduct business in the EC wherever they reside.210 Other provisions in the proposed 
regulation include abolishing nati onality and reciprocity conditions required for applying for a CTM; 
and changes to the decision-making rules for appointments of the Board of Appeal of OHIM.211  
136. All acceding countries will take over and implem ent the EC's intellectual property regime 
upon accession. In order to protect the unitary character of the CTM and CD, those already granted 
will be automatically extended to the territory of the acceding countries, taking into account prior 
rights existing in the acceding country. 
Patents 
137. There are three methods for filing for patents in EC member States. Patents may be filed 
through the national procedure, with the competent national authority; through the unitary procedure, 
available at the European Patent Office (EPO), in order to obtain a European patent; and through the 
international procedure, available under the Patent Cooperation Treaty (PCT). The Commission 
continues to seek to harmonize legislation in areas where differences in national legislation impede 
the functioning of the internal market. 
138. In March 2003, a common political approach was reached on a draft regulation on the 
Community patent; however complete agreement is ye t to be reached. The aim of the draft regulation 
is to provide for the creation of a single industrial property right (across the EC) to be granted by the 
European Patent Office. The regulation also e nvisages the introduction of a "Community Patent 
Court" to decide on legal disputes in respect of Co mmunity patents. The latter has been justified by 
the Commission on the grounds that "only a centrali zed Community court can guarantee, without fail, 
unity of law and consistent case law". If adopted, th is regulation could eliminate the distortions to 
competition created by the territorial nature of national protection of rights and allow for the free 
movement of goods protected by patents. The draft proposal concerning the harmonization of 
legislation on patents for compute r-related inventions, which existed at the time of the previous TPR 
of the EC, is yet to be adopted.  
                                                      
208 Commission Press Release IP/02/1535, 22 October 2002. Companies will still have the option of 
registering designs under national law as harmonized by Directive 98/71/EC, if they so prefer. 
209 Council Regulation (EC) No. 422/2004, 19 February 2004. 
210 This is to avoid situations where the transfer  of professional place of residence or business to 
another member State lead to the loss of entitlement to represent clients before the central industrial property body of the former country of residence. 
 211 European Commission, COM(2002) 767 final, Proposal for a Council Regulation amending 
Regulation (EC) No. 40/94 on the Community trade mark; and Commission Press release, IP/03/77, 
20 January 2003.  WT/TPR/S/136 Trade Policy Review 
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139. Information on patent applications in 2001, comp iled by the trilateral web-site of the EPO, the 
Japanese Patent Office, and the United States Patent  and Trade Mark Office (USPTO), indicates that 
almost all the activities of the three entities con cern each other (Table III.13). The EPO received 
106,243 applications for European patents in 2001, of which 49% were filed by European Patent 
Convention (EPC) members; the rest were mainly from the United States (28%), and Japan (15%). In 
2002, the EPO granted 47,384 patents, of which 54% to EPC members, 25% to the United States, and 17% to Japan.
212 
140. With respect to the protection of plant varieties,  applicants in member States may use either 
the national system or the unitary procedure av ailable at the Community Plant Variety Office 
(CPVO). In 2002, the CPVO received 2,223 applicati ons for Community plant variety rights and 
1,704 titles. As at 31 December 2002, almost 7,800 Community plant variety rights were in force.213  
Table III.13 
Patent applications at the European Pa tent Office by bloc of origin, 1996-2002 
Year EPC States Japan USA Others 
1996 49.2 17.8 29.2 3.8 
1997 50.1 17.6 28.1 4.2 
1998 50.2 16.8 28.6 4.4 
1999 50.4 16.4 28.4 4.8 
2000 49.4 17.0 28.3 5.3 
2001 48.8 18.0 27.7 5.5 
2002 50.3 15.0 28.3 6.4 
Source : The Trilateral Offices [Online].  Ava ilable at: www.european-patent-office.org. 
141. In the area of biotechnological inventions, a report released by the Commission concluded 
that member States need to fully and swiftly implement the Directive on the legal protection of 
biotechnological inventions in order to k eep the EC from falling behind its competitors.214 
(b) Geographical indications 
142. Community-wide rules exist for the protection of geographical designation of origin and 
indication (GI) for agricultural products and foodstuffs, wines, and spirits.215 For agricultural products 
and foodstuffs, there is a Community-wide system of  examination and registration. Associations of 
producers and/or processors working with the same ag ricultural product or foodstuff, or other natural 
or legal persons, under certain conditions, are entitled to apply for registration for an EU-wide GI. The 
application for registration is to be sent either to the relevant member State, for GIs of products of EC 
origin, or to the authorities in the country in which the geographical area is located, for GIs of 
products of non-EC origin. If the EC member State or the relevant authority in the third country 
considers that the application meets the requirements for registration, they transmit it to the European 
                                                      
212 Further information is available online at: http://www.european-patent-
office.org/tws/tsr_2002/ch4/4_3.html. 
213 Further information is available onlin e at: http://www.cpvo. fr/en/default.html. 
214 IP/02/1448, 10 October 2002. During the period under review, the Commission referred eight 
member States (Austria, Belgium, France, Germany, Italy, Luxembourg, the Netherlands, and Sweden) to Court 
for failure to implement the Directive on the legal protec tion of biotechnological inventions. The Directive aims 
to clarify certain principles of patent law applied to biotechnological inventions, whilst ensuring that strict ethical rules are respected. The Directiv e should have been translated into national law of all member States by 
30 July 2000 (Commission Press release, IP/03/991, 10 July 2003).  
215 Council Regulation (EEC) No. 2081/92, 14 July 1992; Council Regulation (EC) No. 1493/1999, 
17 May 1999;  and Council Regulation (EEC) No. 1576/1989, 29 May 1989. European Communities WT/TPR/S/136 
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Commission, which verifies whether the conditions ar e met. The application requires a specification 
containing the name and description of the product;  the definition of the geographical area; the 
methods of preparation; factors relating to the geographic area; the inspection bodies; details of 
labelling, and any other legislative requirement. If the Commission is satisfied with the application, it 
publishes its positive conclusions in the Official Journal of the EC and, if no objections are raised (by 
interested parties from the EU or third countries) w ithin three months of publication, the product is 
entered in the Communty's register. The Commission examines any objections before taking a decision whether to grant the GI. For wines and spirits, the role of the Commission is less important. 
Community legislation establishes the general level of protection, leaving responsibility for control 
and protection of the relevant GIs with member States. Once communicated to the Commission and 
published, GIs enjoy EC-wide protection. 
143. During the period under review, amendments were made to the regulation establishing 
common rules on the protection of geographical indica tions and designations of origin for agricultural 
products and foodstuffs.
216 The amendments include: changes to the scope of the regulation (inclusion 
of wine vinegar and re moval of mineral water)217; extension of the list of pr oducts covered by Annex I 
(foodstuffs) and Annex II (agricu ltural products); empowering the Commission to impose conditions 
requiring that packaging takes pl ace in the limited geographical area when justified on grounds of 
safeguarding quality, traceability, a nd control; and granting WTO Members the right of objection to 
the registration of EC GIs. Other amendments  include provisions for regulating cases where 
geographical names are entirely or partially homon ymous; and rights that have been acquired through 
use.  
144. During the period under review, EC member States also cleared a shortlist of 41 EC regional 
quality products whose name the EC seeks to r ecuperate under the ong oing multilateral trade 
negotiations on agriculture.218 The list is expected to be upda ted with GIs from the new member 
States. 
(c) Copyright and related rights 
145. In the field of copyright and related rights, there have been no changes to the regulatory 
framework at the Community level during the peri od under review, apart from the conclusion of a 
bilateral agreement extending the legal protection of databases to the Isle of Man. The period for 
member States to implement the directive on the ha rmonization of certain aspects of the copyrights 
and related rights in the informati on society expired on 22 December 2002.219 As regards future 
initiatives, the Commission intends to submit a Co mmunication on the Manageme nt of Copyright and 
Related Rights in spring 2004. The Communication is intended to identify meas ures to create a more 
favourable environment for cross-border marketing and licensing of these rights.220  
                                                      
216 Regulation No. 692/2003 came into force on 24 April 2003.  
217 Council noted that Regulation 2081/92 was not suitable for registering mineral and spring waters, 
and that there were difficulties relating to the use of identical names for different waters and of invented names 
not covered by the provisions of the regulation. According to the Commission, Council Directive 80/777/EEC, of July 1980, on the exploitation and marketing of natural mineral waters provides adequate regulation at the 
Community level. 
218 Under wines and spirits, these include Bordeaux, Champagne, Porto, Rioja, and under other 
products, Feta cheese, Roquefo rt cheese, and Parma ham.  
219 Directive 2001/29/EC, 22 May 2001. 
220 COM (2003) 238 final.  Available online at:  http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003 
_0238en01.pdf. WT/TPR/S/136 Trade Policy Review 
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(d) Enforcement  
146. The Commission reports that some 17,000 legitima te jobs are lost annually through piracy 
and counterfeiting in the EC. The major areas appear to  be in software, where it is estimated that 37% 
of software used in the EC is pirated; and s hoes and clothing, where 22% of sales in the EC are 
pirated and counterfeit goods.221 According to estimates from the Commission, pirated and counterfeit 
goods account for about 5-7% of the EC's internati onal trade: in 2001, their value on the legal 
community market was € 2 billion. This represents  an increase by over 900% in the number of articles 
intercepted, compared with 1998.222 In 2002, the 7,553 procedures undertaken resulted in the 
interception of 85 million articles; in 2001 about 94  million articles were seized in 5,056 procedures. 
In 2002, the main articles seized were cigarett es (37%), CD's, DVD's and cassettes (14%), and 
clothing and accessories (11%).223  Data released for the first two quarters of 2003 record 4,559 
procedures and the seizure of about 50 million artic les. To tackle this problem, Council approved a 
regulation to combat counterfeiting and piracy.224 The new regulation sets out the conditions under 
which customs authorities may intervene where goods are suspected of infringing intellectual property 
rights, and provides harmonized procedures by which right holders may apply for action to be taken. 
In cases of violation, member States are require d to apply penalties that are proportionate and 
dissuasive. Under certain conditions, infringing goods could be destroyed without the obligation to 
initiate proceedings to establish whether an intellectual property rights has been infringed.225  T h e  
regulation enters into force on July 2004.226  
147. Tackling piracy and counterfeiting of goods has been established as one of the priorities 
within the Commission's internal market strategy for 2003–06. In this respect, a directive on the 
enforcement of intellectual property rights  was approved by Council in April 2004.227 The objectives 
of the directive are to harmonize national laws on the enforcement of intellectual property rights 
among member States and to establish a general frame work for the exchange of information between 
the competent national authorities. The new direc tive includes procedures covering evidence and the 
protection of evidence, and provisional me asures, such as injunctions and seizure.228 Remedies 
available to right holders include destruction, r ecall or permanent removal from the market of illegal 
goods, financial compensation, injunctions, and da mages. Furthermore, judges are empowered to 
order certain persons to reveal the names and a ddresses of those involved in distributing the illegal 
goods or services, along with details on the quantities and prices involved. There are also rules on 
who may apply to courts, on presumption of authorship  of copyright or ownership of related rights, 
and on legal costs.  
148. According to the Commission, the acceding co untries have mostly adopted the necessary 
legislation for the protection of intellectual prope rty rights, and have strengthened their relevant 
enforcement bodies. Nonetheless, a relatively high degr ee of violations persists compared with the 
                                                      
221 COM (2003) 238 final.  Available online at:  http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003 
_0238en01.pdf. 
222 From 10 million articles to 100 million articles. 
223Further information is available online at:  http://europa.eu.int/comm/taxation_customs/customs/ 
counterfeit_piracy/counterfeit8_en.htm. 
 224 Council Regulation (EC) No 1383/2003,  22 July 2003. Available online at: http://europa.eu.int/eur-
lex/pri/en/oj/dat/2003/l_196/l_19620030802en00070014.pdf. 
225 European Commission Press Release IP/03/1059, 22 July 2003. 
226 The new regulation replaces Regulatio n 3295/94/EC, 22 December 1994. 
227COM(2003) 46 final. Available online at:  http://europa.e u.int/eur-lex/en/com/pdf/2003/com2003 
_0046en01.pdf. 
228 The directive covers infringements of intellectual property rights provided under Comity law and/or 
national law of member States. European Communities WT/TPR/S/136 
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situation in the existing EC members, hence the need to step up the fi ght against piracy and 
counterfeiting in the coming years.229 
                                                      
 229 European Commission (2003c).