WT/TPR/S/30
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II. RECENT DEVELOPMENTS INEUTRADE POLICY
(1) Overview
1. Atthetimeoftheprevious Trade Policy Review, twomain trade-related issues dominated
theagenda oftheEuropean Union: thecompletion oftheSingle Market programme andthecompletion
andtheentry intoforce oftheUruguay Round. Inthelasttwoyears, theEU'spriorities haveshifted
towards thereform ofCommunity institutions inviewoffuture enlargement andtheintroduction of
asingle currency, bothofwhich haveimportant macroeconomic andtradeimplications. Therecently
concluded Intergovernmental Conference hasbrought about changes totheEUTreaty arrangements
inthefields oftrade andcompetition policies.
2. Thebasic framework andobjectives oftheEU'strade policy havenotchanged substantially
since the1995review. Internally, thelasttwoyears haveseentheconsolidation oftheSingle Market
intheareas where integration isalready welladvanced (goods) anditsdeepening inareas stillinthe
stageofintegration (services). Themainfocus hasbeenonfurthering theapplication byMember States
ofexisting Community legislation, inparticular ofthe1,400 directives adopted since 1985, where
performance byMember States hasbeenuneven, rather thanonthedevelopment ofnewnorms.
3. Externally, theEUmaintained amulti-stranded approach, combining bilateral, regional and
multilateral policies. Bilateral priorities included thestrengthening ofeconomic linkswithneighbouring
countries, through theconclusion ofanewgeneration ofassociation agreements withcountries ofthe
Mediterranean basin(Euro-Mediterranean agreements) andtheacceleration ofthepre-accession strategy
fortheCentral andEastern European countries (CEECs) andtheBaltic States. Theaccession process
ofassociated States isalsocovered bytherecent Commission proposal ("Agenda 2000") toadmit to
EUMembership: Cyprus, theCzech Republic, Estonia, Hungary, Poland andSlovenia asafirstgroup.
Further economic integration intheEuropean continent isalsolikely toresult from theintroduction
ofdiagonal cumulation oforigin between theEU,CEECs, European FreeTrade Association (EFTA)
andEuropean Economic Area (EEA) countries.
4. Other bilateral initiatives concerned thedevelopment ofcloser tieswiththeUnited States under
theNewTransatlantic Agenda, thesignature ofnewPartnership andCooperation Agreements with
Former Soviet Union (FSU) countries andtheopening ofnegotiations withMexico andSouth Africa
withaviewtoconcluding newtrade agreements. TheEUalsocompleted themid-term review ofthe
fourth Lomé Convention andistaking stepstodevelop closer traderelations withMERCOSUR, Chile
andSouth-East Asian countries.
5. Themultiplicity offorms ofeconomic cooperation, andespecially ofpreferential agreements,
ledtheEUCouncil tocallforbothamore careful consideration ofWTO conformity ofproposals for
preferential agreements andaclarification ofWTO rulesinthisfield. TheCommunity iscommitted
toworking towards greater uniformity ofcontent andincreased sectoral coverage (inparticular of
agriculture) initsownpreferential agreements.
6. Recent experience indicates thatthestrength oftheEU'sinvolvement inthemultilateral system
hasnotbeendiminished byitsdense andcomplex network ofbilateral andinterregional ties. Ithas
engaged firmly intheUruguay Round implementation, promoted theuseofWTO dispute settlement
procedures, contributed tothesuccess oftheSingapore Ministerial Conference andwasattheforefront
ofrecent GATS andITAnegotiations. Inaddition, theEUconcluded GATT Article XXIV(6)
negotiations withseveral trading partners tocompensate themforreductions inmarket access stemming
from theaccession ofAustria, Finland andSweden.European Union WT/TPR/S/30
Page 15
(2) TheInstitutional Framework
7. IntheSpring of1996, theHeads ofState orGovernment oftheEUestablished an
IntergovernmentalConference(IGC)toreviewtheTreatyontheEuropeanUnion(theMaastrichtTreaty).
TheConference,drawingontheworkofthe"ReflectionGroup"whichreportedtotheEuropeanCouncil
inDecember 1995, wasaimed atmodernizing theUnion 'sbasic texts andadapting theEU's
decision-making procedures inviewoffuture enlargement.1Byconsensus, economic andmonetary
union waskeptoutofthescope ofthereview process.
8. Negotiations werecompleted bytheHeads ofState orGovernment attheEuropean Council
ofAmsterdam inJune1997. Thenewtreaty willbesigned inthesecond halfof1997andthensubmitted
forratification bytheMember States. Itincorporates changes inareas ofdirect concern toindividuals
(employment,environment,freemovementofpersonsandinternalsecurity)andtotheCommonForeign
andSecurity Policy. Anumber ofinstitutional changes havebeenintroduced, suchasthesimplification
oftheprocess andextension ofthescope ofjointdecision-making between theCouncil andtheEuropean
Parliament, andtheextended useofqualified-majority voting. Provision isalsomade forcloser
cooperation involving some Member States only, inparticular areas ofEuropean policies, subject to
normal Community procedures. Thequestion ofvoting weights inCouncil andofthenumber of
Commissioners willbere-examined inconjunction withthenextstage ofenlargement. Anewinter-
governmental conference willbeconvened iftheUnion istoexceed 20Member States.
9. Inthefieldoftrade policy, theHeads ofState orGovernment agreed onaslight revision of
Article 113oftheRome Treaty. While notmodifying fundamentally thecurrent balance ofpower
within theUnion toconclude multilateral tradeagreements, thisamendment opens thedoortoapossible
extensionoftheCommission'sexclusivecompetencetocertaintypesofservicesandintellectualproperty,
iftheCouncil sodecides byunanimity. Provisions oncompetition policy remain unchanged buta
special reference wasmade toservices ofgeneral economic interest (Chapter III(4)(i)), andinterpretative
protocols anddeclarations forparticular sectors, suchaspublic television andsavings banks, have
beenadded tothemain text.
(3) TheAccession ofNewMember States
10. During 1995, theEuropean Union engaged innegotiations under Article XXIV(6) ofGATT
1994 tocompensate trading partners forthechanges inaccess conditions following theaccession of
Austria, Finland, andSweden. Inrespect ofmostnon-agricultural products, compensation wasprovided
bymeans ofaone-year acceleration oftheGATT 1994 tariff schedule oftheEuropean Union of12.2
Within this,tariffs weresubstantially reduced oreliminated onalargenumber ofchemicals andelectrical
components. Details ofthenewrates ofduty areincluded inCouncil Regulation 3093/95 of
22December 1995.3
1Initsfinalreport, theReflection Group recommended, interalia,theextension oftheuseofmajority voting
todealwithfutureenlargement,simplificationoftheco-decisionproceduresbetweentheCouncilandtheEuropean
Parliament, thatCommon Agricultural Policy reforms beconsidered outside theIGCandthatTreaty provisions
onEMU beleftunchanged.
2Forindustrialproducts,theCommunityadvancedfrom1January1997to1January1996theimplementation
ofthethird stage oftariff reductions covered byitsGATT 1994 tariff schedule.
3Official Journal oftheEuropean Communities, L334/1 of30December 1995.WT/TPR/S/30
Page 16Trade Policy Review
11. These adjustments werecomplemented bybilateral agreements withsome WTO Members on
agriculturalandnon-agriculturalproductsofcommoninterest.Transitionalmeasureshadbeennegotiated
withtheUnited States inearly1995toallow some industrial products (computers andelectronic items)
toenter thenewMember States atthelower ratesthatprevailed prior totheiraccession. Thefinal
agreement, concluded attheendof1995, featured substantial m.f.n. tariff reductions onarange of
semiconductorsandintegratedcircuits(aprecursoroftheInformationTechnologyAgreement),reductions
inbound tariffs, andtariff-quota adjustments forsome agricultural products. Agreements ofsimilar
nature weresigned withCanada, Japan, Australia, NewZealand, Chile andThailand, withproduct-
specific provisions. Details ofthese agreements arecontained inCouncil Decisions 95/591/EC and
95/592/EC.4
(4) TheSingle Market
(i) Implementation ofexisting measures andprogramme for1997
12. TheEuropean Union hasmade steady progress intheimplementation oftheSingle Market
inthepasttwoyears. Inearly1997, theMember States hadadopted 94.3percentofthe219Directives
listed intheCommission 'sWhite Paper of1985 and91.5percentofall1,400 Directives relevant
totheSingle Market (the219White Paper measures plusother measures adopted before 1985 ornot
included intheWhite Paper). About 150national measures stillneeded tobeadopted. Inthisregard,
MemberStates'recordsintransposingSingleMarketlegislationintonationallawsvaried,withDenmark,
theNetherlands,SpainandSwedensubstantiallyabovetheEUaverageandGreece,GermanyandAustria
lagging (Chart II.1). TheCommission ispaying increasing attention tothescope anddepth of
transposition, asreflected inthesignificant increase inthenumber ofinfringement proceedings initiated
in1995 and1996.
13. Themainproblem areas forimplementation lieingovernment procurement, environment, the
freemovement ofpersons, themutual recognition ofdiplomas, andintellectual property. There have
beendelays inincorporating andenforcing the11EUprocurement directives; bytheendof1996,
only72percentofthecorresponding national measures hadbeenimplemented, while 39infringement
procedures against Member States werepending. Inthefieldofintellectual property protection, the
transposition oftherental rights directive, thesatellite broadcasting andcableretransmissions directive,
andthetermofprotection directive hasbeenreported asunsatisfactory, despite recent improvements.
Thesituation hasimproved inthefieldofinsurance, where progress onthetransposition oftheThird
LifeandNon-Life Insurance Directive hasbeenrecorded since thelastTPR.
14. Despite thesubstantial advances, inparticular inthefreemovement ofgoods andinvestment,
theSingle Market remains incomplete. Toaddress thissituation, priorities for1997 include the
continuationofeffortstoenactmissinglegislationandtransposeexistingtexts,newinitiativestoestablish
aninternal market forgas,measures toremove barriers inthedistribution sector, thecompletion of
alegalframework forbiotechnology inventions, andastrengthening ofefforts todevelop European
company law.5
4Official Journal oftheEuropean Communities, L334of30December 1995.
5European Commission (1997b).European Union WT/TPR/S/30
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Page 18Trade Policy Review
(ii) Economic impact
15. TheCommissionwasmandatedbytheCouncil(Resolution1218/92)toreportontheeffectiveness
andimpact oftheSingle Market. Awide-ranging economic survey wasconducted in1996, involving
bothCommission services andconsultants.6Themainresults indicate thattheremoval ofthenumerous
barriers tothefreecirculation ofgoods, services, persons andcapital havesofarresulted insubstantial
benefits fortheEUeconomy. Atthemacroeconomic level, model-based calculations estimate that
theSingle Market wasdirectly responsible for:
- anincrease inEUGDP ofsome 1.1to1.5percent, orECU 60to80billion above
whatitwould otherwise havebeen; halfofthisincrease resulted from price effects
andhalffrom productivity effects7;
- ahigher level ofemployment, withjobcreation estimated atbetween 300,000 and
900,000;
- alower inflation rate(1to1.5percent) thanotherwise would havebeenachieved;
and
- ahigher investment levelof1to3percent.
16. Theestimates show thatduring theperiod 1985-95 there wasaconsiderable increase inthe
share ofintra-EU trade inmanufactures8:from61.2to67.9percentinimports andanevengreater
increase, from53.7to67.8percentinexports.9Thecorresponding increases forservices inthesame
period wasfrom 46.9to50percentforimports and42.6to50.2percentforexports (Chart II.2).
TheCommission study alsoshows thattheincrease inintra-EU penetration ratios wasthehighest in
15manufacturing industries seenasmostsensitive toSingle Market measures.10Theshare ofintra-EU
direct investment flows intotalFDIinflows alsoincreased markedly, from 41to59percentinthe
period 1984-1991/93; inthisconnection, theCommission noted therapid riseofcross-border mergers
andacquisitions among EU-based firms, from720to2,296 inindustry andfrom783to2,602 inservices
between 1986 and1995.
6European Commission (1996e). More details canbeobtained inthe38background studies andonebusiness
survey onwhich thesummary document wasbased.
7While substantial, thegains oftheSingle Market aresmaller thanthose predicted bytheCeccini report
of1988. Againof4.5to6percentofGDP wasexpected from thefullimplementation oftheSingle Market
programme. However, exogenous factors suchastheGerman reunification andthe1991-93 recession could
notbetaken intoaccount atthetimeoftheelaboration ofthescenario.
8Inthisparagraph, manufactures include processed agricultural goods.
9Theshare ofintra-EU trade insome individual Member States 'exports grew byaround 20percentage points
(Denmark from 42.2 to67.3 percent, United Kingdom from 44.7 to64.4 percent).
10Study based ontime series forFrance, Germany, Italy andtheUnited Kingdom. Sectors studied are
glassware, ceramics, basic industrial chemicals, pharmaceutical products, boilermaking, etc.,machine tools for
metalworking, machines forfoodstuffs industries, plant formines, telecommunications equipment, electronic
equipment, motor vehicles, aerospace equipment, brewing andmalting, andclothing.European Union WT/TPR/S/30
Page 19
17. Thesurvey alsoindicates that,atthemicroeconomic level, theSingle Market hasmodified
theconditions ofcompetition inindividual Member States, leading tochanges inmarket structures,
anintensificationofpriceandcostcompetition,furtherindustrialrestructuring,andcheapercross-frontier
deliveries intheabsence ofborder checks. Evidence ofincreased market integration andintensification
ofcompetition canbefound inreductions offirms'profit margins (estimated tobesome 0.5percent
lower thanwould havebeenthecasewithout theSingle Market) andincreased convergence ofprices
forgoods andservices.11Savings related tochanges incustoms andfiscal procedures, implying the
elimination of60million customs forms andan85percentdecrease inthenumber ofCommunity
transit movements, wereestimated atabout 0.7percentofthevalue ofintra-EU trade; asanexample,
EUproducers anddistributors oftextiles andclothing reported reductions incross-border delivery
times by15to20percentonaverage, significantly reducing roadhaulage costs inthesector.
18. Whilenotgrowingasrapidlyasintra-EUimports,extra-EUimportsrecordedsignificantgrowth-
about 50percentoverall from 1985 to1996. Moreover, theshare ofmanufacturing imports from
non-EU sources intotalEUconsumption rosefrom 12to14percentbetween 1980 and1993. The
study notes that"The SMP hasalsoledtoexternal liberalization towards non-EU countries, because
market access iseasier withasingle system.". Firms notbased intheEUareseenasbenefiting from
theliberalization ofthemovement ofgoods andservices within theEU,gaining improved access
conditions through suchprovisions asrightofestablishment, the"single passport", harmonization of
standards, andabolition ofcustoms andfiscal frontier formalities.
11Suchbenefits arepartly conditioned byunderlying market structures inindividual Member States. Between
1985 and1993, thecoefficient ofvariation (dispersion) forprices between Member States foridentical goods
andservices shrank from 22.5to19.6percentforconsumer goods, andfrom 33.7to28.6percentforservices.
Bycontrast, insectors where national markets remain fragmented, suchasenergy products orconstruction, price
dispersion actually increased from 21.1 to31.7 percentandfrom 22.1 to27.4 percent, respectively.WT/TPR/S/30
Page 20Trade Policy Review
(iii) Remaining obstacles
19. The1996 survey highlighted anumber ofremaining obstacles tothesmooth functioning of
theSingle Market. Apart fromineffective implementation orenforcement ofEUDirectives incertain
fields, theCommission recognized theneedforclarification andsimplification ofsome EUrules.
Theabsence ofrules inother sectors mayalsohavebeenasource ofsome difficulties, forinstance,
intheabsence ofasingle authorization procedure forinsurance intermediaries. Priority forthefuture
seems, therefore, tobegiven tothecompletion ofunfinished business from the1985 White Paper,
inparticular measures conducive totheestablishment ofasingle business environment, suchasthe
development ofanEUcompany lawandgreater harmonization oftaxation astheCommunity approaches
EMU.
20. Particular attention istobegiven tocompletion oftheSingle Market intheareaofservices,
where legislative measures havecome on-stream much laterthaninthemarket forgoods. Theinitial
Single Market programme firsttargeted theliberalization of"traditional" services suchasbanking,
insuranceandtransportwithagradualphasing-outofliberalizationmeasures.Thescopeofthelegislative
programme inservices wasprogressively extended toareas suchastelecommunications and,inthe
period under review, electricity, gas,andpostal services. According totheCommission, theSingle
Market programme iseither incomplete orhasnotyetbeenfullyfeltinbroad sectors suchasbusiness
andinformation services. Asummary ofthemainachievements orremaining obstacles tocross-border
supply andconditions ofestablishment inservices, asperceived byprivate operators, isprovided in
Table II.1.
21. AnAction Planaddressing these issues wasendorsed bytheHeads ofState orGovernment
attheAmsterdam European Council inJune1997. Itcontains initiatives aimed ataccelerating the
transposition andenforcement oflegislation andTreaty principles, dealing withmarket distortions
(includingtaxbarriersandanti-competitivebehaviour)removingsectoralobstaclestomarketintegration,
andensuring thatEUcitizens reapthebenefits oftheSingle Market. TheAction Planalsoemphasizes
thegrowing interface between theSingle Market process andtheliberalization ofinternational trade,
which areseenasmutually supporting processes. Indeed, while theSingle Market isincreasingly subject
tointernational trade rules, forexample, inrelation toIPR,government procurement andsubsidies,
lessons mayalsobedrawn atthemultilateral level from theprocess ofEUintegration andthe
development ofdisciplines andframeworks inareas suchascompetition policy, stateaidandthe
harmonization ofstandards andother technical requirements.
(5) External Relations
22. Overtheyears, theEUhasdeveloped adense, multi-layered network ofpreferential agreements
covering thelarge majority ofitstrading partners andtaking theform ofcustoms unions, free-trade
areas andnon-reciprocal preferential trading arrangements. These agreements respond to,andevolve
with, commercial interests andwider geo-political objectives which include thepreparation of
neighbouring countries forintegration intotheUnion; support toeconomic andpolitical reform in
countries intransition; strengthening ofpolitical, economic orstrategic linkswithspecific countries
andregions; andtheprovision ofeconomic andfinancial assistance toformer territories.European Union WT/TPR/S/30
Page 21Table II.1
Effectiveness ofsingle market measures inremoving barriers tothefreeprovision ofservices within theEU(asperceived byeconomic operators)
Cross-border service
restrictionsRestrictions on
establishmentRestrictions on
factor flowsRegulatory/
technical barriersaFiscal issues Others
Banking Discriminatory conditions for
cross-border saleofservices
Restrictions onmarketing and
service contentDiscriminatory
conditions forlicencesCapital controls Prudential requirements
Conditions forsales
Taxes onsavings
Investment income taxes
Death dutiesn.a. n.a.
Insurance Discriminatory conditions for
cross-border saleofservices
Restrictions onmarketing and
service contentDiscriminatory
conditions forlicencesCapital controls Consumer protection
Conditions forsalesTaxation of
reserves
Taxation of
premiumsContract law
Road freight
transportBilateral quota restrictions on
access toother ECmarkets
Price restrictionsDiscriminatory
licensing conditionsCabotage restrictions
Recognition of
qualificationsWeights anddimensions
Road safety rules
Speed limiters
Resting hoursExcise duties Border formalities forgoods
Airtransport Bilateral restrictions onfree
access toother ECmarkets
Price restrictions
Slots allocationExclusive rights for
licensing ofaircarriers
Ownership rules in
third country
bilateralsCabotage restrictions
Designation andcapacity
restrictionsConditions forsales
Security andsafety rules
Airport chargesVAT Border formalities forpassengers
Access tocomputer reservation
systems
State aid,unfair practices
Telecoms
liberalized
servicesDiscriminatory conditions for
access tonetworkExclusive rights on:
mobile, dataand
satellite servicesExclusive rights tosell
equipmentTechnical conditions foruse
ofnetworksn.a. Fairaccess tonetworks
TVbroadcasting
servicesRestrictions oncross-frontier
broadcasting
Rental andlending rights
Term ofcopyright protection
Copyright applicable to
satellite andcableNational licensing
rules forbroadcasters
Media ownership
restrictionsn.a. Technical conditions foruse
ofnetworksn.a. n.a.
Distribution
(fast-moving
consumer goods)Norestrictions Norestrictions Restrictions onfree
movement ofgoodsn.a. VAT Border formalities forgoods
Technical barriers onproducts
Advertising Types ofproducts andmedia
Comparative advertisingNorestrictions Restrictions onmedia Misleading advertising
Content restrictionsn.a. n.a.
n.a. Notapplicable.
a These types ofbarriers tendtoincrease thecostofsupplying services andcould beconsidered equivalent totechnical barriers inmanufacturing.
Key: Normal type: Barrier effectively removed. Italic type: Barrier partially removed.
Bold type: Remaining barrier.
Source: ECCommission (1996), TheImpact andEffectiveness oftheSingle Market, COM(96)520 Final, Brussels.WT/TPR/S/30
Page 22Trade Policy Review
23. Since the1995TPR, theCommunity hascontinued toconsolidate anddevelop suchagreements
onthebasisofthose broad objectives. Ithaspursued theprocess ofintegration oftheCEECs through
theacceleration ofthetradeliberalization schedule, started tonegotiate anewgeneration ofAssociation
Agreements withMediterranean countries withthelong-term objective ofestablishing aregional free-
tradeareaby2010, andcompleted themid-term review ofthefourth Lomé Convention. Negotiations
toliberalize trade withMexico andSouth Africa havestarted. Newframeworks forrelations with
North America, MERCOSUR, Chile andSouth-East Asiahavebeendeveloped. Table II.2provides
anupdate ofAgreements notified bytheEUtotheGATT andWTO.
24. Theexistence ofmultiple levels ofpreferences andtheirinternal andexternal impact hasbeen
thesubject ofdebate within theEUover thelasttwoyears. Following afirstCommission
Communication onthismatter inJune1995, theCouncil requested theCommission toconduct adetailed
analysis onWTO conformity andoncommon policies forfuture preferential agreements. InJune1996,
theHeads ofStateorGovernment invited theCouncil toreport on"theevolution oftrade policies and
thepreferential agreements oftheCommunity". Inresponse, anewCommission Communication was
presented inearly 1997, building onthe1995 paper.12While finding "exaggerated andmisleading"
claims thattheproliferation ofregional agreements threatens theWTO system, theCommunication
acknowledges thesharp increase intheglobal number ofpreferential agreements notified totheWTO
andthattheiroperation hasanincreasing impact onworld trade. Itconsiders that"theEUhasan
interest infurther reinforcing theposition ofitsownagreements intheWTO", andcallsfor"clearer"
WTO rules tohelpensure thatEUagreements conform.13
25. Atitsmeeting ofApril 1997, theCouncil ofMinisters considered that,inthefuture, proposals
forentirely newpreferential agreements should besubject toparticularly closescrutiny andthat"priority
should begiven tothedevelopment oftrading agreements withthose partners where acommitment
topreferential negotiations already exist". Byconcluding that"thefundamental architecture ofthe
EU'spolicy onpreferential agreements hasbeenputinplace andshould bepreserved", theCouncil
implicitly leftlittlescope forfurther expansion ofthecurrent network ofagreements.14
26. Meanwhile, efforts havebeenmade toensure thatEUagreements (inparticular Association
Agreements) follow amore consistent pattern ofpreferences andagreater similarity ofform and
coverage. Ingeneral, agreements withtheCEECs andMediterranean countries nowprovide fora
largemeasure ofindustrial tradeliberalization andincreasing agricultural coverage. While undoubtedly
contributing totheexpansion ofbilateral trade andtheconversion ofpartners toamarket economy,
theseagreements havepotential tradediversion effects where reduction orelimination oftrademeasures
isdeeper thanagainst thirdcountry suppliers. Thisisofparticular importance insensitive industries
suchastextiles andclothing where tariffs andrestrictions arebeing removed faster onbilateral trade
thanmoregenerally under WTO deadlines.15Theemphasis onbilateral agreements mayalsopotentially
divert EUfirms fromfastgrowing m.f.n. markets inAsiaorLatin America, where EUmarket shares
haveinrecent years beenlagging behind U.S.andJapanese competitors.
12European Commission (1997c).
13TheCommissionputsparticularemphasisontheclarificationoftheArticleXXIVrequirementthatpreferential
agreements cover "substantially alltrade".
14Extract from theminutes oftheGeneral Affairs Council of29April 1997.
15Increased product coverage ofthepreferential agreements inagriculture andincreased quotas, apositive
evolution initself, alsoraises concerns ofm.f.n. partners about their discriminatory impact.European Union WT/TPR/S/30
Page 23
Table II.2
EUpreferential trade agreements andWTO status
Current agreementsEntry into
forceType ofagreementWTOa
status
1.EEA
Iceland 1/1/94 FTA, Extension oftheInternal Market 17/7/92d
Liechtenstein 1/5/95 FTA, Extension oftheInternal Market 17/7/92d
Norway 1/1/94 FTA, Extension oftheInternal Market 17/7/92d
2.Customs Unions
Turkey 1/1/96 Customs Union 22/12/95
Andorra 1/1/91 Customs Union forindustrial goods Notnotified
SanMarino 1/12/92 Customs Union Notnotified
3.FreeTrade Agreements:
Switzerland 1/1/73 FTA 27/10/72
Faroe Islands
Europe Agreements:1/1/97 FTA 19/2/97
Hungary 1/2/94 FTA, forerunner toaccession 3/4/92d
Poland 1/2/94 FTA, forerunner toaccession 3/4/92d
Czech Republic 1/2/95 FTA, forerunner toaccession 13/5/96
Slovakia 1/2/95 FTA, forerunner toaccession 13/5/96
Bulgaria 1/2/95 FTA, forerunner toaccession 23/12/94d
Romania 1/2/95 FTA, forerunner toaccession 23/12/94d
Estonia 1/1/95bFTA, forerunner toaccession 30/6/95
Latvia 1/1/95bFTA, forerunner toaccession 30/6/95
Lithuania 1/1/95bFTA, forerunner toaccession 26/9/95
Slovenia 1/1/97cFTA, forerunner toaccession 12/12/96
Euro-Mediterranean Agreements (oldgeneration):
Cyprus 1/6/73 FTA, option foreventual Customs Union, forerunner toaccession 13/6/73
Malta 1/4/71 FTA, option foreventual Customs Union 24/3/71
Israel 1/7/75 FTA, cooperation agreement 3/7/75
Euro-Mediterranean Agreements (new generation):
Tunisia 17/7/95fFTA, Association agreement ...
Israel 20/11/95fFTA, Association agreement ...
Morocco 15/11/95fFTA, Association agreement ...
Palestinian Authority 16/10/96fFTA, Association agreement 30/6/97
4.Preferential, Non-Reciprocal Liberalization Agreements
Fourth Lomé
Conventione1/9/91 Agreement, including preferential non-reciprocal access totheEC
market16/12/92
Agreements withMediterranean countries (oldgeneration):
Algeria 1/11/78 Cooperation Agreement, including preferential non-reciprocal
access totheECmarket28/7/76
Syria 1/11/78 Cooperation Agreement, including preferential non-reciprocal
access totheECmarket15/7/77
Tunisia 1/1/78 Cooperation Agreement, including preferential non-reciprocal
access totheECmarket28/7/76
Morocco 1/7/76 Cooperation Agreement, including preferential non-reciprocal
access totheECmarket28/7/76
Jordan 1/7/77 Interim Agreement, including preferential non-reciprocal access to
theECmarket15/7/77
Lebanon 1/7/77 Interim Agreement, including preferential non-reciprocal access to
theECmarket15/7/77
Egypt 1/7/77 Interim Agreement, including preferential non-reciprocal access to
theECmarket15/7/77
... Notavailable.
a Notification datetoGATT orWTO. d Notification oftheInterim Agreement.
b Entry intoforce oftheFTA. Europe Agreements notyetinforce. e Waiver under theArt.24oftheGATT.
c Entry intoforce oftheInterim Agreement. Europe Agreement with f Signed, notyetinforce.
Slovenia notyetinforce.
Source: WTO Secretariat.WT/TPR/S/30
Page 24Trade Policy Review
(i) TheEEA andEFTA
27. TheEEA Agreement provides forafullfree-trade areaforbothgoods andservices (subject
toexceptions inthefieldofagriculture andfisheries), aswellasthefreemovement ofpersons and
capital, thedeepening ofother economic linksandtheintegration oflegislation between theEUand
Norway, Iceland andLiechtenstein. TheEEACouncil ofDecember 1996 noted therecent adoption
bytheEEA Joint Committee ofover 30Decisions, incorporating basic EUlegislation on
telecommunications,financialservices,stateaid,intellectualproperty,technicalregulationsandstandards,
veterinary andplant health matters andother issues intothelegislation ofEEA countries. EEAand
EFTA countries alsoparticipate actively intheinformation andconsultation process forallnewEU
legislation relevant tothese countries.
28. Since theentry intoforce oftheEEA Agreement on1January 1994, anti-dumping and
countervailing rules havebeenreplaced bycompetition rules forthesectors inwhich the"acquis
communautaire isfullyintegrated" (Article 26oftheEEAAgreement), i.e.,excluding fisheries and
agriculture. Thus, inAugust 1996, theCommission initiated anti-dumping andanti-subsidy proceedings
relating toimports offarmed Atlantic salmon originating inNorway. According totheCommission,
these proceedings were expected tobeconcluded bySeptember 1997 withtheacceptance ofaprice
undertaking fromtheNorwegian Government andfromanumber ofNorwegian exporters. Residual
anti-dumping andcountervailing duties aretobeimposed onNorwegian exporters notcovered bythe
undertaking.16
29. TheCommunity hasundertaken toharmonize therulesoforigin within theEU/CEEC/EFTA
zoneonthebasisofthose contained intheEEAAgreement (Chapter III(2)(viii)). Atpresent, theEEA
istreated asasingle territory fororigin purposes andfullcumulation oforigin applies.17From
1January 1997, CEEC andEFTA countries willbelinked totheEEAthrough diagonal cumulation,
creating oneEuropean-wide territory fororigin.18Theprotocols onrules oforigin intheEurope
Agreements, theEEA Agreements andEU-EFTA Agreements havebeenmodified accordingly.
30. EEAandEFTA countries areseeking todevelop common approaches withtheEUonbilateral
negotiations withthird countries. Thus, theyhaverecently heldparallel discussions withCanada,
NewZealand andAustralia onmutual recognition agreements onconformity assessment, similar to
those negotiated bythese countries withtheEU.
31. Following therejection bySwitzerland ofEEAmembership in1992, Switzerland andtheEU
have engaged inbilateral negotiations onthefreemovement ofpersons, airandlandtransport,
liberalization ofpublic procurement, mutual recognition ofconformity certification, market access
foragricultural goods andSwiss access toEUresearch anddevelopment programmes. While good
progress hasbeenmade ongovernment procurement andrecognition ofconformity certification and
16TheNorwegian salmon industry isheavily dependent ontheEUmarket, which absorbs more thantwo
thirds ofitstotalexports.
17Fullcumulation intheEEAprovides forthecumulation oforiginating materials andprocessing operations
between theEU,Norway, Iceland andLiechtenstein (through theadding upofvalue added) fororigin purposes.
Swiss materials arealsoconsidered asoriginating materials intheEEA context, despite Switzerland 'snon-
participation intheEEA.
18Thesystem ofdiagonal cumulation allows aproduct originating inonecountry toretain itsorigin despite
transformation inother countries.European Union WT/TPR/S/30
Page 25
research, persistent differences inthefreemovement ofpersons andintransport bylandandairhave
prevented finalagreement todate.19TheCommunity seeks inparticular toexpand progressively the
range oftransport operations exempted fromthe28tonne-limit applied bySwitzerland andfromthe
banonnight driving (atthelatest, bytheexpiry ofthecurrent bilateral Transit Agreement in2005).
(ii) Central andEastern European Countries (CEECs)
(a) Europe Agreement countries
32. Since theprevious Trade Policy Review oftheEU,atenthEurope Agreement (EA)hasbeen
signed, withtheRepublic ofSlovenia on10June1996. Pending ratification bythenational parliaments,
thetradeandtrade-relatedprovisionsoftheAgreementarebeingappliedthroughanInterimAgreement.20
ForotherEAcountries,dutiesandquantitativerestrictionsonimportsofmostindustrialgoodsoriginating
inSlovenia havebeenabolished ontheentryintoforceoftheInterim Agreement. Textiles andclothing,
andrawandprocessed agricultural products aresubject tospecific provisions, contained inseparate
protocols.21Acomplete free-trade areaisforeseen by2001.
33. Asaresult oftheacceleration oftheliberalization schedule ofEurope Agreements decided
attheCopenhagen European Council, theEUhadremoved almost allduties andquantitative restrictions
onindustrial imports from EAcountries by1January 1995. Remaining duties andquantitative
restrictions onECSC coalandsteelproducts wereabolished on1January 1996.22Tariffs onimports
oftextiles andclothing products frommostEAcountries (with theexception oftheBaltic countries)
werealsophased outon1January 1997, andquantitative restrictions aretobephased outby1January
1998, several years before thefinaldeadline oftheWTO Agreement onTextiles andClothing.23
34. Further liberalization ofagricultural tradewasintroduced following twoyears ofnegotiations
between theEUandsixEAcountries (Hungary, Poland, theCzech Republic, theSlovak Republic,
Romania andBulgaria) toadapt theagricultural elements oftheirexisting agreements totheentry into
force oftheUruguay Round andtheenlargement oftheUnion. With regard totheUruguay Round
results, theEUhasagreed tomaintain thepreferential margins applied toEAproducts. Furthermore,
alltariff quotas affecting EAproducts willbeincreased by25percentinvolume terms bytheyear
2000, withadutypreference of80percent. Inrespect ofEUenlargement, theAgreement ensures
19Bilateral negotiations between theEUandSwitzerland areseenasasingle package. Thus, failure toagree
ononeaspect blocks thefinal agreement.
20Signed on11November 1996, theInterim Agreement came intoforce on1January 1997 andistolast
foramaximum period offouryears.
21Thelastduties andquantitative restrictions ontextiles andclothing products willbeabolished by
1January 1998.
22Thequotas imposed onsteelimports from theCzech Republic andtheSlovak Republic hadalready been
lifted, asscheduled, on31December 1995.
23Quotas hadbeen increased significantly attheendof1995.WT/TPR/S/30
Page 26Trade Policy Review
thattheconcessions granted under theprevious bilateral agreements between thethreeacceding countries
andtheEAcountries willremain unchanged.24
35. Asaresult ofbilateral trade liberalization, more than90percentofallimports from EA
countries enter theEUmarket freeofduties andother restrictions. In1994 and1995 two-way trade
between theEUandEAcountries grew by20percentayearonaverage, outperforming trade with
other regions oftheworld (except Asia). EUexports haveincreased byanaverage of18percent
ayear,withlittlechange intheproduct composition oftrade(machinery, transport equipment, chemicals
andtextiles). Therateofgrowth ofEAexports totheEUsurged from12percentperyearonaverage
intheperiod 1992-93 to21percentin1994-95, toreach 7percentofextra-EU imports (asagainst
4percentin1991), andnarrowing theEAcountries 'tradedeficit withtheEUtosome ECU 0.6billion
in1996. In1996, EUandEAcountries traded ECU 7.4billion ofagricultural andprocessed goods
(HSchapters 1-24).
36. Theintegration ofEAcountries 'economies withEU,EEA andEFTA economies islikely
tobefurther enhanced bytheirparticipation inthenewEuropean-wide system ofdiagonal cumulation
oforigin, noted above insection 5(i).Theestablishment ofthenewsystem required theharmonization
oftherules oforigin ineachrelevant bilateral agreement andthelinking ofrules oforigin between
theEUandtheCzech andSlovak Republics, Hungary, Poland, Romania, Bulgaria, Slovenia, Latvia,
Lithuania, Estonia, Norway, Iceland, Liechtenstein andSwitzerland.
37. TheEUismonitoring theprogress made bytheCEECs inimplementing therecommendations
intheCommission 'sWhite Paper ontheirpreparation forintegration intheinternal market, aswell
asexamining theeffects oftheprocess.25Under theEuropean Agreements, EUandCEEC Ministers
meeteachyearinbilateral Association Councils todiscuss progress andproblems related totheadoption
oftheacquiscommunautaire.Pre-accessionworkisalsobeingcarriedoutintheAssociationCommittees
and,atatechnical level, intheSub-Committees.26Initsmost recent assessment, theCommission
drew particular attention totheneedforharmonization ofstandards andcertification procedures and
called forreform inthebanking sector intheCEEC. Formal accession negotiations areduetostart
afterthecompletion ofthework oftheIGC.
38. AsaresultoftheconsiderableeconomicdisparitybetweenEUMemberStatesandEAcountries,
enlargement islikely toaffect anumber ofEUcommon policies andtheirfinancing (forexample, the
CAP, structural policies) although itsimpact willdepend onthegapsexisting atthetimeofaccession.
Thisiscurrently being studied byboththeCommission andtheEAcountries, inparticular for
agriculture. TheCommission 'sStrategic Paper onagriculture, published inDecember 1995 and
presented totheMadrid European Council, recommends some measures inthefields ofmodernization,
ruraldevelopment andtradetohelpEAcountries ontheirwaytoaccession andpleads foracontinuation
ofthe"1992 approach" forEUagriculture, implying reduced reliance onprice support compensated
bydirectpaymentsandbetterintegrationbetweenmarketpolicies,ruraldevelopmentandtheenvironment
(Chapter IV(2)).
24New concessions arebeing implemented bytheEUonanautonomous basis untiltheentry intoforce of
theadditional Protocols totheEurope Agreements (Council Regulation 1596/97 of24July1997).
25European Commission (1995a).
26Given thecomplexity ofthelegislative preparations fortheintegration ofEAeconomies intotheSingle
Market, theEUputinplace in1996 aTechnical Assistance Information Exchange Office (TAIEX) aimed at
providing Community technical andprofessional expertise toEAcountries.European Union WT/TPR/S/30
Page 27
39. TheCommission 's"Agenda 2000" proposals provide further impetus totheprocess ofaccession
ofEuropeAgreementcountries,byselectingtheCzechRepublic,Estonia,Hungary,PolandandSlovenia
forthenextround ofEUenlargement.27Theconsequences forEUpolicies arefurther discussed and
substantial reforms ofstructural funds andCommon Agricultural Policy arecalled for.Inagriculture,
therecommendations oftheDecember 1995 Strategic Paper areconfirmed -details oftheproposals
aredescribed inChapter IV(2)(i). AttheEuropean Council inDecember 1997, theHeads ofState
orGovernmentaretotakedecisionsontheoverallenlargementprocess,includingpracticalarrangements
fortheinitial phase ofnegotiations andthereinforcement ofthepre-accession strategy.
(b) Former Yugoslavia
40. ACooperation Agreement between theCommunity andtheformer Yugoslav Republic of
Macedonia (FYROM), containing non-reciprocal trade preferences similar tothose afforded toother
former Yugoslavian Republics onanautonomous basis, wassigned on29April 1997andisexpected
toenter intoforce inAutumn 1997. InJune1996, when initialling theagreement, theCommission
indicated itsintention toseekawaiver intheWTO forthepreferential aspects ofthisandpossible
future agreements withother former Yugoslav Republics (with theexception ofSlovenia, discussed
earlier) andAlbania. TheCommission initialled abilateral agreement ontrade intextiles on
16April 1997, which provides fortheremoval ofallquantitative restrictions.
(iii) Agreements withMediterranean countries
41. TheCommunity anditsMember States havecontinued towork onthestrengthening ofthe
EU'spolitical, economic andcultural linkswithMediterranean countries, inlinewiththeobjectives
setattheCorfu European Council in1994andsubsequent meetings. Political impetus tothisprocess
wasgiven attheBarcelona Conference inNovember 1995 when 27Foreign Ministers oftheEUand
Mediterranean countries adopted theformal declaration establishing anew"Euro-Mediterranean
Partnership" intheareasofsecurity, social andcultural exchanges, andeconomic andfinancial relations.
42. Inthecontext oftheEuro-Mediterranean partnership, anewgeneration ofEuro-Mediterranean
Association Agreements arebeing negotiated, toreplace thefirstagreements dating from theperiod
1975-77. New-style agreements havealready beenconcluded withMorocco, Tunisia andthePalestinian
Authority, buthavenotyetentered intoforce, andareunder negotiation withEgypt, Lebanon, Jordan
andAlgeria (Table II.3). The1975Agreement withIsrael wastransformed toafree-trade agreement
in1995.
43. Thenewagreements provide forthegradual establishment offree-trade areas between theEU
andthecountries concerned. Theagreements introduce reciprocal tradeliberalization formostindustrial
products and,more slowly, foragriculture andfisheries.28Theagreements alsocontain provisions
concerning freedom ofestablishment, trade liberalization inservices, competition rules andfree
movement ofcapital. Theobjective oftheEUandMediterranean countries istoestablish, by2010,
awidefree-trade areabetween allcountries intheregion covering flows ofgoods, services andcapital.
27Cyprus wasalsoincluded inthelistofeligible countries, although ithadalready received assurances from
theEuropean Council thatitsaccession negotiations willstartsixmonths after thecompletion oftheIGC.
28Attheentry intoforce oftheAgreements, mostindustrial products originating inMediterranean countries
willenter theCommunity dutyfree. Forother products, dutyandrestrictions willbephased outoveraperiod
of12years. While agriculture issubject toselective coverage, theagreements contain apolitical commitment
toliberalize further agricultural trade onareciprocal basis.WT/TPR/S/30
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Theliberalization ofbilateral trade between theEUandindividual Mediterranean countries isseen
asafirst,important stepinthisdirection, although theachievement ofaregional free-trade areawould
alsorequire theconclusion ofbilateral free-trade agreements between Mediterranean countries.
Table II.3
Progress towards theconclusion ofEuro-Mediterranean association agreements
Tunisia Agreement signed 17July1995, ratification procedure on-going.
Israel Agreement signed 20November 1995, interim agreement, covering trade aspects oftheassociation
agreement, effective since 1January 1996.
Morocco Agreement signed, ratification procedure under way.
Egypt Negotiations on-going since 23January 1995.
Jordan Negotiations on-going since 18July1995.
Lebanon Negotiations on-going since 9November 1995.
Syria Exploratory talks, nonegotiations.
Palestinian Authority Interim Euro-Mediterranean Association Agreement signed on24February 1997.
Algeria Negotiating mandate approved byCouncil, firstround ofnegotiations washeld4-5March 1997.
Source: European Commission.
44. Cyprus, Malta andTurkey havebeenassociate countries totheEUformany years andare
atmore advanced stages ofintegration withtheEUthanother Mediterranean States. Thefinalphase
oftheCustoms Union Agreement between theEUandTurkey entered intoforce on1January 199629;
itwasaccompanied byanincrease inEUfinancial assistance toTurkey.30Malta, which wastobe
included inthenextphase ofenlargement, decided towithdraw itsapplication attheendof1996;
thisdecision hasnoimmediate implications fortheexisting Association Agreement. Negotiations on
theaccession ofCyprus totheCommunity areexpected tostartwithin sixmonths aftertheconclusion
oftheIntergovernmental Conference.
(iv) Partnership andcooperation agreements
45. Since thelastTPR, theCommunity hassigned newPartnership andCooperation Agreements
(PCA) withAzerbaijan, Armenia, Georgia (April 1996) andUzbekistan (June 1996), replacing the
Trade andCooperation Agreement of1989between theECandSoviet Union.31Asimilar agreement
withTurkmenistan wasinitialled inMay1997.
29TheCustoms Union Agreement wasnotified intheCommittee onRegional Trade Agreements inWTO
documents WT/REG22/1-6. On1January 1996, Turkey adopted theEUCommon Customs Régime (including
theEU'scommon external tariff). Within theCustoms Union, duties, quantitative restrictions (except forTurkish
exports ofrawcotton totheEU)andvoluntary restraint agreements have been abolished. Ashort transitional
listofproducts istobeliberalized infiveyears. Atpresent, about 95percentoftotalbilateral trade isfree
from tariff andrestrictions.
30Inearly 1987, theGovernment ofTurkey formally presented itsapplication foraccession totheEU.
31Non-preferential Partnership andCooperation Agreements aredescribed intheprevious TPR(WTO (1995)
pp.24-25).European Union WT/TPR/S/30
Page 29
46. PCAs withalltheformer Soviet Union (FSU) countries, except Tajikistan, havebeenconcluded
todate. Most such agreements arestillsubject toratification; inthemeantime, Interim Agreements
withRussia, Ukraine, Kazakhstan andMoldova haveentered intoforce toimplement thetrade-related
provisions ofthePCAs.32Interim Agreements withother FSUcountries havebeensigned buthave
notyetentered intoforce.
47. Trade withthese countries inanumber ofspecified products (textiles, steelandcoal,nuclear
products) issubject toseparate bilateral agreements. Most bilateral textile agreements concluded in
1993 havebeenextended until31December 1998 andupdated totakeintoaccount EUenlargement.
ThetextileagreementwithRussia,whichexpiredon31December1996,iscurrentlybeingrenegotiated.33
Negotiations arealsobeing heldwithRussia andUkraine torenew forfiveyears theexisting voluntary
restraint arrangements inselected steelproducts (Chapter III(3). TheEUiscurrently conducting
discussions withPoland, Ukraine, Uzbekistan, Kazakhstan andKyrgystan withaviewtoconcluding
agreements onnuclear products.
(v) ACP countries andSouth Africa
48. Themid-term review ofLomé-IV wascompleted in1996. Anagreement ontherenewal of
thefinancial protocol totheConvention fortheperiod 1995-2000 provided foranincrease inMember
States 'contributions from about ECU 12billion under theprevious protocol toECU 14.6billion.34
Inthefield oftrade, discussions focused onthewaytohelpACP countries toimprove their
competitiveness through increased sectoral integration andtotakegreater advantage ofthebenefits
available under theConvention. Market access provisions ofthefinalagreement reflect ashiftaway
fromtheproduct-by-product policy towards amore generalized approach. Concrete measures include
theextension ofpreferences toalmost allACPproducts, theacceleration oftheliberalization schedule
andanincrease intariff quotas. Concerns about thepossible erosion ofbenefits deriving from the
reduction ofpreferential margins asm.f.n. tariffs arelowered under theEU'sUruguay Round
commitments, andasaresult oftheenlargement oftheEU,havebeenaddressed through reductions
ofpreferential rateswhich were notalready atzero, andquota increases.
49. Despite privileged access, ACPexports totheEUdeclined by11percentintheperiod 1990-95,
although recovering somewhat between 1993 and1995 (from ECU 15billion to19.4billion). ACP
imports fromtheEUfollowed asimilar trend, withadecrease of8percentbetween 1990 and1995.
Asaresult, theshare ofACPcountries inextra-EU imports andexports hasbeendeclining inrecent
years, fromabout 5percentinthemid-1980s to3percentin1995. Trade patterns show littleproduct
diversificationovertime,withrelativelyconstantsharesofagriculturalandindustrialproductsintwo-way
trade (Chart II.3). Bycontrast, bilateral trade withSouth Africa, which doesnotbenefit from the
Lomé trade regime (seebelow), surged during thesame period (1990-95), asSouth African exports
totheEUincreased by28percent, while itsimports from theEUalmost doubled (nodoubt partly
reflecting thechanged political situation inSouth Africa).
32While thePCAwiththeRussian Federation hasbeenratified bynineMember States, mostother agreements
have been ratified onlybyaminority ofEUMember States todate.
33Thetextile agreements withRussia, Ukraine andBelarus aretheonlyagreements providing forquantitative
restrictions (Chapter IV(4)(iii)).
34The22percentincrease inECU terms allows foranautonomous increase, inflation adjustment andthe
taking intoaccount oftheaccession ofthethree newMember States totheCommunity.WT/TPR/S/30
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50. NegotiationsforasuccessortothefourthLoméConvention,whichexpiresin2000,arescheduled
tobegin inAutumn 1998. Asbackground, theCommission published a"Green Paper" aimed at
launching awidedebate ontheadaptations andmodifications tothecurrent framework ofcooperation
withACP countries.35Noting thatthecurrent partnership "haslostsubstance" andthat"theimpact
oftrade preferences hasbeendisappointing", thePaper introduces theideaofgreater "differentiation
ofpolicies andmodalities ofcooperation" between countries (including possible increased selectivity
ofaid),raises theissue ofthegeographical coverage ofafuture partnership, andaddresses therôles
ofthepublic andprivate sectors inthepromotion ofACPcountries 'competitiveness. Observing that
various economic andinstitutional constraints havekeptseveral ACPStates fromprofiting fromtrade
preferences under theConvention, theGreen Paper setsoutfouroptions topromote theintegration
oftheACP economies intotheworld economy: (i)thestatus quo, i.e.themaintenance ofa
comprehensive EU-ACP agreement withcertain adaptations; (ii)aglobal agreement complemented
bybilateral agreements; (iii)thereplacement oftheLomé agreement byaseries ofregional
arrangements; and(iv)aspecific agreement withtheleastdeveloped countries oftheACP zone, in
combination withelements ofthethree previous options.
51. InJune1995,theCouncilmandatedtheCommissiontonegotiateabilateraltradeandcooperation
agreement withtheRepublic ofSouth Africa andaProtocol defining theconditions ofSouth Africa 's
accession totheLomé Convention. Under theEU'sinitial proposal, South Africa would notbeeligible
fornon-reciprocal trade andaidpreferences andaccess toEDF funding, butwould benefit from
35European Commission (1996n).European Union WT/TPR/S/30
Page 31
cumulation oforigin withACP countries andhaveaccess toprocurement forEDFprojects.36With
respect tobilateral trade, theproposed agreement includes acommitment toestablish afree-trade area
between theEUandSouth Africa. TheEUpresented proposals foraFTAinMarch 1996, following
aseries ofnegotiations, andSouth Africa formally responded tothese proposals inJanuary 1997;
negotiations areongoing. Themain differences areonmarket access, inparticular, thescope ofthe
EU'sagricultural offer, under which anestimated 40percentofSouth African agricultural products
would beexcluded from anagreement. Bothparties stressed theneedfortheagreement toconform
withWTO rules. Aseparate agreement oncooperation inscience andtechnology wassigned in
December1996andtwoagreementsonwinesandspiritsandonfisheriesarecurrentlyundernegotiation.
(vi) Arrangements inNorth America
52. TheNewTransatlantic Agenda (NTA), adopted bytheEUandtheUnited States inDecember
1995, provides aframework fordialogue andcooperation inseveral economic andpolitical areas.
Inthefieldoftrade, theNTA affords anopportunity toexchange views onmultilateral issues (such
asthefollow-up oftheSingapore Ministerial Conference, theITA,andGATS negotiations) anddefines
common objectives andunderstandings insupport oftheWTO. Atthebilateral level, theEUand
theUnited States areworking onthecreation ofaTransatlantic Marketplace through thereduction
ofbarriers totwo-way trade. Various initiatives have been launched inthefields ofregulatory
cooperation andtechnical barriers totrade (BoxII.1). Concrete results havebeenachieved withthe
conclusion ofamutual recognition agreement, allowing forelimination ofdualapproval procedures
onsome large categories ofproducts (Chapter III(2)(ix)(b)) andacustoms cooperation agreement.
Thebusiness community isinvolved intheprocess within theframework ofthe"Transatlantic Business
Dialogue".
53. Attheendof1995, inthecontext oftherenegotiation oftheEU'sWTO tariff concessions
afterenlargement, theEUandCanada alsosettled several other outstanding trade issues, relating to
theenlargement oftheEuropean Union andtotheEU'simport rules forgrain, beefandveal, and
Canada 'simports ofpasta. Other bilateral issues concerning fisheries, cultural policy andgovernment
procurement arestillunder discussion. Attheendof1996, theEUandCanada adopted aJointPolitical
Declaration andanAction Plantoenhance theircooperation inthefields ofjustice, security, trade
andother matters. Bothparties havecommitted themselves to"revitalizing andliberalizing" bilateral
trade, tostrengthening themultilateral system andtodeveloping closer coordination within theWTO.
TheActionPlanforeseestherapidconclusionofbilateralagreementsonmutualrecognitionofconformity
assessment, equivalence intheveterinary sector, andcompetition policy.
(vii) Arrangements inLatin America
54. On15December 1995 theEU,MERCOSUR andtheirMember States signed aFramework
Cooperation Agreement, which institutionalizes apolitical dialogue, foresees thestrengthening of
economic cooperation andestablishes thebasisforafuture interregional partnership. TheAgreement
contains acommitment to"progressive andreciprocal tradeliberalization taking account ofthesensitive
nature ofcertain products andwithduerespect fortherelevant WTO rules", which could lead,inthe
long-run, toaninterregional free-trade area. Since theconclusion oftheFramework Agreement, the
twoparties havebeenworking onthescope ofpossible future trade negotiations.
36South Africa formally became aLomé IVmember on24April 1997. Itdoesnotbenefit fromallprovisions
oftheConvention, notably itstrade andaidarticles. Itdoesnotparticipate inthegeneral trading arrangements,
thespecial protocols onbananas, rum, vealandbeef, sugar, etc., theSTABEX orSYSMIN.WT/TPR/S/30
Page 32Trade Policy Review
BoxII.1: TheNew Transatlantic Agenda
Under theNew Transatlantic Agenda, theEUandtheUnited States aimtoenhance cooperation and
develop jointactions across arange ofsubjects ofcommon concern. Current initiatives cover economic,
political, trade anddrugs issues. Inrespect ofbilateral trade, theinitiatives being pursued inthe
framework oftheTransatlantic Marketplace include thenegotiation of:
- acustoms cooperation andmutual assistance agreement, covering simplification ofcustoms
procedures, exchanges ofdataandpersonnel, andcooperation oninvestigations. TheAgreement
wassigned in1996;
- amutual recognition agreement onconformity assessment covering several sectors andproducts
(pharmaceuticals, telecommunications equipment, electronic equipment, medical devices, and
recreational crafts), allowing fortheelimination ofdualcertification andinspection procedures
(Chapter III(2)(ix)(b)). Theagreement wasinitialled inJune 1997;
- aveterinary equivalence agreement aimed atthemutual recognition oftheequivalence of
veterinary controls andinspection inslaughterhouses andmeat-processing plants;
- ascience andtechnology agreement providing direct access forEUfirms toUSresearch
programmes andviceversa (negotiations were completed inJune 1997);
- anew agreement complementing the1991 bilateral cooperation agreement inthefield of
competition lawenforcement;
TheEUandtheUnited States arealsoengaged invarious regulatory cooperation initiatives aimed at
ensuring thatdomestic regulations donothinder trade andinvestment.
Inaddition, theEUandtheUnited States launched ajointstudy aimed atidentifying ways ofreducing or
eliminating tariff andnon-tariff barriers onthebilateral flow ofgoods, services andinvestment.
Recommendations foraction areexpected bytheendof1997.
Dialogue attheofficial level isalsodeveloping onmultilateral issues, including WTO initiatives (ITA,
Singapore Ministerial Conference, GATS negotiations) andnegotiations ontheOECD Multilateral
Agreement onInvestment.
55. TheCouncil alsomandated theCommission inJune1996tonegotiate anewbilateral agreement
withMexico strengthening political andeconomic relations, including trade. InJuly1997, thetwo
parties initialled aninterim accord opening theperspective fornegotiations in1997onafully-fledged
free-trade pact.
56. InSeptember1996,theEUandChilesignedaframeworkCooperationAgreementinpreparation
forapolitical andeconomic association.
(viii) Agreements andarrangements inAsia
57. InMarch 1996, Heads ofState orGovernment fromtheEU,theASEAN, China, Japan and
theRepublic ofKorea metintheAsia-Europe Meeting (ASEM) inBangkok, tostrengthen political,
economic andcommercial cooperation between Europe andAsia, which hasnowbecome theEU's
major market. Asanindication ofthegrowing importance ofbilateral trade forbothregions, itwas
agreed thatHeads ofStateorGovernment would meetevery twoyears, andMinisters ofForeign AffairsEuropean Union WT/TPR/S/30
Page 33
onceayear. Follow-up actions include customs cooperation meetings andregular meetings ofsenior
officials todiscuss trade andinvestment. Atrade facilitation action planfocusing onthereduction
ofnon-tariff barriers totrade, andaninvestment promotion action planarebeing prepared. Bilateral
cooperation isalsoexpected tocontinue onaninformal basis.
58. TheEU-Japan dialogue hasrecently focused onderegulatory initiatives, administrative reform
andtransparency indomestic procedures asawaytoimprove access toeachother'smarkets.37
Cooperation onderegulation issues takes theform ofhigh-level meetings ofofficials andexchanges
ofderegulation proposals. Progress inthereduction oftechnical barriers totrade wasachieved with
amutual recognition agreement onautomobile standards, andtesting andcertification procedures signed
inJune1995. Awider Mutual Recognition Framework Agreement, similar tothose negotiated with
theUnited States andCanada, iscurrently under negotiation. Other forms ofcooperation inthefields
ofimport/export promotion (through theEU's"Gateways toJapan" programme andtheJapan External
Trade Organization (JETRO)), training programmes andbusiness dialogue aredeveloping.
59. On28October 1996, theEUandtheRepublic ofKorea signed anon-preferential framework
agreement fortradeandcooperation, aimed atdeveloping tradeandinvestment flows, andestablishing
cooperation invarious economic fields, forexample, science andtechnology, industry, etc. The
agreement wascomplemented byapolitical declaration formalizing political dialogue between thetwo
parties. Acooperation agreement inthefieldofcustoms alsoentered intoforce inApril 1997, and
abilateral agreement ontelecommunication procurement istobesigned shortly.
(ix) GSP
60. TheWTO Secretariat report fortheprevious TPRdescribed theEU'srevised GSPforindustrial
products,applyingto147countriesandterritoriescoveringtheentireindustrialsector(withtheexception
ofHSchapter 93:armsandammunition, andafewprimary products), aswellasanewagricultural
scheme along thesame lines. There havebeennomajor changes inthescheme since thelastreview,
except forthescheduled entryintoforceoftheagricultural scheme on1January 1997andthesuspension
ofGSPbenefits forindustrial andagricultural products toMyanmar.38Theratesandproduct lists
oftheGSParenotscheduled forfurther review before 1January 1999 forindustrial products and
30June1999 foragricultural products.
61. In1995, thetotalvalue ofEUimports benefiting fromGSPtreatment wasabout ECU52billion,
or9percentoftotalextra-EU imports. Themainbeneficiary countries wereChina, fromwhich EU
imports amounted toECU 15billion in1995, India, theRepublic ofKorea, Indonesia, Thailand and
Malaysia.39
37TheEU-Japan Dialogue isbased onthe1991 Joint Political Declaration which provides fortheprinciples
andtheframework ofbilateral cooperation.
38Articles 9and12oftheEU'sGSPregulation allow forthepartial ortotalwithdrawal ofGSPbenefits
incasesofforcedandprisonlabourpractices,shortcomingsincustomscontrols,fraud,and"unfair"tradepractices.
39Thislistcovers onlybeneficiary countries thatdonotbenefit fromother preferential regimes (thus excluding
theCEEC andFSU countries).WT/TPR/S/30
Page 34Trade Policy Review
62. TheGSP"general régime" isbased ontwocomplementary mechanisms, for"modulation"
and"graduation".40Countries affected bythesector/country graduation mechanism since theentry
intoforce ofthenewGSPscheme areSouth Africa, Argentina, Belarus, Brazil, Brunei, Chile, China,
theRepublic ofKorea, Georgia, Hong Kong, China, India, Indonesia, Kazakhstan, Kyrgystan, Libya,
Macau,Malaysia,Mexico,Moldova,Uzbekistan,Pakistan,Philippines,Russia,SaudiArabia,Singapore,
Thailand, Ukraine andUruguay.
63. Under newGSPscheme, theEUintroduced aspecial incentive régime aimed athelping
beneficiary countries "toimprove thequality oftheirdevelopment through theapplication ofmore
advanced social andenvironmental policies" (Articles 7and8ofCouncil Regulation 3281/94).41Since
thepreviousreview,theEUhasbeenexaminingtheeligibilitycriteriaforGSPtreatment,andisexpected
tocomplete thiswork bytheendof1997.
(x) Policy initiatives towards theleast-developed countries (LDCs)
64. Building ontheinitiatives agreed upon attheWTO Ministerial Meeting inSingapore, the
Commission approved inApril 1997 aCommunication suggesting options toimprove market access
andtrading opportunities forLDCs.42TheCommission 'spaper proposes along-term strategy with
initiatives aimed atproviding LDCs similar treatment andequal access totheEUmarket, onan
autonomous basis butcoordinated inthemultilateral framework.43
65. Intheshortterm, theCommission makes twoconcrete proposals alevelling (andharmonization)
ofEUtrade preferences granted totheLDC tomatch thebestavailable under theGSPandtheLomé
Convention (with certain exceptions forsome sensitive products), effective by1January 1998; and
asimplification oftherulesoforigin withextended possibilities ofcumulation forLDCs. Inthemedium
term, taking intoaccount therevision oftheGSPregime in1995andoftheLomé Convention in2000,
theCommission willmake further proposals ontheLDCs. According totheCommission, thelonger-
termoption ofcreating amultilateral scheme forpreferential market access would bebestconsidered
inthecontext ofanewround ofworld trade negotiations. Binding itunder WTO rules might also
beconsidered, butwithin thecontext offuture global tariff negotiations andtaking intoaccount the
results oftherenegotiation oftheLomé Convention. Theproposals made bytheCommssion inits
Communication were approved bytheCouncil inJune1997.
40Thetariff modulation mechanism allows forrates tobevaried according tothesensitivity ofproduct
categories. Thegraduation mechanism provides thecriteria forexcluding specific country/sector combinations,
taking intoaccount thecountry 's"overall level ofindustrial development" andits"level ofexport specialization"
intheproduct category inquestion (WTO, 1995).
41Supplementary preferential margins maybegranted tocountries meeting therequirements ofspecified
International Labour Organization Conventions andstandards setbytheInternational Timber Trade Organization.
42European Commission (1997d).
43In1995, EUimports from theLDCs (asdefined bytheUN)totalled ECU 7.2billion (1.3percentoftotal
imports), upfrom ECU 5.7billion in1993 butdown from ECU 7.8billion in1989.European Union WT/TPR/S/30
Page 35
(6) Participation intheWTO
(i) General policy orientation andpriorities fortheSingapore Ministerial Conference
66. Having beenoneofthemainsupporters ofthecreation oftheWTO during theUruguay Round
negotiations, inthelasttwoyears theEUhasfirmly engaged intheimplementation oftheUruguay
Round Agreements andthefulfilment ofitsnotification obligations. Itplayed akeyroleinthesuccessful
negotiations onbasic telecommunications andoninformation technology products, andprovided the
decisive pushforthe1995 interim agreement andcontinuation ofnegotiations onfinancial services.
Ithasalsobeenamajor promoter anduserofthedispute settlement procedures.
67. FortheWTO Ministerial Conference inSingapore, theEUstressed theneedtocomplete the
Uruguay Round 'sunfinished business, theimportance ofimplementing agreed commitments andthe
needtokeepupthemomentum formultilateral liberalization under theworkprogramme. Thisfollowed
thecallbyEUMinisters attheForeign Affairs Council on29October 1996 forfurther progress on
theimplementation ofUruguay Round Agreements. Ministers alsoagreed onrenewed efforts toreach
aglobal accord onbasic telecommunications andinformation technology products, anddecided to
intensify work onstandards, intellectual property protection andpublic procurement andother areas
oftheWTO 'swork programme.
68. AtSingapore,theEUexpressedstrongsupportfortheestablishmentofWTOworkprogrammes
aimed atclarifying theconnections between trade andcompetition policy andbetween trade and
investment. While notfinding aconsensus onhowtoaddress labour standards issues inWTO fora,
EUMember States stated theirattachment tothe"efforts oftheInternational Labour Organization to
promote abetter definition anduniversal observance ofcorelabour standards". TheEUoutlined its
positions onawide range oftrade issues during thepreparations fortheMinisterial Conference in
aseries ofwritten contributions dealing withcompetition policy, investment, environment, rules of
origin, government procurement, labour standards, TRIPS andtechnical barriers totrade.
(ii) Information Technology Agreement
69. Attheclose oftheWTO Ministerial Conference inSingapore, Ministers adopted theWTO
Declaration onTrade inInformation Technology Products (ITA), providing forparticipants toeliminate
customs duties andother charges oninformation technology products bytheyear2000, onanm.f.n.
basis. Thefinalagreement, which entered intoforce on1July1997, ensured participation of43WTO
Members, accounting forwellover90percentofworld tradeinITproducts. Participating Members
intheAgreement formally approved tariff schedules inApril 1997.
70. TheEU,theUnited States, Japan andCanada, which account forabout 60percentofworld
tradeinITproducts, heldseveral rounds ofdiscussions during 1996. Thecompromise reached between
theEUandtheUnited States oversemiconductors, attheQuad Ministerial meeting inSeptember 1996,
paved thewayfortheinclusion oftheITAontheagenda oftheWTO Ministerial Conference in
Singapore, thereby opening theaccord toallWTO Members.44
44Under theQuad compromise, theEUagreed toarapid elimination oftariffs onsemiconductors inthe
framework oftheITAwhile theUnited States accepted topostpone theformation oftheWorld Semi-Conductor
Council (WSC) tocoincide withtheimplementation oftheITA. Thisaccord willensure eligibility andfull
participation ofEUindustry groups inthework oftheWSC. Under theITAtheEUmade thecommitment to
cuttariffs onsemiconductors by50percentattheentry intoforce oftheAgreement on1July1997, andby
25percenton1January 1998 and1January 1999.WT/TPR/S/30
Page 36Trade Policy Review
71. Withextra-EU imports ofsome US$105 billion in1995, theEUisthesecond largest importer
ofITproducts (Chart II.4). Theelimination bytheEUoftariffs onabout 400products inthefive
maincategoriescoveredbytheITA(computers,telecommunicationsequipment,semiconductors,software
andscientificinstrument)representssignificantmarketaccessimprovementforforeignsuppliers.Making
adistinction between information technology products andrecreational media products (inparticular
those reproducing sound andimage suchasaudio CDsandtapes), theEUadvocated theexclusion
ofanumber ofconsumer electronic products from thescope oftheITA. Details oftheEUtariffs
onITproducts areprovided inChapter III(2)(i).
(iii) Dispute Settlement Body
72. TheEUhasbeeninvolved in38ofthe100requests forconsultations (relating to60distinct
matters) received bytheWTO Dispute Settlement Body since thecreation oftheWTO. Ofthese,
14requests forconsultation concerned measures imposed ormaintained bytheEU;19wereinitiated
bytheEUagainst measures imposed ormaintained byother WTO Members; andinfiveother cases,
theEUhasjoined existing consultations asathirdparty. Asaresult, theEUhasbeenthelargest user
ofdispute settlement procedures intheWTO. Asummary ofthecases involving theEUunder WTO
provisions ispresented inTable II.4. Cases notsettled under theTokyo Round Agreements lapsed
attheendof1996, when thecorresponding agreements expired.European Union WT/TPR/S/30
Page 37
Table II.4
Cases involving theEuropean Union and/or itsMember States under WTO dispute settlement provisions, September 1997
Country subject tocomplaint ComplainantRequest for
consultationFirst panel
establishedPanel
report
circulatedPanel
report
adoptedWTO
document
Initiatives bytheEU
Japan -Taxes onalcoholic
beveragesEU,joined by
U.S. and
Canada29.6.95 27.9.95 11.7.96 1.11.96aWT/DS8/R
WT/DS10/R
WT/DS11/R
Japan -Measures affecting the
purchase of
telecommunications equipmentEU,joined by
theU.S.18.8.95dn.a. n.a. n.a. WT/DS15/1
United States -Tariff increases
onproducts from theEUEU 17.4.96dn.a. n.a. n.a. WT/DS39/1
United States -TheCuban
Liberty andDemocratic
Solidarity ActEU 3.5.96 20.11.96 n.a.en.a. WT/DS38/1
Republic ofKorea -Laws,
regulations andpractices inthe
telecommunications
procurement sectorEU 29.5.96 n.a. n.a. n.a. WT/DS40/1
Japan -Measures concerning
sound recordingsEU 4.6.96dn.a. n.a. n.a. WT/DS42/1
Mexico -Customs valuation of
importsEU 27.8.96 n.a. n.a. n.a. WT/DS53/1
Indonesia -Certain measures
affecting theautomobile
industryEU,joined by
Japan, U.S.
andRep. of
Korea8.10.96 12.6.97 n.a. n.a. WT/DS54/1
United States -Anti-dumping
measures onimports ofsolid
ureafrom former German
Dem. Rep.EU 28.11.96 n.a. n.a. n.a. WT/D63/1
Japan -Procurement ofa
navigation satelliteEU 26.3.97 n.a. n.a. n.a. WT/DS73/1
Republic ofKorea -Taxes on
alcoholic beveragesEU,joined by
theU.S.4.4.97 n.a. n.a. n.a. WT/DS75/
Argentina -Measures affecting
textiles, clothing andfootwearEU 17.4.97 n.a. n.a. n.a. WT/DS77/
India -Patent protection for
pharmaceutical and
agricultural chemical productsEU 28.4.97 n.a. n.a. n.a. WT/DS79/
Brazil -Measures affecting
trade andinvestment inthe
automotive sectorEU 7.5.97 n.a. n.a. n.a. WT/DS81/1
United States -Measures
affecting textiles andapparel
productsEU 23.5.97 n.a. n.a. n.a. WT/DS85/1
Chile -Taxes onalcoholic
beveragesEU 4.6.97 n.a. n.a. n.a. WT/DS87/1
Table II.4(cont'd)WT/TPR/S/30
Page 38Trade Policy Review
Country subject tocomplaint ComplainantRequest for
consultationFirst panel
establishedPanel
report
circulatedPanel
report
adoptedWTO
document
United States -Measures
affecting government
procurementEU 20.6.97 n.a. n.a. n.a. WT/DS88/1
Republic ofKorea -Safeguard
measure onimports ofcertain
dairy productsEU 12.8.97 n.a. n.a. n.a. WT/DS98/1
United States -Measures
affecting imports ofpoultry
productsEU 18.8.97 n.a. n.a. n.a. WT/DS100/1
Initiatives affecting theEU
EU(France) -Trade
description ofscallopsCanada, joined
byPeru, Chile
andJapan24.5.95 19.7.95 5.8.96dn.a. WT/DS7/R
WT/DS12/R
WT/DS14/R
EU-Duties onimports of
cerealsCanada 30.6.95 11.10.95cn.a. n.a. WT/DSB/M/8
WT/DS/9/1
EU-Duties onimports of
grainU.S. 26.7.95dn.a. n.a. n.a. WT/DS/13/1
EU-Regime forthe
importation, saleand
distribution ofbananasGuatemala,
Honduras,
Mexico and
U.S., joined
byseveral
other
Caribbean and
Latin
American
countries28.9.95b
5.2.96n.a.
8.5.96n.a.
22.5.97n.a. WT/DS16/1
EU-Duties onimports ofrice Thailand 5.10.95 n.a. n.a. n.a. WT/DS17/1
EU-Implementation ofthe
Uruguay Round commitments
concerning riceUruguay 19.1.96 n.a. n.a. n.a. WT/DS25/1
EU-Measures concerning
meat andmeat products
(hormones)U.S., joined
by
NewZealand,
Australia,
Canada31.1.96 20.5.96 n.a. n.a. WT/DSB/M/17
WT/DS26/1
EU-Regime forthe
importation, saleand
distribution ofbananasEcuador,
Guatemala,
Honduras,
Mexico, U.S.,
joined by
several
Caribbean and
Latin
American
countries13.2.96b8.5.96 22.5.97 n.a. WT/DSB/M/16
EU-Measures affecting
livestock andmeat (hormones)Canada, joined
byAustralia,
U.S. and
NewZealand28.6.96 16.10.96 18.8.97 n.a. WT/DS48/1
Table II.4(cont'd)European Union WT/TPR/S/30
Page 39
Country subject tocomplaint ComplainantRequest for
consultationFirst panel
establishedPanel
report
circulatedPanel
report
adoptedWTO
document
EU(UK/Ireland) -Customs
classification ofsome
computer equipmentUnited States 8.11.96 25.2.97 n.a. n.a. WT/DS62/1
EU-Measures affecting
poultry productsBrazil 24.2.97 n.a. n.a. n.a. WT/DS69/1
EU-Measures affecting butter
productsNewZealand 24.3.97 n.a. n.a. n.a. WT/DS72/1
Belgium -Measures affecting
telephone directory servicesU.S. 2.5.97 n.a. n.a. n.a. WT/DS80/1
Sweden -Ireland/Denmark -
Enforcement ofIPRU.S. 14.5.97 n.a. n.a. n.a. WT/DS82/DS83
/DS86
Participation oftheEUasathird party
Republic ofKorea -Measures
concerning bottled waterCanada, joined
byU.S. and
EU22.11.95dn.a. n.a. n.a. WT/DS20/2
Japan -Measures concerning
sound recordingsU.S., joined
bytheEU14.2.96dn.a. n.a. n.a. WT/DS28/2
Pakistan -Patent protection
under theIndustrial Property
ActU.S., joined
byEU6.5.96dn.a. n.a. n.a. WT/DS36/2
India -Patent protection for
pharmaceutical and
agricultural chemical productsU.S., joined
byEU9.7.96 20.11.96 n.a. n.a. WT/DS50/2
Brazil -Certain automotive
investment measuresJapan, joined
byKorea, EU,
U.S. and
Canada6.8.96 n.a. n.a. n.a. WT/DS51/3
WT/DS52/5
n.a. Notapplicable.
a Appellate Report adopted. Under implementation.
b Parties reached asettlement.
c ThePanel suspended itswork attherequest oftheEU.
d Nopanelists havebeenselected.
e Afirstrequest forconsultation wasmade byGuatemala, Honduras, Mexico, theUnited States andseveral other Caribbean and
Latin American countries. After Ecuador 'saccession totheWTO, theinitial complainants requested newconsultations with
theEUon13February 1996.
Source: WTO Secretariat.
(iv) Notifications
73. TheEUhasmade notifications totheWTO inallareas where notification requirements exist.
Alarge number oflaws, regulations andmeasures, bothattheCommunity andthenational levels,
havebeenmade, including extensive notifications inthefieldofintellectual property andsubsidies.
Table II.5provides anoverview ofEU'smain notifications totheWTO.WT/TPR/S/30
Page 40Trade Policy Review
Table II.5
Principal notifications made inthecontext ofimplementing WTO Agreements, September 1997a
WTO Agreement Document Main contents
General Agreement onTariffs and
Trade 1994Schedule LXXX replaced by
Schedule CXL aftertheaccession of
Austria, Finland andSwedenSchedule oftariff concessions
General Agreement onTrade in
ServicesGATT doc.GATS/EL andSC/31 of
15April 1994Schedule ofSpecific Commitments in
Services; listofArticle II(m.f.n.)
exemptions
Agreement onTrade-Related Aspects
ofIntellectual Property
(Article 63.2)IP/N/1/EEC/1, 31.3.95; complemented
on20.2.96, 11.3.96, 31.7.96, etc.,plus
notification ofMember States '
legislations (seeTable III.5)TRIPS-related Community andMember
States legislation
Agreement onAgriculture
(Article 18.2) G/AG/N/EEC/1, 8.8.95
andG/AG/N/EEC/3, 12.3.97Tariff andquota administration
(Table MA:1)
WTO docG/AG/N/EEC/4, 12.3.97 Imports under tariff-quotas
(Table MA:2)
(Article 5.7) WTO docG/AG/N/EEC/6, 25.3.97 Notification oftrigger prices inthe
context ofthespecial safeguard
provision (Table MA:5)
G/AG/N/EEC/5, 13.3.97
andG/AG/N/EEC/5/Rev.1 of21.7.97Export subsidies
Agreement onTextiles andClothing
(Articles 2.1and3.1) G/TMB/N/60, 19.4.95; andrevisions
on17.8.95, 14.9.95 and26.7.96;
G/TMB/N/64-65Quantitative restrictions maintained by
theEUon31December 1994
(Article 2.6) G/TMB/W/207, 31.1.97 Second integration stage under the
Agreement onTextiles andClothing
Agreement onTechnical Barriers toTrade
(Article 15) G/TBT/4, 22.2.97 Laws, regulations andadministrative
arrangements
(Annex 3C) G/TBT/CS/N/32-39 Notification ofmeasures under theWTO
Code ofGood Practice
(Article 2.9) G/TBT/Notif.95, 96and97
Agreement onAnti-Dumping Practices
(Articles 18.5) G/ADP/N/1/EEC/1, 31.3.95;
G/ADP/N/1/EEC/2, 2.7.96; and
G/ADP/N/1/EEC/2/Suppl.1 of1.4.97EUlawsandregulations relevant tothe
Agreement
(Article 16.4) G/ADP/N/22/EEC, 25.2.97 Semi-Annual Report ofAnti-Dumping
Actions
Agreement onRules ofOrigin
(Article 5.1andAnnex II)G/RO/N/1/Add.1, 22.6.95 EUpreferential andnon-preferential
rules oforigin
Agreement onSubsidies andCountervailing Measures
(Article 32.6) G/SCM/N/1/EEC/1, 31.3.95 EUlawsandregulations relevant tothe
Agreement
(Article 25) WTO docG/SCM/N/16/EEC, 2.4.97 Notification ofsubsidies
(Article 25.11) G/SCM/N/23/EEC, 18.2.97 Semi-Annual Report ofCountervailing
Duty Actions
Table II.5(cont'd)European Union WT/TPR/S/30
Page 41
WTO Agreement Document Main contents
Agreement onImport Licensing
Procedures
(Articles 1.4(a) and8.2(b))G/LIC/N/1/EEC/1, 12.3.96; and
G/LIC/N/1/EEC/1/Rev.1, 11.4.96EUlawsandregulations concerning
import licensing procedures (common
rules forimports, administration of
quotas)
Agreement onPreshipment Inspection
(Article 5)G/PSI/N/1, 31.3.95 Notification ofEUregulation on
preshipment inspection forexports from
theCommunity
Agreement onCustoms Valuation
(Article 22.2)G/VAL/N/1/EEC/1, 17.11.95, revised
on6.12.95EUregulations. Implementation ofthe
WTO
Agreement ontheApplication of
Sanitary andPhytosanitary Measures
(Article 7,Annex B)G/SPS/N/EEC, 7.3.97 Notification ofmeasures
Agreement onSafeguard Measures
(Article 12.6) G/SG/N/1/EEC/1, 3.4.95 EUlawsandregulations and
administrative procedures relative to
safeguard measures
(Article 12.7) G/SG/N/2/EEC, 24.3.95 Notification ofpre-existing Article XIX
measures
(Article 11.2) G/SG/N/5/EEC, 18.7.95 Timetable forphasing outgrey-area
measures
Plurilateral trade agreements TheEuropean Communities andMember
States havesigned theAgreement on
Trade inCivil Aircraft, theInternational
Bovine Meat Agreement andthe
Agreement onGovernment Procurement.
a Excluding notifications made byMember States inareas ofshared competence. Thetablerefers tothelastnotification made under
eachAgreement.
Source: WTO Secretariat.
(7) Investment Policies
(i) MAI negotiation
74. TheEUiscurrently participating actively intheOECD negotiations towards aMultilateral
Agreement onInvestment (MAI). Inthisareaofshared competence, boththeCommunity andthe
15Member States arepartofthenegotiations. TheMAIisexpected tocontain provisions governing
investment liberalization, theprotection ofinvestments, anddispute settlement procedures. While
negotiated among OECD Members, theMAI willbeafree-standing Treaty, open totheEuropean
Community andnon-OECD members willing andabletoassume itsobligations. Inthecontext of
thepreparationoftheWTOMinisterialConferenceinSingapore,theEUstronglysupportedtheadoption
ofawork programme oninvestment intheWTO.
(ii) Foreign investment policy intheCommunity andvis-à-vis thirdcountries
75. There havebeennochanges intheCommunity framework governing foreign direct investment
since theprevious Trade Policy Review oftheEUin1995. AttheCommunity level, provisions
regarding foreign direct investment arecovered byArticle 73boftheEUTreaty, which provided for
theprohibition ofallrestrictions oncapital movements including foreign direct investment vis-à-vis
bothEUMember States andthirdcountries by31December 1993, withlonger phasing-out periods
forcertain Member States. However, paragraph 1ofArticle 73callowed forthegrandfathering ofWT/TPR/S/30
Page 42Trade Policy Review
measures affecting third countries existing atthatdate. Compliance withTreaty requirements is
monitored bytheCommission andtheMonetary Committee inareport prepared fortheCouncil each
year.45WhileArticle73c(2)stipulatesthattheCouncilmayadoptmeasuresregardingcapitalmovements
fromthirdcountries (including foreign investment), noaction hasbeentaken inthisregard since the
lastreview.
76. Article 73bobligations, andmore generally, theSingle Market process, have helped the
Community toachieve ahighdegree ofcapital movement liberalization. Anyfirmestablished under
MemberStates'lawsisgranted,inprinciple,nationaltreatmentunderSingleMarketprovisionsregardless
ofitsultimate ownership. Foreign direct investment restrictions vis-à-vis thirdcountries 'investors
havegenerally beenrelaxed, except intheaudio-visual sector (radio, television andwritten press),
theenergy sector, andthetransport sector where several Member States continue toimpose direct or
indirect forms ofownership control inmaritime andairtransport.46EUlegislation onfinancial services
andhydrocarbons contain reciprocity provisions regarding therightofnon-EU firms toestablish new
businesses intheEU,butthere hasbeennoapplication ofthese provisions todate. Forfinancial
services, seeChapter IV(4)(iii)(c). Most prior approval requirements affecting non-EU investments
havebeenabolished, thereby putting EUandnon-EU investments onthesame footing, butseveral
Member States, aspermitted under Treaty provisions, maintain review ornotification procedures on
all(EUandnon-EU) investments deemed toaffect national security, public health andsafety, orother
policies.47Thecurrent MAInegotiation intheOECD islikely tohelpreduce remaining restrictions
andcontrols andpreclude anynewmeasure.
77. Ambitious de-monopolization orprivatization programmes, nowunder wayinvarious Member
States, aregenerating newopportunities forforeign investors, particularly insome traditionally closed
areasofservices (utilities). "Golden" shares havebeenusedbysome governments orpublic authorities
tomaintain some control ofprivatized companies. Although EUlegislation provides inprinciple for
non-discrimination inprivatization, some Member States 'lawsallow theGovernment toexercise a
certain discretion inthechoice ofprivatization procedures, leaving insome cases considerable power
totheGovernment tochoose theeligible companies (procédures degréàgré).48Atpresent, there
isnoCommunity ruleregarding theuseortheinterpretation ofthenotion of"national orpublic interest",
which maybeinvoked under certain Member States 'legislation (UK, France) toblock thesaleof
privatized assets.
78. TheCommunity exercises asupervisory rôleovernational incentive programmes toprevent
thedevelopment of"subsidy races" toattract foreign direct investment inparticular territories ofthe
EU.Anyinvestmentmeasure,grantorsubsidyprovidedbyanypublicauthority(State,localauthorities)
45Noinformation onthecontent ofthatreport wasmade available inthecontext ofthisTPR.
46Fordetails, seeWTO (1995). TheCommission argues thatownership controls inthese sectors implement
internationallyaccep tedrulessuchastheChicagoConventioninthefieldofairtransportandUNCLOSinmaritime
transport.
47In1996, France eliminated apriori controls andrestrictions onnon-EU inward foreign direct investment,
although notification requirements andanumber ofnational security andpublic health testsremain.
48Theuseoftheprocedure ontheoccasion oftheprivatization ofThomson, drew criticism from various
sides andwaseventually invalidated bytheFrench Privatization Commission.European Union WT/TPR/S/30
Page 43
isnotifiable under EU'scompetition policy law(Articles 92and93oftheTreaty). Almost allMember
States operate investment incentive schemes atthenational levelintheformofgrants, taxallowances,
andother tax-related benefits.49Policy objectives andscope ofsuchschemes mayvary, butareoften
linked totherevitalization ofregions indifficulty. While these programmes areclosely monitored
bytheCommission andaresubject tospecific guidelines, thenumerous incentive programmes atthe
lower government levels (e.g., municipalities) aremore difficult tomonitor (Chapter III(4)(iii)).50
49More detail ongovernment-sponsored investment schemes isavailable intheEU'snotification ofsubsidies
totheWTO (WTO Document G/SCM/N/16/EEC of2April 1997).
50Arecent report bytheFrench Court ofAuditors (Cour desComptes )point tosignificant investment
competition between local authorities withinflating amounts ofassistance (intheform ofinvestment grants or
taxdeductions). Cour desComptes (1996).