The European Union WT/TPR/S/72
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) OVERVIEW
1. Conditions of market access to the European Union are for the most part unchanged from the
last Trade Policy Review in 1997.  The EU has a basically open market for non-agricultural products
(WTO definition, excluding petroleum), with a simple average tariff of 4.5%.  However, sensitive
products such as textiles and clothing have higher tariffs and quotas in place;  the EU's integration of
such products into GATT 1994 has, to date, liberalized 12 of 52 quotas, affecting only a handful of
suppliers.  A number of exporters of iron and steel products, electronic products, and chemicals are
subject to anti-dumping measures, on which a rising trend of initiations is in evidence for 1999.
2. On agricultural products (WTO definition), conditions of access are affected by the Common
Agricultural Policy (CAP).  The simple average tariff is estimated at 17.3%, although tariff quotasprovide better access on high-tariff items.  In addition, the Community spent some € 45 billion on the
CAP in 1999, on subsidies to producers and on export subsidies.
3. Due to the EU's numerous preferential trade agreements and arrangements, exclusively MFN
treatment applies only to imports from Australia; Canada; Hong Kong, China; Japan; the Republic of
Korea; New Zealand; Singapore; and the United States.  The most beneficial treatment is granted toleast developed countries and ACP countries (95% of lines are duty free), followed by regional trade
agreements (80%), GSP beneficiaries (54%), and countries subject only to MFN (20%).
4. Product regulations and standards is a key market access issue, both in terms of the
functioning of the Internal Market and for trading partners.  Costs of establishing conformity
assessment are reduced by MRAs for major trading partners.  The EU's new policy of "food safety"
may lead to more stringent regulation of foodstuffs in the future, with implications for market access
conditions for exporters of such products to the EU.
5. Greater competition in government procurement (14% of EU GNP) is a longstanding market
access issue in the Internal Market, as well as for trading partners, but where the Commission notes
disappointing results.  Little progress has also been made on the "hard-core" issue of company law.
On company taxation, where significant differences apply to basic rates and to tax concessions, the
EC adopted a (non-binding) Code of Conduct to limit "harmful tax competition".  With respect tolevels of state aid, the Seventh Survey indicates a largely unchanged situation in the Member States,
except for Germany where aid to the new Länder declined sharply.  The Commission notes the
importance of effective policing in this area for c onditions of competition in the Internal Market.
6. A wave of mergers and acquisitions (M&A) is in evidence, induced by the Internal Market,
emerging sectors such as the Internet, and transatlantic merger activity in the context of globalizedmarkets (on which "positive comity" with U.S. competition authorities is an increasingly important
feature).  The Commission's resources to enforce competition policy are, however, stretched to the
limit and its proposal to decentralize enforcement to the Member States is intended to focus efforts on
more effective policing of merger activity of significant consequence for conditions of competition in
the Internal Market.
7. Community-wide initiatives that approximate or harmonize national regimes on intellectual
property rights protection apply to a number of  areas, and a complementary (as opposed to a
substitute) role applies to rights that result fro m a "Community trademark" or "Community plant
variety";  initiatives are being taken for a "Community design" and "Community patent".  A 1999
study highlights infringements of trade marks and copyright, with worst affected areas being
computer software, audio-visual and clothing.WT/TPR/S/72 Trade Policy Review
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(2) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Customs procedures
(a) Community Customs Code1
8. The Community Customs Code, in force since 1 January 1994, applies to all trade in goods
between the Community and third countries conducted by natural and legal persons.  The Code is
administered by the customs authorities of the Member States, and a uniform application of legislationin this field is encouraged by various Community programmes, most recently "Customs 2002".
2
Appeals are governed by procedures at the Member-State level, first to the customs authority and thento national courts, followed by recourse to the European Court of Justice under Article 230 of the EC
Treaty.  The Customs Code Committee assures the overall supervision at the Community level,
operating according to the management procedure (Box II.2).
9. The Customs Code applies uniformly throughout the customs territory of the Community,
which is defined as comprising the European territories of the Member States (including the territorial
waters, the inland maritime waters and airspace) with certain exceptions.
3  Certain European
territories outside the territorial frontiers of the Member States are also included in the Community
customs territory.4
10. A "Community good" is either one that originates in the Community or an imported good that
has acquired that status by virtue of being released into free circulation or a combination of the two;
"non-Community" goods are all others.  Goods entering or exiting the Community may be assigned to
one of five destinations:  placement under a customs procedure;  admission to a free zone or a free
warehouse;  re-exportation from the Community territory; destruction;  or abandonment.  Customs
procedures comprise:  release for free circulation;  transit;  customs warehousing;  inward processing;
processing under customs control;  temporary admission;  outward processing;  and exportation.  Theauthorization of the customs authority is required for procedures with an "economic impact" (e.g.
transformation), such as customs warehousing, inward processing, processing under customs control,
temporary importation, and outward processing.  There are 32 free zones, established by the Member
States in enclosed areas located in maritime ports, airports or islands, to which customs controls apply
at the frontiers.
5
11. The transit procedure is of particular significance, both for the carriage of imported products
within the Community, including through non-EU countries (e.g. Switzerland), and between the
Community and neighbouring countries under the external Community transit procedure;  some
                                                     
1 Council Regulation 2913/92, as amended, and implemented by Commission Regulation 2454/93, as
amended.
2 European Commission, DGX (1999).
3 Article 3 of the Community Customs Code excludes:  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 ofItaly;  Ceuta and Melilla from the territory of Spain.
Denmark, France, the Netherlands, and the United Kingdom are linked to overseas countries and
territories (OCT).  A (second) association between the EC and certain non-European countries and territories
(PTOM) entered into force in 1971, was notified to the GATT 1947 and examined (GATT document L/3611,
BISD 18S/143).
4 The territory of Germany includes the Austrian territories of Jungholz and Mittelberg, the territory of
France includes the Principality of Monaco, and the territory of Italy includes the Republic of San Marino;  acustoms union agreement between the EC and San Marino entered into force on 1 December 1992.
5 COM1999/C345/03.The European Union WT/TPR/S/72
Page 41
20 million transit operations are processed each year by customs authorities of the Member States.6
Under the internal Community transit procedure, a good may be landed in one Member State,
although bound for another Member State, and either customs-cleared upon landing or at destination.7
Various agreements have been concluded with the EFTA countries and certain Europe Agreementcountries in Central and Eastern Europe to simplify transit procedures.
8  However, specific
arrangements apply to agricultural products, for the purpose of applying measures to protect animal,plant, and human health, as well as monetary adjustments in the framework of the Common
Agricultural Policy (CAP).
(b) Customs clearance procedures
12. All goods brought into the customs territory of the Community are subject to customs
supervision and must be presented to customs with a written declaration which, under the normalprocedures, consists of the Sing le Administrative Document (SAD)
9, accompanied by pertinent
documents.  The customs authority may grant permission to simplify the completion of formalities
and procedures, including by waiving the requirement that the goods be presented to customs.  The
use of a customs agent is not required.  The Commission facilitates and encourages the use of a
computerized customs declaration, in particular through electronic data interchange (EDI).  However,the Commission notes that the systems of the Member States have developed in quite different ways,
requiring initiatives at the Community level to brin g these applications closer together in concept,
function, and compatibility
10;  such initiatives would also facilitate trade for exporters to the EU.
13. Under the normal customs clearance procedure, documents that are required include the
invoice or other documents for customs valuation purposes, documents making the consignment
eligible for the application of a preferential tariff arrangement (e.g. the certificate of origin "Form A"
is required for GSP) or for derogation from the basic customs tariff regime, and any other documentrequired by the specific legal regulations valid for the import of the goods mentioned in the bill of
entry (e.g. licence, certificate of conformity, certificate of authenticity for certain alcoholic
beverages).  The customs authorities may verify the declaration by examination of the documents
and/or the goods, or may accept it without verification.
14. The customs declaration for imported and exported goods must state the customs value, the
origin of the goods, and the classification of the good under the Integrated Tariff of the Communities
(TARIC) at importation or under the Combined Nome nclature (CN) at exportation.  Upon request, an
importer may obtain "binding tariff information" on the tariff classification of a good for the customs
                                                     
6 "Council Resolution of 21 June 1999 on the reform of the customs transit system" (OJ C 193, 1999).
7 For example, a good arriving in Le Havre and bound for Spain can either be customs-cleared at
Le Havre and cross the French/Spanish border under the EC VAT and Intrastat systems or, such shipments canbe placed under the Community transit system and cust oms-cleared on arrival at the Spanish side of the
French/Spanish border.
8 "Convention between the European Economic Community, the Republic of Austria, the Republic of
Finland, the Republic of Iceland, the Kingdom of Norway, the Kingdom of Sweden and the Swiss
Confederation, on a common transit procedure" (OJ L 226, 1987, as amended);  "Customs Convention on theInternational Transport of Goods under cover of TIR carnets", the EC-EFTA multilateral Convention on acommon transit procedure.
9 Specimen in Annex 31 of Commission Regulation 2454/93.  The SAD was introduced on
1 January 1988 and replaced all individual  forms previously used in intra-Community trade.  Its use in such
trade was discontinued on 1 January 1993, replaced by tax control arrangements on business premises (EC
VAT) and authorized warehouses, and forms returned by businesses to permit the collection of statistical data(Intrastat system).  It should be noted that there is no standard approach among the Member States to completingthe optional 'boxes' in the SAD (European Communities, 1996b).
10 European Communities (1996b).WT/TPR/S/72 Trade Policy Review
Page 42
administration;  "binding origin information" ma y also be obtained since 1997 as a result of the
Community's implementation of the Agreement on Rules of Origin.11  The customs declaration forms
the basis for the "customs debt", covering the payment of import or export duties, which the importer
may be required to cover (e.g. a drawing request on a tariff quota close to its fill) by posting a cash
deposit or a guarantee.  The customs debt expires upon completion of the customs clearance
procedure.
(ii) Customs valuation
15. Articles 28-36 of the Community Custom s Code and the implementing Commission
Regulation 2454/93 incorporate the main provisions of the Agreement on Implementation of
Article VII of the GATT 1994 (Customs Valuation Agreement).  Since the entry into force of the
WTO, the EU has implemented the "Decision regarding cases where the customs administrations havereasons to doubt the truth or accuracy of the declared value"
12, and the Customs Valuation Committee
has noted the implementation of the "Decision on the treatment of interest charges in the customs
value of imported goods" and the "Decision on carrier media bearing software".13
(iii) Rules of origin
16. The Community applies two different sets of rules of origin:  non-preferential and
preferential.  The former are set out in the Comm unity Customs Code and apply to all non-preferential
commercial policy instruments, such as the tariff and trade defence measures.  Other rules of origin
apply to preferential agreements (Chapter II(4)(ii)) or to preferences granted on an autonomous basis
(Chapter II(4)(iii)).
17. According to the Community's non-preferential rules of origin14, goods originating in a
country are either those wholly obtained or produced in that country (e.g. mineral products) or, if
more than one country is involved in the production, those products which, in that country "underwenttheir last substantial, economically justified processing or working in an undertaking equipped for that
purpose and resulting in the manufacture of a new product or representing an important stage of
manufacture".  This definition is given substance for certain products (e.g. television sets, textile and
textile articles, meat, ceramic lamps), by specific origin rules.  A "change-of-heading" rule is
generally used to determine the origin, except for certain origin-conferring working or processingoperations.
18. In view of the objectives of preferential trade agreements or arrangements, their rules of
origin are, according to the Commission, generally more stringent than non-preferential ones.  For
example, whereas the manufacture of a cotton fabric from cotton yarn confers non-preferential origin,
the same fabric must be made from cotton fibres in order to acquire preferential origin.  Anotheraspect of preferential rules of origin is the cumulation system, which allows partner countries to use
each other's materials and products to produce an originating product.  Cumulation enhances the scope
for production to be integrated across the territories of preferential trade partners.  "Bilateral"
cumulation only operates between the EU and one part ner (e.g. the EU and Poland), while "diagonal"
cumulation allows more than two partners to cumulate origin (e.g. diagonal cumulation applies toASEAN under the GSP regime).  Finally, "full" cumulation applies to several free-trade areas (the
EEA and EU-Mediterranean free-trade area).
                                                     
11 Commission Regulation 12/97.
12 Commission Regulation 3254/94 and Commission Regulation 1762/95, notified in WTO document
G/VAL/N/1EEC/1/Rev.1.
13 WTO document G/VAL/W/5/Rev.6.
14 Notified in WTO document G/RO/N/1.The European Union WT/TPR/S/72
Page 43
19. The European Council noted in 1994 that "harmonization of rules of origin and the extension
of cumulation possibilities would strengthen the effectiveness of the Europe Agreements, improve
market access for originating products and stimulate economic cooperation throughout Europe".15
The System of European Cumulation of Origin, wh ich was introduced in 1997, was notified to the
WTO in 1998 and examined by the Committee on Regional Trade Agreements.16  The system
concerns a large number of regional trade agreements, including those between the EU and EFTA, theEU and CEEC, the EFTA and CEEC;  Turkey was integrated into the system from 1999.  The system
applies to partners having concluded preferential agreements with the Community and with each other
which contain identical rules of origin.  The EU recognizes the benefit of having a "standard protocol"
on rules of origin, which was extended to GSP in 1999
17 and integrated into the agreements concluded
with several Mediterranean countries (Chapter II(4)(ii)(c)).
(iv) Community tariff
(a) Most-favoured-nation (MFN) regime
20. The EU publishes annually in the Official Journal , generally in the month of October, the
tariff for the following calendar year.18  The EU also submits annually in database format the most-
favoured-nation (MFN) tariff to the WTO's Integrated Database (IDB), as well as exports and imports,at the 8-digit level of the Combined Nomenclature (CN).  This submission, which forms the basis of
the Secretariat's analysis of the MFN tariff, indicates that for 1999 the EU's tariff consisted of
10,428 CN 8-digit lines;  all lines are bound in Schedule CXL.
21. For 1999, the simple average applied rate of duty on all products is estimated at 6.9%, just
below the figure of 7% for the bound tariff (Table III.1).  The simple average for agricultural products
(WTO definition)
19 was 17.3%, compared with 4.5% for non-agricultural products (WTO definition,
excluding petroleum).  Tariff peaks (triple the simple average) are in evidence for meat, dairyproducts, and cereals, and for textiles and clothing.  Although non-agricultural product lines have
generally lower levels of tariffs than agricultural product lines, peaks and tariff escalation are an issue
for certain products (Chapter IV(3)), and one third of dutiable lines are "low-tariff" (up to 3%),
implying a nuisance to trade rather than a protective effect (Table AIII.1).  The range of applied
tariffs, in terms of the minimum and maximum rates, is also more important on agricultural products(from 0 to 236.4%) than on non-agricultural products (from 0 to 26%).
22. Just under 10% of lines are established on a non- ad valorem  basis, and mainly concern
agricultural products. Non- ad valorem  rates are either just specific (assessed on a volume basis),
combinations of an ad valorem  component with a specific component (compound rate), or mixed
                                                     
15 Essen European Council, 9 and 10 December 1994, Presidency Conclusions, Annex IV [Online].
Available at: http://www.europarl.eu.int/dg7/summits/en/ [2 December 1999].
16 Notified to the WTO in WT/REG/GEN/N/1.  WT/REG/GEN/1 contains questions and replies on the
system.  Notes on the meetings of the Committee on Regional Trade Agreements to examine the system are
found in WT/REG/GEN/M/1, WT/REG/GEN/M/2 and WT/REG/GEN/M/4.
17 Commission Regulation 46/1999 contains modificati ons to the list of conditions in Annex 15 of
Commission Regulation 2454/93 to confer GSP origin.
18 The analysis in this section is based on the tariff for 1999 contained in Commission Regulation
2261/98;  the latest tariff, for 2000, is found in Commission Regulation 2204/99.  The tariff  has two columnsfor the duty:  one for the "conventional" rate of duty, assessed on imports from all countries (whether or not a
member of the WTO), unless the autonomous rate is lower;  and one for the "autonomous" rate of duty, assessed
on imports from all origins, if this rate is lower than the conventional rate.
19 Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01
to 24 less fish and fish products (Chapter 3), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52and 53.WT/TPR/S/72 Trade Policy Review
Page 44
lines, on which the duty is subject to a minimum rate (MIN) and/or maximum rate (MAX), or lines on
which the rate is set by a technical formula.20  Estimating the tariff on such products poses difficulties
due to the need to convert the duties to ad valorem  equivalents (AVEs), and the Secretariat used the
AVEs submitted by the Commission to the WTO's IDB.  However, every method of calculation for
AVEs is subject to bias, mainly due to the underestimation of AVEs using the unit value method.
Table III.1
Applied MFN tariff, 1999
Imports 1998 8-digit tariff lines
Value ShareSimple average
tariff Number Share
(US$ billion) (%) (%) (%)
Total 734.9 100.0 6.9 10,428 100.0
WTO Agriculturea62.0 8.4 17.3 2,132 20.4
WTO Non-agriculture
(excluding petroleum)618.4 84.1 4.5 8,257 79.2
Petroleum 54.4 7.4 2.9 39 0.4
HS Chapters 01-24 69.5 9.5 17.0 2,378 22.8
Ad valorem 9.6 1,388 58.4
Free 0.0 258 18.6
Dutiable 11.8 1,130 81.4
Non- ad valorem 29.9 990 41.6
Ad valorem  equivalent 32.7 667 67.4
Ad valorem  component 14.4 123 12.4
Empty .. 200 20.2
HS Chapters 25-97 665.4 90.5 4.2 8,050 77.2
Ad valorem 4.1 7,987 99.2
Free 0.0 1,753 21.9
Dutiable 5.3 6,234 78.1
Non- ad valorem 9.8 63 0.8
Ad valorem  equivalent 10.0 59 93.7
Ad valorem  component 7.3 4 6.3
Empty n.a. 0 0.0
n.a. Not applicable.
a Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01 to 24 less fish and fish
products (Chapter 3), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52 and 53.
Note: Ad valorem  equivalents (AVEs) for 1998 were submitted by the EC to the WTO's Integrated Database (IDB) and
adjusted by the Secretariat for developments in applied tariff rates for 1999.  In other cases, the Secretariat has
used the ad valorem  component of duty lines to expand the data on the EC's 1999 Tariff.
Source : WTO Secretariat calculations, based on data provided by the European Commission.
23. An additional source of bias in the estimation of the tariff on agricultural products arises from
the nature of the duty regime itself.  For example, an entry price system applies to the duty regime for
imports of fresh fruit and vegetables that are also produced in the Community, such as tomatoes,cucumbers, oranges, and lemons.  A band of entry prices is established for each period of importation
during the year, climbing in the peak European harvesting period (Annex 2 of the EU's 1999 Tariff).
For each particular price band, the tariff consists of an ad valorem  component and a specific
component, the latter set so as to ensure that the importer always has an incentive to set his price at or
                                                     
20 On "composite agrigoods" of primary and/or processed agricultural products (e.g. milk- and sugar-
containing products), the duty has an agricultural component (EA), including for certain forms of sugar(AD S/Z) or flour (AD F/M) established on the basis of a recipe (Annex 1 of the 1999 Tariff).The European Union WT/TPR/S/72
Page 45
above the price at the lower end of the band.21  To illustrate, the duty regime for lemons consists of six
price bands for the year, the lower end of the price band reaches its highest level from 16 August to
31 October (Chart III.1), and the specific component of the duty rises very sharply at prices below the
floor in each price band.
40414243444546474849505152 53 54 55 56 57 581 Jan - 30 Apr1 - 31 May1 Jun - 31 Jul1 - 15 Aug16 Aug- 31 Oct1 Nov - 31 Dec
01020304050607080Chart III.1
Protective effect of duty regime for lemons, 1999
Entry price (Euro/100 kg.)
Source : WTO Secretariat calculation , based on the 1999 tariff.Ad valorem 
equivalent
(%)
24. In the Secretariat's tariff estimate for 1999, it was not possible to factor in the zero or reduced
tariff treatment available through the EU's tariff quotas, which mostly concern agricultural and fishery
products;  the estimate thus refers to the out-of-quota tariffs only.  In particular, the EU opened105 tariff quotas for imports from WTO Members (including preferential trade partners), resulting
from current and minimum market access commitments under the WTO Agreement on Agriculture
bound in the EU's Schedule of Concessions CXL.  They provide zero or reduced tariff treatment for
imports of the specified product up to the limit of a q uota, established in value or volume terms, and
are available for imports from all WTO Members, unless a specific country allocation is noted in the
commitment (e.g. the African, Caribbean and Pacific (ACP) States are granted an allocation within
the tariff quotas for bananas and sugar).
25. The EU also opened tariff quotas for imports from certain trading partners resulting from
agreements reached to settle trade disputes or as a consequence of enlargement.  For example, the
latest enlargement of the EU in 1995 (Austria, Fi nland, and Sweden) led to the conclusion of a
number of agreements under GATT Article XXIV:6, and new tariff quotas on rice are among the
provisions of those reached with Australia, Thailand, and the United States.
22  A new tariff quota on
                                                     
21 According to the Commission, imports of fresh fruit and vegetables subject to entry prices are in
most cases sold on a consignment basis.  The import prices are therefore derived from selling prices on the
Community market and the customs duty is established after the sale has taken place.  The importer thus doesnot have the possibility to set a price in most cases, but has to rely on market prices in the EC.
22 Council Decision 95/591/EC;  and Council Decision 95/592/EC (OJ L 334).  The agreement with the
United States also provides for the withdrawal of the WTO dispute settlement case on the EC's rice and cerealsWT/TPR/S/72 Trade Policy Review
Page 46
broken rice was also agreed in 1996, in a separate agreement with Thailand, suspending the
consultations under the WTO dispute settlement procedures.23  Finally, the estimated tariff does not
include the tariff quotas on handmade products (subject to certification from the competent
authorities)24, silk and cotton fabrics, or for outward processing of certain textile products.  The EU
opened tariff quotas for products in short supply, including components of electronic products and
chemicals.25
26. WTO Members have raised a number of queries in the WTO Committee on Agriculture on
the allocation and administration of the EU's tariff quotas on agricultural products.26  These have
included:  country-specific allocations (high quality beef, buffalo meat, thin skirt of bovine animals,
live sheep and goats, poultry meat, butter, cheese, manioc, sweet potatoes, bananas, sugar, brown rice,
white rice, mushrooms);  the variable period of validity for import licences (120 days, 150 days, threemonths, four months, six months, up to 30 June);  the details of other arrangements, such as the
requirement of "certificates of authenticity" (oranges and minneolas);  and the low fill rates for certain
tariff quotas.
27  The EU has also been involved in a longstanding dispute settlement proceeding arising
from its regime for bananas and the modifications made to bring the regime into conformity with
WTO obligations;  significant problems of implementation by the EU of panel or Appellate Bodyrulings have led to retaliation against EU exports.
28
(b) Preferential regimes
27. The EU grants duty-free or reduced tariff treatment for imports of a number of products under
preferential agreements and arrangements, for which almost all its trading partners are eligible;
exclusively MFN treatment applies to imports from only eight WTO Members:  Australia; Canada;
Hong Kong, China; Japan; Republic of Korea; New Z ealand; Singapore; and the United States.  Other
trading partners are eligible for a combination of preferential regimes, requiring a comparison of themargin of preference available for a product across different preferential regimes, as well as
associated administrative costs, with the fall-back  of MFN treatment.  For example, Argentina's
exports to the EU may enter under the MFN regime , but are also eligible for GSP preferences on non-
agricultural products;  in addition to MFN and GSP, Cameroon is eligible for Lomé preferences as an
ACP; and, in addition to MFN, GSP, and Lomé, Sierra Leone is eligible for enhanced GSP
preferences on agricultural products as a least developed country.
                                                                                                                                                                    
regime, and the introduction of a "cumulative recovery system" to assess duties on rice imports from the
United States.  See also WT/DS134.
23 "Agreement in the form of an Exchange of Letters on consultations between the European
Community and Kingdom of Thailand under GATT Article XXIII on rice" (OJ L 122, 1996).
24 Council Regulation 1808/1995.  Authorized bodies are located in India, Pakistan, Thailand,
Indonesia, the Philippines, Iran, Sri Lanka, Uruguay, Bangladesh, Laos, Ecuador, Paraguay, Panama,El Salvador, Malaysia, Bolivia, Honduras, Peru, Chile, Guatemala, Argentina, Mexico and Brazil.
25 Council Regulation 2505/96.
26 Two management systems apply to tariff quotas:  one based on customs declarations and the other on
import licences.  Commission Regulation 1427/97 establishes in one framework the general principles and rulesof the management of tariff quotas by the Commission, based on a chronological order of acceptance of customsdeclarations, unless otherwise provided  in the applicable regime.  With respect to specified groups of products,
eligible traders request an import licence from a Memb er State, which draws a quantity corresponding to its
needs through the Commission, requests being managed on a first-come-first-served basis.  In the case of over-
subscription, a reduction coefficient is applied.
27 WTO documents G/AG/N/EEC/1, G/AG/N/EEC/1/Add.1, G/AG/N/EEC/3, and
G/AG/N/EEC/3/Corr.1.
28 WT/DS27. For the latest information on th e proceeding, see WTO Secretariat (ongoing).The European Union WT/TPR/S/72
Page 47
28. In order to analyse the market access available under the EU's preferential regimes, the
Commission gave the Secretariat access to the TARIC database on the applied tariff for all products
from all origins under all regimes, consisting of about 16 million records.  The Secretariat's analysis is
based on the assumption that a country eligible for one or more preferential regimes chooses the
lowest available rate for each product, with MFN rates applying to products not covered by any
preferential regime.  For example, Sierra Leone would choose the lowest rate for each product fromthe preferential regimes for which it is eligible – Lomé, GSP preferences on agricultural and non-
agricultural products – with MFN rates applying to all products not covered by a preferential regime
(shown in Table III.2 as Lomé + LDC + MFN).  The analysis indicates a cascading system of
preferential treatment, with the most beneficial treatment available to least developed countries and
ACP countries, followed by countries having conc luded free-trade agreements with the EU, and then
developing countries (Table III.2).  The detailed results for product categories (Table AIII.2) indicate
that the level of protection remains largely the same across the MFN and all preferential regimes for
live animals, meat, dairy products, and cereals, underlining the difficulty of liberalizing these sectors.
These results also demonstrate that margins of preference are significant for fish, fresh and processed
fruit, nuts and vegetables, tobacco, textiles and clothing products.
Table III.2
Summary of MFN and preferential regimes, 1999
(Per cent)
MFN bound
rateMFN applied
rateLomé +
LDC + MFNLomé + GSP +
MFNLDC +
MFNFTA +
MFNGSP +
MFN
Simple average tariffs
Total 7.0 6.9 1.8 1.9 1.9 3.5 4.9
WTO Agriculturea17.4 17.3 9.5 10.3 10.3 16.7 15.7
WTO Non-agriculture 4.6 4.5 0.0 0.0 0.0 0.5 2.3
Frequency distribution of lines
Duty free 18.0 19.7 94.1 93.2 93.7 80.3 53.7
0-5 39.6 38.4 0.9 1.1 0.9 3.4 18.9
5-35 40.2 39.6 3.3 3.9 3.5 13.9 25.2
35-50 0.8 0.8 0.5 0.6 0.6 0.9 0.8
>50 1.5 1.5 1.2 1.2 1.3 1.5 1.4
a Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01 to 24 less fish and fish
products (Chapter 3), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52 and 53.
Note: Each preferential regime has a different product coverage, and most trading partners are eligible for a variety of regimes .  To be
fully comparable with the bound and applied rates, the Secretariat has estimated the simple average tariff of combinations of
preferential regimes on the assumption that the lowest available rate across the different regimes is selected for each product .
Source :  WTO Secretariat calculations, based on data provided by the European Commission.
29. The Secretariat's analysis does not include the zero or reduced tariff treatment granted by the
EU on imports from partners in preferential trade agreements through tariff suspensions or tariff
quotas, of which there were some 3,000 in place for 1999, most concerning agricultural or fishery
products.29  Preferential tariff quotas may be designed to limit access to the off-season for non-
Community producers, as is the case, for example, of the tariff quota on fresh tomatoes imported from
                                                     
29 Daily updated information is available from the database of the Directorate General on Taxation and
Customs Union at:  http://europa.eu.int/comm/taxation_customs/databases/database.htm.WT/TPR/S/72 Trade Policy Review
Page 48
Morocco from 1 October to 31 March under the preferential agreement.30  Access may also be subject
to minimum-price conditions, such as imports under tariff quotas of carnations and roses from
Cyprus, Israel, Jordan, Morocco, the West Bank and Ga za Strip, which must bear a price of at least
85% of the Community price.31  Similarly, the EU grants a tariff suspension on oranges imported from
Israel for the ad valorem  component of the duty up to a limit of 200,000 tonnes (a reduction of 60%
for quantities above the quota), as well as the specific component during the Community off-seasonprovided entry prices are respected.
32
(v) Indirect taxes
(a) Value-added tax
30. All Member States apply value-added tax (VAT) to imported products at rates which, in
accordance with the national treatment principle, are the same as for goods supplied within theterritory by a taxable person.  Full customs clearance of imported products in a Member State requires
payment of VAT (and excise duties, if applicable).  Such clearance may be completed either in the
Member State where the product is landed, after which it enters into free circulation, or in the Member
State of destination if the product is placed u nder a suspensive customs procedure (usually the
external transit procedure).
33
31. Intra-Community supplies of goods (formerly imports) are taxable acquisitions in the Member
State of destination and have to be declared by the buyer in his periodic VAT statements.  Such
supplies of goods (exports, prior to 1993) are exempt from VAT in the Member State of origin
provided that the purchaser is registered for VAT in the other Member State and that the goods
physically leave the national territory of the Member State of origin.34  In order to compensate for the
elimination of customs formalities and checks and avoid losses of tax revenue, a computerized system
for the automatic exchange of information on th e value of intra-Community deliveries was set up
among the national authorities via a network controlled by the Commission (VAT information
exchange system (VIES)).35  However, the Court of Audit has noted the greater risk of irregularities
given the disappearance of routine inspections at internal borders.36 According to the Commission,
more than ECU 700 billion of intra-Community trade is exempted from VAT at its point of origin,
accounting for ECU 100 billion in taxes.
32. Member States have national VAT regimes whose differences in terms of the standard rate,
the reduced rate, and super reduced categories (Table III.3), were narrowed by the transitional VAT
arrangements introduced in 1993 in the context of the Single Market.37  Luxembourg has the lowest
standard rate (15%), while Denmark and Sweden have the highest (25%).  Standard VAT rates are
required to be a minimum of 15% until 31 December 2000, but Member States may reduce rates (butnot below 5%) for supplies of goods and services having a social or cultural purpose (Annex H), such
                                                     
30 "Agreement on the regime for imports into the EC of tomatoes and courgettes originating in and
imported from Morocco" (OJ L 048/1995).   Apparently, an additional condition is that Moroccan exports stay
within the limits of the quota ("Morocco, EU at odds over tomatoes", Financial Times , 4 February 2000).
31 Council Regulation 4088/1987, as amended.
32 "Agreement on the regime for imports into the Community of oranges originating in Israel"
(OJ L 327/1996).
33 The Commission has submitted a proposal in COM(1994) 370 final to maintain the parallelism
between the regulation on relief from customs duty.
34 Special Report No. 9/98 (OJ C 356, 1998).
35 Council Regulation 218/92.
36 Special Report No. 9/98 (OJ C 356, 1998).
37 COM(1999) 10 final, Figure B.14.The European Union WT/TPR/S/72
Page 49
as foodstuffs, pharmaceutical products, hotels, and so forth, and retain certain zero-rated categories in
place in 1991.  These differences in rates of VAT taxation are additional to differences in excise taxes,
where applicable (see below).
Table III.3
VAT rates by Member State, 1999
(Percentage)
BEL DNK DEU GRC ESP FRA IRL ITA LUX NLD AUT PRT FIN SWE GBR
Standard 21 25 16 18 16 20.6 21 20 15 17.5 20 17 22 25 17.5
Reduced 6 - 7  8 7 5.5 12.5 10 6 6 10/12 5/12 8/17 6/12 5
Super
reduced1-- 4 4 2 . 1 4 3-------
- Negligible.
Source : European Commission, DGXXI (1999).
33. Taxable persons may deduct the tax paid on inputs, both from Community sources and
imported products, to avoid double-taxation.38  Special arrangements apply to the taxation of second-
hand goods (including works of art, collectors' items and antiques) and investment gold (bars and
coins) is exempt since 2000.  A Member State may obtain the authorization of the Council for
individual exemptions to the general VAT regime "to  simplify the procedure for charging the tax or to
prevent certain types of tax evasion or avoidance".39  Goods exported outside the territory of the
Community are VAT-exempt, as are certain services supplied for international transport.
34. One area of increasing importance to the collection of VAT is distance sales from businesses
to private individuals, which includes "indirect" electronic commerce.40  For products shipped from
abroad to the EU, including those purchased from a foreign e-commerce business, the VAT is
collected at the border.  For distance sales inside a Member State by EU companies situated outside
the Member State in question, VAT is applied at the point of origin up to a threshold established by
the Member State of destination, provided it involves products that are not subject to excise duties.
Beyond this threshold (between ECU 35,000 or ECU 100,000), Community sellers are required to be
registered for VAT in the Member State of destination and, where appropriate, have a taxablerepresentative there in order to submit the necessary tax returns.  However, the Court of Audit has
indicated that there is little incentive for a seller to voluntarily register, or for a Member State to
enforce this requirement.
41
35. With regard to a Community-wide VAT system, the Commission envisages taxing goods at
their point of origin and establishing a single place of registration and taxation for Community traders.The adoption of such a system is, however, contingent upon a resolution of the political issues of the
harmonization of rates and the allocation of revenues to the Member State where the good is
consumed rather than produced.
42  The most recent proposal concerns an extension of the
                                                     
38 The Commission has proposed, in COM(1998) 377 final, to amend the arrangements for the refund
of tax to non-established taxable persons, laid down by the eighth Council VAT Directive 79/1072/EEC, and thesystem to administer these proposed new arrangements.
39 COM(1999) 497 final.  The proposal refers to a derogation for the operation of a fixed-link between
Denmark and Sweden as of June 2000.
40 Distance sales (for example, by mail order) are defined as any supply of goods for which shipment is
carried out by, or on behalf of, the seller.  The buyers must be private individuals, taxpayers with no right todeduct the VAT, or legal entities that are not liable for the VAT (Article 28(b) of Directive 77/338/EEC).
41 Special Report No. 9/98 (OJ C 356, 1998).
42 COM(96) 328 final.WT/TPR/S/72 Trade Policy Review
Page 50
Commission's powers to implement the directives requiring approximation of national tax regimes, by
changing the procedure of the VAT Committee from an advisory to a regulatory procedure
(Box II.2).43
(b) Excise duties
36. Excise duties are generally levied on "luxury products", such as cigarettes, alcoholic
beverages, mineral fuels and motor vehicles.  All Member States apply excise duties to importedproducts at rates which, in accordance with the national treatment principle, are the same as for
domestically produced goods.  The Community has harmonized the scope of excise taxes applicable
on cigarettes and manufactured tobacco
44, mineral oils45, alcohol and alcoholic beverages46, and has
established minimum rates of duty on these products.  These minimum rate requirements, however, do
not exclude significant differences in the levels of excise taxes applied by Member States(Table III.4), on top of differences in VAT (see above) or other taxes (e.g. vehicles).
47  In the case of
wine, for example, the EU's minimum excise duty is € 0 per hectolitre of product, and eight Member
States charge no tax, while Sweden, Ireland, and Finland charge the highest rates.
37. The excise duty is a consumption tax collected by the Member State of destination rather than
of dispatch.  The movement between Member States of the main excisable products therefore takesplace under excise duty suspension and under cover of an accompanying administrative document (or
equivalent commercial documents), and the posting of a guarantee is required to cover the risk of tax
fraud inherent in the movement of excisable products.
48  However, products acquired and transported
by private individuals for their own use are subject to payment of the tax in the Member State where
they are acquired.49
38. In the context of the Single Market, the Commission's most recent proposal is aimed at
modernizing the Community's framework for the taxation of mineral oils and extending it to allenergy products.
50
                                                     
43 COM(97) 325 final.
44 Council Directive 92/79/EEC and Council Directive 92/80/EEC, amended by Council Directive
1999/81/EC.
45 Council Directive 92/81/EEC harmonizes the structures of excise taxes and Council Directive
92/82/EEC approximates the rates.
46 Council Directive 92/83/EEC harmonizes the structures of excise taxes and Council Directive
92/84/EEC approximates the rates.
47 European Commission, DG XXI (1997).
48 Council Directive 92/12/EEC of 25 February 1992, as amended.
49 Commission Regulation 2719/92.
50 COM(97) 30 final.The European Union WT/TPR/S/72
Page 51
Table III.4
Excise taxes on selected products by Member State, 1999
(Euro)
BEL DNK DEU GRC ESP FRA IRL ITA LUX NLD AUT PRT FIN SWE GBR
Beer 1.71a3.62- 0.79a1.14a0.77a2.59b19.95b1.40a0.79a9.05- 1.45a7.02- 28.50b15.83b16.51b
68.42a26.54a19.65a
Winec47.00 94.59- 0.00 0.00 0.00 3.35 274.14 0.00 0.00 48.70 0.00 0.00 234.71 292.97 214.32
141.56
Cigarettesd74.74 124.13 76.54 51.00 35.43 86.24 120.61 55.38 52.72 69.12 66.58 56.72 107.30 97.54 171.64
a Per hectolitre per degree Plato.
b Per hectolitre per degree of alcohol of finished product.
cP e r  h e c t o l i t r e .d Per 1,000 pieces.
Source : WTO Secretariat, based on data provided by the European Commission.
(vi) Prohibitions, restrictions, and licensing requirements
(a) Common Foreign and Security Policy (CFSP)
39. Since the entry into force of the Treaty on Eu ropean Union in 1993, the EU adopts, through
common positions, the measures on trade and economic relations provided for by resolutions of the
United Nations Security Council, which may include embargoes falling within  the competence of the
Community.  As of March 2000, the EU had reduced or discontinued trade and economic relationswith Iraq and the Federal Republic of Yugoslavia (Serbia and Montenegro), and instituted various
embargoes on exports (section (3)(ii)).
(b) Protection of the consumer, the environment or animal welfare
40. The placement and use of dangerous substances on the Community market, including by
importation, is strictly regulated to protect the public, and the list of covered substances is regularly
up-dated for technical progress.
51  In 1999, the EU banned, as from 2005, remaining uses of chrysotile
asbestos, invoking the fact that all forms of asbestos are proven carcinogens, and following the bansintroduced to some degree by nine of the 15 Member States;  five of the six types of asbestos had
already been banned in the EU in 1991.
52  The EU also controls trade of dangerous chemicals through
a common system of notification and information fo r imports from, and exports to, third countries of
certain chemicals that are banned or severely restricted on account of their effects on human health
and the environment, for which the Community applies the international notification and priorinformed consent (PIC) procedure established by the United Nations Environment Programme
(UNEP) and the Food and Agriculture Organization (FAO).
53
41. Measures for species protection include a prohibition on imports of whales and other cetacean
products for commercial purposes54, and a prohibition on imports of skins of seal pups (except for
those harvested by Inuit using traditional techniques).55  The EU applies regulations to trade in wild
fauna and flora, since 1984, to implement the provisions of the Convention on International Trade in
                                                     
51 Council Directive 76/769/EEC, as amended.
52 IP/99/572, 27 July 1999.  See also the WTO complaint by Canada (WT/DS135);  for the latest
information on the proceeding, see WTO Secretariat (ongoing).
53 Council Regulation 2455/92, as amended.
54 Council Regulation 348/81.
55 Council Directive 83/129/EEC, as amended by Council Directive 89/370/EEC.WT/TPR/S/72 Trade Policy Review
Page 52
Endangered Species of Wild Fauna and Flora (C ITES), including by prohibitions and licensing
requirements, which were amended in 1997 to introduce stricter trade control measures at the
border.56  Under the International Commission for the Conservation of Atlantic Tuna (ICCAT), the
EU implements, as from 1994, a system for the statistical monitoring of trade in bluefin tuna57, and
prohibited imports of such tuna from Belize, Honduras, and Panama in 1998.58
42. The EU implemented the Montreal Protocol as from 1988, as well as the subsequent
amendments, to control the production, importation, exportation, use and recovery of ozone-depleting
substances, including by prohibitions and licensing requirements.59  In particular, imports of certain
controlled substances and of products containing such substances from a State not party to the
Montreal Protocol are prohibited, and products produced with but not containing such substances may
be restricted by the Community.  The EU implemented the Basel Convention as from 1994 to controlthe export, import, and disposal of hazardous wastes
60, and also controls by prohibitions and licensing
requirements the movement of radioactive waste.61
43. The EU prohibited the use of leg-hold traps in the Community as from 1995 and, as from
1996, the importation of pelts of certain wild species (e.g. beaver, otter, mink) from countries that
permit leg-hold traps or trapping methods that do not meet international humane trapping standards;imports of covered species from covered countries are subject to certification.
62  The EU concluded
international agreements on such standards in 1998 with the major fur-exporting countries of Canada
and the Russian Federation, and the United States.
(c) Common rules on imports
44. The general principle of the EU's regime for imports is "liberalization of imports, namely the
absence of any quantitative restrictions"63, which applies to imports of all products from WTO
Members except for textile and clothing products that are not yet integrated in GATT 1994.  Productsintegrated into GATT 1994 may be subject to restrictive measures, such as safeguard measures, while
products not yet integrated are subject to Council Regulation 3030/1993, as amended, on common                                                     
56 Council Regulation 3626/82 was replaced by Counc il Regulation 338/97, as amended.  Commission
Regulation 1968/1999 contains the latest list of re strictions, to replace Commission Regulation 2473/1998.
57 Council Regulation of 858/94, as amended by Council Regulation 1446/1999.
58 Council Regulation 1435/98;  the measure cites ICCAT's efforts to encourage, to no avail, the three
countries to comply with measures for the conservation and management of Atlantic blue-fin tuna, and theinstructions given by ICCAT to the contracting parties to take appropriate measures to prohibit imports, such
measures being lifted as soon as it is established that the countries have brought their fishing practices into line
with ICCAT's measures.
59 Council Regulation 3093/94.  The Council and European Parliament are considering a Commission
proposal to amend the regulation (COM(98) 398 final, as amended by COM(1999) 67 final).  For a commentaryon  the proposal, see USTR (1999), p. 115.
60 Council Regulation 259/1993, as amended.  The Convention was approved by Council
Decision 93/98/EEC, and Council Decision 97/940/EC approves the amendment to the Convention laid down by
Decision III/1 of the Conference of the Parties.  Th e Council and European Parliament are considering a
Commission proposal to approve the amendment to the Convention laid down by Decision III/1 of theConference of the Parties (COM(98) 634 final).
61 Council Directive 92/3/EURATOM.
62 Council Regulation 3254/91.  According to its Ar ticle 3(2), the prohibition, which was originally
scheduled for 1995, could be postponed by the Commission until 1996 to provide an incentive for the
development of humane trapping standards in major fur-exporting countries, and was decided by Commission
Regulation 1771/94.  The list of countries from which importation is permitted was established by CouncilDecision 97/602/EC (replaced  by Council Decision 98/596/EC) and certification was implemented by
Commission Regulation 35/97.
63 Council Regulation 3285/94 as amended.The European Union WT/TPR/S/72
Page 53
rules for imports of certain textile products from third countries.  A special regime also applies to
certain "state-trading countries".
45. According to the Commission, the Community import licensing system is based on the
premise that no import licences are required except where specific products are subject to quantitative
restrictions, safeguard measures or import surveillance.  Prior Community surveillance (automatic
licensing only) applies for 2000 to imports of certai n iron and steel products covered by the ECSC and
EC Treaties from all third countries, except for EFTA Member States, parties to the EEA, and Turkey,
"in order to provide statistical information permitting rapid analysis of import trends", in view of the
deterioration of net exports and the consequent alleged threat to cause injury to Community
producers. 64  (The EU terminated on 31 December 1997 the prior Community surveillance for
imports of certain steel cables in place from 1 May 1996).65  In addition, the double-checking system
without quantitative limits (export and import licences) was agreed in the framework of the Europe
Agreements with Bulgaria, the Czech Republic, Poland, Romania and Slovakia, respectively.
46. Licensing also applies to imports of certain products subject to common market organization
– cereals, rice, beef and veal, sheepmeat and goatmeat, milk and milk products, sugar, processed fruit
and vegetables, bananas, olive oil, seeds, wine – which, according to the Commission, serves astatistical purpose and is granted automatically.
66  A licence is required to import within a tariff quota.
(d) Special regimes
Textiles and clothing
47. The EU maintains quotas under the WTO Agreement on Textiles and Clothing (ATC) on
imports from Argentina; Brazil; Hong Kong, Chin a; India; Indonesia; Macao; Malaysia; Pakistan;
Peru; the Philippines; Singapore; Republic of Korea; Sri Lanka; and Thailand (Table AIII.3).67  These
quotas were carried over into the WTO from the longstanding Multi-Fibre Arrangement.  Growth
rates on quotas were increased by 16% on 1 January 1995 and by 25% on 1 January 1998;  higher
growth rates have applied to Peru and Sri Lanka, as small suppliers, at 16% plus 25% in 1995 (first
and second stage growth), and a further 27% in 1998 (t hird stage growth).  The EU is to integrate
products into GATT 1994 by 31 December 2004, based on the 3.96 million tonnes of textile and
clothing products imported by the EU in 1990:  16.2% were integrated in 199568, followed by 17.11%
in 199869;  ahead is the third stage on 1 January 2002 (not less than 18%), with all remaining products
to be integrated on 31 December 2004.
48. The EU's integration of textiles and clothing products into the multilateral rules is to eliminate
quotas maintained under the WTO Agreement on Textiles and Clothing (ATC).  Of the EU's 1990
imports, 58% were restricted product categories, mainly yarn, fabrics, and made up textile productsand clothing, of cotton, wool, and man-made fibres (Table III.5).  No restricted product categories
were included in the EU's integration of 1995, while 12 restricted categories were integrated in 1998,
                                                     
64 Commission Regulation 2727/1999.  For 1999, prior Community surveillance was notified to the
WTO as applied under Commission Regulation 2845/98;  for 1998, under Commission Regulation 2604/97; andfor 1997, under Commission Regulation 2412/96.
65 WTO document G/LIC/N/2/EEC/1.
66 WTO document G/LIC/N/3/EEC/2.
67 Council Regulation 3030/93, as amended.
68 GATT document G/TMB/N/1.  The Textiles Monitoring Body received a number of queries on the
product coverage of the first stage integration;  its findings, which were accepted by the EC (WTO documentG/TMB/R/29) resulted in modifications (WTO documents G/TMB/N/1/Corr.2 and G/TMB/N/1/Corr.2/Suppl.1).
69 WTO documents G/TMB/N/207, G/TMB/N/207/Add.1 and G/TMB/N/207/Corr.1.WT/TPR/S/72 Trade Policy Review
Page 54
leading to the lifting of restrictions on five WTO Members – Argentina; Brazil; Hong Kong, China;
Republic of Korea; and Macau.  To date, the EU's integration has concerned 5.4% of 1990 imports of
restricted product categories, leaving most of the restrictions in place (although increased by
applicable growth rates) and the challenge of liberalizing them still ahead.
Table III.5
Quantitative restrictions on imports of textile and clothing products
1990 Liberalized in 1995 Liberalized in 1998
Product
categories
subject to limits1, 2, 3, 4, 5, 6, 7, 8, 9, 20, 22, 23, 32, 39, 12, 13, 14, 15,
16, 17, 18, 19, 21, 24, 26, 27, 28, 29, 31, 68, 73, 77, 78,
83, 33, 35, 36, 37, 46, 50, 61, 10, 67, 70, 72, 74, 86, 91,
97, 100, 111, 13519, 77, 46, 61, 67, 70,
72, 74, 86, 91, 100,
111
Product
categories not
subject to limits0A, 76, 34, 38A, 38B, 40, 41, 42, 43, 47, 48, 49, 51, 53,
54, 55, 56, 58, 59, 60, 62, 63, 65, 66, 69, 75, 76, 84, 85,
87, 88, 90, 93, 94, 95, 96, 98, 99, 101, 109, 110, 112,113, 114, 115, 117, 118, 120, 121, 122, 123, 124, 125A,
125B, 126, 127A, 127B, 128, 129, 130, 130A, 130B,
131, 132, 133, 134, 136, 137, 138, 139, 140, 141, 142,144, 145, 146A, 146B, 146C, 147, 148A, 148B, 149,
150, 151A, 151B, 152, 153, 154, 156, 157, 159, 160, 16169, 75, 85, 99, 134,
148A, 149, 150, 15376, 41, 58, 65, 84, 87,
88, 96, 110, 124, 126
Note: See Table AIII.3 for the definitions of product categories and the country coverage of EC trade restrictions.
Source:   WTO documents G/TMB/N/60 of 19 April 1995 and G/TMB/N/1/Corr.2/Suppl.1 of 20 February 1998.
49. The EU's other liberalization measures in the sector since 1995 for imports from WTO
Members have concerned preferential trade partners.  On 1 January 1996, the EU eliminatedquantitative restrictions on imports from Turkey in  the context of the customs union between the two
parties, and Turkey introduced restrictions on imports from certain third countries parallel to those
maintained by the EU.
70  On 1 January 1998, the EU lifted quantitative restrictions on imports of
textiles and clothing products from all Europe Agreement countries, concerning Bulgaria, the Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Po land, Romania, Slovakia, and Slovenia.  On the
same date, the EU eliminated surveillance on imports from Malta, Morocco, and Tunisia.
50. The EU also maintains quotas on imports from Belarus, China, Ukraine, Viet Nam, and
Uzbekistan under bilateral agreements.71  The EU applies quantitative restrictions on an autonomous
basis on imports from Bosnia-Herzegovina, Croatia, Federal Republic of Yugoslavia (Serbia and
Montenegro), Democratic People's Republic of Korea, and Chinese Taipei.72  Surveillance of imports
of textile and clothing products applies under agreements with Albania, Bangladesh, Cambodia,
China, Egypt, Estonia, Former Yugoslav Republic  of Macedonia (FYROM), Kazakhstan, Kyrgyztan,
Laos, Latvia, Lithuania, Moldova, Mongolia, Nepal, Russian Federation, Tajikistan, Turkmenistan,
Ukraine, United Arab Emirates, Uzbekistan, and Viet Nam.
51. The EU's administrative arrangements for origins subject to restrictions include classification
and origin requirements, import licensing requirements supported by original export certificates, and
                                                     
70 Developments under the EC-Turkey Customs Union Agreement were notified to the WTO under
Article XXIV (WT/REG22/).  Turkey notified to the WTO its new restrictions in G/TMB/SPEC/350.  See also
the complaint by India (WT/DS34).
71 Council Regulation 3030/93, as amended.
72 Council Regulation 517/94, as last amended by Council Regulation 1457/97, and implemented by
Commission Regulation 3168/1994.The European Union WT/TPR/S/72
Page 55
customs cooperation to combat circumvention.73  Surveillance may require single or double checking
of trade flows.
52. The EU also maintains quantitative restrictions on imports of goods resulting from economic
outward processing traffic (OPT) arrangements.74  These arrangements are available only to
established Community producers and have the objective of maintaining industrial activity in the
Community.  A producer must obtain prior authorization, which is subject to conditions.75  An annual
allocation for imports under OPT may be granted up to a maximum of 50% of the value of production
in the Community.  In practice, they have been used to import clothing products into the EU after
textiles exported from the EU have been worked or processed in third countries.  In 1995, some 70%
of OPT quotas were allocated to countries in Central and Eastern Europe, but were dropped following
the lifting of restrictions on these origins in 1998;  in 1999, the EU allocated the bulk of OPT quotasto Belarus and Ukraine.
State-trading countries
53. A special regime applies to the EU's import arrangements with certain (state-trading)
countries – Albania, Armenia, Azerbaijan, Belarus,  China, Georgia, Kazakhstan, Democratic People's
Republic of Korea, Kyrgyzstan, Moldova, Mongolia, Russian Federation, Tajikistan, Turkmenistan,Ukraine, Uzbekistan, and Viet Nam.  The general principle is "liberalization of imports, namely the
absence of any quantitative restrictions"
76, with the exception of textile and clothing products (see
above), quotas or surveillance measures maintained on imports from China or from other origins in
the event of a surge of imports.
54. With respect to China, quotas apply to footwear, tableware and kitchenware (ceramic,
porcelain and china), and surveillance measures apply to a number of products, including toys and
bicycles;  during the period under review, the EU has shifted a number of products from the quotaregime to surveillance, and off the surveillance list, thus progressively liberalizing this aspect of the
regime for imports from China.  The EU imposed a protective measure for imports of garlic from
China for 2000, at the request of Spain, buildin g on measures taken during 1994-99;  protective
measures were also imposed on imports from Chinese Taipei, and Viet Nam, but were lifted during
the period under review.
77
55. The double-checking system without quantitative limits for certain iron and steel products
covered by the ECSC and EC Treaties was agreed with the Former Yugoslav Republic of Macedonia
(FYROM), Kazakhstan, Russian Federation, and Ukraine.  In 1997, the EU concluded bilateral
agreements renewing certain quantitative restrictions on imports of iron and steel products from the
Russian Federation and the Ukraine, first established in 1995, and the EU concluded in 1999 a similartype of agreement with Kazakhstan.
78
                                                     
73 For example WTO documentG/TMB/N/251.
74 Council Regulation 3036/94 of 8 December 1994, implemented by Commission Regulation 3017/95.
75 According to Article 2(2)(a) of Council Regulation 3036/94, "that person must:  manufacture, in the
Community, products which are similar to and at the same stage of manufacturing as the compensating productsin respect of which the application for the arrangement is made, and perform in his own factory, within the
Community, the main production processes on those products, at least sewing and assembly, or knitting in the
case of fully fashioned garments obtained from yarn".
76 Council Regulation 519/94, as amended.
77 Commission Regulation 1040/1999.
78 "97/742/ECSC", "Agreement between the ECSC  and Ukraine" (OJ L 210, 1999), "99/866/ECSC".WT/TPR/S/72 Trade Policy Review
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(vii) Safeguard measures
56. Two safeguard regimes apply to agricultural products (WTO definition):  the special
safeguard mechanism of the WTO Agreement on Agriculture for products in Schedule CXL noted as
"SSG"79;  the regular safeguards provisions of Ar ticle XIX of GATT 1994 and the WTO Agreement
on Safeguards.  For non-agricultural products, the EU's regular safeguards regime, Council Regulation
3285/94, applies to imports from WTO Members except for textile and clothing products and state-trading countries, which are subject to special regimes (section (2)(vi)).  A Member State may request
the EU to institute safeguard measures, which may include quantitative restrictions
80, and the
legislation incorporates the main substantive provisions of Article XIX of GATT 1994 and the WTO
Agreement on Safeguards.
57. The special safeguard mechanism of the WTO Agreement on Agriculture permits the
imposition of "snap-back" tariffs, which the EU may invoke either when import prices fall below
trigger prices, or if import volumes rise above trigger volumes.81  The EU invoked the price-based
SSG as from 1995 for a number of products:  poultry meat, dried egg yolks, and certain sugar
products for the marketing year 1995-96;  poultry meat, turkey meat, and certain sugar products for
the marketing year 1996-97;  poultry meat, turkey meat, uncooked meat preparations (other thanturkey), and certain sugar products for the marketing year 1997-98
82;  and made operational the
volume-based SSG for tomatoes, cucumbers, oranges, clementines, mandarins, lemons, apples, and
pears as of the 1996-97 marketing year.83
58. Under the WTO Agreement on Safeguards, the EU completed the elimination of all
quantitative restrictions introduced or maintained under Article XIX of GATT 1947 in accordance
with the notified timetables84, and no new quantitative restrictions on imports from WTO Members
were introduced by the EU under Article XIX.  Du ring the period under review, the EU removed six
measures:  the quantitative restriction on coal administered by Germany (in force from 1958 to 1997);
the quantitative restriction on coal administered by Spain (in force until 1997); the quantitative
restriction on potatoes delivered to the Canary Islands and administered by Spain (in force until
November 1998);  the "consensus" with Japan on imports into the EU of motor vehicles of Japanese
origin (in force from 1991 to 1999)85;  the minimum import price on dried grapes (in force from 1982
to 1999);  and the minimum import price on preserved cherries (in force from 1989 to 1999).86
(viii) Product regulations and standards
(a) Community activities
Overview
59. The Community framework for product and product-related regulation is based on three main
pillars.  The fundamental rule under Article 28 (ex. 30) of the EC Treaty is the free movement of
                                                     
79 WTO document G/SG/N/1/EEC/1.
80 Council Regulation 520/94, as implemented by Commission Regulation 738/1994, concerns quotas
and their administration.
81 WTO document G/AG/N/EEC/2.
82 WTO documents G/AG/N/EEC/6, G/AG/N/EEC/10 and G/AG/N/EEC/18.
83 Council Regulation 1557/1996.
84 WTO documents G/SG/N/2/EEC, G/SG/N/3/EEC , G/SG/N/5/EEC and G/SG/N/5/EEC/Suppl.1.
85 "Joint declaration of 18 July 1991, defining the principles, objectives and procedures of future
relations between the EC and Japan".
86 WTO document G/L/338.The European Union WT/TPR/S/72
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goods between Member States.  Member States ma y, however, introduce measures, as an exception to
this general rule, to protect legitimate public interests (health and safety, environment, public morality
and security), provided the measures are not discriminatory and are not a disguised barrier to trade.
The second principle is mutual recognition of Member State legislation that has the same objectives in
terms of the level of protection (the 1978 "Cassis de Dijon" ruling of the European Court of Justice).87
The third principle is harmonization of Member State legislation, when differences are too significant
to permit mutual recognition to operate effectively, based on a high level of protection (Article 95).
60. Member States are required to notify draft national measures to the Commission, according to
Council Directive 98/34/EC, to permit action to prev ent barriers to trade, if appropriate;  the
Commission notes that national product legislation remains "the major obstacle to doing business
within the Single Market"88, although on an improving trend since 1998.89  The Commission requires
national measures to contain clauses providing for mutual recognition.
61. Products placed on the Community market, whether of Community or imported origin, must
comply with the relevant regulations, where they exist, to meet health, safety, and environmental
objectives (e.g. car emission objectives).  Product regulations at Community level are of two main
types:  "old approach" product-specific regulation lays down technical requirements, and applies inparticular to motor vehicles, chemicals, foodstuffs, and pharmaceuticals;  "new-approach" regulations
limit mandatory requirements to essential objectives , while leaving specific technical solutions to the
market (e.g. voluntary standards or manufacturers' declarations), and apply to a large number of
areas.
90
62. Three European standards organizations (CENELEC, CEN and ETSI) develop harmonized
standards to provide technical solutions to meet the essential requirements of the directives.  These
organizations draft standards in a process of consultation with national committees (representing all15 Member States and affiliated applicants for accession to the EU), which may include
manufacturers established therein (ETSI).
91  Once adopted, the national members of the standards
organizations are required to transpose European standards into national standards and withdraw any
                                                     
87 COM(1999) 299.
88 COM(1999) 10 final, p. 9.
89 In 1999, the Commission found that "the quality of the technical regulations notified seems to be
improving, with the total number of detailed opinions (i.e. opinions that the project notified is likely to obstructthe free movement of goods) delivered by the Commission and the Member States down by some 30% (173 in1998, compared with  246 in  1997)"  (European Commission, DGXV 1999a, No. 4, p. 20).  The trend
continued in 1999, with the number of detailed opinions down to 141 (European Communities (1999a), p. 57).
90 These are:  low voltage equipment;  simple pressure vessels;  safety of toys;  construction products;
electromagnetic compatibility;  machinery;  personal protective equipment;  non-automatic weighinginstruments;  active implantable medical devices;  app liances burning gaseous fuels;  energy requirement for
new hot-water boilers fired with liquid or gaseous fuels;  explosives for civil uses;  medical devices;  equipmentexplosive atmospheres (ATEX);  recreational craft;  packag ing and packaging waste;  lifts;  interoperability of
trans-European high-speed rail system;  energy efficien cy requirements for household electric refrigerators,
freezers and combinations thereof;  marine equipment;  pressure equipment (adopted in 1997);  in vitro
diagnostic medical devices (in 1998);  and radio equipment and telecommunications terminal equipment and themutual recognition of their conformity (in 1999).  See also http://www.newapproach.org/.
Commission proposals concern articles of precious metals (COM/93/322 final, amended by
COM/94/267 final), cable-way installations designed to carry passengers (COM/93/646 final), marking of
packaging to indicate recyclability and/or reusabilit y (COM/96/191 final) and noise emission (COM/98/46
final).  For a commentary on COM/96/191, see USTR (1999), p. 115.
91 According to the U.S. Trade Representative: "The European standardization process is still closed to
U.S. firms' direct participation, although European standards bodies can be sympathetic to U.S. concerns whenapproached" (USTR, 1999, p. 110).WT/TPR/S/72 Trade Policy Review
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conflicting national standards.  According to the Commission, "concerns have been expressed by
businesses and some Member States that standards are not being delivered in time to meet evolving
needs".92  Indeed, "127 new standards were ratified between April 1998 and May 1999, raising the
percentage of ratified standards to 40% of mandated standards, compared with 35.6% in the last
period"93;  construction products is one area where standards are yet to be developed.
63. New approach directives apply to products placed on the Community market for the first
time, whether new products of Community production or new or used imported products.  The person
placing the product on the market – the manufacturer or the importer (in the event the manufacturer is
not established in the Community and has no authorized representative in the Community) – assumes
responsibility for possible threats to health or sa fety.  Although compliance with the standards leads to
a presumption of conformity with the essential requirements, it remains voluntary since an alternativetechnical solution can also be shown to meet the e ssential requirements.  The manufacturer must affix
the "CE" mark to the product upon compliance with essential requirements, established by the
prescribed conformity assessment procedures, without which the product may not be placed on the
market.
94  In many cases, the manufacturer's declaration is sufficient, but in the event of a sizable risk
factor, the intervention of a third party (a notified body) is required.  Notified bodies are designated bythe Member States, and a manufacturer, whether established in the Community or abroad, may
approach the body of its choice.
95  The conformity assessment procedures of the New Approach may
also offer the manufacturer the possibility of using quality assurance systems.
64. In the absence of specific legislation, whether at Community or Member State level, a
General Product Safety Requirement applies to any consumer product (food or non-food) placed on
the market, enforced by the Member States mainly by market surveillance.96  Other general
requirements include protection against misleading advertising and dishonest provisions in contractswith consumers (Council Directive 84/450/EEC), liability for defective products, including for
primary agricultural products (Council Direct ive 85/374/EEC), and correct indication of prices
(Council Directive 98/6/EEC).  The Commission has in place a system for the rapid exchange of
information among the Member States in the event of a serious and immediate risk to the health and
safety of consumers (RAPEX), and a simila r system applies to foodstuffs (RASFF).
97
Selected areas of regulation
Foodstuffs
65. Within the current regulatory framework for foodstuffs, "horizontal" measures apply to all
foodstuffs and "vertical" measures apply to specific foodstuffs.  Horizontal measures apply to
additives, flavourings, extraction solvents, labelling,  presentation and advertising, hygiene, packaging
etc.  Vertical measures apply only to certain foodst uffs for particular nutritional purposes, of organic
production, dietary foods for medical purposes, quic k frozen foodstuffs, novel foods (produced from
biotechnology), certain compositional requirements (cocoa and chocolate products, sugars, honey,
                                                     
92 COM(1999) 10 final, p.11.
93 European Commission, DGXV (1999a), No. 4, p.13.
94 European Commission, DGIII (1999), Chapter 2.
95 See USTR (1999), p. 106.
96 Council Directive 92/59/EEC or General Product Safety Directive.  See European Commission,
DGXXIV (1999).
97 The RASFF system was not used by the Belgia n authorities in 1999 with respect to potentially
dioxin-contaminated pig and poultry products, which led to a Community-wide ban in June on the placement ofsuch products on the market and on their export to third countries (WTO document G/SPS/GEN/123, Add.1,and Add.2).The European Union WT/TPR/S/72
Page 59
fruit juices and similar products, jams, jellies and marmalades, preserved milk, coffee extracts, and
natural mineral waters), or hygiene and controls of foodstuffs of animal origin.  The Commission
notes that "the fact that Community legislation has resulted in the replacement of 15 different and
sometimes conflicting sets of rules with a single set of harmonized rules has of itself made a
significant contribution to the simplification of food law"98, which is likely to also have been of
benefit to exporters to the EU market.
66. Developments during the period under review include continuing controversy over attempts
to revise the seven directives on compositional requirements to remove hindrances to the free
circulation of such products on the internal market, resolved only with respec t to coffee extracts and
chocolate.  The Commission is also attempting to replace with a single instrument the 15 vertical
directives in the field of hygiene and controls of f oodstuffs of animal origin.  One area of considerable
controversy concerns the placement on the market  of genetically modified organisms (GMOs) and
products that may contain GMOs or GMO derivatives (Box III.1).99
67. Another significant development since the last Trade Policy Review of the EU in 1997 is the
greater visibility of food safety in policy discus sions.  The Commission is concerned with "assuring
that the EU has the highest standards of food safety…[to which end] a radical new approach isproposed" for consultations and discussion, inviting comments by April 2000.
100  This development is
linked to a number of food scares at the Community level, but will also have implications for
imported and exported food given the leading role of the Community in world food trade.  The
Commission proposes the establishment of an inde pendent European Food Authority to carry out the
role of risk assessment and risk communication, building on the reform of the current system for
scientific advice introduced in 1997 in the wake of the BSE crisis.101  The Commission also proposes
a Food Action Plan to establish food safety as the primary objective of EU food law and change theregulatory framework accordingly, including the cont rol of foodstuffs through the entire food chain,
"from farm to table".  Scientific evidence is to underpin the food safety policy, with the precautionary
principle to be used where appropriate.
102  The Commission also proposes, in cooperation with the
Member States, a Community framework for the development and operation of national control
systems, as well as a Community-level approach to the control of imported foodstuffs, currently undercontrol of Member States at Border Inspection Posts (BIPs).
Labelling
68. The Community has mandatory labelling requirements in the interests of the consumer for:
health warnings on tobacco products; alcoholic content of beverages; cosmetic products; energy
consumption of household appliances; materials used in the main components of footwear for sale to afinal consumer; textile names; novel foods; traceab ility of beef and beef products; and medicinal
products for human use.
103 The EC protects, by registration, certain geographical indications and
                                                     
98 COM(97) 176 final, p. 13.
99 For a commentary on the issue for U.S. exports of corn, see USTR (1999), p. 106.
100 COM(1999) 719 final.
101 Commission Decision 97/404/EC setting up a Scientific Steering Committee (SSC).  On bovine
spongiform encephalopathy (BSE) see WTO (1997), p. 90.
102 COM(2000) 1.
103 Council Directive 80/622/EEC, as amended; Council Directive 76/776/EEC;  Council Directive
76/768/EEC, as amended;  Council Directive 92/75/EEC;  Council Directive 94/11/EC;  Council
Directive 96/74/EC, as amended;  Council Directive 258/97:  Commission Regulation 1139/88 concerns the
labelling of two particular GM soya and maize products, which were already on the market before theRegulation entered into force;  Council Regulation 820/97 provided for a beef-labelling scheme that wasoptional up until the end of 1999 and became compulsory on 1 January 2000 for products of Community orimported origin.  The Commission's proposal to modify the regulation would require additional information onWT/TPR/S/72 Trade Policy Review
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designations of origin for agricultural products and foodstuffs; there are certificates of specific
character for such products;  spirits are subject to separate provisions; as is wine.104  The Community
may permit the import of products from third countries bearing geographical indications and
designations of origin established under the law of the third country by bilateral reciprocity-based
agreements (e.g. a 1994 agreement with Australia).
Box III.1:  Placing GMOs on the Community market
Council Directive 90/220/EEC, as amended, applies to genetically modified organisms (GMOs) –
bacteria, fungi, viruses, seeds, plants, insects, fish  or mammals – in which the genetic material has been
altered in a manner that does not occur naturally.  Modification may be intended to increase resistance todisease or tolerance to herbicide of the organism.  (Council Regulation 258/97 applies to novel foods andfood ingredients, including genetically modified (G M) foods).  Authorization to place GMO products on
the Community market had been granted, as of March 2000, to 18 products, mainly soybeans, oilseed
rape, and maize modified for herbicide tolerance or male sterility.  However, a new regulatory frameworkis under consideration and no new authorizations were granted in 1999 or in 2000 to date.
Under the existing procedure, the competent author ity of the Member State where the GMO is to be
placed on the market for the first time is notified.  This step includes a technical dossier of information,
containing a full risk assessment, appropriate safety and emergency response measures, and, in the case of
products, precise instructions and conditions for use, and proposed labelling and packaging.  The
competent authority must, within 90 days, either forward the application to the Commission with afavourable opinion or inform the applicant that it doe s not respect the Directive and is rejected.   In the
event of a favourable opinion, the Commission forwar ds the application to other Member States, which
may present observations.  If no Member State objects in writing, stating its reasons within 60 days, the
initial competent authority consents to the placing on the market.  If an objection is raised, the
Commission forwards the dossier to the Scientific Co mmittee (notably on plants).  After its opinion, the
Commission submits a draft of the measures to be taken to the Regulatory Committee (Box II.2),composed of representatives of the Member States.  If the draft measure is not in accordance with the
opinion of the Committee, or if no opinion is delivered, the Commission submits its proposal to theCouncil.  If the Council does not act within three months, the Commission adopts the measure.
An authorization for placement on the market of a Member State applies throughout the Community.  A
Member State may not, on grounds related to the notification and written consent of deliberate release,prohibit, restrict or impede the placing on the market of the authorized GMO product.  However, where aMember State has justifiable reason that the author ized GMO product constitutes a risk to human health
or the environment, it may provisionally restrict or prohibit the use or sale on its territory by invoking asafeguard clause under Article 16 of Directive 90/220/EC.  The Commission and Member States are
informed and a decision must be taken, again under Article 21 of the Directive.
The Commission has proposed amending the Directive to provide time-bound authorizations, bring
greater precision to the notification requirements, require mandatory labelling, and introduce monitoringafter placement on the Community market (COM(1998)085 final, as amended by COM(1999)139 final).The proposal is currently before the European Parliament and Council;  in December 1999, the
Environment Council adopted a common position on the proposal.  At that time, five Member States
confirmed their declarations of June 1999 to the effect that new authorizations were to be suspended.
Source: Council Directive 90/220/EEC;  Council Regulation 258/97;  European Commission Press
Release IP/99/512 of 15 July 1999 [Online]. Available at:  http://europa.eu.int/rapid [24 November 1999]
                                                                                                                                                                    
the label on the characteristics of beef and the point of slaughter of the animal or animals, and from
1 January 2003, where the animal or animals from which the beef was derived were born, reared andslaughtered (COM(1999) 487 final); and Council Directive 92/27/EEC.
104 Council Regulation 2081/92, as amended; Council Regulation 2082/92; Council Regulation
1576/89; and Council Regulation 2392/89.The European Union WT/TPR/S/72
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69. A new development is the mandatory labelling of foods and food ingredients produced from
GMOs (novel foods) as of April 2000, according to the following labelling categories:  mandatory
labelling for products for which it can be proved scientifically that they consist of, contain or are
derived from GMOs (e.g. "contains GMO-based substances");  mandatory labelling in cases where
material of GMO origin cannot be excluded ("ma y contain GMO-based substances");  voluntary
labelling for products that do not contain any GMOs or substances derived from GMOs ("this doesnot contain GMO-based substances").  A de minimis  threshold of 1% applies for accidental
contamination with genetically modified material.
105
70. A voluntary European eco-label (the "Daisy")  award scheme has been in place since 1992.106
The label may be awarded to a manufacturer or importer of a product whose life cycle meets the
ecological criteria established by the Commission, which are normally valid for three years and thensubject to revision for technical progress.
107  The eco-label is subject to an annual fee of 0.15% of the
annual volume of sales, although the competent authority has the discretion to reduce the fee by up to
20%.108  To date, 55 "licences" for the use of the logo  have been granted to 40 manufacturers and two
importers for 240 products.109
(b) International activities
71. Regulatory activities in both "harmonized" and "non-harmonized" areas are subject, where
appropriate, to the obligations assumed by the EU and the Member States under the TBT and SPS
Agreements, which are designed to prevent unjustifie d barriers to international trade.  The European
standard-setting organizations have each accepted the TBT Code of Good Practice for the Preparation,
Adoption and Application of Standards.  The EU or Member State publishes draft and final
legislation, notifies the WTO of draft regulations that may have a significant effect on trade of other
Members, and generally provides a 60-day period for comments.110  The European Commission has
also established enquiry points for harmonized areas, and Member States have enquiry points in their
domains.
                                                     
105 Commission Regulation 49/2000.  The threshold is aimed at solving the problem faced by operators
who have tried to avoid GMOs but who, due to accidental  contamination (during cultivation, harvest, transport
or processing), find a low percentage of genetically modified (GM) material in their products.  The threshold
applies on each ingredient individually and not on the final product.  For example, in the case of a processed
product containing maize starch, the percentage of allowed GM material is not 1% of the product, but only 1%of the starch.  See Commission Press Release IP99783, 22 October 1999, Brussels [Online].  Available at:http://europa.eu.int/comm/dg03/press/1999/IP99783.htm [ 25 January 2000];  Memo/97/110 [Online].  Available
at:  http://europa.eu.int/comm/environment/press/mem97110.htm [26 November 1999].
106 Council Regulation 880/92.   The Commission has proposed to revise the scheme (COM(96) 603
final, as amended in COM(1999) 21), to establish the European Eco-label Organisation (EEO) to develop theecological criteria, and the assessment and compliance verification requirements, and also promote the eco-
label.  The proposal applies a reduced fee of 0.10% of annual sales to small and medium-sized enterprises andmanufacturers from developing countries, any fee being subject to a ceiling of € 40,000.
107 The Commission has established ecological criteria for 15 product groups
(http://europa.eu.int/environment/ecolabel):  washing machines;  refrigerators; tissue paper;  dishwashers;  soil
improvers;  bed mattresses; indoor paints and varnishes; footwear; textile products; personal computers; laundrydetergents;  detergents for dishwashers; copying paper; light bulbs; and portable computers.  For example, onfootwear, the ecological criteria include the product itsel f, as well as the production process for inputs (e.g.
waste-water treatment from leather tanning sites), and the use of recycled material for the packaging of the finalproduct.  Criteria are under development for hard-surface and sanitary cleaners, hand dish washing detergents,
batteries, rubbish bags, tyres, furniture, TVs and vacuum cleaners.
108 Commission Decision 93/326/EEC:
109 A list of the manufacturers that have been awarded the use of the eco-label is available at
http://europa.eu.int/comm/environment/ecolabel/firms.htm.
110 WTO document G/TBT/2/Add.12/Rev.2.WT/TPR/S/72 Trade Policy Review
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72. Between 1995 and 1999, the EU and its Member States notified the WTO of 1,144 draft
regulations under the TBT Agreement (Table III.6).  The bulk of these regulations were notified by
the Member States, notably the Netherlands, and there appears to be no fully consistent practice
among the Member States regarding the notification obligation.  Furthermore, there appears to be
some controversy between the EU and its trading partners on the measures covered by the TBT
Agreement.111  Between 1995 and 1999, the EU and its Member States notified the WTO of 141 draft
measures under the SPS Agreement, of which 77 were Community-wide measures and the remainder
national measures, notably adopted by the Netherlands (49).   In the Committee on SPS Measures, the
EU's trading partners queried, in particular, measures with respect to the fixing of maximum limits for
aflatoxin in groundnuts, nuts, dried fruit, cereals, milk and processed products,  as well as gelatin. 112
Table III.6
WTO notifications of technical regulations by the EC and Member States, 1995-99
Year Total EU BEL DNK DEU GRC ESP FRA IRL ITA LUX NLD AUT PRT FIN SWE GBR
1 9 9 5 1 2 3 3 1 1 7 2 8 20410 0 0 3 3 0 0 4 5 0
1 9 9 6 1 2 3 4 6 1 3 1 5 30720 0 0 0 0 0 7 3 0 0
1 9 9 7 4 3 7 2 04 82 3 3 0 51 5 10 1 2 8 7 2 0 5 2 2 5
1998 276 36 49 40 3 0 9 20 0 0 2 91 1 0 5 18 2
1 9 9 9 1 8 5 3 42 32 7 3 0 92 1 00 1 4 8 2 0 3 9 5
Source:  WTO Secretariat.
73. The WTO Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary
Measures recognize and encourage activities at the international level designed to reduce barriers totrade resulting from product and product-related regulation, in which the Member States and the
Community are active participants.  Such activities at the international level both reduce potential
barriers to EU exports in third country markets, and allow the EU's trading partners to participate in
efforts to reduce barriers to their exports that could arise on the Community market.  The Community
also concluded during the period under review mutual  recognition agreements (MRAs) for the results
of conformity assessment with Australia, Canada, New Zealand, Switzerland and the United States
(Chapter II(4)(v)).
74. In non-food product areas, the national standard-setting bodies of the Member States are
active in the technical bodies of the International Organization for Standardization (ISO) and
International Electrotechnical Commission (IEC) in order to develop voluntary international
standards.  Through the Vienna and Dresden agreements with ISO and IEC, respectively, the CEN has
a commitment to, and the CENELEC has the obligation to, adopt international standards as Europeanones.  The result, according to the Commission, is a high level of transposition of international
standards as European standards – over 40% for CEN and over 80% for CENELEC.
75. With respect to technical regulations for motor vehicles of trading partners, the EC recognizes
as equivalent 78 of the 104 regulations adopted to date by the Contracting Parties to the 1958
UN/ECE Agreement under the aegis of Working Party 29 (WP29).  The Agreement is based on theprinciple of mutual recognition of approvals granted by Contracting Parties on the basis of
harmonized regulations concerning motor vehicle equipment and parts (e.g. lighting, brakes, safety
belts), of which 104 have been adopted since the Agreement's inception.
113  Since 1989, the EC has
                                                     
111 See complaint by Canada (WTO document WT/DS135).
112 WTO documents G/SPS/N/EEC/51, G/SPS/GN/98, and WTO document G/SPS/GEN/133.
113 List available at:  http://www.itu.int/itudoc/un/editrans/wp29/wp29regs/index.html
[10 January 2000].The European Union WT/TPR/S/72
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sought to transform this regional standardizing process into a global process, amending the 1958
Agreement to permit accession of non-European parties.114  Australia115 and Japan have acceded, and
the Republic of Korea and South Africa have indicated their intention to accede;  the United States,
although not a party, proposed to establish a "Par allel Agreement", the text of which was adopted by
WP29 in 1998.116  The Agreement requires eight signatures to enter into effect;  the United States,
Canada, Japan, France, the United Kingdom, and the Community have so far acceded to theAgreement.
76. With respect to food regulations and standards, each Member State is represented on the
Codex Alimentarius Commission, which is a joint F AO/WHO programme to develop an international
food code. According to the SPS Agreement, as interpreted in the high-profile WTO dispute
settlement proceeding on hormone-treated beef , WTO Members that apply Codex standards or
recommendations are considered to meet the obligations of the SPS Agreement.  According to the
Commission, a WTO Member may only impose more trade restrictive measures if there is scientific
evidence (a risk assessment) justifying measures leading to a higher level of protection than by
applying Codex standards.  As a result, the Co mmunity, whose exports underwent retaliation by the
United States and Canada in 1999, was engaged in early 2000 in such a risk assessment for itsmeasures with respect to hormone-treated beef.
 117
(ix) Government procurement
(a) Community legislative framework
77. Opening up public procurement to competition has long been a central objective of the EU,
due to its importance in the market for goods and services – some 14% of Community GNP, or over
€ 1,000 billion, in 1998 – and potential benefits in terms of a better use of public monies and a more
efficient allocation of resources.118  To date, efforts to open public procurement to greater competition
have focussed on the regulatory framework for relations between purchasing entities and suppliers
(including foreign-owned) in the context of the Single Market.  The Commission, however, notes that
"the EU's efforts to promote greater competition in this field are failing to meet initial
expectations".119  One indicator, compiled on the basis of 1998 data, suggests that the value of
published tenders is low, at some 1.9% of Community GDP.120  New policy proposals for this area are
foreseen by the Commission.
78. The Community legislative framework for procurement consists of a series of directives,
requiring transposition into domestic law at the level of the 15 Member States.   For contracts below
the thresholds, which correspond to those in the GPA (see below), national rules are not bound by EU
directives, nor by the GPA, but only by the provisions of the EC Treaty, which prohibit discrimination
                                                     
114 The 1958 Agreement was amended in 1995 to permit the accession of the EC and non-European
countries in the form of the "Agreement concerning th e adoption of uniform technical prescriptions for wheeled
vehicles, equipment and parts which can be fitted to and/or be used on wheeled vehicles and the conditions for
reciprocal recognition of approvals granted on the basis of these prescriptions", Revision 2.
115 According to the sectoral annex on auto motive products in the 1998 Mutual Recognition
Agreement, Australia and the EC accept conformity assessment tests with UN/ECE regulations for which thereis an EC Directive.
116 United Nations document ECE/TRANS/WP.29/132 and Corr.1 of 25 June 1998.
117 See complaints by the United States (WT/DS26) and Canada (WT/DS48).  For a commentary on the
proceeding, see Hurst (1998).  For the latest informa tion on the proceeding, see WTO Secretariat (ongoing).
118 COM(2000), p.18.
119 COM(1999) 10 final, p. 20.
120 The figure refers only to tenders above the threshold.  Suppliers may have generally had a low
response rate (European Communities, 1997b).WT/TPR/S/72 Trade Policy Review
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on the grounds of nationality (Article 12).  One group of directives contains public authorities
directives121, and another group consists of utilities directives (water, energy, transport, and
telecommunications)122, complemented in each case by a "Remedies" Directive requiring Member
States to establish adequate procedures to ensure effective remedies for infringements of Community
law.123
79. In order to open the market for public procurement, the Community has amended the
directives to extend the scope of utilities operating under conditions of effective competition, notably
in energy and telecommunications (Chapter IV(4)).124  Furthermore, the Commission's Action Plan for
the Single Market for 1997-98 emphasized a full transposition and correct implementation of all
directives at the Member State level, to which end the Commission initiated a number of infringement
procedures (Box II.3).125  Improvements in this area were notable since the share of non-transposed
directives declined from 55% in 1997 to 36% in 1998 (Table II.1).126
80. For the future, the Commission is considering ways to make the public procurement system
work better, which also should have implications  for foreign-owned companies established in the
Community.127  Initiatives include simplification of legislation and the development of an information
technology framework to support the delivery of an effective public-procurement policy in Europe, byproviding contracting entities and suppliers w ith the information they need to manage the
procurement process effectively.
128  Another development, of relevance to companies established in
the Member States, is the promotion of the European Economic Interest Grouping (EEIG), to
facilitate cross-frontier cooperation in public contracts and programmes (section (4)(i)).
81. The Commission is also exploring the role of product regulations and standards in ensuring
equal access to public contracts for suppliers.  Where European or international standards exist, the
public procurement directives require purchasing entities to make reference to them when specifyingthe products concerned by a notice to tender.  A 1996 study of products whose procurement is
covered by the utilities directive indicated, for example, that less than one fifth were covered by
European standards, while two thirds were covered either by a European standard or one in the
development phase or an international standard.  These results demonstrate the interface between
competition in public procurement and the development of European product regulations andstandards (section (2)(viii)).
                                                     
121 Council Directives 93/36/EC, 93/37/EC and 92/50/EC, amended by Council Directive 97/52/EC.
122 Council Directive 93/38/EC.
123 Council Directives 89/665/EC and 92/ 13/EC (Remedies Utilities Directive).
124 Council Directive 98/4/EC amending Council Directive 93/38/EC.  The Commission issued in 1999
an indicative list of services in the telecommunications sector considered to be operating in a fully competitiveenvironment and therefore exempted from the scope of the utilities directive.
125 See European Commission, Internal Market (ongoing).
126 European Commission, DGXV (1999a), No. 4.
127 To follow up on the 1996 Green Paper on public procurement in the European Union, the
Commission issued COM(1998) 143 final, described in the SCADPLUS database on Union policies on publicprocurement (http://europa.eu.int/scadplus/leg/).
128 The European Commission has launched the project "Système d'Informations sur les Marchés
Publics (SIMAP)", available at:  http://simap.eu.int, in order to encourage best practice in the use of modern
information technology for public procurement. Initially the project is aimed at improving the quality ofinformation about the EU procurement opportunities and ensuring that information is made known to allpotentially interested suppliers. In the longer term it will address the whole procurement process, including bids,award of contracts, delivery, invoicing and payment.The European Union WT/TPR/S/72
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(b) International activities
82. At the international level, the Agreement establishing the European Economic Area provides
for a reciprocal exchange of access to procurement between the parties.  The Europe Agreements also
contain provisions on reciprocal access;  more generally, such provisions feature in the regional trade
agreements concluded by the EU (e.g. 1999 free-trade agreement with Mexico).  In addition, the
Community and its Member States are bound by the plurilateral 1994 Agreement on GovernmentProcurement (GPA), whose other parties are Arub a; Canada; Hong Kong, China; Israel; Japan;
Republic of Korea; Liechtenstein; Norway; Singapore; Switzerland; and the United States.
129
Implementation of the GPA led to minor adjustments in Community legislation in March 1998 toavoid "reverse discrimination" against companies established in the Community.
130
83. The 1994 GPA, entered into force on 1 January 1996, provides for non-discrimination and
national treatment for the products, services and suppliers of another party to the Agreement with
respect to the government procurement scheduled by each party, and also emphasizes transparency of
laws, regulations, procedures and practices regarding government procurement.  The scope of the
EU's commitments concern the procuring entities list ed in Annexes 1, 2 and 3 of Appendix I of its
schedule, relating to central government entities, sub-central government entities and other entitiessuch as utilities, respectively, and subject to minimum thresholds for contract values (Table III.7);
and of goods and services and construction services specified in positive lists, found respectively, in
Annexes 4 and 5 of Appendix I.
131
84. Since the entry into force of the GPA in 1996,  the substance of the EU's commitments have
been improved by the EU-United States Agreement of 1994, which followed the 1995 enlargement of
the Community, and which extends national treatment to about US$100 billion of public procurement
annually in each market.132  Other improvements concern the eligibility of products, services and
suppliers of Hong Kong, China resulting from its accession to the GPA, and the commitments
concerning Israel resulting from an agreement on procurement concluded in 1997. 133
(x) State-trading (as defined in GATT Article XVII)
85. According to the Commission, there are two state-trading enterprises and one monopoly in
France in 1999134, a monopoly on the importation of tobacco from third countries in Italy, but none at
Community level or in any other of the Member States.
                                                     
129 The GPA was transposed into EC law by Council Decision 94/800/EC.
130 European Commission, DGXV (1998).
131 WTO document GPA/W/35/Rev.1 incorporates all changes as of 1 July 1999.
132 WTO document GPA/W/32.
133 WTO documents GPA/W/44, and GPA/W/55.
134 Gaz de France, Electricité de France and Entrepri se Minière et Chimique, respectively, on which
details are provided in WTO documents G/STR/N/1/EEC/Add.1, and G/STR/N/4/EEC.WT/TPR/S/72 Trade Policy Review
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Table III.7
Summary of the EU's main commitments under the Agreement on Government Procurement, 2000
Goods Services (exc. construction) Construction services
Central
government
(Annex 1)Threshold:  SDR 130,000
MFN treatmentThreshold:  SDR 130,000
ReciprocityThreshold:  SDR 5 million
Reciprocity
Sub-central
government
(Annex 2)Threshold:  SDR 200,000
MFN treatment, except for suppliersfrom CanadaThreshold:  SDR 200,000
Reciprocity, except for serviceproviders from Canada and the
United StatesThreshold:  SDR 5 million
Reciprocity, except for constructorsfrom Canada and United States
Otherentities
(utilities)
(Annex 3)Threshold:  SDR 400,000
MFN treatment for procurement of
electricity projects and maritime,
inland and other terminal facilities,
water and urban transport.  Country-specific exemptions (reciprocity
required):
Water : Canada, United States
Electricity : Canada, Japan; Rep. of 
Korea and Israel as 
regards procurement of electrical transformers, 
plugs, switches and 
insulated cables; and for Israel, HS Nos. 8501, 
8536 and 902830
Airports : Canada, Korea, Rep. of, 
United States
Ports : Canada; United States as 
regards procurement related to shipbuilding
Urban Canada, Japan, Korea,
transport : Rep. of, United States, 
partly IsraelThreshold:  SDR 400,000
Reciprocity
Explicit country-specific exemptions
(reciprocity required):
Water : Canada, United States
Electricity : Canada, Japan
Airports : Canada, Korea, Rep. of, 
United States
Ports : Canada
Urban Canada, Japan, Korea, Rep.
transport : of, United States, partly 
IsraelThreshold:  SDR 5 million
Reciprocity
Explicit country-specific exemptions
(reciprocity required):
Water : Canada, United States
Electricity : Canada, Japan; Korea, 
Rep. of, and Israel as 
regards procurement of 
electrical transformers, plugs, switches and 
insulated cables; and for 
Israel, HS Nos. 8501, 8536 and 902830
Airports : Canada, Korea, Rep. of, 
United States
Ports : Canada; United States as 
regards dredging services
Urban Canada, Japan, Korea,
transport : Rep. of, United States, 
partly Israel
Further specific exemptions apply, inter alia , for:
- Canada:  special industry machinery, general purpose automatic data-processing equipment, software, supplies and support
equipment (except 7010 ADPE configurations), office machines, visible record equipment, and ADP equipment);communications, protection and coherent radiation equipment;
- United States:  air-traffic control equipment;
- Canada and the United States:  as regards contracts for good or service components of contracts which, although awarded by an
entity covered by this Agreement, are not themselves subject to this Agreement;
- Procurement of agricultural products made in furtherance of agricultural support programmes and human feeding programmes;
- Contracts awarded by central and sub-central entities in connection with activities in the fields of drinking water, energy,
transport or telecommunications.
Source : WTO document GPA/W/35/Rev. 1.
(xi) Anti-dumping and countervailing measures
(a) Anti-dumping measures
Legislative framework
86. The EU's anti-dumping legislation for imports from  third countries applies to agricultural and
industrial products135, except for products covered by the ECSC Treaty, for which the procedures are
                                                     
135 Council Regulation 384/96, as amended, replaced Council Regulation 3283/94, as amended, and
notified in WTO documents G/ADP/N/1/EEC/1, G/ ADP/N/1/EEC/1/Suppl.1 and G/ADP/N/1/EEC/2.The European Union WT/TPR/S/72
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set down separately.136  The legislation applies to all third countries, including preferential trade
partners, except for members of the European Economic Area in the sectors where the EU's
competition policy framework applies.  The legislation contains special rules for non-market economy
countries, which were amended in 1998 to grant exporters from China and the Russian Federation
"market economy treatment" on an ad hoc basis for the purpose of anti-dumping investigations.137
With respect to Bulgaria, the Czech Republic, Esto nia, Hungary, Israel, Latvia, Lithuania, Morocco,
the Palestinian Authority, Poland, Romania, the Slovak Republic, Slovenia, Tunisia, and Turkey, their
regional trade agreements with the EU contain provisions on trade defence instruments, such as
supplementary information facilities and a preference for price undertakings.138
87. The legislation implements the EU's commitments under the WTO Anti-Dumping
Agreement, and also concerns matters not explicitly regulated by the Agreement, in particular, the twoprocedures of "anti-absorption" and "anti-circumvention".
139  Absorption refers to instances where
there is no movement or insufficient movement in the selling prices of the dumped product on the
Community market from the imposition of a definitive  anti-dumping duty.  The EU's broadened post-
Uruguay Round provisions on circumvention are designed to deal with assembly operations in the EU
or in third countries or other practices that are designed to avoid the payment of the anti-dumping duty(Box III.2).  This legislation was notified to the WTO and was reviewed by the Committee on Anti-
Dumping Practices during the period 1997-99, in the course of which WTO Members requested
information on the substance and practice of a number of provisions.
Application
88. The latest comparative data for 1998 indicate that the EU had the second largest number of
measures in force, behind the United States.
140  Of the 192 measures in force at the end of 1999
(Table III.8), WTO Members accounted for 60%141; China accounted for 17% and the Russian
Federation for 7%, and most affected product categories were iron and steel products, consumer
electronics, and chemicals.142  The number of initiations of new investigations in 1999, which rose
three-fold to 66, is likely to lead to a rising tr end of measures in force, once investigations are
concluded.  Products involved in the investigations initiated in 1999 include hot and flat-rolled steel
                                                     
136 Commission Decision 2277/96/ECSC (commonly referred to as the "ECSC Decision").  Upon the
expiry of the ECSC Treaty in 2002, the covered products are to become subject to the common commercialpolicy under Article 133 of the EC Treaty.
137 "State-trading countries" covered by Council Regulation 519/94 (section (2)(vi)(d));  and Council
Regulation 905/98.
138 For example, "Decision No 1/95 of the EC-Turkey Association Council (OJ L 035, 1996) contains
the following statement by the Community on Article 44 (which refers to trade defence instruments):  "Inrelation to Article 44 (2), the Community states that the Commission of the European Communities, withoutprejudice to the position of the Council of the European Union, in the exercise of its responsibilities for anti-dumping and safeguard measures, will offer information to Turkey before the initiation of proceedings. To this
effect, appropriate modalities of application of Article 49 will be set out jointly before the entry into force of this
Decision. Furthermore the Community will give, on a case-by-case basis, where appropriate, a clear preferenceto price undertakings rather than duties in order to conclude anti-dumping cases where injury is found."
139 Replacing Council Regulation 2423/88, which concerned both anti-dumping and countervailing
measures.  Details of modifications are provided in COM(1994) 414 final, Part 6.
140 WTO (1999), Table IV.5, p. 59.
141 Poland (16);  India (13);  Thailand (12);  Mala ysia (8);  Japan and Republic of Korea (7 each);
Hungary and Indonesia (6 each);  Mexico (5);  C zech Republic and Norway (4 each);  Singapore and
United States (3 each);  Brazil, Bulgaria, Estonia, Latvia, Philippines, Romania, Slovak Republic andSouth Africa (2 each);  Egypt, Pakistan, Turkey, Venezuela, and Hong Kong, China (1 each).
142 WTO document G/ADP/N/59/EEC.WT/TPR/S/72 Trade Policy Review
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products, polyester staple fibres, hairbrushes, bicycle components and parts, polyethylene
terephthalate (PET), chemicals, colour-telev ision picture tubes, and compact disc boxes.
Box III.2:  Circumvention in the EU 's anti-dumping legislation, 1987-99
The EU first established the procedure in 1987 to target "screwdriver operations", whose alleged purpose
is to circumvent the anti-dumping duty on the imported finished product by assembly in the Communityfrom imported parts and components.  The legislation provided for the extension of the duty on theimported finished product to the product assembled in the Community.  The Secretariat reported for the
1993 Trade Policy Review of the EU that all of the anti-circumvention procedures initiated between 1987
and 1989 concerned imported components from Japan.  The matter was pursued by Japan in a GATTdispute settlement proceeding, which found this legislation inconsistent with relevant GATT provisions(L/6657, BISD 37S/132).
Following the GATT panel, the anti-circumvention provision fell into disuse and no further procedures
were initiated, pending the outcome of the discussions in the Uruguay Round.   The 1994 Ministerial
Decision on Anti-Circumvention notes that the problem of circumvention formed part of the negotiations,but no specific text was agreed.  The Decision also notes the desirability of the applicability of uniformrules in this area, and consequently refers the matter to the Committee on Anti-Dumping Practices.
The EU's post-Uruguay Round legislation on circumvention has a broader scope.  The Commission noted
that:
Circumvention can occur in several forms ranging from assembly operations, in the
importing country or in third countries, to more direct instances of duty avoidance, such asthe wrong origin declarations, imports of knockdown kits and slightly altered products, etc.The Community has encountered all these forms of circumvention in the recent past,e.g., cameras, bicycles and compact discs and,  as such, there appears to be an immediate
problem which requires attention.
(COM(1994) 414 final, Part 6, p. 6.)
Further developments were reported on by the Commission in 1996, in the context of the review of its
anti-dumping legislation by the WTO Committee on Anti-Dumping Practices, as follows:
Under the Community's revised rules, duties will only be extended to like products,
including parts, which are from the country subject to measures and which are
circumventing the measures in force against that country.  The rules for such investigations
are precise and include dumping and injury tests in all cases.
… Anti-circumvention measures will equate to the existing duty and as such will be
considered as an extension of those measures rather than the imposition of new measures.This is because the only products which may be made subject to an extension of measuresare like products, or products destined for like products, which are deemed to originate
from the country subject to the original measur es and should therefore have been subject to
these measures. As such, of course, these circumvention measures will be imposed with allthe requirements in the Anti-Dumping Agreement having already been fulfilled.
(WTO document
 G/ADP/W/301 of 4 March 1996, p. 14.)The European Union WT/TPR/S/72
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Table III.8
Anti-dumping actions, 1990-99
(Number of cases)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Initiations 43 20 39 21 43 33 24 23 21 66
Measures taken: 27 22 16 19 21 13 26 32 31 40
-  D e f i n i t i v e  d u t i e s 1 81 91 61 91 91 32 62 62 12 5
-  P r i c e  u n d e r t a k i n g s 93002006 1 0 1 5
Measures in force 139 142 158 150 151 147 163 153 162 192
Source:   WTO Secretariat.
(b) Countervailing measures
89. Since the 1997 Trade Policy Review, the EU has replaced its countervailing legislation,
mainly for the purpose of correcting material errors in the previous legislation.143  It applies to
agricultural and industrial products, except for pr oducts covered by the ECSC Treaty, for which the
procedures are set down separately.144
90. The EU is an infrequent user of countervailing procedures compared with the
United States145;  six measures were in force at the end of 1999, five on imports from India and one on
Norway.  However, 23 investigations were ongoing at the end of 1999, suggesting an increase of
measures in force for 2000;  in almost all cases, th e investigations concern products also subject to an
anti-dumping investigation (e.g. polyethylene terephthalate (PET)).146
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
91. The Community Customs Code (section (2)(i)(a)) also applies to exports.  Thus, all goods
leaving the customs territory of the Community are subject to customs supervision and must bepresented to customs with, under the normal procedur e, an export declaration consisting of the Single
Administrative Document (SAD), accompanied by  pertinent documents (e.g. licence for products
covered by the Common Agricultural Policy).   The customs authority may grant permission to
simplify the completion of formalities and procedures.
92. The Community recognizes the right of developing countries to engage the services of
preshipment inspection entities on its customs territory for the purpose of carrying out controls on the
quality, quantity or price of goods destined for export to the territory of these third countries.
However, contracts are subject to prior notification to the Commission (except for the remuneration),
and other conditions concern information to the exporter, the non-discriminatory conduct of
                                                     
143 Council Regulation 2026/97 repealing Council Regulation 3284/94.  In 1998, the Commission
issued guidelines for the calculation of the amount of subsidy in countervailing duty investigations (OJ C 394,
1998).
144 Commission Decision 1889/98/ECSC.  Upon the expiry of the ECSC Treaty in 2002, the covered
products are to become subject to the common commercial policy under Article 133 of the EC Treaty.
145 WTO (1999), Table IV.3, p. 57.
146 WTO document G/SCM/N/56/EEC.WT/TPR/S/72 Trade Policy Review
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preshipment inspection activities, limits on disclosure of information by exporters, and procedures
regarding grievances of exporters.147
(ii) Prohibitions, restrictions, and licensing
93. Measures affecting exports are adopted by the Community to implement the Common
Foreign and Security Policy (CFSP).  As of end-1999, the Union had embargoed the export of arms,
munitions, and military equipment to Afghanistan, An gola (only Unita), Ethiopia and Eritrea, Former
Republic of Yugoslavia (Serbia and Montenegro), Iraq, Libya, Myanmar, Sierra Leone (only RUF),
and Sudan.  The embargo on equipment to Indonesia that might be used for internal repression, in
connection with the situation in East Timor, expired on 16 January 2000.148
94. The Member States, within a common framework established by the Council, maintain
controls on exports of dual-use goods and technology (which can be used for both civil and militarypurposes), through a Community policy consisting of lists of dual-use items, destinations, and
guidelines with respect to such exports.
149  An authorization is required for a listed good (Annex I of
Council Decision 94/942/CFSP, as last amended by Council Decision 2000/243/CFSP) or for a good
that, although not on the list, has been determined by a Member State to be subject to authorization
because of its potential use for the production of chemical, biological or nuclear weapons, dulynotified to the Commission.  Exports to certain destinations may take place under simplified
procedures, such as general authorizations (Annex II of Council Decision 94/942/CFSP, as amended,
lists Australia, Canada, Japan, New Zealand, Norway, Switzerland, and the United States).
95. Measures that apply on the Community market to protect the consumer, environment or
animal welfare generally concern exports as well as imports (section (2)(vi)(b)).  Thus, for example,
controls on trade of dangerous chemicals apply both to imports and exports, and measures to
implement the Montreal Protocol or Basel Conven tion affect both imports and exports of covered
products from the Community.
96. The Community, whose Member States have a rich cultural heritage, maintains export
licensing requirements on certain categories of cultural goods, including archaeological objects,
sculpture, and books more than 100 years old.
150
97. In all other respects, the general principle of EU policy with respect to exports of other goods
to third countries is freedom from quantitative restrictions.151  Exceptions include protective measures
to prevent a critical situation from arising due to a shortage of essential products;  these may be
limited to exports from certain regions of the Community or only to certain destinations.  Currently,
statistical surveillance applies on exports of untreated calf and bovine hides152, and secondary copper
materials (since 1998).153  Automatic licensing applies on certain products concerned by common
                                                     
147 Council Regulation 3287/94.
148 Council Common Position 1999/624/CFSP, implemented by Council Regulation 2158/1999.
149 Council Decision 1994/942/CFSP, implemented by Council Regulation 3381/94, as amended by
Council Regulation 837/95.  The Commission has proposed to modify Council Regulation 3381/94(COM(1998) 257 final).
150 Council Regulation 3911/92, implemented by Commission Regulation 752/93, as amended.  The list
of covered categories is contained in Annex I of the Council Regulation, as last amended in 1996 by Council
Regulation 3911/92.
151 Council Regulation 2603/69, as amended.
152 Annex I of Council Regulation 2603/69, as modified by Commission Decision 79/365/EEC.
153 Commission Decision 98/562/EC.The European Union WT/TPR/S/72
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market organization (section (2)(vii)(c)), or subject to export licensing for the allocation of tariff quota
commitments by trading partners.154
(iii) Duties
98. The Community does not apply duties or charges on exports.
(iv) Export subsidies
99. In principle, the Community does not grant subsidies conditional upon exportation
(section (4)(ii)), except for those provided for under the CAP on alcohol and incorporated products,
milk and milk products, beef and veal, pigmeat, eggs, poultry meat, sugar and related products, wine,
cereals, rice, fruit and vegetables, and processed fruit and vegetables (Chapter IV(2)1(ii)(c)).155
(v) Export assistance
100. The Community does not have a policy of direct or indirect assistance to exports, which
remains within the competence of Member States, and is subject to commitments assumed under the
OECD Agreement on Export Credits.  Direct assistan ce is granted in the form of export credits or
guarantees, and indirect assistance takes the form of programmes of market development, export
promotion, participation in trade fairs, and commer cial missions.  On the whole, the OECD estimates
that such export assistance (based on available notifications for the latest year, generally 1995)constitutes the following share of Member State assistance to industry:  Austria (14%), Belgium (3%),
Denmark (23%), Finland (55%), France (13%), Germany (20%), Portugal (0%), Spain (0%), Sweden
(6%), and United Kingdom (4%).
156
(vi) State-trading enterprises
101. Two state-trading enterprises in France have an impact on exports (as well as imports) of gas
and of electricity, but there are none at Community level or in any other of the Member States
(section (2)(x)).157
(4) MEASURES AFFECTING PRODUCTION AND TRADE
(i) Legal framework for businesses
(a) Company law
102. The EC Treaty prohibits restrictions on the freedom of establishment of companies and firms
by nationals of any Member State, and requires national treatment to be extended to suchestablishment (Article 43).  That is, companies of one Member State that establish themselves in
another Member State cannot be required to comply with formalities other than those laid down for
domestic companies.  As a general principle, Member States do not apply different treatment in the
event of the establishment of companies owned, in w hole or in part, by nationals of third countries.
However, restrictions apply to investment in vari ous sectors of transport (inland waterway, maritime,
                                                     
154 The allocation of export licences for certain chee ses exported to the United States is covered most
recently by Commission Regulation 2319/1999.
155 Commission Regulation 800/1999.
156 OECD (1998).
157 Gaz de France, Electricité de France and Entreprise Minière et Chimique (WTO document
G/STR/N/4/EEC).WT/TPR/S/72 Trade Policy Review
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cabotage, air transport) and financial services (Chapter IV(4)(ii)).  In addition, reciprocity conditions
apply to the grant and use of authorizations for the prospection, exploration, and production of
hydrocarbons.158
103. The EC Treaty also provides for the adoption of directives to attain freedom of establishment
and limit the risks to shareholders of divergences in national legislation, adopted under the Treaty of
Amsterdam by co-decision of the Council and the European Parliament (Article 44).  In the context ofthe Single Market, the early efforts to harmonize company law across the Member States (Box III.3),
gave way to the objective of facilitating cross-frontier business operations by "European" forms of
company organization.  These efforts are also relevant to foreign-owned companies.
Box III.3 - Summary of Company Law Directives
First Company Law Directive (68/151/EEC):   Applies to limited liability companies.  Establishes the
principle of compulsory disclosure for information of a legal nature (e.g. balance sheet, profit and lossaccount for each financial year) and persons representing the company.
Second Company Law Directive (77/91/EEC):   Applies to public limited liability companies.  Establishes
the principle of compulsory disclosure for certain info rmation of relevance to shareholders (e.g. registered
office, types of shares, subscribed capital), and prov isions on the maintenance and alteration of capital.
Third Company Law Directive (78/855/EEC):   Applies to mergers between public limited liability
companies of the same Member State.  Establishes th ree-stage process – draft terms of merger, discussion
at meeting of shareholders, and actual merger – and rules governing the nullity of mergers.
Fourth Company Law Directive (78/660/EEC):   Governs the drawing up of the annual accounts of all
limited liability companies, except that financial service providers may be exempted, and requires auditsby an authorized person.  Less severe rules apply to small and medium-sized companies.
(Proposed) Fifth Company Law Directive (COM(91) 372 final):   Coordinates national laws on the
structure of public limited liability companies and the powers and obligations of their organs.
Sixth Company Law Directive (82/891/EEC):   Governs divisions of public limited liability companies, by
acquisition, by the formation of new companies and division under the supervision of a judicial authority.
Seventh Company Law Directive (83/349/EEC):  Governs the drawing up of the consolidated (i.e. group)
accounts of limited liability companies.
Eighth Company Law Directive (84/253/EEC):   Defines the qualifications of persons authorized to audit
accounts.
(Proposed) Tenth Company Law Directive (COM(84) 727 final):   Defines and sets rules on cross-border
mergers of public limited liability companies.
Twelfth Company Law Directive (89/667/EEC):   Applies to private limited companies and, if allowed by
the Member State, public limited companies.  Establishes disclosure requirements.
(Proposed) Thirteenth Company Law Directive (COM(97) 565 final):   Applies to takeover bids for the
securities of a company governed by the law of a Member State, when traded on a market in one or more
Member States.  Establishes a minimum level of prot ection for shareholders located in different Member
States.
Source : WTO Secretariat.
                                                     
158 Article 8.4 of Directive 94/22/EC of the European Parliament and Council.The European Union WT/TPR/S/72
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104. At the Member State level, the Commission notes that "complex economic and administrative
regulations, inadequate financing possibilities, inappropriate bankruptcy and insolvency rules, limited
information and advice, and insufficient training" hamper the development of small and medium-
sized enterprises, the backbone of job creation.159  In addition, "companies operating at Community
level are obliged to maintain unnecessary and costly partitions in their organizations to meet the
requirements of national company law";  these would be overcome by the adoption of the10
th Company Law Directive (on cross-border mergers) and the European Company statute, which
would allow companies to reap considerable cost savings through simplified organization and
administration, estimated at ECU 30 billion per annum.160  Following the creation of the European
Economic Interest Grouping (EEIG) in 1985, th e Commission proposed the European Company
Statute (and related proposals on European Statutes for associations, cooperatives, and mutualsocieties).  Adoption, however, requires the reso lution of the issue of employee involvement, on
which political discussion among the Member States was renewed following the report of the expert
group delivered in 1997.
161  Progress was made in 1999 towards the adoption of the 13th Company
Law Directive.162
(b) Taxation
105. There are substantial differences in the basic rates of corporation tax between the Member
States (Chart III.2), as well as different approaches to tax concessions for small and medium-sized
enterprises (SMEs) or for enterprises establishing in industrial zones or disadvantaged regions
(section (4)(ii)).
106. Tax measures that provide for a significantly lower effective level of taxation, including zero
taxation, than levels that generally apply in the Member State, have been viewed, in the context of the
Single Market, as raising the potential for "harmful tax competition".163  The Commission notes that
"the need to deal with tax distortions will become increasingly evident as the euro increases price
transparency and expectations of trouble-free transactions".164  The Commission has established the
goal of coordination among the Member States with respect to their company tax regimes – as
opposed to harmonization of company taxation – because the unanimity requirement for the Council
to adopt directives on company taxation (Article 94 of the EC Treaty), has made it difficult to adopt
such measures in practice.165
                                                     
159 COM(1999) 10 final, p. 20.
160 European Commission (1996), p. 55.
161 In 1989, the proposal was split in two, one concerned a Regulation on the operation of the European
company;  and the other a Directive on the involvement of employees.   This did not enable disagreementsamong the Member States to be overcome;  some Member States were against the presence of employees'representatives in the company's statutes and the others  were unable to accept the idea of a European company
without employee participation (a feature of national rules,  notably in the case of France).  The issue was taken
up again in the expert group on European systems of worker involvement, which presented its report in 1997.
The report suggested that social partners first try to agree on a system of worker involvement for each European
company, with the fall-back of a set of reference rules in the event of disagreement.  The Commission states that"a decisive step forward has been made, with discussions focussing less and less on comparisons between a"European" model and the different national models and more and more on the search for a flexible formula thatwould leave the essential features of the different national systems intact."  Available at:http://europa.eu.int/scadplus/leg/e n/lvb/126002.htm [9 February 2000].
162 European Commission, DGXV (1999a).
163 COM(96) 546 final.
164 COM(1999) 10 final, p. 20.
165 "Company Taxation, Current position and outlook" [Online].  Available at:  http://europa.eu.int/
scadplus/leg/en/lvb/126036.htm [9 February 2000].WT/TPR/S/72 Trade Policy Review
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2025303540455055
DEU ITA BEL FRA GRC LUX AUT ESP NLD PRT DNK GBR IRL FIN SWEChart III.2
Standard rates of corporation tax in the European Union
Per cent
Source : European Commission, DGXV (1999a), N°4, p. 15.Higher rate
Average rateLower rate
107. A package to tackle harmful tax competition was adopted in December 1997.166  A  k e y
element is a "Code of Conduct" for business taxati on, an instrument that is not legally binding but
constitutes a political commitment by the Member States to refrain from adopting potentially harmful
tax measures, subjecting such measures to a review process (in the Code of Conduct group established
in March 1998) and rolling them back by 31 December 2002.  Other elements of the package concern
taxation of income from savings, fiscal state aids (section (4)(iii)(c)), and double taxation of
companies.167
108. To eliminate double taxation between affiliate d companies, in 1990 the Council adopted a
directive that applies a common system of taxation for mergers in which companies from two or more
Member States are involved and a directive that eliminates double taxation on dividends paid by
subsidiaries to their parent companies located in another Member State.168  A Convention, which
entered into force in 1995 for five years, provided an arbitration procedure designed to prevent double
taxation that may occur as a result of differing interpretations by Member States of the transfer prices
used by associated enterprises for their joint operations;  a new Convention has been concluded but
has not yet entered into force.  In 1998, the Commission adopted a proposal for a directive to
                                                     
166 European Commission, DGXV (ongoing) No. 10.
167 The taxation of interest income from savings, earned in one Member State by a resident of another
Member State, has an impact on financial services prov ided in the Internal Market (Chapter IV(4)(ii)).  The
Commission has proposed a minimum 20% withholding tax and providing information to a Member Stateregarding interest paid to individuals resident there (COM(98) 295 final).
168 Council Directive 90/434/EEC and Council Directive 90/435/EEC, respectively.  The Commission
has proposed extending the scope of these directives to all firms subject to corporation tax (COM(93) 293 final).The European Union WT/TPR/S/72
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eliminate withholding taxes on payments of interest and royalties between associated companies of
different Member States.169
(ii) Subsidies
(a) Overview
109. Subsidies may be granted at several levels in the EU:  Community-wide programmes, and
aids granted by the national, regional or local governments of the Member States ("State aid").  Underthe financial guideline for the EU, established at the Berlin European Council of March 1999, annual
appropriations for payments (only a portion of which concern subsidies) from the Community budget
for the period 2000-2006 are set at an average ECU 98 billion (in constant 1999 prices), subject to an
overall ceiling of 1.27% of Community GNP.  St ate aid granted by the 15 Member States was
estimated by the Commission at ECU 95 billion annually for the period 1995-97, or 1.2% ofCommunity GDP.
170  In view of the passage to monetary union for 11 of the 15 Member States in
1999, which has reinforced the Internal Market and also requires strict budgetary discipline on the
part of Member States, the Commission intends to "maintain its pressure on State aid in the
Community".171
110. Under GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures, the
Community notifies annually support programmes that may affect products;  the most recent
notification of Community-level programmes and those of Member States concerns 1998.172
However, there does appear to be a difference of vi ews between the EU and its trading partners on the
scope and modalities of the notification requirement, and the information available on subsidy
programmes has been completed by a question-and-answer process in the WTO Committee on
Subsidies and Countervailing Measures.173
(b) Community programmes
111. The two largest areas of expenditure are agriculture (Chapter IV(2)) and structural operations,
representing 45% and 37%, respectively, of expenditure of ECU 90.7 billion for 1998.174 Research
and technological development is another important area of Community-wide activity, accounting for
an estimated 3.9% of total expenditure.
112. With respect to structural funds – the European Regional Development Fund (ERDF),
European Social Fund (ESF), the Guidance Section of the European Agricultural Guidance and
Guarantee Fund (EAGGF) and the Financial Instrument for Fisheries Guidance – the Community has
three priority objectives for 2000-2006:
(i) Objective 1, which accounts for almost 70% of resources in the structural funds,
promotes the development of regions whos e development is lagging behind, generally
applying to regions in which per capita GDP is less than 75% of the EU average;
                                                     
169 COM(98) 67 final.
170 European Commission (1999d).
171 European Commission (1999d), p. 57.
172 WTO document G/SCM/N/48/EEC and Add.1-15.
173 Article 6 of the Agreement on Subsidies and Countervailing Measures provides for written requests
for information on notified subsidies, as well as on programmes that are alleged not to have been notified.  SeeWTO document G/SCM/Q2/EEC/10.
174 WTO document G/SCM/N/48/EEC.WT/TPR/S/72 Trade Policy Review
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(ii) Objective 2 contributes to restructuring areas affected by the decline in industrial and
service sectors, declining rural areas, urban areas in difficulty, and depressed areas
dependent on fisheries;  and
(iii) Objective 3 is concerned with human resource development, to adapt and modernize
policies and systems of education, training, and employment.
Given these criteria, the structural funds mainly concern Germany, Greece, Italy, Spain, and Portugal.
According to the EU's notification to the WTO on subsidies, "the aid involved is largely devoted to
the least-developed areas of the Community, and the great majority of it goes to finance infrastructure
or to assist individuals directly, without necessarily conferring a direct benefit to producers of goods";
the potential trade effects of such aid are then generally described as minimal.   Finally, the Cohesion
Fund, which was established in 1993, finances transport and environment infrastructure in theMember States whose per capita GDP is less than 90% of the EU average, namely Greece, Ireland,
Portugal, and Spain.
113. The fifth framework programme of the EU in the field of research and technological
development (RTD) allocates ECU 13,700 million for 1998-2002.
175  The funds are allocated to
programmes devoted to the themes of quality of life and management of living resources (76%), user-
friendly information society (3%), competitive and sustainable growth (2%), energy, environment and
sustainable development (9%), and the Joint Research Centre (5%)176.  Other important Community-
wide programmes include PHARE, which provides assistance to countries in Central and Eastern
Europe to prepare their accession to the EU, and in particular to adopt and implement the acquis , as
well as MEDIA-II for 1996-2000, which allocates ECU 265 million to the development and
distribution of European audio-visual products.177
(c) State aid
Legislative framework178
114. Article 87 of the EC Treaty declares that state aid that distorts or threatens to distort
competition, insofar as it affects trade between Member States is, except in certain defined
circumstances (e.g. natural disasters or exceptional circumstances), incompatible with the commonmarket.  Under Article 87(3), aid may be granted according to certain derogations (e.g. regional aid),
and Article 88 entrusts the enforcement of the provision to the Commission.  Member States have
notification obligations for new or modified aid programmes, in advance of entry into force, to permit
the Commission to submit its comments on whether the programme is authorized as an exemption or
subject to investigation, which may lead to a potentially negative decision that prevents the aid frombeing granted or requires it to be repaid.  Specific provisions of the EC Treaty apply to agriculture
(Article 36) and transport (Article 73).  The European Coal and Steel Treaty (ECSC) covers aid to
coal and steel (Articles 4, 54 and 95), and is set to expire in July 2002.
115. The Community has an extensive legislative framework to implement the EC and ECSC
treaty provisions on state aid, which was improved  and clarified during the period under review to
make it more effective and reduce the administrative burden on the Commission. Council
Regulation 659/1999 is a key new piece of legislati on of general application to all sectors, which
                                                     
175 Decision 182/1999/EC of the European Parliament and Council.
176 Council Decision 1999/167/EC; Council Decision 1999/168/EC; Council Decision 1999/169/EC;
and Council Decision 1999/170/EC.
177 Council Decision 95/563/EC.
178 European Commission, DGIV (1999a, 1999b).The European Union WT/TPR/S/72
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gathers in one framework the procedural rules on state aid.  These include the requirement by a
Member State to notify the planned measure to the Commission179, its preliminary examination,
request for additional information, the formal investigation procedure (in case of doubt over
compatibility with the common market), and closure of  the procedure.  Also of note is the procedure
regarding "non-notified aid", which concerns aid provided or committed without notification and aid
that has already been put into effect when it is notified, or is put into effect after being notified butbefore the Commission has reached a decision.  Non-notified aid that is granted before authorization
and later deemed by the Commission as being incompatible with the common market is unlawful.
180
Such non-notified aid is generally brought to the attention of the Commission by third-partycomplaints or press reports.
116. To guide Member States, the Commission has set out its position on the grant of regional aid,
and "horizontal" rules that apply to aid granted to any industry or region.
181  An important
development during the period under review is Council Regulation 994/98, which provides for the
Commission to grant "group exemptions" – declared compatible with the common market and exempt
from the notification requirement – to aid in favour of SMEs, research and development,
environmental protection, employment and training, or aid that is granted according to a map of theMember State for regional aid that is approv ed by the Commission.  For example, the Commission
justifies favourable treatment for SMEs because they play a vital role in job creation, but their
development is limited by market imperfections due to difficulties in obtaining capital or credit.
182
The group-exemption regulations are expected to help reduce the administrative burden on theCommission of handling some 500 cases a year.
117. The Commission's rules on financial transfers and transactions between governments and
state-owned enterprises were largely unchanged during the period under review.  One development,which is related to the action taken at the Comm unity level to combat "harmful tax competition"
(section (4)(i)), is the Commission's clarification on the status of differences in direct business
taxation.
183  This matter is often relevant to defining state aid to public undertakings, which may
benefit from an exemption from corporate taxation, as well as the issue of tax concessions to
individual enterprises.  The Commission has also adopted a proposal to require companies thatoperate in a reserved and/or public service sector and in the competitive sector to operate separate
accounts for these different activities.
184
118. The Commission has in place industry-specific or "sectoral" rules defining its approach to
state aid in particular industries, including coal, steel, textiles, synthetic fibres (extended during the
period under review), motor vehicles, transport (road, rail and inland waterway; maritime transport;
aviation), agriculture and fisheries.185  Those that apply to state aid in "sensitive" sectors – coal, steel,
                                                     
179 The "Commission notice on the de minimis  rule for State aid" (OJ C 68, 1996) sets a threshold
figure of aid of ECU 100,000 for a three-year period to a single company for notification.  The rule is based onthe assumption that small amounts of aid do not have an appreciable effects on trade and competition betweenMember States.
180 According to the Commission, the direct effect of Article 88 of the EC Treaty gives national courts
an important role to play in the protection of enterprises against unlawful aid to their competitors, and can beseized to this end.  A study has shown that the national courts are underused by enterprises, suggesting that therules on state aid and avenues of recourse are poorly understood.  See European Commission, DGIV (1999c).
181 "Guidelines on national regional aid" (OJ C 74, 1998) and "Multisectoral framework on regional aid
for large investment projects" (OJ C 107, 1998).
182 European Commission, DGIV (2000).  See also OECD (1994).
183 "Commission notice on the application of the state aid rules to measures relating to direct business
taxation" (OJ C 384, 1998).
184 Soukup (1999), pp. 37-38.
185 European Commission, DGIV (1999a).WT/TPR/S/72 Trade Policy Review
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textiles, synthetic fibres, and motor vehicles – are, according to the Commission, generally more
restrictive than the rules for other industries.186  For example, the rules adopted on state aid in the coal
sector require Member States that intend to grant aid to coal undertakings to submit to the
Commission, in advance, a modernization, rationalization and restructuring plan to improve the
economic viability of the undertakings concerned by reducing production costs or to submit a closure
plan.187  Nevertheless, the Commission authorized a total of ECU 7,529 million of state aid to the coal
industry in 1996188, to support Community production of about one half of Community
consumption189, suggesting that the trade effects of aid to the coal industry are significant.
Seventh Survey on State Aid
119. The Commission published its Seventh Survey on State Aid in 1999 as part of its commitment
to an open policy on the control and use of state aid;  publication of the Eighth Survey is forthcomingin April 2000.  The survey covers aid granted by the 15 Member States during the period 1993-97 to
manufacturing, agriculture, fisheries, coal, transport – railways, inland waterways, maritime and
airline – and financial services.
190   Comparable data are available for 1993-95 for 12 Member States
(Austria, Finland and Sweden acceded to the EU in 1995), and indicate a decrease of 13% in state aid.
In relative terms, state aid fell from 1.5% to 1.2%  of Community GDP, mainly due to a steep decline
of aid granted by Germany to the New BundesLänder.191
120. Large disparities however exist between the Member States:   aid above the Community
average is granted by Italy (1.71% of GDP) and Germany (1.64%), while all other Member States
grant aid below the Community average, the lowest levels being recorded for Finland (0.43%),
Luxembourg (0.50%) and the United Kingdom (0.52%).192  In terms of the sectoral distribution of
state aid, manufacturing remains the most important (37%), followed by transport (35%), mainly due
to aid to railways, agriculture (12%), coal mining (8%), and financial services (3%).193
121. Between 1993-95 and 1995-97, state aid to manufacturi ng declined in Belgium, France, Italy
and Germany, and rose in Denmark, Greece, Ireland, Luxembourg, Netherlands, Portugal, Spain and
the United Kingdom.  In terms of value added, the highest levels of aid are found in Greece and Italy,
at roughly double the Community average, although Italy reduced aid to the sector by 9% (in absolute
terms).  State aid to manufacturing is motivated mainly by regional development objectives (57% ofthe total for the 15 Member States), followed by "horizontal" objectives (31%) and sectoral assistance
(12%).  As to the form in which aid to manufacturing is granted, budgetary expenditure has a share of
75% of the total for the 15 Member States, which is a more transparent form of aid than tax
expenditure (25%).  The Commission notes, however, that in France, Ireland, Italy and Portugal, over
30% of all aid to manufacturing is given in the form of tax breaks.
194
                                                     
186 European Commission, DGIV (1999b).
187 Commission Decision 3632/93/ECSC implemented by Commission Decision 341/94/ECSC.
188 According to WTO document G/SCM/Q2/EEC/12, a Community total of ECU 8,051 million of
state aid was authorized for the coal sector in 1995, mainly by Germany (60%), the United Kingdom (20%),Spain (11%), and France (8%).
189 WTO document G/SCM/N/48/EEC.
190 Figures exclude the ECU 391 million granted in 1997 through the Irish Corporation Tax regime,
which was deemed to constitute state aid in 1998.
191 European Commission (1999d), Table 19, p. 50.
192 European Commission (1999d), Table 19, p. 50.
193 European Commission (1999d), Table 18, p. 49.
194 European Commission (1999d), p. 54.The European Union WT/TPR/S/72
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(iii) Competition policy
(a) Community activity
Legislative framework
122. EU competition policy applies at two levels:  Community-wide policy, which is based on
Articles 31, 81-86 (ex Articles 37, 85-90) of the EC  Treaty and Articles 65 and 66 of the European
Coal and Steel Treaty (ECSC) until its expiry in July 2002195;  and the competition policies of the
15 Member States on their national territories. An effective Community-wide competition policy has
long been viewed as a necessary adjunct to the Internal Market programme, which aims to improve
the competitiveness of European enterprises, and al so to protect the interests of consumers.  The
passage to monetary union for 11 of the 15 Member States in 1999 has reinforced the Internal Market,
leading the Commission to note that competition policy has an important role to play in safeguardingor enhancing the flexibility of product and service markets.
196
123. Under the EC Treaty:
- Article 81 prohibits, as incompatible with the common market, the anti-competitive
acts of undertakings that may affect trade between the Member States197, except for
those exempted by the Commission as providing a benefit on balance198, and
Article 82 prohibits, as incompatible with the common market, the abuse of a
dominant position, without exception;
- Council Regulation 4064/89 (Merger Regulation) prohibits for an ex ante
examination of concentrations with a Community dimension, and prohibits
concentrations that lead to the creation or strengthening of a dominant position, as
incompatible with the common market;
- Articles 31 and 86 apply to state monopolies or undertakings granted exclusive rights
by the Member States to operate services of general interest, and allow derogations to
the general rules of the Treaty.
124. The Commission enforces these provisions, subject to the supervisory jurisdiction of the
Court of First Instance (CFI) and the European C ourt of Justice (ECJ).  An undertaking may either
complain directly to the Commission about the anti-competitive conduct of another or may notify theCommission of certain agreements, or the Commission may itself initiate an investigation.  In 1998,
the Commission received 192 complaints (up from 177 in 1997), 216 notifications of agreements
                                                     
195 Chapter 1 of Title VI of the EC Treaty concerns rules on competition;  Section 1 applies to
undertakings, and Section 2 applies to state aid.  Article s 4, 54 and 95 of the ECSC Treaty cover state aid to coal
and steel.
196 European Communities (1999b), Box 1, pp. 17-18.
197 No definition of this concept for the purposes of competition law is provided by the EC 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 also individuals, engaged in theproduction and distribution of goods and services.   In principle, acts of all undertakings affecting the commonmarket are covered, irrespective of whether the undertakings are established in the Member States, in third
countries, or in a Member State and in a third country.
198 Article 81(3) provides that any agreement, d ecision or concerted practice that contributes to
improving the production or distribution of goods or to promoting technical or economic progress, whileallowing consumers a fair share of the resulting benefit, may be exempt, provided it does not imposeunnecessary restrictions or afford the possibility of substantially eliminating competition.WT/TPR/S/72 Trade Policy Review
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under Articles 81 and 82 (down from 221 in 1997), and initiated 101 cases, mostly concerning the
sector of telecommunications, which was liberalized in 1998 (Chapter IV(4)(iii)).199  In 1998, the
Commission also handled 235 notifications under the Merger Regulation, up by 36% from 1997,
confirming a "merger wave".200  According to the Commission, preliminary data for 1999 indicate a
continuation of these trends, with modest decline in the number of notifications, complaints and own-
initiative investigations, and a further steep increase in the number of merger notifications.
125. During the period under review, the Community  modified the legal framework for its
competition policy;  a new exemption regulation was introduced for vertical restraints by amending
the Merger Regulation.  Given the considerable administrative burden of enforcing the law and the
need to focus available resources on the more serious competition problems of the Internal Market,
the Commission has proposed that the enforcement of  competition rules be shared to a greater extent
than in the past with the competition policy authorities and national courts of the Member States.201
In the context of the Internal Market, the Community has pursued a policy of liberalization for theproduction and distribution of electricity (liberalized as of 1999), and telecommunications (liberalized
as of 1998), and has initiated the process for postal services and transport (Chapter IV(4)(iv)).
Application of Articles 81 and 82126. Council Regulation 17, adopted in 1962, requires undertakings seeking to obtain "negative
clearance" under Articles 81 or 82
202, or an exemption for a specified period under Article 81(3), to
notify the Commission of the agreement or concerted practice.203   The Regulation applies to all
sectors except for transport, where the Commission has issued detailed rules.204 Council
Regulation 19/65 initiated the approach of the "block exemption" regulation, given the administrative
burden on the Commission of handling notifications and related procedures.  Block exemptions exist
for:  exclusive distribution agreements; exclusive purchasing agreements;  patent licensingagreements; motor-vehicle distribution and servicing agreements;  specialization agreements;
research and development cooperation agreements;  franchise agreements;  technology transfer
agreements;  and certain types of agreement in the insurance sector.
                                                     
199 European Communities (1999b), p. 19.
200 European Communities (1999b), p. 47.
201 "White Paper on Modernisation of the Rules Implementing Articles 85 and 86 [81 and 82] of the EC
Treaty" (OJ C 132, 1999).   The Commission notes that "since national competition authorities and courts haveno power to apply Article 85(3) [81(3)], companies have used this centralised authorisation system not only toget legal security but also to block private action before national courts and national competition authorities.
This has undermined efforts to promote decentralized application of EC competition rules.  As a result, the
rigorous enforcement of competition law has suffered and efforts to decentralize the implementation ofCommunity law have been thwarted.  In an ever more integrated Community market, this lack of rigorousenforcement and the failure to apply one common set of rules harms the interests of European industry" (p. 4).
This proposal relies on the direct effect of the provisions of the EC Treaty in the Member States,
including block exemption regulations adopted by the Commission, although a practical hurdle is the fact that
only eight of the 15 administrative authorities of the Member States can directly apply Articles 81 and 82.  See
European Commission, DGIV (1997a).
202 Negative clearance is a procedure whereby the Commission certifies that an agreement does not
appear, on the known facts, to give ground for objection under Articles 81 or 82.
203 European Commission, DGIV (1997b).  Commission Regulation 3385/94 specifies applications and
notifications, Commission Regulation 99/63 concerns hearings and Commission Decision 94/810 concerns the
terms of reference for hearing officers.
204 Council Regulation 141/62 exempts transport from the application of Council Regulation 17/62.
Council Regulation 1017/68 applies the rules of competition to transport by rail, road, and inland waterway;Council Regulation 4056/86 applies the rules of competition to maritime transport;  and CouncilRegulation 3975/87 applies the rules of competition to air transport.The European Union WT/TPR/S/72
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127. The Commission distinguishes between horizontal restraints on competition, which concern
undertakings operating at the same level in the process of production, processing or marketing, and
vertical restraints between undertakings operating at different levels, such as between producers and
distributors.  The Commission notes that "the main reason for treating vertical restraints more
leniently than a horizontal restraint lies in the fact that the latter may concern an agreement between
competitors producing substitute goods/services while the former concerns an agreement between asupplier and a buyer of a particular product/service".
205  The revised notice on agreements of minor
importance sets an aggregate market share threshold of 5% for horizontal agreements and 10% (up
from 5% in 1994) for vertical agreements.206
128. The Community recently adopted a new policy on vertical restraints, which is applicable from
1 June 2000, and replaces the block exemption regulations on exclusive distribution agreements,exclusive purchasing agreements, and franchise agreements.
207  Under the new regime, vertical
arrangements between firms whose combined market share is less than 30% enjoy a safe haven from
the application of Article 81(1), unless the arrangements contain blacklisted restrictions.  Vertical
arrangements between firms over the market share threshold require individual exemption.  By the
end of 2000, the Commission will report on the operation of Commission Regulation 1475/95, theblock-exemption regulation for motor-vehicle distribution and servicing agreements, which expires in
2002.
208
Mergers
129. The amended Merger Regulation came into force in March 1998.209  I t  a p p l i e s  t o  m e r g e r s
with a "Community dimension", defined accordin g to world-wide and Community-wide turnover.210
Such mergers must be notified to the Commission within one week of agreement and, as a general
rule, cannot be put into effect either before notification or within the first three weeks of notification(Box III.4).  The Regulation declares as incompatible with the common market the mergers that create
or strengthen a dominant position as a result of which effective competition would be significantly
impeded.   The Regulation also applies, since 1998, to a joint venture which coordinates the
competitive behaviour of companies that remain independent ("full function co-operative joint
ventures"), which may be declared incompatible with the common market.
211
130. According to the Commission, globalization is the most important factor behind the
substantial increase in merger activity in the Community, which is up four-fold in relation to 1993.  In
addition, monetary union is "creating the possibility of synergies from simplified financial and
commercial operations within groups of companies,  especially those with a substantial interest in
several Member States", in sectors as diverse as banking and finance, automotive components, andpharmaceuticals.
212  Joint ventures in the newly emerging sectors, such as the Internet,
                                                     
205 COM(1998) 542, p. 13.
206 OJ C 372, 1997.
207 Commission Regulation 2790/1999 on the application of Article 81(3) of the Treaty to categories of
vertical agreements and concerted practices sets out the new competition rules for vertical agreements and
prolongs Regulation 1983/83 (exclusive distribution agreements), Regulation 1984/83 (exclusive purchasingagreements), and Regulation 4087/88 (franchise agreements) until 31 May 2000.
208 Krause-Heiber (1999).
209 Council Regulation 1310/97, implemented by Commission Regulation 447/98.
210 "Commission notice on calculation of turnover under Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between undertakings" (OJ C 385, 1994).
211 "Commission notice on the concept of full-function joint ventures under Council Regulation (EEC)
No 4064/89 of 21 December 1989 on the control of con centrations between undertakings" (OJ C 66, 1998).
212 European Communities (1999b), p. 47.WT/TPR/S/72 Trade Policy Review
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telecommunications, and telecommunications-equipmen t, were also a factor in the Commission's
increased case-load.213  The Commission notes the changing nature of mergers, involving not only
European companies, but also global players or the creation thereof214, strengthening the case for
international action.
Box III.4: Proceedings for mergers with a "Community dimension"
Notification
Within one week after a merger agreement, announcement of a public bid or acquisition of control
/g223
Phase 1: Initial examination
One month, unless extended to six weeks
/g223
Decision
The transaction does not fall within the Merger Regulation
OR
The transaction raises no serious doubts as to its compatability
OR
The concentration raises serious doubts as to its compatability
/g223
Phase 2: Initiati on of proceedings
Up to four months
/g223
Final Decision
Compatible, incompatible or compatible under conditions and obligations
/g223
Possibility of Appeal to the European Court of Justice
Source : WTO Secretariat.
(b) International activity
131. The Community has taken the initiative to addr ess anti-competitive acts at the global level, as
noted in the Secretariat Report for the 1997 Trade Policy Review.215  The Commission notes that "the
enhanced opportunities which trade liberalisation has provided for the interpenetration of marketsaround the world could very well be seriously undermined by restrictive commercial practices".
216  In
the WTO, the Community is an active participant in discussions on the interaction between trade and
competition policy and is an advocate of negotiations to conclude a multilateral agreement on
competition, as a complement to trade liberalization.217  Bilaterally, the Commission has concluded
cooperation agreements or integrated provisions to this end in regional trade agreements, andimplements OECD recommendations.  The EU therefore cooperates with the competition policy
authorities in a large number of its trading partners.
                                                     
213 Denness (1998).
214 van Miert (1999).
215 WTO (1997), pp. 70-71.
216 European Communities (1999b), p. 3.
217 "European Commission Communication to the Council and the European Parliament, The EU
Approach to the Millennium Round", and "EU Council Conc lusions, Preparation of the Third WTO Ministerial
Conference" [Online].  Available at:  http ://europa.eu.int/comm/trade/2000_round/position.htm
[15 November 1999].The European Union WT/TPR/S/72
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132. In particular, the 1991 agreement between the EU and the United States, which entered into
force in 1995, aims "to promote co-operation and co-ordination and lessen the possibility or impact of
differences between the Parties in the application of their competition laws".218  Under the 1991
agreement, contacts take place between competition policy authorities – on the one hand, the
Commission, and on the other hand, the Antitrust Divisi on of the United States Department of Justice
and the Federal Trade Commission – and staff-level contacts are frequent.219  During the period under
review, the 1991 Agreement between the EU and the United States was reinforced by a 1998
agreement on "positive comity", which clarifies the conditions under which one competition authority
may request the other to investigate and remedy anti-competitive acts on its territory in accordance
with the applicable legislation.220
(iv) Intellectual property rights protection
(a) Overview
133. Two levels of activity apply to the policies on the protection of intellectual property rights in
the 15 Member States:
(a) national legislation on patents, trademarks, as well as copyrights and neighbouring
rights, and measures of enforcement;
(b) instruments establishing unitary rights at the Community level (Community
trademark, Community plant variety), and Council directives harmonizing or
approximating national legislation in selected areas (e.g., topographies of
semiconductor products).
134. Legislation and enforcement measures at both levels are subject to the international
commitments of the Member States, and those entered into by the Member States and the Community
under the WTO's TRIPS Agreement, noting that "shared competence" applies to the field ofintellectual property rights protection.
221  The EC has, on behalf of the Member States, notified
legislation and enforcement measures in covered areas to the TRIPS Council (Table AII.1).222  All 15
Member States are signatories of the WIPO Convention and actively participate in its activities and
are, with some exceptions, Contracting Parties to the 19 treaties administered by WIPO.223
135. According to the Commission, the protection of intellectual property rights by international
conventions, which has led to some standardization of national legislation, "does not, however,
provide an adequate basis for completing the single market…[and] the Commission therefore decided
to strive for harmonisation of national laws in different areas and for stronger effective protection of
intellectual property throughout the world".224  Developments since the last Trade Policy Review of
the EU in 1997 include the adoption of Directive 98/40/EC on the legal protection of biotechnological
                                                     
218 Article I of the Agreement between the European Communities and the Government of the
United States of America regarding the appli cation of their competition laws (OJ L 95, 1995).
219 European Commission, DGIV (1999d).
220 "Agreement on the application of positive comity principles" (OJ L 173, 1998).
221 European Court of Justice ruling 1/94, discussed in WTO (1995), Vol. 1, p. 13.
222 WTO documents IP/Q/EEC/1, IP/Q2/ EEC/1, IP/Q3/EEC/1, and IP/Q4/EEC/1.
223 The status of membership in the treatie s administered by WIPO is available at:
http://www.wipo.org/eng/ratif/doc/index.htm.
224 "Intellectual Property:  Current position and outlook" [Online].  Available at:  http://europa.eu.int/
scadplus/leg/en/lvb/126021.htm [3 March 2000].WT/TPR/S/72 Trade Policy Review
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inventions (deadline for implementation in the Member States of July 2000), and of Directive
98/71/EC to approximate national laws on the protection of designs (deadline of 2001).
136. For the future, the Commission intends to propose a Community patent225 and a Community
design.226  Furthermore, the Commission intends to propose a directive on the patentatibility of
computer programs to harmonize and clarify Member States' patent laws on this issue.  The
Commission has also proposed Internal Market directives to harmonize or approximate legislation ofthe Member States with respect to utility models, a nd resale rights for the author of an original work
of art.
227  Following a 1995 Green Paper on Copyrights and Related Rights in the Information Society,
as well as two treaties on copyright and related rights adopted within the framework of WIPO in
1996, the Commission has proposed a Community-wide initiative to adjust and complement the
existing EU framework on copyright and related rights for the digital environment.228
137. With respect to counterfeit and pirated goods, Community initiatives have concerned only
measures at its external borders.229  However, the Commission launched in 1998 a consultation
process on the problem of counterfeiting and pirated goods in the Single Market, including with
respect to counterfeits manufactured in the EU.230   The Report issued in 1999 indicates that
practically all cases of reported infringements concern trade marks as well as copyrights andneighbouring rights, and the worst-affected areas are computer software (39% of total EU sales),
audio-visual (US$480 million of total sales of US$11 billion) and clothing (20% of total sales).
231
(b) Patents
138. Member States traditionally legislate in the area of patents, determining the scope of
patentability, the exceptions, and the regime for compulsory licensing.232  Community instruments in
force include:  Council Regulation 1768/92 creating a supplementary protection certificate for
medicinal products, Council Regulation 1610/96 crea ting supplementary protection certificates for
plant protection products, and Directive 98/40/EC on the legal protection of biotechnological
inventions.  The latter's principal objective is to clarify the distinction between what may or may not
be subject to a patent application, in particular to establish that the human body at the various stages
of its formation and development, and processes for cloning human beings, and for modifying the
germ-line genetic identity of human beings, may not be regarded as patentable inventions.
139. Applicants for patent rights in Member States may use:  the national procedure, the procedure
under the European Patent Convention (EPC), or  the international procedure under the Patent
                                                     
225 The 1989 Agreement on Community Patents (OJ L 401, 1989), has not yet entered into force.
226 COM (93) 342 final, amended by COM (1999) 310 final.
227 COM (97) 691 final, amended by COM (1999) 309 final;  and COM (96) 97 final, amended by
COM (98) 78 final.
228 COM (97) 628 final, amended by COM (1999) 250 final.  The Commission also proposed to the
Council to approve, on behalf of the EC, the Madrid Agreement (COM (96) 367 final), as well as the WIPO
Copyright Treaty (1996) and the WIPO Performances and Phonograms Treaty (1996); the latter two are not yetin force (COM (1998) 249 final).  On 16 March 2000, the Council approved the decision to ratify the two WIPOtreaties.
229 Council Regulation 241/1999, amending Council Regulation 3295/94.
230 European Commission, Internal Market (1998).
231 European Commission, Internal Market (1999).
232 According to the Commission, "both the Communities and their Member States have the possibility
to legislate in the area of patents and industrial property in general.  But once the Communities have legislatedin one specific area, the Member States are no longer free to legislate or to derogate from Community law."
(WTO document IP/Q3/EEC/1, p. 8).The European Union WT/TPR/S/72
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Cooperation Treaty (PCT).233  The EPC entered into force in 1977, and established the European
patent, which can be obtained by filing a single ap plication at the European Patent Office (EPO) in a
unitary procedure before the EPO, and when granted becomes a national patent in each of the
Contracting States designated by the applicant (Box III.5).  The EPC currently has 19 Contracting
States, including all 15 Member States of the EU , Cyprus, Liechtenstein, Monaco, and Switzerland;
Albania, Latvia, Lithuania, the former Yugosl av Republic of Macedonia, Romania, and Slovenia
allow extension of European patents to their territories.  The EPO also acts as receiving, searching,
and examining authority for international applicatio ns under the PCT (as well as the national offices
of Austria and Sweden).
140. Information on patent applications filed during 1997 compiled by WIPO indicates that the
EPO received 97,943 applications, of which just over half were filed under the PCT with a view toobtaining a European patent, and the remainder were filed under the EPC.
234  In 1997, the EPO
granted 39,646 European patents, of which 71% were granted under the EPC and the remainder under
the PCT.  The European patents granted by the EPO resulted in 175,673 patents in Member States,
mainly in Germany, France, Italy, and the United Kingdom.235
Box III.5:  Procedure to obtain a European patent under the European Patent Convention
Filing of application for a patent
/g223
Search to establish the state of th e art with respect to the invention
/g223
Request for substantive examination of the inventive step and industrial applicability
/g223
Publication of application for a patent after 18 months
/g223
Announcement of grant of patent or examination report leading to amendment/refusal/withdrawal
/g223
Publication of patent specifications
/g223
Nine months for filing opposition
/g223
Maintenance (possibly in amended form) or revocation of patent
Source : WTO Secretariat, based on Japanese Patent Office and European Patent Office (1999).
141. In a recent communication on research in the Eu ropean Union, the Commission notes that the
EPO-based system is "costly and the high cost of patents is broadly believed to be one the major
obstacles to widespread use of patents in Europe", and proposes the Community patent as an
                                                     
233 The PCT offers the option of filing in the national office an international patent application, so that
protection can be sought simultaneously in several c ountries, without initially having to translate the
documentation or pay national fees (WIPO, 2000).  An applicant filing an international application may indicatethat a European patent is sought, and subsequently decide  whether to file nationally in a Member State or at the
EPO.
234 WIPO (1999).
235 The decision on whether to file an application for a patent in a national office or at the EPO
generally depends on the applicable fees in relation to the geographical scope of desired protection. From
1 July 1999, procedural fees at the EPO fell by 18%.  According to Ladas & Perry (1999):  "it is normallyestimated that if one requires protection in more than thr ee or four designated States, it is cheaper to file a single
European application than it is to file separate national patent applications".WT/TPR/S/72 Trade Policy Review
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alternative.  In its 1997 Green Paper, the Commission noted that "unlike the European patent, the
Community patent could be granted, transferred, revoked or allowed to lapse only in respect of the
whole of the Union"236, but one major weakness was the costs associated with translating the entire
patent specification into all the languages of the Member States.
142. With respect to the protection of plant varieties,  applicants for patent rights in Member States
may use two types of granting procedures:  the Community plant variety and protection systemestablished under Council Regulation 2100/94, and the national systems operated by Member
States.
237  A Community plant variety may be created by registration at the Community Plant Variety
Office;  the duration of protection is 25 years following the year of grant, and 30 years for vines or
trees.  Information on applications for registration of plant varieties filed during 1997 compiled by
WIPO indicates that the 15 Member States rece ived 2,567 applications, and the Community Plant
Variety Office received 1,528 applications.
(c) Lay-out designs (topographies) of semiconductor products
143. With respect to the protection of lay-out designs (topographies) of semiconductor products,
Council Directive 87/54/EEC provides for Member States to approximate their national legislation,
and grants exclusive rights for a term of ten years.  Council Decision 94/824/EC extends the legalprotection of topographies to persons from a WTO Member.
(d) Trade marks
144. There are three types of granting procedure for applicants for trade mark rights in Member
States:  the national procedure (including the Benelux Office), the procedure under Council
Regulation 40/94 to obtain a Community trade mark, or the Madrid system of international
registration of marks.
238  A Community trade mark may be created through registration at the Office
for Harmonisation in the Internal Market (Trade Marks and Designs), and should be used within fiveyears of registration.   Such a trade mark may be owned by a national of a Member State, or by a
national of a State party to the Paris Convention, or by a national of another State, provided it grants
national treatment on trade mark protection to nationals of Member States.   The duration of
registration for a Community trade mark is ten years from the date of filing of the application, and the
registration may be renewed for further periods of ten years.
145. The Office for Harmonisation in the Internal Market received 27,238 applications for a
Community trade mark in 1997, of which two thirds were from residents of the EU.  However, just
576 registrations were effected in 1997, reflecting the fact that the Regulation became effective in
1996.   Between 1996 and 1999, a total of 143,062 registrations were effected, of which the EU
accounted for 61% and WTO Members for 38%.
                                                     
236 "Intellectual Property:  Green Paper on the Community patent and the patent system in Europe"
[Online].  Available at:  http://europa.eu. int/scadplus/leg/en/lvb/126051.htm [3 March 2000].
237 Except for Luxembourg and Greece, all other Member States are members of (the 1961 and/or
1978 Act) International Convention for the Protection of New Varieties of Plants (UPOV Convention).  The1991 Act, which entered into force in 1998, has 30 Members and has been ratified by Denmark, Germany, theNetherlands, Sweden and the United Kingdom.
238 The Madrid system applies to a mark already re gistered in the country of origin, for which an
international application is filed by the Patent Office of the country of origin to the International Bureau atWIPO, designating the countries in which the mark is to be protected.  Each designated country has the right torefuse registration within 12 months.  An international registration is valid for ten years and may be renewed forten years by payment of fees.The European Union WT/TPR/S/72
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(e) Geographical indications
146. Member States register and enforce the protection of geographical indications for products of
Community manufacture, subject to the requirements of Community instruments on the matter.239  On
agricultural products and foodstuffs (other than quality wine, spirits, and aromatized wines), the
Commission administers a register of protected geographical indications.  All geographical
indications are protected against misleading advertising under Council Directive 84/450/EEC.
147. Member States recognize and protect geographical indications for wine and spirits (subject to
the Community rules in the case of wines).  The Commission (in the case of wines) and the Council
(in the case of spirits) publishes the list of geographical indications to be protected at Community
level in the Official Journal .  In relation to third countries, reciprocal protection is granted through
bilateral agreements: with Mexico, Switzerland, and the United States for spirits;  and with Australia,Bulgaria, Hungary, Romania, and Switzerland for wines.
240
(f) Industrial designs
148. Applicants for rights of protection with respect to industrial designs in Member States may
use:  the national procedure (including the Benelux Design Office), or international arrangements that
have effect in the Member State.241  Council Directive 98/71/EEC provides for Member States to
approximate their national legislation on protection of industrial designs, and grants protection for one
or more periods of five years, with a maximum duration of 25 years.  The Commission has proposed a
Community design which, like the Community trade mark, would be valid throughout the
Community.  Information compiled by WIPO indicat es that 42,188 applications for registration were
received by Member States in 1997, all filed under a national procedure.242
(g) Copyrights and neighbouring rights
149. All Member States provide protection of copyrights and neighbouring rights, are parties to the
Paris Convention (1883), and are required to be parties to the Berne Convention (Paris Act of 1971)
and the Rome Convention (1961).243  Community-wide initiatives have centred principally on
providing a comparable level of copyright protection in all Member States for computer programs;
databases;  satellite broadcasting and cable transmission;  rental right and lending right;  certain
related rights;  and duration of protection.244  In particular, Council Directive 93/98/EEC sets the
duration of copyright in a literary or artistic work at 70 years after the death of the author of the work
or the date on which the work was lawfully made available to the public, and for related rights at
50 years;  a work originating in a third country or whose author is not a Community national is
protected for the same period as in the country of origin up to the ceiling of the Community term of
protection.
                                                     
239 Council Regulation 823/87 for quality wines, Council Regulation 1576/89 for spirits, Council
Regulation 1601/91 for aromatized wines, as modified by Council Regulation 1493/1999 on the common market
organization for wine.  Council Regulation 2081/92 applies to geographical indications for agricultural productsand foodstuffs.
240 For example, "Agreement with Australia on wine" (OJ L 86, 1994).
241 France, Germany, Greece, Italy, Spain and the Benelux countries are parties to the Hague
Agreement.
242 WIPO (1999).
243 In 1999, the Commission initiated infringement proceedings with respect to Ireland, which has not
joined the Paris Act of the Berne Convention, and Portugal, which has not joined the Rome Convention (1961).
244 Council Directive 91/250/EEC;  Directive 96/9/EC of the Council and European Parliament;
Council Directive 93/83/EEC; Council Directive 92/100/EEC;  and Council Directive 93/98/EEC.