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II. TRADE AND INVESTMENT REGIMES 
(1) INSTITUTIONAL FRAMEWORK  
1. Since its last TPR in January 2007, no majo r changes have taken place in the institutional 
framework of the European Communities (EC).  Its main decision-making bodies remain:  the 
Council of the European Union (commonly called the Council)1, the European Parliament, and the 
Commission of the European Communities (c ommonly called the Commission or European 
Commission).  The Commission is the executive body of the EC.  In this capacity, it, inter alia , 
proposes legislation to the European Parliament a nd the Council;  implements EC policies and the 
budget;  enforces EC law (together with the Court of Justice);  coordinates economic policies among 
Member States;  and negotiates in ternational agreements, including tr ade and cooperation agreements.  
The European Parliament, currently composed of 785 deputies, exercises supervision over all EC 
institutions, and shares with the Council the power to legislate and approve the EC budget.2 
2. Under the Treaty on the European Union (also re ferred to as the Maastricht Treaty), the EU is 
based essentially on three pillars.  The first pillar pursues integration under the Treaties establishing 
the European Community;  it also deals with matte rs formerly covered by the European Coal and 
Steel Community (23 July 1952 to 23 July 2002), and the European Atomic Energy Community.  It 
addresses: citizenship of the European Union;  freedom of movement;  and the Economic and Monetary Union. The second and third pillars of inte gration, introduced in 1993 by the EU Treaty, 
address foreign and security policies, and justice and home affairs, respectively.  The Treaty of Nice, which entered into force on 1 February 2003, aims to adapt the European institutions to the arrival of 
new members. 
3. The European Court of Justice adjudicates on i ssues under EC law, and settles legal disputes 
between Member States, institutions, businesses, and individuals.  Most of the cases fall into one of 
four categories:  references for a preliminary ruling; actions for failure to fulfil an obligation;  actions 
for annulment;  and actions for failure to act.  The Ombudsman receives compla ints from EC citizens, 
or from natural or legal persons r esiding or having their legal domicile in a Member State, and helps 
uncover maladministration in EC institutions and bodies.  The Ombudsman also carries out 
investigations following a complaint or on her/his own initiative.  The European Court of Auditors 
ensures the reliability of the revenue and expe nditure accounts of the EC, and the legality and 
regularity of the underlying transactions;  it reports  annually to Parliament and the Council.  In 
particular, the Court investigates the paperwork of any person or organization handling EC income or 
expenditure, including through on-the-spot checks, and presents any problems to the Commission and 
member governments.  Other key functions of the Court are annual audit re ports, and opinions on 
proposals for EC financial legislation and for EC action to fight fraud. 
4. The European Central Bank (ECB) and the Euro pean Investment Bank (EIB) are the EC's 
financial bodies.  For the 16 EC Member States that have introduced the euro, the ECB frames and 
implements the monetary policy, conducts forei gn exchange operations, and manages the payment 
system.  The EIB lends money for projects of Europ ean interest, such as rail and road links, airports, 
and environmental schemes.  It also provid es credit for investment by small businesses. 
                                                     
 
 1 The Council of the European Union is also referred to  as the Council of Minist ers. This differs from 
the European Council which brings together the Heads of  State or Government of the Member States of the 
European Union and the President of the European Commission, and gives political direction to the EC. 
 2 For a detailed presentation of the EC institutions see Europa online information.  Viewed at:  
http://europa.eu.int/inst-en.htm. European Communities WT/TPR/S/214/Rev.1 
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5. The Committee of Regions (CoR) and the Eur opean Economic and Social Committee (EESC) 
are the EC's main advisory bodies.  The CoR, co mposed of representatives of Europe's regional and 
local authorities, must be consulted before decisi ons are taken on matters c oncerning regional policy, 
the environment, education, and transport.  Th e EESC represents the interests of organized civil 
society vis-à-vis the Commission, the Council, a nd the European Parliame nt.  It consists of 
employers, trade unions, farmers, consumers, and ot her interest groups.  The office of the European 
Data Protection Supervisor is manda ted to ensure that people's right to privacy is respected when 
personal data are processed.3 
6. A number of specialized and decentralized EC  agencies have been established to support 
Member States and their citizens. They are designed to  cope with new tasks of a legal, technical, or 
scientific nature. As of October 2008, there were 23  ("first pillar") regulatory agencies, three in the 
field of common foreign and security policy (i.e. within  the remit of the Council) and three in the field 
of police and judicial cooperation ag ainst organized international crime.4  In addition, there were six 
executive agencies which, unlike regulatory agencies, are set up only for the duration of the 
Community programme that they are tasked to implement.5 
7. Various institutional changes are expected to take place with the adoption of the Treaty of 
Lisbon (also known as the Reform Treaty), signed by EC leaders on 13 December 2007.  The Treaty 
is designed to streamline the workings of the EC  with a view to enhancing its efficiency and 
democratic legitimacy and to improving the coherence of its action.  However, its ratification has not 
been completed. 
(2) POLICY FORMULATION AND IMPLEMENTATION  
8. The EC's trade policy is formulated and implem ented by means of two types of legislation. 
Under primary legislation, i.e. treaties and other ag reements of similar status, the EC concludes and 
implements the Common Commercial Policy (CCP), including international agreements.  The CCP 
covers trade in goods6, all aspects of trade in services, and commercial aspects of intellectual property 
as extended under the Nice Treaty.  Other issues, pa rtially covered by the CCP, include indirect 
taxation, standards and other technical regula tions, community patents, and enforcement of 
intellectual property rights.  The non-harmonizati on of some trade-related measures (including in 
these areas) and implementation challenges for harmonized legislation somewhat hinder trade amongst Member States. The secondary legislation comp rises:  regulations (with general application) 
                                                     
 
 3 Furthermore, there are three inter-institutional bodie s, the Office for Official  Publications, which is 
responsible for producing and distributing all official EC publications; the EC Personnel Selection Office, 
responsible for recruiting staff to work in EC institu tions;  and the European Administrative School, which 
provides training in specific ar eas for members of EC staff.  
 4 These agencies include: the Comm unity Fisheries Control Agency (CFCA); the European Chemicals 
Agency (ECHA); the European Fundamental Rights Agency (EFRA); the European Global Navigation Satellite System Supervisory Authority (EGSA); the European Po lice College (CEPOL); the Education, Audiovisual and 
Culture Executive Agency; an d the Executive Agency for the Public Health Programme.  The establishment of 
two additional "first pillar" agencies (the Agency for the Co-operation of Energy Regulators, and the European 
Electronic  Communications Market Authority) is under consideration. 
 
5 These organizations are established in accordance with Council Regulation (EC) No. 58/2003 
(OJ L 11, 16 January 2003). 
 6 The exclusive competence of the Co mmunity in trade in goods has be en made clear in a series of 
judgements by the European Court of Justice. For instance, in Opinion 1/75, [1975] ECR 1355, on the Understanding of Local Cost Standard, the Court ruled that the Common Commercial Policy was conceived in 
the Treaty "in the context of the operation of the common market, for the defence of common interests of the 
Community", and that any claim of concurrent power on the part of Member States would entail the risk of "compromising the effective defence" of those interests. WT/TPR/S/214/Rev.1 Trade Policy Review 
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that are binding and directly applicable in all Memb er States;  directives (requiring transposition into 
national law and practice);  decisions (binding upon their addressees);  and recommendations and 
opinions, which are based on treaties but do not have binding force.  
9. Various institutions are involved in decision-ma king, in particular the European Commission, 
the European Parliament, and the Council.  Ne w legislation is proposed by the Commission and, 
depending on the type of act and issue, the fina l decision is taken jointly by the Council and the 
European Parliament, and may involve the fina ncial and advisory bodies.  In addition, the 
Commission oversees the implementation of Community acts both at the Community level and at Member State level.  The Council can amend proposed  acts before adopting them, in some cases, with 
Parliamentary approval.  Whereas Parliament makes mo st decisions by absolute majority of the votes 
cast, most Council decisions are taken by qualified majority vote (QMV).
7  The exception relates to 
sensitive areas, for instance taxati on, where adoption of a decision requires unanimity.  Alternatively, 
the Council or European Parliament may delegate  powers to the Commission to take decisions, 
assisted by a committee composed of repr esentatives from Member States (comitology).8  The role of 
the committee has long been contentious between th e European Parliament, the Commission, and the 
Council.  According to critics, the comitology pro cedure is opaque and fails to provide stakeholders 
with current information.   
10. The Commission used comitology procedures in 2,862 cases in 2006, up from 2,654 in 2005.  
The comitology agenda for 2007-08 included issues relating to, inter alia , the implementation of a 
new (comitology) procedure (regulatory procedure with scrutiny), which notably gives a veto right to 
the European Parliament on draft implementing measures proposed by the Commission.  Since 
April 2008, a new online register has b een in place to provide the public with, inter alia , access to 
most comitology documents (agendas of meetings, draft measures, summary records, voting results, 
list of participants) transmitted to the European Parl iament. To further increase  transparency in other 
areas, the Commission has also launched a European Transparency Initiative to strengthen ethics rules 
for EC policy-makers, some 15,000 lobbyists, NGOs , and other pressure groups . As a key component 
of the Initiative,  the Commission has invited all interest repr esentatives to abide by a code of conduct, 
to declare their lobbying activities and to provide financial information in a public registry as of 
June 2008. 
11. Three decision-making processes are used:  co-d ecision, assent, and consultation.  However, 
matters falling under the CCP are decided by the Council, acting in most cases under QMV without 
consulting the European Parliament.  The co-decisi on procedure is used for most EC law-making. 
Under this procedure, the European Parliament shar es legislative power with the Council.  However, 
if the two institutions cannot agree on the propo sed legislation, it is put before a conciliation 
committee composed of equal numbers of represe ntatives from the two institutions.  After the 
committee reaches an agreement, the text is sent back to Parliament and the Council for adoption as 
law.  This procedure covers issues affecting the in ternal market, such as free movement of workers, 
customs cooperation, services, education, health, tr ans-European networks, right of establishment, 
environment, culture, and research.  Under the assent procedure, the Council must obtain Parliament's 
assent before certain decisions are taken.  Parliame nt cannot amend a proposal;  it must either accept 
or reject it.  Under the consultation procedure, Council consults Parliament, as well as the EESC and 
                                                      
 7 Areas requiring QMV include: changes in tariff rates; conclusion of agreements on tariffs and trade 
(on goods and services) and on commercial aspects of inte llectual property, with some exceptions for services 
and intellectual property; achievement of uniformity in liberalization measures; export policy; and trade defence 
measures such as anti-dumping and countervailing duties. 
 8 See EURIM online information.  Viewed at:  h ttp://www.eurim.org/EURGUIDE.html#Diff_kinds.  
The committee considers the draft of the measures to be taken and delivers its opinion by majority as laid down in Article 205(2) of the Treaty (see Council Decision 1999/468/EC, 28 June 1999).   European Communities WT/TPR/S/214/Rev.1 
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the CoR, before an Act is adopted. Parliament may approve the proposal, reject it, or request 
amendments.9 However, the Council is not bound by Parlia ment's position.  Acceptance by Parliament 
requires an absolute majority of the votes cast.  Th e procedure is applicable to decisions concerning 
accession of new Member States, association agreemen ts, other "fundamental" agreements with third 
countries, and structural and cohesion funds.     
12. Before it commences negotiations on internati onal agreements, the Commission must have 
prior authorization from the Council.10  Moreover, Parliament must e ither be consulted or give its 
assent for the conclusion of agreements that are beyond the scope of the CCP, including Association 
and Cooperation Agreements.  Other agreements requiring approval, including by the Member States 
individually, are those that go beyond the Community's powers as conferred by the Treaty of Nice, or 
what is necessary for the achie vement of Community objectives.11  With an enlarged EC, the approval 
requirements of both the Community and Member St ates may be lengthy.  There has been a call for 
most decisions to be taken by qualified majority voting.   
13. Since 1999, the Commission has been holding a regular dialogue with civil society with a 
view to making its trade policy formulation more  transparent and participative. Organizations 
involved include business associations, chambers  of commerce, trade unions, and other non-
governmental organizations. The Commission uses ex-ante  trade sustainability impact assessments 
(SIAs) to analyse the economic, environmental, and so cial impact of trade agreements, in the EC itself 
and in its trading partners.12  They are designed to help inform decision-makers, and contribute to the 
transparency of trade policy by taking into account the views of stakeholders in the EC and partner 
countries.  As a result of Trade SIAs, which are ca rried out by independent consultants, measures may 
be proposed to enhance positive effects and prev ent/mitigate negative effects, both trade and non-
trade-related.  Trade SIAs are also ca rried out for the Doha Round negotiations. 
(3) TRADE POLICY OBJECTIVES  
14. The Treaty of Nice establishes the overall objectiv es of the EC's trade policy.  As established 
by Article 131, the EC common policy aims to "cont ribute, in the common interest, to the harmonious 
development of world trade, the progressive abolitio n of restrictions on in ternational trade and the 
lowering of customs barriers".  This objective is in line with the general aims of the Treaty "to 
promote, throughout the Community, a harmonious , balanced and sustainable development of 
economic activities, a high level of employment and social protection, equality between men and 
women, a high degree of competitiveness and converg ence of economic performance, a high level of 
protection and improvement of the quality of the envi ronment, the raising of the standard of living and 
quality of life, and economic and social cohesion and solidarity among Members".   
                                                      
 9 If Parliament suggests amendments, the Commission must consider all the changes;  if it accepts the 
suggestions it sends an amended prop osal to the Council.  The Council  examines the amended proposal and 
either adopts it or amends it further;  if it decides to amend the proposal, it must do so unanimously. 
 10 The negotiations are conducted under directives from the Council, and in consultation with a special 
committee appointed by the Council in  accordance with Article 133(3) of the EC Tr eaty.  This special 
committee (sometimes referred to as th e 133 committee) consists of experts from Member States and functions 
as a permanent regulator to the Co mmission (OJ C 325, 24 December 2002). 
 11 Shared competence applies in:  the internal marke t;  the areas of freedom, security, and justice;  
agriculture and fisheries (excluding the conservation of marine biological resources);  transport and trans-European networks;  energy;  social policy;  economic, social and territorial cohesion;  environment;  consumer 
protection;  and public health. 
 
12 For additional information concerning SIA, including the SIA Handbook for methodology, see 
European Commission online information.  Viewed at: http://ec.europa.eu/trade/issues/global/sia/index_en.htm. WT/TPR/S/214/Rev.1 Trade Policy Review 
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15. In particular, the EC's trade policy seeks to pr omote European interests in open markets, the 
progressive abolition or lowering of obstacles to intern ational trade, and clear regulatory frameworks.  
It also aims to contribute to sustainable developm ent in the context of the WTO negotiations and by 
integrating more countries in world trade.13  In addition, the EC seeks to defend values on democracy, 
rule of law, environment, social rights, public  services, cultural diversity, and food security.   
16. These objectives are to be achieved at the multilatera l, bilateral, and unila teral levels.  At the 
multilateral level, the EC prioritizes the liberalizati on of its trade regime in the framework of the 
WTO.  The rationale for its bilateral agreemen ts includes:  trade expansion and rule-making 
("WTO +"); promotion of sustainable development, including at the regional level; and neighbourhood policy.  Specific trade policy measures vis-à-vis  third countries and regional areas, and 
unilateral measures are taken in the interests of deve lopment or political stability in line with the EC's 
political priorities.
14 
17. Through its Single Market Policy, the EC se eks to improve the free movement of goods, 
services, capital, and labour within the Community, via a wide range of regulatory measures and 
actions. The regulatory measures cover: indirect taxation, mutual recognition, standardization, 
harmonization of national rules governing unfair  commercial practices, air traffic control 
management, railways, procedures for the elimina tion of double taxation, public procurement,  
Community patent, enforcement of intellectual property rights, and corporate governance.  The 
Commission's communication on "A Single Market for 21st century Europe" provides an assessment 
of the single market and sets out a number of initiatives and actions to make use of the untapped potential of the single market.
15  Despite some progress, the single market is not yet a reality in all 
areas.  For example, markets are still fragmented in retail financial services, public procurement, 
transport, energy, intellectual property, and telecommunications.16   
18. The Commission is working, in partnership with  Member States, to ensure that measures are 
transposed into national law on time and properly applied.  According to the Internal Market 
Scoreboard of 9 July 2008, on average, only 1.0% of directives for which the implementation deadline 
had passed had not been transposed into national law, down from 1.6% in February 2006 and against 
a benchmark of 1.5% agreed by Heads of State.17  The EC also seeks to give businesses and citizens a 
quick and effective means of redress thr ough the SOLVIT problem-solving network.18 
(4) TRADE REGULATIONS AND BUSINESS ENVIRONMENT  
19. Article 157 of the EC Treaty is the basis fo r the Commission's enterprise policy, which is 
shaped by work in three key areas:  SMEs, innova tion, and competitiveness, including single market 
opportunities and benefits.  The EC's  policy on SMEs, adopted in 2005,  is geared towards creating a 
more coherent, pragmatic and horizontal framework for enterprises.19  It proposes action in five key 
                                                      
 13 European Commission (2007l).  
 14 For example, the EC implements the Generalized Sy stem of Preferences (GSP), including the special 
arrangements on GSP+ and the Everything But Arms Initia tive (EBA); and asymmetrical preferences, e.g. for 
the Balkans and Moldova, with the ai m of ensuring peace, stability, freedom  and economic prosperity in the 
region. 
 15 European Commission (2007a). 
 16 European Commission (2007m).  Further liberalizati on measures are to be adopted in areas such as 
transport, energy, and telecommunications. 
 17 European Commission online information, "Internal Market Scoreboard".  Viewed at: http://eu.euro 
pa.eu/internal_market/score/index_en.htm.   
18 SOLVIT is an online network in which Member States work together  to pragmatically solve, without 
legal proceedings, problems caused by the misapplica tion of Internal Market law by public authorities. 
 19 COM(2005) 551. Also see Commission Recommendation No. 2003/361/EC of 6 May 2003, 
OJ L124, 20 May 2003. European Communities WT/TPR/S/214/Rev.1 
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areas:  promoting entrepreneurship and skills; impr oving SMEs' access to markets; cutting red tape by 
simplifying the regulatory and administrative constraints on SMEs; improving SMEs growth potential; and strengthening dialogue a nd consultation with SME stakeholders.
20   
20. EC enterprise policy focuses on fostering th e competitiveness and innovation capability of all 
businesses by establishing a dynamic enterprise environm ent;  and aims to ensure that businesses have 
effective access to markets for their goods and servi ces, as well as access to finance.  A key financing 
instrument is the Entrepreneurship and Innova tion Programme (EIP) under the Competitiveness and 
Innovation Framework Programme (CIP).   Other so urces of financing are the Structural Funds and 
the European Investment Bank.  In addition, va rious support networks cr eated by the EC help 
businesses gain a better understanding of European issues.21  Numerous initiatives and funds to 
support the creation of new businesses exist at the national and regional levels. 
21. The CIP, running from 2007 to 2013 with a budget of €3.6 billion, aims to encourage the 
competitiveness of European enterprises through  increased use of information technologies, 
environmental technologies, and renewable energy sources.22 With SMEs as its main target, the 
programme supports innovation activities (including eco-innovation), provides easier access to 
finance, and delivers business support services in  the regions. The "i2010" programme, the 
Commission's strategic framework for the information society, aims to boost the digital economy.  It 
addresses the issues of the appropriate legal framework for electronic communications and audiovisual contents, the priorities for research  spending on ICT, and the promotion of these new 
technologies and services.   
22. The EC Treaty prohibits restrictions on the freedom of establishment, including setting-up of 
agencies, branches or subsidiaries.  This freedom includes the right to take up and pursue self-employed activities, and to set up and manage  undertakings, in accordance with national laws.  
However, based on Articles 46 of the Treaty, deroga tions may be invoked with respect to provisions 
on special treatment of foreign nationals on grounds of  public policy, public security or public health.  
This freedom also extends to companies or firm s established in a Member State and having their 
registered office, central administration or principal place of business within the Community.
23  The 
Statute for a European Company, which entered in to force in 2004, allows companies operating in 
more than one Member State to establish themselve s as a single company called a Societas Europaea 
(SE).24  SEs operate throughout the EC under one set of rules and a un ified management and reporting 
system.  By October 2008, around 185 SEs were es tablished in 18 EEA Member states, mostly in 
Germany and the Czech Republic.  Likewise, the Stat ute for a European Coop erative Society allows 
the creation of a Societas Cooperativa Europaea (SCE).25 
                                                      
 20 On 25 June 2008, the Commission adopted a Communication on a Small Business Act for Europe, 
which sets out a strategy to make SMEs more competitive, including a set of principles to make policies at EC and national levels more SME-friendly. 
 
21 These include the Enterprise Eu rope Network, which replaces th e Business to Europe (B2Europe) 
initiative; the Euro Info Centre and the Innovation Relay Centres; and the network of Organizations for 
Promotion of Energy Technologies.  The EC cooperates with its partners on industrial policy by establishing 
different forms of exchange, including industrial round-tables and industrial cooperation.  
22 COM(2005) 121 final. 
 23 For additional information on EU companies laws, see Europa online information. Viewed at:  
http://europa.eu/scadplus/leg/en/s09000.htm.  
24 Council Regulation (EC) No. 2157/2001, 8 October 2001.  The regulation is complemented by the 
Council Directive  supplementing the Statute for a European Comp any with regard to the involvement of 
employees (OJ L 294, 10 November 2001, pages 22-32.).    
25 Council Regulation (EC) No. 1435/2003, 22 July 2003. WT/TPR/S/214/Rev.1 Trade Policy Review 
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23. In July 2007, the Commission published a review  of its industrial policy to take stock of 
progress and set out plans for the period 2007-09.26  Planned actions include simplifying the 
regulatory framework and reducing the administ rative burden on enterprises, and stimulating 
innovation. 
(5) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Overview 
24. The EC continued its process of enlargement dur ing the period under review, with Bulgaria 
and Romania joining in January 2007.  The EC mainta ined its status as one of the key players in the 
WTO and a major force behind the Doha Developm ent Agenda (DDA) negotiations.  Provided the 
overall package is acceptable, the EC has stated that it would be prepared to reduce overall trade 
distorting subsidies in agriculture by up to 80%, to eliminate export subsidies by 2013, and to significantly cut its average tariffs.  In NAMA, the EC has accepted the current negotiating texts as a 
basis for an agreement, with lesser cuts and space to shelter sensitive products for developing 
countries.  The EC has emphasized the importance of achieving a substantive result in both services 
and geographical indications (register  and extension) if the overall pack age is to be acceptable. In the 
context of the current economic downturn, the EC ha s underscored the importance of Doha as the best 
policy vehicle to prevent trade protectionism.   
25. The EC continued to build upon its wide netw ork of preferential trade agreements (PTAs) 
with both developed and developing countries.  It considers its PTAs as part of a broader policy of 
promoting multilateralism.  Thus, a significant numb er of its negotiations are with, or encourage 
creation of, regional groupings.  These include the MERCOSUR;  the Gulf States;  the Association of 
Southeast Asian Nations; Economic Partnership Agre ements (EPAs) with the African, Caribbean and 
Pacific (ACP) countries;  and the Euro-Mediterranean  free-trade area.  As a result of its numerous 
preferential agreements and its GSP scheme, the EC 's entirely MFN regime applies to only nine WTO 
Members (Australia;  Canada;  Chinese Taipei;  Hong  Kong, China;  Japan;  Republic of Korea;  New 
Zealand;  Singapore;  and the United States).  These nine WTO Members accounted for 27.5% of the 
EC's total merchandise imports in 2007, down from some 30% in 2005. 
26. The EC's preferential trade agreements have so  far resulted in free trade in non-agricultural 
goods, and limited liberalization of trade in agricu ltural goods;  some also cover trade in services.  
Some of the EC's reciprocal preferential arra ngements consist of both bilateral and multilateral 
aspects, and in almost all cases, liberalization is asymmetrical, with the EC's partners liberalizing at a 
slower pace than the EC, and over different transition periods to reflect country and regional needs.  
The arrangements cover, inter alia , harmonization of technical requirements and standards;  
protection of intellectual property rights;  liberaliz ation of investment and capital flows;  cooperation 
on competition policies; government procurement;  trad e defence instruments;  and dispute settlement.  
Furthermore, the EC claims that its PTAs take in to account social and environmental considerations 
through sustainability impact assessments;  they us ually also contain provisions on political or cultural 
cooperation.  The EC has continued to review its  arrangements under the Cotonou Agreement and has 
replaced the unilateral preferences granted under this  Agreement by reciprocal preferences through 
Economic Partnership Agreemen ts with the ACP countries. 
27. In 2007, the EC started negotiations on new PTAs with India, Korea, and members of 
ASEAN.   Negotiations with the Gulf Coopera tion Council are ongoing, while negotiations with 
MERCOSUR were suspended in September 2004. 
                                                     
 
 26 COM(2007)/917. European Communities WT/TPR/S/214/Rev.1 
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(ii) WTO 
28. The EC is an original Member of the WTO in its  own right;  each of its Member States is also 
a WTO Member.  The EC grants at least MFN treatment to all trading partners.   
29. The EC is one of the most active participants in the WTO and a key player in the Doha Round 
negotiations.  Together with some of its Member States, the EC also contributes to the DDA Global 
Trust Fund and financed or co-financed specific activities under the DDA.  It co-funded the WTO Public Forum 2007.   
30. Since its last TPR in January 2007, the EC has continued to focus on:  improved market 
access for non-agricultural goods and services, ba sed on a non-linear formula that would cut the 
highest tariffs most, but offer flexibility for develo ping countries;  liberalization of agriculture in 
accordance with the July 2004 Framework Agreement;  a fair, predictable, and transparent rules-based 
system to govern world trade and investment;  in corporation of the development priorities of its 
trading partners in the negotiations;  provision of tr ade-related assistance to help developing countries 
to build their trade capacity, implement DDA conclu sions, and enable them to participate in the 
negotiations.  The EC has also been encouraging developed countries and those developing countries 
in a position to do so, to provide duty-free and quot a-free access to products originating in LDCs.  
The EC has always supported a round whereby cont ributions are calibrated with appropriate S&D 
treatment for the weakest and most vulnerable Member s.  Furthermore, the EC supports key elements 
of sustainable development (environment protection,  liberalization of trade in environmental goods 
and services, social development,  and consumer concerns).   
31. On agricultural goods, the EC offer has been, si nce October 2005, to increase market access 
and decrease domestic support, and to eliminate a ll trade-distorting export practices by 2013, 
including export subsidies.   More specifically, the EC accepted to reduce (up to 80%) its overall trade 
distorting support and to cut its final bound tari ffs by between 50% and 70% (except on some 
sensitive products) depending on the level of the ta riffs, while developing countries would cut tariffs 
by two thirds of the rates set for developed countries.  It has also ca lled for an enhanced extension of 
the possibilities to protect agricultural products  through a multilateral register for geographical 
indications, and the extension of additional prot ection of geographical indications for wines and 
spirits (under the TRIPS Agreement) to other produc ts, with a view to improving the possibilities for 
consumers to choose quality products. 
32. The objectives of the EC in the negotiations on non-agricultural goods include the 
achievement of effective market access in conjuncti on with an improved rules-based system.  In the 
NAMA negotiations, the EC is seeking meaningful liberalization across all non-agricultural products, 
which represent over 70% of developing country exports, with particular emphasis on sectors where 
high tariff peaks and non-tariff barriers exist.  The EC  considers that the main contributions to this 
initiative should come from developed countries; it al so expects major advanced developing countries 
to make significant contributions in market access for non-agricultural goods (representing over 60% 
of DCs' exports).  While the EC supports flexibilit y for other developing countries, it also expects 
them to make a contribution to the trade negotiations.  
33. The EC has submitted proposals and initiatives on tariff reductions for all WTO Members on 
textiles, clothing, and footwear to bring tariffs to a narrow common range, as close to zero as possible. 
The EC has also sponsored sectoral initiatives for chem icals, machinery, and gems and jewellery.  On 
non-tariff barriers, it has submitted proposals on the elimination of export ta xes, as well as of non-
tariff barriers for electrical and electronic products, textiles, clothing, and footwear.  It has proposed to create a mediation mechanism to solve disputes and c ontroversies.  The EC also advocates substantial WT/TPR/S/214/Rev.1 Trade Policy Review 
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changes to multilateral rules on contingency meas ures, regional trade agreements, geographical 
indications, trade and environment, and trade facilitation. 
34. In the negotiations on services, the EC's objectives include: removing barriers to trade in 
services; a more transparent and non-discriminatory regulatory environment; preserving public 
services and cultural diversity;  and helping developing countries to benefit from trade in services.  
The EC submitted its initial offer in June 200327, its improved conditiona l offer in June 200528, and its 
revised request in January 2006.29 
35. The EC has generally met its notification oblig ations during the period under review, which 
has contributed to the transparency of its trade re gime.  Its notifications during the period cover trade-
related legislation and measures, and its applied MFN tariff as of Ja nuary 2008 (notified to the WTO 
Integrated Database (IDB)).  In 2006, the EC notified the WTO of the accession of Bulgaria and 
Romania.30  Other notifications cover reports on devel opments in the use of various trade policy 
instruments (Table AII.1).   
36. The EC remains one of the most activ e Members in WTO dispute settlement.31  During the 
period under review, the EC initiated six new disputes32, and was a respondent in six cases.33  In 
addition, it was a third party in 13 disputes. 34 
37. The EC's position in the review of the Di spute Settlement Unders tanding (DSU) under the 
Doha Ministerial Declaration has not changed since its last TPR in 2007.  It has submitted proposals 
on:  the use of permanent panellists;  clarification of the DSU provisions on implementation, and the 
sequencing issue35;  the arbitration procedure on the leve l of suspension of concessions;  and the 
establishment of a procedure to lift suspension of  concessions once a losing party has implemented 
changes.  Other concerns include the improvement  of trade compensation as a remedy; speeding up 
the process whenever this is feasible an d justified; and increasing transparency.36 
(iii) Preferential trade agreements and arrangements 
(a) Agreements with European countries/groupings  
EC accession 
38. Having signed the Treaty of Accession in Ap ril 2005, Bulgaria and Romania became full 
members of the EC in January 2007.  As for ot her acceding countries, accession implied meeting the 
Copenhagen criteria:  stable in stitutions guaranteeing democracy; the rule of law; respect for 
                                                      
 27 WTO document TN/S/O/EEC, 10 June 2003.  
 28 European Commission online information, "Communication from European Communities and their 
Member States, Conditional Revised Offer". Viewed a t:  http://trade.ec.europa.eu/doclib/docs/2005/january/ 
tradoc_121197.pdf. 
 29 The revised request seeks a reduction in market acce ss restrictions and thus an expansion in trading 
opportunities for the European services industry.   
 30 WTO document WT/REG220/N/1, 2 October 2006.  
 31 Since the beginning of WTO/GATT dispute settlement, the EC has been a complainant in 79 cases, a 
respondent in 62 cases, and a third party in 82 disputes. 
 32 WTO documents WT/DS/352, 353, 364, 370, 370, 372, and 380. 
 33 WTO documents WT/DS/361, 364, 369; 375;  376;  377 
 34 WTO documents WT/DS/331, 334, 335, 336, 343, 344, 345, 355, 360, 362, 363, 366, and 367. 
 35 "Sequencing" relates to the steps that need to be taken, and their order, before determining that the 
losing party has not complied co rrectly with the DSB recommenda tions, and reacting accordingly. 
 36 WTO document TN/DS/W/38, 23 January 2003. European Communities WT/TPR/S/214/Rev.1 
 Page 23 
 
 
protection of human rights and minorities; existence of a functioning market economy, and capacity to 
cope with market forces and competitive pressure s within the Union; and ability to take on the 
obligations of membership.  While there are no tr ansitional restrictions on trade in goods with 
Bulgaria and Romania, a few transitional arrangements apply in other specified areas.37 In particular, 
EC-25 countries may apply transitional measures on access to their labour markets by workers from 
Bulgaria or Romania:  currently Austria, Belgium, Denmark, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Po rtugal, Spain, and the United Kingdom apply such 
measures.  Moreover, until January 2010, Bulgaria n and Romanian transport companies may not 
provide land cabotage services in the other Member States.  For their part, Bulgaria and Romania 
have the right to restrict the acquisition of agri cultural land by non-nationals for a period of seven 
years.   
39. Various countries that acceded in 2005 have been  allowed to maintain temporary restrictions 
on the acquisition of agricultural land by non-nationals  (Czech Republic, Estonia, Latvia, Lithuania, 
Hungary, and Slovakia for seven years; Poland for twelve years).   Furthermore, as of October 2008, 
transitional restrictions were maintained by  Austria, Belgium, Denmark, and Germany  on access to 
their labour markets by workers from eight members that acceded to the EC in 2004.
38  
European Economic Area 
40. The Agreement establishing the European Ec onomic Area (EEA Agreement), negotiated 
between the EC and EFTA states, entered into force on 1 January 1994.  Among EFTA states, the EEA remains in force for Iceland, Liechtenstein, a nd Norway (but not Switzerland), and allows them 
to participate in the internal market without assuming the full responsibilities of EC membership. The 
Agreement covers all four pillars of the intern al market, i.e. freedom of movement of goods 
(excluding agriculture and fisheries, which are incl uded to a very limited extent), persons, services, 
and capital.  It also covers other horizontal issues on social policy, consumer protection, environment, 
company law, and statistics.
39  In these horizontal areas, the EEA-EFTA States adopt EC legislation.  
Moreover, the substantive competition rules of  the agreement correspond to the Community acquis . 
The agreement is implemented through a set of sp ecial institutional arrange ments and updated through 
continuous incorporation of new Community legislation.40   
41. Article 19 of the EEA Agreement provides for reviews, at two-year intervals, of the 
conditions of trade in agricultural products between parties.  Bilateral negotiations were resumed in 
early 2008, with a view to furthering bilateral conc essions and integrating Norway into regional trade 
in Europe.  A major challenge in 2005/06 was to en sure that the EEA was en larged at the same time 
as the EC.  To this end, an EEA Enlargement Agr eement was negotiated between the EC (its Member 
States), the EEA-EFTA states, and Bulgaria and Ro mania.  The agreement entered into force on 
1 January 2007, allowing for the simultane ous enlargement of the EC and the EEA. 
                                                      
 37 The transitional measures are specified in Annexes VI (Bulgaria) and VII (Romania) to the 
Accession Protocol.   
 38 For detailed information about transitional restri ctions on labour market access by workers from new 
EC Members, see European Commission online information.  Viewed at:  http://ec.europa.eu/employment_ social/free_movement/enlargement_en.htm 
 
39 In addition, the Agreement contains provisions to allow cooperation between the EC and the EEA-
EFTA states on research and technol ogical development, information services, education, small and medium-
sized enterprises, tourism, the audio- visual sector, and civil protection. 
 40 An EEA Joint Committee is mandated to adopt decisions extending Community regulations and 
directives to EEA-EFTA States.  It currently has fo ur sub-committees on:  free movement of goods; free 
movement of capital and services; free movement of persons; and horizontal and flanking policies. WT/TPR/S/214/Rev.1 Trade Policy Review 
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Switzerland 
42. Relations between the EC and Switzerland are governed by the EC-Switzerland Agreement of 
1972, which established free trade in goods and co mpetition rules, and a total of 16 bilateral 
agreements, of which the first seven entered into force in June 2002.41  The agreements cover, inter 
alia,  the free movement of persons, trade in agri cultural products, public procurement, technical 
barriers to trade, air transport, transport by ro ad and rail, research, taxation of savings, and fight 
against fraud.  The bilateral agreements with the expanding EC have resulted in market liberalization 
between the two partners, and cons iderable convergence of Swiss regulations to those of the EC.  
Negotiations on trade in services have been suspe nded since March 2003.  Negotiations on trade in 
agri-food products were to begin in November 2008. 
Western Balkans  
43. Since 1999, the EC has been pursuing a stab ilization and association strategy with the 
countries in the Western Balkan region.  The polic y framework for the EC's relationship with these 
countries was reaffirmed by the 2003 Thessaloniki Agenda, which also provides for multilateral, 
bilateral, and unilateral trade measures.  Stabiliza tion and association agreements (SAAs) are in place 
with Croatia and the Former Yugoslav Republic of  Macedonia (FYROM).  Pending the ratification of 
the SAAs with Albania, Bosnia and Herzegovina, Se rbia, and Montenegro, the trade part has entered 
into force through Interim Ag reements, except with Serbia.42  The EC has granted autonomous trade 
measures to the Western Balkan countries, including the customs territory of Kosovo43, allowing for 
non-reciprocal duty-free access to the EC market for products from the region.44  I n  2 0 0 5 ,  t h e  
autonomous trade measures were renewed until the end of 2010.45 
44. Accession negotiations with Croatia have been ongoing since 2005, while candidate status 
was granted to the FYROM in 2005.  The EC ha s also supported regional integration under the 
Central European Free Trade Agreement (CEFTA) to complement the SAA process.46  A t  t h e  
multilateral level, the Commission supports the accession of Bosnia and Herzegovina, Montenegro, 
and Serbia to the WTO. 
Other European agreements 
45. The EC opened accession negotiations with Tu rkey in October 2005.  The analytical 
examination of the acquis,  the first phase of accession negotiati ons, lasted until the end of 2006.  
Since the beginning of negotiations, eight of 33 ch apters have been opened, and one, on science and 
research, was provisionally closed in June 2006.47  The current principles, priorities, and conditions 
for the EC's accession partnership with Turkey ar e laid down in a Council decision of February 
                                                      
 41 For further details, see European Commission online information. Viewed at:  http://ec.europa.eu/ 
comm/external_relations/switzerland/intro/index.htm.  
42  The EC has granted non-recipr ocal preferences to the Western Balkans. See Council Regulation 
(EC) No. 2007/2000, OJ L 240, 23 September 2000, as last amended by Commission Regulation (EC) 
No. 407/2008, OJ L 122, 7 May 2008. 
 43 Kosovo as defined by UNSCR 1244. 
 44 Council Regulation (EC) No. 2007/2000, OJ L 240, 23 September 2000, as last amended by 
Commission Regulation (EC) No. 407/2008, OJ L 122, 7 May 2008. Under this scheme, most products are 
given duty-free and quota-free access with the exception of  wine and certain fishery products. 
 45 Council Regulation (EC) No. 1946/2005, OJ L 312/2005, 14 November 2005. 
 46 CEFTA entered into force for all parties on 22 No vember 2007.  In addition to the Western Balkans 
countries and UNMIK/Kosovo, the CEFTA also includes Mo ldova. It is a single FTA for all parties, replacing 
the previous network of more  than 30 bilateral FTAs. 
 47 European Commission (2007n). European Communities WT/TPR/S/214/Rev.1 
 Page 25 
 
 
2008.48  In the meantime, trade relations continue under the EU-Turkey Customs Union established in 
1995.  Although there is no timetable for the full inte gration of agriculture into the customs union, a 
decision taken in 1998 (98/223/EC) allows for asymmetric  partial liberalization of trade in agricultural 
products (in favour of Turkey).  In 2006/07, furt her trade concessions were established for basic and 
processed agricultural products, to take into account  the enlargement of the EC by ten new Member 
States.  In 2000, the two parties began negotiations  with the aim of reaching agreements on trade in 
services and government procurement;  these negotia tions are now part of Turkey's EC accession 
process.  The customs union agreement makes u se of the pan-Euro-Mediterranean system of 
cumulation of origin, and covers technical barriers to trade, competition policies, and protection of 
intellectual property rights.49   
46. The EC also has customs union agreements w ith Andorra and San Marino, and a free-trade 
agreement with the Faeroe Islands.  In the framewo rk of free-trade agreements between the EC and 
third countries, products originati ng in Andorra or San Marino norma lly benefit from the preferences 
granted to the EC.  The Faeroe Islands now also pa rticipate in the pan-Euro-Mediterranean system of 
cumulation of origin. 
(b) Agreements with non-European countries or groupings 
Chile 
47. Since February 2003, an Association Agreemen t has governed trade relations between the EC 
and Chile.50  The agreement provides for progressive and reciprocal liberalization of trade in goods 
over a ten-year period.51  It also covers services, government procurement, liberalization of 
investment and capital flows, protection of intellect ual property rights, cooperation in the field of 
competition, and dispute settlement.  In addition, it contains provisions on cust oms and related areas, 
and standards, technical regulations, and conformity assessment procedures.52   
Mexico 
48. Trade relations between the EC and Mexico are governed by a free-trade agreement that 
entered into force in October 2000.53  The FTA covers trade in goods and services, public 
procurement, competition, intellectual property ri ghts, investment, and dispute settlement.  In 
accordance with the agreement's asymmetric liber alization schedule, all duties on non-agricultural 
imports from Mexico were removed by the EC in  2003, whereas Mexico lifted all duties on EC 
non-agricultural goods in 2007.  The phasing out of duti es in preferential agricultural and fishery trade 
will be achieved by 2010.  The FTA also provid es for preferential treatment in services, through a 
standstill clause that prevents both parties from in troducing new discriminatory measures, and through 
a schedule for the elimination of remaining discrim ination over ten years.  In accordance with the 
review clause of the agreement, adjustments to  the FTA are under negotiation in the agriculture, 
services, and investment sectors, so as to increase integration between the economies.   
                                                      
 48 Council Decision 2008/157/EC of 18 February 2008. 
 49 European Commission online information. Viewed at: http://ec.europa.eu/comm/enlargement/turkey/ 
index.htm. 
 50 The Association Agreement was notified in WTO document WT/REG164/N/1, 18 February 2004.  
 51 European Commission online information. Viewed at: http://ec.europa.eu/comm/trade/issues/bilatera 
l/countries/chile/index_en.htm. 
 52 See WTO (2004) for further details. 
 53 The Economic Partnership, Political Co-ordination and Co-operation Agreement has three pillars:  
political dialogue, trade liberalization, and cooperation.   European Commission online information. Viewed at: 
http://europa.euEC.int/comm/external_relations/mexico/in tro/index.htm; and http://europa.euEC.int/comm/trade 
/issues/bilateral/countries/mexico/index_en.htm. WT/TPR/S/214/Rev.1 Trade Policy Review 
Page 26 
 
 
Mediterranean countries 
49. Under the Barcelona process, the EC and the Mediterranean (MED) c ountries aim to establish 
a Euro-Mediterranean free-trade area by 2010, i.e. free trade in non-agricultural products, and 
progressive liberalization of trade in agricultural goods and services.54  The free-trade area is being 
established, on the one hand, through the conclusi on of Euro-Mediterranean association agreements 
between the EC and individual Mediterranean countries and, on the other hand, through the 
conclusion of free-trade agreements between the Mediterranean partners themselves.  Under the 
association agreements, the MED partners will fully  liberalize their trade in non-agricultural goods 
over a 12-year transition period (15 in the case of  Egypt), while imports of these products from the 
MED countries will have duty- and quota-free access to the EC from the date of entry into force of the 
association agreements.55  All agreements, except the one with Syria, have entered into force.  
50. The EC supports free-trade arrangements amongst the Mediterranean countries, as a means of 
regional integration (e.g. the Agadir Agreement concluded between Morocco, Tunisia, Egypt, and 
Jordan).56  Since launching the Barcelona pro cess, progress has been made through, inter alia , 
reduction of tariffs, elimination of quantitative restri ctions, removal of non-tariff barriers, adoption of 
pan-euro-med rules of origin, and trade facilitation. Presently, the MED countries enjoy duty-free 
access for non-agricultural goods to the EC market and are reciprocating through progressive tariff 
dismantling over transitional periods.  
51. Negotiations on the liberalization of services and the right of establishment were launched in 
March 2006, following a two-track approach:  negotia tions on general provisions of interest to all 
parties should be conducted collectiv ely, while negotiations on matters , such as schedules of specific 
commitments, should be conducted on a bilatera l basis.  In 2008, negotiations on services were 
launched with Egypt, Israel, Morocco, and Tunisia. 
52. Furthermore, negotiations to deepen agricu ltural trade liberalization and on a dispute 
settlement mechanism started in 2006. Agricultural ne gotiations were concluded with Egypt and Israel 
in 2008. A protocol establishing a dispute settle ment mechanism with Tunisia was signed in 
July 2008. Furthermore, preparations are under way on how to further develop the trade agenda with 
Mediterranean partners with a view to, inter alia , deepening current association agreements on 
trade-related regulatory areas. 
South Africa 
53. Trade relations between the EC and South Africa are governed by the Trade, Development 
and Co-operation Agreement (TDCA).57 The agreement provides for (asymmetrical) trade 
liberalization in favour of South African goods and services until 2012.  It also contains provisions for 
cooperation on competition, right of establishment, and supply of services.  Separate agreements on 
                                                      
 54 The Mediterranean partners are Algeria, Egypt,  Israel, Jordan, Lebanon, Morocco, Palestinian 
Authority, Syria, Tunisia, and Turkey.  Libya has observer status since 1999. 
 55 The agreements also provide for reciprocal liberalization of  imports of raw and processed 
agricultural and fishery products, where mutual concessions are given in various forms, including zero tariff, 
reduced import duties (both within and out of quota), and increased tariff quotas.  In addition, the agreements 
contain basic provisions on trade in services and th e right of establishment, capital movements, public 
procurement, competition rules, origin rule s, and intellectual property rights.   
 56 For additional information on EC-Mediterranean arrangements see European Commission online 
information.  Viewed at: http://ec.europa.eu/comm /trade/issues/bilateral/regions/euromed/index_en.htm. 
 57 The agreement was signed in October 1999 and, following provisional and partial implementation 
from 1 January 2000, entered fully into force in May 2004.  The agreement was notified in WTO document WT/REG113/1, 7 December 2000. European Communities WT/TPR/S/214/Rev.1 
 Page 27 
 
 
wines and spirits, signed in January 2002, are app lied provisionally;  they provide for reciprocal 
protection of wine and spirits na mes, cover oenological practices and processes, as well as product 
specifications.  Both parties are wo rking to solve pending technical i ssues in agricultural trade, rules 
of origin, and anti-dumping.   
54. In June 2006, the EC proposed a Strategic Part nership to set out a comprehensive long-term 
framework for its economic and political relations with South Africa.  The EC also adopted a negotiating mandate to amend the TDCA with a thr eefold purpose:  to bring the agreement into line 
with the revised Cotonou Agreement as regards ne w political provisions on issues such as terrorism or 
weapons of mass destruction;  to achieve further tr ade liberalization; and cooperation in other areas.  
In March 2007, following the request by the SADC-EPA group, the EC decided to include South 
Africa in the negotiations for the conclusion of an EU-SADC Economic Partnership Agreement (see 
below). 
Economic Partnership Agreements 
55. The EC's trade relations with the African , Caribbean and Pacific (ACP) countries are 
governed by the Cotonou Agreement, which was co ncluded for a 20-year period from March 2000 to 
February 2020.  The agreement  is based on five interdependent pillars: an enhanced political 
dimension; increased participation; a more stra tegic approach to cooperation focusing on poverty 
reduction; new economic and trade partnerships;  and improved fina ncial cooperation.  Under the 
agreement, ACP countries (except for South Afri ca), have benefited from non-reciprocal trade 
preferences during an interim period (2001-07), i.e. duty-free treatment on industrial, certain 
agricultural, and fishery products, subject to a saf eguard clause.  Until 31 December 2007, these trade 
preferences were under the cover of a WTO waiv er approved at the Doha Ministerial Meeting.
58  For 
certain products, the EC pr ovided special market access und er "commodity protocols".59  T h e  
Cotonou Agreement provides for a revision clause (Ar ticle 95) and for its adaptation every five years 
(with the exception of the economic and trade pr ovisions for which there is a special review 
procedure).  The amendments resulting from the first revision in 2004-05 covered the political 
dimension, development strategies, investment f acility, and implementation, as well as management 
procedures.60  The revised Cotonou Agreement entered into force in July 2008.61   
56. Since September 2002, the EC has been negotia ting economic partnershi p agreements (EPAs) 
with the African, Caribbean and Pacific (ACP) countries.62  The negotiations are to replace the 
unilateral preferences granted under the Cotonou Ag reement by bilateral pr eferences granted under 
EPAs.  EPAs are based on four main pillars:  (i) pa rtnership, entailing rights and obligations for both 
sides; (ii) regional integration, taking  into account existing integration initiatives63; (iii) development, 
taking account of the economic, social, and environm ental constraints of ACP countries; and (iv) link 
to the WTO, with a view to facilitating the grad ual integration of ACP countries into the world 
economy.  Specifically, the agreements provide for progressive liberalization of trade in both goods 
                                                      
 58 WTO document WT/MIN(01)/15, 14 November 2001. 
 59 The products concerned are bananas, beef and veal, and sugar. 
 60 European Commission online information. Viewed at: http://ec.europa.eu/comm/development/body/ 
cotonou/pdf/negotiation_20050407_en.pdf#zoom=100. 
 61 For early application, transitional measures allowe d the majority of the revised provisions to enter 
into force upon signature during the ratification process.  
62 The 48 sub-Saharan African states , 15 states in the Caribbean, and 15 states in the Pacific.   
 63 Based on existing regional integration institutions, the 77 ACP countries have been grouped into six 
negotiation regions (West Africa, Central Africa, Eastern and Southern Africa, the Southern African Development Community, the Ca ribbean, and the Pacific). WT/TPR/S/214/Rev.1 Trade Policy Review 
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and services, and address other trade-related issues.64  Development concerns are reflected through 
flexibility vis-à-vis depth of liberalization, its asy mmetry, length of transition periods, trade coverage 
and exceptions, and through EC support measures.   
57. The Cotonou trade preferences e xpired on 31 December 2007.  By that time, negotiations 
were concluded on an EPA with the Caribbean regi on, as well as a series of interim agreements with 
the other ACP regions.  While the EPA with the Cari bbean region covers trade in goods and services, 
as well as other trade-related issues, the interi m agreements were negotiated with a view to 
establishing a secure legal framework for trade in goods and preventing trade disruption.  
Negotiations on full EPAs with the African regions and the Pacific are continuing with a view to 
concluding them by mid-2009. 
58. The EC is the main trading partner for the majority of ACP countries.  In 2007, EC 
merchandise imports from these countries amounted to €47.7 billion, and exports were €47.0 billion.  
ACP exports to the EC consist mainly of petroleum (42% of total exports), followed by cocoa beans 
(5%), and diamonds (5%).  EC exports to the ACP countries are dominated by machinery (22%), followed by oil (11%), vehicles (7%), ship/boats (7%), and medicines (3%).  The share of imports 
from ACP countries in total EC imports incr eased from 2.75% in 2004 to 3.3% in 2007. 
(c) Agreements under negotiation 
Andean Community 
59. Negotiations for a bi-regional Association Agre ement comprising an FTA with the Andean 
Community (Bolivia, Colombia, Ecuador, and Peru) we re opened in June 2007.  The trade part of the 
agreement is to include provisions on market acce ss for goods, rules of origin, customs and trade 
facilitation, technical barriers to trade, SPS measures, trade defence measures, services, government procurement, intellectual property rights, compe tition, trade and sustainable development, and a 
dispute settlement mechanism. The EC maintains b ilateral trade relations with each of the four 
countries of the Andean Community, with total e xports of €5.8 billion in 2007, and imports of  
€10.3 billion. 
Central America 
60. Negotiations for a bi-regional Association Ag reement, including a free-trade area, with 
Central American countries (Costa Rica, El Salv ador, Guatemala, Honduras, and Nicaragua) were 
opened in October 2007.
65  The trade part of the future agreem ent is to include provisions on market 
access for goods, rules of origin, customs and trad e facilitation, technical barriers to trade, SPS 
measures, trade defence measures, services, inv estment, public procurement, intellectual property 
rights, competition, trade and sustainable developmen t, and a dispute settlement mechanism.  Because 
of its bi-regional dimension, the agreement is to  guarantee free circulation of goods and services 
exported from one region to the other.    
61. The EC maintains bilateral trade relations with  each of the Central American countries, with 
privileged access conditions to the EC market through its GSP+ regime. In 2007, EC exports 
amounted to €5.3 billion, and imports from Ce ntral America reached almost €4.8 billion. 
                                                      
 64 These issues include sanitary and phytosanitary measures, intellectual property rights, public 
procurement, competition policy, investment, trade and environment, trade and labour standards, consumer 
policy regulation and consumer health protection, st andardization and certification, and food security. 
 65 Panama has been an observer to these negotiations. European Communities WT/TPR/S/214/Rev.1 
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Gulf states 
62. Negotiations on an FTA between the EC and the Gulf Cooperation Council66 (GCC) started in 
1990 and resumed in 2002, following a break of more than ten years.  The objective of EC trade 
relations with countries in the Gulf region is to  enhance political dialogue and to foster economic 
integration between the two parties, with a view to diversifying and increasing bilateral trade;  and to 
promote regional integration within the GCC.  Th e proposed FTA is to provide for progressive and 
reciprocal liberalization of trade in goods and services.  During the period under review, several 
rounds of negotiation and technical meetings  took place.  The negotiations cover, inter alia , market 
access on goods and services, government procuremen t, intellectual property rights, competition, 
dispute settlement, and rules of origin.67  GCC countries currently benefit from preferential access to 
the EC market under the EC's GSP Scheme.  In 2007, the EC's merchandise exports to the Gulf region 
amounted to €61.4 billion, while imports were €30.6 billion. 
India, Republic of Korea, and ASEAN 
63. Negotiations on PTAs between the EC and Indi a, Korea, and ASEA N were launched in 
May 2007.  The negotiati ons cover trade in goods and services,  rules, and legal and institutional 
issues.   
64. In 2007, the EC's merchandise exports to Korea amounted to €24.8 billion, and imports were 
€39 billion;  its merchandise exports to India were €29.5 billion, and imports totalled €26.2 billion. 
MERCOSUR 
65. Since 2000, the EC and MERCOSUR have be en negotiating a bi-regional association 
agreement.  The agreement is to cover, inter alia , market access, rules on government procurement, 
investment, intellectual property rights, competition policies, SPS measures, technical barriers to 
trade, trade defence instruments, and a dispute-se ttlement mechanism.  However, since October 2004, 
discussions have continued mainly informally, at technical level, as both parties recognized that 
greater clarity on the outcome of the Doha talk s was necessary before an agreement could be 
concluded.  Notwithstanding the suspension of the negotiations, the EC maintains bilateral relations 
with each of the four founding MERCOSUR countri es (Argentina, Brazil, Paraguay, and Uruguay).  
These relations are based on cooperation framework  agreements establishing joint committees that 
enable the two parties to regularly discuss questions of mutual interest.  In 2007, the EC's exports to 
MERCOSUR's four founding members amounted to €32.1 billion, and imports were €47.8 billion. 
Ukraine 
66. In February 2008, the EC and Ukraine launche d negotiations on a comprehensive free-trade 
agreement, which is also to cover, inter alia , SPS measures, intellectual property rights, and services.  
Generalized System of Preferences (GSP) 
67. The EC's GSP scheme for the period January 2006 to December 2008 is based on Council 
Regulation (EC) No. 980/2005.   The primary objective of the scheme is to contribute to the reduction 
                                                      
 66 The Cooperation Council for the Arab States of the Gulf (GCC) is a regional organization regrouping 
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the Un ited Arab Emirates.  It has been forming a customs 
union since January 2003.   
 67 European Commission online information. Viewed at: http://europa.eu.int/comm/trade/issues/bilate 
ral/regions/gcc/index_en.htm; and http://europa.eu.int/c omm/external_relations/gulf_cooperation/intro/index. 
htm. WT/TPR/S/214/Rev.1 Trade Policy Review 
Page 30 
 
 
of poverty and the promotion of sustainable de velopment and good governan ce. Total imports under 
the scheme were €57 billion in 2007 compared with  €51 billion in 2006, an increase of 12%.  The 
associated benefit to eligible countries – in terms of import duties that would otherwise be applied – 
was estimated by the Commission at over €2.5 million in 2007.  In July 2008, the EC extended its 
GSP scheme from 1 January 2009 to the end of 2011.  While the scheme remains basically 
unchanged, the graduation mechanism (in the light of most recent trade data) will lead to preferences 
for specific product groups being re-established for Algeria, India, Indonesia, Russia, South Africa, and Thailand;  and certain preferences being suspended for Viet Nam.
68 
68. The EC's GSP scheme contains three distinct a rrangements.  First, all eligible countries 
benefit from the "general arrangement".  Second, a "special incentive arra ngement for sustainable 
development and good governance" (the GSP+) provides additional benefits to countries 
implementing international standards in sustainabl e development and good governance.  Third, the 
Everything But Arms (EBA) initiative grants LDCs  duty-free and quota-free access to the EC market.  
Under the general arrangement, products are classifi ed as either sensitive or non-sensitive to the EC 
economy.  Most agricultural goods are listed as sens itive, whereas non-sensitive products are mainly 
non-agricultural.69  Non-agricultural sensitive products include textiles, clothing and apparel, carpets, 
and footwear.  The scheme provides for the exclus ion of a beneficiary country on grounds of its 
degree of development, i.e. if it is classified by the World Bank as a high-income country and has 
achieved a certain level of diversification of its GS P exports to the EC in accordance with a criterion 
set out in the regulation.  Similarly, beneficiary countries may be removed if they are bound to the 
Community by a preferential trade agreement that covers at least all the preferences provided under 
the GSP. The scheme uses the GSP preferential rules of origin, set out in Commission Regulation (EEC) No. 2454/93 of 2 July 1993. 
69. The special incentive arrangeme nt for sustainable development and good governance (GSP+) 
is open to vulnerable countries that have ratifie d and effectively implemented the international 
conventions listed in Annex III to the Regulation.
70  A distinction is made between two sets of 
                                                      
 68 GSP preferences will be re-established or susp ended for the following beneficiary country and 
product group combinations: de-graduation (i.e. re-establis hment of preferences) for Algeria, Section V (mineral 
products); India, Section XIV (jewellery, pearls, precious metals and stones); Indonesia, Section IX (wood and articles of wood); Russia, Section VI (products of the chemical or allied indust ries) and Section XV (base 
metals); South Africa, Section XVII (transport equipment); Thailand, Section XVII (transport equipment); 
graduation (i.e. suspension of preferences) for Viet Nam, Section XII (footwear, headgear, umbrellas, sun umbrellas, artificial flowers, etc.). The net value of these adjustments to beneficiary countries has been 
estimated by the Commission at €160 million (minimum) in terms of import duties that would otherwise be 
imposed.   
69 Non-sensitive products benefit from the suspension  of customs tariffs, whereas sensitive products 
enjoy tariff reductions by 3.5% of the MFN ad valorem  rate, and 30% of specific duties, with the exception of 
undenatured ethyl alcohol and other denatured spirits, where the specific duty reduction is 15%. Where tariffs on sensitive products include both ad valorem  and specific duties, the latter will not be reduced;  and where 
tariffs specify either minimum or maximum duties, minimum duties are not to be reduced whilst maximum 
duties do not apply.  However, products in Sections XI(a) and XI(b) of the GSP (mainly textiles and clothing) 
benefit from a 20% reduction in tariffs. Additionally, ta riffs are suspended where preferential treatment results 
in ad valorem duties of 1% or less, or in specific duties of a total of €2 or less, because the cost of collection 
might be higher than the revenue collected. Regional cumulation of origin is possible.  Examples of non-
sensitive agricultural goods include fresh sweet potatoes;  Jerusalem artichokes and similar roots and tubers with 
high inulin content;  and Macadamia nuts.   
70 In this case, ad valorem  and specific duties on all products listed in Annex II are suspended. 
However, where both duties apply, the specific duty is limited to 16% of the customs value for products with 
certain codes. See Article 8(2) of Council Regulation (EC) No. 980/2005.  This applies to products of CN codes 1704.1091 and 1704.1099.  European Communities WT/TPR/S/214/Rev.1 
 Page 31 
 
 
international conventions: (i) core human and la bour rights under UN and ILO conventions (Part A of 
Annex III) - ratification and effective implementa tion of these are, in principle, obligatory71;  and (ii) 
conventions related to the environm ent and governance (Part B of Annex III).72  Ratification and 
effective implementation of at least seven of th ese conventions are required, while the remaining 
conventions must be ratified a nd implemented by 31 December 2008.73  Under the new GSP 
Regulation for 2009-2011, no such distinction is drawn between the Conventions listed in the two 
Parts of Annex III: GSP+ beneficiaries would need to ratify and effectively implement all 
27 Conventions listed in the Annex.74 
70. The special arrangement for LDCs incorpor ates the Everything But Arms (EBA) initiative 
under which the EC extends duty-free access for products , without any quantitative restrictions, with 
the exception of arms and ammunition.  However, for 41 tariff lines concerning rice and sugar, the EC 
has established expanding duty-free tariff quotas until full liberalization is achieved in 
September 2009 (rice) and October 2009 (sugar).  Furthermore, for the period 1 October 2009 to 
30 September 2012, importers of s ugar will be required to purchase at a price not lower than 90 % of 
the EC reference price.  The EC applies the list of LDCs drawn up by the UN;  as at August 2008, 
50 countries were in this category.  Removal fro m the list is progressive, involving a transitional 
period of at least three years.  Since the EC's last TPR in 2007, Cape Verde has been removed from 
the list of eligible countries with effect from 1 January 2011.75 
71. The EC's GSP regulations allow temporary w ithdrawal from the preferential arrangements 
mainly as a consequence of serious and systematic violations of principles laid down in the core 
human and labour rights under the conventions listed in part A of Annex III, on the basis of the 
conclusions of relevant monitoring  bodies; serious and systematic unfair trading practices;  trade in 
drugs, or failure to comply with international conventions on money-la undering;  serious and 
systematic infringements of the rules governing fish eries and fishery resources;  and exports of goods 
made by prison labour.  Temporary withdrawal follows  an investigation.  A withdrawal decision, in 
principle, enters into force six months after its adoption.  As at August 2008, Belarus and Myanmar 
remain temporarily withdrawn from the scheme since the reasons for their withdrawal (serious and 
                                                      
 71 These include the International Covenant on Civil and Political Rights;  International Covenant on 
Economic, Social and Cultural Rights;  International Convention on the Elimination of All Forms of Discrimination Against Women;  Convention Against Torture and other Cruel, Inhuman or Degrading 
Treatment or Punishment;  the Convention on the Rights of the Child;  the Conventio n concerning the Abolition 
of Forced Labour (No 105);  and Convention concerning Forced or Compulsory Labour (No. 29).  However, if a country is faced with specifi c constitutional constraints, and has neither  ratified nor effectively implemented two 
of the sixteen conventions on the list, it must make a formal commitment to do so. 
 
72 These include the Montreal Protocol on Substances that Deplete the Ozone Layer; Basel Convention 
on the Control of Trans-b oundary Movements of Hazardous Wastes a nd their Disposal; Stockholm Convention 
on Persistent Organic Pollutants; Convention on the International Trade in Endangered Species of Wild Fauna 
and Flora; Convention on Biological Diversity; Cartagena Protocol on Biosafety; Kyoto Protocol to the United Nations Framework Convention on Climate Change; UN Single Convention on Narcotic Drugs (1961);  and the 
UN Convention against Illicit Traffic in Narco tic Drugs and Psychotropic Substances (1988). 
 
73 To qualify for GSP+ treatment under the new GSP Regulation for 2009-11, countries must have 
ratified and effectively implemented all 27 of the relevant Conventions. 
 74 For the purposes of this arrangement, a "vulnerable"  country is one that is not classified by the World 
Bank as high-income country during three consecutive years and whose five largest sections of its GSP-covered 
imports to the Community represent more than 75% in value of its total GSP-covered imports and whose GSP-
covered imports into the Community represent less than 1% in value of total GSP imports to the EC.  The GSP+ countries are Bolivia, Colombia, Costa Rica, Ecuador, Ge orgia, Guatemala, Hondura s, Sri Lanka, Moldova, 
Mongolia, Nicaragua, Panama, Peru, El Salvador, and Venezuela.   
 
75 The transitional arrangements are set out in  Commission Regulation (EC) No. 1547/2007, 
20 December 2007. WT/TPR/S/214/Rev.1 Trade Policy Review 
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systematic violations of principles laid down in co re ILO conventions on la bour rights) still apply, 
according to the Commission. 
72. The scheme also includes a safe guard clause allowing the EC to suspend tariff preferences 
when imports of a product cause serious difficulties or create direct competition with similar EC 
products.  Serious difficulties are assessed using cr iteria measuring EC producers' market share, 
production, stocks, production capac ity, bankruptcies, profitability, capacity utilization, employment, 
imports, and prices.  Such an action can be taken by the Commission, on its own initiative, or at the 
request of a Member State.  This clause has not been applied during the period under review. 
Overseas countries and territories (OCT)  
73. The EC has been granting duty-free and quota-free treatment on all products originating in the 
Community's overseas countries and territories (OCT76) on a non-reciprocal basis since 1963, subject 
to a safeguard provision adopted in 1991.77   Origin rules provide for cumulation with the EC and the 
ACP, without limits, except for rice and sugar.  The arrangement also has provisions on transhipment.  
A Council Decision on the OCT Association Arrange ments was adopted on 27 November 2001 to 
continue the regime until the end of 2011. 
(iv) Aid for Trade (AfT) 
74. The EC's Aid for Trade (AfT) strategy was adopted by Council on 15 October 2007.78 It is a 
joint EC (Community and EC-27 Member States) po licy initiative to substantially step up efforts in 
this area.  Since AfT is part of overall EC o fficial development assistance (ODA), the Community 
finances the trade-related assistance (TRA) compone nt under its regular budget and the European 
Development Fund, while individual EC Member Stat es are relatively more active in other AfT fields.  
75. The strategy contains five sections: quantitativ e ambitions; pro-poor focus and quality; EC 
capacity; ACP specific angles (EPA context); and mon itoring and reporting.  It set the EC approach 
for implementation of its 2005 commitment to increase spending on TRA to €2 billion annually by 
2010 (€1 billion from the Community, €1 billion from its Member States).79  The strategy also 
commits the EC to increase efforts in the wider AfT agenda, in accordance with overall increases in 
ODA, but without absolute quantitative financial target s. It stresses the need for partner countries to 
define and articulate priorities in their developmen t policies, and includes specific support actions and 
priorities from the EC side.  
76. The strategy emphasizes the need to achieve r esults that reduce poverty, and outlines related 
efforts. It also outlines specific efforts and aims to  apply the existing international and EC principles 
for aid effectiveness.  It commits to increased EC  support to regional integration, and to a greater 
application of aid effectiveness principles also at the regional level.  Under the section on ACP (EPA 
context), the EC and its Member States undertook to  make available for ACP needs an amount in the 
range of 50% of the increase in TRA. Aid for Trade by EC, other donors and developing countries is 
                                                      
 76 The 20 overseas countries and territories (O CTs) associated with the Community depend 
constitutionally on four of the EC Member States:  Denmar k, France, the Netherlands, and the United Kingdom.  
OCT nationals are in principle EC citizens. 
 77 The 1971 decision was notified under GATT 1947, Article XXIV and examined in a working party 
(GATT document L/3611, BISD 18S/143, 9 November 1971).  
78 Information provided by the EC authorities. 
 79 At the Hong Kong WTO Minister ial of December 2005, the EC pl edged to increase its collective 
annual spending on trade-related assistance (TRA) to €2 billion (€1 billion from the EC and €1 billion from the Member States) by 2010. European Communities WT/TPR/S/214/Rev.1 
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monitored, nationally as well as globally, with a view to avoiding "AfT orphans" (countries where 
there is no donor interest). 
77. According to 2006 figures compiled by the Co mmission, TRA by the Community and its 
Member States amounted to €1.58 billion, with €64 1 million by the EC Member States (up from an 
average of €358 million between 2001 and 2004), a nd €941 million by the Community (up from an 
average of €890 million over 2001-04).  Overall AfT (including TRA) by the Community and its 
Member States increased from €5,102 million (2001-04 average) to €6,560 million in 2005 and €7,279 million (with €2,564 million by the Community and €4,715 million by its Member States) in 2006.  There is no specific EC financial pledge on wi der or total AfT.  According to the Commission, 
the Community and its Member States increased their ODA from €34.7 billion in 2004 to €47.7 
billion in 2006.  
78. The largest share of AfT has been on bu ilding productive capacity (BPC), followed by 
trade-related infrastructure (TRI), and trad e policy and regulation (TPAR) (Table II.1).
80  In terms of 
the recipients of AfT, sub-Saharan Africa ranks fi rst, followed by Asia, th e Mediterranean countries, 
Europe and the Americas (Table II.2). 
Table II.1 
Distribution of EC AfT by category, 2001-06 
(€ million) 
AfT category 2001 2002 2003 2004 2005 2006 Total 
TPAR 68 194 236 146 229 484 1,358 
TRI 2,303 2,269 2,551 2,166 3,451 3,255 15,995 
BPC 2,785 2,747 2,486 2,458 2,879 3,539 16,894 
Source: Information provided by the EC authorities. 
Table II.2 
Distribution of EC AfT by recipient, 2001-06 
Recipient € million  
Average 2001-06 % of total 
Sub-Saharan Africa 1,718.7 39.5 
Asia and Pacific 1,216.0 27.9 
Mediterranean countries 518.2 11.9 
Europe  457.6 10.5 
Latin America and Caribbean 442.7 10.2 
Total 4,353.2 100.0 
Source: Information provided by the EC authorities. 
 
                                                      
 80 The table includes only AfT categories 1, 3 and 4. Since the concept was only defined in 2006, the 
CRS database which records overall development assistance flows was not yet adapted to include or show the other categories.