European Union WT/TPR/S/248 
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IV. DEVELOPMENTS IN SELECTED SECTORS 
(1) AGRICULTURE  
(i) Agriculture in the European Union 
1. In 2009, agriculture production contributed about  1.6% to gross value added for all economic 
sectors in the EU and about 5.1% to employment.  In 2010, agriculture goods (WTO definition) 
represented about 6.7% of total EU export s and about 5.7% of total EU imports.  
2. The gross value added for agriculture, hunting and forestry in the EU was €168 billion in 
2009.  It has varied over the past ten years reflec ting changes in prices, and is down from €194 billion 
in 2007.1  To some extent, the changes in farm gate prices have reflected changes in policies as the 
Common Agricultural Policy has undergone considerable reform over the past ten years;  they also 
reflect changes in international pr ices, which peaked in early 2008, fell back in 2009, and rose again 
in 2010.  Despite the wide range of products grown and raised in the EU, six commodities make up 
over half of total value of production by value (Table IV.1). 
3. Support to agriculture has been reformed signi ficantly over the past few years, but remains 
considerable in both absolute and relative terms.  In 2009, total support to the agriculture sector was 
estimated by the OECD to be just over €100 billion, which is the equivalent of nearly one third of the 
total value of production, while support to pr oducers was estimated to be about €87 billion.2 
Table IV.1 
Agriculture goods output at basic prices for selected agricultural products, 2008-10 
(€ million) 
 2008        % 2009       %  2010      % 
Total value of production (at farm gate) 352,620 100 308,458 100 326,382 100 
of which:    
Milk 52,718 15.0 41,782 13.5 47,413 14.5 
Pigs 32,993 9.4 29,987 9.7 29,809 9.1 
Cattle 30,737 8. 7 28,665 9 .3  28,578 8.8 
Fresh vegetables 29,820 8.5 28,620 9.3 30,869 9.5 
Plants and flowers 20,072 5.7 19,302 6.3 19,682 6.0 
Other forage plants 18,942 5.4 17,830 5.8 n.a. n.a. 
Wheat and spelt 25,620 7.3 17,019 5.5 20,651 6.3 
Poultry 17,487 5.0 16,312 5.3 16,877 5.2 
Wine 16,298 4.6 16,065 5.2 15,668 4.8 
n.a. Not available. 
Note: Figures for 2010 are estimates. 
Source : EuroStat database.  Viewed at:  http://epp.euros tat.ec.europa.eu/portal/page/portal/statistics/themes 
[February 2011]. 
4. The EU produces a very wide range of agricu ltural products and is the world's biggest 
producer of several agricultural commodities, incl uding dairy milk, wheat, grapes, olives, rapeseed, 
and sunflower seeds, and it is the second or third bigg est producer of a number of other products, such 
as beef, pig meat, eggs, and potatoes (Table IV.2).3  The EU is also a major exporter and importer of 
agricultural products (Table IV.3 and Table IV.4).  With a large and diversified trade in agriculture 
products and a large share of the world market, its agriculture policies can have a significant impact 
                                                      
1 EuroStat database.  Viewed at:  http://epp.eurosta t.ec.europa.eu/portal/page/portal/ statistics/themes. 
2 OECD (2010a), p. 51. 
3 FAOStat database.  Viewed at:  http ://faostat.fao.org/site/339/default.aspx. WT/TPR/S/248 Trade Policy Review 
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on other countries, particularly on those whose ec onomies depend on agriculture.  The reverse is also 
true, that the EU, as a major producer, importer, and exporter of agriculture products is also affected 
by the agriculture policies of other countries. 
Table IV.2 
Production of selected agricultural products, 2006-09 
('000 tonnes) 
 2006 2007 2008 2009 % world production 
in 2009 
Pig meat 21,804.9  22,697.0  22,387.7  21,888.1  20.6 
Wheat 126,735.0  120,263.6  150,296.7  138,725.1  20.3 
Butter and ghee 2,022.6  2,022.4  2,011.1  1,953.1  20.3 
Cheese 8,669.0  8,770.5  8,762.1  8,692.0  44.9 
Beer of Barley 39,928.1  40,004.2  39,470.7  38,404.7  22.8 
Wine 17,672.8  15,796.6  15,931.0  16,336.2  60.3 
Source:   FAOStat database.  Viewed at:  http://faost at.fao.org/default.aspx and European Commission. 
Table IV.3 
Exports of selected agricultural products, 2006-09 
HS 
Code Product  2006 2007 2008 2009 % of world 
exports in 2009 
0203 Pig meat US$ million 2,584.5  2,738.2  3,696.6  2,895.8  28.5 
  000 tonnes 900.7  906.7  1,230.0  1,008.3  25.0 
0405 Butter US$ million 600.8  704.9  740.1  503.5  23.2 
  000 tonnes 241.1  211.7  153.1  147.5  16.2 
0406 Cheese and curd US$ million 2,785. 0  3,347.1  3,780. 7  3,301.1  30.9 
  000 tonnes 586.5 595.8 554.6  576.8 n.a. 
1001 Wheat and meslin US$ million 2, 203.7  2,181.9  6,157. 4  4,628.2  21.4 
  000 tonnes 13,978.3  8,448.4  18,184.9  20,602.6  16.4 
2106 Food preparations not 
specified elsewhere US$ million 
000 tonnes 3,745.8  
808.1 4,345.5  
855.0 4,725.3  
868.1 4,749.6  
918.8 31.7 
24.0 
2203 Beer US$ million 2,421.7  2,749.3  3,041.9  3,016.8  45.5 
  000 tonnes 2,173.4  2,388.2  2,588.2  2,630.5  37.0 
2204 Wine of fresh grapes, incl 
fortified US$ million 
000 tonnes 6,957.0 
1,839.0   8,272.2  
1,893.3 9,205.3 
1,799.0   7,534.7 
1,664.6   52.3 
34.4 
2208 Distilled spirits US$ million 8,061. 2  9,098.5  9,154. 2  7,990.6  28.7 
  000 tonnes 1,107.3 1,154.6 1,121.6 1,039.3 28.7 
 Total agricultural exports US$ million 86,592.5  99,692.2  118,115.8  102,144.7   
n.a. Not applicable. 
Note:   WTO definition of agricultural products. 
Source :  UN Comtrade database.  Viewed at:  http://comtrade.un.org/and European Commission. 
5. The agriculture situation in the EU varies cons iderably from one member State to another and 
within individual member States.  In general, the lower GDP per capita the more important is 
agriculture to the economy and to employment.  Thus, in 2009, although the gross value added in 
agriculture was 1.6% of total GVA in the EU as a wh ole, it was over 7% in Romania and less than 1% 
in Belgium, Ireland, Luxembourg, and the Unite d Kingdom.  However, in all member States, 
agriculture's percentage contribution to GVA is declin ing, with the greatest falls in those states where 
it made the biggest contribution to the economy notably for Bulgaria and Romania where the relative decline in agriculture reflects general economic growth that started in the pre-accession period. 
 
 
 
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Table IV.4 
Imports of selected agricultural products, 2006-09 
HS 
Code Product  2006 2007 2008 2009 % of world 
imports in 
2009 
0803 Bananas, including plantains, 
fresh or dried US$ million 
000 tonnes 3,217.2 
4,452.8   3,770.4 
4,762.6   4,338.0 
4,924.6   3,850.3 
4,591.6   41.0 
31.5 
0901 Coffee, coffee husks and skins 
and coffee substitutes US$ million 
000 tonnes 5,490.1  
2,682.8 6,663.8  
2,752.3 8,246.5  
2,765.2 7,338.3  
2,716.8 45.3 
47.0 
1201 Soya beans US$ million 3,646.7  5,243.0  7,529.9  5,671.3  16.8 
  000 tonnes 14,074.9  15,218.3  14,424.6  12,903.3  17.1 
1511 Palm oil and its fractions US$ million 2,024.1  2,900.8  4,389.5  3,716.2  19.5 
  000 tonnes 4,272.2  4,408.2  4,555.4  5,351.0  19.2 
1801 Cocoa beans, whole or broken, 
raw or roasted US$ million 
000 tonnes 2,267.0 
 1,334.5 2,882.2 
1,458.7   3,576.2 
1,453.4   4,319.6 
1,503.4   54.8 
53.9 
2204 Wine of fresh grapes, incl 
fortified  US$ million 
000 tonnes 3,039.7  
1,227.3 3,723.7 
1,330.6   3,620.6  
1,272.2 3,253.8 
1,310.8   23.8 
28.8 
 Total agricultural imports US$ million 89, 060.4  110,541.6  133,05 2.2  111,525.3   
Note:   WTO definition of agricultural products. 
Source:    UN Comtrade database.  Viewed at:  http://comtrade.un.org/. 
6. Agriculture also differs among member States in  terms of farm size, both in area and in 
economic terms, and principal products.  The aver age economic size of holdings, as measured by the 
gross margin per holding, was highest in the Nether lands and was 100 times more than the lowest, in 
Romania (Table IV.5).  The degree of specializati on in agriculture also varies among member States:  
in Ireland the top three products account for over 71% of the value of production, while in France they 
account for less than 42%.  
7. The structure of holdings in some member States reflects the large number of small holdings 
in those States.  Over three quarters of holdings in Bulgaria, Hungary, Romania, and Slovakia have an annual gross margin of less than €1,200 while in the Netherlands very few farms are so small. 
Table IV.5 
Structure of farming in individual member States, 2007 and 2009 
 GVA  
agriculture 
to total 
GVA Employment 
in agriculture 
to total 
employment No. of 
agriculture 
holdings Agricultural 
area per 
holding Average 
gross 
margin  
per farm Value of 
output of 
agricultural 
goods Main products 
 20091 2009 2007 2007 2007 2009  
 % % '000 ha € € million  
EU 1.6 5.1 13,700 12.6 13,560  308,458 Vegetables, milk, 
cereals 
Austria 1.8 5.3 165 19.3 20,040  5,518 Milk, cattle, forage 
plants 
Belgium 0.7 1.5 48 28.6 84,360  6,819 Pigs, vegetables, 
cattle 
Bulgaria 8.5 7.1 493 6.2 2,640  3,144 Cereals, industrial 
crops, milk 
Cyprus 2.1 3.9 40 3.6 9,600  634 Fruits, milk, 
vegetables 
Czech Republic 2.3 3.1 39 89.3 49,440  3,531 Cereals, milk, 
industrial crops 
Denmark 1.0 2.5 45 59.7 96,120  7,928 Pigs, milk, cereals 
Estonia 2.3 4.0 23 38.9 9,120  507 Milk, cereals, pigs 
       Table IV.5 (cont'd) WT/TPR/S/248 Trade Policy Review 
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 GVA  
agriculture 
to total 
GVA Employment 
in agriculture 
to total 
employment No. of 
agriculture 
holdings Agricultural 
area per 
holding Average 
gross 
margin  
per farm Value of 
output of 
agricultural 
goods Main products 
 20091 2009 2007 2007 2007 2009  
 % % '000 ha € € million  
Finland 2.6 4.6 68 33.6 29,040  3,367 Milk, vegetables, 
cereals 
France 1.7 2.9 527 52.1 64,320  57,447 Cereals, wine, cattle 
Germany  0.9 1.7 370 45.7 59,400  40,486 Milk, pigs, forage 
plants 
Greece 2.9 11.9 860 4.7 8,640  9,241 Vegetables, fruit, 
milk 
Hungary 3.3 4.6 626 6.8 3,840  5,370 Cereals, pigs, 
vegetables 
Ireland 0.9 5.0 128 32.3 23,280  4, 727 Cattle, milk, forage 
plants 
Italy 1.7 3.7 1,679 7.6 17,880  39,365 Vegetables, fruits, 
milk 
Latvia 3.2 8.7 108 16.5 3,720  781 Cereals, milk, forage 
plants 
Lithuania 3.3 9.2 230 11.5 3,000  1,692 Cereals, milk, pigs 
Luxembourg 0.3 1.3 2 56.9 62,160  247 Milk, cattle, forage 
plants 
Malta 1.8 1.4 11 0.9 5,880  123 Vegetables, milk, 
pigs 
Netherlands 1.7 2.5 77 24.9 133,560  19,489 Vegetables, milk, 
pigs 
Poland 3.6 13.3 2,391 6.5 4,320  16,941 Cereals, milk, pigs 
Portugal 2.2 11.2 275 12.6 7,920  6,406 Vegetables, fruits, 
wine 
Romania 7.1 29.1 3,931 3.5 1,200  12,658 Cereals, forage 
plants, vegetables 
Slovakia 3.9 3.6 69 28.1 8,640  1,664 Cereals, milk, cattle 
Slovenia 2.4 9.1 75 6.5 7,080  1,031 Forage plants, milk, 
cattle 
Spain 2.5 4.2 1,044 23.8 24,720  35,968 Vegetables, fruits, 
pigs 
Sweden 1.7 2.2 73 42.9 29,640  3,705 Milk, forage plants, 
cereals 
United Kingdom 0.9 1.1 300 53.8 37,680  19,669 Milk, cattle, cereals 
Note: Data for Bulgaria are for 2006, for Germany for 2008, for Austria and Portugal for 2007 and for the UK for 2005. 
Source :   Eurostat database:  http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home. 
 
(ii) Agriculture policies 
8. Since 2007, funding for agriculture policies in the EU has been provided through the 
European Agricultural Guarantee Fund (EAGF) a nd the European Agricultural Fund for Rural 
Development (EAFRD).  The EAGF covers fundi ng for direct payments to farmers and market 
intervention measures (the first pillar of the CAP) .  The EAFRD covers fundi ng for rural development 
programmes (the second pillar of the CAP), which includes assistance to less-favoured areas,  
investment aids for agriculture and forestry, and payments under environmental programmes.   
9. In the 1992-2003 period, there was a significant shift in the structure of support in the EU 
away from intervening in the market to direct payments linked to the number of livestock and crop area.  Since 2003, reform has focussed on moving to  a system of direct payments decoupled from 
prices and production.  However, market price support (as defined by the OECD) continues to European Union WT/TPR/S/248 
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represent a large, though declining, portion of transfers to producers.4  In the past export subsidies and 
intervention purchases, along with relatively high tariffs kept domestic prices well above world 
market price levels for many commodities.  As e xport subsidies and intervention have been reduced, 
the gap between international and domestic prices has narrowed.  Ho wever, the reforms of the CAP 
have not reduced MFN tariffs which remain relatively high.  
10. In 2007, the 21 different Common Market Orga nizations (CMO) were replaced by a single 
one covering all sectors under the CAP and the separate management committees by a single committee.  To some extent, the introduction of  a single CMO and a single management committee 
was for legal and administrative reasons as th e Regulation still provides for different support 
measures for different products.
5   
11. The Health Check of the Common Agricultural Policy, agreed to by the EU agriculture 
ministers in November 2008, continued the direction of reform seen in the 2003 Mid Term Review.  
The Health Check made further reductions in the ro le of the CAP in the market, extended the systems 
of support that are decoupled from agricultural prices or production, and increased the emphasis on the second pillar of the CAP.  The process of reform in  the EU is expected to continue with the focus 
now on the 2013 and subsequent reform of the CAP.
6   
(a) Domestic support 
 Direct payments 
12. In the 2003 reform of the CAP, the EU introduced the Single Payment Scheme of direct 
payments that, to a large extent, replaced the previ ously existing systems where direct payments were 
linked to animal numbers for beef cattle, sheep, and goats and crop areas for cereals, oilseeds, and 
starch potatoes.  The reforms were extended in subsequent stages to cover sugar, hops, olives, 
tobacco, cotton, fruits and vegetables, and wine.  The 2008 Health Check carried the reforms a stage 
further by ending most of the remaining direct  payments that were linked to production.  
13. The Single Payment Scheme applies to the EU 15 member States, plus Malta and Slovenia.  
Each member State can apply the SPS using: 
- a historical, approach where each farmer  receives payment entitlements for direct 
payment based on the total of animal number or crop area payments received during the 2000-02 reference period;  
- a regional approach where the total amount of animal number or crop area payments 
paid out in the region in the 2000-02 re ference period divided by the number of 
eligible hectares they relate to, forms th e basis for the entitlement to Single Payment 
Scheme payments.  Each fa rmer receives a payment proportionate to her or his 
eligible area;  or 
                                                      
4 The OECD defines Market Price Support (MPS) as "the annual monetary value of gross transfers 
from consumers and taxpayer s to agricultural producers arising from policy measures that create a gap between 
domestic market prices and border prices of a specific ag ricultural commodity, measured at the farm gate level. 
MPS is also available by commodity."  See OECD (2010), p. 40. 
5 Council Regulation (EC) No 1234/2007, 22 October 2007. 
6 DG Agriculture and Rural Development online info rmation.  Viewed at  http://ec.europa.eu/ 
agriculture/cap-post-2013/index_en.htm. WT/TPR/S/248 Trade Policy Review 
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- hybrid models where a member State can u se different methods in different regions 
within the country or calculate Singl e Payment Scheme payments based on a 
combination of the historical and regional approaches.7 
14. In order to qualify for Single Payment Scheme  payments, farmers are required to keep the 
land in good agricultural and environmental condition but they are not required to produce any 
agricultural product on their land.   
15. Each Member state may also keep up to 10 % of the total amount available for direct 
payments for quality/marketing, environmental or ri sk management programmes, or to assist farmers 
in disadvantaged areas or types of farming in the dairy, rice, beef and veal, goat, or sheep sectors  
(Article 68 payments).8   
16. At present, Member states are also able to reser ve some of the funds for direct payments for 
production-linked direct payments but, from 2012, th is flexibility will apply only to suckler cows, 
sheep and goats, and cotton (where 35% of the cott on component of the Single Payment Scheme must 
remain coupled to production) while transiti onal support for fruits and vegetable production will 
continue until budget year 2014 at the latest. 
17. With the exception of Malta and Slovenia, th e countries that acceded to the EU after 2004, 
apply the Single Area Payment Scheme (SAPS) which involves payment of uniform amounts per hectare of claimed agricultural land.  Malta a nd Slovenia decided to apply the Single Payment 
Scheme.  The payments under the SAPS are decoupl ed from prices and production.  The Member 
States using the SAPS system can do so until end-2013.  The new Member States can also apply 
Complementary National Direct Payments subject to authorisation from the European Commission 
and within specific limits. 
 Internal Market Supports 
18. As stated above the OECD definition of mark et price support measures includes all measures 
that are designed to raise the domestic price of  agricultural products and include market access 
measures, such as tariffs and tariff quotas, as well as export subsidies.
9  In this section, internal market 
support measures are defined as those that work in side the customs territory to increase prices by 
reducing or controlling supply or by encouraging consumption.  In the EU, such measures have 
included intervention, aids to private storage,  production quotas, export subsidies, and other 
programmes that restrict supply (such as market wi thdrawal programmes) pl us consumer subsidies 
that encourage consumption (such as the school milk programme). 
19. The use of internal market support programmes has been reduced consid erably over the past 
20 years as intervention prices and the quantities th at can be taken into intervention have been 
reduced.  With the implementation of the 2008 Hea lth Check, intervention has been restricted to: 
- wheat, at €101.31 per tonne, for up to 3 million tonnes; 
- butter, at €2,217.51 per tonne, for up to 30,000 tonnes; 
                                                      
7 For an overview of the implementation of direct payments in the member States, see Europa online 
information.  Viewed at:  http://ec.europa.eu/agriculture/markets/sfp/pdf/ms_en.pdf. 
8 Article 68 of Council Regulation (EC) No 73/2009, 19 January 2009, which replaced Article 69 of EC 
Regulation (EC) No 1782/2003. 
9 OECD (2010a), p. 40. European Union WT/TPR/S/248 
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- skimmed milk powder, at €1,746.90 per tonne, for up to 109,000 tonnes; and 
- beef and veal, whenever the average market price in a member State or region falls 
below €1,560.00 per tonne for two consecutive weeks.10 
20. Intervention prices have also been set for several other products including: durum wheat, 
barley, maize, and sorghum (at the same price as  wheat); and paddy rice (at €150 per tonne) but the 
quantity that may be bought into intervention has been set at zero .  Intervention prices and quantities 
were also set for sugar, but these ceased to ap ply from end September 2010.  The Commission may 
decide to continue public intervention for durum wheat, barley, maize, sorghum, paddy rice, sugar, 
butter and skimmed milk powder beyond the limits set  out above if the "market situation and, in 
particular, the development of market prices, so requires."11  In 2009, a total of 76,367 tonnes of 
butter and 256,982 tonnes of skimmed milk powder were bought into intervention and released in 
2010 as prices increased.12  In addition, 1,568,000 tonnes of cereals were bought into intervention in 
marketing year 2008/09  and 5,875,000 tonnes in 2009/10. 
21. Production quotas for dairy continue to exist.  Milk quotas were increased by 2% in 2008 and 
are subject to 1% annual increases from 2009 to 2013 (except for Italy where there was a single 5% 
increase in 2009).  The goal is to achieve a gradual removal of quotas by 2015.  In a majority of 
member States quotas no longer restrict production, alt hough in some milk deliveries still exceed their 
yearly quota.  In quota year 2009/10 overall EU milk deliveries were 7% below quota.  Production quotas on sugar have been reduced since 2005, whic h has resulted in cessation of production in five 
member States and major reductions in others.  Sugar production is now concentrated in seven 
member States. 
22. Support for fruits and vegetables is provided through producer organisations and their 
operational programmes.  Since the start of 2008, th e producer organisations ha ve had more flexibility 
to choose from among different instruments, includi ng crisis prevention and management measures 
such as market withdrawal (where products are w ithdrawn from the market);  non-harvesting (where 
no commercial produce is taken);  and green harvesti ng (total harvesting of non-marketable products 
before normal harvesting).  Producer organisations  can also choose from among measures that support 
crisis management such as promotion and communicati on, training, harvest insurance, and support for 
setting up mutual funds.
13  In addition, they may also implement measures related to planning of 
production, product quality, marketing and promotion,  training and environmental actions.  Producer 
organisations' operational programmes are 50% fi nanced from the EU budget, except for market 
withdrawals for free distribution to charitable or ganisations and foundations , penal institutions, and 
schools that are 100% funded from the EU budget.   
23. Market intervention measures for wine are bei ng phased out in line with the final stage of 
reform that entered into force in August 2009.14  The reform included:  a grubbing up scheme to 
remove up to 175,000 ha from production; an end to restrictive planting rights from the start of 2016 
                                                      
10 Commission Regulations (EU) No 1234/2007 and 1272/2009. 
11 Council Regulation (EC) No 72/2009, Article 13(3). 
12 European Commission document COM(2010) 727 final, 8 December 2010.  Viewed at:  
http://ec.europa.eu/agriculture/milk/quota-report/com-2010-727_en.pdf. 
13 Council Regulation (EC) No 1182/2007. 
14 Europa press release IP/09/1214, "CAP Reform:  fina l stage of EU wine reform to enter into force on 
1st August", 31 July 2009 .  Viewed at:  http://europa.eu/rapid/pressReleasesAction. 
do?reference=IP/09/1214&format=HTML&aged=0&language=EN&guiLanguage=en. WT/TPR/S/248 Trade Policy Review 
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(2018 in some member States); and the phasing out of  distillation for industrial and potable alcohol by 
2012.15   
24. Although it is not specifically intended to increase domestic prices, the requirement to 
achieve a 10% share for renewable energy in petr ol and diesel by 2020 will require greater production 
of ethanol and biodiesel and demand for feedstocks  to make them.  This increase in demand will 
probably be met by increased production as well as in creased imports, will require some land to be 
diverted from other crops, and is likely to have an impact on world markets, particularly for 
oilseeds.16 
 Rural development 
25. Under the Rural Development policy 2007-13 each  member State drew up a national strategy 
plan for rural development that assigned programmes to three objectives: 
- improving competitiveness of the agricultu re and forestry sector by supporting 
restructuring, development, and innovation; 
- improving the environment and the countryside by supporting land management;  and  
- encouraging diversification of the rural economy and improving the quality of life in 
rural areas. 
26. In addition, some funding must be used to  support "Leader" community projects (highly 
individual projects designed and executed by local pa rtnerships to address specific local problems). 
27. In its national strategy plan, a member State was able to choose from among a wide variety of 
measures set out for each objective in the Council Re gulation on rural development.  Funding had to 
be distributed across each of the three objectives a nd Leader projects.  In addition, the national 
strategy plan had to be submitted to the Commis sion to assess its consistenc y with the objectives and 
to improve coherence in rural development across the EU.17  All national strategy plans were agreed 
by end-2008 with total funding of abut €150 billion for 2007-13, with  an average EU contribution of 
60%.   
28. In their national strategies, all member States ha ve devoted more than half of total funding to 
the objectives of improving competitiveness and the environment, both of which are open only to the 
agriculture and forestry sectors.  The choice of measures varies widely from one country to another although almost all include training, farm modern ization, agri-environment payments, setting-up of 
young farmers, and agriculture and forestry infr astructure.  Across a ll member States, agri-
environmental payments represent 23% of funding,  followed by modernisation of agricultural 
holdings (11%), and payments to fa rmers in areas with handicaps (7%).
18 
(b) Market access 
29. Like domestic support, market access in the EU has also been changing over the past few 
years.  Most of the changes have been the resu lt of bilateral trade agreements or preferential 
                                                      
15 Council Regulation (EC) No 479/2008, 29 April 2008. 
16 Blanco Fonseca et al (2010). 
17 Council Decision 2006/144/EC, 20 February 2006, and Council Regulation (EC) No 1698/2005, 
20 September 2005. 
18 Directorate General for Agriculture and Rural Development (2010), pp. 134-150.  European Union WT/TPR/S/248 
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arrangements under the Generalized System of Pr eferences (Chapter II(4)(i)).  Tariff quotas operated 
by the EU have changed as a result of nego tiations under GATT Articles XXIV.b and XVIII. 
 Tariffs 
30. In 2011, the EU had 1,998 tariff lines for agri cultural products (WTO definition) with an 
average rate of 15.2%, considerably higher than tariffs for non-agricultural products which average 
4.1%.  Not only is the average tariff on agricultu ral products higher than for non-agricultural products, 
but tariff rates also vary widely from one product to another with a standard deviation of 18.9 for 
agriculture products compared to 4.1 for non-agriculture tariff lines.   Furthermore, tariffs also vary 
within the HS chapters that cover agricultural prod ucts, particularly for dair y products, live animals, 
and tobacco, which, along with grains, are also th e HS Chapters with the highest average tariffs 
(Table III.3 and Chapter III(1)(iv)). 
31. The EU applies a large number of non- ad valorem  tariffs to agriculture goods, most of which 
are specific duties but others are compound duties (an ad valorem duty plus a specific duty), mixed 
(an ad valorem or a specific duty) or more comp licated forms (such as those in the Meursing Table 
applied to some processed products).  In addition,  particularly for fresh fruits and vegetables, it 
applies seasonal tariffs that vary dependi ng on the date.  The large number of non ad valorem  tariffs 
for agricultural products accounts for changes in the average tariffs for agricultural products from one 
year to another.  As agricu lture prices vary so does the ad valorem  equivalent.  The average tariff on 
agricultural products was 15.2% in 2011, dow n from18.6% in 2006 (Chapter III(1)(iv)). 
32. In response to fluctuations in world prices, the EU has, within the limits of its bound tariffs, 
changed its MFN applied tariffs.  It reduced tariffs  on cereals to zero in January 2008 in response to 
high world prices, and reintroduced them at the end of October 2008.  For wheat, the tariff is based on 
the difference between world prices and 155% of th e intervention price, up to the bound rate of 
€95 per tonne for high quality wheat and €148 per tonne for high quality durum wheat19 with similar 
systems for other cereals.  The resulting duty has b een set at zero for:  durum wheat and high quality 
soft wheat since 1 July 2010;  maize since 17 August 2010;  and sorghum and rye since 
19 October 2010.  In February 2011, the Commission  announced that the in-quota tariff for low and 
medium quality soft wheat and feed barl ey would be suspe nded until end-June 2011.20  Such changes 
in duties in response to world market prices can re duce predictability and exac erbate fluctuations in 
world market prices. 
33. In late 2009, the EU announced that it had c oncluded negotiations with Latin American 
suppliers of bananas and would be  changing the market access arrangements for bananas by reducing 
the MFN tariff on imports of bananas from €176 per tonne in eight stages to €114 per tonne in 2017 (at the earliest or 2019 at the latest).  Since 1 January 2008, all ACP exports of bananas to the EU have qualified for duty- and quota-free access unde r separate trade and development agreements.
21 
  
  
                                                      
19 Government of Canada online information, "Wheat Report".  Viewed at:  http://www. 
canadainternational.gc.ca/eu-ue/policies-politique s/reports_wheat-ble_rap ports.aspx?lang=eng. 
20 WTO document TN/AG/S/11, 15 November 2004 provides an overview of the tariff forms used by 
the EU and some other WTO Members at that time. 
21 Europa Press release, "The EU-Latin Ameri ca Bananas Agreements – Questions and Answers", 
15 December 2009.  Viewed at:  http://europa.eu/rapid/pressReleases Action.do?reference=MEMO/09/557. WT/TPR/S/248 Trade Policy Review 
Page 110 
  
 Tariff quotas 
34. The EU notified 114 separate tariff quotas as be ing in operation in the calendar year 2009 and 
marketing year 2008/09.22  These included several cases where two or more quotas covered the same 
or similar products, for example there are eight tariff quotas for rice covering paddy rice, broken rice, 
husked rice, and milled rice, including three separ ate quotas for semi-milled and wholly milled rice. 
This is further complicated by the changing nu mber, product coverage, a nd quantities of different 
tariff quotas applied by the EU as it took account of the WTO commitments of acceding countries.  In 
addition, some quotas are so small it  is hard to consider them as commercially meaningful, such as 
quotas for 1,300 tonnes of millet, 4,504 tonnes of chemic ally pure fructose, or 7 tonnes of rice.  The 
Commission noted that changes to quotas were the result of EU enlargemen ts and subsequent GATT 
Article XXVIII negotiations, and stated that ta riff quotas are market access openings and an 
assessment of them should take this into account. 
35. The methods used to administer and allocate ta riff quotas vary widely; some are allocated to 
supplying countries while others are open to all pot ential suppliers; the validity of licences to import 
inside a quota vary from a few weeks to one year; and quotas are administered in different ways from licences on demand, to historical importers, to first-come-first-served.
23   
36. Fill rates vary widely from one tariff quota to anot her.  In the last notification for marketing 
year 2008/09 and calendar year 2009, 39 tariff quot as were completely used while 20 had no imports 
at all.   
 Special Agricultural Safeguard 
37. In its Uruguay Round commitments, the EU reserved  the right to use th e Special Agricultural 
Safeguard (SSG) on 539 tariff lines.  However, actua l use of the SSG has been on a limited range of 
products.  The price-based SSG has been made ope rational for chicken, tu rkey, and sugar products 
almost continuously, with some egg products adde d for marketing years 2007/08 and 2008/09.  The 
EU has calculated trigger volumes for fruit and vegetables on a regular basis but the volume-based SSG has never been implemented. 
(c) Export subsidies 
38. The export subsidy regime in the EU has not ch anged substantially over the past few years.  
Under its WTO commitments, the EU can use expor t subsidies for 20 different product groups, of 
which 10 actually received subsidies in the 2007/08 marketing year, the most recent year for which a 
notification has been made.
24  The amount of export subsidy vari es from one product to another and 
can vary from one market to another but, in res ponse to domestic reforms and higher world prices for 
agricultural products, some products no  longer receive export subsidies. 
39. As at February 2011, export subsidies continue  to be available for cereals, beef and veal, 
poultry meat, pig meat, eggs, sugar, and some proces sed goods but they have not been used on cereals 
since July 2006 or on sugar since October 2008.  In marketing year 2007/08, sugar products received 
most export subsidies in terms of both the quantit y of subsidized exports and the value of the 
subsidies, followed by pig meat, and in terms of the quantity of subsidized exports, wine (Chart IV.1).  
In January 2009, in response to low world pri ces, export subsidies were reintroduced for dairy 
                                                      
22 WTO document G/AG/N/EEC/67, 18 January 2011. 
23 The administration and allocation of tariff quotas ar e found in the EU notifications to the Committee 
on Agriculture G/AG/N/EEC/1 and addenda, G/AG/N/EEC/3 and Corr.1 and addenda, G/AG/N/EEC/14 and 
addenda, and G/AG/N/EEC/15 and addenda. 
24 WTO document G/AG/N/EEC/61, 15 October 2009. European Union WT/TPR/S/248 
 Page 111 
 
 
products in response to low world prices but we re removed in October of the same year.25  T h e  
application of export subsidies can exacerbate swings  in world prices and change the terms of trade to 
the detriment of other exporters.  However, the Commission noted that budget spending on export subsidies has fallen to less than one-tenth the level of  the early 1990s.  They also stated that there is 
no correlation between the use of export subsidies by  the EU and its share in the world market, and 
that the reintroduction of export subsidies in 2009 fo r dairy products did not fully bridge the gap 
between EU and prevailing world market prices at that time. 
05001,0001,5002,0002,5003,000
2003/04 2007/08Chart IV.1
Export subsidies in the European Union, 2003/04 and 2007/08
Source: WTO notifications. Source: WTO notifications.Skim milk powder
CheeseSugar
Incorporated products
Butter and butteroil
Other milk productsPigmeat
Beef meat€million
 
(iii) Domestic support levels 
40. Based on notifications to the WTO Committee on Agriculture (the most recent of which is for 
the marketing year 2007/08), the structure of domestic support in the European Union has changed 
considerably over the past few years as a result of  the changes to the Common Agricultural Policy.  
To some extent, the notifications, particularly for market price support, do not reflect the real 
economic value of support because the methodology used  to calculate the aggregate measurement of 
support (AMS) is based on a fixed external referen ce price used in the Uruguay Round.  As the 
administered prices have been reduced over the y ears, in some cases they are now below the fixed 
external reference price, which means that the AM S figure reported in notifications suggests negative 
support.  In the EU, the fixed external reference pric e is used to calculate the level of support provided 
for cereals, sugar, dairy, and beef.  For most othe r products, the level of support notified is the value 
of direct payments. 
41. Although the AMS is not a measure of the economic  value of support, it is clear that there has 
been a significant change in the structure of suppor t over the past few years.   Since marketing year 
2000/01, Green Box support has increased nearly thr ee-fold, to €62.6 billion, while Blue and Amber 
                                                      
25 Council Regulations (EU) No. 948/2010 and 953/2010, 21 October 2010. WT/TPR/S/248 Trade Policy Review 
Page 112 
  
Box support have both declined by three-quarters,  to about €5.2 billion and €12.4 billion respectively 
(Chart IV.2). 
010,00020,00030,00040,00050,00060,00070,000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08Chart IV.2
Domestic support in the Eu ropean Union, 2000/01-2007/08
Note:
Source:Blue box
The chart does not include de minimis support.
WTO notifications.€million
Amber boxGreen box
 
42. Support provided through the Amber Box has decreased over the past decade as direct 
payments under the Single Payment Scheme have  replaced intervention purchases and payments 
linked to the number of livestock and crop area.  As a result of reforms of the CAP, support for beef, 
olive oil, and fruits and vegetables, as measured by th e current total AMS, has either declined sharply 
or ceased altogether.  However, up to marketing year 2007/08, support for cereals, dairy, and sugar 
remained significant (Chart IV.3). 
43. Support provided through the Blue Box, which covers direct payments to farmers based on 
animal numbers or crop area under production-limiting pr ogrammes, also declined  considerably in the 
2004/05 to 2007/08 period (Chart IV.3) and will con tinue to decline, as the Health Check in 2008 
required that remaining Blue Box support should be integrated into the Single Payment Scheme, 
although member States may maintain current levels of coupled support26 for some animal premia 
payments.  From 2003, some new payment schemes were introduced in other areas that allowed 
partial decoupling of support for some products in cluding: protein crops, rice, cotton, olives, hops, 
energy crops, nuts, and bananas.  The amount provi ded for these products was small relative to total 
Blue Box subsidies but in some cases it was significa nt compared with the value of production of the 
product concerned:  for example, the value of cotton production in 2005/06 was €1,231.2 million and 
Blue Box support to cotton in the following year was €255 million.27  Under the Health Check, 
coupled support for most of these products has been stopped or is being phased out, the main 
exceptions being cotton and bananas.28   
                                                      
26 Council Regulation (EC) No 73/2009, whereas No. 40 to 45. 
27 WTO documents G/AG/N/EEC/59 of 2 March 2009 and G/AG/N/EEC/64 of 4 February 2010. 
28 Council Regulation (EC) No 73/2009, Articles 52 and 53. European Union WT/TPR/S/248 
 Page 113 
 
 
44. Under the 2003 Mid Term Review and subsequent reforms, price-support in the Amber Box 
and production-linked direct payments in the Blue  Box declined, while income support through the 
Green Box, mostly the Single Payment Scheme, incr eased (Chart IV.3).  Suppo rt provided for general 
services has remained fairly constant over the past ten years, but in 2007/08 there was a big increase 
in spending on extension and advisory services to €1,114 million from €347 million in the previous 
year.  Support for Structural assistance programme s has been relatively constant;  according to the 
authorities, the apparent increase in spending on  investment aids in 2007-08 was due to the 
notification covering the transition to a new progra mming period when expenditure typically tends to 
increase. 
45. In its annual publication on agricultural polic ies in OECD countries, the OECD measures the 
value of transfers to agricultural producers through the Producer Support Estimate (PSE) and 
associated indicators.  The methodology for calculati ng these indicators is different from that used to 
calculate the AMS, and the two sets of data are not compatible or comparable.  The methodology used 
by the OECD is evolving and was revised for the 2007 Monitoring and Evaluation report resulting in 
several changes, including the estimat es of support of specific commodities.29  The total PSE is "the 
annual monetary value of gross transfers from cons umers and taxpayers to agricultural producers, 
measured at the farm gate level, arising from po licy measures that support agriculture, regardless of 
their nature, objectives or impacts on farm production or income. It includes market price support, budgetary payments and budget revenu e foregone, i.e. gross transfers from consumers and taxpayers 
to agricultural producers arising from policy measu res based on: current output, input use, area 
planted/animal numbers/receipts/incomes (current , non-current), and non-commodity criteria."  Thus, 
the PSE includes estimates for the value of protec tion provided by market access measures, such as 
tariffs and tariff quotas, and includes direct payments to producers that are coupled to prices or production as well as direct payments decoupled from prices and production.
30   
46. The EU authorities noted that the PSE does not ta ke changes in market intervention measures 
(such as intervention prices, export subsidies, or ta riffs) directly into account.  The value of these 
measures is measured indirectly through the diffe rences between domestic and international prices for 
different commodities.  Therefore, reductions in ad ministered prices may not be fully reflected in a 
change in the PSE. 
47. The composition of the PSE in the EU has change d over the years (Table IV.6).  In 2000, 
transfers to specific commodities in EU-15 (as meas ured by the Single Commodity Transfer), mostly 
through market price support measures like interv ention prices and tariff protection, made up over 
half of the total PSE.  In 2009 market price support in EU-27 was less than a third of the total PSE as 
the Single Payment Scheme replaced both market pr ice support and payments linked to production.  
Over the same period world prices increased and the difference between international and internal EU 
prices declined.  The convergence in prices redu ces the PSE, which uses the difference between them 
in calculating the transfer from consumers to produ cers.  However, despite the decline in product-
specific support overall, it remains significant in some sectors, particular sugar, poultry, and beef and 
veal. 
48. In 2009, the PSE for the EU-27 was 24% of gross farm receipts, compared to the average for 
all OECD countries of 22%.  Although the relative leve l of support in the EU is close to the OECD 
average and though support has declined since 2004,  when it was €110 billion for EU-25, the large 
size of the agriculture sector in the EU means that the value of s upport for producers, at €87 billion in 
2009, represented over half of the total value of  support to producers for all OECD countries 
combined.  
                                                      
29 OECD (2007). 
30 OECD (2010a). WT/TPR/S/248 Trade Policy Review 
Page 114 
  
010,00020,00030,00040,00050,00060,00070,000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/0805,00010,00015,00020,00025,00030,000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/0805,00010,00015,00020,00025,00030,00035,00040,00045,00050,000
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08€million
c) Green box support in the European Union, 2000/01-2007/08€million
b) Blue box support in the European Union, 2000/01-2007/08Note:Chart IV.3
a) Amber box support in the European Union, 2000/01-2007/08
Does not include de minimis.
Source: WTO notifications.€millionOther
Olive oilSugarDairy
CerealsFruits and vegetablesBeef
Other
Sheeps and goats
Dairy
Beef
Cereals, oil seeds, 
protein crops etc.
Other
General servicesStructural adjustment, environment and 
regional assistanceDecoupled income support and SAPS
 European Union WT/TPR/S/248 
 Page 115 
 
 
49. In total, during the ten years to 2009, taxpayers  and consumers in the EU have transferred 
nearly €1 trillion to agricultural producers (Table  IV.6), which represents a high level of support and 
keeps production and exports higher, and imports lower, than would otherwise be the case.  However, 
the comprehensive reform of domestic support and export subsidies in the CAP has improved 
transparency and reduced trade and production distortions.  According to the EU authorities, studies 
have shown that complete liberalization of the CAP (that is, removing direct payments, market 
measures, all import tariffs and export refunds) w ould not dramatically lower production in the EU 
but would have a severe impact on farm income and the territorial balance.31  However, other studies 
indicate that the CAP, even after the reforms of th e past 20 years, continues to have negative effects 
both within and outside the EU.32 
Table IV.6 
Total producer support estimate and single commodit y transfer values for selected commodities, 2000-09 
(€ million or % of gross farm receipts for respective products) 
      2000      2001      2002      2003      2004 2005 2006   2007 2008 2009 
Producer Support Estimate      
€ million 94,709  90,073  98,289  98,134  109,727  99,736  99,008   93,689   92,795  86,980  
of which MPS 50,650 42,480 50,648 49,701 53,510 43,370 36,982 31,463 25,645 20,925 
PSE as %  gross farm receipts 33 30 34 34 33 30 29 24 22 24 
Single Commodity Transfers     
Common wheat     
€ million 1,041 50 13 141 1 1 0 -1 0 2 
of which MPS 951 0 0 141 0 0 0 0 0 0 
SCT as % gross farm receipts 9 0 0 1 0 0 0 0 0 0 
Rapeseed     
€ million 17 12 6 5 4 3 2 2 3 2 
of which MPS 0 0 0 0 0 0 0 0 0 0 
SCT as % gross farm receipts 1 1 0 0 0 0 0 0 0 0 
Refined sugar     
€ million 3,136 2,608 2,866 3,083 3 ,802 3,555 1,428 1,762 1,430 496 
of which MPS 3,090 2,591 2,859 3,083 3,795 3,549 1,404 1,732 1,394 428 
SCT as % gross farm receipts 55 53 53 65 65 56 33 49 45 15 
Milk     
€ million 15,314 11,369 17,240 16,463 17,608 11,748 8,300 2,207 1,057 410 
of which MPS 14,805 10,990 16,979 16,254 15,039 10,077 7,394 1,913 688 -50 
SCT as % gross farm receipts 41 28 46 45 41 28 21 5 2 1 
Beef and veal     
€ million 15,019 15,101 17,966 15,666 16, 833 13,444 12,693 10,765 8,121 8,149 
of which MPS 9,545 8,505 10,158 7,934 8,589 9,814 10,548 8,768 5,876 6,093 
SCT as % gross farm receipts 60 65 69 61 60 55 52 44 31 34 
Pig meat    
€ million 3,125 3,762 2,336 2,814 3 ,975 1,661 1,600 -381 2,837 938 
of which MPS 3,093 3,734 2,330 2,804 3,931 1,652 1,592 -452 2,778 856 
SCT as % gross farm receipts 12 13 10 12 14 6 5 -1 8 3 
Poultry meat           
€ million 2,267 2,394 2,552 2,586 4,4 31 3,435 2,875 4,881 4,643 4,926 
of which MPS 2,252 2,386 2,550 2,586 4,415 3,431 2,871 4,807 4,578 4,863 
SCT as % gross farm receipts 27 26 30 31 43 33 28 37 34 38 
Note:   EU-15 for 2000-03, EU-25 for 2004-06, and EU-27 from 2007. 
Source : OECD. 
                                                      
31 Nowicki et al (2009). 
32 Matthews (2010);  Huan-Niemi et al, (2009);  and OECD (2009) and (2010). 
 WT/TPR/S/248 Trade Policy Review 
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(2) TRADE  IN SERVICES 
(i) Introduction 
50. The Directive on Services in the Internal Mark et (the Services Directive) was adopted in 
December 2006, and the EU member States were  provided a three-year transitional period to 
transpose the Directive into national legislation.  However, several member States missed the end-
2009 deadline, and work to implement the Directive continued throughout 2010.33  Although the vast 
majority of the member States have chosen to impl ement the general principles and obligations of the 
Directive through a single act, implementation of the general principles has been carried out through 
several acts in France and Germany.  In addition, all member States have had to amend or abrogate 
existing legislation to ensure conformity  with the provisions of the Directive.34   
51. The Services Directive does not harmonize national legislation applicable to the services 
sector, but obliges member States to screen their au thorization schemes to ensure that they are 
maintained only if non-discriminatory, justified by an overriding reason relating to public interest, and 
proportionate.35  The Directive extends to all services except those specifically excluded from its 
scope, i.e:  financial services;  electronic communication services and networks;  transport services, 
services of temporary work agencies; healthcare and pharmaceutical services;  audiovisual and 
broadcasting services;  gambling activities;  certain social services;  private security services; and 
services by notaries and bailiffs appointed by an offi cial act of government.  Key services sectors such 
as financial services, telecommunications, and transport were not included as these have been liberalized under other rules.  The Commission has not drawn up concrete plans to cover the other 
excluded services.  Services activities are in any event always subject to the EC Treaty provisions, 
notably the fundamental freedoms of establishmen t (Article 43) and free movement of services 
(Article 49).  The Services Directive applies onl y to EU (EEA) citizens and legal entities established 
in the EU (EEA), and does not oblige member St ates to consider changes applicable to non-EU 
services suppliers.   
52. The global financial crisis had a significant imp act on EU(27) trade in commercial services 
with the rest of the world.  Overall, both imports and exports declined by approximately 16% in value 
between the third quarter of 2008 and the first half of 2009, and remained well below pre-crisis levels 
throughout 2009 and the first three months of 2010 (T ables IV.7 and IV.8).  However, with a strong 
and sustained recovery taking place during the rest of 2010, the value of EU imports and exports of 
services was back at pre-crisis levels by the third quarter of 2010.  Trade performance varied 
considerably across the services sectors, though.  While the decline, and subsequent recovery, was 
particularly sharp for transportation, travel, and fi nancial services, the impact on trade in other types 
                                                      
33 Estonia, Lithuania, and Finland adopted laws to im plement the Services Direc tive in December 2009.  
Slovenia, Belgium, Italy, Slovakia, and Poland passed their laws in March 2010, followed by Latvia (April), 
Portugal (May), Cyprus (July), and Ireland (in November 2010).  During 2010, the Commission was monitoring the implementation by the member States, of both the ne w legal frameworks adopted in order to implement the 
Services Directive as well as their efforts to establish operational "Points of Contact", notably the online portals 
providing businesses with information about the requirements and procedures to be complied with, and the 
"Internal Market Information Systems" facilitating admi nistrative cooperation between the authorities of the 
member States.   
34 Member States have been engaged in a process of  mutual evaluation, including evidence-based "peer 
review", to assess the implementation of Services Dir ective.  The Commission summarized the results of the 
mutual evaluation process in a communication dated 27 January 2011 (COM(2011) 20 final).  For more information, see http://ec.europa.eu/internal_market/services/services-dir/implementation_en.htm.   
35 In cases where an enterprise locat ed in one member State uses its ow n workforce to carry out work in 
another member State, the "hard core" of terms and cond itions applicable to those employees is defined by the 
legislation of the host member State.   European Union WT/TPR/S/248 
 Page 117 
 
 
of services appears to have been much more muted.   Although the growth path was not linear, trade in 
communication services actually expanded significantl y between the third quarter of 2008 and the 
third quarter of 2010, by more than 30% fo r exports, and just over 20% for imports.   
Table IV.7 
EU(27) exports of commercial services, 2008-10 
(€ billion) 
 2008 
Q3 2008 
Q4 2009 
Q1 2009 
Q2 2009 
Q3 2009 
Q4 2010 
Q1 2010 
Q2 2010 
Q3 
Commercial services 136.6 135.4 111.9 117.2 121.3 122.4 114.4 131.0 140.2 
   Transportation 36.2 34.0 26.7 26.8 27.3 27.3 27.7 32.5 34.1 
   Travel 24.4 16.2 12.8 17.6 22.6 15.2 13.6 18.9 25.1 
   Other commercial services 75.8 85.1 72.4 72.5 71.8 79.8 73.0 79.6 80.9 
      Communications services 3.0 3.3 3.1 3.0 3.4 3.5 3.5 4.0 4.0 
      Construction services 4.2 5.2 4.0 4.0 4.2 4.5 3.6 4.3 4.2 
      Insurance services 3.8 3.2 4.3 3.9 4.3 2.5 4.1 3.7 4.6 
      Financial services 11.7 12.8 9.9 9.8 9.9 11.4 10.5 11.7 11.3 
      Computer and information    
   services 7.3 8.8 7.6 7.1 7.0 8.4 7.4 9.0 8.9 
      Royalties and license fees 6.6 8.1 7.2 6.5 6.5 6.9 7.4 6.7 7.2 
      Other business services 38.1 42.2 35.5 37.3 35.4 41.2 35.6 39.0 39.2 
      Personal. cultural and recreational 
   services 1.1 1.5 0.8 1.0 1.2 1.5 1.0 1.3 1.5 
   Services not allocated 0.1 0.1 0.0 0.4 -0.4 0.1 0.1 0.1 0.1 
Source : Eurostat. BOP statistics.  Viewed at:  http://epp.euro stat.ec.europa.eu/portal/page/portal/balance-of-payments/data/ 
 database. 
Table IV.8 
EU(27) imports of commercial services, 2008-10 
(€ billion) 
 2008 
Q3 2008 
Q4 2009 
Q1 2009 
Q2 2009 
Q3 2009 
Q4 2010 
Q1 2010 
Q2 2010 
Q3 
Commercial services 117.9 113.4 98.7 99.7 106.2 103.6 101.9 110.7 119.2 
   Transportation 29.5 27.0 21.9 21.4 22.1 22.8 24.3 27.4 28.6 
   Travel 31.1 19.8 18.2 21.4 27.8 19.1 18.4 21.7 29.1 
   Other commercial services 54.0 64.1 54.8 54.4 53.5 58.0 55.8 58.4 58.5 
      Communications services 3.1 3.6 3.2 3.1 3.4 3.4 3.4 3.6 3.7 
      Construction services 2.0 2.5 2.0 2.3 2.1 2.3 1.9 2.2 2.5 
      Insurance services 1.6 2.3 2.1 1.9 1.8 1.8 2.1 2.1 2.3 
      Financial services 4.5 4.8 3.7 4.1 4.4 4.0 4.2 4.9 4.6 
      Computer and information        
   services 2.7 3.7 3.3 3.0 3.0 3.4 3.6 3.2 3.5 
      Royalties and license fees 10.4 12.0 10.6 9.5 10.2 10.5 11.1 10.5 10.3 
      Other business services 28.0 33.7 28.4 29.2 27.2 31.1 27.8 30.4 30.1 
      Personal. cultural and recreational    services 1.7 1.6 1.6 1.3 1.5 1.4 1.7 1.6 1.6 
   Services not allocated 3.2 2.4 3.7 2.4 2.8 3.7 3.5 3.2 3.0 
Source : Eurostat.  BOP statistics.  Viewed at:  http://epp.eurostat.ec.europa.eu/portal/page/portal/balance-of-payments/data 
 database. 
 
(ii) Financial services 
53. The Financial Services Action Plan (1999-2005), designed to create a single market for 
financial services in the EU, originally compri sed 42 legislative measures to harmonize the 
framework in the member States governing securities, banking, insurance, mortgages, and other forms 
of financial transactions.  In December 2005, th e Commission tabled a white paper setting out its WT/TPR/S/248 Trade Policy Review 
Page 118 
  
policy and objectives for the following five years, i.e. consolidating the progress achieved, completion 
of existing measures, enhancing supervisory co -operation and convergence, and removing the 
remaining barriers to integration.  The 13 "Post- FSAP Directives" cover amendments to Directives 
adopted under the FSAP as well as new initiatives, notably with respect to payment services in the 
internal market, electronic money institutions , and the Insurance Solvency II project.   
(a) Banking 
54. The legal basis for establishment of a financ ial services supplier continues to be Directive 
2006/48/EC of the European Parliament and of th e Council of 14 June 2006 relating to the taking up 
and pursuit of the business of credit institutions (recast), and Directive 2006/49/EC of the European 
Parliament and of the Council of 14 June 2006 on th e capital adequacy of investment firms and credit 
institutions (recast).36  Regulation of the banking system in the EU is based on the principle of home-
country control in relation to pruden tial supervision together with the principle of a "single passport".  
Banks are thus regulated in accordance with the lega l and institutional framework in the member State 
where the (parent) bank is incorporated.  For a ba nk conducting business in another member State, the 
supremacy of the supervisory authority of its "h ome" country will be recognized by the "host" 
country.  The single passport allows a bank licensed to do business in one member State the 
opportunity to do business in any other member State, whether through the establishment of a branch or cross-border provision of its services.  Non-EU credit institutions may avail themselves of the 
single passport provided they establish a subsidiary in an EU member State.  The subsidiary may subsequently provide services cross-border within the EU or open branches in other EU member 
States, under the supervision of the regulatory au thority of the home country of the subsidiary.
37   
55. Concerning the implementation of the Post -FSAP Directives, 15 member States had 
transposed the Payments Services Directive into national law by the end of 2009, and a further 11 
completed the process during 2010.38  The purpose of the Payment Services Directive, adopted in 
November 200739, is to ensure that electronic payments with in the EU become as efficient, easy and 
secure as domestic payments within a member State.  The Directive reinforces the rights protection of 
all users of payment services, and ensures that all euro or domestic electronic payment orders are 
effected within a maximum of one day.40  The Directive also provides the legal foundation for the 
Single Euro Payments Area, an initiative of the Eu ropean banking industry, offering an integrated 
                                                      
36 From a trade perspective, Directive 2002/65/EC of 23 September 2002 concerning the distance 
marketing of consumer financial services is also relevant .  The directive, which applies to the provision of "any 
service of a banking, credit, insurance, personal pension, investment or payment nature", establishes a 
regulatory framework for transactions that are not conducted  face-to-face, e.g. services  provided via the internet, 
email or by telephone, within an EU Member State or  across the EU.  The directive is implemented on a 
"country of origin" basis.  Thus, the supervisory authority of a member State is responsible for the 
implementation and enforcement of the Directive only in respect of the suppliers established on the territory of that member State.   
37 Non-EU credit institutions may also provide fina ncial services through branches in the EU.  
However, as these branches will be treated under nationa l rules in the absence of a harmonized EU framework, 
such "direct" branches may not benefit from the single pa ssport to provide services in other EU Member States 
(other than the one in which the branch is located).   
38 Poland is set to implement the Directive in 2011.   
39 Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007.   
40 The annual costs of operating fragmented national payments systems within the EU may have 
amounted to 2-3% of GDP in the past.  Although the Payments Services Directive generally provides a fully 
harmonized payments regime, it contains 23 optional provisions leaving a certain margin of discretion to the 
member States.  A "transposition group" has been set up to assist in the implementation and evaluate the approaches chosen.   European Union WT/TPR/S/248 
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market for payments services with no distinction be tween cross-border and national payments within 
the euro area.   
56. In order to level the playing field between e- money institutions and banks that also issue e-
money, the EU amended the electronic money di rective in 2009 through Directive 2009/110/EC on 
the taking up, pursuit and prudential supervision of the business of electronic money institutions 
(EMD2).  The new directive adopts a simpler, techno logy-neutral definition of e-money, and applies 
to all electronic money issuers: credit institutions, electronic money institutions, and post office giro 
institutions entitled under national law to issue el ectronic money. The EMD2 also establishes a new 
prudential regime, with lower initial capital requi rements of €350,000 (down from €1 million in the 
original e-money directive).  In addition, while th e original e-money directive provided for certain EU 
cross-border passport rights for electronic money institutions, the new directive improves the 
passporting regime and, in particular, extends th e passport rights to enable an electronic money 
institution to operate through a branch or agent in  another EU member State, in addition to the 
freedom to provide services cross-border.   
(b) Insurance 
57. The main legislative and policy developments fo r the insurance industry since the last Trade 
Policy Review of the EU concern the implementati on of Insurance Solvency II.  The project was 
adopted in July 2007, and the "Solvency II Directive" was published in December 2009.41  According 
to the European Commission, the rationale for this Directive was to facilitate the development of a 
Single Market in insurance services, until now hampered by the different regulatory requirements 
introduced by many EU member States.42  For the first time, economic risk-based solvency 
requirements are introduced across all member St ates.  Insurance and reinsurance businesses may 
calculate their Solvency Capital Requirement either using an approved internal model or subject to a 
European standard formula approach.43  The enterprises are also ob liged to conduct Own Risk and 
Solvency Assessments (ORSAs) to demonstrate, inter alia,  that they maintain an effective risk 
management system with proper identification of prospective risks.  In addition, the Directive 
establishes reporting requirements on the insurers bot h in terms of public disclosure (annual solvency 
and financial condition reports) and of their periodic (non-public) reports  to the supervisory authority.  
These requirements are applied at the individually regul ated entity level as well as at the group level. 
58. The Solvency II Directive str esses the need for convergence not only in the use of common 
tools but also regarding supervisory practice.  In this context, the Committe e of European Insurance 
and Occupational Pensions Superv isors (CEIOPS) was designated  a key function as an advisor to the 
Commission and the European Parliament, and in conducting peer reviews and comparing regulatory 
practice to ensure consistent implementation and application of the Solvency II regime.44  O n  
1 January 2011, CEIOPS was replaced by th e newly established European Insurance and 
Occupational Pensions Authority (EIOPA).  Accord ingly, the Commission proposed a limited set of 
amendments to the Solvency II Directive stem ming from the EIOPA Regulation (1094/2010/EC) in 
                                                      
41 Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009, on the 
taking-up and pursuit of the business of insurance and reinsurance ( OJ L 335, of 17 December 2009). 
42 European Commission online information, "Solvency II:  Frequently Asked Questions".  Viewed at 
http://ec.europa.eu/internal_market/insurance/docs/solvency/solvency2/faq_en.pdf. 
43 The new rules are designed to capture the real risks run by any particular insurer, resulting in 
solvency requirements that are more risk-sensitive and sophisticated than in the past.   
44 CEIOPS was established by the Commission through Decision 2004/6/EC of 5 November 2003, 
subsequently repealed and replaced by  Decision 2009/79/EC, and made up of  high-level representatives of the 
supervisory authorities in EU member States.  The Co mmission and representatives of Norway, Iceland, and 
Liechtenstein have participated as observers.   WT/TPR/S/248 Trade Policy Review 
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January 2011.  The proposed amendments cover more specific tasks for EIOPA such as ensuring 
harmonized technical approaches in the use of ratings  in relation to the solvency capital requirements, 
and extending the implementation date by two months  to provide better alignment with the end of the 
financial year for the majority of insurance a nd reinsurance undertakings.  The proposal also 
empowers the Commission to specify transitional measures in certain areas, if deemed necessary to 
avoid market disruption and allow a smooth transitio n to the new regime under Insurance Solvency II.    
59. Insurance and reinsurance businesses will continue to be supervised at member State level.  If 
a third-country insurer establishes an authorized subs idiary in an EU member State, that subsidiary 
will itself be entitled to provide services to clients in other member States (single passport), since it is 
an EU undertaking.  However, third-country insure rs with a head office outside the European Union 
are required to establish a local branch in order to  pursue direct business in individual EU member 
States if they wish to pursue their business thr ough a commercial presence (Mode 3).  The supply of 
cross-border direct insurance and reinsurance (Mode  1) remains a matter for the member States, in 
compatibility with their WTO obligations.   
60. An important aspect of the Solvency II Direc tive is the power granted to the European 
Commission to determine whether third-country solven cy regimes are equivalent to those applied in 
the EU.  Equivalence under Solvency II is not a si ngle determination in relation to a third-country’s 
solvency regime, but three separate decisions c oncerning reinsurance (Article 172), calculation of 
group solvency (Article 227), and parent undert akings outside the Community (Article 260). 
61. In the case of reinsura nce, where a third-country solvency regime has been found equivalent 
to that provided in Solvency II, reinsurers from th at jurisdiction will be treated in exactly the same 
manner as EU reinsurers.  In particular, they will not be required to pledge  assets to cover unearned 
premiums and outstanding claims provisions in rela tion to such reinsurance contracts (Article 173).  
However, if a third-country solvency regime is not deemed equivalent, then it is up to the individual 
EU member State to determine the treatment of rein surers based in that third country, which could be 
required, for example, to comply with additional requirements, such as the posting of collateral in 
relation to the risks they reinsu re in the European Union.   
62. EIOPA (previously CEIOPS) has been tasked  with identifying and assessing third-country 
regimes that could be included in a positive equi valence finding to be adopted by the Commission.45  
The complexity of the solvency regimes of some third countries means that this could be a time-
consuming task.46  According to the present timetable, the Commission is committed to publishing 
                                                      
45 The starting point for such considerations would be whether a third-country's supervisory regime is 
fully risk based, or steps have been taken to move towards a risk-based system.  However, it is also recognized 
that systems that are not risk-based in the same manner as  Solvency II could offer similar levels of protection to 
the policyholders and beneficiaries.   
46 The approach for assessing the so lvency regime of the United States remains to be determined.  
CEIOPS advised the Commission to include Switzerland and Bermuda in the "first wave" of equivalence 
assessments, as well as Japan (for reinsurance).  Further equivalence assessments are to be carried out after the 
first wave.   European Union WT/TPR/S/248 
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decisions on equivalence by July 2012.47  The Insurance Solvency II re gime is to be operational and 
applicable to the insurance industry from 1 January 2013.48   
(c) Response to the global financial crisis 
63. As the turmoil in the financial markets unfol ded in the second half of 2008, EU member 
States took urgent measures to safe guard and restore stability in their financial systems.  Governments 
acted under national law.  The Commission is of the vi ew that the crisis demonstrated clearly that the 
absence of an EU framework hamper ed the ability of the member States to deal with the problems, 
particularly in relation to cross-border banks within the EU.   
64. The Commission published guidance to the member States in October and December 2008 to 
ensure that support to financial institutions in resp onse to the financial crisis does not unduly distort 
competition by allowing beneficiary banks to  have access to capital and funding without 
differentiating beneficiary banks according to their ri sk profiles.  In December 2008, the Commission 
also adopted a temporary framework for state-ai d measures to support access to finance applicable 
horizontally to all sectors.  The temporary framework was modified in 2009, and replaced by a new temporary framework in December 2010.  Betwee n October 2008 and October 2010, the Commission 
approved aid schemes of 22 member States pursuant to the temporary framework.  The maximum 
volume of Commission-approved measures from the beginning of the crisis until 1 October 2010, including the schemes and ad hoc interventions, amounts to €4,590 billion, or some 40% of EU-27 
GDP for 2009 (Chapter III(3)(iii)(c)).
49  In its assessments, the Commission has evaluated all 
measures against the criteria for compliance with stat e-aid rules, in particular the principle of non-
discrimination, to preserve the proper functioning of the internal market.   
65. Following changes to financial instruments accounting rules (IAS 39) by the International 
Accounting Standards Board (IASB), the Commi ssion adopted amendments to the accounting 
standards on 15 October 2008.  The changes allowed comp anies, in rare circumst ances, to reclassify 
assets held for trading as assets held until maturity, so that price fluctuations would not be reflected in 
their financial statements for these assets.  As the appropriate treatment of impaired assets of banks 
was considered essential in restoring confidence in the financial markets and the long-term viability of 
the banking sector, the Commission provided Guidance on the Treatment of Impaired Assets in the 
EU Banking Sector on 25 February 2009 after exte nsive discussions with the member States and on 
account of recommendations by the European Central Bank.  The key principles to be followed in such interventions included (i) full transparency an d disclosure of impairments prior to government 
intervention;  (ii) a coordinate d approach to the identification of assets eligible for asset relief 
measures based on common principles;  (iii) adequa te burden-sharing of the costs (between the 
shareholders, the creditors, and the State) and re muneration (to the State);  and (iv) appropriate 
restructuring, including measures to remedy distorti ons to competition with a view to the long-term 
viability and normal functioning of the European banki ng industry.  Assistance could, for example, 
take the form of asset purchase, swaps, insurance, guarantees or a combination of such measures.  The 
                                                      
47 The current Solvency II Directive does not foresee any transitional regime for third-country 
equivalence.  Should the Directive be amended, a third co untry eligible for inclusion in the transitional regime 
would be likely to receive the same benefits from equivalence as it w ould have with a positive equivalence 
finding.  In the absence of a Commission decision on eq uivalence, or transitional measures, the treatment of a 
third-country reinsure r will remain within the compet ence of each member State.   
48 Very small insurers, i.e. those with gross annual premium income below €5 million or gross 
technical reserves not exceeding €25 million, are ex cluded from the scope of the Directive.   
49 European Commission document COM(2010) 701final, 1 December 20 10.  Viewed at:  http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0701:FIN:EN:PDF.   WT/TPR/S/248 Trade Policy Review 
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measures would be elaborated and implemented by the member States, but subject to assessment and 
approval by the Commission.   
66. A schematic overview of the Commission's policy initiatives in the aftermath of the financial 
crisis is presented in Chart IV.6 .  The EU legislative response to the financial crisis has been based on 
the following principles: all activities of systemic importance should be regulated and supervised; the 
finance industry needs to be better capitalized and with less leverage; and unintended incentives in the 
financial sector must be eliminated.  In this c ontext, some of the new regulatory initiatives have 
implications for the supply of financial services into the EU.   
DEEPENING THE SINGLE MARKET
NEW SUPERVISORY ARCHITECTURE
MACRO/ESRB MACRO/ESAs
REGULATORY REFORM
MARKETS
- Efficiency
-I n t e g r a l i t y
- TransparencyFINANCIAL
INSTITUTIONS
- Stability
-G o v e r n a n c e
- TransparencyCONSUMERS
-C o n f i d e n c e
- Protection
-I n c l u s i o n
CRISIS MANAGEMENT
Supervisory intervention tools ESA powers Network of resolution fundsChart IV.4
Schematic representation  of policy initiatives
Source: European Commission.  
67. The new regulations on credit rating agencies (C RAs) introduced mandatory registration for 
all CRAs operating in the EU.50  Since several credit rating agen cies have their headquarters and 
several subsidiaries outside the EU, the regula tion introduces an endorsement regime allowing CRAs 
established and registered in the EU to endorse cred it ratings issued in third countries, provided the 
latter comply with requirements that are as stringent  as the requirements provided for in the Directive.  
Additionally, a certification system was introduced  for smaller CRAs from third countries with no 
presence or affiliation in the EU.  Such certification is possible after determination by the Commission of the equivalence of the legal and su pervisory framework of a third country to the 
requirements of the Directive.  The equivalen ce mechanism envisaged does not grant automatic 
access to the EU but offers the possibility for small CRAs from a third country to be assessed on a 
case-by-case basis and be granted an exemption from some of the organizational requirements for 
CRAs active in the EU, including the requirem ent of physical presence in the EU.   
                                                      
50 Regulation (EC) No 1060/2009 of 16 September 2009. European Union WT/TPR/S/248 
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68. Another regulation with implications for th ird countries is the Directive on Alternative 
Investment Fund Managers (AIFM), adopted in 2010.51  It is expected to be transposed into national 
legislation by summer 2013.  The Directive does not  regulate Alternative Investment Funds (AIFs), 
which can therefore continue to be regulated and supervised at the national level, but regulates the 
activities of AIF managers (AIFMs).  After a long a nd protracted negotiation, the specific rules that 
were adopted regarding third-c ountry managers and funds foresee the progressive extension of 
passporting rights to EU AIFMs marketing non-EU AIFs, and to non-EU AIFMs marketing EU- and 
non-EU AIFs.   
69. In specific areas, the Commission,  the European Central Bank, and EU member States have 
taken a leading role in shaping a coordinated globa l response through the G20, the Financial Stability 
Board, and international institutions such as the IM F and the Bank for International Settlements.  New 
capital and liquidity requirements are being introd uced to strengthen the resilience of the banking 
sector in facing future adverse conditions.  Fo llowing agreement by the Group of Governors and 
Heads of Supervision of the central banks (Bas el Committee) in September 2010, the new higher 
standards were endorsed at the G20 summit in Novemb er 2010.  The "Basel III"  framework is to be 
transposed into domestic legislation by 1 January 20 13 and, to allow the additional requirements to be 
applicable and phased in gradually between  the beginning of 2013 and 1 January 2019.52  T h e  
Commission intends to table the n ecessary legislative proposals, i.e. a revised Capital Requirements 
Directive and other relevant amendments, in J une 2011.  Systemically important banks will be 
required to have loss-absorbing capacity beyond the standards set by Basel III.53  The Financial 
Stability Board and the Basel Committee continue to  work on an integrated approach to these 
institutions.54   
70. The Commission has outlined a number of additional regulatory measures to be a future EU 
framework for crisis manageme nt in the financial sector.55  A central element would give powers and 
tools for authorities to manage the resolution of fa iled banks.  Contributions from the financial sector 
could be channelled into resolution funds.  The f unds could be used to finance the orderly winding 
down or restructuring of a troubled institution, for example through the establishment of a temporary 
                                                      
51 European Parliament legislative resolution of 11 November 2010 on the proposal for a directive of 
the European Parliament and of the Council on Alterna tive Investment Fund Managers and amending Directives 
2004/39/EC and 2009/…/EC (COM(2009)0207 – C7-0040/2009 – 2009/0064(COD)).   
52 Compared to "Basel II", the new fully phased-i n framework will raise the minimum common equity 
requirement for banks from 2% to 4.5% and the minimum Tier 1 capital ratio from 4% to 6%, while also applying a more stringent definition of banks' cap ital.  In addition, Base l III introduces a new capital 
conservation buffer (2.5%, to be phased in from 2016), a non-risk based leverage ratio, a liquidity coverage 
ratio, and a net stable funding ratio.  Depending on the national circumstances and at the discretion of the national authorities, banks may also be required to hold a counter-cyclical buffer (0-2.5%) of common equity or 
other fully loss-absorbing capital, to be built up in peri ods of excessive credit growth and drawn upon in times 
of financial stress.   
53 Large, complex or systemic interconnected institutions, whose disorderly failure could cause severe 
disruption to the overall financial system and harm economic activity.   
54 Combinations of capital surcharges, contingent capital, and bail-in debt are being considered as 
additional measures applicable to SIFIs.  The Financia l Stability Board has reportedly drawn up a world-wide 
list of SIFIs, but no such list is p ublicly available.  According to the Financial Times , the list comprises 
30 global financial institutions.  Of those, 12 banks an d 4 insurance groups are headquartered in EU member 
States ( Financial Times , "Thirty Financial Groups on Systemic Risk List", 29 November 2009).   
55 See European Commission documents COM(2010) 301, 2 June 2010.  Viewed at: 
http://ec.europa.eu/internal_market/finances/docs/general/com2010_en.pdf;  COM(2010) 254, 26 May 2010. 
Viewed at:  http://ec.europa.eu/internal_market/bank/docs/crisis-management/funds/com2010_254_en.pdf;  and 
COM(2010) 579, 20 October 2010.  Viewed at:  http://ec.europa.eu/internal_market/bank/docs/crisis-management/framework/com2010_579_en.pdf. WT/TPR/S/248 Trade Policy Review 
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bridge bank to carry on its business, asset separati on (bad bank), or debt write down.  For the 
protection of consumers, some  40 deposit guarantee schemes are operated in the EU at present, 
covering differing groups of de positors and deposits.  Directiv e 94/19/EC on Deposit Guarantee 
Schemes was amended in March 2009 as an emerge ncy measure to raise the coverage level and 
standardize the payout delay.56  Following a clause contained in the 2009 Directive, the Commission 
made a proposal in July 2010 for a thorough revision of the Directive on Deposit Guarantee Schemes.  The proposed text confirmed the €100,000 figure, among other measures.   
71. The Commission also intends to revise the Investor Compensation Schemes Directive
57, the 
Market Abuse Directive58, the Markets in Financial Instruments Directive (MiFID)59, and the 
Insurance Mediation Directive60, and the introduction of European rules to protect insurance policy 
holders will be examined in a white paper on in surance compensation schemes.  The Commission has 
also presented two recommendations  on remuneration principles in the financial services sector and 
for directors of listed companies.61   
72. Overhauling the EU's supervisory architecture,  three new European supervisory authorities 
(ESAs) and a European Systemic Risk Board (ESRB) have been established with effect from 
1 January 2011.62   The three supervisory authorities – th e European Banking Authority (EBA), the 
European Securities and Markets Authority (ESMA) , and the European Insurance and Occupational 
Pensions Authority (EIOPA) – have  taken over all the functions of the previous committees, and been 
given additional competencies, including to (i) devel op proposals for technical requirements to define 
more clearly common standards for the application of legislative acts, respecting the improved 
regulation principles;  (ii) resolve cases of disag reement between national supervisors, in instances 
where legislation requires them to cooperate or to  agree;  (iii) contribute to ensuring consistent 
application of existing and future EU technical rules (including through peer reviews);  and (iv) play a 
coordinating role in emergency situations.   
73. For the ESAs to work effectively, the existing fi nancial services Directives have been, or will 
be amended to lay down the precise scope for the ES As to exercise some of their new powers.  The 
areas needing amendments are, broadly:  (i) defi ning the appropriate areas in which the authorities 
will be able to propose technical requirements as an  additional tool for supervisory convergence, and 
with a view to developing a single rulebook to en sure strengthened ability, equal treatment, lower 
compliance costs, and the prevention of regulatory arbitrage;  (ii) detailing how the authorities will 
                                                      
56 Directive 2009/14/EC of 11 March 2009.  The coverage level was raised in stages, from 20,000 to at 
least €50,000 by June 2010, and to a uniform level of €100,000 by the end of 2010, with depositors to be 
reimbursed by the guarantee scheme within seven calenda r days in the case of a failing bank.  In addition to 
financial stability considerations, potential distortions to  competition arising from actions by individual member 
States seem to have played a role in the EU decision.  In its opinion of 18 November 2008, the European Central 
Bank emphasized "that any increase in the coverage exce eding the latter of the above mentioned amounts (i.e. 
€50,000 and €100,000) should be preced ed by close coordination at the EU level, as substantial differences 
between national measures may have a counter-productive effect and create distortions in the single market." 
(Opinion of 18 November 2008 at the request of the Council of the European Union on a proposal for a 
Directive of the European Directive 94/19/EC on deposit-guarantee schemes as regards the coverage level and 
the payout delay (CON/2008/70)).   
57 Directive 1997/9/EC.   
58 Directive 2003/6/EC.   
59 Directive 2004/39/EC, amended by Directives 2006/31/EC, 2007/44/EC, and 2008/10/EC.   
60 Directive 2002/92/EC. 
61 C(2009) 3159 and C(2009) 3177 of 30 April 2009.   
62 The Commission made the original proposal on 23 June 2009.  On 22 September 2010, the European 
Parliament, following agreement by all member States, voted through the new supervisory framework proposed by the Commission.  This was confirmed by the ECOFIN Council on 17 November 2010. European Union WT/TPR/S/248 
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settle disagreements betwee n national supervisors in a balanced  manner, in the areas where common 
decision-making processes or cooperation procedures already exist in sectoral legislation;  and 
(iii) general amendments considered necessary for the existing Directives to operate in the context of 
the new ESAs, e.g. by renaming the level 3 committees as the new Authorities and ensuring the 
appropriate gateways for the conti nued exchange of information.   
74. Specifically, the London-based EBA has taken over all existing and ongoing tasks and 
responsibilities from the Committee of European Banking Supervisors (CEBS), and has broad 
competences, including supervisory coordination, and the provision of advice to the EU institutions in 
the areas of banking, payments and e-money regul ation as well as on issues related to corporate 
governance, auditing, and financial reporting.  It is  to play a key role in cross-border coordination 
under the crisis management framework, notably in  the development and coordination of recovery 
and resolution plans.  The Paris-based ESMA is res ponsible for ensuring the integrity, transparency, 
efficiency, and orderly functioning of securities markets,  as well as enhancing investor protection, and 
as such, will have the authority to examine certa in financial products and may, if necessary, 
temporarily ban them.  From 1 July 2011, ESMA w ill have exclusive supervisory powers over credit 
rating agencies, and is also likely to be grante d supervisory power over trade repositories under the 
proposed regulation on OTC derivative markets.  Th e main responsibilities of the EIOPA, located in 
Frankfurt, are to ensure transparency of mark ets and financial products , and the protection of 
insurance policyholders as well as members and bene ficiaries of pension schemes.  Also based in 
Frankfurt, the ESRB, as an independent EU body re sponsible for the macro-prudential oversight of 
the financial system within the EU, will, inter alia , monitor market developments, assess risks to the 
stability of the entire financial system, and is sue risk warnings and recommendations when 
necessary.63   
(iii) Transport 
75. Recognizing the importance of an efficient trans port system for the free movement of people 
and goods, European Union transport policy aims  to complete the EU internal market.64  In 2001, the 
Commission published a white paper, setting out an ag enda for European transport policy up to 2010, 
and emphasizing the need to manage transport by achieving a better balance between modes.  Much 
has been achieved since then.  Further market opening has taken place in aviation, road, and rail 
transport.  The Single European Sky programme h as been launched.  Safety and security of all 
transport modes has increased.  New rules on working conditions and on passenger rights have been 
adopted, and protection of the environment is a rec ognized goal.  Trans-European transport networks 
have encouraged the construction of high-speed railway  lines, and contributed to territorial cohesion.  
International ties and cooperati on have been strengthened.   
76. Nevertheless, EU transport policy faces signifi cant challenges, given its geographical scope 
(almost the whole continent of Eu rope) and population ser ved (500 million citizens).  There are clear 
concerns over the future use of global resources su ch as oil, and there is general agreement on the 
                                                      
63 The General Board consists of about 60 members including the President and the Vice-President of 
the European Central Bank (ECB);  the Governors of the national central banks of the member States;  one 
member of the European Commission;  the Chairpersons of the EBA, the EIOPA, and the ESMA;  the Chair and 
the two Vice-Chairs of the Advisory Scientific Commi ttee (ASC);  the Chair of  the Advisory Technical 
Committee (ATC);  as well as others without voting rights.  Fourteen of those members form the Steering 
Committee. 
64 For the transport sector itself, competition and state-aid rules for firms operating in rail, road, and 
inland waterway transport were introduced at the outset th e European integration process.  Although the EU is 
moving towards a level playing field in an increasingly integrated transport market, some taxation and subsidies issues remain to be addressed.   WT/TPR/S/248 Trade Policy Review 
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need to reduce world greenhouse gas emissions.  In th is context, the Commission is preparing to adopt 
a new white paper, looking again at developments in the trans port sector, future challenges for 
transport, and at policy initiatives to be  considered in the period 2010-20.   
77. Starting with the 1992 Maastricht Treaty, the EU  has been working on the establishment and 
development of a trans-European infrastructure network in the area of transport (TEN-T).65  T h e  
network covers infrastructure of all modes of transport, as well as the traffic management systems, and the positioning and navigation systems, ne cessary to operate them.  The TEN-T should be 
interoperable in all its components, and allow for connection with the transport networks of the EFTA 
member states, states that are candidates for EU membership, and states in the eastern and southern 
neighbourhood.  The first Guidelines for the de velopment of TEN-T were  established in 1996
66, and 
amended to respond to evolving circumstances.67  According to EU estimates, investment in TEN-T 
from inception until 2013 will total approximately € 800 billion, of which about one third from EU 
sources.68  However, the development of TEN-T has been marked by cost  increases, persisting 
bottlenecks, and delays in the implementation of projects, particularly cross-border sections.  A 
review process started in February 2009, and will lead to the overhaul of the TEN-T policy.69   
(a) Road transport 
78. At present, road transport relations between individual member States and third countries 
(except Switzerland) are governed by bilateral agre ements.  Negotiations to establish a common road 
transport market between the EU and its south- eastern European neighbours (Albania, Bosnia and 
Herzegovina, Croatia, FYROM, Montenegro, Serbia , and Kosovo) are ongoing.  In parallel to the 
adoption of EU legislation (the acquis ) by south-east European partners, markets will be opened 
progressively under a quota system.  The quota will be additional to any quotas established under 
existing bilateral agreements with individual EU member States, agreements that are to remain in 
force.   
79. The internal EU legislation applicable to road transport services establishes common rules 
regarding access to the profession and to the mark et, sets minimum standards for working time, 
driving time, and rest periods for professional tr ansport providers, and covers vehicle taxation 
(minimum annual tax) and common rules on tolls and user charges for heavy goods vehicles.  New road transport regulations were adopted in De cember 2009, but previous legislation will remain 
applicable until 3 December 2011.   
80. For road passenger transport, cross-border ca rriage of passengers by coach and bus will be 
governed by Regulation No. 1073/2009, with application from 4 December 2011.
70  Within the EU, 
any operator in the possession of a valid EU licence, issued in the member State of establishment, is 
granted free access to the entire EU market for international road passenger transport.71  T h e  
                                                      
65 Treaty on the Functioning of the European Union (TFU), Title XVI, Articles 170-172.   
66 Decision No. 1692/96/EC of the European Parliament and of the Council of 23 July 1996. 
67 Decisions Nos. 1346/2001/EC, 884/2004/EC and 661/2010/EU.  
68 See Annex 3 of "TEN-T Policy Review – background papers", Commission Staff Working 
Document COM(2010) 613.  Funding from EU sources includes both EU  grants (some €98.5 billion for the 
period 1996-2013) and guarantees (about €133 billion in total for the same period).   
69 European Commisson online information.  Viewed at:  http://ec.europa.eu /transport/infrastructure/ 
tent_policy_review/tent_policy_review_en.htm.   
70 The regulation replaces Council Regulation (EEC) 684 /92 and Council Regulation (EC) No. 12/98.   
71 The regulation governs transportation between member  States or transit through a member State.  
Passenger transport between a member State and a third country is subject to bilateral agreement between the 
two countries.   European Union WT/TPR/S/248 
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regulation covers regular services (requiring national authorization by a competent authority), special 
regular services (e.g. transport of schoolchildren) performed under a contract between the organizer 
and the transport operator, and occasional service s carried out under cover of a journey form.72  Own-
account transport is exempt from the authorization scheme, but requires a certificate issued by the 
member State where the vehicle is registered.  Th e regulation also covers cabotage operations.  On 
30 November 2010, the European Parliament and C ouncil agreed on a set of basic passenger rights, 
with additional rights for passengers travelling a dist ance of more than 250 kilometres.  The European 
Parliament and the Council formally adopt ed the regulation on 16 February 2011.73  This means that 
after application of the legislation in 2013, EU le gislation will protect passengers travelling by all 
transport modes.   
81. For goods transport, Regulation (EC) No. 1072/ 2009 simplified and streamlined the rules to 
minimize the administrative burden on the road haulag e industry, and harmonized rules applicable to 
cabotage.  Within the EU, cabotage was opene d up progressively under Regulation No. 3118/93 of 
25 October 1993.  However, as the regulation re ferred to cabotage operations carried out by non-
resident transport operators on a "temporary" basis, a more harmonized approach was necessary.  
Regulation 1072/2009 clarifies the notion of "temporary" as meaning the provision of a maximum of 
three cabotage operations within a period of seven days following the unloading at the end of the international journey.  The cabotage provisions of the regulation entered into force on 14 May 2010.  
The same provisions apply for all member States except for Bulgaria and Romania, whose hauliers 
face restrictions in some member States until 1 January 2012.   
82. According to EU estimates
74, international road freight trans port consists mostly of bilateral 
traffic between EU member States (82%), leaving 15%  to be accounted for by cross-trade (third-party 
traffic), and 3% to cabotage.  For the EU as a whol e, the cabotage penetration rate is no more than 
1%.  Extra-EU international road freight transport accounts for approximately 5% of total EU international freight transport, but is relatively im portant for Bulgaria, Sweden, Estonia, Latvia, and 
Finland (and to some extent for Denmark and Lithuania).
75   
(b) Rail transport 
83. The Commission has taken an active role in restructuring the rail transport market and 
enhancing the importance of railways relative to othe r modes of transport.  Initiatives have focused on 
opening the rail transport market to competition w ithin and between EU member States, improved 
interoperability and safety of nationa l networks, and the development of  rail transport infrastructure.  
The First Railway Package (2001) gave rail freight  operators access to th e Trans-European Rail 
Freight Network on a non-discriminatory basis.76  The Second Railway Package (2004) accelerated 
the liberalization of rail freight services, opening the market for freight by rail between EU member States from 1 January 2006, and for domestic rail freight from 1 January 2007.   The Third Railway 
Package (2007) introduced open access rights, includi ng cabotage, for international rail passenger 
                                                      
72 Public passenger transport services are governed by Regulation (EC) No. 1370/2007.   
73 Regulation (EU) No. 181/2011 of the European Parliament and of the Council of 16 February 2011 
concerning the rights of passengers in bus and coach transport and amending Regulation (EC) No. 2006/2004, 
OJ L55/11. 
74 European Commission online information.  Viewed at:  http://ec.europa.eu/transport/road/doc/ 
2009_road_freight_vademecum.pdf.  The data refers to 2006. 
75 Data for international transport by carriers resident  within the EU.  Road fre ight transport by non-EU 
registered hauliers on EU territory is not covered in EU statistics.   
76 The 2001 package also clarifie d the rules for issuing licences and safety certificates to railway 
undertakings, the allocation and pricing of railway infrast ructure, the roles and responsibilities of the regulatory 
bodies in the member States, and the separation of acc ounts between subsidized and non-subsidized activities.    WT/TPR/S/248 Trade Policy Review 
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services by 2010.  It also strengthens rail passe ngers' rights under Regul ation 1371/2007 on rail 
passenger rights and obligations, which entered into force on 3 December 2009.77  The regulation 
provides passenger protection thr ough information requirements, lia bility for passengers and their 
luggage, reimbursement and re-routing as well as compensation and assistance in the case of delays, 
missed connections, and cancellations, with speci al requirements for passengers with reduced 
mobility.  The regulatory framework governing inte roperability and safety was amended with the 
adoption of Directives 2008/57/EC and 2008/110/EC.78  Furthermore, a regulation on rail freight 
corridors was adopted on 20 October 2010.79   
84. On 22 July 2010, a plan was adopted for the deployment of the European Rail Traffic 
Management System (ERTMS).  The ERTMS networ k is expected to cover 30,000 km by 2020.   
85. In accordance with the "Guide lines for transport in Europe  and neighbouring regions",80 the 
EU favours extending the major trans-European tr ansport axes to neighbouring countries.  The 
Commission encourages the implementation of EU-compliant rules on railway safety and interoperability in the western Balkans.   
(c) Maritime transport 
86. In January 2009, the Commission presented a co mmunication outlining the strategic goals and 
recommendations for EU maritime policy until 2018.
81  In addition to human resources, seamanship, 
and maritime know-how, the communication also addresses improved environmental performance, 
maritime transport safety, security, maritime surve illance, and maritime transport as a key element of 
EU energy security.  In intra-EU seaborne trade, the aim is to establish a "European maritime 
transport space without barriers" by reducing un necessary administrative formalities, duplicated 
cross-border controls, and all other factors hamper ing the potential growth of short-sea shipping.  
Committed to open and fair competition in shipping, as well as to quality shipping, the EU will work to further these objectives with its partners in in ternational fora such as the IMO, ILO, WTO, and 
WCO, and through a strong and growing network of  bilateral maritime transport agreements.   
87. Directive 2010/65/EU on reporti ng formalities for ships arrivi ng in and/or departing from 
ports of EU member States was adopted in October 2010.
82  The adoption of the Directive is part of 
the efforts to promote short-sea shipping in the EU  by identifying and eliminating obstacles in order 
to facilitate maritime transport and reduce admi nistrative burdens for shipping companies.  The 
Directive simplifies and harmonizes the reporting form alities required by legal acts of the EU and by 
EU member States by rationalizing the use of diffe rent forms and by setting up a "single window" for 
transmitting electronic forms.   
                                                      
77 Regulation (EC) No. 1371/2007 of the European Parliament and of the Council of 23 October 2007 
on rail passengers' rights and obligations.   
78 Directive 2008/57/EC of the European Parliament and of the Council of 17 June 2008 on the 
interoperability of the rail system within the Community (OJ L191, 18 July 2008) and Directive 2008/110/EC of 
the European Parliament and of the Council of 16 December 2008 amending Directive 2004/49/EC on safety on 
the Community's railways (OJ L 345, 23 December 2008).   
79 Regulation No. 913/2010 of the European Parliament and of the Council of 20 October 2010 
concerning a European rail network for compe titive freight (OJ L 276, 20 October 2010).   
80 European Commission document COM(2007) 32, 31  January 2007.  Viewed at:  http://www. 
central2013.eu/fileadmin/user_upload/Downloads/Document_Centre/OP_Resources/01_com2007_0032en01. 
pdf. 
81 European Commission document COM(2009) 8 fina l, 21 January 2009.  Viewed at:  http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0008:FIN:EN:pdf. 
82 Directive 2010/65/EU of the European Parliament and of the Council on reporting formalities for 
ships arriving in and/or departing from ports of the member States and repealing Directive 2002/6/EC.   European Union WT/TPR/S/248 
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88. The Commission intends to promote alignment of  substantive competition rules applicable to 
the maritime transport sector.  All joint price fixi ng for services to and from the EU (EEA) is currently 
illegal following the abolition of the block exempti on for liner shipping conferences, effective since 
30 October 2008.  The EU liberalized cabotage op erations for companies from other member States 
on 1 January 1993.83   
89. The European Parliament and the Council has adopted Regulation (EU) No. 1177/2010 
concerning the rights of passengers when travelling by sea and inland waterway.84  F r o m  
18 December 2012, when the provisions of this re gulation become applicable , maritime passengers 
will benefit from this set of provisions.   
(d) Air transport 
90. The completion of the Single European Sky (SES) initiative and its associated SES Air 
Traffic Management Research (SESAR) programme is  aimed at reorganizing airspace according to air 
traffic patterns, setting common technical and proce dural rules, and fostering the development of a 
harmonized European air traffic management (ATM) system over the next 30 years.  The original 
Single European Sky (SES I) package came into force in 2004 with a focus on dealing with air traffic 
management congestion and safety.  With an increased emphasis on the environment and cost 
efficiency in recent years, supplemented by a ca ll for a less prescriptive regulatory approach ("better 
regulation"), the updated Single European Sky ( SES II) package was adopted in 2010 to tackle the 
performance and sustainability of the aviation syst em.  At the same time, SESAR development has 
progressed on the basis of a three-phased approach:  (i) the definition phase (2004-08), to deliver an 
ATM master plan defining the content, developmen t, and deployment of the next generation of ATM 
systems85;  (ii) the development phase (2008-13), to develop the new equipment and standards to 
ensure, through the regulatory mechanisms of the sing le European sky, the replacement of the existing 
ground and airborne systems, and in teroperability with those outside Europe;  and (iii) the deployment 
phase (2014-20), to consist of large-scale production,  procurement, and implementation of the new 
ATM infrastructure and of the corresponding aircra ft equipment.  Key performance targets are to 
enable a three-fold increase in capacity, improve  safety by a factor of ten, reduce by 10% the 
environmental impact per flight, and to cut ATM costs by 50%.86   
91. As the EU and the United States together ac count for around 60% of the global market for 
aviation services, it has been estimated that the removal of all barriers between the two sides could create up to 80,000 new jobs and economic benefits  worth some €12 billion.   An expanded "open 
skies" agreement between the European Union and the United States was signed on 24 June 2010.
87  
The new agreement strengthens cooperation on secur ity and on environmental matters, harmonizing 
the rules regarding aircraft emissions, fuel, and noi se.  The Joint Committee m eets at least once a year 
to review the implementation of the agreement, including developments towa rds legislative changes 
referred to in it.  The Joint Committee may also cons ider the implications, and develop proposals, for 
third countries to accede to the agreement.   
                                                      
83 Council Regulation No. 3577/92/EEC of 7 Decembe r 1992.  Transitional arrangements applied for 
France, Italy, Portugal,  Spain, and Greece.   
84 Regulation (EU) No. 1177/2010 of the European Parliament and of the Council of 
24 November 2010 concerning the rights of passenge rs when travelling by sea and inland waterway and 
amending Regulation (EC) No. 2006/2004.   
85 This phase was led by Eurocontrol, the European Organization for the Safety of Air Navigation, and 
was co-financed by the Commission (€30 million from the budget for trans-European networks).  See European 
Commission (2007c).   
86 European Commission (2007b). 
87 The first EU-US Open Skies agreement was signed in April 2007 and entered into force in 2008. WT/TPR/S/248 Trade Policy Review 
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92. Extending the benefits of the single aviation ma rket to other countries is a key EU objective 
built on three pillars, i.e. (i) updating member States' bilateral agreements to en sure legal certainty and 
to put all EU airlines on equal footing for flights to countries outside the EU;  (ii) establish a common aviation area with neighbouring countries in the Mediterranean and the south-east
88;  and (iii) setting 
up open aviation areas with other international partne rs, for example, Canada, Brazil, China, India, 
Australia, New Zealand, and Chile.89   
93. Air transport is today the most advanced sector w ith regard to protection of passenger rights.  
EU legislation on air passengers' rights comprise s Regulation (EC) No. 261/2004, Regulation (EC) 
No. 1107/2006, and Regulation (EC) No. 889/2002.90  The overall regulatory background on air 
passenger rights also includes other legislati on, notably Regulation No. 1008/2008 on common rules 
for the operation of air services in the Community (whi ch includes provisions on price transparency);  
Directive 96/67, which defines the conditions for access to the ground handling market at European 
airports, and Regulation No. 2111/2005 on safet y issues; and Regulation No. 80/2009 on 
computerized information systems (CRS), which,  despite its business-to-business scope, also has 
some influence on the information provided by  travel agents to their customers.   
94. The Commission is currently engaged in a "f itness check" to evaluate whether Regulation 
Nos. 1008/2008 and 80/2009 (and a regulation on insurance requireme nts) are still fit for their 
purposes.  The result of this check should be availabl e towards the end of 20011 or in early 2012.  The 
Commission is also working on an "airport packag e" consisting of the rules regarding slots and 
ground handling.   
                                                      
88 An agreement establishing the European Common Av iation Area (ECAA) was signed in June 2006.  
The non-EC ECAA partners (Albania, Bosnia and Herzegovina, Croatia, FYROM, Montenegro, Serbia, the UN 
Interim Administration Mission in Kosovo (UNMIK), Icel and, and Norway) will adopt EU air transport laws 
and regulations, while air transport between the EU and its ECAA partners is liberalized gradually.  ECAA 
partners fully implement the EU's aviation rules, and EC AA airlines will have open access to the enlarged EU 
single market.  In addition, the EU has signed air agr eements with Morocco (2006), Georgia (2010), and Jordan 
(2010), while negotiations continue with Israel, Lebanon, and Ukraine (February 2011) (European Commission, 
2011).  The Commission is also working on updating the bilateral air services agreements to bring them into 
conformity with EU law, specifically to include the acceptance by third countries of the notion of EU designation.     
89 The EU and Canada signed a comprehensiv e aviation agreement in December 2009.  The 
Commission was granted a mandate to negotiate a comprehe nsive air transport agreemen t with Brazil in 2010;  
the agreement was initialled in March 2011.  A joint declaration on cooperation was signed at the EC-China 
aviation summit in 2005.  The Commission proposed opening comprehensive aviation negotiations with China 
in March 2005.  A joint action plan for closer cooperation in the future was agreed with India in 2005.  In September 2005, the Commission proposed opening comprehensive aviation agreements with India.  The 
Commission received authoriza tion to negotiate comprehensive air tran sport agreements with Australia and 
New Zealand in June 2008.  The Commission proposed to open comprehensive aviation negotiations with Chile 
in September 2005.   
90 Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004 
establishing common rules on compensation and assistance to passengers in the event of denied boarding and of 
cancellation or long delay of flights, and repealing Regulation (EEC) No. 295/91, OJ L 46, 17 February 2004, 
pp. 1-8; Regulation (EC) No. 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air (OJ L 204, 
26 July 2006, pp. 1-9);  and Regulation (EC) No. 889/2002 of the European Parliament and of the Council of 
13 May 2002 amending Council Regulation (EC) No. 20 27/97 on air carrier liability in the event of accidents 
(OJ L 140, 30 May 2002, pp. 2-5).   European Union WT/TPR/S/248 
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(iv) Telecommunications and postal services 
(a) Telecommunications 
95. Liberalization of the telecommunications sector began in the 1980s in the value-added 
services, and the public network monopolies were ende d in the majority of member States in 1998.  
Since then, focus has been on enfo rcement and adjustment of the regulatory framework.  However, 
even though competition has increased and consumer s benefit from lower prices and higher standards 
of service, the EU market for telecommunications  services has remained fragmented as the EU 
framework has not been implemen ted in a uniform manner by nati onal regulators.  Few operators 
provide pan-European services, and the packaging of these services differ from one member State to 
another to satisfy variations in national requirements.   
96. The present rules governing the telecoms sector in the EU were agreed in 2002, i.e. the 
"Framework" Directive and the "Specific" Directives.91  As the sector is changing rapidly, the 
Commission proposed a telecoms reform package in November 2007.  After two years of discussion, 
agreement was reached on the Telecoms Reform on 4 November 2009.  The package was published in 
the Official Journal  on 18 December 2009.  The transpositi on of the revised regulatory framework 
into national legislation by the 27 member States should be completed by May 2011.   
97. The main elements of the reform package c oncern the strengthening of consumer protection 
and user rights as well as enhancing regulatory indepe ndence, co-operation, and consistency.  In the 
future, consumer contracts must stipulate mini mum service quality levels, and compensations or 
refunds if these levels are not met:  the duration of the initial contract cannot exceed 24 months;  
contracts with a maximum duration of 12 months s hould be available;  and customers should be able 
to switch operator, while keeping their fixe d or mobile number, in one working day.92  The new rules 
include provisions to protect privacy in the handlin g of user data and to safeguard the fundamental 
rights and freedoms of citizens in accessing or usi ng services or applications through telecom 
networks.  Additional measures are being put in pl ace to reinforce the independence and powers of the 
national regulators who, if necessary,  will be able to order functiona l separation of the networks and 
services branches of telecom operators in countries where significant market power (SMP) operators 
continue to own the communication networks.  The reforms also aim at better management of the 
radio spectrum to facilitate access to wireless broadb and services in rural areas where investment in 
new fibre infrastructure is not considered economically viable.   
98. Responsibility for the management, implementa tion, and development of the telecoms 
regulatory framework has been shared among th e Communications Committee, the Radio Spectrum 
Committee, the Radio Spectrum Policy Group, and th e European Regulators Group (ERG).  As part 
of the reforms, the ERG has been replaced by  a new body, BEREC – the Body of European 
Regulators of Electronic Communications.  Building upon, but expanding the earlier somewhat loose 
                                                      
91 Directive 2002/21/EC of 7 March 2002 on a common regulatory framework for electronic 
communications networks and services together w ith Directives 2002/19/ EC (access), 2002/20/EC 
(authorization), 2002/22/EC (universal service), and 2002/58/EC (privacy and electronic communications).  The 
framework is complemented and supported by Regulation (EC) No. 717/2007 on roaming on public mobile communications networks within the Community.   
92 Regulation (EC) No. 544/2009 of 18 June 2009 also amends Regulation (EC) No 717/2007 to reduce 
the retail price ceilings for regulated roaming calls to €0.39 for calls made from 1 July 2010, and €0.35 from 1 July 2011, and €0.15 (2010) and €0.11 (2011) for calls received.  The retail charge for roaming SMS messages 
is not to exceed €0.11 per message.  In addition, operators are obliged to offer their customers a cut-off limit on 
the monthly roaming charges (€50 has been the default maximum since 1 July 2010) and to notify the customer when 80% of the agreed limit has been reached.   WT/TPR/S/248 Trade Policy Review 
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cooperation between the national regulators in the ER G, the principal role of BEREC is to promote 
fair competition and improved consistency in the re gulation of the European telecoms sector.  As a 
rule, BEREC decisions will be taken by a two-thirds majority of the heads of the 27 national telecoms 
regulators.  Administrative and professional support is  provided by a new, independent supranational 
Office located in Riga (Latvia).  The Commission pr oposed merging the agency in charge of network 
security (ENISA – the European Network and Inform ation Security Agency) with BEREC, but this 
was not accepted by the European Parliament a nd the Council.  ENISA will continue as a separate 
agency at least until 2013, when the pr esent arrangement will be reviewed.   
99. The new rules provide the Commission with th e authority to monitor regulatory remedies 
proposed by a national regulator, e.g. in relation to termination rates or conditions of access to the 
network of a dominant operator.  In close coopera tion with BEREC, the Commission will review draft 
measures proposed by national regulators and, in case of disagreement, issue recommendations obliging the national regulators to amend or wit hdraw the proposed remedies if the measures are 
considered a barrier to the single market  or contrary to Community law.   
100. Although the demand for high-speed services is rising rapidly, the deployment of Next 
Generation Access (NGA) Networks is still at an ear ly stage of development in Europe, where the 
Internet is still predominantly accessed via c opper telephone lines and TV cable networks.
93  T h e  
regulatory environment must therefore simultaneously  stimulate substantial private-sector investment 
in high-speed networks while fostering compe tition in the market for broadband services.  On 
20 September 2010, the Commission issued a r ecommendation on regulated access to NGAs.94  The 
recommendation aims at consistency in the decisions  of the national regulatory authorities throughout 
the EU single market as the authorities design and impose access obligations appropriately adjusted 
for investment risk.  The recommendation should also  be seen in the broader context of the "Digital 
Agenda for Europe", presented by the Commission in May 2010.95 
(b) Postal services 101. In view of the importance of the changes contemplated, but also the size of the market and 
number of countries involved, the European Union has b een at the forefront of global efforts to reform 
the postal sector.  The Third Postal Directive represent s a last legislative step in the EU postal reform 
(phased-in over time), and set the end of 2010 as the cut-off point for 16 member States (95% of EU postal markets in terms of volume) to abolish any remaining reserved areas in the postal sector.  The 
other 11 member States may make use of a two-ye ar transition period, thereby delaying full market 
opening to the end of 2012.
96   
102. Despite the timelines set by the Third Postal Di rective, adopted in 2008, a number of member 
States have already abolished the reserved area s, e.g. Finland (1991), Sweden (1993), the United 
Kingdom (2006), Germany (2008), Estonia (2009), a nd the Netherlands (2009).  Others had also 
already liberalized gradually.  From 1996 to 2006, th e reserved area was reduced  three times, the last 
                                                      
93 The Commission notes that while the penetration rate for Fibre-to-the-Home (FTTH) networks was 
at 1% in Europe in July 2009, it had reached 12% in Japan and 15% in Korea.   
94 Recommendation No. 2010/572/EU, published in OJ L 251 on 25 September 2010. 
95 COM(2010) 245 final/2 of 26 August 2010, replacing COM(2010) 245 final dated 19 May 2010.  
The Digital Agenda, in turn, is a cornerstone among seven initiatives under the Europe 2020 strategy for smart, 
sustainable and inclusive growth.   
96 Article 3(1) of the Third Postal Directive, and "I nformation of Member States that intend to postpone 
the implementation of Directive 2008/6/EC until 31 December 2012 in order to continue to reserve services to universal service provider(s)", OJ C 265, 18 October 2008, p. 26. European Union WT/TPR/S/248 
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one exempting from competition only mail items wei ghing less than 50 grams and costing less than 
2.5 times the basic tariff.97   
103. As a result of regulatory changes and market developments, according to the Commission98, 
the traditional postal operators in the EU have mo dernized, restructured, and moved towards more 
market-driven and customer-oriented supply of servi ces, greater efficiency and service quality.  For 
example, evidence suggests that greater competiti on has led to relatively greater mail volumes, the 
development of new value-added servic es, and downward pressure on bulk prices.99  This contrasts 
with the situation at the beginning of the 1990s, where, according to a study prepared for the 
European Commission, postal services were provided in many member States by "inefficient loss-
making postal entities with a considerable lack of  customer attention, resulting in substantial 
heterogeneity of service quality", and where "posta l monopolies often covered delivery of letter post 
items up to 2 kg and sometimes included even express services".100   
104. Actual competition in the letter-post market h as emerged only slowly because the largest part 
of this market in terms of volume was reserved for the designated universal service provider(s) in a given member State.  It stemmed more from the full liberalization of specific segments of the 
addressed mail segments – for example direct mail (e.g., Italy, Netherlands) or intra-city mail (Spain) 
– than from the reserved area's reduction from 100 to 50 grams.
101  Market shares of new entrants 
have increased, but remain low, even where postal markets have been fully liberalized, although, in 
various instances, competitors have been able to es tablish profitable operations on a smaller scale.  In 
the United Kingdom, where there is no reserved area, competition has developed in the upstream 
market through access to the network of a designated universal service provider, with competitors 
accounting for 34% of the volume of addressed mail.102   
105. Despite the gradual market opening, the majority of universal service providers in member 
States have remained state-owned.103  While not mandated in the Postal Directives, further advances 
in terms of privatization have occurred in rece nt years:  the German government reduced its 
shareholding in the German universal service provide r, and the Dutch government sold its remaining 
10% share and gave up its "golden share" in TNT.104   
106. The evolution of the EU postal regime also highlights the importance of regulation, including 
the role of independent national regulatory author ities in monitoring market developments while 
preventing the introduction of regulatory barriers to market entry, and tackling abusive market practices of postal operators with significant market power.   
107. The process of gradual market opening as laid down in the EU Postal Directives is not an end 
in itself nor the main objective of EU postal reform.  The directives also cover various other aspects of 
the postal markets, with the objective of developing  common rules for the growth of the EU internal 
postal market and improving service quality.  For exampl e, it requires all member States to provide a 
universal postal service for all users, comprising a minimum of one delivery and collection not less 
                                                      
97 Article 7(1) of the First Postal Directive (97/67 /EC) as amended by the Second Postal Directive 
(2002/39/EC). 
98 European Commission (2008b). 
99 Ecorys (2008). 
100 ITA Consulting and WIK-Consult (2009). 
101 ITA Consulting and WIK-Consult (2009). 
102 Postcomm (2011).  
103 European Commission  document COM(2008) 884, 22 D ecember 2008.  Viewed at:  
http://ec.europa. eu/internal_marke t/post/doc/reports/report_en.pdf.  
104 ITA Consulting and WIK-Consult (2009), p. XI.  WT/TPR/S/248 Trade Policy Review 
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than five working days a week, and provides that  all users be permanently provided with a postal 
service of specified quality throughout the territory at  an affordable price.  It requires tariffs for 
universal services to be cost-based, transparent, a nd non-discriminatory.  Cross-subsidies from the 
reserved area to the competitive area are only allowed if this is necessary to ensure the fulfilment of 
universal service obligations.  Universal service pr oviders have to apply transparent and separated 
cost accounting principles, and provide separat e accounts for reserved and non-reserved universal 
services and non-universal services.  Member Stat es also have to establish regulatory authorities 
independent from postal operators and bodies exerci sing ownership control, which in most cases are 
the state authorities.  The Directives also provid e that member States may establish a compensation 
fund to ensure that universal service is provided, should the universal service obligation constitute an 
unfair financial burden for the designated universal service provider.105   
                                                      
105 WTO document S/C/W/319, "Postal and Courier Se rvices", Background Note by the Secretariat, 
11 August 2010. European Union WT/TPR/S/248 
 Page 135 
 
 
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